UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K/A

(Amendment No. 2)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2007

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to

Commission File No. 1-14164

SUN-TIMES MEDIA GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-3518892
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)
350 North Orleans Street, 10-S
Chicago, Illinois	60654
(Address of Principal Executive Office)	(Zip Code)

Registrant’s telephone number, including area code
(312) 321-2299

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock par value $.01 per share
Preferred Share Purchase Rights

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  o       No  þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes o       No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes þ       No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o  Accelerated filer þ  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller Reporting Company o 

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes o       No þ

     As of June 29, 2007, the aggregate market value of Class A Common Stock held by non-affiliates was approximately $338,507,642 determined using the closing price per share of $5.25, as reported on the New York Stock Exchange.

     The number of outstanding shares of the registrant’s common stock as of October 31, 2008 was as follows: 82,312,709 shares of Class A Common Stock.

TABLE OF CONTENTS

EX-23.1: CONSENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

EX-31.1: CERTIFICATION

EX-31.2: CERTIFICATION

EX-32.1: CERTIFICATION

EX-32.2: CERTIFICATION

EXPLANATORY NOTE

     This Amendment No. 2 on Form 10-K/A amends the Registrant’s Annual Report on Form 10-K, as filed by the Registrant with the Securities and Exchange Commission on March 12, 2008 (as amended by Amendment No. 1, which was filed on April 29, 2008) (the “10-K”), and is being filed solely to amend the Report of Independent Registered Public Accounting Firm contained in Item 8 of the 10-K to correct the date related to the audit of the effectiveness of internal control over financial reporting from December 31, 2006 to December 31, 2007 and the reference to the date of the report on the effectiveness of internal control over financial reporting from March 10, 2007 to March 10, 2008. Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, we have repeated the entire text of Item 8 of the 10-K in this Amendment No. 2; however, there have been no changes to the text of such Item other than those stated in the immediately preceding sentence.

     Except as otherwise stated herein, no other information contained in Form 10-K is amended by this Amendment No. 2.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Sun-Times Media Group, Inc.:

     We have audited the accompanying consolidated balance sheets of Sun-Times Media Group, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity (deficit) and cash flows for each of the years in the three-year period ended December 31, 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sun-Times Media Group, Inc. and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.

     As described in Note 1 to the accompanying consolidated financial statements, effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R), and effective January 1, 2006, the Company adopted SFAS No. 123(R), Share-Based Payment.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Sun-Times Media Group, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 10, 2008 expressed an adverse opinion on the effective operation of internal control over financial reporting.

/s/ KPMG LLP

Chicago, Illinois
March 10, 2008

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31, 2007 and 2006

	2007			2006
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	142,533		$	186,318
Accounts receivable, net of allowance for doubtful accounts of $12,276 in 2007 and $10,267 in 2006		73,031			73,346
Inventories		7,937			9,643
Escrow deposits and restricted cash		35,641			26,809
Recoverable income taxes		16,509			34,672
Other current assets		7,034			62,135
Total current assets		282,685			392,923
Loan to affiliate		—			33,685
Investments		42,249			6,422
Property, plant and equipment, net of accumulated depreciation		163,355			178,368
Intangible assets, net of accumulated amortization		88,235			92,591
Goodwill		124,301			124,301
Prepaid pension asset		89,512			49,645
Other assets		1,249			21,924
Total assets	$	791,586		$	899,859
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt	$	35		$	867
Accounts payable and accrued expenses		112,621			110,168
Amounts due to related parties		8,852			7,995
Income taxes payable and other tax liabilities		1,027			627,385
Deferred revenue		10,060			10,698
Total current liabilities		132,595			757,113
Long-term debt, less current installments		3			6,041
Deferred income tax liabilities		58,343			26,974
Other tax liabilities		597,206			385,436
Other liabilities		78,448			84,078
Total liabilities		866,595			1,259,642
Stockholders’ equity (deficit):
Class A common stock, $0.01 par value. Authorized 250,000,000 shares; 88,008,022 and 65,308,636 shares issued and outstanding, respectively, at December 31, 2007 and 88,008,022 and 64,997,456 shares issued and outstanding, respectively, at December 31, 2006		880			880
Class B common stock, $0.01 par value. Authorized 50,000,000 shares; 14,990,000 shares issued and outstanding in 2007 and 2006		150			150
Additional paid-in capital		501,138			502,127
Accumulated other comprehensive income (loss):
Cumulative foreign currency translation adjustments		3,878			6,576
Unrealized gain on marketable securities		141			66
Pension adjustment		(29,718	)		(43,412	)
Accumulated deficit		(325,451	)		(597,050	)
		151,018			(130,663	)
Class A common stock in treasury, at cost — 22,699,386 shares at December 31, 2007 and 23,010,566 shares at December 31, 2006		(226,027	)		(229,120	)
Total stockholders’ equity (deficit)		(75,009	)		(359,783	)
Total liabilities and stockholders’ equity (deficit)	$	791,586		$	899,859

See accompanying notes to these consolidated financial statements.

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2007, 2006 and 2005

	2007			2006			2005
	(In thousands, except per share data)
Operating revenue:
Advertising	$	287,198		$	324,607		$	357,820
Circulation		77,629			85,235			89,527
Job printing		4,785			8,260			9,194
Other		2,646			2,277			2,725
Total operating revenue		372,258			420,379			459,266
Operating costs and expenses:
Cost of sales:
Wages and benefits		108,569			110,329			110,458
Newsprint and ink		50,619			67,196			72,004
Other		81,092			80,883			77,588
Total cost of sales		240,280			258,408			260,050
Selling, general and administrative:
Sales and marketing		70,378			66,499			73,537
Other operating costs		82,282			66,244			47,834
Corporate expenses		79,658			51,707			43,406
Indemnification, investigation and litigation costs, net of recoveries		7,807			(17,407	)		13,633
Total selling, general and administrative		240,125			167,043			178,410
Depreciation		20,407			21,992			18,664
Amortization		11,667			11,886			12,057
Total operating costs and expenses		512,479			459,329			469,181
Operating loss		(140,221	)		(38,950	)		(9,915	)
Other income (expense):
Interest expense		(603	)		(704	)		(935	)
Interest and dividend income		17,811			16,813			11,625
Other income (expense), net		(27,844	)		2,642			(3,839	)
Total other income (expense)		(10,636	)		18,751			6,851
Loss from continuing operations before income taxes		(150,857	)		(20,199	)		(3,064	)
Income tax expense (benefit)		(420,888	)		57,431			42,467
Income (loss) from continuing operations		270,031			(77,630	)		(45,531	)
Discontinued operations, net of income taxes:
Income from operations of business segments disposed of		—			199			1,062
Gain from disposal of business segments		1,599			20,758			32,903
Income from discontinued operations		1,599			20,957			33,965
Net income (loss)	$	271,630		$	(56,673	)	$	(11,566	)
Basic earnings (loss) per share:
Earnings (loss) from continuing operations	$	3.36		$	(0.91	)	$	(0.50	)
Earnings from discontinued operations		0.02			0.25			0.37
Net earnings (loss)	$	3.38		$	(0.66	)	$	(0.13	)
Diluted earnings (loss) per share:
Earnings (loss) from continuing operations	$	3.35		$	(0.91	)	$	(0.50	)
Earnings from discontinued operations		0.02			0.25			0.37
Net earnings (loss)	$	3.37		$	(0.66	)	$	(0.13	)
Weighted average shares outstanding:
Basic		80,446			85,681			90,875
Diluted		80,661			85,681			90,875

See accompanying notes to these consolidated financial statements.

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Years Ended December 31, 2007, 2006 and 2005

	2007			2006			2005
				(In thousands)
				Restated
				(Note 1(q))
Net income (loss)	$	271,630		$	(56,673	)	$	(11,566	)
Other comprehensive income (loss):
Foreign currency translation adjustments, net of related tax provision of $106 (2006 — net of related tax provision of $4; 2005 — net of related tax benefit of $757)		(2,698	)		(1,948	)		(17,215	)
Reclassification adjustment for realized foreign exchange (gains) losses upon the substantial reduction of net investment in foreign operations		—			(11,571	)		1,241
		(2,698	)		(13,519	)		(15,974	)
Unrealized gains (losses) on marketable securities arising during the year, net of a related tax provision of $2 (2006 — net of related tax provision of $4; 2005 — net of related tax benefit of $616)		75			16			(951	)
Reclassification adjustment for realized gains reclassified out of accumulated other comprehensive income (loss), net of related taxes of $nil (2006 — net of related tax provision of $661; 2005 — net of related tax benefit of $1,851)		—			870			(3,212	)
		75			886			(4,163	)
Pension adjustment, net of related tax provision of $8,166 (2006 — net of related tax provision of $3,117; 2005 — net of related tax benefit of $1,430 and recovery of minority interest of $36)		13,694			4,675			(821	)
		11,071			(7,958	)		(20,958	)
Comprehensive income (loss)	$	282,701		$	(64,631	)	$	(32,524	)

See accompanying notes to these consolidated financial statements.

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
For the Years Ended December 31, 2007, 2006 and 2005

						Accumulated
	Common		Additional			Other
	Stock		Paid-In			Comprehensive			Accumulated			Treasury
	Class A & B		Capital			Income (Loss)			Deficit			Stock			Total
	(In thousands)
Balance at January 1, 2005	$	1,030	$	500,006		$	21,456		$	(221,497	)	$	(148,809	)	$	152,186
Stock-based compensation		—		653			—			—			—			653
Dividends payable in cash — Class A and Class B, $3.20 per share		—		—			—			(290,166	)		—			(290,166	)
Minimum pension liability adjustment		—		—			(821	)		—			—			(821	)
Change in cumulative foreign currency translation adjustments		—		—			(15,974	)		—			—			(15,974	)
Change in unrealized loss on securities, net		—		—			(4,163	)		—			—			(4,163	)
Net loss		—		—			—			(11,566	)		—			(11,566	)
Balance at December 31, 2005		1,030		500,659			498			(523,229	)		(148,809	)		(169,851	)
Stock-based compensation		—		2,580			—			—			—			2,580
Dividends payable in cash — Class A and Class B, $0.15 per share		—		—			—			(12,678	)		—			(12,678	)
Pension adjustment related to the adoption of SFAS No. 158		—		—			(29,310	)		—			—			(29,310	)
Minimum pension liability adjustment		—		—			4,675			—			—			4,675
Change in cumulative foreign currency translation adjustments		—		—			(13,519	)		—			—			(13,519	)
Change in unrealized gain on securities, net		—		—			886			—			—			886
Repurchase of common stock		—		—			—			—			(95,744	)		(95,744	)
Issuance of treasury stock in respect of stock options exercised and deferred stock units		—		(1,112	)		—			(4,470	)		15,433			9,851
Net loss		—		—			—			(56,673	)		—			(56,673	)
Balance at December 31, 2006		1,030		502,127			(36,770	)		(597,050	)		(229,120	)		(359,783	)
Stock-based compensation		—		2,432			—			—			—			2,432
Issuance of treasury stock in respect of deferred stock units		—		(3,421	)		—			(31	)		3,093			(359	)
Minimum pension liability adjustment		—		—			13,694			—			—			13,694
Change in cumulative foreign currency translation adjustments		—		—			(2,698	)		—			—			(2,698	)
Change in unrealized gain on securities, net		—		—			75			—			—			75
Net income		—		—			—			271,630			—			271,630
Balance at December 31, 2007	$	1,030	$	501,138		$	(25,699	)	$	(325,451	)	$	(226,027	)	$	(75,009	)

See accompanying notes to these consolidated financial statements.

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2007, 2006 and 2005

	2007			2006			2005
	(In thousands)
Cash Flows From Continuing Operating Activities:
Net income (loss)	$	271,630		$	(56,673	)	$	(11,566	)
Income from discontinued operations		(1,599	)		(20,957	)		(33,965	)
Income (loss) from continuing operations		270,031			(77,630	)		(45,531	)
Adjustments to reconcile income (loss) from continuing operations to net cash provided by (used in) continuing operating activities:
Depreciation and amortization		32,074			33,878			30,721
Deferred income taxes		147,454			9,777			29,903
Collection of proceeds from directors and officers insurance settlement		50,000			—			—
Loss on sale of newspaper operations		13,603			—			—
Write-off of capitalized direct response advertising costs		15,191			—			—
Reduction of tax liabilities		(586,686	)		—			—
Bad debt expense related to loan to subsidiary of Hollinger Inc.		33,685			—			—
Equity in losses of affiliates		184			259			1,752
Loss (gain) on sales of investments		(1,019	)		76			(2,511	)
Gain on sales of property, plant and equipment		(269	)		(80	)		(202	)
Write-down of investments		12,200			—			298
Write-down of property, plant and equipment		1,487			882			—
Other		11,997			(1,497	)		(2,547	)
Changes in current assets and liabilities, net of dispositions:
Accounts receivable		3,715			18,338			(6,028	)
Inventories		1,706			2,957			(1,147	)
Other current assets		240			(47,890	)		8,366
Recoverable income taxes		18,163			(34,672	)		—
Accounts payable and accrued expenses		(18,892	)		(18,680	)		(8,464	)
Income taxes payable and other tax liabilities		11,724			61,390			(142,089	)
Deferred revenue and other		(12,113	)		(7,776	)		(8,347	)
Cash provided by (used in) continuing operating activities		4,475			(60,668	)		(145,826	)
Cash Flows From Investing Activities:
Purchase of property, plant and equipment		(11,645	)		(9,134	)		(16,626	)
Proceeds from sale of property, plant and equipment		4,808			231			281
Investments, intangibles and other non-current assets		(6,523	)		(7,592	)		(9,174	)
Collection of notes receivable pursuant to settlement with a former officer		8,460			—			—
Sale of short-term investments, net		—			57,650			474,400
Purchase of investments		(48,200	)		—			—
Proceeds on disposal of investments and other assets		2,039			18,237			4,550
Proceeds from the sale of newspaper operations, net of cash disposed		2,664			86,609			38,677
Other		370			(266	)		—
Cash provided by (used in) investing activities		(48,027	)		145,735			492,108
Cash Flows From Financing Activities:
Repayment of debt and premium on debt extinguishment		(6,976	)		(1,193	)		(6,304	)
Escrow deposits and restricted cash		(5,366	)		3,678			(2,569	)
Net proceeds from issuance of equity securities		—			9,851			—
Repurchase of common stock		—			(95,744	)		—
Dividends paid		—			(17,212	)		(516,858	)
Other		3,046			(1,528	)		(3,140	)
Cash used in financing activities		(9,296	)		(102,148	)		(528,871	)
Net cash provided by (used in) discontinued operations:
Operating cash flows		—			(387	)		54,622
Investing cash flows		—			—			(4,680	)
Financing cash flows		—			7,143			53,717
Net cash provided by discontinued operations		—			6,756			103,659
Effect of exchange rate changes on cash		9,063			(1,745	)		2,523
Net decrease in cash and cash equivalents		(43,785	)		(12,070	)		(76,407	)
Cash and cash equivalents at beginning of year		186,318			198,388			274,795
Cash and cash equivalents at end of year	$	142,533		$	186,318		$	198,388

See accompanying notes to these consolidated financial statements.

SUN-TIMES MEDIA GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2007, 2006 and 2005

(1) Significant Accounting Policies

     (a) Description of Business

     Sun-Times Media Group, Inc. (the “Company”) operates principally as a publisher, printer and distributor of newspapers and other publications through subsidiaries and affiliates in the greater Chicago, Illinois metropolitan area. The Company’s operating subsidiaries and affiliates in Canada were sold in 2005 and early 2006 (the sold Canadian businesses are referred to collectively as the “Canadian Newspaper Operations”). See Note 2. In addition, the Company has developed Internet websites related to its publications. The Company’s raw materials, principally newsprint and ink, are not dependent on a single or limited number of suppliers. Customers primarily consist of purchasers of the Company’s publications and advertisers in those publications and Internet websites.

     (b) Principles of Presentation and Consolidation

     The Company is a subsidiary of Hollinger Inc., a Canadian corporation. At December 31, 2007, Hollinger Inc. owned approximately 19.6% of the combined equity and approximately 70.0% of the combined voting power of the outstanding common stock of the Company.

     The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries and other controlled entities. All significant intercompany balances and transactions have been eliminated in consolidation.

     The Company’s newspaper operations are on a 52 week/53 week accounting cycle. This generally results in the reporting of 52 weeks in each annual period. However, the year ended December 31, 2006 contains 53 weeks.

     (c) Use of Estimates

     The preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates including those related to matters that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These matters include bad debts, goodwill, intangible assets, income taxes, pensions and other postretirement benefits, contingencies and litigation. The Company bases its estimates on historical experience, observance of trends, information available from outside sources and various other assumptions that are believed to be reasonable under the circumstances. Information from these sources form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

     (d) Cash Equivalents

     Cash equivalents consist of certain highly liquid investments with original maturities of three months or less.

     (e) Accounts Receivable, Net of Allowance for Doubtful Accounts

     Accounts receivable are stated net of the related allowance for doubtful accounts. The following table reflects the activity in the allowance for doubtful accounts for the years ended December 31:

	2007			2006			2005
	(In thousands)
Balance at beginning of year	$	10,267		$	11,756		$	11,654
Provision		4,448			3,820			4,598
Write-offs		(3,113	)		(6,419	)		(5,886	)
Recoveries and other		674			1,110			1,390
Balance at end of year	$	12,276		$	10,267		$	11,756

     (f) Inventories

     Inventories consist principally of newsprint that is valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

     (g) Long-Lived Assets

     Property, plant and equipment are recorded at cost. Routine maintenance and repairs are expensed as incurred. Depreciation is calculated under the straight-line method over the estimated useful lives of the assets, principally 25 to 40 years for buildings and improvements, 3 to 10 years for machinery and equipment and 20 years for printing press equipment. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the lease term. Property, plant and equipment categorized as construction in progress is not depreciated until the items are in use.

     The Company assesses the recoverability of the carrying value of all long-lived assets including property, plant and equipment whenever events or changes in business circumstances indicate the carrying value of the assets, or related group of assets, may not be fully recoverable. The assessment of recoverability is based on management’s estimate of undiscounted future operating cash flows of its long-lived assets. If the assessment indicates that the undiscounted operating cash flows do not exceed the carrying value of the long-lived assets, then the difference between the carrying value of the long-lived assets and the fair value of such assets is recorded as an impairment charge in the Consolidated Statements of Operations.

     Primary indicators of impairment include significant permanent declines in circulation and readership; the loss of specific sources of advertising revenue, whether or not to other forms of media; and an expectation that a long-lived asset may be disposed of before the end of its useful life. Impairment is generally assessed at the reporting unit level (being the lowest level at which identifiable cash flows are largely independent of the cash flows of other assets).

     (h) Derivative Financial Instruments

     The Company is a limited user of derivative financial instruments to manage risks generally associated with interest rate and foreign currency exchange rate market volatility. The Company does not hold or issue derivative financial instruments for trading purposes. All derivative instruments are recorded on the Consolidated Balance Sheets at fair value. Derivatives that are not classified as hedges are adjusted to fair value through earnings. Changes in the fair value of derivatives that are designated and qualify as effective hedges are recorded either in “Accumulated other comprehensive income (loss)” or through earnings, as appropriate. The ineffective portion of derivatives that are classified as hedges is immediately recognized in net earnings (loss). See Note 12(b) for a discussion of the Company’s use of derivative instruments.

     (i) Investments

     Investments largely consist of commercial paper and equity securities and at times may include other debt securities. Marketable securities which are classified as available-for-sale are recorded at fair value. Unrealized holding gains and losses, net of the related tax effects, on available-for-sale securities are excluded from earnings and are reported as a separate component of “Accumulated other comprehensive income (loss)” until realized. Realized gains and losses and declines in values determined to be other than temporary, if any, from the sale of available-for-sale securities are determined on specific investments and recognized in the Consolidated Statements of Operations under the caption of “Other income (expense), net.” Other corporate debt and equity securities are recorded at cost less declines in market value that are other than temporary (other than those investments accounted for under the equity method as discussed below).

     A decline in the market value of any security below cost that is deemed to be other than temporary, results in a reduction in the carrying amount to fair value. Any such impairment is charged to earnings and a new cost basis for the security is established.

     Dividend and interest income is recognized when earned.

     Investments in the common stock of entities, for which the Company has significant influence over the investee’s operating and financial policies, but less than a controlling voting interest, are accounted for under the equity method. Significant influence is generally presumed to exist when the Company owns between 20% and 50% of the investee’s voting stock.

     Under the equity method, the Company’s investment in an investee is included in the Consolidated Balance Sheets (under the caption “Investments”) and the Company’s share of the investee’s earnings or loss is included in the Consolidated Statements of Operations under the caption “Other income (expense), net.”

     (j) Goodwill and Other Intangible Assets

     Goodwill represents the excess of acquisition costs over the estimated fair value of net assets acquired in business combinations.

     Intangible assets with finite useful lives include subscriber and advertiser relationships, which are amortized on a straight-line basis over 30 years.

     The Company follows the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). The standard requires that goodwill and intangible assets with indefinite useful lives are not amortized, but instead are tested for impairment at least annually. The standard also specifies criteria that intangible assets must meet in order to be recognized and reported apart from goodwill. In addition, SFAS No. 142 requires that intangible assets with finite useful lives are amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

     The Company is required to test goodwill for impairment on an annual basis. The Company would also evaluate goodwill for impairment between annual tests and intangible assets if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Certain indicators of potential impairment that could impact the Company include, but are not limited to, the following: (i) a significant long-term adverse change in the business climate that is expected to cause a substantial decline in advertising revenue, (ii) a permanent significant decline in newspaper readership, (iii) a significant adverse long-term negative change in the demographics of newspaper readership and (iv) a significant technological change that results in a substantially more cost effective method of advertising than newspapers. The Company has determined that no impairment is indicated at December 31, 2007 and 2006 for purposes of the annual impairment test.

     (k) Pension Plans and Other Postretirement Benefits

     General

     The Company provides defined benefit pension, defined contribution pension, postretirement and postemployment health care and life insurance benefits to eligible employees or former employees under a variety of plans. See Note 15.

     Pension costs for defined contribution plans are recognized as the obligation for contribution arises and at expected or actual contribution rates for discretionary plans.

     In general, benefits under the defined benefit plans (the “Plans”) are based on years of service and the employee’s compensation during the last few years of employment.

     Health care benefits are available to eligible employees meeting certain age and service requirements upon termination of employment. Postretirement and postemployment benefits are accrued in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other than Pensions” (“SFAS No. 106”), and SFAS No. 112, “Employers’ Accounting for Postemployment Benefits” (“SFAS No. 112”).

     The annual pension expense is based on a number of actuarial assumptions, including expected long-term return on assets and discount rate. The Company’s methodology in selecting these actuarial assumptions is discussed below.

     Long-Term Rate of Return on Assets

     In determining the expected long-term rate of return on assets, the Company evaluates input from various sources which may include its investment consultants, actuaries and investment management firms including their review of asset class return expectations, as well as long-term historical asset class returns. Returns projected by such consultants are generally based on broad equity and bond indices.

     The Company regularly reviews its actual asset allocation and periodically rebalances its investments to its targeted allocation when considered appropriate.

     The Company’s determination of net pension expense is based on market-related valuation of assets, which reduces year-to-year volatility. This market-related valuation of assets recognizes investment gains or losses over a three-year period from when they occur. Investment gains or losses for this purpose reflect the difference between the expected return calculated using the market-related value of assets and recognized gains or losses over a three-year period. The future value of assets will be affected as previously deferred gains or losses are recorded.

     Discount Rate

     The discount rate for determining future pension obligations is determined by the Company using various input including the indices of AA-rated corporate bonds that reflect the weighted average period of expected benefit payments.

     The Company will continue to evaluate its actuarial assumptions, generally on an annual basis, including the expected long-term rate of return on assets and discount rate, and will adjust them as appropriate. Actual pension expense will depend on future investment performance, changes in future discount rates, the level of contributions by the Company and various other factors related to the populations participating in the pension plans.

     (l) Income Taxes

     Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for the tax effects attributable to the carryforward of net operating losses. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statement of Operations in the period that includes the enactment date. The Company considers future taxable income and ongoing tax strategies in assessing the need for a valuation allowance in relation to deferred tax assets. The Company records a valuation allowance to reduce deferred tax assets to a level where they are more likely than not to be realized based upon the above mentioned considerations.

     (m) Revenue Recognition

     The Company’s principal sources of revenue are comprised of advertising, circulation and job printing. As a general principle, revenue is recognized when the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and services have been rendered, (iii) the price to the buyer is fixed or determinable and, (iv) collectibility is reasonably assured or is probable. Advertising revenue, being amounts charged for space purchased in the Company’s newspapers, Internet websites or for inserts distributed with the newspapers, is recognized upon publication. Circulation revenue from subscribers, billed to customers at the beginning of a subscription period, is recognized on a straight-line basis over the term of the related subscription. Deferred revenue represents subscription receipts that have not been earned. Circulation revenue from single copy sales is recognized at the time of distribution. In both cases, circulation revenue is recorded net of an allowance for returned copies. Fees and commissions paid to distributors are recorded as a component of costs of sales. Job printing revenue, being charges for printing services provided to third parties, is recognized upon delivery.

     (n) Foreign Currency Translation

     Foreign operations of the Company have been translated into U.S. dollars in accordance with the principles prescribed in SFAS No. 52, “Foreign Currency Translation.” All assets and liabilities are translated at period end exchange rates, stockholders’ equity is translated at historical rates, and revenue and expense are translated at the average rate of exchange prevailing throughout the period. Translation adjustments are included in the “Accumulated Other Comprehensive Income (Loss)” component of stockholders’ equity. Translation adjustments are not included in earnings unless they are actually realized through a sale or upon complete or substantially complete liquidation of the Company’s net investment in the foreign operation. Gains and losses arising from the Company’s foreign currency transactions are reflected in the Consolidated Statements of Operations.

     (o) Earnings (Loss) per Share

     Earnings (loss) per share is computed in accordance with SFAS No. 128, “Earnings per Share.” See Note 20 for a reconciliation of the numerator and denominator for the calculation of basic and diluted earnings (loss) per share.

     (p) Stock-based Compensation

     Effective January 1, 2006, the Company adopted SFAS No. 123R “Share-Based Payment” (“SFAS No. 123R”), requiring that stock-based compensation payments, including grants of employee stock options, be recognized in the consolidated financial statements over the service period (generally the vesting period) based on their fair value. The Company elected to use the modified prospective transition method. Therefore, prior results were not restated. Under the modified prospective method, stock-based compensation is recognized for new awards, the modification, repurchase or cancellation of awards and the remaining portion of service under previously granted, unvested awards outstanding as of adoption. The Company treats all stock-based awards as individual awards for recognition and valuation purposes and recognizes compensation cost on a straight-line basis over the requisite service period. See Note 14.

     As a result of the adoption of SFAS No. 123R, the Company recognized pre-tax stock-based option compensation of $0.5 million expense, or $0.01 per basic and diluted share for the year ended December 31, 2006 for the unvested portion of previously issued stock options that were outstanding at January 1, 2006, adjusted for the impact of estimated forfeitures.

     A summary of information with respect to stock-based compensation was as follows:

	Year Ended December 31,
	2007		2006		2005
	(In thousands)
Total stock-based compensation expense included in income (loss) from continuing operations	$	2,432	$	2,580	$	653

     If the Company had determined stock-based compensation in 2005 in accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” the loss from continuing operations and related per share amounts would have been adjusted to the pro forma amounts listed in the table below:

	2005
	(In thousands, except
	per share amounts)
Loss from continuing operations, as reported	$	(45,531	)
Add: stock-based compensation expense, as reported		653
Deduct: pro forma stock-based compensation expense		(1,384	)
Pro forma loss from continuing operations	$	(46,262	)
Basic loss from continuing operations per share, as reported	$	(0.50	)
Diluted loss from continuing operations per share, as reported	$	(0.50	)
Pro forma basic loss from continuing operations per share	$	(0.51	)
Pro forma diluted loss from continuing operations per share	$	(0.51	)

     (q) Reclassifications and Correction of Error

     Certain amounts in the consolidated financial statements for prior periods have been reclassified to conform to the current year’s presentation.

     Significant reclassifications include $1.7 million and $1.4 million from “Circulation” revenue to “Other” cost of sales in 2006 and 2005, respectively.

     Upon adoption of SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”) in 2006, the Company recognized a comprehensive loss of $29.3 million (net of income taxes) to record the unfunded portion of its defined benefit and other postretirement benefit plan liabilities. This adjustment was disclosed in the notes to the December 31, 2006 consolidated financial statements. However, SFAS No. 158 requires that this adjustment not affect comprehensive income, but rather be reflected as an adjustment directly to stockholders’ equity. The reported net loss, the loss from continuing operations, the cumulative pension adjustment and total stockholders’ deficit were not affected by this misstatement, however, as a result of this error, which has now been corrected, the reported comprehensive loss of $93.9 million had been overstated by $29.3 million.

(2) Dispositions and Discontinued Operations

     In November 2003, the Company announced that the Board of Directors had retained Lazard Frères & Co. LLC and Lazard & Co., Limited as financial advisor to explore alternative strategic transactions on the Company’s behalf, including a possible sale of the Company as a whole, the sale of one or more of its individual businesses, or other transactions.

     On December 19, 2005, the Company announced that its subsidiary, Hollinger Canadian Publishing Holdings Co. (“HCPH Co.”), entered into agreements to sell its 70% interest in Great West Newspaper Group Ltd. and its 50% interest in Fundata Canada Inc. (“Fundata”) for approximately $40.5 million. The transaction closed on December 30, 2005. Great West Newspaper Group Ltd. is a Canadian community newspaper publishing company which publishes 16 titles, mostly in Alberta. Fundata is a Toronto-based provider of mutual fund data and analysis. The Company recognized a gain on sale of approximately $17.1 million, net of taxes, which is included in “Gain from disposal of business segments” in the Consolidated Statement of Operations for the year ended December 31, 2005. The gain on sale also includes the recognition of a deferred tax asset of $15.8 million at December 31, 2005 related to the Company’s investment in Hollinger Canadian Newspapers, Limited Partnership (“Hollinger L.P.”), which was realized upon completion of the sale in February 2006.

     On February 6, 2006, the Company completed the sale of substantially all of its remaining Canadian operating assets, consisting of, among other things, approximately 87% of the outstanding equity units of Hollinger L.P. and all of the shares of Hollinger Canadian Newspapers GP Inc., Eco Log Environmental Risk Information Services Ltd. and KCN Capital News Company, for an aggregate sale price of $106.0 million, of which approximately $17.5 million was placed in escrow ($21.8 million including interest and currency translation adjustments as of December 31, 2007). A majority of the escrow may be held up to seven years, and will be released to either the Company, Glacier Ventures International Corp. (the purchaser) or CanWest Global Communications Corp. (“CanWest”) upon a final award, judgment or settlement being made in respect of certain pending arbitration proceedings involving the Company, its related entities and CanWest. In addition, the Company received $4.3 million in the second quarter of 2006, and received an additional $2.8 million in July 2006, related to working capital and other adjustments. The Company recognized a gain on sale of approximately $20.3 million, net of taxes of $34.9 million, which is included in “Gain from disposal of business segment” in the Consolidated Statements of Operations for the year ended December 31, 2006. See Note 21(a).

     On August 31, 2007, the final transfer of pension assets from the HCPH Co. Pension Trust Account to the Glacier Pension Trust Account was completed. The transfer of the pension assets triggered certain additional contingent consideration based on the excess funding status of the pension plans. As a result, the Company recognized a gain of $1.6 million, net of taxes of $1.1 million, which is included in “Income from discontinued operations” in the Consolidated Statements of Operations for the year ended December 31, 2007.

     In 2006, the Company recorded an additional gain of $0.5 million, net of taxes of $0.3 million, on the 2004 sale of substantially all of its U.K. operations largely related to additional tax losses surrendered to the purchaser.

     In 2006, the Company received approximately $10.2 million from the sale of Hollinger Digital LLC and other investments identified in the agreement. The Company also may receive up to an additional $0.9 million in the future if certain conditions are satisfied. The Hollinger Digital LLC transaction resulted in a pre-tax loss of $0.1 million for the year ended December 31, 2006, which is included in “Other income (expense)” in the Consolidated Statements of Operations.

     The following table presents information about the operating results of the Canadian Newspaper Operations for the year ended December 31, 2005 and the period from January 1 through February 6, 2006:

	Year Ended December 31,
	2006		2005
	(In thousands)
Operating revenue:
Advertising	$	4,101	$	75,246
Circulation		972		12,908
Job printing and other		569		12,684
Total operating revenue		5,642		100,838
Operating costs and expenses:
Newsprint		383		8,624
Compensation		2,896		41,653
Other operating costs		2,041		31,404
Depreciation and amortization		159		2,493
Total operating costs and expenses		5,479		84,174
Operating income	$	163	$	16,664

     Assets of the Canadian Newspaper Operations included $57.3 million of goodwill as of December 31, 2005. For the period from January 1, 2006 through February 6, 2006 and the year 2005, income (loss) before taxes for the Canadian Newspaper Operations were income of $0.2 million and a loss of $18.6 million, respectively.

(3) Reorganization Activities

     In December 2007, the Company announced that its Board of Directors adopted a plan to reduce annual operating costs by $50 million. The plan, which will be implemented during the first half of 2008, includes expected savings previously announced in connection with the Company’s distribution agreement with Chicago Tribune Company and the consolidation of two of the Company’s suburban newspapers. The plan also includes a reduction in full-time staffing levels. Certain of the costs directly associated with the reorganization include involuntary termination benefits amounting to approximately $6.4 million (including costs related to the suburban newspapers) for the year ended December 31, 2007, are included in “Other operating costs” in the Consolidated Statement of Operations. An additional $0.5 million in severance not related directly to the reorganization was incurred in 2007, of which $0.7 million and a reduction of costs of $0.2 million, respectively, are included in “Other operating costs” and “Corporate expenses,” respectively, in the Consolidated Statements of Operations. These estimated costs have been recognized in accordance with SFAS No. 88 (as amended) “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” (“SFAS No. 88”) related to incremental voluntary termination severance benefits and SFAS No. 112 for the involuntary, or base, portion of termination benefits under the Company’s established termination plan and practices.

     The involuntary termination benefits are largely expected to be paid by December 31, 2008 and relate to certain involuntary terminations of approximately 199 full-time employees and the continuation of certain benefit coverage under the Company’s termination plan and practices. The reorganization accrual is included in “Accounts payable and accrued expenses” in the Consolidated Balance Sheet at December 31, 2007.

     The following summarizes the termination benefits recorded and reconciles such charges to accrued expenses at December 31, 2007 (in thousands):

Charges for workforce reductions	$	6,352
Cash payments		(7	)
Accrued expenses	$	6,345

(4) Other Current Assets

     At December 31, 2007, the balance of $7.0 million in “Other current assets” on the Consolidated Balance Sheet consisted primarily of deposits of $1.1 million, assets held for sale of $1.7 million, $2.2 million of prepaid insurance costs, and other items including prepaid software maintenance.

     At December 31, 2006, the balance of $62.1 million in “Other current assets” on the Consolidated Balance Sheet consisted primarily of a $50.0 million insurance settlement receivable, assets held for sale of $2.2 million, $3.4 million of prepaid insurance costs and the current portion of notes receivable totaling $4.7 million.

(5) Investments

	December 31,
	2007		2006
	(In thousands)
Available-for-sale securities, at fair value:
Asset-backed commercial paper(a)	$	36,000	$	—
Equity securities		114		80
Other non-marketable investments, at cost		4,876		4,328
		40,990		4,408
Equity accounted companies, at equity:
Internet related companies		7		44
Other		1,252		1,970
		1,259		2,014
	$	42,249	$	6,422

	December 31,
	2007			2006
	(In thousands)
Gross unrealized holding gains on available-for-sale securities:
Equity securities	$	158		$	78
Less — deferred tax expense		(17	)		(12	)
Unrealized gains on available-for-sale securities included in stockholders’ equity (deficit)	$	141		$	66

     (a) On August 21, 2007, $25.0 million of the Company’s investments in Canadian asset-backed commercial paper (“Canadian CP”) held through a Canadian subsidiary matured but were not redeemed and remain outstanding. On August 24, 2007, $23.0 million of similar investments matured but were not redeemed and remain outstanding. The Canadian CP held by the Company was issued by two special purpose entities sponsored by non-bank entities. The Canadian CP was not redeemed at maturity due to the combination of a collapse in demand for Canadian CP and the refusal of the back-up lenders to fund the redemption due to their assertion that these events did not constitute events that would trigger a redemption obligation. The combined total of the investments that were not redeemed and remain outstanding is $48.2 million, including accrued interest. Due to uncertainties in the timing as to when these investments will be sold or otherwise liquidated, the Canadian CP is classified as a noncurrent asset included in “Investments” on the Consolidated Balance Sheet at December 31, 2007.

     A largely Canadian investor committee is leading efforts to restructure the Canadian CP that remains unredeemed. On December 23, 2007, the investor committee announced that an agreement in principle had been reached to restructure the Canadian CP, subject to the approval of the investors and various other parties. Under the agreement in principle, the Canadian CP will be exchanged for medium term notes, backed by the assets underlying the Canadian CP, having a maturity that will generally match the maturity of the underlying assets. The agreement in principle calls for $11.1 million of the Company’s medium term notes to be backed by a pool of assets that are generally similar to those backing the $11.1 million held by the Company and which were originally held by a number of special purpose entities, while the remaining $37.1 million of the Company’s medium term notes are expected to be backed by assets held by the specific special purpose entities that originally issued the Canadian CP. The stated objective of the investor committee is to complete the restructuring process by March 31, 2008. To facilitate the restructuring, commercial paper investors, sponsors of the special purpose entities and other stakeholders agreed to a standstill agreement which has been extended and is likely to continue to be extended until the restructuring process is complete. The Company cannot predict the ultimate outcome of the restructuring effort, but expects its investment will be converted into medium term notes. However, it is possible that the restructuring effort will fail and the Company or the special purpose entities may be forced to liquidate assets into a distressed market resulting in a significant realized loss for the Company.

     The Canadian CP has not traded in an active market since mid-August 2007 and there are currently no market quotations available, however, the Canadian CP continues to be rated R1 (High, Under Review with Developing Implications) by Dominion Bond Rating Service. The Company has estimated the fair value of the Canadian CP assuming the agreement in principle is approved. The Company has employed a valuation model to estimate the fair value for the $11.1 million of Canadian CP that will be exchanged for medium term notes backed by the pool of assets. The valuation model used by the Company to estimate the fair value for this portion of the Canadian CP incorporates discounted cash flows, the best available information regarding market conditions and other factors that a market participant would consider for such investments. The fair value of the $37.1 million of Canadian CP that will be exchanged for medium term notes backed by assets held by specific special purpose entities was estimated using prices of securities similar to those the Company expects to receive.

     During 2007, the Company’s valuation resulted in an impairment charge and reduction of $12.2 million to the estimated fair value of the Canadian CP. The assumptions used in determining the estimated fair value reflect the terms of the December 23, 2007 agreement in principle described above. The Company’s valuation assumes that the replacement notes will bear interest rates similar to short-term instruments and that such rates would otherwise be commensurate with the nature of the underlying assets and their associated cash flows. Assumptions have also been made as to the amount of restructuring costs that the Company will bear. Continuing uncertainties regarding the value of the assets which underlie the Canadian CP, the amount and timing of cash flows, the yield of any replacement notes, whether an active market will develop for the Canadian CP or any replacement notes and other outcomes of the restructuring process could give rise to a further change in the value of the Company’s investment which could materially impact the Company’s financial condition and results of operations.

(6) Property, Plant and Equipment

	December 31,
	2007			2006
	(In thousands)
Land	$	9,053		$	9,510
Building and leasehold interests		93,681			101,122
Machinery and equipment		204,192			194,903
Construction in progress		2,599			6,428
Less: accumulated depreciation		(146,170	)		(133,595	)
	$	163,355		$	178,368

     Depreciation of property, plant and equipment totaled $20.4 million, $22.0 million and $18.7 million in 2007, 2006 and 2005, respectively.

(7) Goodwill and Intangible Assets

     The changes in the carrying amount of goodwill for the years ended December 31, 2007 and 2006 are as follows:

	Total
	(In thousands)
Balance as of January 1, 2006	$	124,104
Adjustments of excess acquisition reserves		(69	)
Acquisition		266
Balance as of December 31, 2006 and 2007	$	124,301

     The Company’s amortizable intangible assets consist of subscriber and advertiser relationships. The components of amortizable intangible assets at December 31, 2007 and 2006 are as follows:

	December 31,
	2007			2006
	(In thousands)
Subscriber and advertiser relationships:
Gross carrying amount	$	135,880		$	135,880
Accumulated amortization		(47,645	)		(43,289	)
Net book value	$	88,235		$	92,591

     Amortization of intangible assets for the years ended December 31, 2007, 2006 and 2005 was $4.4 million, $4.4 million and $4.4 million, respectively. Future amortization of intangible assets is expected to approximate $4.4 million per year from 2008 through 2012.

(8) Other Assets

	December 31,
	2007		2006
	(In thousands)
Deferred financing costs	$	—	$	123
Capitalized direct response advertising costs, net of accumulated amortization (Note 16(b))		—		16,193
Receivable from Bradford Publishing Co. (Note 22(f))		—		3,430
Other		1,249		2,178
	$	1,249	$	21,924

(9) Accounts Payable and Accrued Expenses

	December 31,
	2007		2006
	(In thousands)
Accounts payable	$	34,067	$	30,821
Accrued expenses:
Labor and benefits		28,665		30,543
Accrued interest		—		30
Professional fees		9,848		19,070
Current pension and postretirement liability		6,478		6,455
Other		33,563		23,249
	$	112,621	$	110,168

(10) Long-Term Debt

	December 31,
	2007		2006
	(In thousands)
Hollinger International Publishing Inc.:
9% Senior Notes due 2010	$	—	$	6,000
Other debt		38		908
		38		6,908
Less:
Current portion included in current liabilities		35		867
	$	3	$	6,041

     On October 1, 2007, the Company repurchased the remaining $6.0 million of the Company’s 9% Senior Notes due 2010 (the “9% Senior Notes”) at 101% of face value plus accrued and unpaid interest. The total amount paid was $6.2 million. The Company was required to offer to repurchase the remaining $6.0 million of the Company’s 9% Senior Notes due to the actions taken by Hollinger Inc. as described in Note 22.

     Interest paid in 2007, 2006 and 2005 was $0.5 million, $0.7 million and $1.0 million, respectively.

(11) Leases

     The Company leases various facilities and equipment under non-cancelable operating lease arrangements. Rental expense under all operating leases was approximately $5.6 million, $5.9 million and $6.5 million in 2007, 2006 and 2005, respectively.

     Minimum lease commitments at December 31, 2007 are as follows:

	(In thousands)
2008	$	5,560
2009		4,760
2010		3,935
2011		3,784
2012		3,880
Thereafter		28,397
	$	50,316

(12) Financial Instruments

     (a) Fair Values

     The Company has entered into various types of financial instruments in the normal course of business.

     For certain of these instruments, fair value estimates are made at a specific point in time, based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of perceived risk and the country of origin. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, may not represent actual values of the financial instruments that could be realized in the future.

     The carrying values of all financial instruments at December 31, 2007 and 2006 approximate their estimated fair values.

     (b) Derivative Financial Instruments

     The Company may enter into various swap, option and forward contracts from time to time when management believes conditions warrant. Such contracts are limited to those that relate to the Company’s actual exposure to commodity prices, interest rates and foreign currency risks. If, in management’s view, the conditions that made such arrangements worthwhile no longer exist, the contracts may be closed. The Company currently has no derivative financial instruments in place.

(13) Stockholders’ Equity

     Preferred Stock

     The Company is authorized to issue 20,000,000 shares of preferred stock in one or more series and to designate the rights, preferences, limitations and restrictions of and upon shares of each series, including voting, redemption and conversion rights.

     Class A and Class B Common Stock

     Class A Common Stock and Class B Common Stock have identical rights with respect to cash dividends and in any sale or liquidation, but different voting rights. Each share of Class A Common Stock is entitled to one vote per share and each share of Class B Common Stock is entitled to ten votes per share on all matters, where the two classes vote together as a single class, including the election of directors. Class B Common Stock is convertible at any time at the option of Hollinger Inc. into Class A Common Stock on a share-for-share basis and is transferable by Hollinger Inc. under certain conditions. Where Hollinger Inc. does not meet these conditions, and there is a change of control of the Company, the Class B shares are automatically converted on a share-for-share basis into Class A shares.

     Shareholder Rights Plan (“SRP”)

     On February 27, 2004, the Company paid a dividend of one preferred share purchase right (a “Right”) for each share of Class A Common Stock and Class B Common Stock held of record at the close of business on February 5, 2004. Each Right, if and when exercisable, entitles its holder to purchase from the Company one one-thousandth of a share of a new series of preferred stock at an exercise price of $50.00. Unless earlier redeemed, exercised or exchanged, the Rights will expire on January 25, 2014.

     The SRP provides that the Rights will separate from the Class A Common Stock and Class B Common Stock and become exercisable only if a person or group beneficially acquires, directly or indirectly, 20% or more of the outstanding stockholder voting power of the Company without the approval of the Company’s directors, or if a person or group announces a tender offer which if consummated would result in such person or group beneficially owning 20% or more of such voting power. The Company may redeem the Rights at $0.001 per Right or amend the terms of the plan at any time prior to the separation of the Rights from the Class A Common Stock and Class B Common Stock.

     Under most circumstances involving an acquisition by a person or group of 20% or more of the stockholder voting power of the Company, each Right will entitle its holder (other than such person or group), in lieu of purchasing preferred stock, to purchase shares of Class A Common Stock of the Company at a 50% discount to the current per share market price. In addition, in the event of certain business combinations following such an acquisition, each Right will entitle its holder to purchase the common stock of an acquirer of the Company at a 50% discount from the market value of the acquirer’s stock.

     Conrad M. Black (“Black”) and each of his controlled affiliates and Hollinger Inc., are considered “exempt stockholders” under the terms of the plan. This means that so long as Black and his controlled affiliates do not collectively, directly or indirectly, increase the number of shares of Class A and Class B Common Stock above the level owned by them when the plan was adopted, their ownership will not cause the Rights to separate from the Common Stock. This exclusion would not apply to any person or group to whom Black or one of his affiliates transfers ownership, whether directly or indirectly, of any of the Company’s shares. Consequently, the Rights may become exercisable if Black transfers sufficient voting power to an unaffiliated third party through a sale of interests in the Company, Hollinger Inc., Ravelston Corporation Limited (“Ravelston”) or another affiliate. As a result of the filing on April 22, 2005 by Ravelston and Ravelston Management, Inc. (“RMI”), seeking court protection under Canadian insolvency laws, and the appointment of a court-appointed receiver for Ravelston and RMI, on May 10, 2005, the Board’s Corporate Review Committee amended the SRP to include the receiver, RSM Richter Inc., which was appointed by the Ontario Superior Court of Justice as the receiver of Ravelston’s assets (the “Receiver”) as an “exempt stockholder” for purposes of the SRP.

     Common Stock Repurchases and Issuance of Treasury Stock

     On March 15, 2006 the Company announced that its Board of Directors authorized the repurchase of an aggregate value of $50.0 million of its common stock to begin following the filing of the 2005 Form 10-K. The Company completed the repurchase of common stock on May 5, 2006, aggregating approximately 6.2 million shares for approximately $50.0 million, including related transaction fees.

     On May 17, 2006, the Company announced that its Board of Directors authorized the repurchase of common stock utilizing approximately $8.2 million of proceeds from the sale of Hollinger Digital LLC (see Note 2) and $9.6 million of proceeds from stock options exercised in 2006. In addition, on June 13, 2006 the Company announced that its Board of Directors had authorized an additional $50.0 million for the repurchase of common stock. Through December 31, 2006, the Company repurchased approximately 6.0 million shares for approximately $45.7 million, including related transaction fees, out of the $67.8 million authorized subsequent to the program announced on March 15, 2006. The Company has not purchased any treasury shares in 2007 and has no active program in place to acquire shares for treasury.

     The Company issued approximately 1.5 million shares of its Treasury Stock in respect of options exercised or shares issued in respect of deferred stock units (“DSU’s”) vesting through December 31, 2006. Proceeds received from the exercise of options were then used to repurchase Treasury Stock as discussed above. During 2007, the Company issued approximately 0.3 million shares of Treasury Stock in respect of DSU’s vesting through December 31, 2007 and issued approximately 0.1 million shares in January 2008 in respect of DSU’s vesting through December 31, 2007.

     Dividends and Dividends Payable

     The Company is a holding company and its assets consist primarily of investments in its wholly-owned direct and indirect subsidiaries. As a result, the Company’s ability to meet its future financial obligations and its ability to pay dividends is dependent on the availability of cash flows from its subsidiaries through dividends, intercompany advances and other payments.

     On December 13, 2006, the Company announced that its Board of Directors voted to suspend the Company’s quarterly dividend of five cents ($0.05) per share.

(14) Stock-Based Compensation

     Stock Options

     In 1999, the Company adopted the Hollinger International Inc. 1999 Stock Incentive Plan (“1999 Stock Plan”) which provides for awards of up to 8,500,000 shares of Class A Common Stock. The 1999 Stock Plan authorizes the grant of incentive stock options and nonqualified stock options. The exercise price for stock options must be at least equal to 100% of the fair market value of the Class A Common Stock on the date of grant of such option. The maximum term of the options granted under the 1999 Stock Plan is 10 years and the options vest ratably, over two or four years.

     In 1999, the Company repriced a series of stock options which had originally been issued in 1998. Under Financial Accounting Standards Board (“FASB”) Interpretation No. 44 (“FIN 44”), these repriced options effectively change to a variable stock option award and are subject to recognition as a compensation expense. Accordingly, the stock-based compensation determined for this repriced series of options for 2005 amounted to income of $0.3 million.

     The Company has not granted any new stock options since 2003. Stock compensation expense recognized in 2005 represents the variable expense of the stock options modified in prior periods, the amortization of DSU’s over the vesting period and the modification of certain options as discussed below.

     On May 1, 2004, the Company suspended option exercises under its stock option plans until such time that the Company’s Securities and Exchange Commission (“SEC”) registration statement with respect to these shares would again become effective (the “Suspension Period”). The suspension did not affect the vesting schedule with respect to previously granted options. In addition, the terms of the option plans generally provide that participants have 30 days following the date of termination of employment with the Company to exercise options that are exercisable on the date of termination. Participants in the stock incentive plans whose employment had been terminated were provided with 30 days following the lifting of the Suspension Period to exercise options that were vested at the termination of their employment. The extension of the exercise period constituted a modification of the awards, but did not affect, or extend, the contractual life of the options.

     As a result of the Company’s inability to issue common stock upon the exercise of stock options during the Suspension Period, the exercise period with respect to those stock options which would have been forfeited during the Suspension Period had been extended to a date that is 30 days following the Suspension Period. These extensions constitute amendments to the life of the stock options, for those employees expected to benefit from the extension, as contemplated by FIN 44. Under FIN 44, the Company is required to recognize compensation expense for the modification of the option grants. The additional compensation charge for the affected options, calculated as the difference between the intrinsic value on the award date and the intrinsic value on the modification date, amounted to $0.5 million for 2005.

     On April 27, 2006, the Company filed with the SEC a Form S-8 registering shares to be issued under the 1999 Stock Plan and the registration statements for the Company’s stock incentive plans were effective as of that date. The Company notified option grantees that the Suspension Period would end on May 1, 2006 related to vested options under the Company’s stock incentive plans.

     Stock option activity with respect to the Company’s stock option plans was as follows:

				Weighted-			Weighted-
				Average			Average		Aggregate
	Number of			Exercise			Remaining		Intrinsic
	Options			Price			Term		Value
							(Months)		(In thousands)
Options outstanding at December 31, 2006		698,460		$	8.11
Options granted		—		$	—
Options exercised		—		$	—				$	—
Options forfeited		(302,735	)	$	(8.01	)
Options expired		—		$	—
Options outstanding at December 31, 2007		395,725		$	8.19			42	$	—
Options exercisable at December 31, 2007		395,725		$	8.19			42	$	—

     The following table summarizes information about the stock options outstanding as of December 31, 2007:

			Options			Options Exercisable
	Number		Outstanding			Number
	Outstanding at		Weighted-Average			Exercisable at
	December 31,		Remaining	Weighted Average		December 31,		Weighted-Average
Range of Exercise Prices	2007		Contractual Life	Exercise Price		2007		Exercise Price
$6.69 — $8.67		293,093	3.88 years	$	7.45		293,093	$	7.45
$10.17 — $10.66		102,632	2.53 years	$	10.29		102,632	$	10.29
$6.69 — $10.66		395,725	3.53 years	$	8.19		395,725	$	8.19

     Other information pertaining to stock option activity was as follows:

	Year Ended December 31,
	2007		2006		2005
	(In thousands)
Total intrinsic value of stock options exercised	$	—	$	1,047	$	—

     The fair value of stock options was estimated using the Black-Scholes option-pricing model and compensation expense is recognized on a straight-line basis over the remaining vesting period of such awards. As the Company has not granted any new stock options after 2003, the expense recognized for 2006 largely represents the service expense related to previously granted, unvested awards. The remaining cost related to the unvested options was recognized in January 2007. The Company had no unrecognized cost related to non-vested options at December 31, 2007.

     SFAS No. 123R requires the recognition of stock-based compensation for the number of awards that are ultimately expected to vest. Upon the adoption of SFAS No. 123R, the Company recognized an immaterial one-time gain based on SFAS No. 123R’s requirement to apply an estimated forfeiture rate to unvested awards. As a result, stock compensation expense was reduced for estimated forfeitures expected prior to vesting. Estimated forfeitures are based on historical forfeiture rates and approximated 8%. Estimated forfeitures will be reassessed in subsequent periods and the estimate may change based on new facts and circumstances. Prior to January 1, 2006, actual forfeitures were included in pro forma stock compensation disclosures as they occurred.

     Prior to the adoption of SFAS No. 123R, the Company accounted for stock options and DSU’s granted to employees and directors using the intrinsic value-based method of accounting.

 Deferred Stock Units

     Pursuant to the 1999 Stock Plan, the Company issues DSU’s, each of which are convertible into one share of Class A Common Stock. The value of the DSU’s on the date of issuance is recognized as employee compensation expense over the vesting period or through the grantee’s eligible retirement date, if shorter. The DSU’s are reflected in the basic earnings per share computation upon vesting. As of December 31, 2007, 1,020,828 DSU’s are fully vested, in respect of which 513,390 shares of stock have not been delivered and the Company has approximately $3.1 million of unrecognized compensation cost related to non-vested DSU’s. All non-vested DSU’s have a contractual vesting period of 10 months to 3 years and the remaining unrecognized compensation cost is expected to be recognized through 2010.

     On December 16, 2004, from the proceeds of the sale of the Company’s U.K. operations, the Board of Directors declared a special dividend of $2.50 per share on the Company’s Class A and Class B Common Stock paid on January 18, 2005 to holders of record of such shares on January 3, 2005, in an aggregate amount of approximately $226.7 million. On January 27, 2005, the Board of Directors declared a second special dividend of $3.00 per share on the Company’s Class A and Class B Common Stock paid on March 1, 2005 to holders of record of such shares on February 14, 2005, in an aggregate amount of approximately $272.0 million. Following the special dividends paid in 2005, pursuant to the underlying stock option plans, the outstanding grants under the Company’s stock incentive plans, including DSU’s, have been adjusted to take into account this return of cash to existing stockholders and its effect on the per share price of the Company’s Class A Common Stock. As a result, DSU’s increased from 262,488 to 355,543 units and the number of shares potentially issuable pursuant to outstanding options increased from approximately 3.2 million shares before the adjustment to approximately 4.6 million shares after the adjustment.

     On January 26, 2005, the Company granted 134,015 DSU’s (adjusted for special dividends), on March 14, 2005, the Company granted 20,000 DSU’s and on December 9, 2005, the Company granted 253,047 DSU’s that vest in 25% increments on each anniversary date with immediate vesting upon: a change in control as defined in the agreement; retirement (with certain restrictions); or death or permanent disability. These DSU’s, with a fair value on the dates granted of approximately $3.9 million, have been fully expensed. The Company was ratably expensing 100,764 DSU’s during 2005, which were to be issued in January 2006 with an estimated value of $1.0 million, pursuant to an employment contract covering the year ended December 31, 2005. The employment contract was amended in December 2005, such that the DSU’s would no longer be issued. The Company reversed the expense associated with these DSU’s in the fourth quarter of 2005. In addition, the Company expensed approximately $0.1 million in 2005 related to 12,424 DSU’s pursuant to this contract, which were unconditionally issuable in November 2005.

     The Company recognized $2.4 million and $2.3 million in stock-based compensation in 2007 and 2006, respectively, related to DSU’s. On August 1, 2007, the Company announced it received notice from Hollinger Inc., the Company’s controlling stockholder, that certain corporate actions with respect to the Company had been taken by written consent. These actions included increasing the size of the Board of Directors with vacancies being filled by stockholders having a majority interest. As a result of the change in control, approximately 165,000 outstanding DSU’s that were not yet vested became vested, which resulted in stock compensation expense of $1.0 million in 2007.

     Non-vested DSU activity was as follows:

				Weighted-Average					Aggregate
	Number of			Grant Date			Weighted-Average		Intrinsic
	Units			Fair Value			Remaining Term		Value
							(Months)		(In thousands)
Unvested at December 31, 2006		215,335		$	7.97
DSU’s granted		2,631,954		$	1.50
DSU’s vested		(513,342	)	$	(4.63	)			$	1,551
DSU’s forfeited		(17,672	)	$	(9.99	)
Unvested at December 31, 2007		2,316,275		$	1.34			24	$	5,096

	Year Ended December 31,
	2007		2006		2005
	(In thousands)
Total fair value of DSU’s granted	$	3,938	$	975	$	4,036
Intrinsic value of DSU’s vested	$	1,551	$	1,481	$	483

(15) Employee Benefit Plans

     Defined Contribution Plans

     The Company sponsors three domestic defined contribution plans, all of which have provisions for Company contributions. For the years ended December 31, 2007, 2006 and 2005, the Company contributed $2.2 million, $2.6 million and $2.5 million, respectively.

     Defined Benefit Plans

     During 2006, the FASB issued SFAS No. 158 that requires implementation in fiscal years ending after December 15, 2006. SFAS No. 158 amends SFAS Nos. 87, 88, 106 and 132R but retains most of the measurement and disclosure requirements and does not change the amounts recognized in the income statement as net periodic benefit cost. The Company adopted the SFAS No. 158 requirements for the December 31, 2006 financial statements and disclosures.

     SFAS No. 158 required the Company to 1) recognize the funded status of Pension and Other Postretirement Plans in its Consolidated Balance Sheets, measured as the difference between the plan assets at fair value and the projected benefit obligation, 2) classify, as a current liability, the amount by which the benefits included in the benefit obligation payable in the next twelve months exceeds the fair value of plan assets 3) recognize as a component of “Other comprehensive income (loss),” net of tax, the unrecognized actuarial gains and losses, prior service costs and transition obligations that arise during the period but are not recognized as components of net periodic benefit cost, 4) measure the plan assets as of the date of the Company’s fiscal year end and 5) disclose additional information as to the effect on net periodic benefit cost for the next fiscal year that arise from delayed recognition of gains and losses, prior service costs and transition obligations.

     As a result of adopting SFAS No. 158 as of December 31, 2006, the Company recorded a reduction in stockholders’ equity via a charge to the “Pension adjustment” component of accumulated other comprehensive income (loss) of $29.3 million, net of deferred income taxes of $17.0 million, to recognize the unfunded portion of its defined benefit pension plans and other postretirement benefit plans liabilities.

     The Company has seven domestic and six Canadian single-employer defined benefit pension plans and six domestic and two Canadian supplemental retirement arrangements. The Company’s contributions to these plans for the years ended December 31, 2007, 2006 and 2005 were approximately $7.2 million, $3.3 million and $6.1 million, respectively, and it expects to contribute approximately $10.5 million to these plans in 2008.

     The benefits under subsidiary companies’ single-employer pension plans are based primarily on years of service and compensation levels. The Company funds the annual provision deductible for income tax purposes. The plans’ assets consist principally of marketable equity securities and corporate and government debt securities. The pension plans’ obligations and assets are measured as of December 31 for all years presented.

     The components of net periodic benefit cost (credit) for the years ended December 31, 2007, 2006 and 2005 are as follows:

	2007			2006			2005
	(In thousands)
Service cost	$	1,305		$	1,526		$	2,169
Interest cost		18,456			18,653			17,625
Expected return on plan assets		(26,158	)		(25,609	)		(22,471	)
Amortization of losses		2,666			2,825			3,126
Settlement and curtailment (gain) loss		458			(67	)		—
Amortization of transitional obligation		112			112			112
Amortization of prior service costs		183			198			190
Net periodic benefit cost (credit)	$	(2,978	)	$	(2,362	)	$	751

     The table below sets forth the reconciliation of the benefit obligation as of December 31, 2007 and 2006:

	December 31,
	2007			2006
	(In thousands)
Benefit obligation at the beginning of the year	$	348,179		$	342,036
Service cost		1,305			1,526
Interest cost		18,456			18,653
Participant contributions		5			81
Currency translation differences		43,770			(189	)
Settlements and transfers		(1,380	)		1,152
Actuarial (gain) loss		(16,029	)		17,780
Curtailment gain		—			(224	)
Benefits paid		(30,934	)		(32,636	)
Benefit obligation at the end of the year		363,372			348,179
Fair value of plan assets at the beginning of the year		351,624			348,296
Actual return on plan assets		34,628			31,337
Currency translation differences		51,271			24
Settlements and transfers		(1,388	)		1,190
Employer contributions		7,249			3,332
Participant contributions		5			81
Benefits paid		(30,934	)		(32,636	)
Fair value of plan assets at the end of the year		412,455			351,624
Funded status	$	49,083		$	3,445

     Amounts recognized in the Consolidated Balance Sheets consist of:

	December 31,
	2007			2006
	(In thousands)
Prepaid pension asset	$	89,512		$	49,645
Pension liability included in current liabilities	$	(3,993	)	$	(4,489	)
Pension liability included in noncurrent liabilities	$	(36,436	)	$	(41,711	)
Accumulated other comprehensive loss, before income taxes	$	59,070		$	78,826

     Amounts recognized in Accumulated other comprehensive loss, before income taxes consist of:

	December 31,
	2007		2006
	(In thousands)
Net actuarial losses	$	56,907	$	76,521
Prior service costs		1,240		1,270
Net transition obligation		923		1,035
	$	59,070	$	78,826

     Accumulated other comprehensive loss, before taxes in 2007 included net actuarial gains of $24.5 million, foreign currency translation losses of $8.2 million, settlement and curtailment losses recognized of $0.4 million and amortization of net actuarial losses, prior service costs and net transition obligation of $2.7 million, $0.2 million and $0.1 million, respectively.

     The estimated net actuarial losses, prior service costs and net transition obligation for the defined benefit pension plans that will be amortized from Accumulated other comprehensive loss into net periodic benefit costs over the next fiscal year are $1.0 million, $0.2 million and $0.1 million, respectively.

     Information for pension plans with an accumulated benefit obligation in excess of plan assets as of December 31:

	December 31,
	2007		2006
	(In thousands)
Projected benefit obligation	$	111,084	$	117,229
Accumulated benefit obligation	$	107,841	$	113,754
Fair value of plan assets	$	70,655	$	71,029

     Information for pension plans with plan assets in excess of the accumulated benefit obligation as of December 31:

	December 31,
	2007		2006
	(In thousands)
Projected benefit obligation	$	252,288	$	230,950
Accumulated benefit obligation	$	252,288	$	230,950
Fair value of plan assets	$	341,800	$	280,595

     Assumptions

     The ranges of assumptions are as follows:

	December 31,
	2007			2006			2005
Discount rate		5.50 — 6.25	%		5.00 — 5.75	%		5.50 — 6.25	%
Expected return on plan assets		5.50 — 8.00	%		5.50 — 8.25	%		5.25 — 8.25	%
Compensation increase		3.0	%		3.0	%		3.0% — 4.0	%

     Weighted-average assumptions used to determine plan benefit obligations at December 31:

	Pension Benefits
	2007			2006
Discount rate		5.67	%		5.18	%
Rate of compensation increase		2.53	%		2.47	%

     Weighted-average assumptions used to determine plan net periodic benefit cost for the years ended December 31:

	Pension Benefits
	2007			2006			2005
Discount rate		5.67	%		5.18	%		5.49	%
Expected long-term return on plan assets		6.53	%		7.22	%		7.23	%
Rate of compensation increase		2.53	%		2.47	%		3.02	%

     The discount rate is based on yield curves derived from AA corporate bond yields with terms similar to the projected benefit payment duration of the benefit plans. The Company used a building block approach to determine its current assumption of the long-term expected rate of return on pension plan assets. Based on historical market studies, the Company’s long-term expected returns range from 5.50% to 8.00%. The Company’s current target asset allocation for pension plan assets is 50% in equity securities and 50% in debt and other securities.

     Pension Plan Assets

     The Company’s pension plan weighted-average asset allocations at December 31, 2007 and 2006, by asset category are as follows:

	Plan Assets at
	December 31,
Asset Category	2007			2006
Equity securities		55.9	%		48.2	%
Debt securities		38.2	%		46.7	%
Other		5.9	%		5.1	%
Total		100.0	%		100.0	%

     The Plans’ pension investment objectives have been designed to provide a long-term investment return greater than the actuarial assumption and maximize investment return commensurate with appropriate levels of risk.

     The Plans’ strategies are predicated on the Plans’ investment objectives noted above. Risk is intended to be minimized through the use of diverse asset classes, which will stabilize the portfolio and thereby reduce the level of volatility for each level of expected return.

     Investment funds are selected on the basis of:

• Historically competitive investment returns and risks;

• Stability and financial soundness of companies offering funds;

• Desirability of offering funds run by different managers; and

• Manager’s investment philosophy and style.

     The Plans’ fund managers review the investment funds quarterly for consistency of style and competitive investment performance.

      Postretirement and Postemployment Benefits

     The Company sponsors three foreign postretirement plans that provide postretirement benefits to certain former employees. These and other benefits are accrued in accordance with SFAS No. 106 and SFAS No. 112. The Company has no domestic postretirement benefit plan. The postretirement obligations and assets are measured as of December 31 for all years presented.

     During 2006, the Company has adopted the requirements of SFAS No. 158. SFAS No. 158 amends SFAS No. 106 but retains most of the measurement and disclosure requirements and does not change the amounts recognized in the income statement as net periodic benefit cost. SFAS No. 158 does not amend SFAS No. 112.

     The components of net periodic postretirement benefit cost for the years ended December 31, 2007, 2006 and 2005 are as follows:

	2007			2006			2005
	(In thousands)
Service cost	$	10		$	27		$	21
Interest cost		1,103			1,357			1,325
Amortization of gains		(1,782	)		(788	)		(907	)
Net periodic postretirement benefit cost (credit)	$	(669	)	$	596		$	439

     The table below sets forth the reconciliation of the accumulated postretirement benefit obligation:

	December 31,
	2007			2006
	(In thousands)
Accumulated postretirement benefit obligation at the beginning of the year	$	29,476		$	36,754
Service cost		10			27
Interest cost		1,103			1,357
Actuarial gains		(2,495	)		(6,171	)
Benefits paid		(2,146	)		(2,032	)
Currency translation differences		4,977			(459	)
Accumulated postretirement benefit obligation at the end of the year		30,925			29,476
Fair value of plan assets at the end of the year		2,008			2,005
Unfunded status	$	28,917		$	27,471

     As a result of the Company adopting the requirements of SFAS No. 158 in 2006, unrecognized gains and losses are recognized as a component of other comprehensive income, net of tax. The unrecognized gains and losses were previously included as a component of the postretirement liability. In addition, the amount of benefits included in the postretirement benefit obligation that are payable in the next twelve months are classified as a current liability. The Company previously included these obligations in other liabilities.

	December 31,
	2007		2006
	(In thousands)
Unfunded status, included in current liabilities	$	2,400	$	1,966
Unfunded status, included in other liabilities	$	26,517	$	25,505
Unrecognized net gain, included in accumulated other comprehensive income, net of tax	$	11,515	$	6,011

     Unrecognized net gain, before taxes in accumulated other comprehensive income in 2007 included net actuarial gains of $1.0 million, foreign currency translation gains of $1.7 million and amortization of net actuarial gains of $0.6 million.

     The estimated net actuarial gain for the postretirement benefits plans that will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit cost over the next fiscal year is $0.7 million.

     The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 5.50% and 5.0% as of December 31, 2007 and 2006, respectively. The weighted average discount rate used in determining the net periodic benefit cost was 5.0% for 2007 and 2006. The discount rate is based on yield curves derived from AA corporate bond yields with terms similar to the projected benefit payment duration of the benefit plans. Generally, benefits under the plan are paid for by the Company’s contributions to the Plan and the Company expects the contributions in 2008 to approximate those in 2007.

	2007			2006
Healthcare cost trend assumed next year		7.4	%		8	%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)		5	%		5	%
Year that rate reaches ultimate trend rate		2012			2012

     Assumed health care cost trend rates have a significant effect on the amounts reported for heath care plans. If the health care cost trend rate was increased 1%, the accumulated postretirement benefit obligation as of December 31, 2007 would have increased $1.3 million (2006 — $1.2 million) and the effect of this change on the aggregate of service and interest cost for 2007 would have been an increase of $0.1 million (2006 — $0.1 million). If the health care cost trend rate was decreased 1%, the accumulated postretirement benefit obligation as of December 31, 2007 would have decreased by $1.2 million (2006 — $1.0 million) and the effect of this change on the aggregate of service and interest cost for 2007 would have been a decrease of $0.1 million (2006 — $0.1 million).

     Pension and Other Benefit Payments

     The following table presents the expected future benefit payments to be paid by the pension and postretirement plans during the ensuing five years and five years thereafter:

	Pension		Postretirement
Year	Benefits		Benefits
	(In thousands)
2008	$	33,489	$	2,400
2009	$	31,109	$	2,475
2010	$	30,549	$	2,534
2011	$	29,993	$	2,582
2012	$	29,554	$	2,615
2013-2017	$	139,462	$	13,159

(16) Other Operating Costs and Corporate Expenses

     Items Included in “Other Operating Costs”

     Included in “Other operating costs” are the following amounts that the Company believes may make meaningful comparison of results between periods difficult based on their nature, magnitude and infrequency.

	Year Ended December 31,
	2007		2006		2005
	(In thousands)
Reorganization costs (Note 3)	$	6,352	$	9,201	$	—
Severance expense		405		2,642		117
Write-off of capitalized direct response advertising costs(a)		15,191		—		—
Write-off of capitalized software(b)		1,487		882		—
Costs related to outsourcing of certain newspaper distribution activities, including severance		1,770		—		—

     (a) Write-off of Capitalized Direct Response Advertising Costs

     The Company follows the accounting methodology set forth in Statement of Position 93-7 “Reporting on Advertising Costs” (“SOP 93-7”). Changes in the Company’s business practices and the Company’s expectations as to the effect of economic trends and consumer demand for the Company’s products, as indicated by recent declines in circulation and related advertising revenue, indicate that the benefit period of these direct response advertising costs can best be described as indeterminate and will be expensed as incurred.

     The Company has therefore determined that its direct response advertising costs are impaired under the belief that the subscription life can not be assumed to exceed the initial subscription period (again reflective of an indeterminate subscription life in the current environment). As a result, the Company can no longer conclude that direct response advertising costs result in probable future economic benefits as contemplated in SOP 93-7 and the Company has further concluded that the capitalized costs are impaired and have therefore been written off.

     (b) Write-off of Capitalized Software

     Relates to software development projects that were halted and cancelled.

     Items Included in “Corporate Expenses”

     Included in “Corporate expenses” are the following amounts that the Company believes may make meaningful comparison of results between periods difficult based on their nature, magnitude and infrequency.

	Year Ended December 31,
	2007			2006		2005
	(In thousands)
Bad debt expense related to loan to subsidiary of Hollinger Inc.(a)	$	33,685		$	—	$	—
Loss on sale of newspaper operations(b)		13,603			—		—
Severance expense		(176	)		6,954		1,125
Unclaimed property costs		—			2,000		—

(a) Bad Debt Expense Related to Loan to Subsidiary of Hollinger Inc.

     Represents bad debt expense related to a loan to a subsidiary of Hollinger Inc. discussed in detail in Note 22(c). The Company’s collateral for the loan is subordinated to certain obligations of Hollinger Inc. which initiated a court supervised restructuring under the Companies Creditors Arrangement Act (Canada) and a companion proceeding in the U.S. pursuant to Chapter 15 of the U.S. Bankruptcy Code.

(b) Loss on Sale of Newspaper Operations

     Represents an adjustment of estimated net proceeds to be received related to a sale in prior years.

(17) Indemnification, Investigation and Litigation Costs, Net of Recoveries

     The Company is involved in a series of disputes, investigations and legal proceedings relating to transactions between the Company and certain former executive officers and certain former directors of the Company and their affiliates. The potential impact of these disputes, investigations and legal proceedings on the Company’s financial condition and results of operations cannot currently be estimated. See Note 21(a). These costs primarily consist of legal and other professional fees as summarized in the following table. Such costs are accrued as services are rendered.

     On March 18, 2007, the Company announced settlements, negotiated and approved by a special committee of independent directors (the “Special Committee”), with former President and Chief Operating Officer, F. David Radler (“Radler”), (including his wholly-owned company, North American Newspapers Ltd. f/k/a F.D. Radler Ltd.) and the publishing companies Horizon Publishing Company (“Horizon”) and Bradford Publishing Company (“Bradford”). The Company received $63.4 million in cash to settle the following: (i) claims by the Company against Radler, Horizon and Bradford, (ii) potential additional claims against Radler related to the Special Committee’s findings regarding incorrectly dated stock options and (iii) amounts due from Horizon and Bradford. The Company has recorded $47.7 million of the settlement, as a recovery, within “Indemnification, investigation and litigation costs, net of recoveries” and $7.2 million in “Interest and dividend income” in the Consolidated Statement of Operations for the year ended December 31, 2007. The remaining $8.5 million represents the collection of certain notes receivable.

										Incurred Since
	Year Ended December 31,									Inception through
	2007			2006			2005			December 31, 2007(5)
							(In thousands)
Special Committee investigation costs(1)	$	6,216		$	4,743		$	19,044		$	63,680
Litigation costs(2)		1,533			6,376			3,601			28,478
Indemnification fees and costs(3)		47,776			18,949			23,363			109,714
Recoveries(4)		(47,718	)		(47,475	)		(32,375	)		(127,568	)
	$	7,807		$	(17,407	)	$	13,633		$	74,304

(1)

Costs and expenses arising from the Special Committee investigation. These amounts include the fees and costs of the Special Committee’s members, counsel, advisors and experts.

(2)

Largely represents legal and other professional fees to defend the Company in litigation that has arisen as a result of the issues the Special Committee has investigated, including costs to defend the counterclaims of Hollinger Inc. and Black in Hollinger International Inc. v. Conrad M. Black, Hollinger Inc., and 504468 N.B. Inc. described in the Company’s previous filings (the “Delaware Litigation”).

(3)	Represents amounts the Company has been required to advance in fees and costs to indemnified parties, including former officers and directors and their affiliates and associates who are defendants in the litigation brought by the Company or in the criminal proceedings. See Note 21(a) “Black v. Hollinger International Inc.”
(4)	Represents recoveries including $47.7 million related to a settlement with Radler described above, $47.5 million in a settlement with certain of the Company’s directors and officers insurance carriers in 2006, $30.3 million in a settlement with Torys LLP in 2005 and $2.1 million in recoveries of indemnification payments from Black in 2005. Excludes settlements with former directors and officers, pursuant to a restitution agreement reached in November 2003, of $1.7 million and $31.5 million recognized in 2004 and 2003, respectively, which were recorded in “Other income (expense), net”, and interest related to various recoveries and settlements of $15.8 million which was recorded in “Interest and dividend income”. Total recoveries, including interest, aggregate $176.6 million. In addition, the Radler settlement resulted in the collection of $8.5 million of notes receivable.
(5)	The Special Committee was formed on June 17, 2003. These amounts represent the cumulative net costs from that date.

(18) Other Income (Expense), Net

	December 31,
	2007			2006			2005
	(In thousands)
Loss on extinguishment of debt(a)	$	(60	)	$	—		$	—
Expenses related to FDR Collection(b)		—			—			(795	)
Write-down of investments(c)		(12,200	)		—			—
Foreign currency gains (losses), net		(16,569	)		2,943			(2,171	)
Legal settlement		—			—			(800	)
Gain (loss) on sale of investments		1,019			(76	)		2,254
Equity in losses of affiliates		(184	)		(259	)		(1,752	)
Other		150			34			(575	)
	$	(27,844	)	$	2,642		$	(3,839	)

(a)	In 2007, the Company retired $6.0 million of its 9% Senior Notes and recognized a premium for early redemption. See Note 10.
(b)	In 2005, the Company paid the State of New York approximately $0.8 million to settle a claim that the Company was liable for sales taxes related to acquisitions of papers and other memorabilia of President Franklin Delano Roosevelt.
(c)	In 2007, the Company recorded a $12.2 million impairment charge related to the valuation of its Canadian CP. See Note 5.

(19) Income Taxes

     Total income taxes for the years ended December 31, 2007, 2006 and 2005 were allocated as follows:

	2007			2006			2005
	(In thousands)
Income tax expense (benefit) allocated to:
Loss from continuing operations before income taxes	$	(420,888	)	$	57,431		$	42,467
Income from discontinued operations		1,066			35,173			13,778
Other comprehensive income (loss) — foreign currency translation adjustments		106			(4	)		757
Other comprehensive income (loss) — unrealized holding gain (loss) on marketable securities		2			(665	)		(2,467	)
Other comprehensive income (loss) — pension adjustment		8,166			3,117			(1,430	)
	$	(411,548	)	$	95,052		$	53,105

     Income tax expense (benefit) allocated to loss from continuing operations before income taxes for the years shown below consists of:

	Current			Deferred			Total
	(In thousands)
Year ended December 31, 2007:
U.S. federal	$	(11,509	)	$	116,590		$	105,081
Foreign		(556,833	)		460			(556,373	)
State and local		—			30,404			30,404
	$	(568,342	)	$	147,454		$	(420,888	)
Year ended December 31, 2006
U.S. federal	$	3,910		$	12,091		$	16,001
Foreign		43,138			(5,222	)		37,916
State and local		606			2,908			3,514
	$	47,654		$	9,777		$	57,431
Year ended December 31, 2005:
U.S. federal	$	(4,279	)	$	22,327		$	18,048
Foreign		19,442			4,327			23,769
State and local		(2,599	)		3,249			650
	$	12,564		$	29,903		$	42,467

     U.S. and foreign components of loss from continuing operations before income taxes are presented below:

	2007			2006			2005
	(In thousands)
U.S.	$	(121,511	)	$	(29,351	)	$	(6,241	)
Foreign		(29,346	)		9,152			3,177
	$	(150,857	)	$	(20,199	)	$	(3,064	)

     Total income taxes paid during the years ended December 31, 2007, 2006 and 2005 amounted to $33.3 million, $23.3 million and $184.4 million, respectively.

     Income tax expense (benefit) allocated to loss from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 35% for 2007, 2006 and 2005 as a result of the following:

	2007			2006			2005
	(In thousands)
Income tax benefit at federal statutory rate	$	(52,800	)	$	(7,070	)	$	(1,073	)
Impact of taxation at different foreign rates		4,191			(1,725	)		143
U.S. state and local income tax benefit, net of federal tax impact		(8,298	)		(1,462	)		(550	)
Tax impacts of the disposition and liquidation of Canadian operations, including book and tax basis differences, foreign exchange differences and related items		—			(10,551	)		(7,431	)
Provision for tax contingencies		—			29,042			607
Reduction of tax contingency accruals due to the resolution of uncertainties(a)		(578,530	)		(39,297	)		(16,194	)
Reversal of U.S. deferred tax benefits related to disposition and liquidation of Canadian operations(b)		157,344			—			—
Interest on tax contingency accruals, net of federal tax benefit on a portion thereof		47,967			81,523			53,680
Items non-deductible or non-includible for income tax purposes		4,228			831			(2,817	)
U.S. income tax expense (benefit) on intercompany and other transactions involving non-U.S. operations(a)		(28,797	)		2,241			4,621
Increase in valuation allowance, net(c)		35,374			5,366			8,894
Other, net		(1,567	)		(1,467	)		2,587
Income tax expense (benefit) allocated to loss from continuing operations	$	(420,888	)	$	57,431		$	42,467

(a) During 2007, the Company reached an agreement with the Canada Revenue Agency (“CRA”) settling certain tax issues largely related to the disposition of certain Canadian operations in 2000. As a result of the settlement, the Company reduced its tax contingency accruals by $571.8 million and recorded a U.S. tax benefit of $14.9 million related to the deduction arising from the settlement.

(b)

The Company had recorded deferred tax assets for the U.S. tax benefits that were related to the 2000 disposition and liquidation of Canadian operations. Upon the settlement of the Canadian tax issues with the CRA, the Company reversed the U.S. deferred tax asset of $157.3 million and the corresponding valuation allowance.

(c)

The net increase in the valuation allowance in 2007 includes the effects of the following significant transactions. The Company recorded $193.5 million of increases in the valuation allowance to conform with its accounting policy that requires deferred tax assets be reduced to a level where they are more likely than not to be realized. The Company recorded a reduction of the valuation allowance in the amount of $157.3 million as described in (b) above.

     “Deferred income tax liabilities” presented as non-current liabilities in the Consolidated Balance Sheets are summarized as follows:

	December 31,
	2007			2006
	(In thousands)
Deferred tax liabilities	$	106,907		$	139,240
Deferred tax assets, net of valuation allowance		(48,564	)		(112,266	)
	$	58,343		$	26,974

     The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities are presented below:

	December 31,
	2007			2006
	(In thousands)
Deferred tax assets attributable to:
Accounts receivable, principally due to allowance for doubtful accounts	$	2,087		$	1,304
Bad debt allowance on loan to subsidiary of Hollinger Inc.		13,474			—
Accrued expenses		20,502			13,012
Postretirement obligations		15,365			18,198
Investments		20,796			12,911
Net operating loss carryforwards		38,508			5,261
Claims for restitution		43,964			58,252
U.S. tax benefit related to disposition and liquidation of Canadian operations		10,849			167,140
Accrued interest and state income tax effects related to income tax contingent liabilities included in “Other tax liabilities”(a)		93,000			—
Capital loss carryovers		6,745			17,521
Other		20,898			14,180
Deferred tax assets		286,188			307,779
Less valuation allowance		(237,624	)		(195,513	)
Net deferred tax assets	$	48,564		$	112,266
Deferred tax liabilities attributable to:
Property, plant and equipment, principally due to differences in depreciation and deferred gain on exchange of assets	$	59,649		$	76,249
Pension assets		23,502			11,148
Deferred gain on disposition of Canadian Newspaper Operations		21,146			21,146
Deferred tax on settlement		—			20,047
Other		2,610			10,650
Deferred tax liabilities	$	106,907		$	139,240

(a) At December 31, 2006, deferred tax assets of $75.6 million attributable to the U.S. Federal tax benefit related to interest and state income tax temporary differences had been netted directly against the accruals for those income tax contingent liabilities in “Other tax liabilities.”

     The valuation allowance relates to tax benefits of future deductible temporary differences and net operating and capital loss carry-forwards. Management believes that it is more likely than not that such benefits will not be fully realized, due to the inability to depend on the generation of taxable income from future operations to realize such benefits.

     At December 31, 2007, the Company had approximately $22.4 million of Canadian net operating loss carryforwards, which will expire in varying amounts from December 31, 2008 through December 31, 2015. As a result of the disposition of Canadian operations in 2006, excess capital losses of $34.9 million were realized and are available for carryforward. There is no expiration for the capital loss carryforward.

     At December 31, 2007, the Company had approximately $62.3 million of U.S. net operating loss carryforwards, which will expire in 2027.

     The Company adopted the provisions of FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007. The adoption of FIN 48 did not have a material impact on the Company’s financial position or results of operations. As part of its adoption, the Company performed an item by item evaluation and considered the state of its ongoing audits by, and discussions with, various taxing authorities. Although the Company has made significant progress in resolving or settling certain tax issues, the remaining items under the caption “Other tax liabilities” in the accompanying Condensed Consolidated Balance Sheet at December 31, 2007 have not sufficiently advanced to the degree or with the level of finality that would cause the Company to adjust its accruals for income tax liabilities under the “more likely than not” criteria pursuant to FIN 48.

     FIN 48 addresses the determination of how tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

     A reconciliation of the Company’s beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance at January 1, 2007(a)	$	717,067
Reduction due to settlement with CRA		(377,798	)
Additions for tax provisions of prior year(b)		16,891
Reclassification of recoverable income taxes(c)		12,102
Balance at December 31, 2007	$	368,262

(a)	At January 1, 2007, the unrecognized tax benefits were included in “Income taxes payable and other tax liabilities” ($627.4 million) and “Other tax liabilities” ($385.4 million). U.S. federal deferred tax assets of $75.6 million attributable to interest and state income tax temporary differences had been presented as reductions of the income tax contingency accruals. (At December 31, 2007, the corresponding U.S. deferred tax assets of $93.0 million are presented as gross deferred tax assets).
(b)	Gives effect to contingent tax liabilities for tax positions that relate only to matters involving the timing of tax return inclusion. Because of deferred tax accounting, changes in the timing of inclusion of items in tax returns would not have a material impact on annual effective tax rates.
(c)	Gives effect to the reclassification of recoverable income taxes that had been presented as a reduction of “Income taxes payable and other tax liabilities” at January 1, 2007.

     Other than the $16.9 million presented as “Additions for tax provisions of prior years,” substantially all of the unrecognized tax benefits at December 31, 2007 would affect the Company’s effective tax rate if recognized. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of January 1, 2007 and December 31, 2007, the Company had accruals of approximately $371.3 million and $228.9 million, respectively, in interest and penalties related to uncertain tax positions.

     The Company files income tax returns with federal, state and foreign jurisdictions. The Company has been notified that the Internal Revenue Service (“IRS”) will examine its 2004 through 2006 federal tax returns. The Company’s 2004 through 2005 Illinois unitary tax returns are currently being examined and the 2006 return is subject to future examination. The Company’s 1998 through 2000 New York City tax returns are currently being examined.

     In January 2008, the Company received an examination report from the IRS setting forth proposed adjustments to the Company’s U.S. income tax returns from 1996 through 2003. The Company plans to dispute certain of the proposed adjustments. The process for resolving disputes between the Company and the IRS is likely to entail various administrative and judicial proceedings, the timing and duration of which involve substantial uncertainties. As the disputes are resolved, it is possible that the Company will record adjustments to its financial statements that could be material to its financial position and results of operations and it may be required to make material cash payments. The timing and amounts of any payments the Company may be required to make are uncertain, but the Company does not anticipate that it will make any material cash payments to settle any of the disputed items during 2008.

(20) Earnings (Loss) per Share

     The following tables reconcile the numerator and denominator for the calculation of basic and diluted income (loss) per share from continuing operations:

	Year Ended December 31, 2007
	Earnings		Shares		Per-Share
	(Numerator)		(Denominator)		Amount
	(In thousands, except per share amounts)
Basic EPS
Income from continuing operations	$	270,031		80,446	$	3.36
Effect of dilutive securities		—		215		—
Diluted EPS
Income from continuing operations	$	270,031		80,661	$	3.35

     The number of potentially dilutive securities, comprised of shares issuable in respect of DSU’s and stock options, at December 31, 2007 was 2,712,000.

	Year Ended December 31, 2006
	Loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
	(In thousands, except per share amounts)
Basic EPS
Loss from continuing operations	$	(77,630	)		85,681	$	(0.91	)
Effect of dilutive securities		—			—		—
Diluted EPS
Loss from continuing operations	$	(77,630	)		85,681	$	(0.91	)

     The effect of stock options has been excluded from the calculations for 2006 because they are anti-dilutive as a result of the loss from continuing operations. The number of potentially dilutive securities, comprised of shares issuable in respect of DSU’s and stock options, at December 31, 2006 was 913,795.

	Year Ended December 31, 2005
	Loss			Shares		Per-Share
	(Numerator)			(Denominator)		Amount
	(In thousands, except per share amounts)
Basic EPS
Loss from continuing operations	$	(45,531	)		90,875	$	(0.50	)
Effect of dilutive securities		—			—		—
Diluted EPS
Loss from continuing operations	$	(45,531	)		90,875	$	(0.50	)

     The effect of stock options has been excluded from the calculations for 2005 because they are anti-dilutive as a result of the loss from continuing operations. The number of potentially dilutive securities, comprised of shares issuable in respect of DSU’s and stock options, at December 31, 2005 was 4,568,580.

(21) Commitments and Contingencies

     (a) Litigation

     Litigation Involving Controlling Stockholder, Senior Management and Directors

     As previously reported, on January 28, 2004, the Company, through the Special Committee, filed a civil complaint in the United States District Court for the Northern District of Illinois asserting breach of fiduciary duty and other claims against Hollinger Inc., Ravelston, RMI, Black, Radler and J.A. Boultbee (“Boultbee”), which complaint was amended on May 7, 2004, and again on October 29, 2004. The action is entitled Hollinger International Inc. v. Hollinger Inc., et al., Case No. 04C-0698 (the “Special Committee Action”). The second amended complaint, in which Barbara Amiel Black (“Amiel Black”), Daniel W. Colson (“Colson”) and Richard N. Perle are also named as defendants, seeks to recover approximately $542.0 million in damages, including prejudgment interest of approximately $117.0 million, and punitive damages. The second amended complaint asserts claims for breach of fiduciary duty, unjust enrichment, conversion, fraud and civil conspiracy in connection with transactions described in the report of the Special

Committee as filed on Form 8-K on August 31, 2004, as amended by a current report on Form 8-K/A filed with the SEC on December 15, 2004 (the “Report”), including, among other transactions, unauthorized “non-competition” payments, excessive management fees, sham broker fees and investments and divestitures of Company assets. All defendants have answered the second amended complaint, and with their answers defendants Black, Radler, Boultbee, Amiel Black and Colson asserted third-party claims against Richard R. Burt (“Burt”), James R. Thompson (“Thompson”) and Marie-Josee Kravis. These claims seek contribution for some or all of any damages for which defendants are held liable to the Company. On January 25, 2006, the court dismissed those third-party claims, and on February 8, 2006, defendants moved for reconsideration of that decision. In addition, Black asserted counterclaims against the Company alleging breach of his stock option contracts with the Company and seeking a declaration that he may continue participating in the Company’s option plans and exercising additional options. On May 26, 2005, the Company filed its reply to Black’s counterclaims.

     Ravelston and RMI asserted counterclaims against the Company and third-party claims against HCPH Co. and Hollinger International Publishing Inc. (“Publishing”). Without specifying any alleged damages, Ravelston and RMI allege that the Company has failed to pay unidentified management services fee amounts in 2002, 2003, and 2004, and breached an indemnification provision in the management services agreements. Ravelston and RMI also allege that the Company breached a March 10, 2003 “Consent Agreement” (“Consent”) between the Company and Wachovia Trust Company. The Consent provided, among other things, for the Company’s consent to a pledge and assignment by RMI to Wachovia Trust Company, as trustee, of the management services agreements as part of the security for Hollinger Inc.’s obligations under Hollinger Inc.’s 11 7/8% Senior Secured Notes due 2011. The Consent also provided for certain restrictions and notice obligations in relation to the Company’s rights to terminate the management services agreements. Ravelston and RMI allege that they were “third-party beneficiaries” of the Consent, that the Company breached it, and that they have incurred unspecified damages as a result. The Company believes that the Consent was not approved or authorized by either the Company’s Board of Directors or its Audit Committee of the Board of Directors (the “Audit Committee”). The Company filed a motion to dismiss these claims on August 15, 2005. On March 3, 2006, the court granted the motion to dismiss the claim based on the Consent, ruled that Ravelston and RMI are not entitled to the same management fee that they obtained in 2003 and denied the motion to dismiss the other claims. On January 26, 2006, Ravelston and RMI also asserted third-party claims against Bradford and Horizon and its affiliates. These claims seek contribution for some or all of any damages for which Ravelston and RMI are held liable to the Company.

     The U.S. Attorney’s Office intervened in the case and moved to stay discovery until the conclusion of the criminal proceedings against Black and other former officers. On March 2, 2006, the court granted the motion over the Company’s objection. On July 30, 2007, after conclusion of the criminal proceedings, the Company moved for entry of a discovery schedule so that discovery could resume. On January 16, 2008, Magistrate Judge Maria Valdez denied the motion, and on January 31, 2008, the Company filed objections to that decision with United States District Judge Blanche Manning. On January 29, 2008, the U.S. Attorney’s Office filed its motion to withdraw from the civil case, and on January 31, 2008, the motion was granted.

     On July 6, 2006, Hollinger Inc. filed a motion seeking permission to file a counterclaim against the Company. The proposed counterclaim alleges, among other things, fraud in connection with Hollinger Inc.’s 1995 sale to the Company of Hollinger Inc.’s interest in The Telegraph and Hollinger Inc.’s 1997 sale to the Company of certain of Hollinger Inc.’s Canadian assets. On March 30, 2007, Magistrate Judge Maria Valdez granted Hollinger Inc.’s motion over the Company’s opposition. On April 13, 2007, the Company filed objections to that decision with United States District Judge Blanche Manning. On May 14, 2007, the Company also moved to dismiss Hollinger Inc.’s counterclaims. Judge Manning has yet to rule on either the objections or the motion to dismiss.

     In connection with and ancillary to the Special Committee Action, on October 12, 2006, the Company commenced an action in the Ontario Superior Court of Justice against Black, Amiel Black, Black-Amiel Management Inc. (“Black-Amiel”), Conrad Black Capital Corporation, 1269940 Ontario Limited, and 2753421 Canada Limited (the “Ontario Injunctive Action”). The Ontario Injunctive Action seeks, among other things, an injunction restraining the defendants and any persons controlled by them from transferring, removing, or otherwise disposing of any of their assets except with leave of the Ontario court. The Ontario Injunctive Action does not seek any damages. On February 6, 2007, the Court denied the Blacks’ motion to dismiss the Ontario Injunctive Action, and stayed the Action. On April 12, 2007, the Ontario Superior Court of Justice denied the Company’s motion for leave to appeal that decision. The Ontario Injunctive Action remains pending.

     On March 16, 2007, the Company entered into settlement agreements with Radler, and his wholly-owned company, North American Newspapers Ltd. (f/k/a FD Radler Ltd.), and the publishing companies Horizon and Bradford. Under the settlements, the Company has received $63.4 million in cash (i) to settle the Company’s claims against Radler, Horizon, and Bradford; (ii) to settle potential additional claims against Radler related to the Special Committee’s recent findings regarding backdated stock options; and (iii) to satisfy Horizon’s and Bradford’s debts to the Company. Upon motion by the Company, the claims in the Special Committee Action against Radler were subsequently dismissed.

     Black v. Hollinger International Inc.

     As previously reported, on May 13, 2005, Black filed an action against the Company in the Court of Chancery of the State of Delaware in regard to the advancement of fees and expenses in connection with his engagement of Williams & Connolly LLP to represent him in the investigations of Black by the U.S. Department of Justice and the SEC. In his initial complaint, Black sought payment of $6.8 million in legal fees allegedly already incurred, plus interest, and a declaration that he is entitled to advancement of 100% of Williams & Connolly’s legal fees going forward in connection with the two investigations, notwithstanding the June 4, 2004 Stipulation and Final Order in which the Company and Black agreed that the Company would advance only 50% of Black’s legal fees. In its response, filed on June 8, 2005, the Company brought counterclaims against Black for breach of contract in failing to repay money advanced to him in connection with Hollinger International Inc. v. Conrad M. Black, Hollinger Inc., and 504468 N.B. Inc. described in the Company’s previous filings, and seeking a declaration that the Company is no longer obligated to advance fees to Black because he repudiated his undertaking to repay money advanced in connection with the Delaware Litigation and because of the court’s findings in the Delaware Litigation that he breached his fiduciary and contractual duties to the Company. In the alternative, the Company sought a declaration that Black is entitled to advancement of only 50% of the Williams & Connolly LLP fees under the June 4, 2004 Stipulation and Final Order. The Company also filed a third-party claim against Hollinger Inc. seeking equitable contribution from Hollinger Inc. for fees that the Company has advanced to Black, Amiel Black, Radler and Boultbee.

     In March 2006, Black and the Company reached an agreement to settle the claims asserted against each other. Pursuant to the settlement agreement, the Company has advanced approximately $4.4 million for legal bills previously submitted to the Company for advancement, which reflects an offset for amounts previously advanced to Black that he was required to repay as a result of the rulings against him in the Delaware Litigation. In connection with future legal bills, the Company agreed to advance 75% of the legal fees of attorneys representing Black in the criminal case against him in the United States District Court for the Northern District of Illinois (See “— Federal Indictment of Ravelston and Former Company Officials”) and 50% of his legal fees in other matters pending against him. All such advancement was subject to Black’s undertaking that he will repay such fees if it is ultimately determined that he is not entitled to indemnification. The settlement agreement does not affect the Company’s third-party claim against Hollinger Inc.

     On June 8, 2006, the Company filed an amended third-party complaint against Hollinger Inc., expanding its allegations regarding the Court’s personal jurisdiction over Hollinger Inc. On June 19, 2006, Hollinger Inc. moved to dismiss or stay the amended complaint. The Court denied Hollinger Inc.’s motion on November 6, 2006. The Court ruled that it had personal jurisdiction over Hollinger Inc. and it declined to dismiss the Company’s claim in regard to actions in which the Company had paid or is paying more than 50% of the legal fees submitted for advancement by Black and others with whom Hollinger Inc. has indemnification and advancement agreements.

     On February 1, 2008, the Company brought an action in the Court of Chancery of the State of Delaware against Black, Boultbee, Mark S. Kipnis and Peter Y. Atkinson (“Atkinson”). In the action, entitled Sun-Times Media Group, Inc. v. Black, C.A. No. 3518-VCS, the Company seeks a declaration that it has no obligation to advance any of the defendants’ attorneys fees and other expenses incurred in connection with the appeals of their respective criminal convictions and sentences, and that it is entitled to repayment or setoff of legal fees and expenses that it previously advanced to each defendant in connection with the criminal counts on which they were convicted.

     Hollinger International Inc. v. Ravelston, RMI and Hollinger Inc.

     As previously reported, on February 10, 2004, the Company commenced an action in the Ontario Superior Court of Justice (Commercial List) against Ravelston, RMI and Hollinger Inc. This action claimed access to and possession of the Company’s books and records maintained at 10 Toronto Street, Toronto, Ontario, Canada. The parties negotiated and executed a Protocol dated March 25, 2004, providing for access and possession by the Company to the claimed records.

     On March 5, 2004, a statement of defense and counterclaim was issued by Ravelston and RMI against the Company and two of its subsidiaries, Publishing and HCPH Co. The counterclaim seeks damages in the amount of approximately $174.3 million for alleged breaches of the services agreements between the parties and for alleged unjust enrichment and tortious interference with economic relations by reason of those breaches. On March 10, 2004, Hollinger Inc. filed a statement of defense and counterclaim against the Company seeking Cdn.$300.0 million, claiming that by the Company’s refusal to pay its obligations under its services agreement with Ravelston, the Company intended to cause Ravelston to default in its obligations to Hollinger Inc. under a support agreement between Ravelston and Hollinger Inc., and intended to cause Hollinger Inc. to default on its obligations under its outstanding notes, with the resulting loss of its majority control of the Company. This litigation was stayed in May 2004 pending a final resolution of the proceedings in Illinois and Delaware.

     Black v. Breeden, et al.

     As previously reported, five defamation actions have been brought by Black in the Ontario Superior Court of Justice against Richard C. Breeden (“Breeden”), Richard C. Breeden & Co. (“Breeden & Co.”), Gordon A. Paris (“Paris”), Thompson, Burt, Graham W. Savage and Raymond Seitz. The first case was filed on February 13, 2004; the second and third cases were filed on March 11, 2004; the fourth case was filed on June 15, 2004; and the fifth case was filed on October 6, 2004. The fifth case does not name Thompson and Burt as defendants but adds Paul B. Healy as a defendant. Damages in the amount of Cdn.$850.0 million are sought in the first and second cases; damages in the amount of Cdn.$110.0 million are sought in the third and fourth cases; and Cdn.$1.0 billion in general damages and Cdn.$100.0 million in punitive damages are sought in the fifth case. Black has agreed to a stay of these actions pending the determination of the proceedings and appeals with regard to the Delaware Litigation. Although such matters described above are now completed, no steps have been taken to advance these defamation actions in the Ontario Superior Court of Justice.

     On February 11, 2005, Black issued a libel notice indicating his intention to issue a sixth defamation action, with the defendants being Breeden, Breeden & Co., Paris, Thompson, Burt, Graham W. Savage, Raymond Seitz, Shmuel Meitar and Henry A. Kissinger. On March 9, 2005, a statement of claim in the sixth action was issued. This action names all of the aforementioned individuals as defendants. The amount claimed in the action is Cdn.$110.0 million.

     The defendants named in the six defamation actions have indemnity claims against the Company for all reasonable costs and expenses they incur in connection with these actions, including judgments, fines and settlement amounts. In addition, the Company is required to advance legal and other fees that the defendants may incur in relation to the defense of those actions.

     The Company agreed to indemnify Breeden and Breeden & Co. against all losses, damages, claims and liabilities they may become subject to, and reimburse reasonable costs and expenses as they are incurred, in connection with the services Breeden and Breeden & Co. are providing in relation to the Special Committee’s ongoing investigation.

     United States Securities and Exchange Commission v. Hollinger International Inc.

     As previously reported, on January 16, 2004, the Company consented to the entry of a partial final judgment and order of permanent injunction (the “Court Order”) against the Company in an action brought by the SEC in the U.S. District Court for the Northern District of Illinois. The Court Order enjoins the Company from violating provisions of the Securities Exchange Act of 1934, including the requirements to file accurate annual reports on Form 10-K and quarterly reports on Form 10-Q and keep accurate books and records. The Court Order required the Company to have the previously appointed Special Committee complete its investigation and to permit the Special Committee to take whatever actions it, in its sole discretion, thinks necessary to fulfill its mandate. The Court Order also provides for the automatic appointment of Breeden as a special monitor (“Special Monitor”) of the Company under certain circumstances, including the election of any new person as a director unless such action is approved by 80% of the incumbent directors at the time of the election. Breeden became Special Monitor pursuant to this provision in January 2006 based on the actions of Hollinger Inc. at the Company’s 2005 Annual Meeting of Stockholders.

     The Company has received various subpoenas and requests from the SEC and other agencies seeking the production of documentation in connection with various investigations into the Company’s governance, management and operations. The Company is cooperating fully with these investigations and is complying with these requests.

     United States Securities and Exchange Commission v. Conrad M. Black, et al.

     As previously reported, on November 15, 2004, the SEC filed an action in the United States District Court for the Northern District of Illinois against Black, Radler and Hollinger Inc. seeking injunctive, monetary and other equitable relief. In the action, the SEC alleges that the three defendants violated federal securities laws by engaging in a fraudulent and deceptive scheme to divert cash and assets from the Company and to conceal their self-dealing from the Company’s public stockholders from at least 1999 through at least 2003. The SEC also alleges that Black, Radler and Hollinger Inc. were liable for the Company’s violations of certain federal securities laws during at least this period.

     The SEC alleges that the scheme used by Black, Radler and Hollinger Inc. included the misuse of so-called “non-competition” payments to divert $85.0 million from the Company to defendants and others; the sale of certain publications owned by the Company at below-market prices to a privately-held company controlled by Black and Radler; the investment of $2.5 million of the Company’s funds in a venture capital fund with which Black and two other former directors of the Company were affiliated; and Black’s approval of a press release by the Company in November 2003 in which Black allegedly misled the investing public about his intention to

devote his time to an effort to sell Company assets for the benefit of all of the Company’s stockholders and not to undermine that process by engaging in transactions for the benefit of himself and Hollinger Inc. The SEC further alleges that Black and Radler misrepresented and omitted to state material facts regarding related party transactions to the Company’s Audit Committee and Board of Directors and in the Company’s SEC filings and at the Company’s stockholder meetings.

     The SEC’s complaint seeks: (i) disgorgement of ill-gotten gains by Black, Radler and Hollinger Inc. and unspecified civil penalties against each of them; (ii) an order enjoining Black and Radler from serving as an officer or director of any issuer required to file reports with the SEC; (iii) a voting trust upon the shares of the Company held directly or indirectly by Black and Hollinger Inc.; and (iv) an order enjoining Black, Radler and Hollinger Inc. from further violations of the federal securities laws.

     On March 10, 2005, the SEC filed an amended complaint that corrects several minor errors in the original complaint, extends the SEC’s claim of federal securities law violations to Hollinger Inc., and amends the relief sought to include a voting trust upon the shares of the Company that are controlled directly or indirectly by Black and Hollinger Inc. On September 14, 2005, the court granted a motion by the U.S. Attorney’s Office to stay discovery, other than document discovery, pending resolution of the government’s criminal case and investigation. On December 14, 2005, the court granted the U.S. Attorney’s Office’s motion for a complete discovery stay pending resolution of the criminal case.

     On September 19, 2007, the court granted the SEC’s motion to lift the discovery stay and ordered the parties to complete written discovery by November 19, 2007. The parties submitted competing deposition schedules on December 17, 2007, and the court has yet to rule on the matter. On January 16, 2008, the SEC moved for summary judgment on certain of its claims against Black. Black filed his response to the motion on February 20, 2008, and the court has not yet ruled on the motion.

     CanWest Arbitration

     As previously reported, on December 19, 2003, CanWest commenced notices of arbitration against the Company and others with respect to disputes arising from CanWest’s purchase of certain newspaper assets from the Company in 2000. CanWest and the Company have competing claims relating to this transaction. CanWest claims the Company and certain of its direct subsidiaries owe CanWest approximately Cdn.$84.0 million. The Company is contesting this claim, and has asserted a claim against CanWest in the aggregate amount of approximately Cdn.$80.5 million. On February 6, 2006, approximately $17.5 million of the proceeds from the sale of the remaining Canadian Newspaper Operations was placed in escrow, to be held up to seven years, pending a final award, judgment or settlement in respect of the arbitration (“CanWest Arbitration”). There has been a series of hearings in February, April, May, June, October, November and December 2007 and January 2008. The remaining hearings are scheduled to occur during the weeks of March 31 to April 14, 2008 and June 2 to June 9, 2008. All outstanding matters are expected to be resolved through the scheduled hearings.

CanWest and The National Post Company v. Hollinger Inc., Hollinger International Inc., the Ravelston Corporation Limited and Ravelston Management Inc.

     As previously reported, on December 17, 2003, CanWest and The National Post Company brought an action in the Ontario Superior Court of Justice against the Company and others for approximately Cdn.$25.7 million plus interest in respect of issues arising from a letter agreement dated August 23, 2001 to transfer the Company’s remaining 50% interest in the National Post to CanWest. On November 30, 2004, the Company settled all but two of the matters in this action by paying The National Post Company the amount of Cdn.$26.5 million. The two remaining matters in this action have been discontinued and transferred to the CanWest Arbitration on consent of the parties.

     RMI brought a third party claim in this action against HCPH Co. for indemnification from HCPH Co. in the event CanWest and The National Post Company were successful in their motion for partial summary judgment as against RMI in the main action. CanWest’s motion against RMI was unsuccessful and CanWest’s claim against RMI was dismissed on consent of the parties. RMI’s third party action against HCPH Co. remains outstanding. The Company is seeking a discontinuance of the third party claim and an acknowledgment and release from RMI that HCPH Co. and the Company are not liable on a promissory note issued in connection with the sale of NP Holdings Company.

     Class Action Settlement

     On July 31, 2007 the Company announced that it had entered into an agreement to settle securities class action suits pending against it and a number of its former directors and officers in the United States and Canada and an agreement to settle litigation over its directors and officers insurance coverage. These agreements are subject to court approval in the United States and Canada.

     If approved, the securities class action settlement will resolve the claims asserted against the Company, a number of its former directors and officers, certain affiliated companies, and the Company’s auditor, KPMG LLP, in a consolidated class action in the United States District Court for the Northern District of Illinois entitled In re Hollinger International Inc. Securities Litigation, No. 04C-0834, and in similar actions that have been initiated in Saskatchewan, Ontario, and Quebec, Canada. Those actions assert, among other things, that from 1999 to 2003 the defendants breached U.S. federal, state, and/or Canadian law by allegedly making misleading disclosures and omissions regarding certain “non-competition” payments and the payment of allegedly excessive management fees. The Company’s settlement of the securities class action lawsuits will be funded entirely by $30.0 million in proceeds from the Company’s insurance policies. The settlement includes no admission of liability by the Company or any of the settling defendants and the Company continues to deny any such liability or damages.

     In addition, the Company’s insurers have deposited $24.5 million in insurance proceeds into an escrow account to fund defense costs the Company incurred in the securities class action and other litigation or other claimed loss. The insurance carriers are expected to be released from any other claims for the July 1, 2002 to July 1, 2003 policy period. The Company and other parties will then seek a judicial determination regarding how to allocate the $24.5 million in insurance proceeds among the insureds who assert claims to the proceeds. The Company and Hollinger Inc. have had negotiations concerning how any such proceeds awarded to them should be allocated between the two companies and have agreed to resolve it through binding arbitration if an agreement can not otherwise be reached.

     Other Matters

     As previously reported, Stockgroup Information Systems Inc. and Stockgroup Media Inc. (collectively referred to as “Stockgroup”) commenced an action in Ontario against Hollinger Inc. and HCPH Co., alleging that Hollinger Inc. and HCPH Co. owed damages in respect of advertising credits. Stockgroup sought, jointly and severally, approximately $0.5 million from Hollinger Inc. and HCPH Co. plus interest and costs. In May 2007, Stockgroup dismissed the action against Hollinger Inc. after determining Hollinger Inc. was not a party to the contract under dispute. In January 2008, the parties settled the remaining claims in this action for an immaterial amount.

     The Company becomes involved from time to time in various claims and lawsuits incidental to the ordinary course of business, including such matters as libel, defamation and privacy actions. In addition, the Company is involved from time to time in various governmental and administrative proceedings with respect to employee terminations and other labor matters, environmental compliance, tax and other matters.

     Management believes that the outcome of any pending claims or proceedings described under “Other Matters” will not have a material adverse effect on the Company taken as a whole.

     (b) Guarantees or Indemnifications

     (i) Dispositions

     In connection with certain dispositions of assets and/or businesses, the Company has provided customary representations and warranties whose terms range in duration and may not be explicitly defined. The Company has also retained certain liabilities for events occurring prior to sale, relating to tax, environmental, litigation and other matters. Generally, the Company has indemnified the purchasers in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a number of years.

     The Company is unable to estimate the maximum potential liability for these indemnifications as the underlying agreements do not always specify a maximum amount and the amounts are dependent upon the outcome of future events, the nature and likelihood of which cannot be determined at this time.

     Historically, the Company has not made any significant indemnification payments under such agreements and does not expect to in the future; accordingly no amount has been accrued in the accompanying consolidated financial statements with respect to these indemnification guarantees. The Company continues to monitor the conditions that are subject to guarantees and indemnifications to identify whether it is probable that a loss has occurred, and would recognize any such losses under any guarantees or indemnifications if and when those losses become probable and estimable. See section (c) following.

     (ii) Letters of Credit

     In connection with the Company’s insurance program, letters of credit are required to support certain projected workers’ compensation obligations. At December 31, 2007, letters of credit in the amount of $12.2 million ($9.3 million at December 31, 2006) were outstanding and the Company maintained compensating deposits with the issuer of $12.1 million ($7.6 million at December 31, 2006).

     (iii) Other

     The Company licenses some of the content it publishes for use by third parties. In doing so, the Company warrants that it is entitled to license that content and indemnifies the licensee against claims against improper use. The number or potential magnitude of such claims cannot be reasonably estimated. Historically, claims of this nature have not been significant.

     (c) Canadian Ownership Matters

     The Company has indemnified the buyer of the Canadian Newspaper Operations against any losses related to the following or similar Canadian ownership issues as discussed below.

     Under the Canadian Income Tax Act (“ITA”), there are limits on the deductibility by advertisers of the cost of advertising in newspapers that are not considered Canadian-owned under the ITA. The status of certain of the newspapers within the Canadian Newspaper Operations as Canadian-owned was affected by Black’s renunciation of his Canadian citizenship in June 2001. Although the Company believes that it had a structure in place that meets the ITA Canadian ownership rules for at least a portion of the period since June 2001, that structure may be challenged by the Canadian income tax authorities. Should any challenge be successful, advertisers in Canada might seek compensation for any advertising costs disallowed as a deduction. The amount of exposure, if any, cannot presently be determined. Additionally, one or more of the entities within the Canadian Newspaper Operations has received funding under a Canadian governmental program that is intended to benefit entities that are Canadian owned or controlled. It is possible that the Canadian government could seek the return of these funds as a result of Black’s renunciation of his Canadian citizenship. The total amount received under such grants from January 1, 2001 through January 31, 2006 was approximately Cdn.$4.0 million.

     On October 27, 2005, a claim (which was subsequently amended) was filed in the Court of Queens Bench of Alberta by the operator of a weekly magazine in Edmonton, Alberta, Canada against the Company, certain of its subsidiaries and affiliates, the Attorney General of Canada (as liable for the Minister of National Revenue for Canada), and others, one of whom has been indemnified by the Company as described in the first paragraph above. The plaintiff alleges that one title within the Canadian Newspaper Operations made certain misrepresentations to customers regarding the title’s ownership, resulting in damage to the plaintiff. This action is in a preliminary stage, and it is not yet possible to determine its ultimate outcome.

     (d) Commitments

     The Company is party to a distribution agreement through August 31, 2017, which is terminable by either party upon three years notice. Base annual minimum fees payable by the Company pursuant to the agreement amount to $9.1 million.

(22) Related-party Transactions

     The following is a description of certain relationships and related-party transactions for the three years ended December 31, 2007. Most of the findings of the Special Committee set forth in the Report are the subject of ongoing litigation and are being disputed by the former executive officers and certain of the former directors of the Company who are the subject of the Report.

     (a) On November 15, 2003, the Special Committee and the Audit Committee disclosed to the Board of Directors the preliminary results of their investigations. The Committees determined that a total of $32.2 million in payments characterized as “non-competition” payments were made by the Company without appropriate authorization by either the Audit Committee or the full Board of Directors. According to the Report, of the total unauthorized payments, approximately $16.6 million was paid to Hollinger Inc. in 1999 and 2000, approximately $7.2 million was paid to each of Black and Radler in 2000 and 2001, and $0.6 million was paid to each of Boultbee and Atkinson in 2000 and 2001. As a consequence of these findings, the Special Committee then entered into discussions with Black that culminated in the Company and Black signing an agreement on November 15, 2003 (the “Restructuring Agreement”). The Restructuring Agreement provides for, among other things, restitution by Hollinger Inc., Black, Radler, Boultbee and Atkinson to the Company of the full amount of the unauthorized payments, plus interest.

     In 2004, the Company received $32.1 million, plus interest of $8.2 million, from Hollinger Inc., Black, Radler and Atkinson. During the year ended December 31, 2004, the Company recorded approximately $1.7 million in “Other income (expense), net,” which was received from a settlement with Atkinson and approximately $1.1 million as “Interest and dividend income” related to the amounts due at December 31, 2003.

     (b) The Company was party to management services agreements with Ravelston, pursuant to which Ravelston provided advisory, consultative, procurement and administrative services to the Company. These services agreements were assigned on July 5, 2002 to RMI. The Company and its subsidiaries have not recorded fees allegedly payable to Ravelston and RMI (including amounts reflected in discontinued operations), after 2004 pursuant to these agreements. Moffat Management Inc. (“Moffat”) and Black-Amiel had separate services agreements with the Company. The Restructuring Agreement provided for the termination of these agreements in accordance with their terms, effective June 1, 2004, and the negotiation of the management fee payable thereunder for the period from January 1, 2004 until June 1, 2004. In November 2003, in accordance with the terms of the Restructuring Agreement, the Company notified RMI, Moffat and Black-Amiel of the termination of the services agreements effective June 1, 2004 and subsequently proposed, and recorded a charge for, a reduced aggregate management fee of $100,000 per month for the period from January 1, 2004 through June 1, 2004. RMI did not accept the Company’s offer and demanded a management fee of approximately $2.0 million per month, which the Company did not accept. RMI seeks damages from the Company for alleged breaches of the services agreements in legal actions pending before the courts. See Note 21(a) “— Hollinger International Inc. v. Ravelston, RMI and Hollinger Inc.”

     Amounts due to related parties amounted to $8.9 million and $8.0 million at December 31, 2007 and 2006, respectively, largely representing amounts payable in respect of management fees which are no longer being accrued (since June 2004).

     (c) On July 11, 2000, the Company loaned $36.8 million to a subsidiary of Hollinger Inc. to fund the cash purchase by Hollinger Inc. of HCPH Special Shares. The loan was originally payable on demand but on March 10, 2003, the due date for repayment was extended to no earlier than March 1, 2011. It was classified as “Loan to affiliate” (a long-term asset) on the Consolidated Balance Sheet at December 31, 2006. Effective January 1, 2002, the interest rate was changed from 13.0% per annum to LIBOR plus 3.0% per annum, without review by or approval of the Company’s independent directors. As of December 31, 2002, the balance, including accrued interest at the new unapproved rate, was $45.8 million. On March 10, 2003, the Company repurchased for cancellation, from a wholly owned subsidiary of Hollinger Inc., 2,000,000 shares of the Company’s Class A Common Stock at $8.25 per share for a total of $16.5 million. The Company also redeemed, from the same subsidiary of Hollinger Inc., pursuant to a redemption request, all of the 93,206 outstanding shares of Series E Redeemable Convertible Preferred Stock of the Company at the fixed redemption price of Cdn.$146.63 per share or approximately $9.3 million. Payments for the March 10, 2003 repurchase and redemption were applied against this debt due from the Hollinger Inc. subsidiary resulting in a calculation of net outstanding debt due to the Company of approximately $20.4 million as of March 10, 2003, the date of the repayment. At December 31, 2007, approximately $33.7 million of debt (including interest) remains outstanding, based on the promissory note the Hollinger Inc. subsidiary was required to sign on March 10, 2003, for the outstanding balance as then calculated, and based on the lower of two potentially applicable interest rates, as described below. The debt, since the date of the partial repayment, bears interest at 14.25% or, if paid in additional notes, 16.5% and is subordinated to the Hollinger Inc. Senior Secured Notes (so long as the Senior Secured Notes are outstanding), guaranteed by Ravelston, the controlling stockholder of Hollinger Inc., and secured by certain assets of Ravelston. Following the receipt of an independent fairness opinion and a review of all aspects of the transaction relating to the changes in the debt arrangements with Hollinger Inc., including the subordination of this remaining debt, by a committee of the Board of Directors of the Company, composed entirely of independent directors, the committee approved the new debt arrangements.

     The Company previously reported that the committee of independent directors referred to above had agreed to a partial offset to the $20.4 million debt against amounts owed by the Company to RMI, a subsidiary of Ravelston, and further stated that the offset was effected April 30, 2003. The amounts contemplated in the partial offset are further described in Note 22(d). Although the former management of the Company maintained that it believed final approval had been given to the offset by the committee of independent directors, according to the Report, the committee had not given such approval. The committee of independent directors later agreed to approve the requested partial offset on certain terms and conditions, but these terms and conditions were not acceptable to Hollinger Inc. and Ravelston, and the offset was not completed.

     Neither the Hollinger Inc. subsidiary nor Ravelston has complied with the terms of the new debt arrangements. Under the terms of the promissory note, the Hollinger Inc. subsidiary is permitted to make interest payments with additional notes if interest payments to the Company are prohibited under the indenture governing Hollinger Inc.’s 11 7/8% Senior Secured Notes. The Hollinger Inc. subsidiary made only partial cash interest payments on the note until August 2003, when it discontinued payments altogether. At this time, the Company cannot ascertain which interest rate is the appropriate one to apply to the debt. Although as set forth in the Report, the Special Committee believes interest should be accrued at the higher rate, to be conservative, the Company has accrued interest at the lower rate. At December 31, 2007, the Company calculates that based on the amount in the promissory note Hollinger Inc.’s subsidiary was required to sign and using the lower interest rate, unpaid interest amounts to $13.3 million. Ravelston was required to fund a cash collateral account to secure the Hollinger Inc. subsidiary’s repayment obligation. Ravelston has funded approximately $0.2 million to this cash collateral account as of December 31, 2007. The Hollinger Inc. subsidiary’s debt is guaranteed by Ravelston.

     The Company has not yet sought to collect on the Ravelston guarantee or attach the receivables. Instead, the Company has sued Hollinger Inc. and Ravelston seeking to rescind the loan entirely and have it repaid in full. The Company claims that Black, Radler, Boultbee and Hollinger Inc. and its subsidiary made material misrepresentations to the Audit Committee in order to obtain its approval for the loan in July 2000 and, therefore, the Company is entitled to rescind the loan. The Company seeks repayment of the entire loan balance, properly calculated without regard to the unauthorized interest rate reduction. See Note 21(a).

     The Company’s collateral for the loan is subordinated to certain obligations of Hollinger Inc., which initiated a Court supervised restructuring under the Companies’ Creditors Arrangement Act (Canada) and a companion proceeding in the U.S. pursuant to Chapter 15 of the U.S. Bankruptcy Code in August 2007. The Company recorded a bad debt expense of $33.7 million related to this loan which is included in “Corporate expenses” on the Consolidated Statement of Operations at December 31, 2007. See Note 16.

     (d) On July 3, 2002, NP Holdings, a subsidiary of the Company, was sold to RMI for $3.8 million (Cdn.$5.8 million). The Company, through the Special Committee, has sued RMI and others for breach of fiduciary duty and fraud in connection with the transaction. See Note 21(a). Before the sale, NP Holdings had no significant assets or liabilities other than unutilized tax loss carryforwards. Prior management asserted that NP Holdings potentially had an obligation from a letter agreement executed by Hollinger Inc. purporting to obligate the Company to pay The National Post Company Cdn.$22.5 million in connection with the sale to CanWest of The National Post Company, which owned the Company’s remaining 50% interest in the National Post newspaper. Immediately prior to the sale, prior management caused the Company to contribute Cdn.$22.5 million as equity to NP Holdings and then borrow that amount from NP Holdings by way of a demand promissory note bearing interest at the three month bankers acceptance rate plus 4%. The note is payable by the Company’s subsidiary, HCPH Co., and was originally in favor of NP Holdings but was later assigned to RMI. Notwithstanding these transactions and absent consent from CanWest or The National Post Company to the assumption of the obligation by any party other than the Company, the Company was required to pay Cdn.$22.5 million plus interest on November 30, 2004 to satisfy a judgment obtained against the Company by The National Post Company for that amount. See Note 21(a). RMI brought a third party claim in the action commenced by CanWest and The National Post Company in the Ontario Superior Court of Justice (action number 03-CV-260727CMA1) against HCPH Co., a subsidiary of the Company, for indemnification from HCPH Co. in the event CanWest and The National Post Company were successful in their motion for partial summary judgment as against RMI in the main action (action number 03-CV-260727CM). CanWest’s motion against RMI was unsuccessful and CanWest’s claim against RMI was dismissed on consent of the parties. RMI’s third party action against HCPH Co. remains outstanding. The Company is seeking a discontinuance of the third party claim and an acknowledgment and release from RMI that HCPH Co. and the Company are not liable on the note. In addition, since the sale, the Company has learned that NP Holdings had greater loss carryforwards than the parties believed at the time of the sale. Therefore, the Company has requested that RMI pay a higher price in recognition of the greater value of NP Holdings, but the Company does not have a contractual right to receive any such additional amount.

     (e) The Company has recorded $47.8 million, $18.9 million and $23.4 million of expenses on behalf of current and former executive officers and directors of the Company during the years ended December 31, 2007, 2006 and 2005, respectively. The majority of these expenses relate to payments of fees for legal counsel representing former executive officers and directors of the Company in their dealings with the Special Committee, while conducting its investigations or with respect to criminal proceedings and litigation as described in Note 21(a). Payments of such fees were made pursuant to indemnification provisions of the Company’s Certificate of Incorporation and the Company’s by-laws. See Note 17.

     (f) Included in “Other assets” at December 31, 2006, is $3.4 million, owing to the Company from Bradford. Bradford is controlled by Black and Radler. Bradford granted a non-interest bearing note receivable to the Company in connection with a “non-competition” agreement entered into on the sale of certain operations to Bradford during 2000. This note was non-interest bearing, and accordingly, the Company established the amount receivable at the net present value at the time of the agreement. The remaining balance represented that net present value less any payments received. The note receivable was unsecured and due over the period to 2010. This loan was fully repaid in 2007 as part of a settlement with Radler, Horizon and Bradford announced by the Company on March 18, 2007. See Note 17.

     (g) Included in “Other current assets” at December 31, 2006, is $4.7 million owed by Horizon. Such amounts represent the balance outstanding on a loan receivable granted by the Company in connection with the sale of certain operations to Horizon during 1999. The loan receivable was unsecured and was scheduled to mature in 2007. This loan was fully repaid in 2007 as part of a settlement with Radler, Horizon and Bradford announced by the Company on March 18, 2007. See Note 17.

     (h) The Company entered into a consulting agreement with Atkinson under the terms of which Atkinson was engaged to assist the Chief Executive Officer (“CEO”) of the Company with respect to the Company’s ongoing relationship with CanWest and to perform such other functions and tasks as assigned by the CEO of the Company from time to time. During the term of the agreement, the Company agreed to pay Atkinson $30,000 per month for services rendered through February 28, 2005 and permit continued vesting during the term of the agreement of any unvested stock options previously granted to Atkinson by the Company that would have vested during such term but for Atkinson’s resignation from the Company on April 27, 2004. The Company also agreed to provide Atkinson with suitable office space and appropriate secretarial and administrative assistance at the Company’s expense and to reimburse him for reasonable travel and other expenses approved in advance by the Company during the term of the agreement.

     On February 23, 2005, the Company entered into a second consulting agreement with Atkinson effective from March 1, 2005 to September 30, 2005. The Company agreed to pay Atkinson an hourly rate of Cdn.$350.00 and reimburse him for reasonable travel and other expenses approved in advance by the Company. During the duration of this contract, the Company paid Atkinson $18,865.

     (i) During the year ended December 31, 2005, the Company paid $1.2 million in estimated tax payments on behalf of Atkinson. The funds were applied against amounts held under an escrow agreement related to the exercise of certain stock options.

     (j) On March 18, 2007, the Company announced settlements, negotiated and approved by the Special Committee, with former President and Chief Operating Officer, Radler, (including his wholly-owned company, North American Newspapers Ltd. f/k/a F.D. Radler Ltd.) and the publishing companies Horizon and Bradford, including certain notes receivable. See Note 17.

     (k) On August 1, 2007 the Company announced that it received notice from Hollinger Inc., the Company’s controlling stockholder, that certain corporate actions with respect to the Company had been taken by written consent adopted by Hollinger Inc. and its affiliate, 4322525 Canada Inc., which collectively hold a majority in voting interest in the Company. These corporate actions included (i) amending the Company’s By-Laws to increase the size of the Company’s Board of Directors from eight members to eleven members and to provide that vacancies occurring in the Board of Directors may be filled by stockholders having a majority in voting interest; (ii) removing John F. Bard, John M. O’Brien and Raymond S. Troubh as directors of the Company; and (iii) electing William E. Aziz, Brent D. Baird, Albrecht Bellstedt, Peter Dey, Edward C. Hannah and G. Wesley Voorheis as directors of the Company.

     (l) On November 28, 2007, the Receiver for Ravelston and on behalf of Ravelston, appeared for a sentencing hearing before a U.S. court in certain criminal proceedings. Counsel for the Receiver advised the court that the Receiver and the United States Attorneys’ Office had entered into an agreement in respect of the amount of restitution to be paid by Ravelston. In accordance with that agreement, the court ordered Ravelston to pay a fine of $7.0 million and restitution in the net amount of $6.0 million to the Company.

(23) Liquidity Considerations

     Cash and Cash Equivalents

     Cash and cash equivalents amounted to $142.5 million at December 31, 2007 as compared to $186.3 million at December 31, 2006, a decrease of $43.8 million. Cash and cash equivalents at December 31, 2007 exclude $48.2 million of Canadian CP that was initially purchased under the Company’s cash management program. However, because the Canadian CP was not redeemed at maturity in August 2007 due to the combination of a collapse in demand for Canadian CP and the refusal of the back-up lenders to fund the redemption due to their assertion that these events did not constitute events that would trigger a redemption obligation, the Company’s investments in Canadian CP have instead been recorded as investments and classified as non-current assets in the Consolidated Balance Sheet at December 31, 2007. See “Investments” below.

     Investments

     Investments include $36.0 million in Canadian CP, net of a $12.2 million write-down. The Canadian CP was issued by certain special purpose entities sponsored by non-bank entities.

     A largely Canadian investor committee has been formed and is leading efforts to restructure or identify other solutions to the Canadian CP problem. The liquidity needs of investors are a very important priority of the investor committee. A standstill period has been in place, which has been extended and is likely to continue to be extended until the restructuring process is complete. The Company anticipates the restructuring proposals will include the redemption of the asset backed commercial paper or call for its conversion to medium term notes, and a credit for accrued interest less a pro-rata share of restructuring costs. The ultimate outcome of this effort can not be predicted but it is possible the Company or the special purpose entities may be forced to liquidate assets into a distressed market for amounts less than current carrying value. See Note 5.

     Corporate Structure

     Sun-Times Media Group, Inc. is a holding company and its assets consist primarily of investments in its subsidiaries and affiliated companies. As a result, the Company’s ability to meet its future financial obligations is dependent upon the availability of cash flows from its subsidiaries through dividends, intercompany advances and other payments. Similarly, the Company’s ability to pay any future dividends on its common stock may be limited as a result of its dependence upon the distribution of earnings of its subsidiaries and affiliated companies. The Company’s subsidiaries and affiliated companies are under no obligation to pay dividends and may be subject to or become subject to statutory restrictions and restrictions in debt agreements that limit their ability to pay dividends or repatriate funds to the United States. The Company’s right to participate in the distribution of assets of any subsidiary or affiliated company upon its liquidation or reorganization, if such an event were to occur, would be subject to the prior claims of the creditors of such subsidiary or affiliated company, including trade creditors, except to the extent that the Company may itself be a creditor with recognized claims against such subsidiary or affiliated company.

Factors That Are Expected to Affect Liquidity in the Future

     Potential Cash Outlays Related to Accruals for Income Tax Contingent Liabilities

     The Company has the following income tax liabilities recorded in its Consolidated Balance Sheet:

	December 31, 2007
	(In thousands)
Income taxes payable	$	1,027
Deferred income tax liabilities		58,343
Other tax liabilities		597,206
	$	656,576

     The Company has recorded accruals to cover contingent liabilities related to additional taxes, interest and penalties it may be required to pay in various tax jurisdictions. Such accruals are included in “Other tax liabilities” listed above.

     Significant cash outflows are expected to occur in the future regarding the income tax contingent liabilities. Efforts to resolve or settle certain tax issues are ongoing and may place substantial demands on the Company’s cash, cash equivalents, investments and other resources to fund any such resolution or settlement. The timing and amounts of any payments the Company may be required to make are uncertain, but the Company does not anticipate that it will make any material cash payments to settle any of the disputed items during 2008. See Note 19.

     Potential Cash Outflows Related to Operations

     The Company’s cash flow is expected to continue to be cyclical, reflecting changes in economic conditions. The Company is dependent upon the Sun-Times News Group for operating cash flow. That cash flow in turn is dependent to a significant extent on the Sun-Times News Group’s ability to sell advertising in its Chicago area market. Advertising revenue for the Sun-Times News Group declined 12% during 2007 compared to 2006. Based on the Company’s assessment of market conditions in the Chicago area and the potential of these negative trends continuing, the Company has considered and may continue to consider a range of options to address the resulting significant shortfall in performance and cash flow and has suspended its dividend payments since the fourth quarter of 2006.

     The Company does not currently have a credit facility in place. The recent declines in revenue and operating performance in the Sun-Times News Group may have a detrimental impact on the amount of debt and/or terms available to the Company in bank and bond markets. Moreover, the operating performance of the Company continues to result in the use of cash to fund continuing operations.

     The Company is currently involved in several legal actions as both plaintiff and defendant and is funding significant amounts under indemnification agreements to certain former officers and directors. The actions are in various stages and it is not yet possible to determine their ultimate outcome. At this time, the Company cannot estimate the impact these actions and the related legal fees and indemnification obligations may have on its future cash requirements. However, such requirements may be significant and may exceed amounts that may be recovered through insurance claims or otherwise.

     Other

     The Company expects that its liquid assets at December 31, 2007 are sufficient to support its operations and meet its obligations into 2009. However, the Company is currently reviewing potential sources of additional liquidity, which may include the sale of certain assets.

(24) Quarterly Financial Data (Unaudited)

     Quarterly financial data for the years ended December 31, 2007 and 2006 are as follows:

	2007
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(In thousands, except per share data)
Total operating revenue(a)	$	91,717		$	94,744		$	92,539		$	93,258
Operating income (loss)	$	5,679		$	(80,639	)	$	(23,227	)	$	(42,034	)
Income (loss) from continuing operations	$	(4,823	)	$	527,980		$	(193,991	)	$	(59,135	)
Net income (loss)	$	(4,823	)	$	527,980		$	(192,392	)	$	(59,135	)
Earnings (loss) from continuing operations per basic share(a)	$	(0.06	)	$	6.57		$	(2.41	)	$	(0.73	)
Earnings (loss) from continuing operations per diluted share	$	(0.06	)	$	6.56		$	(2.41	)	$	(0.73	)
Net earnings (loss) per basic share(b)	$	(0.06	)	$	6.57		$	(2.39	)	$	(0.73	)
Net earnings (loss) per diluted share	$	(0.06	)	$	6.56		$	(2.39	)	$	(0.73	)

	2006
	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(In thousands, except per share data)
Total operating revenue(a)	$	102,794		$	107,788		$	99,485		$	110,312
Operating income (loss)	$	(24,270	)	$	(13,711	)	$	(22,418	)	$	21,449
Income (loss) from continuing operations	$	(26,593	)	$	20,121		$	(34,865	)	$	(36,293	)
Net income (loss)	$	(7,755	)	$	20,574		$	(34,865	)	$	(34,627	)
Earnings (loss) from continuing operations per basic and diluted share(a)	$	(0.29	)	$	0.23		$	(0.43	)	$	(0.45	)
Net earnings (loss) per basic and diluted share(b)	$	(0.09	)	$	0.24		$	(0.43	)	$	(0.43	)

(a)	Certain amounts previously netted against revenue in the first and second quarters of 2007 and in 2006 have been reclassified to expense to conform with the current year’s presentation.
(b)	Earnings (loss) per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings (loss) per share does not necessarily equal the total for the year.

Item 15.  Exhibits and Financial Statement Schedules

Exhibit
No.	Description of Exhibit
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	Certificate of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2	Certificate of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.

	SUN-TIMES MEDIA GROUP, INC. Registrant
	By:	/s/ Cyrus F. Freidheim, Jr.
		Cyrus F. Freidheim, Jr.
		President and Chief Executive Officer
Date: November 6, 2008
	By:	/s/ William G. Barker III
		William G. Barker III
		Senior Vice President and Chief Financial Officer

Date: November 6, 2008