TORSTAR - Interim Management’s Discussion and Analysis

For the three and six months ended June 30, 2011 and 2010

Dated: July 28, 2011 The following review and analysis of Torstar Corporation’s (the “Company” or “Torstar”) operations and financial position for the three and six months ended June 30, 2011 and 2010 is supplementary to, and should be read in conjunction with the audited consolidated financial statements of Torstar Corporation for the year ended December 31, 2010 set forth in the Company’s Annual Report for such fiscal year and incorporated by reference in the Company’s renewal Annual Information Form dated March 22, 2011.

Torstar reports its financial results under International Financial Reporting Standards (“IFRS”) in Canadian dollars. Per share amounts are calculated using the weighted average number of shares outstanding for the applicable period.

Torstar’s 2010 financial results included in this Interim MD&A have been restated to an IFRS basis.

Non-IFRS measures Management uses both operating profit, as presented in the consolidated statement 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 Torstar’s operations or by a reporting unit or segment. EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under IFRS. Torstar calculates EBITDA as the consolidated, segment or division operating profit as presented on the consolidated statement of income, which is before charges for interest and taxes, adjusted for amortization and depreciation. Torstar also excludes restructuring and other charges from its calculation of EBITDA. 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 MD&A. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate”, “believe”, “plan”, “forecast”, “expect”, “intend”, “would”, “could”, “if”, “may” and similar expressions. All such statements are made pursuant to the “safe harbour” provisions of applicable Canadian securities legislation. These statements reflect current expectations of management regarding future events and operating performance, and speak only as of the date of this MD&A. In addition, forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.

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

These factors include, but are not limited to: • general economic conditions in the principal markets in which the Company operates; • the Company’s ability to operate in highly competitive industries; • the Company’s ability to compete with other forms of media and media platforms; • the Company’s ability to attract and retain advertisers; • the Company’s ability to retain and grow its digital audience and further develop its digital businesses; • cyclical and seasonal variations in the Company’s revenues; • labour disruptions; • newsprint costs; • the Company’s ability to reduce costs; • foreign exchange fluctuations; • credit risk; • restrictions imposed by existing credit facilities, debt financing and availability of capital; • pension fund obligations;

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TORSTAR - Interim Management’s Discussion and Analysis

• results of impairment tests; • reliance on its printing operations; • reliance on technology and information systems; • risks related to business development; • interest rates; • availability of insurance; • litigation; • environmental regulations; • dependence on key personnel; • loss of reputation; • privacy and confidential information; • product liability; • intellectual property rights; • control of the Company by the Voting Trust; and • uncertainties associated with critical accounting estimates.

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

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

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

OPERATING RESULTS – Second quarter and year to date 2011 Overall Performance Total revenue was $393.3 million in the second quarter of 2011, up $15.7 million from $377.6 million in the second quarter of 2010. Excluding the $4.4 million increase from a change in reporting for Torstar’s share of Metro’s revenues and the $0.3 million decrease from the stronger Canadian dollar, total revenue would have been up $11.6 million or 3.1% in the quarter. Excluding these items, Media Segment revenues were up $18.9 million or 7.3% in the quarter with growth in product sales, digital and distribution revenues more than offsetting declines in print advertising revenue. Book Publishing revenues were down $7.3 million or 6.2% in the quarter as declines in print retail revenues more than offset digital revenue growth in both the North America and Overseas divisions.

Year to date, total revenue was $744.7 million, up $32.2 million from $712.5 million in 2010. Excluding the $8.2 million increase from a change in reporting for Torstar’s share of Metro’s revenues and the $5.6 million decrease from the stronger Canadian dollar, total revenue would have been up $29.6 million in the first six months of 2011. Excluding these items, Media Segment revenues were up $29.0 million year to date with growth in product sales, digital and distribution revenues more than offsetting declines in print advertising revenue. Book Publishing revenues were up $0.7 million year to date with both the North America and Overseas divisions up.

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Operating profit before restructuring and other charges was $58.0 million in the second quarter of 2011, down $4.9 million from $62.9 million in the second quarter of 2010. Including the $3.4 million of restructuring and other charges, operating profit was $54.6 million in the second quarter of 2011, down $4.2 million from $58.8 million in 2010 (which included $4.1 million of restructuring and other charges). Media Segment operating profit before restructuring and other charges was $46.1 million in the second quarter of 2011, up $0.2 million from $45.9 million in the second quarter last year. Revenue growth for the Media Segment was offset by related cost increases and net investment spending, primarily in the digital properties. Book Publishing operating profit before restructuring and other charges was $16.3 million in the second quarter of 2011, down $4.4 million from $20.7 million in the second quarter of 2010, including a decline of $0.9 million from the impact of foreign exchange. The decline in underlying results included lower positive adjustments to prior year returns, higher book returns, timing of promotional spending and softness in several overseas markets.

Year to date, operating profit before restructuring and other charges was $91.9 million, down $11.6 million from $103.5 million in 2010. Including the $3.8 million of restructuring and other charges, operating profit was $88.1 million in the first six months of 2011, down $2.8 million from $90.9 million in 2010 (which included $12.6 million of restructuring and other charges). Media Segment operating profit before restructuring and other charges was $61.7 million in the first six months of 2011, down $4.7 million from $66.4 million in the same period last year. Book Publishing operating profit before restructuring and other charges was $38.3 million in the first six months of 2011, down $5.6 million from $43.9 million in the same period in 2010, including a decline of $4.1 million from the impact of foreign exchange.

Corporate costs before restructuring and other charges were $4.4 million in the second quarter of 2011, up $0.7 million from $3.7 million in the second quarter of 2010. Year to date, corporate costs were $8.1 million, up $1.3 million from $6.8 million in 2010. In both periods, the increase primarily relates to year over year differences in the mark-to-market of a share-based compensation hedging instrument. Increased salary and benefit costs have been partially offset by lower professional fees.

EBITDA1 was $65.7 million in the second quarter of 2011, down $5.1 million from $70.8 million in the second quarter of 2010. Year to date, EBITDA was $107.4 million, down $12.4 million from $119.8 million in 2010.

Second Quarter Year to Date (in $000’s) 2011 2010 2011 2010 Media $52,893 $52,583 $75,361 $80,500 Book Publishing 17,192 21,865 40,082 46,010 Corporate (4,394) (3,639) (8,073) (6,739) EBITDA $65,691 $70,809 $107,370 $119,771

1 EBITDA is calculated as operating profit as presented on the consolidated statement of income, which is before charges for interest and taxes, adjusted for amortization and depreciation and restructuring and other charges. See “non-IFRS measures”.

Restructuring and other charges Restructuring and other charges of $3.4 million were recorded in the second quarter of 2011 and $3.8 million year to date. The second quarter charge included a $2.4 million provision for rented space that the Media Segment will be vacating as reduced staff counts allow for space consolidation. The charge represents the discounted shortfall between the remaining obligation under the existing lease and the amounts to be received through a sublease arrangement. The annual cost savings from the space consolidation are approximately $1.3 million a year with $0.3 million expected to be realized in the fourth quarter of 2011. The balance of the restructuring and other charges relate to staff reductions in the Media Segment. The 2011 restructuring initiatives are expected to result in annualized savings of approximately $2.9 million (rent and salaries) and a reduction of approximately 20 positions. $1.4 million of the savings is expected to be realized in 2011 (with $0.3 million realized in the first six months).

In 2010, restructuring and other charges of $4.1 million and $12.6 million were recorded in the second quarter and year to date respectively. The second quarter 2010 charge included $2.0 million for restructuring in the Media Segment, $2.0 million of costs related to Torstar’s bid to purchase the newspaper and digital business of Canwest

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TORSTAR - Interim Management’s Discussion and Analysis

Limited Partnership and $0.1 million related to transaction costs from Harlequin’s acquisition of the other half of the German publishing business. Restructuring and other charges in the first six months of 2010 included $9.4 million for restructuring in the Media Segment, $2.8 million of costs related to Torstar’s bid to purchase the newspaper and digital business of Canwest Limited Partnership and $0.4 million related to transaction costs from Harlequin’s acquisition of the other half of the German publishing business.

Interest and financing costs Interest and financing costs were $2.0 million in the second quarter of 2011, down $4.6 million from $6.6 million in the second quarter of 2010. Year to date, interest and financing costs were $12.8 million, up $1.9 million from $10.9 million in 2010.

Interest expense was $1.4 million in the second quarter of 2011, down $5.2 million from $6.6 million in the second quarter of 2010. The lower expense reflects the significantly lower level of average net debt outstanding in the second quarter of 2011 subsequent to the receipt of the CTV sale proceeds and a slightly lower effective interest rate. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $95.2 million in the second quarter of 2011, down $390.3 million from $485.5 million in the same period last year. Torstar’s effective interest rate was 4.3% in the second quarter of 2011 and 5.0% in the second quarter of 2010.

Year to date, interest expense was $7.6 million, down $3.3 million from $10.9 million in 2010. The lower expense reflects the significantly lower level of average net debt outstanding in the second quarter of 2011 and a higher effective interest rate. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $233.2 million in the first six months of 2011, down $261.8 million from $495.0 million in 2010. Torstar’s effective interest rate was 5.7% in the first six months of 2011 and 4.1% in the same period last year. The higher rate in 2011 reflected the higher interest rate spread that started to apply to new debt during the first quarter of 2010. It also reflected the mix of debt outstanding with a larger proportion being the higher fixed-rate debt in 2011.

Net debt was $108.1 million at June 30, 2011, down $260.5 million from $368.6 million at December 31, 2010.

Year to date interest and financing costs include the $3.8 million first quarter charge related to the settlement of Canadian dollar debt interest rate swaps. In 2006, in connection with the investment in CTV, Torstar had entered into interest rate swap agreements to fix the rate of interest on $250 million of Canadian dollar borrowings at 4.3% (plus the applicable interest rate spread based on Torstar’s long-term credit rating) through September 2011. The five-year swap arrangements required a resetting of pricing and debt instruments every ninety days with a reset date occurring in March 2011. In anticipation of the receipt of the funds from the completion of the CTV sale, the swap arrangements were not reset in March and Torstar settled the swaps.

Interest and financing costs also included interest accretion on long-term restructuring provisions, deferred purchase price and contingent consideration obligations of $0.6 million in the second quarter of 2011 and $1.4 million year to date. There was no interest accretion in the first six months of 2010.

Foreign exchange The non-cash foreign exchange gain or loss reported in the consolidated statement of income primarily relates to the translation of U.S. dollar denominated assets and liabilities held by Torstar’s Canadian operations into Canadian dollars. It does not include the translation of foreign currency (including U.S. dollars) denominated assets and liabilities of Torstar’s foreign operations or the translation of U.S. dollar debt that has been designated as a hedge against those net assets. The foreign exchange on the translation of those foreign-currency denominated assets and liabilities and the related hedge-designated debt into Canadian dollars is reported through other comprehensive income. The amount of the non-cash foreign exchange gain or loss in any year will vary depending on the movement in the relative value of the Canadian dollar and on whether Torstar’s Canadian operations have a net asset or net liability position in U.S. dollars.

Torstar reported a non-cash foreign exchange gain of $0.9 million in the second quarter of 2011 compared with a loss of $5.8 million in the second quarter of 2010. Year to date, Torstar reported a non-cash foreign exchange gain of $1.6 million compared with a loss of $3.0 million in 2010. Torstar’s Canadian operations were in a net

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TORSTAR - Interim Management’s Discussion and Analysis

liability position in U.S. dollars in both years however, the Canadian dollar strengthened during the second quarter and first six months of 2011 and weakened during the second quarter and first six months of 2010.

Torstar’s net liability position in U.S. dollars was larger in 2010 as Torstar had not designated any of its U.S. dollar debt as a hedge against its net investment in U.S. operations thereby increasing the net liability position in U.S. dollars. Effective January 1, 2011, Torstar has designated $80.0 million of its U.S. dollar denominated debt as a hedge against its net investment in the Book Publishing businesses that have the U.S. dollar as their functional currency. This reduces Torstar’s net liability position in U.S. dollars.

Loss of associated businesses The loss of associated businesses was $0.6 million in the second quarter of 2011 compared with a loss of $7.1 million in the second quarter of 2010. Year to date, the loss of associated businesses was $1.2 million compared with a loss of $11.7 million in 2010. The 2011 losses included Torstar’s share of Canadian Press losses. Torstar acquired a one-third interest in Canadian Press in the fourth quarter of 2010.

Torstar ceased to equity account for its investment in CTV on September 10, 2010 and as a result did not include any amounts related to CTV in the loss of associated businesses in the second quarter or first six months of 2011. Torstar’s share of CTV’s net loss was $7.0 million in the second quarter and $11.7 million for the first six months of 2010.

Torstar is also not currently recording its share of Black Press’s results due to a notional accounting negative carrying value. Torstar’s share of Black Press’s net income would have been $1.7 million in the second quarter of 2011 down slightly from $2.0 million in the second quarter of 2010. Year to date, Torstar’s share of Black Press’s net income would have been $1.5 million compared with a loss of $1.7 million in 2010. The 2010 loss included a $3.1 million impairment loss related to a customer-related intangible asset and goodwill related to a printing operation. Excluding the impairment loss in 2010, results would have been flat year over year.

Gain on sale of CTV During the second quarter of 2011, Torstar recorded a gain of $190.1 million on its sale of its 20% interest in CTV. The transaction closed on April 1, 2011 and Torstar received cash proceeds of $291.6 million.

Income and other taxes The reporting of the gain on the sale of CTV in 2011 and the loss of associated businesses from CTV in 2010 had an impact on Torstar’s effective tax rate in both years. There was no tax expense recorded against the gain on the sale as it was a reversal of prior year losses of associated businesses and impairment losses which had not been tax-affected.

Excluding the impact of CTV in both years, Torstar’s effective tax rate was 27.4% in the second quarter of 2011 and 33.7% in the second quarter of 2010. Year to date, Torstar’s effective tax rate was 29.2% in 2011 and 32.6% in 2010. The lower effective tax rates in 2011 included the benefit of the lower Canadian statutory tax rate and the impact of permanent differences year over year. The Canadian statutory rate is lower in 2011, although Torstar only realizes a portion of the benefit as a large proportion of its income is taxed in foreign jurisdictions where tax rates remain unchanged. In 2010, Torstar had incurred a larger amount of expenses that were only partially deductible for income tax purposes which increased the effective tax rates in that year.

Net income attributable to equity shareholders Torstar reported net income attributable to equity shareholders of $228.3 million or $2.87 per share in the second quarter of 2011 up $204.9 million or $2.57 per share from $23.4 million or $0.30 per share in the second quarter of 2010. Year to date Torstar reported net income attributable to equity shareholders of $243.7 million or $3.07 per share up $203.8 million or $2.57 per share from $39.9 million or $0.50 per share in 2010.

The second quarter 2011 gain on the sale of CTV was $190.1 million or $2.40 per share. In 2010, Torstar recorded $7.0 million ($0.09 per share) in the second quarter and $11.7 million ($0.15 per share) year to date from CTV as part of the loss of associated businesses. Excluding the impact of CTV in both years, Torstar would have reported net income attributable to equity shareholders of $38.2 million or $0.47 per share in the second quarter of 2011 up $7.8 million or $0.08 per share from $30.4 million or $0.39 per share in the second quarter of

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TORSTAR - Interim Management’s Discussion and Analysis

2010. Year to date Torstar would have reported net income attributable to equity shareholders of $53.6 million or $0.67 per share up $2.0 million or $0.02 per share from $51.6 million or $0.65 per share in 2010.

The average number of Class A and Class B non-voting shares outstanding was 79.4 million in the second quarter and 79.3 million in the first six months of 2011 up slightly from 79.1 million and 79.0 million in the same periods last year.

The following chart provides a continuity of net income per share from 2010 to 2011:

Second Quarter Year to Date Net income attributable to equity shareholders per share 2010 $0.30 $0.50 • Loss from CTV (2010) 0.09 0.15 Adjusted net income attributable to equity shareholders per share 2010 $0.39 $0.65 Changes • Operations 0.01 (0.07) • Restructuring and other charges 0.01 0.08 • Settlement of interest rate swap contracts 0.00 (0.03) • Non-cash foreign exchange 0.06 0.04 Pre CTV gain net income attributable to equity shareholders per share $0.47 $0.67 • Gain on sale of CTV 2.40 2.40 Net income attributable to equity shareholders per share 2011 $2.87 $3.07

SEGMENT OPERATING RESULTS – MEDIA The Media Segment includes Star Media Group (SMG) and Metroland Media Group (MMG).

Star Media Group includes the Toronto Star, Canada’s largest daily newspaper which is read in print and online (thestar.com) by more than 3 million readers every week. Online, thestar.com is one of the most-visited newspaper websites in Canada. Star Media Group also includes Torstar Syndication Services (which provides editorial content to newspapers and other media), Wheels.ca, InsuranceHotline.com, moneyville.ca, parentcentral.ca, healthzone.ca, yourhome.ca, toronto.com (an online destination for events and attractions in the Greater Toronto Area), Olive Media (a leader in online advertising sales in Canada with the ability to reach over 17 million unique Canadian visitors monthly on a portfolio of top-tier sites including thestar.com, nytimes.com, CNET.com, cyberpresse.ca, and auFeminin.ca), eyeReturn Marketing (a leading provider of online marketing services), wagjag.com (a daily deal website), travelalerts.ca (an online publisher of travel deals) and the Torstar Digital corporate group.

In addition to the above operations, Star Media Group also includes Torstar’s proportionate interests in Sing Tao Daily, Metro and Workopolis. Sing Tao Daily publishes a Chinese language newspaper in Canada with editions in Toronto, Vancouver and Calgary. It is also involved in printing, outdoor advertising, Chinese language telephone directories, radio and weekly magazine publishing. Torstar jointly owns the Canadian operations of Sing Tao Daily with Sing Tao Holdings Limited. Metro is a free daily newspaper that is published in Toronto, Vancouver, Ottawa, Calgary, Edmonton, London and Winnipeg, jointly by Torstar and Metro International S.A. and in Halifax, jointly by Torstar, Metro International S.A. and Transcontinental Media G.P. Torstar owns 50% of Workopolis, Canada’s leading provider of Internet recruitment and job search solutions. Square Victoria Digital Properties (a subsidiary of Power Corporation) is Torstar’s partner in Workopolis.

Metroland Media Group publishes in print and online more than 100 weekly community newspapers including The Mississauga News and Oshawa This Week and three daily newspapers – The Hamilton Spectator, the Waterloo Region Record and the Guelph Mercury. Its online properties include flyerland.ca, HomeFinder.ca, gottarent.com, save.ca and a 50% interest in LeaseBusters.com. Metroland Media Group also participates in Wheels.ca, InsuranceHotline.com and wagjag.com. Metroland Media Group publishes the Gold Book print and online directories, a number of specialty publications and operates several consumer shows throughout Ontario. Metroland Media Group also operates Torstar Media Group Television (“TMGTV” - a teleshopping channel and a

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product sourcing and distribution business). Metroland Media Group has eight web press facilities which print the Metroland newspapers but also engage in commercial printing.

The following table sets out, in $000’s, the results for the Media Segment for the three months ended June 30, 2011 and 2010.

2011 2010 MMG SMG Total MMG SMG Total Operating revenue $153,606 $129,426 $283,032 $140,978 $118,736 $259,714

Other operating costs (64,305) (65,755) (130,060) (52,130) (56,373) (108,503) Salaries and benefits (57,125) (42,954) (100,079) (56,661) (41,967) (98,628) EBITDA 32,176 20,717 52,893 32,187 20,396 52,583 Amortization & depreciation (2,550) (4,249) (6,799) (2,407) (4,324) (6,731) Operating profit before restructuring and other charges 29,626 16,468 46,094 29,780 16,072 45,852 Restructuring and other charges (471) (2,915) (3,386) (1,052) (947) (1,999) Operating profit $29,155 $13,553 $42,708 $28,728 $15,125 $43,853

The following table sets out, in $000’s, the results for the Media Segment for the six months ended June 30, 2011 and 2010.

2011 2010 MMG SMG Total MMG SMG Total Operating revenue $273,486 $245,583 $519,069 $255,368 $226,542 $481,910

Other operating costs (116,917) (132,180) (249,097) (99,424) (110,265) (209,689) Salaries and benefits (108,958) (85,653) (194,611) (107,798) (83,923) (191,721) EBITDA 47,611 27,750 75,361 48,146 32,354 80,500 Amortization & depreciation (5,014) (8,635) (13,649) (5,572) (8,557) (14,129) Operating profit before restructuring and other charges 42,597 19,115 61,712 42,574 23,797 66,371 Restructuring and other charges (872) (2,915) (3,787) (1,315) (8,152) (9,467) Operating profit $41,725 $16,200 $57,925 $41,259 $15,645 $56,904

Total revenue of the Media Segment was $283.0 million in the second quarter of 2011, up $23.3 million from $259.7 million in the second quarter of 2010. The revenue growth included $4.4 million from a change in reporting for Torstar’s share of Metro’s results. Excluding this change, Media Segment revenue was up $18.9 million in the quarter. Higher product sales in Metroland Media Group’s TMGTV operations provided $12.3 million of the revenue growth, while digital revenue growth and higher distribution revenues more than offset continued softness in print advertising revenues. Digital revenues grew 32.5% in the second quarter of 2011 and were 12.0% of the total Media Segment revenue in 2011, up from 9.9% in 2010.

Year to date, total revenue of the Media Segment was $519.1 million, up $37.2 million from $481.9 million in 2010. The revenue growth included $8.2 million from a change in reporting for Torstar’s share of Metro’s results. Excluding this change, Media Segment revenue was up $29.0 million in the first six months. Higher product sales in Metroland Media Group’s TMGTV operations provided $20.7 million of the revenue growth. As in the quarter, digital revenue growth and higher distribution revenues more than offset continued softness in print advertising revenues. Digital revenues grew 32.4% in the first six months of 2011 and were 11.7% of the total Media Segment revenue in 2011, up from 9.5% in 2010.

At the end of 2010, the jointly-owned Metro operations met certain milestones that resulted in a change in how Torstar reports its share of the results effective with the first quarter of 2011. The change results in a higher amount of revenue and expenses being reported by Torstar but with no change in operating profit. The impact on

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the Media Segment of the change in reporting was an increase of $4.4 million to both revenue and expenses in the second quarter and $8.2 million year to date.

The Media Segment expenses were up $23.0 million in the second quarter of 2011 and $42.3 million year to date. Excluding the increase of $4.4 million in the quarter and $8.2 million year to date from the change in reporting for Metro, expenses were up $18.6 million in the quarter and $34.1 million year to date. The higher expenses included increased costs related to the TMGTV product sales (which have a lower margin) and the higher distribution volumes. It also included an investment in staff and marketing costs in the digital properties. Net savings of $3.3 million were realized in the quarter and $7.5 million year to date from prior and current year restructuring initiatives. Pension costs were up $0.5 million in the quarter and $0.8 million year to date. Newsprint pricing was flat in both the quarter and year to date.

The Media Segment EBITDA was $52.9 million in the second quarter of 2011, up $0.3 million from $52.6 million in the second quarter of 2010. Year to date, Media Segment EBITDA was $75.4 million, down $5.1 million from $80.5 million in 2010. In both periods, the segment was impacted by investment spending, primarily in the digital businesses, while softness in print advertising revenues was mitigated by cost savings from prior year restructuring initiatives. Net investment spending continued during the second quarter of 2011 but at a lower level than in the first quarter. Operating profit before restructuring and other charges was $46.1 million in the second quarter of 2011 up $0.2 million from $45.9 million in the same period last year. Year to date, operating profit before restructuring and other charges was $61.7 million down $4.7 million from $66.4 million in 2010.

Metroland Media Group Metroland Media Group revenues were $153.6 million in the second quarter of 2011 up $12.6 million from $141.0 million in the second quarter of 2010. This increase included $12.3 million of growth in product sales in the TMGTV operations. Digital revenues grew 39.8% in the second quarter and distribution revenues were up on higher volumes including the benefit of acquisitions and new markets. Print advertising revenues continued to be soft during the second quarter at both the daily and community newspapers but the declines were less than those realized in the first quarter of 2011.

Year to date, Metroland Media Group revenues were $273.5 million, up $18.1 million from $255.4 million in 2010. The increase included $20.7 million of growth in product sales in the TMGTV operations, digital revenue growth of 42.7% and higher distribution revenues offset by lower print advertising revenues.

Metroland Media Group expenses were up $12.6 million in the second quarter of 2011 and $18.6 million year to date. The higher expenses included increased costs related to the TMGTV product sales (which have a lower margin) and the higher distribution volumes. The second quarter of 2011 also included an allocation from Star Media Group for costs related to cross-segment digital initiatives. Net savings of $0.9 million were realized in the quarter and $2.0 million year to date from prior and current year restructuring initiatives. Pension costs were up $0.5 million in the quarter and $0.8 million year to date. Newsprint pricing was flat in both the quarter and year to date.

Metroland Media Group’s EBITDA was $32.2 million in the second quarter of 2011, flat to the second quarter of 2010. Year to date, Metroland Media Group’s EBITDA was $47.6 million, down $0.5 million from $48.1 million in 2010. Year to date, Metroland Media Group’s earnings benefited in the first quarter from revenue participation in cross-segment digital initiatives while the Star Media Group absorbed most of the expenses related to these digital initiatives. Effective with the second quarter of 2011, Metroland Media Group was absorbing its share of the costs. Operating profit before restructuring and other charges was $29.6 million in the second quarter of 2011, down $0.2 million from $29.8 million in the same period last year. Year to date, operating profit before restructuring and other charges was $42.6 million, consistent with the same period last year.

Star Media Group Star Media Group revenues were $129.4 million in the second quarter of 2011, up $10.7 million from $118.7 million in the second quarter of 2010. Year to date, Star Media Group revenues were $245.6 million, up $19.1 million from $226.5 million in 2010. Excluding the increase of $4.4 million in the quarter and $8.2 million year to date from the change in reporting for Metro, revenues were up $6.3 million in the quarter and $10.9 million year to date.

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TORSTAR - Interim Management’s Discussion and Analysis

Advertising revenues were down 3.7% in the quarter and 2.7% year to date at the Toronto Star. National advertising was flat in the second quarter and only slightly down year to date. All other categories were down in both periods. Revenue at Star Media Group’s digital properties was up 27.6% in the quarter and 26.6% year to date. The digital revenue growth in both periods included strong revenue performance from the 2010 acquisitions of travelalerts.ca, wagjag.com and Tuango (50% ownership as of April 2011) and improved revenue at Workopolis. The jointly-owned Metro newspapers continued to have revenue growth in all their markets and also benefited from the new markets of London and Winnipeg that launched at the beginning of the second quarter. Sing Tao had higher revenues in the quarter and year to date for both their newspapers and magazines.

Star Media Group expenses were up $10.4 million in the second quarter of 2011 and $23.7 million year to date. Excluding the increase of $4.4 million in the quarter and $8.2 million year to date from the change in reporting for Metro, expenses were up $6.0 million in the quarter and $15.5 million year to date. The higher expenses included an investment in staff and marketing costs in the digital properties including, in the first quarter of 2011, the majority of the expenses related to the cross-segment digital initiatives. In the second quarter an allocation of a portion of those costs was made to Metroland Media Group. Net savings of $2.4 million in the quarter and $5.5 million year to date were realized from prior and current year restructuring initiatives. Pension costs and newsprint pricing were both flat in both the quarter and year to date.

Star Media Group EBITDA was $20.7 million in the second quarter of 2011, up $0.3 million from $20.4 million in the second quarter of 2010. Year to date, Star Media Group EBITDA was $27.8 million, down $4.6 million from $32.4 million in 2010. Year to date, Star Media Group’s earnings were negatively impacted as it absorbed most of the expenses related to the cross-segment digital initiatives in the first quarter. Operating profit before restructuring and other charges was $16.5 million in the second quarter of 2011, up $0.4 million from $16.1 million in the same period last year. Year to date, operating profit before restructuring and other charges was $19.1 million, down $4.7 million from $23.8 million in 2010.

SEGMENT OPERATING RESULTS – BOOK PUBLISHING The Book Publishing Segment reports the results of Harlequin, a leading global publisher of books for women. Harlequin publishes books around the world in a variety of genres and formats, including digital. Harlequin sells books under several imprints including Harlequin, Silhouette, MIRA, HQN, LUNA, Spice, Kimani Press and Carina Press. Harlequin sells books through the retail channel, in stores and online, and directly to the consumer through its direct mail businesses and from its Internet sites (in North America – Harlequin.com). Harlequin’s publishing operations are comprised of two divisions: North America and Overseas.

The following tables set out, in $000’s, a summary of operating results for the Book Publishing Segment and a continuity of revenue and operating profit before restructuring and other charges, including the impact of foreign currency movements, for the three and six months ended June 30, 2011 and 2010.

Second Quarter Year to Date 2011 2010 2011 2010 Operating revenue $110,290 $117,847 $225,675 $230,618

Other operating costs (68,168) (72,205) (135,721) (136,610) Salaries and benefits (24,930) (23,777) (49,872) (47,998) EBITDA 17,192 21,865 40,082 46,010 Amortization & depreciation (872) (1,139) (1,787) (2,115) Operating profit before restructuring and other charges 16,320 20,726 38,295 43,895 Restructuring and other charges (142) (357) Operating profit $16,320 $20,584 $38,295 $43,538

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TORSTAR - Interim Management’s Discussion and Analysis

Second Quarter Year to Date Reported revenue, prior year $117,847 $230,618 Impact of currency movements and foreign exchange contracts (276) (5,622) Change in underlying revenue (7,281) 679 Reported revenue, current year $110,290 $225,675

Reported operating profit before restructuring and other charges, prior year $20,726 $43,895 Impact of currency movements and foreign exchange contracts (949) (4,079) Change in underlying operating profit (3,457) (1,521) Reported operating profit before restructuring and other charges, current year $16,320 $38,295

In the second quarter of 2011, Book Publishing revenues were down $7.3 million excluding the impact of foreign exchange, with North America and Overseas down $4.7 million and $2.6 million respectively. Book Publishing operating profit before restructuring and other charges was down $3.5 million in the second quarter excluding the impact of foreign exchange, with North America down $3.5 million and Overseas flat.

Year to date, Book Publishing revenues were up $0.7 million excluding the impact of foreign exchange, with North America and Overseas up $0.4 million and $0.3 million respectively. Book Publishing operating profit before restructuring and other charges was down $1.5 million year to date excluding the impact of foreign exchange, with North America and Overseas down $1.2 million and $0.3 million respectively.

North American division revenues were down $4.7 million in the second quarter of 2011 but up $0.4 million year to date. Operating profit before restructuring and other charges was down $3.5 million in the second quarter and $1.2 million year to date excluding the impact of foreign exchange. Digital revenues were up $7.3 million in the quarter and $15.0 million year to date reflecting the continued growth of the e-book market. Sales of print books declined in the quarter and year to date. Retail print revenues were down $10.8 million in the quarter and $12.6 million year to date from a combination of the shift in format from physical to digital books and lower positive adjustments to prior year returns provisions compared to the second quarter and first six months of 2010. The second quarter of 2011 also included a negative adjustment to the first quarter returns provision. The rapid shift to digital sales resulted in higher book returns in the Retail print business due to a lower percentage of books sold relative to books distributed in the U.S. market, which had a negative impact on Retail print operating results for the quarter and year to date. Retail print operating profit was also negatively impacted by $0.9 million in the quarter and $1.5 million year to date from the timing of promotional spending. Direct-to-consumer revenues were down $1.2 million in the second quarter and $2.0 million year to date. The traditional direct mail business was down in the quarter and year to date reflecting the ongoing trend in the direct mail business.

Overseas division revenues were down $2.6 million in the second quarter of 2011 but up $0.3 million year to date. Operating profit before restructuring and other charges was flat in the second quarter and down $0.3 million year to date excluding the impact of foreign exchange. Excluding the benefit from the acquisition of the other half of the German business at the beginning of the second quarter of 2010, Overseas revenues were down $3.8 million and operating profit before restructuring and other charges was down $1.0 million year to date. The Overseas print retail businesses were down in the quarter and year to date with declines in France, Germany and the Nordic markets. Offsetting part of this decline was improvement in the U.K. and Japanese digital businesses. The Overseas direct-to-consumer businesses were down slightly in the quarter and overhead costs were down in several markets.

Global digital revenues were 15.0% of total revenue in the second quarter of 2011 and 14.3% year to date, up from 7.0% and 6.4% in the same periods last year.

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TORSTAR - Interim Management’s Discussion and Analysis

LIQUIDITY AND CAPITAL RESOURCES Overview Torstar’s businesses generate a significant amount of cash flow from operations. These funds are generally used for capital expenditures, acquisitions, distributions to shareholders and debt repayment. Long-term debt is used to supplement funds from operations as required, generally for capital expenditures or acquisitions.

Torstar’s long-term debt facility will mature in January 2012. As a result, all $137.3 million of debt outstanding under the facility at June 30, 2011 has been presented as a current obligation.

It is expected that future cash flows from operating activities, combined with the renewal of the long-term debt facility will be adequate to cover forecasted financing requirements. In the second quarter of 2011, $15.0 million of cash was generated from operations, $259.2 million was received from investing activities and $282.7 million was used in financing activities. Cash and cash equivalents net of bank overdraft decreased by $8.1 million in the quarter from $37.3 million to $29.2 million. In the first six months of 2011, $24.0 million of cash was generated from operations, $249.4 million was received from investing activities and $280.9 million was used in financing activities. Cash and cash equivalents net of bank overdraft decreased by $6.8 million in the quarter from $36.0 million to $29.2 million.

Operating Activities Operating activities provided cash of $15.0 million in the second quarter of 2011, down $13.7 million from $28.7 million in the second quarter of 2010. The lower amount in the second quarter of 2011 reflected the higher employee benefits funding and payments for restructuring provisions. Torstar’s non-cash working capital investment increased $19.8 million in the second quarter of 2011. The increase was primarily the result of increased accounts receivable from higher revenue compared with the first quarter, partially offset by an increase in taxes and accounts payable. During the second quarter, $4.0 million was paid against restructuring provisions.

Operating activities provided cash of $24.0 million in the first six months of 2011, down $36.0 million from $60.0 million in the same period last year. The lower amount in 2011 reflected the higher employee benefits funding and payments for restructuring provisions as well as the lower operating results and higher income tax payments. Torstar’s non-cash working capital investment increased $24.5 million in the first six months of 2011. This increase was a combination of first quarter payments of income taxes, restructuring provisions and accounts payable partially offset by lower accounts receivable. During the first six months of 2011, $12.8 million was paid against restructuring provisions.

Investing Activities During the second quarter of 2011, $259.2 million was received from investing activities including $291.6 million of proceeds from the sale of Torstar’s 20% interest in CTV. Excluding the CTV proceeds, $32.4 million of cash was used in investing activities in the second quarter of 2011. This included $8.6 million of additions to property, plant and equipment and intangible assets and $23.8 million for acquisitions.

During the second quarter of 2011, the Media Segment completed several acquisitions including Starmail Distributors (a distribution business operating in the London, Ontario market), Brant News (a community newspaper publishing and flyer distribution business operating in the Brantford area), the remaining 50% of Save.ca (an online coupon website providing consumers with savings on leading packaged goods brands) and exercised its option to purchase an additional 16.67% (bringing Torstar’s ownership interest to 50%) of Tuango (a Quebec-based daily deal business). The Media Segment also made a portfolio investment in Social Game Universe (a Toronto-based developer and publisher of social games). The total purchase price for these acquisitions and investments was $17.5 million of cash and $0.3 million of deferred payments. The Media Segment also made $2.9 million of deferred and contingent purchase payments related to prior year acquisitions. The Book Publishing Segment made a $3.4 million deferred purchase payment in the second quarter related to its prior year acquisition of the remaining 50% of its German publishing business.

During the first six months of 2011, excluding the CTV proceeds, $42.2 million of cash was used in investing activities. This included $17.0 million of additions to property, plant and equipment and intangible assets and $24.9 million for acquisitions.

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TORSTAR - Interim Management’s Discussion and Analysis

Financing Activities Cash of $282.7 million was used in financing activities during the second quarter of 2011 including $273.2 million of debt repayment and $9.9 million for the payment of dividends. During the first six months of 2011, cash of $280.9 million was used in financing activities including $264.6 million of debt repayment and $17.1 million for the payment of dividends. Torstar’s quarterly dividend increased in the second quarter of 2011 from $0.0925 to $0.125 per share.

Net Debt Net debt was $108.1 million at June 30, 2011, down $265.7 million from $373.8 million at March 31, 2011. The $265.7 million decrease in the second quarter included $273.2 million of debt repayment, a reduction of $1.0 million from the strengthening Canadian dollar and an increase of $8.5 million from changes in cash and bank overdraft.

Net debt was $108.1 million at June 30, 2011, down $260.5 million from $368.6 million at December 31, 2010. The $260.5 million decrease year to date included $264.6 million of debt repayment, a reduction of $3.2 million from the strengthening Canadian dollar and an increase of $7.3 million from changes in cash and bank overdraft.

Long-term Debt At June 30, 2011, Torstar had $137.3 million of debt outstanding under its long-term debt facility. As the facility will mature in January 2012, the debt has been classified as current on the June 30, 2011 consolidated statement of financial position. The debt consisted of U.S. dollar bankers’ acceptances of $85.6 million and Canadian dollar bankers’ acceptances of $51.8 million.

During the second quarter of 2011, Torstar received $291.6 million of cash proceeds from the completion of the sale of its interest in CTV to BCE Inc. The cash proceeds were used to repay debt as Canadian dollar bankers’ acceptances came due in early April. With the reduction in debt outstanding Torstar cancelled its $175 million revolving operating loan and reduced its revolving term loan to $275 million (from $425 million) in April. Torstar will renegotiate its long-term debt facility during the second half of 2011. The pricing of the new facility will be at market prices at the time of the negotiation.

Torstar’s long-term credit facility of $275 million also acts as a standby line in support of letters of credit. At June 30, 2011, a total of $165.5 million was drawn under the facility, including a $25.2 million letter of credit relating to an executive retirement plan, leaving $109.5 million of available credit.

Contractual Obligations The changes in Torstar’s significant contractual obligations during the first six months of 2011 included additional office leases for the Media Segment’s digital businesses and new minimum revenue share obligations for Olive Media. The acquisitions obligations have been updated for new acquisition obligations related to current year acquisitions in the Media Segment and also to include contingent consideration provisions related to prior year acquisitions.

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TORSTAR - Interim Management’s Discussion and Analysis

As of June 30, 2011, Torstar has the following significant contractual obligations (in $000’s1):

Nature of the Balance of Obligation Total 2011 2012–2013 2014–2015 2016 + Office leases $137,704 $9,056 $37,166 $33,805 $57,677 Services 14,437 3,544 6,485 3,512 896 Acquisitions 13,913 707 13,206 Equipment leases 1,491 396 885 210 Subtotal 167,545 13,703 57,742 37,527 58,573 Foreign currency forward contracts: - payments 51,446 15,911 35,535 - receipts (55,773) (17,579) (38,194) - net (4,327) (1,668) (2,659) US $ Interest rate swaps 12,352 1,603 6,412 4,337 Long-term debt 137,341 137,341 Total $312,911 $13,638 $198,836 $41,864 $58,573

1 All foreign denominated obligations were translated at the June 30, 2011 spot rates.

Funding of Post Employment Benefits Torstar’s current funding obligation for its defined benefit pension plans is approximately $50.0 million for 2011 based on actuarial reports that were completed as of December 31, 2009. However, the most significant group of Torstar’s defined benefit pension plans (in terms of assets and obligations) is required to prepare another set of actuarial reports as of December 31, 2010. It is expected that these reports will be completed during the third quarter of 2011. These reports will determine the actual funding required for the defined benefit pension plans in 2011. Torstar anticipates that the actual funding will not be materially different from the $50.0 million.

FINANCIAL INSTRUMENTS Foreign Exchange During the second quarter of 2011, Torstar realized a gain of $0.8 million on forward foreign exchange contracts to sell $9.8 million U.S. dollars at an average rate of $1.06. In the second quarter of 2010, Torstar realized a gain of $1.4 million on forward foreign exchange contracts to sell $13.4 million U.S. dollars at an average rate of $1.14.

During the first six months of 2011, Torstar realized a gain of $1.7 million on forward foreign exchange contracts to sell $19.0 million U.S. dollars at an average rate of $1.06. In the first six months of 2010, Torstar realized a gain of $4.3 million on forward foreign exchange contracts to sell $24.8 million U.S. dollars at an average rate of $1.20.

Torstar has entered into forward foreign exchange contracts to sell $16.5 million U.S. dollars during the second half of 2011 at an average rate of $1.07, $31.9 million U.S. dollars in 2012 at an average rate of $1.04 and $5.0 million U.S. dollars in 2013 at an average rate of $1.02. These U.S. dollar contracts are designated as revenue hedges for accounting purposes and any resulting gains or losses are recognized in Book Publishing revenues as realized.

OUTLOOK After the first six months of 2011, there is still limited visibility on the print advertising environment, the pace of economic recovery and their related impact on the full year revenue for the Media Segment. Digital revenues grew 32.4% in the first six months and this trend is generally expected to continue in the second half of the year. Net investment spending was increased in the Media Segment in the first six months to support future growth in digital and other areas. Torstar expects to invest between $5 million and $10 million on such initiatives over the course of the year. For the balance of the year, pension expense is expected to be $0.8 million higher for the segment, while newsprint pricing is expected to remain flat. Cost savings from restructuring initiatives are expected to be $5.5 million through the next six months.

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TORSTAR - Interim Management’s Discussion and Analysis

After the first six months of 2011, Harlequin’s operating results are down $1.5 million compared to 2010 excluding the impact of foreign exchange. The transition from printed books to digital has been very rapid. Harlequin has been adjusting the volume of printed books distributed into the market and expects to see lower book returns relative to books distributed which should contribute to better year over year operating results in the second half of the year. This is anticipated to result in full year earnings being flat to slightly up excluding the impact of foreign exchange. Relative to prior year and excluding the negative impact of foreign exchange, fourth quarter earnings are expected to be stronger than third quarter earnings. If the Canadian dollar remains at its current levels relative to the U.S. dollar and overseas currencies, Harlequin anticipates a year over year negative foreign exchange impact of approximately $7.7 million (including the $4.1 million realized in the first six months), including the impact of the U.S. dollar hedges currently in place. The negative impact of foreign exchange is expected to be similar in both the third and fourth quarters.

SUMMARY OF QUARTERLY RESULTS The following table presents, in $000’s (except for per share amounts) selected financial information for each of the eight most recently completed quarters:

Quarter Ended June 30/11 March 31/11 Dec 31/10 Sept 30/10

Revenue $393,322 $351,422 $417,530 $353,710 Net income $228,435 $15,388 $36,633 $14,686

Net income attributable to equity shareholders per Class A voting and Class B non-voting share Basic $2.87 $0.20 $0.46 $0.18 Diluted $2.85 $0.19 $0.45 $0.18

Quarter Ended1 June 30/10 March 31/10 Dec 31/09 Sept 30/09

Revenue $377,561 $334,967 $394,785 $343,734 Net income (loss) $23,664 $16,552 $57,355 $4,037

Net income (loss) attributable to equity shareholders per Class A voting and Class B non-voting share Basic $0.30 $0.21 $0.73 $0.05 Diluted $0.29 $0.21 $0.73 $0.05

1 The quarters ended Sept 30/09 and Dec 31/09 have not been restated to IFRS and are as originally reported under Canadian GAAP.

The summary of quarterly results illustrates the cyclical nature of revenues and operating profit in the Media Segment. The fourth and second quarters are generally the strongest for the media businesses with the third quarter being the softest. The revenue declines realized in 2009 from the weak economy have masked some of the quarterly cyclical impact over the past two years. Book Publishing revenues will vary each quarter depending on the publishing schedule and the impact of foreign exchange rates.

The lower revenues in the Media Segment in 2009 had a negative impact on net income during that period. In addition, restructuring and other charges have impacted the level of net income in several quarters. In 2011, the first and second quarters had restructuring and other charges of $0.4 million and $3.4 million respectively. In 2010, the first, second, third and fourth quarters had restructuring and other charges of $8.5 million, $4.1 million, $2.5 million and $17.5 million respectively. In 2009, the third and fourth quarters had restructuring and other charges of $1.1 million and $13.0 million respectively.

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TORSTAR - Interim Management’s Discussion and Analysis

Net income for the 2009 quarters is not comparable to the 2010 and 2011 quarters as the 2009 quarters have not been restated to IFRS. Due to certain adjustments recorded on the transition to IFRS, Torstar’s pension expense and depreciation are significantly lower than they were under Canadian GAAP. These lower expenses, net of income taxes, result in the 2009 net income being lower than it would be were those quarters restated to IFRS.

During the second quarter of 2011, Torstar reported a gain of $190.1 million on the sale of its 20% interest in CTV. There were no taxes provided against the gain so the full amount was included in net income for that quarter. Net income in the first and second quarters of 2011 and the fourth quarter of 2010 compared with the first and second quarters of 2010 and the fourth quarter of 2009 respectively was also impacted by the level of income (loss) of associated businesses in those quarters as a result of Torstar ceasing to equity account for its investment in CTV on September 10, 2010. In the second quarter of 2011, Torstar reported a $0.6 million loss of associated businesses compared with a loss of $7.1 million in the second quarter of 2010. In the first quarter of 2011, Torstar reported a $0.6 million loss of associated businesses compared with a loss of $4.6 million in the first quarter of 2010. In the fourth quarter of 2010, Torstar reported a $0.4 million loss of associated businesses compared with income of $30.4 million in the fourth quarter of 2009.

CHANGES IN ACCOUNTING STANDARDS Adoption of IFRS Torstar was required to prepare financial statements in accordance with IFRS starting with the interim financial statements for the quarter ended March 31, 2011. These statements required the 2010 results to be restated in accordance with IFRS.

Detailed notes on the changes to previously reported amounts were included in the notes to the condensed consolidated financial statements for the period ended March 31, 2011. There is additional disclosure related to the three and six months ended June 30, 2010 and as of June 30, 2010 in the condensed consolidated financial statements for the period ended June 30, 2011. Both sets of statements were filed on SEDAR and are also available on Torstar’s website www.torstar.com.

The 2011 first quarter interim MD&A provided selected restated 2010 results by quarter. An adjustment of $0.3 million per quarter has been made to the allocation of corporate expenses between salaries and benefits and other operating costs.

Further IFRS Changes

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

IAS 12 Income Taxes In December 2010, the IASB amended IAS 12 for the recovery of underlying assets and the impact on deferred taxes. The amendments provide a solution to the problem of assessing whether recovery would be through use or through sale when the asset is measured at fair value under IAS 40 Investment Property, by adding the presumption that the recovery would normally be through sale. The amendment also incorporates the remaining guidance in SIC-21 Income Taxes – Recovery of Revalued Non-depreciable Assets, as SIC-21 has been withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1, 2012. Torstar is in the process of reviewing the amendment to determine the impact on the consolidated financial statements.

IFRS 9 Financial Instruments: Classification and Measurement In November 2009, the IASB issued IFRS 9, which covers classification and measurement as the first part of its project to replace IAS 39. In October 2010, the Board also incorporated new accounting requirements for liabilities. The standard introduces new requirements for measurement and eliminates the current classification of

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 15

TORSTAR - Interim Management’s Discussion and Analysis

loans and receivables, available-for-sale and held-to-maturity, currently in IAS 39. There are new requirements for the accounting of financial liabilities as well as a carryover of requirements from IAS 39. Torstar does not anticipate early adoption and will adopt the standard on the effective date of January 1, 2013. Torstar is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

In May 2011, the IASB issued the following standards which are effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. Torstar is in the process of reviewing the standards to determine the impact on the consolidated financial statements.

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

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

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

IFRS 13 Fair Value Measurement IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement.

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

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

In June 2011, the IASB amended the following standards, which Torstar is in the process of reviewing to determine the impact on the consolidated financial statements.

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

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

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TORSTAR - Interim Management’s Discussion and Analysis

RISKS AND UNCERTAINTIES Other than the two updates that follow, there have been no material changes in any risks or uncertainties facing Torstar since the year ended December 31, 2010.

Labour Disruptions During the first six months of 2011, Metroland Media Group reached six new collective agreements covering approximately 240 employees within the community newspapers whose contracts had expired by the end of 2010. A first contract covering approximately 31 editorial employees in Ottawa was also reached in the first quarter. Negotiations are not yet scheduled for seven agreements covering approximately 240 employees at the daily newspapers whose contracts expired at the end of 2010 (four agreements, approximately 150 employees) and in May 2011 (three agreements, approximately 90 employees).

Reliance on Printing Operations During the second quarter of 2011, Harlequin’s North American third party printer, Quad/Graphics, Inc., announced the closure of its printing facility in Depew, New York that has printed Harlequin’s mass market paperback books for many years. Harlequin’s printing will be transitioned to another Quad/Graphics, Inc. facility and Harlequin is not anticipating any disruptions to its business from the transition.

CONTROLS AND PROCEDURES Changes in Internal Control over Financial Reporting There have been no changes in Torstar’s internal controls over financial reporting that occurred during the second quarter of 2011, the most recent interim period, that have materially affected, or are reasonably likely to materially affect, Torstar’s internal controls over financial reporting.

OTHER Share Data At June 30, 2011, Torstar had 9,870,667 Class A voting shares and 69,636,559 Class B non-voting shares outstanding. More information on Torstar’s share capital is provided in Note 13 of the condensed consolidated financial statements for the period ended June 30, 2011.

At June 30, 2011, Torstar had 4,173,497 options to purchase Class B non-voting shares outstanding to executives and non-executive directors. More information on Torstar’s stock option plan is provided in Note 14 of the condensed consolidated financial statements for the period ended June 30, 2011.

Additional information relating to Torstar including the Annual Information Form is available on SEDAR at www.sedar.com and on Torstar’s corporate website at www.torstar.com.

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 17

TORSTAR - Condensed Consolidated Financial Statements

Torstar Corporation Consolidated Statement of Financial Position (Thousands of Canadian Dollars) (Unaudited) June 30 December 31 January 01 2011 2010 2010

Assets Current: Cash and cash equivalents $32,610 $42,991 $39,158 Receivables (note 11) 251,406 266,436 250,289 Inventories (note 4) 31,010 34,294 33,953 Derivative financial instruments (note 11) 3,861 3,354 6,067 Prepaid expenses and other current assets 48,737 49,439 48,913 Prepaid and recoverable income taxes 2,201 3,013 2,997 Total current assets 369,825 399,527 381,377

Property, plant and equipment (note 6) 169,154 171,543 177,493 Investment in associated businesses (note 7) 1,014 2,201 170,783 Derivative financial instruments (note 11) 1,471 Intangible assets (note 8) 67,454 61,522 54,094 Goodwill (note 9) 597,042 594,303 580,302 Other assets 18,675 1,118 2,089 Deferred income tax assets 82,945 84,804 84,950 Investment in CTV Inc. − classified as held for sale (note 7) 98,945

Total assets $1,306,109 $1,413,963 $1,452,559

Liabilities and Equity Current: Bank overdraft $3,418 $6,958 $2,052 Current portion of long-term debt (note 10) 137,341 Accounts payable and accrued liabilities 190,554 212,293 194,348 Derivative financial instruments (note 11) 4,947 Provisions (note 17) 23,392 21,170 27,966 Income tax payable 17,344 33,239 19,172 Total current liabilities 372,049 278,607 243,538

Long-term debt (note 10) 404,586 551,240 Derivative financial instruments (note 11) 7,787 7,647 16,633 Provisions (note 17) 10,392 20,923 2,095 Other liabilities 16,846 21,967 17,548 Employee benefits (note 16) 202,602 207,768 186,952 Deferred income tax liabilities 10,632 9,621 8,267

Equity: Share capital (note 13) 395,190 392,816 391,626 Contributed surplus 14,018 13,235 12,182 Retained earnings 285,547 70,392 33,702 Accumulated other comprehensive loss (note 15) (11,170) (15,724) (12,530) Total equity attributable to equity shareholders 683,585 460,719 424,980 Minority interests 2,216 2,125 1,306 Total equity 685,801 462,844 426,286

Total liabilities and equity $1,306,109 $1,413,963 $1,452,559 (see accompanying notes)

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Torstar Corporation Consolidated Statement of Income (Thousands of Canadian Dollars except per share amounts) (Unaudited) Three months ended Six months ended June 30 June 30 2011 2010 2011 2010

Operating revenue $393,322 $377,561 $744,744 $712,528

Other operating costs (199,086) (181,791) (386,589) (348,374) Salaries and benefits (128,545) (124,961) (250,785) (244,383) Amortization and depreciation (7,686) (7,884) (15,466) (16,273) Restructuring and other charges (note 17) (3,386) (4,128) (3,787) (12,603) Operating profit 54,619 58,797 88,117 90,895 Interest and financing costs (note 10(d)) (2,039) (6,636) (12,754) (10,945) Foreign exchange 856 (5,798) 1,624 (2,978) Loss of associated businesses (note 7) (624) (7,099) (1,187) (11,656) Gain on sale of CTV Inc. (note 19) 190,123 190,123 Income before taxes 242,935 39,264 265,923 65,316 Income and other taxes (note 5) (14,500) (15,600) (22,100) (25,100) Net income $228,435 $23,664 $243,823 $40,216

Attributable to: Equity shareholders $228,260 $23,408 $243,732 $39,869 Minority interests $175 $256 $91 $347

Net income attributable to equity shareholders per Class A (voting) and Class B (non-voting) share (note 13(b)): Basic $2.87 $0.30 $3.07 $0.50 Diluted $2.85 $0.29 $3.05 $0.50 (see accompanying notes)

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TORSTAR - Condensed Consolidated Financial Statements

Torstar Corporation Consolidated Statement of Comprehensive Income (Thousands of Canadian Dollars) (Unaudited) Three months ended Six months ended June 30 June 30 2011 2010 2011 2010

Net income $228,435 $23,664 $243,823 $40,216

Other comprehensive income (loss):

Exchange differences on translation of foreign operations (no income tax effect) (504) 7,183 (3,850) 976

Net gain (loss) on available-for-sale financial assets (no income tax effect) (1) 41 (6) 10

Net movement on cash flow hedges (1,474) (5,502) 5,314 (5,117) Income tax effect 400 1,565 (1,500) 1,408

Net movement on cash flow hedges for associated businesses (no income tax effect) 1,332 2,429

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

Unrealized gain on hedge of net investment 600 2,424 Income tax effect (50) (350)

Actuarial losses on employee future benefits (31,010) (74,970) (15,120) (102,440) Income tax effect 7,800 18,910 3,800 25,840

Other comprehensive loss, net of tax (21,717) (51,441) (6,766) (76,894)

Comprehensive income (loss), net of tax $206,718 ($27,777) $237,057 ($36,678)

Attributable to: Equity shareholders $206,543 ($28,033) $236,966 ($37,025) Minority interests $175 $256 $91 $347 (see accompanying notes)

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Torstar Corporation Consolidated Statement of Changes in Equity (Thousands of Canadian Dollars) (Unaudited) Accumulated Total other attributable Share Contributed Retained comprehensive to equity Minority Total capital surplus earnings loss shareholders interests equity

At December 31, 2010 $392,816 $13,235 $70,392 ($15,724) $460,719 $2,125 $462,844

Net income for the period 243,732 243,732 91 243,823 Other comprehensive income (loss) (11,320) 4,554 (6,766) (6,766) Total comprehensive income 232,412 4,554 236,966 91 237,057 Dividends (note 13) 151 (17,257) (17,106) (17,106) Exercise of share options (note 13) 361 (50) 311 311 Issue of share capital – other (note 13) 1,862 1,862 1,862 Share-based compensation expense 833 833 833

At June 30, 2011 $395,190 $14,018 $285,547 ($11,170) $683,585 $2,216 $685,801

At January 1, 2010 $391,626 $12,182 $33,702 ($12,530) $424,980 $1,306 $426,286

Net income for the period 39,869 39,869 347 40,216 Other comprehensive loss (76,600) (294) (76,894) (76,894) Total comprehensive income (loss) (36,731) (294) (37,025) 347 (36,678) Dividends (note 13) 113 (14,624) (14,511) (14,511) Issue of share capital – other (note 13) 894 894 894 Share-based compensation expense 489 489 489

At June 30, 2010 $392,633 $12,671 ($17,653) ($12,824) $374,827 $1,653 $376,480 (see accompanying notes)

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Torstar Corporation Consolidated Statement of Cash Flows (Thousands of Canadian Dollars) (Unaudited) Three months ended Six months ended June 30 June 30 2011 2010 2011 2010

Cash was provided by (used in) Operating activities $15,000 $28,669 $24,029 $60,016 Investing activities 259,168 (5,109) 249,434 (8,493) Financing activities (282,664) (23,966) (280,899) (48,098) Increase (decrease) in cash (8,496) (406) (7,436) 3,425 Effect of exchange rate changes 423 117 595 (1,468) Cash, beginning of period 37,265 39,352 36,033 37,106 Cash, end of period $29,192 $39,063 $29,192 $39,063 Operating activities: Net income $228,435 $23,664 $243,823 $40,216 Depreciation and amortization (notes 6 and 8) 7,686 7,884 15,466 16,273 Deferred income taxes (note 5) 800 4,000 4,100 5,400 Loss of associated businesses (note 7) 624 7,099 1,187 11,656 Gain on sale of CTV Inc. (note 19) (190,123) (190,123) Non-cash employee benefit expense (note 16) 3,662 3,228 7,344 6,461 Employee benefits funding (note 16) (14,543) (4,805) (27,308) (9,777) Other (note 18) (1,763) 7,707 (6,005) 6,953 34,778 48,777 48,484 77,182 Increase in non-cash working capital (19,778) (20,108) (24,455) (17,166) Cash provided by operating activities $15,000 $28,669 $24,029 $60,016 Investing activities: Additions to property, plant and equipment and intangible assets ($8,586) ($5,816) ($17,036) ($9,004) Proceeds from sale of CTV Inc. (note 19) 291,590 291,590 Acquisitions and investments (note 20) (23,826) (5,508) (24,917) (5,704) Proceeds from mortgage receivable 6,215 6,215 Other (10) (203) Cash provided by (used in) investing activities $259,168 ($5,109) $249,434 ($8,493) Financing activities: Issuance of bankers’ acceptances $8,521 Repayment of bankers’ acceptances ($273,165) ($16,673) (273,165) ($33,890) Dividends paid (9,859) (7,236) (17,106) (14,511) Exercise of share options 311 Other 360 (57) 540 303 Cash used in financing activities ($282,664) ($23,966) ($280,899) ($48,098)

Cash represented by: Cash $24,952 $31,940 $24,952 $31,940 Cash equivalents – short-term deposits 7,658 9,416 7,658 9,416 Cash and cash equivalents 32,610 41,356 32,610 41,356 Bank overdraft (3,418) (2,293) (3,418) (2,293) $29,192 $39,063 $29,192 $39,063 (see accompanying notes)

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 22

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands of Canadian dollars)

(Unaudited)

1. CORPORATE INFORMATION Torstar Corporation is incorporated under the laws of Ontario, Canada and its Class B (non-voting) shares are publicly traded on the Toronto Stock Exchange. The condensed consolidated financial statements for the six months ended June 30, 2011 include the accounts of the Company and all its subsidiaries and joint ventures. The registered office is located at One Yonge Street, Toronto, Canada. The principal activities of the Company and its subsidiaries are described in Note 21.

The consolidated financial statements of the Company as at and for the year ended December 31, 2010 prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) are available at www.sedar.com and on the Company’s corporate website at www.torstar.com.

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

These condensed consolidated financial statements have been authorized for issue in accordance with a resolution from the Board of Directors on July 28, 2011.

3. ACCOUNTING POLICIES Changes in accounting standards

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

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

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withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1, 2012. The Company is in the process of reviewing the amendment to determine the impact on the consolidated financial statements.

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

In May 2011, the IASB issued the following standards which are effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company is in the process of reviewing the standards to determine the impact on the consolidated financial statements:

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

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

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

IFRS 13 Fair Value Measurement IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement.

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

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

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 24

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

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

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

4. INVENTORIES June 30, 2011 December 31, 2010 January 1, 2010 Finished goods $9,642 $10,681 $11,164 Work in progress 9,722 11,013 11,292 Raw materials 11,646 12,600 11,497 $31,010 $34,294 $33,953

The Company has expensed inventory costs of $102.7 million for the six months ended June 30, 2011 (2010 - $98.6 million) and $52.7 million for the three months ended June 30, 2011 (2010 - $51.7 million). The Company recorded an inventory write-down of $1.4 million for the six months ended June 30, 2011 (2010 - $1.6 million) and $0.8 million for the three months ended June 30, 2011 (2010 - $0.8 million).

5. INCOME TAXES Income tax expense is made up of the following:

Three months ended June 30 Six months ended June 30 2011 2010 2011 2010 Current income tax expense (recovery): Current year $13,400 $12,100 $17,700 $20,200 Adjustment for prior years 300 (500) 300 (500) 13,700 11,600 18,000 19,700 Deferred income tax expense (recovery): Origination and reversal of temporary differences 2,100 3,800 5,700 5,200 Recognition of previously unrecognized tax losses (1,100) (200) (1,400) (200) Adjustment for prior years (200) 400 (200) 400 800 4,000 4,100 5,400 Income tax expense 14,500 15,600 22,100 25,100

Current income tax expense in OCI 200 Deferred income tax recovery in OCI (8,150) (20,475) (2,150) (27,248) Income tax expense in OCI (8,150) (20,475) (1,950) (27,248)

Total income taxes $6,350 ($4,875) $20,150 ($2,148)

The Company sold its 20% interest in CTV in April 2011 and recognized a gain of $190.1 million which was not subject to tax, as the Company had previously written down the cost of the investment below its tax basis. The Company realized a capital loss for tax purposes of $45.6 million on the disposition. No tax benefit has been recognized on $37.5 million of the capital loss.

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6. PROPERTY, PLANT AND EQUIPMENT Building and Machinery leasehold and Land improvements equipment Total Cost Balance at January 1, 2010 $6,836 $135,358 $207,058 $349,252 Acquisitions 33 33 Additions 4,109 12,196 16,305 Disposals (85) (3,499) (12,140) (15,724) Reclassifications 384 (2,099) (1,715) Foreign exchange (132) (563) (1,253) (1,948) Balance at December 31, 2010 6,619 135,789 203,795 346,203 Acquisitions 424 424 Additions 2,120 5,829 7,949 Disposals (34) (34) Reclassifications 246 728 974 Foreign exchange (77) (302) (543) (922) Balance at June 30, 2011 $6,542 $137,853 $210,199 $354,594 Depreciation and impairment Balance at January 1, 2010 $48,513 $123,246 $171,759 Additions 6,979 14,830 21,809 Disposals (3,271) (12,015) (15,286) Reclassifications (112) (2,138) (2,250) Foreign exchange (434) (938) (1,372) Balance at December 31, 2010 51,675 122,985 174,660 Acquisitions 107 107 Additions 3,543 6,892 10,435 Disposals (32) (32) Reclassifications 87 759 846 Foreign exchange (236) (340) (576) Balance at June 30, 2011 $55,069 $130,371 $185,440 Net book value At January 1, 2010 $6,836 $86,845 $83,812 $177,493 At December 31, 2010 $6,619 $84,114 $80,810 $171,543 At June 30, 2011 $6,542 $82,784 $79,828 $169,154

7. INVESTMENT IN ASSOCIATED BUSINESSES The Company’s Investment in associated businesses includes a 33.33% equity interest in Canadian Press Enterprises Inc. (“Canadian Press”), a 19.35% equity interest in Black Press Ltd. (“Black Press”) and a 30% equity interest in Q-ponz Inc. (“Q-ponz”). The Company’s 20% equity interest in CTV Inc. (“CTV”) was also classified as an investment in associated businesses until September 10, 2010 when it was classified as held for sale.

The following is a continuity of Investment in associated businesses:

Three months ended June 30 Six months ended June 30 2011 2010 2011 2010 Balance, beginning of period $1,638 $167,323 $2,201 $170,783 Loss of associated businesses (624) (7,099) (1,187) (11,656) Change in investees’ AOCI 1,332 2,429 Balance, end of period $1,014 $161,556 $1,014 $161,556

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8. INTANGIBLE ASSETS Non- Amortizable amortizable Software Other Total Total Cost Balance at January 1, 2010 $25,132 $65,816 $19,041 $84,857 $109,989 Acquisitions – business combinations 4,071 413 2,704 3,117 7,188 Additions – internally developed 4,195 4,195 4,195 Additions – purchased 6,473 6,473 6,473 Disposals (4,363) (4,363) (4,363) Reclassifications 1,581 1,581 1,581 Foreign exchange 45 (241) 21 (220) (175) Balance at December 31, 2010 29,248 73,874 21,766 95,640 124,888 Acquisitions – business combinations 800 900 900 1,700 Additions – internally developed 3,168 3,168 3,168 Additions – purchased 5,919 5,919 5,919 Reclassifications 220 (9) 211 211 Foreign exchange 146 (51) 26 (25) 121 Balance at June 30, 2011 $30,194 $83,130 $22,683 $105,813 $136,007 Amortization and impairment Balance at January 1, 2010 $1,633 49,333 $4,929 $54,262 $55,895 Amortization 6,401 3,282 9,683 9,683 Impairment loss 90 90 Disposals (4,363) (4,363) (4,363) Reclassifications 2,250 2,250 2,250 Foreign exchange (182) (7) (189) (189) Balance at December 31, 2010 1,723 53,439 8,204 61,643 63,366 Amortization 3,289 1,742 5,031 5,031 Reclassifications 190 190 190 Foreign exchange (38) 4 (34) (34) Balance at June 30, 2011 $1,723 $56,880 $9,950 $66,830 $68,553 Net book value At January 1, 2010 $23,499 $16,483 $14,112 $30,595 $54,094 At December 31, 2010 $27,525 $20,435 $13,562 $33,997 $61,522 At June 30, 2011 $28,471 $26,250 $12,733 $38,983 $67,454

9. GOODWILL Goodwill Cost and net book value: Balance at January 1, 2010 $580,302 Acquisitions – business combinations 14,197 Foreign exchange and other (196) Balance at December 31, 2010 594,303 Acquisitions – business combinations 2,363 Foreign exchange and other 376 Balance at June 30, 2011 $597,042

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10. LONG-TERM DEBT June 30, December 31, January 1, 2011 2010 2010 Bankers’ acceptance: Cdn. dollar denominated $51,756 $320,998 $381,819 U.S. dollar denominated 85,585 83,588 92,951 $137,341 $404,586 $474,770 Medium term notes: Cdn. Dollar denominated 75,000 Fair value hedge 1,470 76,470 $137,341 $404,586 $551,240

Current $137,341 Long-term $404,586 $551,240

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

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

iii. In September 2006, the Company entered into interest rate swap agreements for five years through September 2011, with major Canadian chartered banks that fix the interest rate on $250 million of Canadian dollar borrowings. As a result, the Company paid quarterly a fixed rate of 4.3% per annum (plus the interest rate spread referred to in 10(a)(ii)) and received quarterly floating rate payments based on 90 day bankers’ acceptance rates. These swap contracts were designated as cash flow hedges until the Company extinguished these swap agreements in March 2011 and paid $3.8 million, which has been included in interest expense. The fair value of these swap agreements was $4.9 million unfavourable at December 31, 2010.

iv. The average rate on Canadian dollar bank borrowings outstanding at June 30, 2011 was 1.7% (December 31, 2010 – 2.7%; 5.3% including the effect of the interest rate swap noted in 10(a)(iii)).

v. In May 2008, the Company entered into two interest rate swap agreements that fix the interest rate on U.S. $80 million of borrowings at approximately 4.2% (plus the interest rate spread referred to in 10(a)(ii)) for seven years ending May 2015. These swaps have been designated as cash flow hedges. The fair value of the U.S. interest rate swap arrangements at June 30, 2011 was $7.8 million unfavourable (December 31, 2010 – $7.6 million unfavourable).

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vi. Bank debt outstanding at June 30, 2011 included U.S. dollar borrowings of U.S. $88.9 million (December 31, 2010 – U.S. $84.2 million) at an average rate of 0.7% (December 31, 2010 – 1.9%). Including the effect of the interest rate swap noted in 10(a)(v) the effective rate was 4.5% at June 30, 2011 (December 31, 2010 – 5.8%).

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

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

(d) Interest expense for the six month period ended June 30, 2011 consists of interest on long-term debt of $11.4 million, including the $3.8 million paid to extinguish the swap agreements in 10(a)(iii), (2010 – $10.9 million) and interest accretion costs of $1.4 million (2010 – $nil). Interest expense for the three month period ended June 30, 2011 consists of interest on long-term debt of $1.4 million (2010 – $6.6 million) and interest accretion costs of $0.7 million (2010 – $nil)

(e) Interest paid during the six month period ended June 30, 2011 (excluding the $3.8 million paid to extinguish the swap agreements in 10(a)(iii)) was $7.7 million (2010 – $11.3 million).

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 29

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11. FINANCIAL INSTRUMENTS

Fair value of financial instruments

The carrying values of the Company’s financial instruments approximate their fair values unless otherwise noted.

June 30, December 31, January 1, 2011 2010 2010 Financial assets: Loans and receivables, measured at amortized cost: Cash and cash equivalents $32,610 $42,991 $39,158

Trade accounts receivable 245,215 256,922 236,718 Other receivables 6,191 9,514 13,571 Receivables 251,406 266,436 250,289 Available-for-sale, measured at cost: Portfolio investments 525¹ 98,945 811¹ Available-for-sale, measured at fair value: Portfolio investments¹ 196 203 72 Derivatives designated as effective hedges, measured at fair value: Foreign currency forward contracts 3,861 3,354 6,067 Interest rate swaps – cash flow hedges (current) (4,947) Interest rate swaps – cash flow hedges (non-current) (7,787) (7,647) (16,632) Interest rate swaps – fair value hedges (non-current) 1,470 Derivatives Other (non-current) 1 Other (non-current) (1) Other financial liabilities, measured at amortized cost: Bank overdraft 3,418 6,958 2,052 Current portion of long-term debt 137,341 Long term debt 404,586 551,240 Accounts payable and accrued liabilities 190,554 212,293 194,348 Deferred payments on acquisitions¹ 3,984 3,667 Provisions (current) 23,392 21,170 27,966 Provisions (non-current) 10,392 20,923 2,095 ¹ These amounts are included in Other assets or Other liabilities

Risk management

The Company is exposed to various risks related to its financial assets and liabilities. These risk exposures are managed on an ongoing basis.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due or at a reasonable cost. The Company manages liquidity risk primarily by maintaining sufficient unused capacity within its long term credit facilities. The unused capacity at June 30, 2011 was approximately $110 million (December 31, 2010 - $173 million). The credit facilities mature in January 2012 and the Company has the intention to renegotiate the renewal during the second half of 2011.

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 30

TORSTAR - Condensed Consolidated Financial Statements

Credit risk

In the normal course of business, the Company is exposed to credit risk from its accounts receivable from customers. The carrying amounts for accounts receivable are net of applicable allowances for doubtful accounts and returns, which are estimated based on past experience, specific risks associated with the customer and other relevant information.

The Company is also exposed to credit-related losses in the event of non-performance by counterparties to derivative instruments. The Company manages its counterparty risk by only contracting with major financial institutions with high credit ratings, as approved by the Board of Directors, as counterparties.

The maximum exposure to credit risk is the carrying value of these financial assets.

The following table sets out details of the age of trade receivables and provision for doubtful debts and book returns:

June 30, 2011 December 31, 2010 January 1, 2010 Gross accounts receivable: Current $245,929 $263,012 $250,421 Up to three months past due date 95,121 97,355 86,861 Three to twelve months past due date 6,596 6,483 4,522 Impaired 7,027 6,905 6,051 354,673 373,755 347,855 Allowance for doubtful accounts (14,546) (14,247) (13,478) Book returns provision (94,912) (102,586) (97,659) $245,215 $256,922 $236,718

Market risk

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

a) Foreign currency risk The Company is exposed to foreign currency risk through Harlequin’s international operations. The most significant foreign currency exposure is to movements in the U.S. dollar/Cdn. dollar exchange rate. To manage this exchange risk in its operating results, the Company’s practice is to enter into forward foreign exchange contracts to hedge a portion of its U.S dollar revenues as detailed below. From time to time, the Company may also enter into forward foreign exchange contracts to hedge other currencies (Yen, Euro, Pound Sterling) realized in Harlequin’s overseas operations. A $0.05 higher (lower) average U.S. dollar/Cdn. dollar exchange rate during the six month period ended June 30, 2011 would have increased (decreased) net income by approximately $0.6 million (2010 – $0.4 million). The Company has entered into forward foreign exchange contracts to allow it to convert a portion of its expected future U.S. dollar revenue into Canadian dollars. The forward foreign exchange contracts establish a rate of exchange of Canadian dollar per U.S. dollar of $1.07 for U.S. $35.5 million in 2011, $1.04 for U.S. $31.9 million in 2012 and $1.02 for U.S. $5.0 million in 2013 (December 31, 2010 – $1.07 for U.S. $35.5 million in 2011 and $1.07 for U.S. $19.0 million in 2012). These forward foreign exchange contracts have been designated as cash flow hedges and the net fair value of these contracts was $3.9 million favourable at June 30, 2011 (December 31, 2010 – $3.4 million favourable). In order to offset the exchange risk on its consolidated statement of financial position from net U.S. dollar denominated assets, the Company maintains a certain level of U.S. dollar denominated debt as indicated in Note 10(a)(vi). Effective January 1, 2011, the Company has designated $80 million of its U.S. dollar debt as a hedge of its U.S. dollar denominated net investment in subsidiaries with the U.S. dollar as their functional currency. Gains or losses on the translation of the designated hedge amount are transferred to OCI to offset

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 31

TORSTAR - Condensed Consolidated Financial Statements

any gains or losses on translation of the net investments in subsidiaries with the U.S. dollar as their functional currency. There was no hedge ineffectiveness in the six month period ended June 30, 2011. b) Interest rate risk The Company’s interest rate risk arises from borrowings issued at variable rates which expose the Company to cash flow interest rate risk. The Company manages this risk through the use of interest rate swap contracts to fix the interest rate on a portion of the debt as detailed in Note 10. An assumed increase of 1% in the Company’s short term borrowing rates during the six month period ended June 30, 2011 would have decreased net income by $0.6 million (2010 – $0.7 million), with an equal but opposite effect for an assumed decrease of 1% in short term borrowing rates.

12. CAPITAL MANAGEMENT The Company’s capital management objectives are to maintain financial flexibility in order to preserve its capacity to meet its financial commitments, to pay dividends and to meet its potential obligations resulting from internal growth and acquisitions.

The Company defines capital as: • Total equity • Long term debt • Bank overdraft net of cash and cash equivalents

Total managed capital was as follows: June 30, 2011 December 31, 2010 January 1, 2010 Total equity $685,801 $462,844 $426,286 Long term debt (including current portion) 137,341 404,586 551,240 Bank overdraft 3,418 6,958 2,052 Cash and cash equivalents (32,610) (42,991) (39,158) $793,950 $831,397 $940,420 The Company manages its capital structure in accordance with changes in economic conditions. In order to maintain or adjust its capital structure, subject to capital market conditions, the Company may elect to adjust the amount of debt outstanding, adjust the amount of dividends paid to shareholders, return capital to its shareholders, repurchase its shares in the marketplace or issue new shares.

The Company is currently meeting all its financial commitments. The Company’s credit facilities are subject to financial tests and other covenants with which it was in compliance at June 30, 2011.

There have been no changes in the Company’s approach to capital management during the year.

The Company is not subject to any external capital requirements.

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 32

TORSTAR - Condensed Consolidated Financial Statements

13. SHARE CAPITAL (a) Summary of changes in the Company’s share capital: Six months ended June 30 2011 2010 Shares Amount Shares Amount Class A shares (voting) Balance, beginning of period 9,873,337 $2,682 9,875,407 $2,683 Converted to Class B (2,670) Balance, end of period 9,870,667 $2,682 9,875,407 $2,683 Class B shares (non-voting) Balance, beginning of period 69,244,753 $390,134 69,129,929 $388,943 Converted from Class A 2,670 Dividend reinvestment plan 11,396 151 12,492 113 Issued under ESPP 334,997 1,853 81,394 886 Options 42,068 361 Other 675 9 875 8 Balance, end of period 69,636,559 $392,508 69,224,690 $389,950

Total Class A and Class B shares 79,507,226 $395,190 79,100,097 $392,633

(b) Earnings per share Basic earnings per share amounts have been determined by dividing net income attributable to equity shareholders by the weighted average number of Class A and Class B shares outstanding during the year. The treasury stock method is used for the calculation of the dilutive effect of share options and other dilutive securities. In calculating diluted per share amounts under the treasury stock method, the numerator remains unchanged from the basic per share calculation as the assumed exercise of the Company’s share options and employee share purchase plan (“ESPP”) does not result in an adjustment to income. The reconciliation of the denominator in calculating diluted per share amounts is as follows:

Three months ended Six months ended June 30 June 30 (thousands of shares) 2011 2010 2011 2010 Weighted average number of shares outstanding, basic 79,446 79,078 79,287 79,042 Effect of dilutive securities - share options 660 473 679 303 - ESPP 38 172 43 138 Weighted average number of shares outstanding, diluted 80,144 79,723 80,009 79,483

(c) Dividends: The following dividends were declared and distributed by the Company per Class A (voting) share and Class B (non-voting) share: Three months ended Six months ended June 30 June 30 2011 2010 2011 2010 First quarter ended March 31: 9.25 cents (2010 - 9.25 cents) $7,320 $7,308 Second quarter ended June 30: 12.5 cents (2010 - 9.25 cents) $9,937 $7,316 9,937 7,316 Total dividends $9,937 $7,316 $17,257 $14,624

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 33

TORSTAR - Condensed Consolidated Financial Statements

14. SHARE-BASED COMPENSATION PLANS a) Share option plan

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

Weighted average Share options exercise price At December 31, 2010 4,149,077 $17.19 Granted 488,813 $12.21 Exercised (42,068) $7.40 Forfeited or expired (422,325) $20.23 At June 30, 2011 4,173,497 $16.39

Options exercisable at June 30, 2011 are as follows: Share options Weighted average Range of exercise price exercisable exercise price $5.75 – 8.37 439,789 $7.35 $15.75 – 19.61 483,422 $19.24 $20.30 – 22.20 1,209,464 $22.12 $25.50 – 29.01 565,737 $27.31 $5.75 – 29.01 2,698,412 $20.29

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

b) Restricted share unit (“RSU”) plan

A summary of changes in the RSU plan is as follows: Units At December 31, 2010 627,252 Vested and paid (113,368) Granted 146,341 At June 30, 2011 660,225

RSUs are accrued over the three-year vesting period as compensation expense and a related liability. As at June 30, 2011, 352,845 units have been accrued at a value of $4.2 million of which 221,164 units have been accrued in Accounts payable and accrued liabilities at a value of $2.7 million while 131,681 units have been accrued in Other liabilities at a value of $1.6 million (December 31, 2010 – 361,960 units accrued at a value of $4.4 million of which 113,368 units have been accrued in Accounts payable and accrued liabilities at a value of $1.4 million while 248,592 units have been accrued in Other liabilities at a value of $3.0 million).

The Company has entered into a derivative instrument in order to lock in the expense for 561,194 RSUs. Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of changes in the value of the RSUs that have been accrued. As the RSUs are accrued over the three-year period until the RSUs vest, there will not be an exact offset each period.

c) The Company has recognized in 2011 compensation expense totaling $1.7 million (2010 - $1.1 million) for the share options granted in 2008 to 2011, RSUs granted in 2009 to 2011 and the ESPP originating in 2009 to 2011.

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 34

TORSTAR - Condensed Consolidated Financial Statements

d) Deferred share unit (“DSU”) plan

The Company has a DSU plan for executives and one for non-employee directors. As at June 30, 2011, 289,661 units were outstanding at a value of $3.5 million (December 31, 2010 – 262,868 units at a value of $3.2 million). The Company has entered into a derivative instrument in order to offset its exposure to 258,600 units. Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of changes in the value of the outstanding deferred share units.

15. ACCUMULATED OTHER COMPREHENSIVE LOSS (NET OF TAX) Unrealized Unrealized Foreign gains losses on Unrealized currency (losses) on available- Net losses on translation cash flow for-sale investment CTV’s cash adjustment hedges securities hedge flow hedges Total As at December 31, 2010 ($6,332)¹ ($6,770)² ($100)¹ ($2,522)¹ ($15,724) OCI (3,850) 3,814 (6) $2,074 2,522 4,554 As at June 30, 2011 ($10,182)¹ ($2,956)² ($106)¹ $2,074³ ($11,170) 1Net of deferred income tax asset of $nil (2010 – $nil). ²Net of deferred income tax asset of $970 (2010 – $2,470). ³Net of deferred income tax liability of $150 and current income taxes of $200.

16. EMPLOYEE FUTURE BENEFITS The Company maintains a number of defined benefit plans which provide pension benefits to its employees in Canada and the United States. The Company also maintains capital accumulation plans in Canada, the United States and in certain overseas operations of Harlequin. Post employment benefits other than pensions are also available to employees, primarily in the newspaper operations, which provide for various health and life insurance benefits.

The Company has expensed net pension benefit costs of $5.8 million for the six months ended June 30, 2011 (2010 – $4.7 million) and $2.9 million for the three months ended June 30, 2011 (2010 – $2.4 million). With respect to post-employment benefits other than pensions, for the six months and three months ended June 30, 2011 the net benefit cost was $1.6 million and $0.8 million respectively (2010 – $1.3 million and $0.6 million respectively).

Changes to the net defined benefit obligation were as follows:

Pension plans Post Funded employment Canada United States Unfunded2 benefit plans Total Balance at December 31, 2010 $124,302 $8,892 $23,158 $51,416 $207,7681 Expense recognized in income statement 4,193 621 1,006 1,524 7,344 Amounts recognized in OCI 13,670 360 340 750 15,120³ Contributions to plan (24,521) (777) (852) (1,158) (27,308) Foreign exchange and other 25 (271) (76) (322) Balance at June 30, 2011 $117,669 $8,825 $23,576 $52,532 $202,602 1At January 1, 2011 and June 30, 2011, the entire net defined benefit obligation is reflected in Employee Benefits liabilities. ²The unfunded pension plan is an executive retirement plan, which is supported by an outstanding letter of credit of $25.2 million as at June 30, 2011 (December 31, 2010 - $21.9 million). ³The actuarial losses recognized in OCI are net of $3,800 deferred tax benefit.

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 35

TORSTAR - Condensed Consolidated Financial Statements

The total amount expensed for capital accumulation plans for the six months and three months ended June 30, 2011 was $1.5 million and $0.8 million respectively (2010 – $1.4 million and $0.8 million respectively).

17. PROVISIONS Contingent Restructuring Legal consideration Total Balance at December 31, 2010 $32,387 $2,560 $7,146 $42,093 Provisions made during the period 3,879 3,879 Reversals of provisions during the period (92) (250) (342) Foreign exchange 19 19 Provisions paid during the period (12,816) (35) (164) (13,015) Interest accretion 757 393 1,150 Balance at June 30, 2011 $24,115 $2,294 $7,375 $33,784

Current $14,543 $2,294 $6,555 $23,392 Non-current $9,572 $820 $10,392

Restructuring The restructuring provisions relate to staff reductions primarily in the Media Segment. The current year provision includes a $2.4 million provision in the second quarter for rented space that the Media Segment will be vacating as reduced staff counts allow for space consolidation. The charge represents the discounted shortfall between the remaining obligation under the existing lease and the amounts to be received through a sublease arrangement. The non-current restructuring provisions are expected to be paid out from 2012 through 2028.

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

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

18. OTHER NON-CASH ITEMS PROVIDED BY (USED IN) OPERATING ACTIVITIES Three months ended Six months ended June 30 June 30 2011 2010 2011 2010 Share-based compensation plans ($100) $1,408 ($357) $3,027 Foreign exchange (856) 5,798 (1,624) 2,978 Restructuring provisions (1,762) (5,478) Interest accretion 687 20 1,366 40 Other 268 481 88 908 ($1,763) $7,707 ($6,005) $6,953

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 36

TORSTAR - Condensed Consolidated Financial Statements

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

20. ACQUISITIONS AND INVESTMENTS During the six month period ended June 30, 2011, the Company completed acquisitions and investments in its Media Segment with a total purchase price of $20.0 million. The purchase price included $18.6 million of cash and $1.4 million of deferred purchase payments. The Company also made payments of $6.1 million for deferred purchase payments and $0.2 million of contingent consideration in respect of prior year acquisitions. The deferred purchase payments included $3.4 million in respect of the Book Publishing Segment’s prior year acquisition of the remaining 50% of its German publishing business, Cora Verlag from Axel Springer Verlag, its joint venture partner in Germany since 1976. The remaining $2.7 million deferred purchase payments were in the Media Segment for eyeReturn Marketing and Gottarent. The $0.2 million contingent consideration was also paid in the Media Segment. Total cash used for acquisitions and investments during the period was $24.9 million. The Media Segment completed acquisitions of $19.5 million and investments of $0.5 million. The acquisitions were accounted for by the purchase method and included Starmail Distributors (a distribution business operating in the London, Ontario market) on June 1, 2011; Brant News (a community newspaper publishing and flyer distribution business operating in the Brantford area) on April 15, 2011; Autocatch (a web-based classified advertising solution for vehicle dealers and sellers) on February 15, 2011; the remaining 50% of Save.ca (an online coupon website providing consumers with savings on leading packaged goods brands) on June 16, 2011 and exercised its option to purchase an additional 16.67% of Tuango (a Quebec-based daily deal business) on April 18, 2011, bringing the Company’s interest to 50%. The preliminary allocation of the $19.5 million total purchase price for these acquisitions (including $18.1 million of cash and $1.4 million of deferred purchase payments) was $0.3 million to property, plant and equipment, $0.8 million to non-amortizable intangible assets, $0.9 million to amortizable intangible assets, $2.4 million to goodwill, $15.7 million to other assets, $0.3 million to deferred tax assets, $0.3 million to deferred tax liabilities and a credit of $0.6 million to working capital. The amount of goodwill that is deductible for tax purposes is nil. These acquisitions contributed $1.3 million of revenue with a negligible impact on operating profit in the Media Segment in 2011. In addition, the Company made a portfolio investment of $0.5 million in Social Game Universe (a Toronto-based developer and publisher of social games) on April 21, 2011. This investment has been classified as available for sale and carried at cost since it is not quoted on a stock exchange market.

During the six month period ended June 30, 2010, the Company completed acquisitions with a total purchase price of $12.9 million. The purchase price included $2.6 million of cash, $5.7 million of deferred purchase payments and a $4.6 million estimate of the fair value of contingent consideration. The Company also made payments of $2.7 million for deferred purchase payments and $0.4 million of contingent consideration in respect of prior year acquisitions. Total cash used for acquisitions and investments during the period was $5.7 million. The total purchase price for Harlequin’s acquisition of the remaining 50% of Cora Verlag was $8.1 million, of which $2.4 million has been paid while the remaining $5.7 million is deferred purchase price that is payable over the next two years. This acquisition was completed on April 1, 2010 and has been accounted for by the purchase method. The final allocation of the purchase price (including the discounted value of the deferred payments), was $2.8 million to non-amortizable intangible assets, $0.6 million to amortizable intangible assets, $6.1 million to goodwill, $0.6 million to other liabilities, $0.1 million to deferred tax liabilities and a credit of $0.7 million to working capital. The amount of goodwill that is deductible for tax purposes is $5.0 million. The Media Segment acquisitions included WagJag (a business that allows local businesses to access new customers featuring one deal per day) in June 2010 and several other smaller businesses. The total purchase price for these acquisitions was $4.8 million, including $0.2 million of cash and a $4.6 million estimate of the fair

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 37

TORSTAR - Condensed Consolidated Financial Statements

value of contingent consideration, which is based on future revenues, is capped at $5.9 million and will be payable in 2012. The Media Segment acquisitions were accounted for by the purchase method. The final allocation of the $4.8 million purchase price was $0.6 million to non-amortizable intangible assets, $0.2 million to amortizable intangible assets, $4.4 million to goodwill, $0.2 million to deferred tax liabilities and a credit of $0.2 million to working capital. The amount of goodwill that is deductible for tax purposes is $0.1 million.

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

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

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

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

Segment profit or loss has been defined as operating profit which corresponds to operating profit as presented in the consolidated statement of income.

Regular, non-exceptional finance income and expense and income taxes are managed on a Company basis and are not provided to the chief operating decision-maker at the operating segment level. These items are therefore not allocated to the operating segments.

Book Total Three months ended June 30, 2011 Media Publishing segments Corporate Consolidated Operating Revenue $283,032 $110,290 $393,322 $393,322

Other operating costs (130,060) (68,168) (198,228) ($858) (199,086) Salaries and benefits (100,079) (24,930) (125,009) (3,536) (128,545) Amortization and depreciation (6,799) (872) (7,671) (15) (7,686) Restructuring and other charges (3,386) (3,386) (3,386) Reportable Segment Operating Profit $42,708 $16,320 $59,028 ($4,409) $54,619

Book Total Three months ended June 30, 2010 Media Publishing segments Corporate Consolidated Operating Revenue $259,714 $117,847 $377,561 $377,561

Other operating costs (108,503) (72,205) (180,708) ($1,083) (181,791) Salaries and benefits (98,628) (23,777) (122,405) (2,556) (124,961) Amortization and depreciation (6,731) (1,139) (7,870) (14) (7,884) Restructuring and other charges (1,999) (142) (2,141) (1,987) (4,128) Reportable Segment Operating Profit $43,853 $20,584 $64,437 ($5,640) $58,797

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 38

TORSTAR - Condensed Consolidated Financial Statements

Book Total Six months ended June 30, 2011 Media Publishing segments Corporate Consolidated Operating Revenue $519,069 $225,675 $744,744 $744,744

Other operating costs (249,097) (135,721) (384,818) ($1,771) (386,589) Salaries and benefits (194,611) (49,872) (244,483) (6,302) (250,785) Amortization and depreciation (13,649) (1,787) (15,436) (30) (15,466) Restructuring and other charges (3,787) (3,787) (3,787) Reportable Segment Operating Profit $57,925 $38,295 $96,220 ($8,103) $88,117

Book Total Six months ended June 30, 2010 Media Publishing segments Corporate Consolidated Operating Revenue $481,910 $230,618 $712,528 $712,528

Other operating costs (209,689) (136,610) (346,299) ($2,075) (348,374) Salaries and benefits (191,721) (47,998) (239,719) (4,664) (244,383) Amortization and depreciation (14,129) (2,115) (16,244) (29) (16,273) Restructuring and other charges (9,467) (357) (9,824) (2,779) (12,603) Reportable Segment Operating Profit $56,904 $43,538 $100,442 ($9,547) $90,895

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 39

TORSTAR - Condensed Consolidated Financial Statements

TRANSITION TO IFRS In preparing its opening IFRS Consolidated Statement of Financial Position, the Company has adjusted amounts previously reported that have been prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s financial position and financial performance on the Transition Date, for the three months ended March 31, 2010, for the year ended December 31, 2010 and as of December 31, 2010 are set out in the tables and notes in the Company’s condensed consolidated financial statements for the first quarter ended March 31, 2011. The Company has also selected certain transition exemptions on the Transition Date, the details of which are also in the notes to the March 31, 2011 financial statements. These statements are available at www.sedar.com and on the Company’s corporate website at www.torstar.com.

An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s financial position and financial performance for the three and six months ended June 30, 2010 and as of June 30, 2010 is set out in the following tables and the notes that accompany the tables. The transition adjustments did not have a material impact on the Company’s cash flows.

Reconciliation of Consolidated Statement of Income for the three months ended June 30, 2010

As reported under Canadian GAAP for As reported under the three months IFRS for the three ended months ended Notes June 30, 20101 Adjustments June 30, 2010 Operating revenue $376,520 $1,041 $377,561 Other operating costs (181,744) (47) (181,791) Salaries and benefits T1 (128,179) 3,218 (124,961) Amortization and depreciation T2 (11,688) 3,804 (7,884) Restructuring and other charges T3 (4,778) 650 (4,128) Operating profit 50,131 8,666 58,797 Interest and financing costs (6,616) (20) (6,636) Foreign exchange T4 (876) (4,922) (5,798) Loss of associated businesses T6 (6,856) (243) (7,099) Income before taxes 35,783 3,481 39,264 Income and other taxes T8 (13,100) (2,500) (15,600) Net income $22,683 $981 $23,664 Attributable to: Equity shareholders $22,683 $23,408 Minority interests $256 Net Income attributable to equity shareholders per Class A (voting) and Class B share (non-voting) Basic $0.29 $0.30 Diluted $0.28 $0.29

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

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 40

TORSTAR - Condensed Consolidated Financial Statements

Reconciliation of Consolidated Statement of Income for the six months ended June 30, 2010

As reported under As reported under Canadian GAAP for IFRS for the six the six months ended months ended Notes June 30, 20101 Adjustments June 30, 2010 Operating revenue $710,739 $1,789 $712,528 Other operating costs (348,080) (294) (348,374) Salaries and benefits T1 (251,381) 6,998 (244,383) Amortization and depreciation T2 (23,790) 7,517 (16,273) Restructuring and other charges T3 (13,110) 507 (12,603) Operating profit 74,378 16,517 90,895 Interest and financing costs (10,905) (40) (10,945) Foreign exchange T4 (1,720) (1,258) (2,978) Loss of associated businesses T6 (11,156) (500) (11,656) Income before taxes 50,597 14,719 65,316 Income and other taxes T8 (20,500) (4,600) (25,100) Net income $30,097 $10,119 $40,216 Attributable to: Equity shareholders $30,097 $39,869 Minority interests $347 Net Income attributable to equity shareholders per Class A (voting) and Class B share (non-voting) Basic $0.38 $0.50 Diluted $0.38 $0.50

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

Reconciliation of Consolidated Statement of Comprehensive Income for the three months ended June 30, 2010

As reported under Canadian As reported GAAP for the under IFRS for three months the three ended months ended Notes June 30, 2010 Adjustments June 30, 2010 Net income $22,683 $981 $23,664 Other comprehensive income (loss), net of tax Unrealized foreign currency translation adjustment T4 1,737 5,446 7,183 Unrealized gain on available-for-sale financial 41 41 assets Realized gain on cash flow hedges transferred to net income (841) (841) Unrealized change in fair value of cash flow hedges (3,096) (3,096) Realized loss on cash flow hedges for associated businesses transferred to net income 1,223 1,223 Unrealized change in fair value of cash flow hedges for associated businesses 109 109 Actuarial losses on employee benefits T5 (56,060) (56,060) Other comprehensive loss (827) (50,614) (51,441) Comprehensive income (loss) $21,856 ($49,633) ($27,777) Attributable to: Equity shareholders $21,856 ($28,033) Minority interests $256

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 41

TORSTAR - Condensed Consolidated Financial Statements

Reconciliation of Consolidated Statement of Comprehensive Income for the six months ended June 30, 2010

As reported under Canadian As reported GAAP for the under IFRS for six months the six months ended ended June 30, Notes June 30, 2010 Adjustments 2010 Net income $30,097 $10,119 $40,216 Other comprehensive income (loss), net of tax Unrealized foreign currency translation adjustment T4 (567) 1,543 976 Unrealized gain on available-for-sale financial assets 10 10 Realized gain on cash flow hedges transferred to net income (2,623) (2,623) Unrealized change in fair value of cash flow hedges (1,086) (1,086) Realized loss on cash flow hedges for associated businesses transferred to net income 2,120 2,120 Unrealized change in fair value of cash flow hedges for associated businesses 309 309 Actuarial losses on employee benefits T5 (76,600) (76,600) Other comprehensive loss (1,837) (75,057) (76,894) Comprehensive income (loss) $28,260 ($64,938) ($36,678) Attributable to: Equity shareholders $28,260 ($37,025) Minority interests $347

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

Share Contributed Retained Minority Total Notes capital surplus earnings AOCI interests equity Reported under Canadian GAAP as at June 30, 2010 $392,633 $13,177 $307,779 ($18,690) $694,899 IFRS adjustments increase (decrease): Employee benefits T1 (247,066) (247,066) Property, plant and equipment T2 (65,831) (65,831) Changes in functional currencies T4 (1,258) (1,198) (2,456) Foreign currency IFRS 1 adjustment T4 (7,064) 7,064 Income taxes T8 107,292 107,292 Share-based compensation (506) 722 216 Revenue recognition (1,147) (1,147) Prepaid expenses and other current assets (973) (973) Provisions 613 613 Impairments 539 539 Investment in associates T6 (8,545) (8,545) Actuarial loss T1, T5 (102,440) (102,440) Business combinations (274) (274) Minority interests T7 $1,653 1,653 Reported under IFRS as at June 30, 2010 $392,633 $12,671 ($17,653) ($12,824) $1,653 $376,480

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 42

TORSTAR - Condensed Consolidated Financial Statements

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

Unrealized loss Foreign Unrealized Unrealized loss on associated currency gains (losses) on available- businesses’ translation on cash flow for- sale cash flow adjustment hedges securities hedges Total AOCI as reported under Canadian GAAP as at June 30, 2010 ($4,890) 1 ($11,335) 2 ($330)1 ($2,135) 1 ($18,690) Changes in functional currencies (1,198) (1,198) Foreign currency IFRS 1 adjustment 7,064 7,064 AOCI as reported under IFRS as at June 30 , 2010 $9761 ($11,335) 2 ($330)1 ($2,135) 1 ($12,824)

1 Net of deferred income tax benefit of $nil 2 Net of deferred income tax benefit of $4,347

Notes to the June 30, 2010 reconciliation schedules:

T1. SALARIES AND BENEFITS For the six months ended June 30, 2010, the salaries and benefits’ expense was lower by $7.0 million from Canadian GAAP ($3.2 million for the three months ended June 30, 2010). This decrease included $7.0 million from the changes in employee benefits ($3.4 million for the three months ended June 30, 2010). The expense also decreased by $0.9 million as a result of the changes in the share-based compensation ($0.3 million for the three months ended June 30, 2010) (Note T10 – March 31, 2011), and was offset by higher expenses for the presentation change for minority interests (Note T7 – June 30, 2011).

On transition, a decrease in opening retained earnings of $254.0 million was recorded as a result of adjustments made for the change in accounting for past service costs, actuarial gains and losses, and minimum funding requirements relating to employee benefits. (Note T1 – March 31, 2011). This transition adjustment combined with the lower employee benefit expense for the six months ended June 30, 2010, resulted in a decrease in the June 30, 2010 retained earnings of $247.0 million.

T2. PROPERTY, PLANT AND EQUIPMENT AND RELATED AMORTIZATION AND DEPRECIATION Amortization and depreciation expense for the six months ended June 30, 2010 was $7.5 million lower under IFRS than it was under Canadian GAAP ($3.8 million for the three months ended June 30, 2010). This was primarily the result of the Company electing to measure specific items of property, plant and equipment at fair value as deemed cost on transition. As discussed in Note T2 of the March 31, 2011 condensed consolidated financial statements, a transition adjustment of $73.2 million reduced the value of property, plant and equipment. This transition adjustment, combined with lower depreciation expense for the six months ended June 30, 2010, resulted in a decrease in the June 30, 2010 retained earnings of $65.8 million.

T3. RESTRUCTURING AND OTHER CHARGES Restructuring and other charges for the six months ended June 30, 2010 were $0.5 million lower under IFRS than they were under Canadian GAAP. This included a $0.9 million decrease from the timing of restructuring provisions, (Note T9 – March 31, 2011), partially offset by the impact of expensing $0.4 million of transaction costs related to Harlequin’s acquisition of the remaining half of its German publishing business (Note 16 – March 31, 2011). For the three months ended June 30, 2010, other charges are $0.7 million lower than reported under Canadian GAAP due to the timing of recognition of transaction costs with respect to the Company’s bid to purchase the newspaper and digital businesses of Canwest Limited Partnership (Note T17 – March 31, 2011).

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 43

TORSTAR - Condensed Consolidated Financial Statements

T4. FOREIGN EXCHANGE As a result of the transition to IFRS, effective January 1, 2010, the Company determined that the U.S. dollar was the functional currency of certain of its foreign subsidiaries (Note T3 – March 31, 2011). The foreign exchange on the translation of a significant portion of the Company’s U.S. dollar denominated assets is recorded through OCI under IFRS rather than through net income under Canadian GAAP.

T5. EMPLOYEE BENEFITS – ACTUARIAL GAINS AND LOSSES The Company has chosen to recognize actuarial gains and losses related to its employee benefit plans through OCI. The amount recognized each period is not retained in AOCI but goes directly to retained earnings.

T6. INVESTMENT IN ASSOCIATES The investment in associates adjustment includes the transition adjustments of $8.0 million, which primarily related to employee benefits partially offset by reversals of impairment provisions and other miscellaneous items (Note T6 – March 31, 2011) and $0.5 million increased loss of associated businesses for the period ended June 30, 2010.

T7. MINORITY INTERESTS The Company began to present the minority interest in Olive Media as part of the transition to IFRS (Note T11 – March 31, 2011).

T8. INCOME TAXES The income taxes adjustment includes the income tax impact of the transition adjustments (Note T4 – March 31, 2011) and the related changes in the consolidated statement of income and consolidated statement of comprehensive income through June 30, 2010.

TORSTAR CORPORATION 2011 SECOND QUARTER REPORT 44