TORSTAR - Management's Discussion and Analysis

For the three and six months ended June 30, 2018

The following management’s discussion and analysis (“MD&A”) comments on the financial condition and results of operations of Torstar Corporation (“Torstar”, "we", "our" or the “Company") for the three and six months ended June 30, 2018 and updates the MD&A for the fiscal year ended December 31, 2017 (the "Annual MD&A"). The information contained herein should be read in conjunction with the annual audited consolidated financial statements of Torstar for the year ended December 31, 2017 (the “2017 Consolidated Financial Statements”) and the Annual MD&A which are 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 20, 2018.

We report our financial results under International Financial Reporting Standards (“IFRS”) as set out in the CPA Canada Standards and Guidance Collection. All financial information contained in this MD&A and in the condensed consolidated financial statements for the three and six months ended June 30, 2018 (the "Condensed Consolidated Financial Statements") has been prepared in accordance with IFRS, except for certain “Non-IFRS Measures” as described in Section 11 of this MD&A. Per share amounts are calculated using the weighted average number of shares outstanding for the applicable period. In addition, during 2017, Torstar realigned its management structure and operating segments in order to better align its operations by type of publication. The Company now has three reportable operating segments: Community Brands ("Communities"), Daily Brands ("Dailies") and Digital Ventures. The comparative results for 2017 have been restated to reflect these and other classification changes.

This MD&A is dated July 31, 2018 and all amounts are denominated in Canadian dollars, unless otherwise noted.

Other than new accounting standards adopted effective January 1, 2018 and disclosed in Section 7 of the MD&A, the accounting policies applied in this interim MD&A are consistent with those disclosed in Note 2 to the annual consolidated financial statements for the year ended December 31, 2017.

Additional information relating to Torstar, including the 2017 Consolidated Financial Statements, Annual Report and Annual Information Form, are available on Torstar’s website at www.torstar.com and on SEDAR at www.sedar.com.

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, financial 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”, “estimate”, “intend”, “would”, “could”, “if”, “may” and similar expressions. This MD&A includes, among others, forward-looking statements regarding estimates and expectations regarding the expected net proceeds from the recent Workopolis transaction in Sections 1 and 2 of this MD&A, expectations regarding our transformation efforts in Section 2 of this MD&A, expectations relating to contingent liabilities in Section 3 of this MD&A, expected savings including savings from restructuring initiatives and other cost reductions in Sections 3, 4 and 5 of this MD&A, Torstar's outlook for 2018 including anticipated revenue trends within the Daily and Community Brands segments, the expected effects of the Postmedia transaction on Torstar’s earnings and revenue, anticipated revenue trends within the Digital Ventures segment, expected operating expenses and capital expenditures, expectations related to our transformation efforts, including efforts to obtain digital subscription revenues, and the proposed merger of our defined benefit pension plans with the CAAT jointly sponsored defined benefit pension plan (including the expected timing and benefits of the transaction, obtaining member and regulatory approvals and the satisfaction of other closing conditions) in Section 4 of this MD&A, expectations regarding cash flows and forecasted cash requirements and potential measures to increase liquidity in Section 5 of this MD&A, expectations regarding the costs, obligations, contributions, return on plan assets, discount rates, required funding, solvency liabilities and other expectations related to employee future benefit obligations and the impact of interim solvency relief measures in Section 6 of this MD&A, estimates and judgements in connection with critical accounting policies as described in Section 7 of this MD&A, expectations regarding recent accounting pronouncements in Section 8 of this MD&A, and expectations regarding risks and uncertainties in Section 12 of this MD&A. 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: -the Company’s ability to operate in highly competitive changing industries; -the Company’s ability to compete with digital media, other newspapers and other forms of media; -the Company’s ability to respond to the shift to digital media and the shift by advertisers to other digital platforms;

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 1 TORSTAR - Management's Discussion and Analysis

-the Company’s ability to attract, grow and retain its digital audience and profitably develop its digital platforms; -the Company’s ability to attract and retain advertisers and customers; -the Company’s ability to build and maintain adequate circulation/subscription levels; -the Company’s ability to attract and retain readers and traffic; -the Company’s ability to integrate the technology associated with new digital platforms; -general economic conditions and customer prospects in the principal markets in which the Company operates; -the Company’s ability to reduce costs; -loss of reputation; -dependence on third party suppliers and service providers; -reliance on technology and information systems; -cybersecurity and risks of security breaches; -the Company’s ability to execute appropriate strategic growth initiatives including acquisitions; -changes in employee future benefit obligations; -unexpected costs or liabilities related to acquisitions and dispositions; -investments in other businesses; -reliance on printing operations; -labour disruptions; -newsprint costs; -privacy, anti-spam, communications, competition, e-commerce, data use and environmental laws, health and safety regulations and other laws and regulations applicable generally to the Company’s businesses; -litigation; -foreign exchange fluctuations and foreign operations; -dependence on key personnel; -availability of insurance; -intellectual property rights and other content risks; -credit risk; -availability of capital and restrictions imposed by credit facilities; -income tax and other taxes; -dividend policy; -controls over financial reporting, results of impairment tests and uncertainties associated with critical accounting estimates -holding company structure; -control of the Company by the Voting Trust; and -the ultimate outcome of the proposed transaction with CAAT, including the risk that the transaction may not close, and the ability to obtain member consents and regulatory approvals on a timely basis.

Torstar cautions that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect Torstar’s 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 economies; tax laws; continued availability of printing operations; availability of financing on appropriate terms; exchange rates; market conditions and competition; rates of return and discount rates relating to pension expense and pension plan obligations; discount rates and trends in healthcare costs relating to post employment benefits; expected future revenues; expected future liabilities; expected future cash flows and discount rates relating to valuation of intangible assets; and successful development and launch of strategic initiatives and new products; and expected benefits from the transaction with CAAT. There is a risk that some or all of these assumptions may prove to be incorrect. There is no assurance regarding the amount and timing of future dividends. 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.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 2 TORSTAR - Management's Discussion and Analysis

Management’s Discussion and Analysis – Contents Section Page Overview 4 1 A summary of our business Highlights 2 5 Highlights for the second quarter of 2018 compared to the second quarter of 2017 Operating Results 3 6 A discussion of our operating results for the three and six months ended June 30, 2018 Outlook 15 4 The outlook for our business in the balance of 2018 Liquidity and Capital Resources 16 5 A discussion of our cash flow, liquidity and other disclosures Employee Benefit Obligations 17 6 A summary of our employee benefit obligations Critical Accounting Policies and Estimates 7 A description of accounting estimates and judgements that are critical to determining our financial results, and 17 changes to accounting policies Recent Accounting Pronouncements 19 8 A discussion of recent IFRS developments that will affect our business Controls and Procedures 19 9 A discussion of our disclosure controls and internal controls over financial reporting Summary of Quarterly Results 20 10 A summary view of our quarterly financial performance Reconciliation and Definition of Non-IFRS Measures 20 11 A description and reconciliation of certain non-IFRS and additional IFRS measures used by management Risks and Uncertainties 22 12 Risks and uncertainties facing our business

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 3 TORSTAR - Management's Discussion and Analysis 1. Overview A summary of our business

Torstar is a broadly based Canadian media company listed on the Toronto Stock Exchange (Symbol:TS.B). The Company has three reportable operating segments: Community Brands ("Communities"), Daily Brands ("Dailies") and Digital Ventures.

The Daily Brands include the daily Toronto Star newspaper and thestar.com, The Hamilton Spectator, the Waterloo Region Record, the St. Catharines Standard, the Niagara Falls Review, the Welland Tribune and the Peterborough Examiner daily newspapers, as well as each of their respective websites. The Dailies also include Free Daily News Group Inc. (“Metro” or "StarMetro"), which publishes the English-language Metro free daily newspapers (rebranded as StarMetro effective April 10, 2018) in several of Canada’s largest cities, and through a joint venture arrangement, the Dailies own an interest in the Chinese-language Sing Tao Daily and its related publications in Toronto, Vancouver and Calgary. The Dailies also include wheels.ca and other specialty publications and magazines and distribution services.

The Community Brands include more than 80 weekly community newspapers, digital properties (including homefinder.ca, save.ca, travelalerts.ca, and regional online sites, such as durhamregion.com) and flyer distribution operations. The Communities also have a number of specialty publications, directories and consumer shows.

Digital Ventures includes our 56% interest in VerticalScope Holdings Inc. ("VerticalScope") and includes eyeReturn Marketing Inc. (“eyeReturn”). Digital Ventures also includes our joint venture interest in Workopolis. On April 12, 2018, Workopolis sold workopolis.com and related assets to Recruit Holdings Co., Ltd. Following the sale and subsequent wind up of the remaining Workopolis business, we estimate that net proceeds will be in the range of $3.5 million to $4.0 million, $3.2 million of which has been received to date.

Our investment in VerticalScope is classified as an associated business rather than a consolidated subsidiary or joint venture as a result of certain terms in the applicable shareholders’ agreement. VerticalScope is a Toronto-based focused digital media company with expertise in programmatic advertising and which has approximately 230 employees and services the North American market through its network of user forums and premium content sites offering advertisers access to large audiences in popular verticals including automotive, powersports, outdoors, home and health.

We also have several other investments in Associated Businesses, which at June 30, 2018 included a 19% equity investment in Black Press Ltd. (“Black Press”), a 16% equity investment in Blue Ant Media Inc. (“Blue Ant”), a 33% equity investment in Canadian Press Enterprises Inc. (“Canadian Press”) and an approximate 22% interest in Nest Wealth Asset Management Inc. ("Nest Wealth").

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 4 TORSTAR - Management's Discussion and Analysis 2. Highlights Highlights for the second quarter of 2018 compared to the second quarter of 2017

Three months ended June 30 Six months ended June 30

Favourable Favourable (in $000’s, except per share amounts) 2018 2017 (Unfavourable) 2018 2017 (Unfavourable)

Net income (loss) from continuing operations $4,849 ($7,499) $12,348 ($16,011) ($31,896) $15,885 Per Share $0.06 ($0.10) $0.16 ($0.20) ($0.40) $0.20

Net income (loss) attributable to equity shareholders 4,848 (6,988) 11,836 (9,654) (31,266) 21,612 Per Share $0.06 ($0.09) $0.15 ($0.12) ($0.39) $0.27

Adjusted income (loss) Per Share2 $0.16 ($0.03) $0.19 ($0.04) ($0.24) $0.20

Operating profit (loss)1,2 2,186 (8,052) 10,238 (16,743) (31,430) 14,687

Adjusted EBITDA1,2 27,802 17,999 9,803 29,599 19,998 9,601

Revenues1,2 160,665 180,772 (20,107) 308,073 337,487 (29,414) 1 Includes proportionately consolidated share of joint venture operations and our 56% interest in VerticalScope. These include Non-IFRS or additional IFRS measures, refer to Section 11 of this MD&A. 2These are Non-IFRS or additional IFRS measures, refer to Section 11 of this MD&A.

• We are in the midst of a significant transformation of our business. Highlights of progress made to date against this multi- phased transformation plan include a major national digital expansion which includes more robust digital offerings on thestar.com in Vancouver, Calgary, Edmonton, Toronto and Halifax, an exclusive deal with the Wall Street Journal, and an increased investment in investigative journalism and hyper-local content. Also, well under way are advances in areas such as data infrastructure, advanced analytics capabilities, customer life cycle management capabilities, single sign-on/ identity management, and paywall/subscription platform implementations.

• On April 12, 2018, Workopolis.com and Workopolis' related assets were sold to Recruit Holdings Co., Ltd. Following the sale and subsequent wind up of the remaining Workopolis business, we estimate that the net proceeds will be in the range of $3.5 million to $4.0 million, with $3.2 million of proceeds received to date.

• Ended the second quarter of 2018 with $49.4 million of cash and cash equivalents and $7.7 million of restricted cash; Torstar has no bank indebtedness.

• Our net income attributable to equity shareholders was $4.8 million ($0.06 per share) in the second quarter of 2018, an improvement relative to a net loss of $7.0 million ($0.09 per share) in the second quarter of 2017.

• Our net income from continuing operations in the second quarter of 2018 was $4.8 million ($0.06 per share) compared to a net loss of $7.5 million ($0.10 per share) in the second quarter of 2017.

• Adjusted earnings per share was $0.16 in the second quarter of 2018, an improvement of $0.19 per share relative to the second quarter of 2017.

• Our segmented operating profit was $2.2 million in the second quarter of 2018 which included $17.9 million of non-cash amortization and depreciation expense as well as $7.6 million of restructuring and other charges.

• Our segmented adjusted EBITDA was $27.8 million in the second quarter of 2018, an improvement of $9.8 million from the second quarter of the prior year. Segmented adjusted EBITDA in the Daily Brands segment was $18.7 million in the second quarter, an improvement of $15.6 million relative to 2017. The improvement in adjusted EBITDA included the benefit of a $15.8 million digital media tax credit. This tax credit related to a claim made in respect of 2015 and not current year operations. Segmented adjusted EBITDA in the Community Brands segment was $7.9 million, down $2.5 million relative to the comparable period in 2017 while segmented adjusted EBITDA in the Digital Ventures segment was $5.7 million,

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 5 TORSTAR - Management's Discussion and Analysis

down $1.2 million relative to the second quarter of 2017, $0.5 million of which was related to the sale of Workopolis in early April. Corporate costs were also $2.0 million higher in the second quarter of 2018 relative to the second quarter of 2017.

• Segmented revenue was $160.7 million in the second quarter of 2018, down $20.1 million (11%) from $180.8 million in the second quarter of 2017 and included revenue growth of $1.3 million or 12% (16% growth in USD) from VerticalScope. On a same store basis, segmented revenue was down $9.9 million (5%) in the second quarter of 2018.

The following chart provides a continuity of earnings per share from the second quarter and first six months of 2017 to the second quarter and first six months of 2018:

Three months ended June 30 Six months ended June 30

Adjusted Adjusted Earnings Earnings Earnings Earnings (Loss) Per (Loss) Per (Loss) Per (Loss) Per Share Share** Share Share**

($0.10) ($0.03) ($0.40) ($0.24) Loss per share from continuing operations attributable to equity shareholders in 2017 Changes • Adjusted EBITDA* 0.12 0.12 0.12 0.12 • Amortization and depreciation* 0.01 0.01 0.03 0.03 • Operating earnings (loss)* 0.03 0.10 (0.25) (0.09) • Restructuring and other charges* (0.01) (0.01) • Impairment of assets* 0.04 • Operating profit (loss)* 0.02 0.10 (0.22) (0.09) • Non-cash foreign exchange (0.01) (0.01) • Other 0.05 0.06 0.03 0.05

Earnings (Loss) per share from continuing operations attributable to $0.06 $0.16 ($0.20) ($0.04) equity shareholders in 2018

$0.08 Earnings per share from discontinued operations attributable to equity shareholders in 2018

$0.06 $0.16 ($0.12) ($0.04) Earnings (Loss) per share attributable to equity shareholders in 2018 * Includes proportionately consolidated share of joint venture operations and VerticalScope's operations. These include Non-IFRS or additional IFRS measures, refer to Section 11 of this MD&A. ** Refer to Section 11 for a reconciliation of earnings (loss) per share to adjusted earnings (loss) per share and a definition of adjusted earnings (loss) per share.

3. Operating Results A discussion of our operating results for the three and six months ended June 30, 2018

Unless otherwise noted, the following is a discussion of our second quarter and year to date 2018 operating results relative to the comparable periods in 2017. During the fourth quarter of 2017, we realigned our management structure and operating segments in order to better align our operations by type of publication. We now have the following three reportable operating segments: Community Brands, Daily Brands and Digital Ventures. Relevant comparative information has been restated to reflect these changes.

Overall Performance

We have three reportable operating segments to which Corporate costs have not been allocated. Management of the segments are accountable for the revenues, adjusted EBITDA, operating earnings and operating profit of the segments including our proportionate share of joint venture operations as well as our 56% interest in VerticalScope. When reported in the consolidated statement of income (loss), joint ventures and our 56% investment in VerticalScope (which, pursuant to certain terms in the shareholders agreement, is classified as an Associated Business rather than a consolidated subsidiary or joint venture), are accounted for using the equity method. The net income is included in “Income (loss) from joint ventures” and “Income (loss) from associated businesses”, as applicable. We own a significantly higher percentage of VerticalScope relative to our other Associated Businesses.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 6 TORSTAR - Management's Discussion and Analysis

The following tables set out our segmented results which include our proportionate share of results from VerticalScope and our joint ventures for the three and six months ended June 30, 2018 and June 30, 2017 and provide a reconciliation to the consolidated statement of income (loss):

Three months ended June 30, 2018 Total Per Adjustments Consolidated Digital Total & Statement of (in $000’s) Communities Dailies Ventures Corporate Segmented* Eliminations1 Income (Loss) Operating revenue $68,661 $75,406 $16,598 $160,665 ($17,494) $143,171 Salaries and benefits (31,965) (12,669) (5,155) ($1,681) (51,470) 6,165 (45,305) Other operating costs (28,807) (44,034) (5,738) (2,814) (81,393) 5,616 (75,777) Adjusted EBITDA** 7,889 18,703 5,705 (4,495) 27,802 (5,713) 22,089 Amortization & depreciation (2,758) (3,192) (11,911) (17,861) 11,327 (6,534) Share based compensation (61) 72 (411) 197 (203) 203 Operating earnings (loss)** 5,070 15,583 (6,617) (4,298) 9,738 5,817 15,555

Restructuring and other charges (4,071) (1,663) (1,818) (7,552) 1,768 (5,784) Operating profit (loss)** $999 $13,920 ($8,435) ($4,298) $2,186 $7,585 $9,771 Net income $4,849

Six months ended June 30, 2018 Total Per Adjustments Consolidated Digital Total & Statement of (in $000’s) Communities Dailies Ventures Corporate Segmented* Eliminations1 Income (Loss) Operating revenue $128,426 $146,621 $33,026 $308,073 ($35,930) $272,143 Salaries and benefits (63,387) (42,613) (11,233) ($3,493) (120,726) 12,155 (108,571) Other operating costs (56,575) (86,771) (10,733) (3,669) (157,748) 11,039 (146,709) Adjusted EBITDA** 8,464 17,237 11,060 (7,162) 29,599 (12,736) 16,863 Amortization & depreciation (5,760) (6,299) (21,440) (33,499) 20,285 (13,214) Share based compensation (153) 15 (592) (152) (882) 882 Operating earnings (loss)** 2,551 10,953 (10,972) (7,314) (4,782) 8,431 3,649 Restructuring and other charges (5,624) (4,258) (2,079) (11,961) 2,173 (9,788) Operating profit (loss)** ($3,073) $6,695 ($13,051) ($7,314) ($16,743) $10,604 ($6,139) Loss from continuing operations ($16,011) Income from discontinued operations $6,300 Net loss ($9,711)

Three months ended June 30, 2017 Total Per Adjustments Consolidated Digital Total & Statement of (in $000’s) Communities Dailies Ventures Corporate Segmented* Eliminations1 Income (Loss) Operating revenue $82,620 $79,794 $18,358 $180,772 ($19,015) $161,757 Salaries and benefits (36,031) (29,142) (5,649) ($1,562) (72,384) 5,928 (66,456) Other operating costs (36,147) (47,560) (5,763) (919) (90,389) 5,562 (84,827) Adjusted EBITDA** 10,442 3,092 6,946 (2,481) 17,999 (7,525) 10,474 Amortization & depreciation (3,425) (8,454) (7,317) (19,196) 6,779 (12,417) Share based compensation (206) (22) (491) 75 (644) 644 Operating earnings (loss)** 6,811 (5,384) (862) (2,406) (1,841) (102) (1,943)

Restructuring and other charges (3,053) (2,816) (142) (200) (6,211) 141 (6,070) Operating profit (loss)** $3,758 ($8,200) ($1,004) ($2,606) ($8,052) $39 ($8,013)

Loss from continuing operations ($7,499) Income from discontinued operations $500 Net loss ($6,999)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 7 TORSTAR - Management's Discussion and Analysis

Six months ended June 30, 2017 Total Per Adjustments Consolidated Digital Total & Statement of (in $000’s) Communities Dailies Ventures Corporate Segmented* Eliminations1 Loss Operating revenue $148,378 $154,936 $34,173 $337,487 ($37,054) $300,433 Salaries and benefits (69,802) (58,959) (11,226) ($3,047) (143,034) 11,835 (131,199) Other operating costs (67,255) (94,837) (10,904) (1,459) (174,455) 11,138 (163,317) Adjusted EBITDA** 11,321 1,140 12,043 (4,506) 19,998 (14,081) 5,917 Amortization & depreciation (6,808) (14,628) (14,930) (36,366) 13,884 (22,482) Share based compensation (336) (125) (611) 100 (972) 972 Operating earnings (loss)** 4,177 (13,613) (3,498) (4,406) (17,340) 775 (16,565) Restructuring and other charges (5,727) (4,880) (283) (200) (11,090) 537 (10,553) Impairment of assets (3,000) (3,000) 3,000 Operating profit (loss)** ($1,550) ($18,493) ($6,781) ($4,606) ($31,430) $4,312 ($27,118) Loss from continuing operations ($31,896) Income from discontinued operations $500 Net loss ($31,396) 1 Reflects adjustments and eliminations of proportionately consolidated results of, and transactions with joint ventures and VerticalScope *Includes proportionately consolidated share of joint venture operations and VerticalScope **These are non-IFRS or additional IFRS measures, refer to Section 11 of this MD&A

Revenue In November 2017, we completed a transaction with Postmedia Network Inc. (“Postmedia”), in which we purchased and sold a number of daily and community newspapers. As part of the transaction, we acquired eight weekly community publications, seven daily community newspapers and two free daily newspapers from Postmedia. In addition, we sold 22 weekly community newspapers in eastern and southern Ontario and the Metro Winnipeg and Metro Ottawa free daily publications to Postmedia. Readers and advertisers of certain publications we acquired and subsequently closed are now being serviced by one or more of our other Community properties while we continue to operate four daily newspapers acquired from Postmedia now included in our Daily Brands segment. Refer to Section 12 of this MD&A as well as Section 16 of our annual MD&A for further discussion. As a result of publications sold and acquired, revenues in the Community Brands segment were estimated to be $6.8 million and $11.9 million lower in the second quarter and first six months of 2018, while revenues in the Daily Brands segment were $2.4 million and $4.8 million higher in the second quarter and first six months of 2018. Revenues in the second quarter and first six months of 2018 were also impacted by the sale of Workopolis in April 2018 and wagjag.com in October 2017. When we refer to same store basis in the following discussion, the comparisons have been adjusted to exclude these factors.

In addition, as a result of a variation in the publishing calendar in the first quarter of 2018 relative to the first quarter last year, our year to date revenue benefited from additional publishing days in both the Daily Brands and Community Brands Segment. This variance in the publishing calendar will reverse in the fourth quarter of 2018. The impact of these shifts in the calendar resulted in incremental net revenue of $3.4 million in the first six months of 2018 (Community Brands - $2.6 million, Daily Brands - $0.8 million). In addition, there were other minor differences in revenues in the second quarter predominantly in the Daily Brands segment as a result of a shift in the days of the week within the calendar quarter. The impact on adjusted EBITDA as a result of these shifts was minimal.

Segmented revenue was down $20.1 million or 11% in the second quarter of 2018 ($29.4 million or 9% year to date) and included revenue growth of $1.3 million (12%) from VerticalScope (16% in USD) ($2.7 million or 13% year to date or 18% USD year to date). On a same store and comparable timing basis, segmented revenue was down $9.9 million (5%) in the second quarter and $18.6 million (6%) in the first six months of 2018.

Operating revenue (excluding our proportionate share of revenues from our joint ventures and our 56% interest in VerticalScope) was down $18.6 million or 11% in the second quarter of 2018 (year to date - down $28.3 million or 9%).

On a reported basis, segmented revenue in the second quarter and year to date reflected increases of 5% in subscriber revenues, declines of 19% and 17% respectively in print advertising revenues and declines of 15% and 12% in flyer distribution revenues. On a same store and comparable timing basis for the second quarter and year to date, segmented revenue reflected subscriber revenues which were almost flat compared to the prior year, declines of 14% in print advertising revenues and declines of 5% in flyer distribution revenues.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 8 TORSTAR - Management's Discussion and Analysis

On a same store basis, digital revenue in the second quarter and first six months of 2018 were up 3% and 5% relative to the second quarter and first six months of 2017 reflecting continued solid growth at VerticalScope, growth in local digital advertising within the community websites and growth at thestar.com. Gains in these areas were partially offset by declines in other properties. Digital revenues were 19% of total revenue in the second quarter and first six months of 2018 compared to 18% in the second quarter and first six months of 2017 on a reported basis.

The following charts provide a breakdown of total segmented operating revenue:

Communities Dailies Digital Ventures Total Three months ended June 30, 2018 $ % $ % $ % $ % Print advertising $27,963 41% $29,480 39% $57,443 36% Digital advertising 6,517 9% 6,921 9% $16,598 100% 30,036 19% Distribution 24,465 36% 5,591 7% 30,056 19% Subscriber 115 —% 30,355 40% 30,470 19% Other 9,601 14% 3,059 5% 12,660 7% Total $68,661 100% $75,406 100% $16,598 100% $160,665 100%

Communities Dailies Digital Ventures Total Six months ended June 30, 2018 $ % $ % $ % $ % Print advertising $50,774 40% $58,935 40% $109,709 36% Digital advertising 12,663 10% 12,704 9% $33,026 100% 58,393 19% Distribution 46,000 36% 10,159 7% 56,159 18% Subscriber 234 —% 59,509 41% 59,743 19% Other 18,755 14% 5,314 3% 24,069 8% Total $128,426 100% $146,621 100% $33,026 100% $308,073 100%

Communities Dailies Digital Ventures Total Three months ended June 30, 2017 $ % $ % $ % $ % Print advertising $35,248 43% $35,690 45% $70,938 39% Digital advertising 8,058 10% 6,338 8% $18,358 100% 32,754 18% Distribution 29,241 35% 6,105 8% 35,346 20% Subscriber 186 —% 28,928 36% 29,114 16% Other 9,887 12% 2,733 3% 12,620 7% Total $82,620 100% $79,794 100% $18,358 100% $180,772 100%

Communities Dailies Digital Ventures Total Six months ended June 30, 2017 $ % $ % $ % $ % Print advertising $62,005 42% $70,274 45% $132,279 39% Digital advertising 14,846 10% 12,211 8% $34,173 100% 61,230 18% Distribution 52,616 35% 10,871 7% 63,487 19% Subscriber 374 —% 56,358 36% 56,732 17% Other 18,537 13% 5,222 4% 23,759 7% Total $148,378 100% $154,936 100% $34,173 100% $337,487 100%

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 9 TORSTAR - Management's Discussion and Analysis

Salaries and benefits Segmented salaries and benefits costs were down $20.9 million (29%) in the second quarter and $22.3 million (16%) in the first six months of 2018 and included the benefit of a $15.8 million digital media tax credit (as this represents recoveries of previously incurred salary and benefit costs). Excluding the impact of the tax credit, segmented salaries and benefit costs were down $5.1 million (7%) in the second quarter and $6.5 million (5%) in the first six months of 2018 reflecting lower costs associated with the Postmedia transaction ($2.0 million in the second quarter and $3.6 million year to date) as well as the benefit of savings from restructuring initiatives, including lower staffing costs associated with Toronto Star Touch. These reductions were partially offset by the impact of higher minimum wage in Ontario, additional staffing related to our transformation activities as well as increased salary and benefit costs in support of organic and acquisition related growth at VerticalScope.

Other operating costs Segmented other operating costs primarily include newspaper circulation and flyer distribution costs, production costs and newsprint costs, which represented 40%, 13% and 11%, respectively, of segmented other operating costs for the second quarter of 2018 and 40%, 14% and 11% respectively of other operating costs for the first six months of 2018.

Segmented other operating costs were down $9.0 million (10%) in the second quarter and $16.8 million (10%) in the first six months of 2018, largely as a result of lower costs associated with the sale of publications to Postmedia ($4.3 million in the second quarter and $7.7 million in the first six months of 2018) as well as lower print volumes and the impact of other cost reductions, in part associated with an increase focus on print subscriber profitability, partially offset by additional costs related to our transformation activities.

Adjusted EBITDA Our segmented adjusted EBITDA was $27.8 million in the second quarter of 2018, an improvement of $9.8 million from the second quarter of 2017. Segmented adjusted EBITDA in the Daily Brands segment was $18.7 million in the second quarter, an improvement of $15.6 million relative to 2017. The improvement in adjusted EBITDA included the benefit of a $15.8 million digital media tax credit. This tax credit related to a claim made in respect of 2015 and not current year operations. Segmented adjusted EBITDA in the Community Brands segment was $7.9 million, down $2.5 million relative to the comparable period in 2017 while segmented adjusted EBITDA in the Digital Ventures segment was $5.7 million, down $1.2 million relative to the second quarter of 2017, $0.5 million of which was related to the sale of Workopolis in early April. Corporate costs were also $2.0 million higher in the second quarter of 2018 relative to the second quarter of 2017.

The second quarter of 2018 included an incremental $1.7 million in segmented adjusted EBITDA resulting from synergies associated with the Postmedia transaction, as well as $3.0 million of savings related to restructuring initiatives offset by $4.9 million of costs related to our transformation activities and higher legal fees.

Our segmented adjusted EBITDA was $29.6 million in the first six months of 2018, an improvement of $9.6 million from the first six months of 2017. Segmented adjusted EBITDA in the Daily Brands segment was $17.2 million in the first six months of 2018, an improvement of $16.1 million relative to the first six months of 2017. The improvement in adjusted EBITDA included the benefit of a $15.8 million digital media tax credit. Segmented adjusted EBITDA in the Community Brands segment was $8.5 million, down $2.8 million relative to the comparable period in 2017 while segmented adjusted EBITDA in the Digital Ventures segment was $11.1 million, down $0.9 million relative to the first six months of 2017, $0.4 million of which was related to the sale of Workopolis in early April. Corporate costs were also $2.7 million higher in the first six months of 2018 relative to the first six months of 2017.

The first six months of 2018 included an incremental $4.3 million in segmented adjusted EBITDA resulting from synergies associated with the Postmedia transaction, as well as $8.4 million of savings related to restructuring initiatives offset by $6.6 million of costs related to our transformation activities and higher legal fees.

Our transformation efforts through the end of the second quarter have been concentrated on a major national digital expansion, an exclusive deal with the Wall Street Journal, an increased investment in investigative journalism, hyper-local and local content, development of our data infrastructure, advanced analytics capability, subscription platform implementations and customer life cycle management capabilities.

Amortization and depreciation Total segmented amortization and depreciation of $17.9 million and $33.5 million in the second quarter and first six months of 2018 decreased $1.3 million and $2.9 million respectively relative to the comparable period in 2017. These decreases

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 10 TORSTAR - Management's Discussion and Analysis were primarily the result of lower amortization associated with our Daily Brands segment partially offset by higher amortization related to acquisitions made at VerticalScope.

Operating earnings (loss) Segmented operating earnings were $9.7 million in the second quarter of 2018 compared to a segmented operating loss of $1.8 million in the second quarter of 2017. Year to date, segmented operating loss was $4.8 million compared to $17.3 million in the first six months of 2017. These improvements largely reflected the benefit of a $15.8 million digital media tax credit.

Restructuring and other charges Total segmented restructuring and other charges were $7.6 million and $12.0 million in the second quarter and first six months of 2018 compared to $6.2 million and $11.1 million in the second quarter and first six months of 2017.

Restructuring initiatives undertaken through the end of the second quarter of 2018 are expected to result in annualized net savings of $11.3 million and have resulted in the reduction of approximately 200 positions with $8.1 million of the savings expected to be realized in 2018 (including $2.6 million in the first six months).

Impairment of assets There were no impairment charges recorded in the first six months of 2018. During the first six months of 2017, we incurred non-cash charges related to asset impairment of our joint venture investment in Workopolis totalling $3.0 million. This charge had no impact on cash flows and was the result of a further downward revision in longer term forecasted revenues reflecting further increased competition in the online recruitment and job search markets as well as general market conditions. As discussed above, Workopolis sold workopolis.com and related assets to Recruit Holdings Co., Ltd on April 12, 2018.

Operating profit (loss) Segmented operating profit was $2.2 million in the second quarter of 2018, reflecting an improvement of $10.3 million relative to the second quarter of 2017 and was largely the result of higher adjusted EBITDA which included the benefit of a $15.8 million digital media tax credit. Segmented operating profit for the second quarter of 2018 included $17.9 million of non- cash amortization and depreciation expense ($19.2 million - in the second quarter of 2017) and $7.6 million of restructuring and other charges ($6.2 million - in the second quarter of 2017).

Segmented operating loss was $16.7 million in the first six months of 2018, which was an improvement of $14.7 million relative to the first six months of 2017 and reflected higher adjusted EBITDA which included the benefit of a $15.8 million digital media tax credit.

Our operating loss excluding our proportionate share of operating profit (loss) from VerticalScope and our joint ventures improved $17.8 million in the second quarter and $21.0 million in the first of six months of 2018 relative to the comparable periods in 2017.

Income (loss) from joint ventures Our income from joint ventures was $1.8 million in the second quarter of 2018 compared to income of $0.4 million in the second quarter of 2017. The results of our joint ventures are included in our discussions of segmented revenue and segmented adjusted EBITDA above. The income from joint ventures in the second quarter of 2018 included a $3.6 million gain on the sale of Workopolis.com and related assets that were sold on April 12, 2018 as well as $1.8 million of restructuring charges related to the closure of the remaining Workopolis business following the sale. The loss from joint ventures in the first six months of 2017 included an impairment charge of $3.0 million related to our investment in Workopolis.

Loss from associated businesses Our loss from associated businesses was $5.7 million in the second quarter and $9.8 million in the first six months of 2018 compared to a loss of $0.3 million in the second quarter and $2.5 million in the first six months of 2017.

The loss in the second quarter of 2018 included income of $0.6 million from Black Press offset by a loss of $6.1 million from VerticalScope and $0.3 million from Nest Wealth. The loss from VerticalScope included $11.1 million of amortization and depreciation expense largely related to acquisition activity. The loss in the second quarter of 2017 included income of $1.9 million from Blue Ant and income of $1.1 million from our investment in Nest Wealth offset by losses of $2.0 million from Black Press and $1.2 million from VerticalScope which included $6.3 million of amortization and depreciation expense.

The loss in the first six months of 2018 included income of $1.0 million from Black Press offset by losses of $10.2 million from VerticalScope, $0.3 million from Blue Ant and $0.3 million from Nest Wealth. The loss from VerticalScope included TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 11 TORSTAR - Management's Discussion and Analysis

$19.7 million of amortization and depreciation expense. The loss in the first six months of 2017 included income of $2.2 million from Blue Ant and income of $1.1 million from our investment in Nest Wealth offset by losses of $2.5 million from Black Press and $3.2 million from VerticalScope which included $13.0 million of amortization and depreciation expense.

During the second quarter and first six months of 2018, VerticalScope generated U.S. $5.9 million and U.S. $14.4 million in cash from operations and made acquisitions totalling U.S. $2.7 million and U.S. $42.5 million respectively. VerticalScope's debt, net of cash, increased U.S. $30.4 million from U.S. $87.1 million at December 31, 2017 to U.S. $117.5 million at June 30, 2018.

Income and other taxes We recorded tax expense of $0.2 million in the second quarter and first six months of 2018, and recoveries of $nil and $1.1 million in the second quarter and first six months of 2017. We have not recognized the benefit of deferred income tax assets in the income tax expense recorded in the second quarter and first six months of 2018.

Net income (loss) from continuing operations Our net income was $4.8 million ($0.06 per share) in the second quarter of 2018. This compares to a net loss of $7.5 million ($0.10 per share) in the second quarter of 2017. Our net loss was $16.0 million ($0.20 per share) in the first six months of 2018. This compares to a net loss of $31.9 million ($0.40 per share) in the first six months of 2017.

Income from discontinued operations Income from discontinued operations of $nil and $6.3 million in the second quarter and first six months of 2018 and $0.5 million in the second quarter and first six months of 2017 resulted from an adjustment to the estimated income tax expense related to the sale of Harlequin in 2014.

Net income (loss) attributable to equity shareholders Our net income was $4.8 million ($0.06 per share) in the second quarter of 2018. This compares to a net loss of $7.0 million ($0.09 per share) in the second quarter of 2017.

Our net loss was $9.7 million ($0.12 per share) in the first six months of 2018. This compares to a net loss of $31.3 million ($0.39 per share) in the first six months of 2017.

Segment Operating Results – Community Brands

Revenues Revenues in the Community Brands segment were down $13.9 million (17%) in the second quarter of 2018, and down $20.0 million (13%) in the first six months of 2018, with an estimated $6.8 million and $11.9 million of the respective decreases in revenue resulting from publications purchased and sold in 2017. Local print advertising revenues, which represent the largest portion of the Community Brands' advertising revenues, were down 21% in the second quarter and 19% in the first six months of 2018 (11% and 9% on a same store and comparable timing basis). National print advertising revenues, which represent a less significant portion of the Community Brands' overall revenue, were down 18% in the second quarter of 2018 and 9% in the first six months of 2018 (8% and 2% respectively, on a same store and comparable timing basis). Flyer distribution revenues which represented 36% of the Community Brands total revenue in the second quarter and first six months of 2018 were down 16% and 13% in the second quarter and first six months of 2018 and were largely impacted by the sale of publications to Postmedia and shifts in the publication schedule as well as the closure of certain retail clients in 2017. On a same store and comparable timing basis and adjusting for the loss of certain retail clients, flyer distribution revenues in the second quarter and first six months of 2018 were down 5%, relative to the comparable periods in 2017.

On a same store basis, digital revenues in the Community Brands segment were up 3% in the second quarter and up 4% in the first six months of 2018. This was the result of continued strong growth in local digital revenue at the community sites, partially offset by declines in other digital verticals.

Salaries and benefits costs The Community Brands' salaries and benefits costs were down $4.0 million in the second quarter and $6.4 million in the first six months of 2018, and included the benefit of $2.0 million of cost savings from restructuring initiatives ($4.5 million - year to date) as well as $2.3 million of lower costs associated with the sale of publications to Postmedia ($4.4 million - year to date), partially offset by additional costs resulting from an increase in the minimum wage in Ontario as well as additional staffing related to our transformation activities.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 12 TORSTAR - Management's Discussion and Analysis

Other operating costs The Community Brands' other operating costs were down $7.3 million in the second quarter and down $10.7 million in the first six months of 2018, as a result of $5.5 million of lower costs associated with the sale of publications to Postmedia ($10.2 million - year to date) as well as volume related reductions in circulation and flyer distribution costs, lower newsprint consumption, and other cost reductions offset by additional costs related to our transformation activities.

Adjusted EBITDA The Community Brands' adjusted EBITDA was $7.9 million in the second quarter and $8.5 million in the first six months of 2018, down $2.5 million from adjusted EBITDA of $10.4 million in the second quarter and down $2.8 million from adjusted EBITDA of $11.3 million in the first six months of 2017, primarily reflecting lower revenues and costs related to our transformation activities which were substantially offset by lower costs, including $2.0 million of savings related to restructuring initiatives ($4.5 million - year to date) as well as $0.9 million of incremental adjusted EBITDA resulting from synergies associated with the transaction with Postmedia ($2.7 million - year to date).

Operating profit (loss) The Community Brands' operating profit was $1.0 million in the second quarter of 2018 compared to an operating profit of $3.8 million in the second quarter of 2017, reflecting lower adjusted EBITDA and higher restructuring and other charges in the second quarter of 2018.

The Community Brands' operating loss was $3.1 million in the first six months of 2018 compared to an operating loss of $1.6 million in the first six months of 2017, reflecting lower adjusted EBITDA partially offset by lower amortization and depreciation charges relative to the first six months of 2017.

Segment Operating Results – Daily Brands

Revenue Daily Brands' segment revenues were down $4.4 million (5%) in the second quarter and down $8.3 million (5%) in the first six months of 2018 and included an incremental $2.4 million in revenue ($4.8 million - year to date) associated with daily publications purchased and sold in late 2017.

Encouragingly, subscriber revenues, which represented approximately 40% of the Daily Brands' total revenue in the second quarter and first six months of 2018, grew 5% and 6% relative to the comparable periods in 2017 respectively. On a same store basis, subscriber revenues were almost flat to prior year in the second quarter and first six months of 2018. Flyer distribution revenues, which represented 7% of the Daily Brands' total revenue in the second quarter and first six months of 2018, were down 8% in the second quarter and 7% in the first six months of 2018 relative to the second quarter and first six months of 2017 (7% and 8% in the second quarter and first six months of 2018, respectively, on a same store and comparable timing basis).

The decrease in revenue in the second quarter of 2018 was primarily the result of lower print advertising revenues. Local print advertising revenues, which represented 23% of the Daily Brands' total revenues in the second quarter and first six months of 2018, were more resilient, down 6% and 7% relative to the respective periods in 2017 (6% in the second quarter and 9% year to date, on a same store and comparable timing basis). However, national print advertising revenues, which represented 10% of the Daily Brands' overall revenue in the second quarter and first six months of 2018, continued to be more challenged and were down 41% in the second quarter and 37% in the first six months of 2018 relative to the comparable periods in 2017 (38% in the second quarter and 37% in the first six months of 2018 on a same store and comparable timing basis).

Digital revenues from the Daily Brands segment were up 9% in the second quarter and 4% in the first six months of 2018. On a same store basis, digital revenues from the Daily Brands were comparable to prior year in the second quarter of 2018 and first six months of 2018. Results in the second quarter and first six months of 2018 reflected growth at thestar.com and the other daily websites offset by declines in other digital revenue streams.

Salaries and benefits costs The Daily Brands' salaries and benefits costs were down $16.4 million in the second quarter and the first six months of 2018 and included the benefit of a $15.8 million digital media tax credit (as this represents recoveries of previously incurred salary and benefits costs). This tax credit related to a claim made in respect of 2015 and not current year operations. Excluding the impact of the tax credit, segmented salaries and benefit costs in the second quarter and first six months of 2018 for the Daily Brands were down $0.6 million reflecting $0.3 million of incremental costs in the second quarter ($0.8 million - year TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 13 TORSTAR - Management's Discussion and Analysis to date) associated with the transaction with Postmedia and additional staffing related to our transformation partially offset by the benefit of savings from restructuring initiatives and lower staffing costs associated with Toronto Star Touch.

Other operating costs The Daily Brands' other operating costs were down $3.6 million in the second quarter and $8.0 million in the first six months of 2018, reflecting lower volume related circulation and distribution costs, lower newsprint consumption and other cost reductions, partially offset by $1.2 million of incremental costs in the second quarter ($2.5 million - year to date) associated with the Postmedia transaction as well as additional costs related to our transformation activities.

Adjusted EBITDA The Daily Brands' segmented adjusted EBITDA was $18.7 million in the second quarter and $17.2 million in the first six months of 2018, up $15.6 million and $16.1 million relative to the second quarter and first six months of 2017. Excluding the benefit of the $15.8 million digital media tax credit, adjusted EBITDA from the Daily Brands was down $0.2 million in the second quarter and up $0.3 million in the first six months of 2018 respectively. The decrease in the second quarter primarily reflects lower revenues and additional costs related to our transformation activities which were almost entirely offset by an incremental $0.8 million of adjusted EBITDA resulting from synergies associated with the transaction with Postmedia as well as $1.0 million of savings related to restructuring initiatives. The increase in adjusted EBITDA in the first six months of 2018 primarily reflects lower revenues and additional costs related to our transformation activities which were more than offset by an incremental $1.5 million of adjusted EBITDA resulting from synergies associated with the transaction with Postmedia as well as lower costs, and $3.9 million of savings related to restructuring initiatives.

Operating profit (loss) The Daily Brands' operating profit was $13.9 million in the second quarter and $6.7 million in the first six months of 2018, compared to an operating loss of $8.2 million in the second quarter and an operating loss of $18.5 million in the first six months of 2017. The improvement in the second quarter and first six months of 2018 was largely the result of higher adjusted EBITDA which included $15.8 million of digital media tax credits, as well as lower amortization and depreciation expenses.

Segment Operating Results – Digital Ventures

Revenues Digital Ventures revenues were down $1.8 million (10%) in the second quarter and down $1.2 million (3%) in the first six months of 2018 largely reflecting the absence of revenue from Workopolis following the sale in early April. Adjusting for the sale of Workopolis, Digital Ventures revenues were up $0.8 million (5%) in the second quarter and $2.2 million (6%) in the first six months of 2018 as a result of revenue growth of $1.3 million in the second quarter and $2.7 million in the first six months at VerticalScope, partially offset by lower revenues at eyeReturn. Our proportionate share of VerticalScope's revenue in the second quarter and first six months of 2018 was $12.6 million ($23.8 million year to date), which represented growth of 12% (13% year to date) (16% and 18% growth in USD) largely benefiting from growth from acquisitions.

Salaries and benefits costs Digital Ventures’ salaries and benefits costs were down $0.4 million in the second quarter and comparable to prior year in the first six months of 2018 reflecting the absence of salary and benefit costs following the Workopolis sale, offset by increased salary and benefit costs in support of organic and acquisition related growth at VerticalScope.

Other operating costs Digital Ventures' other operating costs were down $0.1 million in the second quarter and down $0.2 million in the first six months of 2018 reflecting the absence of costs following the sale of Workopolis and lower costs at eyeReturn, partially offset by increased costs at VerticalScope related to investment in their technology platform and costs to support both organic and acquisition related growth in the business.

Adjusted EBITDA Digital Ventures' adjusted EBITDA was $5.7 million, down $1.2 million in the second quarter and down $0.9 million in the first six months of 2018. Of the decline in adjusted EBITDA in the second quarter and first six months of 2018, $0.5 million was related to the Workopolis sale in early April. The balance is the result of lower adjusted EBITDA at VerticalScope due to higher costs related to investment in their technology platforms and cost to support the investment in organic and acquisition related revenue growth. Our proportionate share of adjusted EBITDA at VerticalScope was $5.7 million in the second quarter and $11.1 million in the first six months of 2018, which represented 45% and 47% of revenue respectively.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 14 TORSTAR - Management's Discussion and Analysis

Operating profit (loss) Digital Ventures' operating loss was $8.4 million in the second quarter of 2018, compared to an operating loss of $1.0 million in the second quarter of 2017. The increase in the operating loss in the second quarter of 2018 was largely the result of higher amortization and depreciation expenses associated with acquisition activity at VerticalScope.

Digital Ventures' operating loss was $13.1 million in the first six months of 2018, compared to an operating loss of $6.8 million in the first six months of 2017 also as a result of higher amortization and depreciation expenses associated with acquisition activity at VerticalScope.

4. Outlook The outlook for our business in the balance of 2018

In the second quarter of 2018, the Community Brands and the Daily Brands segments continued to face a challenging print advertising market resulting from ongoing shifts in spending by advertisers. While these trends have continued early into the third quarter, it is difficult to predict if these trends will improve or worsen in the balance of the year. On a same store and comparable timing basis as well as adjusting for the closure of certain retail clients in 2017, flyer distribution revenues declined 5% through the end of the second quarter and we expect this trend to deteriorate slightly in the balance of the year. On a same store and comparable timing basis, subscriber revenues were almost flat through the end of the second quarter, however, we expect this will decrease marginally in the balance of 2018 as we continue to increase focus on subscriber profitability. Overall digital revenue at the Community Brands and Daily Brands is expected to continue to grow in the balance of 2018 benefiting from growth at thestar.com and in local digital advertising at both the daily newspaper sites and the community sites partially offset by expected continued declines in other digital verticals.

We expect the transaction with Postmedia in November 2017 to continue to have a positive effect on earnings due to anticipated synergies, but a negative effect on revenue, as we experienced in the first six months of 2018. We continue to expect that synergies from this transaction will contribute to an improvement in operating earnings in the range of $5 million to $7 million for the full year ($4.3 million in the first six months of 2018).

Within the Digital Ventures segment, revenue growth at VerticalScope experienced through the second quarter of 2018 is expected to increase slightly in the balance of the year. This will be partially offset by declines resulting from the sale of Workopolis.com and related assets on April 12, 2018. Segmented revenue and adjusted EBITDA in respect of Workopolis was $4.8 million and $0.7 million respectively, in the third and fourth quarter of 2017. The revenue trends experienced at eyeReturn through the end of the second quarter of 2018 are expected to continue through the balance of the year.

In the first six months of 2018, we have incurred an incremental $4.8 million of costs and $1.1 million of capital investment related to our transformation efforts. Our transformation efforts through the end of the second quarter have been concentrated on a major national digital expansion aimed at driving future digital subscription revenues, an exclusive deal with the Wall Street Journal, an increased investment in investigative journalism, hyper-local and local content, development of our data infrastructure, advanced analytics capability, subscription platform implementations and customer life cycle management capabilities. We anticipate that we will incur an approximate $13 million of incremental operating expenses in support of these efforts for the full year in 2018.

We expect these incremental costs will be more than offset by $17.9 million of full year savings related to restructuring initiatives undertaken through the end of the second quarter of 2018 ($8.7 million in the Community Brands segment and $9.2 million in the Daily Brands segment). $8.4 million of this benefit was realized in the first six months of 2018. We also expect to identify additional cost savings in the balance of the year. We anticipate that capital expenditures for the full year 2018 will be in the range of $15 - $16 million, including approximately $5 - $6 million of capital spending related to technology platforms in connection with our transformation activities.

We continue to make progress on a potential merger of our defined benefit pension plans with the Colleges of Applied Arts & Technology (“CAAT”) jointly-sponsored defined benefit pension plan. On June 21, 2018 we entered into an agreement with the Sponsors Committee and Board of Trustees of the CAAT Pension Plan to merge our eight registered defined benefit pension plans with CAAT Pension Plan effective October 1st, 2018, with Torstar and certain of its subsidiaries becoming participating employers under the CAAT Pension Plan. The agreement contains customary representations and warranties and is subject to customary closing conditions and approvals, including consent by the Torstar Plan members and approval of the Superintendent of Financial Services (Ontario).

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 15 TORSTAR - Management's Discussion and Analysis

If approved by Torstar Plan members, future benefits will accrue under the new DBplus provisions of the CAAT Pension Plan beginning October 1st, 2018. Members of the Torstar Plans must vote on this proposed merger before September 27, 2018. The merger also requires regulatory approval by the Superintendent of Financial Services (Ontario) and at the time approval is granted, the liabilities for all past benefits under the Torstar Plans will be transferred to the CAAT Plan together with the assets of the Torstar Plans, and the CAAT Plan will assume responsibility for all pension benefit payments to members of the Torstar Plans going forward. Regulatory approval is not expected to occur prior to the second half of 2019. No additional cash funding related to the transferred liabilities is expected to be required from Torstar in connection with the merger.

5. Liquidity and Capital Resources A discussion of our cash flow, liquidity and other disclosures

We use cash and cash equivalents on hand and the cash generated by our operations to fund working capital, capital expenditures, distributions to shareholders, and acquisitions. Based on our current and anticipated level of operations, it is expected that our future cash flows from operating activities, combined with existing cash and cash equivalents, will be adequate to cover forecasted cash requirements in the foreseeable future. If we need to take additional measures to increase our liquidity and capital resources, we currently expect that we would do so through the sale of investments or assets, obtaining additional debt or equity financing, reducing distributions to shareholders or reducing capital expenditures.

In the second quarter of 2018 we generated $3.0 million of cash from operating activities, we used $3.3 million of cash in investing activities and we used $1.9 million of cash in financing activities. Total cash and cash equivalents was $49.4 million at June 30, 2018.

Year to date we used $11.5 million of cash in operating activities, we used $6.6 million of cash for investing activities and we used $3.9 million of cash in financing activities.

At June 30, 2018 we had $7.7 million of restricted cash held as collateral for outstanding standby letters of credit ($5.8 million of which is in respect of a standby letter of credit supporting an unfunded executive retirement plan liability).

Operating Activities During the second quarter of 2018, we generated $3.0 million of cash from operating activities, including funding of $3.4 million of contributions to employee benefit plans and an increase of $13.4 million in non-cash working capital. The increase in non-cash working capital was largely related to the $15.8 million digital media tax credit receivable. In the second quarter of 2017, operating activities used cash of $6.2 million which included funding of $7.9 million of contributions to employee benefit plans and a $6.5 million increase in non-cash working capital.

During the first six months of 2018, we used $11.5 million of cash in operating activities including funding of $7.6 million of contributions to employee benefit plans and an $18.7 million increase in non-cash working capital. The increase in non- cash working capital in the first six months of 2018 was largely related to the $15.8 million digital media tax credit receivable. In the first six months of 2017, we used $17.8 million of cash in operating activities including funding of $12.0 million of contributions to employee benefit plans and a $10.0 million increase in non-cash working capital which was largely related to payments in respect of restructuring provisions.

Investing Activities During the second quarter and first six months of 2018, we used $3.3 million and $6.6 million, respectively, of cash in investing activities which were primarily for additions to property, plant and equipment and intangible assets (excluding Torstar’s proportionate share of additions related to its joint ventures and 56% interest in VerticalScope).

During the second quarter and first six months of 2017, we used $2.8 million and $5.1 million, respectively, of cash in investing activities substantially all of which was for additions to property, plant and equipment and intangible assets (excluding Torstar’s proportionate share of additions related to its joint ventures and 56% interest in VerticalScope).

Financing Activities During the second quarter of 2018 and 2017 we used $1.9 million and $2.1 million, respectively, of cash for financing activities which was primarily used for the payment of dividends. During the first six months of 2018 and 2017 we used $3.9 million and $4.0 million, respectively, of cash for financing activities which was primarily used for the payment of dividends. In the first six months, dividends were 2.5 cents per share for each quarter in 2018 and 2017.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 16 TORSTAR - Management's Discussion and Analysis

Outstanding Share and Share Option Information As at June 30, 2018 Torstar had 9,808,215 Class A voting shares and 71,233,027 Class B non-voting shares outstanding. More information on Torstar’s share capital is provided in Note 14 of the Condensed Consolidated Financial Statements.

As at June 30, 2018, Torstar had 8,888,148 options to purchase Class B non-voting shares outstanding to executives. More information on Torstar’s share option plan is provided in Note 15 of the Condensed Consolidated Financial Statements.

6. Employee Benefit Obligations A summary of our employee benefit obligations

During the second quarter and first six months of 2018, we recorded, through other comprehensive income, actuarial gains of $21.2 million and $21.5 million respectively related to the defined benefit pension and the other post employment benefit plans. These gains were estimated by management. The second quarter gain reflects the favourable impact resulting from an increase in long-term interest rates and higher than anticipated investment returns. The year to date gain reflects the favourable impact resulting from an increase in long-term interest rates partially offset by lower than anticipated investment returns.

Actuarial reports for our most significant group of registered defined benefit pension plans (in terms of assets and obligations) were completed as of December 31, 2016. In addition, we completed updated valuations for two of these plans as of September 29, 2017 and we expect to file further updated actuarial valuations as of December 31, 2017 for all plans later this year. Based on these valuations, we anticipate that 2018 funding in respect of registered defined benefit pension plans will be in the range of $7 to $8 million.

Based on the December 31, 2016 solvency report, we had an estimated solvency deficit of $119 million at December 31, 2016. This report also indicated that a 100 basis point change in the discount rate used to calculate solvency liabilities would result in a change in liabilities of approximately $148 million. The blended discount rate of the most significant group of our registered defined benefit pension plans which management uses to calculate the estimated solvency deficit decreased to 3.03% at June 30, 2018 from 3.06% at December 31, 2016. Given the change in the discount rate, combined with asset returns from December 31, 2016 through to June 30, 2018, management estimates that the solvency deficit for these plans at June 30, 2018 was approximately $99 million.

7. Critical Accounting Policies and Estimates A description of accounting estimates and judgements that are critical to determining our financial results, and changes to accounting policies

Accounting Policies The accounting policies adopted in the preparation of the Condensed Consolidated Financial Statements are consistent with those followed in the preparation of the annual consolidated financial statements for the year ended December 31, 2017, except for the adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments effective January 1, 2018. The impact of the adoption of IFRS 15 and IFRS 9 are discussed below. We have not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

IFRS 15 Revenue from Contracts with Customers The Company adopted IFRS 15 Revenue from Contracts with Customers in accordance with the modified retrospective transitional approach. There were no transitional adjustments or changes to the Company’s revenue recognition policies required on adoption of this standard. The Company’s contracts with customers are for a term of one year or less. The Company expenses its incremental costs of obtaining a contract when incurred in accordance with the practical expedient in IFRS 15.92 as the amortization period would have been one year or less. The Company records deferred revenues primarily from subscribers when cash payments are received or due in advance of the Company’s performance. The standard requires disclosure with respect to contract assets and contract liabilities. Deferred revenue was previously included in the Consolidated Statement of Financial Position as part of current Accounts payable and accrued liabilities. Upon adoption of IFRS 15, Deferred revenue has been separately disclosed in current liabilities.

IFRS 9 Financial Instruments The Company adopted IFRS 9 Financial Instruments, effective January 1, 2018, which replaced IAS 39 Financial Instruments. With the exception of hedge accounting, which the Company has applied prospectively, the Company has applied IFRS 9 retrospectively.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 17 TORSTAR - Management's Discussion and Analysis

The Company has not restated comparative information for 2017 for financial instruments in the scope of IFRS 9. Therefore, the comparative information for 2017 is reported under IAS 39 and is not comparable to the information presented for 2018 in accordance with IFRS 9. Differences arising from the adoption of IFRS 9 have been recognized directly in retained earnings as of January 1, 2018.

The measurement categories for financial assets under IAS 39 (fair value through profit or loss (“FVTPL”), available for sale (“AFS”), and held-to-maturity and amortized cost) have been replaced by the following categories under IFRS 9:

• Debt instruments at amortized cost • Debt instruments at fair value through other comprehensive income (“FVOCI”), with gains or losses recycled to profit or loss on derecognition • Equity instruments at FVOCI, with no recycling of gains or losses to profit or loss on derecognition • Financial assets at FVTPL

Under IFRS 9, the classification of debt instruments is based on two criteria: a Company’s business model for managing the assets; and whether the assets' contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’). The assessment of a Company’s business models and contractual cash flows of debt instruments is made as of the date of initial application.

Under IFRS 9, equity instruments are generally classified as FVTPL. For equity instruments that are not held for trading, a Company can make an irrevocable election on initial recognition to classify the instrument as FVOCI with no recycling of gains or losses to profit or loss on derecognition. This election is available on an instrument-by-instrument basis.

Debt instruments at amortized cost

On adoption of IFRS 9, our loans and receivables will continue to be subsequently measured at amortized cost, as these assets are held in order to collect contractual cash flows and the contractual terms give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding. Loans and receivables are initially recognized at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method less any impairment.

Equity Instruments at FVOCI with no recycling

On adoption of IFRS 9, we have irrevocably elected to classify our unquoted equity instruments (portfolio investments) at FVOCI with no recycling of gains or losses to profit or loss on derecognition. Each of our portfolio investments meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. Effective January 1, 2018, the portfolio investments continue to be carried at fair value with changes in fair value reported as unrealized gains or losses within OCI. On January 1, 2018, the carrying value of the portfolio investments was $10.9 million and are included in Other assets in the Consolidated Statement of Financial Position. Equity instruments classified as FVOCI are not subject to an impairment assessment under IFRS 9. Under IAS 39, the Company’s portfolio investments were classified as AFS financial assets.

On adoption of IFRS 9, the cumulative gain of $2.9 million related to the change in fair value of AFS financial assets previously reported in the accumulated other comprehensive income (loss) reserve ("AOCI") and the cumulative impairment loss (net of tax) of $2.0 million previously reported in accumulated deficit have both been reclassified on the Consolidated Statement of Changes in Equity to a new fair value reserve of financial assets at FVOCI.

Financial assets at fair value through profit or loss

On adoption of IFRS 9, we will continue to classify certain financial assets as fair value through profit or loss. Assets and liabilities in this category include derivative financial instruments that are not designated as hedging instruments in hedge relationships. We have not classified any financial instruments as held-to-maturity, and therefore there is no impact on the elimination of this measurement category under IFRS 9.

Other financial liabilities

The accounting for our financial liabilities remains the same as it was under IAS 39. Other financial liabilities will continue to be measured at amortized cost using the effective interest rate method.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 18 TORSTAR - Management's Discussion and Analysis

Derivative instruments and hedging

We have applied hedge accounting prospectively. At the date of the initial application, all of our existing hedging relationships were eligible to be treated as continuing hedging relationships.

We have continued to designate the change in the intrinsic fair value of the collar arrangements to sell U.S. dollars as hedges against the foreign currency exposure on our net investment in VerticalScope. Under IFRS 9, changes in fair value arising from fluctuations in the rate of exchange of Cdn. dollar per U.S. dollar within the collar range are now recognized in OCI to the extent of hedge effectiveness and accumulated in a separate component of equity rather than net income under IAS 39. Fair value changes from movement in the foreign exchange rate within the collar range reflect the cost of hedging as the options have no intrinsic value. When the rate of exchange is above or below the collar range, the changes in fair value are recorded in OCI to the extent of hedge effectiveness with the portion related to the cost of hedging accumulated in the separate component of equity. The ineffective portion is recognized in the consolidated statement of income or loss.

As at December 31, 2017, the cumulative change in the fair value of the collar options was a gain of $0.1 million related to the cost of hedging. On adoption of IFRS 9, the cumulative gain of $0.1 million has been reclassified from accumulated deficit to a separate component of equity within AOCI.

Impairment

For Trade and other receivables, we have applied the standard’s simplified approach and have calculated expected credit losses based on lifetime expected credit losses. We have established a provision matrix that is based on the Company’s historical credit loss experience, adjusted for forward-looking factors specific to the customers and the economic environment. There are no differences between the ending impairment allowances for trade and other receivables under IAS 39 and the opening loss allowance under IFRS 9.

Accounting Estimates and Judgements The Condensed Consolidated Financial Statements are prepared in accordance with IFRS, which require management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements. There have been no significant changes in our critical accounting estimates and judgements from what was previously disclosed in the Annual MD&A.

8. Recent Accounting Pronouncements A discussion of recent IFRS developments that will affect our business The International Accounting Standards Board (“IASB”) continues to issue new and revised IFRS. A listing of the changes in IFRS is included in Note 2(s) in Torstar’s December 31, 2017 Consolidated Financial Statements.

In January 2016, the IASB issued IFRS 16 Leases which supersedes IAS 17 Leases and related interpretations. The new standard provides a single lessee accounting model which eliminates the distinction between operating and finance leases, by requiring lessees to recognize assets and liabilities for all leases unless the underlying asset has a low value or the lease term is 12 months or less. Lessor accounting remains largely unchanged and the distinction between operating and finance leases is retained. We do not anticipate early adoption and we plan to adopt the standard on its effective date of January 1, 2019. We are in the process of reviewing the standard to determine the impact on the consolidated financial statements.

9. Controls and Procedures A discussion of our disclosure controls and internal controls over financial reporting

There have been no changes in our internal controls over financial reporting that occurred during the interim period ended June 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Management, under the supervision of, and with the participation of the CEO and CFO, assessed the effectiveness of internal controls over financial reporting, using the 2013 Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework, and based on that assessment concluded that internal controls over financial reporting were effective as at June 30, 2018.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 19 TORSTAR - Management's Discussion and Analysis 10. Summary of Quarterly Results A summary view of our quarterly financial performance

The following table presents selected financial information for each of the eight most recently completed quarters:

Quarter Ended (in $000’s - except per share Jun 30, Mar 31, Dec 31, Sep 30, Jun 30, Mar 31, Dec 31, Sep 30, amounts) 2018 2018 2017 2017 2017 2017 2016 2016 Revenue $143,171 $128,972 $169,339 $145,913 $161,757 $138,676 $188,408 $162,098 Net Income (loss) from continuing operations $4,849 ($20,860) $7,847 ($6,589) ($7,499) ($24,397) $683 $1,081

Per Class A voting and Class B non-voting share Basic and Diluted $0.06 ($0.18) $0.10 ($0.08) ($0.09) ($0.30) $0.01 $0.01

Net Income (loss) attributable to equity shareholders $4,848 ($14,502) $8,652 ($6,557) ($6,988) ($24,278) $1,264 $1,432

Per Class A voting and Class B non-voting share Basic and Diluted $0.06 ($0.18) $0.11 ($0.08) ($0.09) ($0.30) $0.01 $0.02

The summary of quarterly results illustrates the cyclical nature of revenues and operating profit in Daily Brands, Community Brands and Digital Ventures. The second and fourth quarters are generally the strongest with the first and third quarters being the softest. Restructuring and other charges have also affected the level of net income for several quarters. Reported on a segmented basis, restructuring and other charges were $4.4 million and $7.6 million in the first and second quarter of 2018 and $4.9 million, $6.2 million, $1.7 million and $6.0 million in the first, second, third and fourth quarters of 2017 respectively and $3.7 million and $4.4 million in the third and fourth quarters of 2016 respectively. Additionally, losses on impairment of assets (reported on a segmented basis) of $3.0 million and $8.1 million were recorded in the first and fourth quarters of 2017 respectively and $7.5 million was recorded in the fourth quarter of 2016. The first quarter of 2018 includes an income tax recovery of $6.3 million from discontinued operations in respect of the sale of Harlequin. The second and fourth quarters of 2017 included pre-tax recoveries from discontinued operations of $0.6 million and $1.0 million respectively while the third and fourth quarters of 2016 included pre-tax recoveries from discontinued operations of $0.4 million and $0.5 million respectively, all of which related to provisions for indemnities in respect of the sale of Harlequin.

11. Reconciliation and Definition of Non-IFRS Measures A description and reconciliation of certain non-IFRS and additional IFRS measures used by management In addition to operating profit, an additional IFRS measure, as presented in the consolidated statement of income (loss), management uses the following non-IFRS measures: segmented revenue, adjusted EBITDA (and where applicable segmented adjusted EBITDA), operating earnings (loss) (and where applicable segmented operating earnings (loss)) and adjusted earnings (loss) per share, as measures to assess the consolidated performance and the performance of the reporting units and business segments.

Segmented revenue Segmented revenue is calculated in the same manner as operating revenue in the Condensed Consolidated Financial Statements, except that it is calculated using total segment results which includes our proportionately consolidated share of revenues from joint ventures and our 56% interest in VerticalScope. Management of each segment is accountable for the revenues, including the proportionately consolidated share of revenues from joint venture operations. We believe that segmented revenue is a useful measure for investors as it is a measure of the revenues for which management of each segment is accountable. The intent of segmented revenue is to provide additional useful information to investors, analysts and readers of our financial statements. The measure does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies.

Adjusted EBITDA/Segmented Adjusted EBITDA Management believes that adjusted EBITDA is an important proxy for the amount of cash generated by our ongoing operations (or by a reporting unit or business segment) to generate liquidity to fund future capital needs and we use this metric for this TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 20 TORSTAR - Management's Discussion and Analysis purpose. Adjusted EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under IFRS. We calculate adjusted EBITDA as operating revenue, less salaries and benefits and other operating costs, as presented on the consolidated statement of income (loss), and exclude share based compensation, restructuring and other charges and impairment of assets. Share based compensation is eliminated as it is a non-cash expense that fluctuates significantly from period to period, in particular for VerticalScope as a result of industry compensation practices. Restructuring and other charges and impairment of assets are eliminated as these activities are not related to ongoing operations as of the end of the period. The exclusion of impairment of assets also eliminates the non-cash impact. Adjusted EBITDA is also used by investors and analysts for valuation purposes. The intent of adjusted EBITDA is to provide additional useful information to investors, analysts and readers of our financial statements. The measure does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies (including calculating EBITDA on an adjusted basis to exclude restructuring and other charges, impairment of assets and share based compensation). Segmented adjusted EBITDA is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated results for joint ventures and our 56% interest in VerticalScope for which management is accountable.

Operating earnings (loss)/Segmented operating earnings (loss) Operating earnings (loss) is used by management to represent the results of ongoing operations inclusive of amortization and depreciation. We use operating earnings (loss) as a measure of the amount of income (loss) generated by our ongoing operations (or by a reporting unit or business segment) after giving effect to amortization and depreciation. We believe this metric is also useful for investors for this purpose. We calculate operating earnings (loss) as operating revenue less salaries and benefits, other operating costs, share based compensation and amortization and depreciation. Operating earnings (loss) excludes restructuring and other charges and impairment of assets. Restructuring and other charges and impairment of assets are eliminated as these activities are not related to ongoing operations as of the end of the period. Our method of calculating operating earnings (loss) (including calculating operating earnings (loss) on an adjusted basis to exclude restructuring and other charges and impairment of assets) may differ from other companies and accordingly may not be comparable to measures used by other companies. The intent of operating earnings (loss) is to provide additional useful information to investors, analysts and readers of our financial statements. The measure does not have any standardized meaning under IFRS, is not a recognized measure of financial performance under IFRS, and accordingly may not be comparable to measures used by other companies. Segmented operating earnings (loss) is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated operating earnings for joint ventures and our 56% interest in VerticalScope for which management is accountable.

The following is a reconciliation of adjusted EBITDA and operating earnings (loss) (and segmented adjusted EBITDA/ segmented operating earnings (loss) - as applicable) with operating profit (loss) (segmented operating profit (loss) - as applicable). Adjusted EBITDA, segmented adjusted EBITDA, operating earnings (loss) and segmented operating earnings (loss) are regularly reported to the chief operating decision maker and correspond to the definitions used in our historical discussions.

Per Consolidated Statement of Income Segmented (Loss) Second Quarter Second Quarter Second Quarter Second Quarter 2018 2017 2018 2017 Operating profit (loss) $2,186 ($8,052) $9,771 ($8,013) Add: Restructuring and other charges 7,552 6,211 5,784 6,070 Add: Impairment of assets Operating earnings (loss) $9,738 ($1,841) $15,555 ($1,943) Add: Share based compensation 203 644 Add: Amortization and depreciation 17,861 19,196 6,534 12,417 Adjusted EBITDA $27,802 $17,999 $22,089 $10,474

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 21 TORSTAR - Management's Discussion and Analysis

Per Consolidated Statement of Income Segmented (Loss) Six months ended Six months ended Six months ended Six months ended June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017 Operating profit (loss) ($16,743) ($31,430) ($6,139) ($27,118) Add: Restructuring and other charges 11,961 11,090 9,788 10,553 Add: Impairment of assets 3,000 Operating earnings (loss) ($4,782) ($17,340) $3,649 ($16,565) Add: Share based compensation 882 972 Add: Amortization and depreciation 33,499 36,366 13,214 22,482 Adjusted EBITDA $29,599 $19,998 $16,863 $5,917

Adjusted earnings (loss) per share Adjusted earnings (loss) per share is used by management to represent the per share earnings of results of our ongoing operations (or by a reporting unit or business segment) and is not a recognized measure of financial performance under IFRS. We believe this metric is also useful for investors for this purpose. We calculate adjusted earnings (loss) per share as earnings (loss) per share from continuing operations less the per share effect of restructuring and other charges, impairment of assets, non-cash foreign exchange, other income (expense) and change in deferred taxes. Restructuring and other charges and impairment of assets are eliminated as these activities are not related to ongoing operations as of the end of the period. Non-cash foreign exchange, other income (expense) and changes in deferred taxes are eliminated as these are not related to routine operating activities. The intent of presenting adjusted earnings (loss) per share is to provide additional useful information to investors, analysts and readers of our financial statements. Our method of calculating adjusted earnings (loss) per share may differ from other companies and accordingly may not be comparable to measures used by other companies. The measure does not have any standardized meaning under IFRS, is not a recognized measure of financial performance under IFRS, and accordingly may not be comparable to measures used by other companies. The following is a reconciliation of adjusted earnings per share to earnings per share.

Three months ended June 30 Six months ended June 30 2018 2017 2018 2017 Adjusted income (loss) per share $0.16 ($0.03) ($0.04) ($0.24)

• Restructuring and other charges (0.10) (0.08) (0.15) (0.14)

• Impairment of assets (0.04)

• Non-cash foreign exchange 0.01 (0.01)

• Change in current and deferred taxes 0.02

Income (loss) per share from continuing operations $0.06 ($0.10) ($0.20) ($0.40)

Operating profit (loss)/Segmented operating profit (loss) Operating profit (loss) is an additional IFRS measure. Management uses operating profit (loss) to measure the results of operations inclusive of impairments and restructuring and other charges. Operating profit (loss) appears in our consolidated statement of income (loss). We believe that operating profit (loss) provides additional useful information to investors, analysts and readers of our financial statements. The measure does not have any standardized meaning under IFRS and accordingly may not be comparable to measures used by other companies. Our method of calculating operating profit (loss) may differ from other companies and accordingly may not be comparable to measures used by other companies. Segmented operating profit (loss) is calculated in the same manner described above, except that it is calculated using total segment results including proportionately consolidated results for joint ventures and our 56% interest in VerticalScope for which management is accountable.

12. Risks and Uncertainties Risks and uncertainties facing our business

We are subject to a number of risks and uncertainties, which are set forth in our Annual MD&A which is incorporated herein by reference, and a copy of which is available on our website at www.torstar.com and on SEDAR at www.sedar.com. A risk is the possibility that an event might happen in the future that could have a negative effect on our financial condition, financial performance or business. The actual effect of any event on our business could be materially different from what is anticipated. The description of risks in the Annual MD&A does not include all possible risks.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 22 TORSTAR - Management's Discussion and Analysis

In March 2018, officials from the Competition Bureau (the “Bureau”) conducted searches of our corporate offices as part of the Bureau’s ongoing review of the Postmedia transaction under the conspiracy provisions of the Competition Act (Canada). The Bureau is also investigating the transaction under the merger provisions of the Competition Act (Canada), and as part of the Bureau’s merger review obtained an order requiring the Company to produce records and information. Torstar does not believe it has contravened the Competition Act (Canada) and is cooperating fully with the Bureau in connection with its reviews.

The Competition Act allows for a one-year period following the completion of a merger transaction during which the Commissioner of Competition may bring an application to the Competition Tribunal challenging the transaction on the basis that it prevents or lessens competition substantially in any relevant market. Refer to Section 16 of our annual MD&A for further discussion.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 23 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Torstar Corporation Consolidated Statement of Financial Position (Thousands of Canadian Dollars) (Unaudited) As at As at June 30, 2018 December 31, 2017 Assets Current: Cash and cash equivalents $49,389 $71,377 Restricted cash (note 4) 7,692 9,056 Receivables (note 11) 113,698 112,946 Inventories 4,072 4,326 Derivative financial instruments (note 11) 57 Prepaid expenses 6,945 4,373 Prepaid and recoverable income taxes 808 1,000 Total current assets 182,604 203,135 Investments in joint ventures (note 6) 24,339 23,420 Investments in associated businesses (note 7) 138,630 142,769 Property, plant and equipment (note 8) 52,052 55,259 Intangible assets (note 9) 34,728 40,217 Other assets 14,239 12,967 Deferred income tax assets 118 3,460 Total assets $446,710 $481,227 Liabilities and Equity Current: Accounts payable and accrued liabilities $61,469 $72,962 Deferred revenue 14,917 16,170 Derivative financial instruments (note 11) 1,799 Provisions (note 12) 14,042 18,113 Income tax payable 482 6,781 Total current liabilities 92,709 114,026 Provisions (note 12) 6,250 6,714 Other liabilities 5,861 6,599 Employee benefits (note 13) 82,938 104,716 Deferred income tax liabilities 3,342 Equity: Share capital (note 14) 403,364 403,040 Contributed surplus 21,588 21,322 Accumulated deficit (165,716) (176,180) Other components of equity (note 16) (82) (2,207) Total equity attributable to equity shareholders 259,154 245,975 Minority interests (202) (145) Total equity 258,952 245,830 Total liabilities and equity $446,710 $481,227 (see accompanying notes)

ON BEHALF OF THE BOARD

(Signed) (Signed) John Honderich Paul Weiss Director Director

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 1 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Torstar Corporation Consolidated Statement of Income (Loss) (Thousands of Canadian Dollars except per share amounts) (Unaudited) Three months ended Six months ended June 30 June 30 2018 2017 2018 2017

Operating revenue $143,171 $161,757 $272,143 $300,433

Salaries and benefits (45,305) (66,456) (108,571) (131,199) Other operating costs (75,777) (84,827) (146,709) (163,317) Amortization and depreciation (notes 8 and 9) (6,534) (12,417) (13,214) (22,482) Restructuring and other charges (note 12) (5,784) (6,070) (9,788) (10,553) Operating profit (loss) 9,771 (8,013) (6,139) (27,118) Interest and financing costs (note 11) (744) (575) (1,474) (1,137) Foreign exchange (66) 1,003 (679) 158 Income (loss) from joint ventures (note 6) 1,788 367 2,233 (2,449) Loss from associated businesses (note 7) (5,711) (302) (9,763) (2,497) Other income 11 21 11 47 5,049 (7,499) (15,811) (32,996) Income and other taxes recovery (expense) (note 10) (200) (200) 1,100 Net income (loss) from continuing operations 4,849 (7,499) (16,011) (31,896) Income from discontinued operations (note 17) 500 6,300 500 Net income (loss) $4,849 ($6,999) ($9,711) ($31,396) Attributable to: Equity shareholders $4,848 ($6,988) ($9,654) ($31,266) Minority interests $1 ($11) ($57) ($130)

Net income (loss) attributable to equity shareholders per Class A (voting) and Class B (non-voting) share (note 14(b)): Basic and Diluted: From continuing operations $0.06 ($0.10) ($0.20) ($0.40) From discontinued operations $0.01 $0.08 $0.01 $0.06 ($0.09) ($0.12) ($0.39) (see accompanying notes)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 2 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Torstar Corporation Consolidated Statement of Comprehensive Income (Loss) (Thousands of Canadian Dollars) (Unaudited) Three months ended Six months ended June 30 June 30 2018 2017 2018 2017

Net income (loss) $4,849 ($6,999) ($9,711) ($31,396)

Other comprehensive income (loss) (“OCI”) that are or may be reclassified subsequently to net income (loss): Unrealized foreign currency translation adjustment (“CTA”) (no income tax effect) (8) 15 (21) 21 Unrealized foreign currency translation adjustment for associated businesses (no income tax effect) (note 7) 1,945 (2,869) 4,932 (3,791) Net movement on available-for-sale financial assets (no income tax effect) (130) (170) Unrealized gain (loss) on hedge of net investment (cost of hedging) (no income tax effect) (note 11) 57 (1,063)

1,994 (2,984) 3,848 (3,940)

Other comprehensive income (loss) (“OCI”) that will not be reclassified subsequently to net income (loss):

Actuarial gain (loss) on employee benefits (no income tax effect) (note 13) 21,230 (35,110) 21,530 (54,027) Actuarial gain (loss) on employee benefits for associated businesses (no income tax effect) (note 7) (24) (366) 692 17 Fair value change on equity instruments at FVOCI (no income tax effect) 89 220 21,295 (35,476) 22,442 (54,010)

Total other comprehensive income (loss), net of tax $23,289 ($38,460) $26,290 ($57,950)

Comprehensive income (loss), net of tax $28,138 ($45,459) $16,579 ($89,346) Attributable to: Equity shareholders $28,137 ($45,448) $16,636 ($89,216) Minority interests $1 ($11) ($57) ($130) (see accompanying notes)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 3 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Torstar Corporation Consolidated Statement of Changes in Equity (Thousands of Canadian Dollars) (Unaudited)

Accumulated Fair value other reserve of Total comprehensive financial attributable to Share Contributed Accumulated income (loss) assets at equity Minority capital surplus deficit (“AOCI”) FVOCI shareholders interests Total equity

At December 31, 2017 $403,040 $21,322 ($176,180) ($2,207) $245,975 ($145) $245,830

Adoption of IFRS 9 (note 2) 1,943 (2,867) 924

At January 1, 2018 (adjusted) 403,040 21,322 (174,237) (5,074) 924 245,975 (145) 245,830

Net loss for the period (9,654) (9,654) (57) (9,711)

Other comprehensive income 22,222 3,848 220 26,290 26,290

Total comprehensive income (loss) 12,568 3,848 220 16,636 (57) 16,579

Dividends (note 14) 82 (4,047) (3,965) (3,965)

Issue of share capital – other (note 14) 242 242 242

Share-based compensation expense 266 266 266

At June 30, 2018 $403,364 $21,588 ($165,716) ($1,226) $1,144 $259,154 ($202) $258,952

At December 31, 2016 $402,814 $20,797 ($102,599) $5,176 $326,188 ($18) $326,170

Net loss for the period (31,266) (31,266) (130) (31,396)

Other comprehensive loss (54,010) (3,940) (57,950) (57,950)

Total comprehensive income (loss) (85,276) (3,940) (89,216) (130) (89,346)

Dividends (note 14) 69 (4,038) (3,969) (3,969)

Issue of share capital – other (note 14) 93 93 93

Share-based compensation expense 279 279 279

At June 30, 2017 $402,976 $21,076 ($191,913) $1,236 $233,375 ($148) $233,227 (see accompanying notes)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 4 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Torstar Corporation Consolidated Statement of Cash Flows (Thousands of Canadian Dollars) (Unaudited) Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Cash was provided by (used in) Operating activities $3,013 ($6,160) ($11,507) ($17,834) Investing activities (3,274) (2,757) (6,612) (5,114) Financing activities (1,877) (2,085) (3,869) (4,047) Decrease in cash (2,138) (11,002) (21,988) (26,995) Cash, beginning of period 51,527 59,381 71,377 75,374 Cash, end of period $49,389 $48,379 $49,389 $48,379 Operating activities: Net income (loss) from continuing operations $4,849 ($7,499) ($16,011) ($31,896) Amortization and depreciation (notes 8 and 9) 6,534 12,417 13,214 22,482 Loss (income) from joint ventures (note 6) (1,788) (367) (2,233) 2,449 Distributions from joint ventures (note 6) 1,314 1,814 1,314 1,814 Loss from associated businesses (note 7) 5,711 302 9,763 2,497 Dividend from associated businesses (note 7) 194 Non-cash employee benefit expense (note 13) 3,666 3,816 7,334 7,782 Employee benefits funding (note 13) (3,436) (7,888) (7,582) (12,029) Other (note 18) (406) (2,217) 20 (3,965) 16,444 378 5,819 (10,672) Decrease in restricted cash (note 4) 1,364 2,791 Increase in non-cash working capital (13,431) (6,538) (18,690) (9,953) Cash provided by (used in) operating activities $3,013 ($6,160) ($11,507) ($17,834) Investing activities: Additions to property, plant and equipment and intangible assets ($2,149) ($2,820) ($5,660) ($5,052) Received from associated businesses (note 7) 63 63 Acquisitions and portfolio investments (note 19) (1,125) (1,125) (125) Other 173 Cash used in investing activities ($3,274) ($2,757) ($6,612) ($5,114) Financing activities: Dividends paid ($1,984) ($1,983) ($3,965) ($3,969) Other 107 (102) 96 (78) Cash used in financing activities ($1,877) ($2,085) ($3,869) ($4,047) Cash represented by: Cash $13,914 $15,342 $13,914 $15,342 Cash equivalents – short-term deposits 35,475 33,037 35,475 33,037 Net cash, end of period $49,389 $48,379 $49,389 $48,379 (see accompanying notes)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 5 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in thousands of Canadian dollars except per share amounts) (Unaudited)

1. CORPORATE INFORMATION

Torstar Corporation (the "Company") is incorporated under the laws of Ontario, Canada and its Class B (non-voting) shares are publicly traded on the Toronto Stock Exchange. The registered office is located at One Yonge Street, Toronto, Canada. The principal activities of the Company and its subsidiaries are described in note 3.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

These condensed consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”) applicable to the preparation of consolidated interim financial statements, including International Accounting Standard (“IAS”) 34.

These condensed consolidated financial statements have been authorized for issue in accordance with a resolution from the Board of Directors on July 31, 2018.

The condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and accordingly should be read in conjunction with the Company’s annual consolidated financial statements for the year ended December 31, 2017.

Certain comparative figures for previous periods have been restated to conform to the current period presentation.

(b) Changes in accounting standards

The accounting policies adopted in preparation of the condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements for the year ended December 31, 2017, except for the adoption of IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments which were effective January 1, 2018. The nature and impact of the adoption of these standards is described below. The Company has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.

IFRS 15 Revenue from Contracts with Customers The Company adopted IFRS 15 Revenue from Contracts with Customers in accordance with the modified retrospective transitional approach. There were no transitional adjustments or changes to the Company’s revenue recognition policies required on adoption of this standard. The Company’s contracts with customers are for a term of one year or less. The Company expenses its incremental costs of obtaining a contract when incurred in accordance with the practical expedient in IFRS 15.92 as the amortization period would have been one year or less. The Company records deferred revenues primarily from subscribers when cash payments are received or due in advance of the Company’s performance. The standard requires disclosure with respect to contract assets and contract liabilities. Deferred revenue was previously included in the Consolidated Statement of Financial Position as part of current Accounts payable and accrued liabilities. Upon adoption of IFRS 15, deferred revenue has been separately disclosed in current liabilities.

IFRS 9 Financial Instruments The Company adopted IFRS 9 Financial Instruments, effective January 1, 2018, which replaced IAS 39 Financial Instruments. With the exception of hedge accounting, which the Company has applied prospectively, the Company has applied IFRS 9 retrospectively.

The Company has not restated comparative information for 2017 for financial instruments in the scope of IFRS 9. Therefore, the comparative information for 2017 is reported under IAS 39 and is not comparable to the information presented for 2018 in accordance with IFRS 9. Differences arising from the adoption of IFRS 9 have been recognized directly in retained earnings as of January 1, 2018. TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 6 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

The measurement categories for financial assets under IAS 39 (fair value through profit or loss (“FVTPL”), available for sale (“AFS”), and held-to-maturity and amortized cost) have been replaced by the following categories under IFRS 9: • Debt instruments at amortized cost • Debt instruments at fair value through other comprehensive income (“FVOCI”), with gains or losses recycled to profit or loss on derecognition • Equity instruments at FVOCI, with no recycling of gains or losses to profit or loss on derecognition • Financial assets at FVTPL

Under IFRS 9, the classification of debt instruments is based on two criteria: a Company’s business model for managing the assets; and whether the assets' contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’). The assessment of a Company’s business models and contractual cash flows of debt instruments is made as of the date of initial application.

Under IFRS 9, equity instruments are generally classified as FVTPL. For equity instruments that are not held for trading, a Company can make an irrevocable election on initial recognition to classify the instrument as FVOCI with no recycling of gains or losses to profit or loss on derecognition. This election is available on an instrument-by- instrument basis.

Debt instruments at amortized cost

On adoption of IFRS 9, the Company’s loans and receivables will continue to be subsequently measured at amortized cost, as these assets are held in order to collect contractual cash flows and the contractual terms give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding. Loans and receivables are initially recognized at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest method less any impairment.

Equity Instruments at FVOCI with no recycling

On adoption of IFRS 9, the Company has irrevocably elected to classify its unquoted equity instruments (portfolio investments) at FVOCI with no recycling of gains or losses to profit or loss on derecognition. Each of the portfolio investments meet the definition of equity under IAS 32 Financial Instruments: Presentation and are not held for trading. On January 1, 2018, the carrying value of the portfolio investments was $10.9 million and are included in Other assets in the Consolidated Statement of Financial Position. The portfolio investments continue to be carried at fair value with changes in fair value reported as unrealized gains or losses within OCI. Equity instruments classified as FVOCI are not subject to an impairment assessment under IFRS 9. Under IAS 39, the Company’s portfolio investments were classified as AFS financial assets.

On adoption of IFRS 9, the cumulative gain of $2.9 million related to the change in fair value of AFS financial assets previously reported in the accumulated other comprehensive income (loss) reserve ("AOCI") and the cumulative impairment loss (net of tax) of $2.0 million previously reported in accumulated deficit have both been reclassified on the Consolidated Statement of Changes in Equity to a new fair value reserve of financial assets at FVOCI (note 16).

Financial assets at fair value through profit or loss

On adoption of IFRS 9, the Company has continued to classify certain financial assets as fair value through profit or loss. Assets and liabilities in this category include derivative financial instruments that are not designated as hedging instruments in hedge relationships. The Company had not classified any financial instruments as held-to- maturity, and therefore there is no impact on the elimination of this measurement category under IFRS 9.

Other financial liabilities

The accounting for the Company’s financial liabilities remains the same as it was under IAS 39. Other financial liabilities will continue to be measured at amortized cost using the effective interest rate method.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 7 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Derivative instruments and hedging

The Company has applied hedge accounting prospectively. At the date of the initial application, all of the Company’s existing hedging relationships were eligible to be treated as continuing hedging relationships.

The Company has continued to designate the change in the intrinsic fair value of the collar arrangements to sell U.S. dollars as hedges against the foreign currency exposure on its net investment in VerticalScope Holdings Inc. ("VerticalScope"). Under IFRS 9, changes in fair value arising from fluctuations in the rate of exchange of Cdn. dollar per U.S. dollar within the collar range are now recognized in OCI to the extent of hedge effectiveness and accumulated in a separate component of equity rather than net income under IAS 39. Fair value changes from movement in the foreign exchange rate within the collar range reflect the cost of hedging as the options have no intrinsic value. When the rate of exchange is above or below the collar range, the changes in fair value are recorded in OCI to the extent of hedge effectiveness with the portion related to the cost of hedging accumulated in the separate component of equity. The ineffective portion is recognized in the consolidated statement of income or loss.

As at December 31, 2017, the cumulative change in the fair value of the collar options was a gain of $0.1 million related to the cost of hedging. On adoption of IFRS 9, the cumulative gain of $0.1 million has been reclassified from accumulated deficit to a separate component of equity within AOCI (note 16).

Impairment

For Trade and other receivables, the Company has applied the standard’s simplified approach and has calculated expected credit losses based on lifetime expected credit losses. The Company has established a provision matrix that is based on the Company’s historical credit loss experience, adjusted for forward-looking factors specific to the customers and the economic environment. There are no differences between the ending impairment allowances for trade and other receivables under IAS 39 and the opening loss allowance under IFRS 9.

3. SEGMENTED INFORMATION

During the fourth quarter of 2017, the Company realigned its management structure and operating segments in order to better align its operations by type of publication. The Company has three reportable operating segments: Community Brands ("Communities"), Daily Brands ("Dailies") and Digital Ventures. Corporate is the provision of corporate services and administrative support. Digital businesses outside the traditional newspaper operations are managed as one operating segment - Digital Ventures, which remains a separate reportable segment. Relevant comparative information has been restated to reflect these changes. The Company’s chief operating decision- maker (“CODM”) monitors the operating results of the operating segments for the purpose of assessing performance. Segment performance is evaluated based on operating profit which corresponds to operating profit as measured in the consolidated financial statements except that it includes the proportionately consolidated share of joint venture operations and in the case of the Digital Ventures segment, the Company’s 56% interest in VerticalScope, which as a result of terms in the applicable shareholder’s agreement, is classified as an associated business (rather than being a consolidated subsidiary or classified as a joint venture). The Company owns a significantly higher percentage of VerticalScope relative to its other associated businesses. Decisions regarding resource allocation are made at the reportable operating segment level.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 8 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Per Adjustments Consolidated and Statement of Three months ended Digital Eliminations Income June 30, 2018 Communities Dailies Ventures Corporate Total ¹ (Loss) Operating revenue $68,661 $75,406 $16,598 $160,665 ($17,494) $143,171 Salaries and benefits (32,026) (12,597) (5,566) ($1,484) (51,673) 6,368 (45,305) Other operating costs (28,807) (44,034) (5,738) (2,814) (81,393) 5,616 (75,777) Amortization and depreciation (2,758) (3,192) (11,911) (17,861) 11,327 (6,534) Restructuring and other charges (4,071) (1,663) (1,818) (7,552) 1,768 (5,784) Reportable segment operating profit (loss) $999 $13,920 ($8,435) ($4,298) $2,186 $7,585 $9,771 Interest and financing costs (744) Foreign exchange (66) Income from joint ventures 1,788 Loss from associated businesses (5,711) Other income 11 Income before taxes from continuing operations $5,049

Per Adjustments Consolidated Three months ended Digital and Statement of June 30, 2017 Communities Dailies Ventures Corporate Total Eliminations¹ Income (Loss) Operating revenue $82,620 $79,794 $18,358 $180,772 ($19,015) $161,757 Salaries and benefits (36,237) (29,164) (6,140) ($1,487) (73,028) 6,572 (66,456) Other operating costs (36,147) (47,560) (5,763) (919) (90,389) 5,562 (84,827) Amortization and depreciation (3,425) (8,454) (7,317) (19,196) 6,779 (12,417) Restructuring and other charges (3,053) (2,816) (142) (200) (6,211) 141 (6,070) Reportable segment operating profit (loss) $3,758 ($8,200) ($1,004) ($2,606) ($8,052) $39 ($8,013) Interest and financing costs (575) Foreign exchange 1,003 Income from joint ventures 367 Loss from associated businesses (302) Other income 21 Loss before taxes from continuing operations ($7,499)

Per Adjustments Consolidated and Statement of Six months ended Digital Eliminations Income June 30, 2018 Communities Dailies Ventures Corporate Total ¹ (Loss) Operating revenue $128,426 $146,621 $33,026 $308,073 ($35,930) $272,143 Salaries and benefits (63,540) (42,598) (11,825) ($3,645) (121,608) 13,037 (108,571) Other operating costs (56,575) (86,771) (10,733) (3,669) (157,748) 11,039 (146,709) Amortization and depreciation (5,760) (6,299) (21,440) (33,499) 20,285 (13,214) Restructuring and other charges (5,624) (4,258) (2,079) (11,961) 2,173 (9,788) Reportable segment operating profit (loss) ($3,073) $6,695 ($13,051) ($7,314) ($16,743) $10,604 ($6,139) Interest and financing costs (1,474) Foreign exchange (679) Income from joint ventures 2,233 Loss from associated businesses (9,763) Other income 11 Loss before taxes from continuing operations ($15,811)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 9 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Per Adjustments Consolidated Six months ended Digital and Statement of June 30, 2017 Communities Dailies Ventures Corporate Total Eliminations¹ Income (Loss) Operating revenue $148,378 $154,936 $34,173 $337,487 ($37,054) $300,433 Salaries and benefits (70,138) (59,084) (11,837) ($2,947) (144,006) 12,807 (131,199) Other operating costs (67,255) (94,837) (10,904) (1,459) (174,455) 11,138 (163,317) Amortization and depreciation (6,808) (14,628) (14,930) (36,366) 13,884 (22,482) Restructuring and other charges (5,727) (4,880) (283) (200) (11,090) 537 (10,553) Impairment of assets (3,000) (3,000) 3,000

Reportable segment operating loss ($1,550) ($18,493) ($6,781) ($4,606) ($31,430) $4,312 ($27,118) Interest and financing costs (1,137) Foreign exchange 158 Loss from joint ventures (2,449) Loss from associated businesses (2,497) Other income 47 Loss before taxes from continuing operations ($32,996)

¹ Adjustments and eliminations represent the elimination of the proportionately consolidated results of, and transactions with joint ventures and VerticalScope.

The following charts provide a breakdown of total operating revenue:

Three months ended Total Total June 30, 2018 Communities Dailies Digital Ventures Segmented Eliminations Consolidated Print advertising $27,963 $29,480 $57,443 ($3,187) $54,256 Digital advertising 6,517 6,921 $16,598 30,036 (13,118) 16,918 Distribution 24,465 5,591 30,056 — 30,056 Subscriber 115 30,355 30,470 (399) 30,071 Other 9,601 3,059 12,660 (790) 11,870 Total $68,661 $75,406 $16,598 $160,665 ($17,494) $143,171

Three months ended Total June 30, 2017 Communities Dailies Digital Ventures Total Segmented Eliminations Consolidated Print advertising $35,248 $35,690 $70,938 ($3,546) $67,392 Digital advertising 8,058 6,338 $18,358 32,754 (14,402) 18,352 Distribution 29,241 6,105 35,346 — 35,346 Subscriber 186 28,928 29,114 (447) 28,667 Other 9,887 2,733 12,620 (620) 12,000 Total $82,620 $79,794 $18,358 $180,772 ($19,015) $161,757

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 10 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Six months ended Total Total June 30, 2018 Communities Dailies Digital Ventures Segmented Eliminations Consolidated Print advertising $50,774 $58,935 $109,709 ($6,885) $102,824 Digital advertising 12,663 12,704 $33,026 58,393 (26,967) 31,426 Distribution 46,000 10,159 56,159 — 56,159 Subscriber 234 59,509 59,743 (796) 58,947 Other 18,755 5,314 24,069 (1,282) 22,787 Total $128,426 $146,621 $33,026 $308,073 ($35,930) $272,143

Six months ended Total June 30, 2017 Communities Dailies Digital Ventures Total Segmented Eliminations Consolidated Print advertising $62,005 $70,274 $132,279 ($7,678) $124,601 Digital advertising 14,846 12,211 $34,173 61,230 (27,565) 33,665 Distribution 52,616 10,871 63,487 — 63,487 Subscriber 374 56,358 56,732 (896) 55,836 Other 18,537 5,222 23,759 (915) 22,844 Total $148,378 $154,936 $34,173 $337,487 ($37,054) $300,433

4. RESTRICTED CASH

At June 30, 2018, the Company had restricted cash totalling $7.7 million (December 31, 2017 – $9.1 million) which included $5.8 million (December 31, 2017 – $7.7 million) held as collateral for outstanding standby letters of credit in respect of an unfunded executive retirement plan liability (note 13).

5. INVENTORIES

The Company expensed inventory costs of $8.8 million for the three months ended June 30, 2018 (2017 – $10.7 million) and $17.1 million for the six months ended June 30, 2018 (2017 – $19.7 million).

6. INVESTMENTS IN JOINT VENTURES

The Company’s joint ventures include investments in Workopolis (50%) and Sing Tao Daily (approximately 50%).

The table below provides a continuity of investments in joint ventures:

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Balance, beginning of period $23,865 $24,647 $23,420 $27,463 Income (loss) from joint ventures 1,788 367 2,233 (2,449) Distributions from joint ventures (1,314) (1,814) (1,314) (1,814) Balance, end of period $24,339 $23,200 $24,339 $23,200

On April 12, 2018, Workopolis sold workopolis.com and related assets to a subsidiary of Recruit Holdings Co., Ltd. The income from joint ventures in the three and six months ended June 30, 2018 included a $3.6 million gain on the sale of assets in Workopolis as well as $1.8 million of restructuring charges related to the closure of the remaining Workopolis business. Following the sale and subsequent wind-up of the remaining Workopolis business, the

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 11 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

Company expects to receive a distribution from the joint venture, which is estimated to be in the range of $3.5 million to $4.0 million.

During the six month period ended June 30, 2017, the Company recorded a $3.0 million impairment charge in respect of its joint venture investment in Workopolis. This charge had no impact on cash flows and was the result of a further downward revision in longer term forecasted revenues reflecting further increased competition in the online recruitment and job search markets as well as general market conditions.

Summarized Supplemental Financial Information

The following is summarized supplemental financial information based on the Company’s proportionate share of the joint ventures:

(i) Statement of Financial Position

As at As at June 30, 2018 December 31, 2017 Cash and cash equivalents $6,720 $7,324 Other current assets 7,725 6,260 Total current assets 14,445 13,584 Total non-current assets 13,890 16,786 Total assets $28,335 $30,370 Current liabilities $3,343 $6,216 Other non-current liabilities 653 734 Total equity 24,339 23,420 Total liabilities and equity $28,335 $30,370

(ii) Statements of Income (Loss) and Comprehensive Income (Loss)

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Operating revenue $4,851 $7,702 $12,154 $15,965 Salaries and benefits (2,159) (3,173) (5,076) (6,698) Other operating costs (2,431) (3,589) (5,728) (7,142) Amortization and depreciation (193) (457) (567) (933) Restructuring and other charges (1,757) (25) (1,943) (420) Impairment of Assets (3,000) Operating profit (loss) (1,689) 458 (1,160) (2,228) Interest and financing costs 4 (3) 6 (6) Foreign exchange 1 2 4 2 Gain on sale of assets 3,561 3,561 1,877 457 2,411 (2,232) Income and other taxes (89) (90) (178) (217) Net income (loss) and Comprehensive income (loss) from continuing operations $1,788 $367 $2,233 ($2,449)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 12 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

7. INVESTMENTS IN ASSOCIATED BUSINESSES

As of June 30, 2018, the Company’s Investments in associated businesses include a 56.4% equity investment in VerticalScope; a 19.4% equity interest in Black Press Ltd. (“Black Press”); a 15.8% equity interest in Blue Ant Media Inc. (“Blue Ant”); a 33.3% equity interest in Canadian Press Enterprises Inc. (“Canadian Press”) and a 22.3% interest in Nest Wealth Inc. ("Nest Wealth").

The table below provides a continuity of Investments in associated businesses:

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Balance, beginning of period $142,420 $154,969 $142,769 $157,897 Dividends received (194) Sale of investment (47) (47) Loss of associated businesses (5,711) (302) (9,763) (2,497) OCI – Actuarial gain (loss) on employee benefits (24) (366) 692 17 OCI – Foreign currency translation adjustment 1,945 (2,869) 4,932 (3,791) Balance, end of period $138,630 $151,385 $138,630 $151,385

The tables below provide income and losses from associated businesses and other comprehensive income and losses from associated businesses:

Three months ended Six months ended June 30 June 30 Net income (loss) 2018 2017 2018 2017 VerticalScope ($6,128) ($1,185) ($10,207) ($3,233) Black Press 645 (2,045) 1,021 (2,512) Blue Ant 26 1,868 (323) 2,188 Nest Wealth (254) 1,060 (254) 1,060 Total ($5,711) ($302) ($9,763) ($2,497)

Three months ended Six months ended June 30 June 30 Other comprehensive income (loss) 2018 2017 2018 2017 VerticalScope $2,076 ($2,848) $4,933 ($3,759) Black Press (140) (400) 564 (55) Blue Ant (15) 13 127 40 Total $1,921 ($3,235) $5,624 ($3,774)

VerticalScope

Pursuant to certain terms in the shareholders agreement, the investment is accounted for as an associated business using the equity method.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 13 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

The following is summarized supplemental financial information for 100% of VerticalScope as at June 30, 2018, including the Company’s fair value adjustments on acquisition of the investment:

(i) Statement of Financial Position

As at December 31, As at June 30, 2018 2017 Cash and cash equivalents $13,393 $28,682 Other current assets 16,704 16,015 Total current assets 30,097 44,697 Total non-current assets 347,401 303,189 Total assets $377,498 $347,886 Current portion long-term debt $3,621 $3,450 Other current liabilities 26,190 19,701 Total current liabilities 29,811 23,151 Long-term debt 160,993 130,920 Other non-current liabilities 5,842 4,747 Total equity 180,852 189,068 Total liabilities and equity $377,498 $347,886

(ii) Statements of Loss and Comprehensive Loss

Three months ended Six months ended June 30 June 30

2018 2017 2018 2017 Operating revenue $22,407 $20,048 $42,163 $37,372 Net loss ($10,859) ($2,100) ($18,088) ($5,729) Other comprehensive income (loss) 3,679 (5,048) 8,742 (6,662) Total comprehensive loss ($7,180) ($7,148) ($9,346) ($12,391)

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8. PROPERTY, PLANT AND EQUIPMENT

Building and leasehold Machinery and Land improvements equipment Total Cost Balance at December 31, 2017 $1,407 $61,191 $107,520 $170,118 Additions 327 1,120 1,447 Disposals (465) (861) (1,326) Balance at June 30, 2018 $1,407 $61,053 $107,779 $170,239 Depreciation and impairment Balance at December 31, 2017 $38,859 $76,000 $114,859 Additions 1,848 2,580 4,428 Disposals (308) (792) (1,100) Balance at June 30, 2018 $40,399 $77,788 $118,187 Net book value At December 31, 2017 $1,407 $22,332 $31,520 $55,259 At June 30, 2018 $1,407 $20,654 $29,991 $52,052

9. INTANGIBLE ASSETS

Finite life Software 1 Other Total Cost Balance at December 31, 2017 $67,557 $57,857 $125,414 Additions – internally developed 1,180 1,180 Additions – purchased 2,117 2,117 Disposals (352) (352) Balance at June 30, 2018 $70,502 $57,857 $128,359 Amortization and Impairment Balance at December 31, 2017 $44,330 $40,867 $85,197 Amortization 4,717 4,069 8,786 Disposals (352) (352) Balance at June 30, 2018 $48,695 $44,936 $93,631 Net book value At December 31, 2017 $23,227 $16,990 $40,217 At June 30, 2018 $21,807 $12,921 $34,728

¹ These amounts include $0.4 million of software in development as at June 30, 2018 for which amortization has not commenced.

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10. INCOME TAXES

Income tax expense is made up of the following:

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Current income tax expense (recovery): Current year $100 ($1,300) Adjustment for prior years $200 (100) $200 200 Income tax expense (recovery) in the consolidated statement of income (loss) $200 $200 ($1,100)

11. FINANCIAL INSTRUMENTS

Hedge activities

(a) Hedge of net investments in foreign operations

The Company’s primary exposure to foreign currency risk is through its investment in VerticalScope, which is denominated in the U.S. dollar. In order to offset the foreign exchange risk on its consolidated statement of financial position from its net investment in VerticalScope, the Company entered into collar arrangements totalling U.S. $137.0 million which were designated as a hedge of the original net investment in VerticalScope.

Any fluctuations in fair value arising from fluctuations in the rate of exchange of Cdn. dollar per U.S. dollar within the collar range are recognized in OCI to the extent of hedge effectiveness and accumulated in a separate component of equity within AOCI. Fair value changes from movement in the foreign exchange rate within the collar range reflect the cost of hedging as the options have no intrinsic value. When the rate of exchange is above or below the collar range, the changes in fair value are recorded in OCI to the extent of hedge effectiveness with the portion related to the cost of hedging accumulated in the separate component of equity.

As at December 31, 2017, the collar arrangements for U.S. $137.0 million established a rate of exchange with a range of Cdn. $1.40 to Cdn. $1.20 for U.S. $1.00 in 2017.

In February 2018, the Company rolled over the collar arrangement totaling U.S. $137.0 million and simultaneously entered into a new U.S. $137.0 million zero cost collar arrangement with a range of Cdn. $1.15 to Cdn. $1.31 for U.S. $1.00 maturing in 2018.

During the six month period ended June 30, 2018, the change in the fair value of the collar options was a loss of $1.9 million. The effective portion of the hedge was $1.1 million related to the cost of hedging and has been recorded in OCI. The ineffective portion of $0.8 million has been included in foreign exchange in the consolidated statement of income (loss).

The net fair value of the collar options outstanding at June 30, 2018 was $1.8 million unfavourable (December 31, 2017 – $0.1 million favourable).

Receivables

Receivables include $15.8 million for Digital Media Tax Credits. The Company received certification from the Ontario Media Development Corporation for digital media tax credits in respect of the period ended April 23, 2015. The claim, which will be subject to an audit by the Canada Revenue Agency, primarily relates to the recovery of previously recognized compensation expenses. The Company recorded a recovery of $15.8 million in salaries and benefits in the Dailies Segment in respect of these claims.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 16 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

(b) Interest and financing costs:

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Interest earned on short-term investments $149 $113 $293 $253 Interest accretion costs (29) (45) (58) (96) Interest – other 56 14 126 24 Net financing expense relating to employee benefit plans (920) (657) (1,835) (1,318) ($744) ($575) ($1,474) ($1,137)

12. PROVISIONS

Restructuring Other Total Balance at December 31, 2017 $23,637 $1,190 $24,827 Provisions made during the period 9,788 9,788 Provisions paid during the period (14,085) (296) (14,381) Interest accretion 58 58 Balance at June 30, 2018 $19,398 $894 $20,292 Current $13,148 $894 $14,042 Non-current $6,250 $6,250 Balance at December 31, 2017 Current $16,923 $1,190 $18,113 Non-current $6,714 $6,714

Restructuring

During the six month period ended June 30, 2018, the Company recorded restructuring and other charges of $9.8 million. Restructuring charges of $5.6 million were recorded in the Communities segment and $4.2 million in the Dailies segment. These charges largely related to ongoing efforts to reduce costs.

Other

On August 1, 2014, the Company sold all of the shares of Harlequin (which previously represented the Company’s Book Publishing Segment) to a division of HarperCollins Publishers L.L.C., a subsidiary of News Corp. (the “Purchaser”). In connection with the sale of Harlequin, the Company indemnified the Purchaser for costs and fees related to certain matters including certain tax and pre-existing litigation matters. The Company assessed the fees that it may incur as well as the probability of occurrence of any losses in respect of these matters, estimated the exposure under these indemnities and recorded a contingent liability in respect of these matters. The Company reviews the estimates at each reporting period and any required adjustments are included in the determination of income (loss) from discontinued operations.

Other provisions also included provisions for contingent consideration, which is an estimate of the fair value of contingent consideration for acquisitions, which are primarily based on revenue and earnings levels estimated to be realized by the acquired businesses for specified periods following the acquisition.

The Company is also involved in various legal actions, 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.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 17 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

13. EMPLOYEE BENEFITS

The Company maintains a number of defined benefit plans which provide pension benefits to its employees primarily in the Province of Ontario. Pension benefits are calculated based on a combination of years of service and compensation levels.

The Company also maintains capital accumulation plans in Canada.

Other post-employment benefits provide for various health and life insurance benefits to employees in the newspaper operations hired prior to August 23, 2000.

Changes to the net defined benefit obligation were as follows:

Pension plans Other post employment Funded Unfunded1 benefit plans Total At December 31, 2017 $47,548 $8,947 $48,221 $104,716 Expense recognized in the consolidated statement of income (loss): Salaries and benefits 5,259 130 110 5,499 Interest and financing costs 890 144 801 1,835 6,149 274 911 7,334 Amounts recognized in OCI (20,400) (130) (1,000) (21,530) Contributions to plans / payments (4,472) (1,654) (1,456) (7,582) At June 30, 2018 $28,825 $7,437 $46,676 $82,938 Recorded in: Liabilities $28,825 $7,437 $46,676 $82,938 At December 31, 2017 Recorded in: Liabilities $47,548 $8,947 $48,221 $104,716 1 The unfunded pension plan includes an executive retirement plan liability, which is supported by an outstanding letter of credit of $5.8 million as at June 30, 2018 (December 31, 2017 – $7.7 million).

Capital accumulation plans The total amount expensed for capital accumulation plans for the three and six months ended June 30, 2018 was $0.5 million and $1.0 million, respectively (2017 – $0.5 million and $1.0 million, respectively).

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 18 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

14. SHARE CAPITAL

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

Six months ended June 30 2018 2017 Shares Amount Shares Amount Class A shares (voting) Balance, beginning of period 9,817,215 $2,668 9,826,215 $2,670 Converted to Class B (9,000) (12) Balance, end of period 9,808,215 $2,656 9,826,215 $2,670 Class B shares (non-voting) Balance, beginning of period 71,037,138 $400,372 70,891,322 $400,144 Converted from Class A 9,000 12 Dividend reinvestment plan 52,497 82 42,753 69 Issued under ESPP 134,292 242 50,911 92 Other 100 350 1 Balance, end of period 71,233,027 $400,708 70,985,336 $400,306 Total Class A and Class B shares 81,041,242 $403,364 80,811,551 $402,976

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

(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 period.

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 the employee share purchase plan (“ESPP”) does not result in an adjustment to income. Outstanding share options totalling 8,888,148 (June 30, 2017 – 7,411,675), which are anti-dilutive, have been excluded from the calculation of dilutive securities.

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) 2018 2017 2018 2017

Weighted average number of shares outstanding, basic and diluted 80,990 80,778 80,923 80,748

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

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 First quarter ended March 31: 2.5 cents (2017 – 2.5 cents) $2,021 $2,018 Second quarter ended June 30: 2.5 cents (2017 – 2.5 cents) $2,026 $2,020 2,026 2,020 Total dividends $2,026 $2,020 $4,047 $4,038

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 19 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

15. 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 December 31, 2017 7,028,109 $5.12 Granted 2,300,844 $1.72 Forfeited or expired (440,805) $7.71 June 30, 2018 8,888,148 $4.11

Options exercisable at June 30, 2018 were as follows:

Share options Weighted average Range of exercise price exercisable exercise price $1.91 to 5.85 1,736,988 $4.05 $6.33 to 7.81 2,006,264 $6.82 $8.28 to 12.21 783,567 $9.69 $1.91 to 12.21 4,526,819 $6.25

The fair value of the share options granted in 2018 (which will vest and be expensed over four years) was estimated to be within the range of $0.34 to $0.38 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 1.7% to 2.0%; expected annual dividend yield of 5.81% per share; expected volatility of between 36.0% to 39.1% 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, 2017 1,417,569 Vested and paid (270,454) Granted 722,284 Forfeited (81,101) Dividend equivalents 60,961 At June 30, 2018 1,849,259

As at June 30, 2018, 816,411 units have been accrued at a value of $1.1 million of which 349,766 units have been accrued in Accounts payable and accrued liabilities at a value of $0.5 million while 466,645 units have been accrued in Other liabilities at a value of $0.6 million (December 31, 2017 – 769,489 units were accrued at a value of $1.3 million of which 270,454 units were accrued in Accounts payable and accrued liabilities at a value of $0.5 million and 499,035 units were accrued in Other liabilities at a value of $0.9 million).

The Company has entered into a derivative instrument in order to lock in the expense for 610,000 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.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 20 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

(c) Deferred share unit (“DSU”) plan

A summary of changes in the DSU plan is as follows:

Units At December 31, 2017 1,158,981 Granted 131,579 Directors’ mandatory retainer 3,320 Directors’ voluntary election 20,232 Dividends 40,250 At June 30, 2018 1,354,362

As at June 30, 2018, the 1,354,362 units outstanding were valued at $1.8 million (December 31, 2017 – 1,158,981 units valued at $2.0 million).

The Company has entered into a derivative instrument in order to offset its exposure to 490,000 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 DSUs.

(d) For the three and six month period ended June 30, 2018, the Company has recognized share-based compensation recovery of $0.2 million and expense of $0.3 million, respectively (2017 – expense of $0.2 million and $0.4 million, respectively).

16. OTHER COMPONENTS OF EQUITY

The following is a continuity for the other components of equity:

Accumulated Fair value Net other reserve of Available- Net investment comprehensive financial Other Foreign for-sale investment hedge (cost income (loss) assets at components CTA 1 securities 2 hedge 3 of hedging)4 (“AOCI”) FVOCI5 of equity December 31, 2017 ($2,101) $2,924 ($3,030) ($2,207) ($2,207)

Adoption of IFRS 9 (2,924) 57 (2,867) $924 (1,943) January 1, 2018 (adjusted) (2,101) (3,030) 57 (5,074) 924 (4,150) OCI 4,911 (1,063) 3,848 220 4,068 June 30, 2018 $2,810 ($3,030) ($1,006) ($1,226) $1,144 ($82) 1Net of deferred income tax asset/liability of $nil (December 31, 2017 – $nil). 2Net of deferred income tax asset/liability of $nil (December 31, 2017 – $nil). 3Net of current income tax recovery of $500 (December 31, 2017 – $500). 4Net of deferred income tax asset/liability of $nil (December 31, 2017 – $nil). 5Net of deferred income tax asset of $300 (December 31, 2017 – $300).

On adoption of IFRS 9, the cumulative gain of $0.1 million related to the changes in fair value of the collar options was reclassified from accumulated deficit to net investment hedge (cost of hedging) in AOCI. The cumulative gain of $2.9 million related to the change in fair value of available-for-sale securities previously reported in AOCI and the cumulative impairment loss (net of tax) of $2.0 million previously reported in accumulated deficit have been reclassified to the new fair value reserve of financial assets at FVOCI.

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 21 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

17. DISCONTINUED OPERATIONS

On August 1, 2014, the Company sold all of the shares of Harlequin (which previously represented the Company’s Book Publishing Segment) to a division of HarperCollins Publishers L.L.C., a subsidiary of News Corp. During the six month period ended June 30, 2018, the Company recorded an income tax recovery of $6.3 million, which was an adjustment to the income tax expense related to the sale of Harlequin recorded in 2014.

(i) Statement of Income (Loss)

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Gain (loss) on sale of Harlequin (note 12) $500 $500 Income before taxes from discontinued operations 500 500 Income and other taxes $6,300 Net income from discontinued operations $500 $6,300 $500 Attributable to: Equity shareholders $500 $6,300 $500 Net income from discontinued operations attributable to equity shareholders per Class A (voting) and Class B (non-voting) share (note 14(b)): Basic and Diluted $0.01 $0.08 $0.01

(ii) Statement of Comprehensive Income (Loss)

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Net income from discontinued operations $500 $6,300 $500

Comprehensive income from discontinued operations, net of tax $500 $6,300 $500 Attributable to: Equity shareholders $500 $6,300 $500

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

Three months ended Six months ended June 30 June 30 2018 2017 2018 2017 Share-based compensation plans ($427) $69 ($357) ($71) Foreign exchange 66 (1,003) 679 (158) Non-current restructuring provisions 68 (1,069) (464) (3,664) Interest accretion 29 45 58 96 Other (142) (259) 104 (168) ($406) ($2,217) $20 ($3,965)

TORSTAR CORPORATION 2018 SECOND QUARTER REPORT 22 TORSTAR - Condensed Consolidated Financial Statements (Unaudited)

19. ACQUISITIONS AND PORTFOLIO INVESTMENTS

Six months ended June 30, 2018 Corporate

Portfolio investments $1,125

Total cash used in acquisitions and portfolio investments $1,125

20. RELATED PARTY TRANSACTIONS

The following summarizes the total value of sales to, purchases from and amounts owed to and by the Company’s joint ventures and associates for the three and six month periods ended June 30, 2018.

Three months ended Six months ended As at June 30, 2018 June 30, 2018 June 30, 2018 Purchases Purchases Amounts Amounts Sales to from Sales to from owed by owed to Joint Ventures $20 $4 $68 $30 $4 Associates $1,852 $3,733 $27 $252

Sales to and purchases of goods and services from related parties are in the normal course of operations. The Company received in the six months ended June 30, 2018 $0.2 million (2017 – $0.2 million) of rent from a joint venture. No provisions have been made for doubtful debts in respect of amounts owed by related parties.

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