ARGUS CORPORATION LIMITED

March 19, 2005 02:24 ET

Argus Corporation Limited: Status Update Report


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: ARGUS CORPORATION LIMITED

TSX SYMBOL: AR.PR.A
TSX SYMBOL: AR.PR.D
TSX SYMBOL: AR.PR.B

MARCH 19, 2005 - 02:24 ET

Argus Corporation Limited: Status Update Report

TORONTO, ONTARIO--(CCNMatthews - March 19, 2005) - Argus Corporation
Limited ("Argus") (TSX:AR.PR.A)(TSX:AR.PR.D)(TSX:AR.PR.B) today provided
a status update of developments since its last Status Update Report was
filed on March 4, 2005.

Argus provides updates on its affairs on at least a bi-weekly basis
(each a "Report"), normally every second Friday. These Reports are to
continue until Argus is able to meet its public filing obligations. They
are made in accordance with certain guidelines of the Ontario Securities
Commission (the "OSC").

Argus MCTO

A Management and Insider Cease Trade Order ("MCTO") was issued by the
OSC with respect to the management and insiders of Argus on June 3, 2004
(the "Order"). The Reports that have been filed since then, including
certain alternative financial reporting, are available to review at
www.sedar.com.

The Order was varied by a Variation Order issued by the OSC on March 8,
2005 whereby certain additional persons who became directors of Argus or
Hollinger Inc. ("Hollinger") since the Order was issued were added as
respondents to the MCTO.

The Order was originally issued as Argus did not file its financial
statements and related information when required, dating back to those
required for the First Quarter of 2004. Argus was unable to prepare and
file this information as it is required to consolidate its financial
statements with those of Hollinger which were not available.

Hollinger in turn was unable to prepare and file its financial
statements as the financial statements of Hollinger International Inc.
("International") were not available.

MCTOs of Hollinger and International.

Hollinger and International are each also subject to a MCTO that was
issued on June 1, 2004 for the failure to file financial statements and
related reports when required. As Argus' Order has been varied, the
MCTOs of Hollinger and International were similarly varied by Variation
Orders issued by the OSC on March 8, 2005 to add persons who had become
directors and officers since the MCTOs were issued and certain
additional corporate respondents.

Argus' Interest in Hollinger and International

Argus owns or controls 61.8% of the Retractable Common Shares (the
"Common Shares") of Hollinger. Hollinger in turn owns 66.8% of the
voting shares and 17.4% of the equity of International.

As the Common Shares of Hollinger held by Argus are its only significant
asset, developments of Hollinger and International are material to
Argus. Accordingly, certain financial information and an update as to
the preparation and filing of financial statements and other related
matters by Argus and its subsidiary Hollinger and, in turn,
International is included in this Report.

Proposed Privatization of Hollinger

Shareholders Meeting

A special meeting of the holders of the Retractable Common shares (the
"Common Shares") and the Series II Preference Shares (the "Series II
Shares") is to be held at 10:00 a.m. at the TSX Broadcast and Conference
Centre, The Exchange Tower, 130 King Street West on Thursday, March 31,
2005 (the "Meeting").

The Meeting is to consider a proposed going private transaction by way
of a consolidation (the "Proposed Transaction"). The Proposed
Transaction involving Hollinger had been announced on October 28, 2004.

Hollinger's Board of Directors unanimously determined on March 8, 2005
to call the Meeting and announced the Meeting that day.

Notice of the Meeting and a Management Proxy Circular in connection with
the Proposed Transaction was sent out to Hollinger's shareholders by
March 10, 2005 (the "Management Proxy Circular").

Proposed Transaction

The Proposed Transaction is structured as a share consolidation and
retirement of Hollinger shares held by parties other than Argus and The
Ravelston Corporation Limited ("Ravelston") directly and indirectly.

Ravelston initially agreed to support the proposed privatization on the
basis that (i) holders of Common Shares (other than Ravelston and
certain of its affiliated entities including Argus) would receive Cdn.
$7.25 in cash for each Common Share held by them, and (ii) holders of
Series II Preference Shares of Hollinger (each a "Series II Share")
would receive 0.46 of a share of Class A Common Stock of International
for each Series II Share held by them.

On March 7, 2005, Hollinger announced that Ravelston would revise its
support the Proposed Transaction by increasing the payment to holders of
the Common Shares (other than Ravelston and certain of its affiliated
entities) to an aggregate of (i) Cdn. $7.60 and (ii) an additional
amount as described below, if any, per Common Share, in cash for each
Common Share held by them, and (iii) a contingent cash payment right (a
"CCPR") that would entitle them to participate in their proportionate
interest in the economic benefit of certain potential claims and
litigation.

The additional amount to be paid for each Common Share is to be based on
a second valuation of the Common Shares by an independent valuator
following the public release by International of its 2004 audited
financial statements.

GMP Securities Ltd ("GMP") had been retained by the Independent
Privatization Committee of Hollinger to provide a formal valuation of
the outstanding Common Shares.

The GMP Valuation estimated the fair market value of the outstanding
Common Shares was in the range of Cdn. $7.21 to Cdn. $7.57 per Common
Share at March 1, 2005 (the "Initial Valuation Range") and that the
value of the outstanding Series II Shares is equivalent to 0.46 of a
share of Class A Common Stock of International.

On the fair value range for the Common Shares being updated by the
Second Valuation, each holder of Common Shares (other than Ravelston and
certain of its affiliated entities including Argus) will receive,
subject to applicable laws, an addition amount per Common Share equal to
the amount, if any, by which the mid-point of the updated valuation
range exceeds Cdn. $7.39 which is the midpoint of the Initial Valuation
Range.

Holders of Series II Shares are to continue to receive 0.46 of a share
of Class A Common Stock of International for each Series II Share held
by them.

The full terms of the Proposed Transaction are set out in the Management
Proxy Circular that is set out at www.hollinger.com (Sedar Information)
or at www.sedar.com

March 7, 2005 Motion

The independent directors of Hollinger and Hollinger brought a Motion
seeking advice and directions whether in all circumstances the Proposed
Transaction should be put to a vote of minority public shareholders of
Hollinger before the Report of Ernst & Young Inc. (the "Inspector") is
made available from its inspection of Hollinger's related party
transactions (the "Inspection").

The Motion was heard before the Honourable Justice Colin L. Campbell of
the Superior Court of Ontario (the "Court") on Monday, March 7, 2005.
The Ontario Securities Commission and three shareholders of Hollinger,
including Argus, Lawrence and Company, Inc. and Kenneth McLaren made
submissions before the Court.

Justice Campbell ruled that, in the circumstances, it was not
appropriate for the Court to make an Order at that stage

OSC Hearings

The OSC issued a Notice of Hearing on March 11, 2005 for a Hearing on
March 21, 2005 in relation to an application. The OSC issued a Revised
Notice of Hearing on March 15, 2005 for a Hearing on March 21, 23 and
24, 2005 in relation to two Applications dated March 15, 2005 brought by
Hollinger and other applicants including Argus, Ravelston, Lord Conrad
M. Black and others (the Applications").

The Applications have been brought for orders of the OSC to vary the
MCTO of each of International and Hollinger to provide certain direct or
indirect trades of shares of International of Hollinger and acts in
furtherance of such trades by persons named as respondents to the MCTOs
of International and Hollinger.

The relief sought in the Applications includes a transfer of registered
title to certain Common Shares by one Argus subsidiary to another Argus
subsidiary to ensure that any one Argus subsidiary does not hold fewer
than 5,766,783 Common Shares so that Argus, and indirectly Ravelston,
will not receive any consideration as a consequence of the consolidation
of that number of Common Shares to one post-consolidation common share
of Hollinger.

Hollinger and Ravelston filed written submissions in support of the
Applications on March 17, 2005 (the "Submissions").

Applications for standing to intervene (each an "Application for
Standing") were publicly filed on March 18, 2005 by International and
the independent Directors of Hollinger and by three holders of shares of
Hollinger including Catalyst Fund General Partner I Inc., a holder of
Series II Shares, and Lawrence and Company, Inc. and Kenneth McLaren,
holders of Common Shares.

The Hearing is to be held in the Main Hearing Room of the OSC's offices,
located on the 17th floor, 20 Queen Street West, Toronto.

Copies of an OSC News Release, the Notices of Hearing, Applications and
Submissions and the Application for Standing of the independent
Directors of Hollinger may be viewed online at www.osc.gov.on.ca.

Position of Argus

On November 12, 2004, Argus established a committee of its independent
Directors (the "Independent Committee") to review the Proposed
Transaction when information became available and make recommendations
to the Board of Directors of Argus (the "Argus Board").

The Independent Committee has been reviewing the Proposed Transaction
and is expected to present its Report and recommendations on Monday,
March 21, 2005. The Argus Board will then consider the recommendations
and the position that it will take with respect to the Proposed
Transaction.

On completion of the Proposed Transaction, Argus would hold a greater
percentage of the post-consolidation common shares of Hollinger. As all
of the post-consolidation common shares would be owned directly and
indirectly by Ravelston and Argus, Hollinger would no longer meet the
listing requirements of the Toronto Stock Exchange with respect to those
shares.

OSC Enforcement Proceedings

On March 18, 2005, the OSC issued a Notice of Hearing and related
Statement of Allegations against Hollinger, Lord Black, Mr. F. David
Radler, Mr. John A. Boultbee and Mr. Peter Y. Atkinson.

Lord Black, Mr. Radler and Mr. Boultbee are former directors and
officers of Hollinger and International. They are directors, and
respectively the Chairman of the Board and Chief Executive Officer,
President and Executive Vice-President, of Argus and of Ravelston,
Argus' parent company. Mr. Boultbee is also the Chief Financial Officer
of Ravelston.

The first appearance in this matter is to set a date for the Hearing and
will be held at 9:00 a.m. on Wednesday, May 18, 2005 in the small
hearing room of the OSC on the 17th Floor at 20 Queen Street West,
Toronto.

A copy of the Notice of Hearing and Statement of Allegations is
available on the OSC's website at www.osc.gov.on.ca.

Current Status of Financial Reporting

Hollinger's Current Financial Reporting (GAAP)

Hollinger has been unable to file its financial statements prepared in
accordance with generally accepted accounting principles ("GAAP") as at
and for the year ended December 31, 2003 and the first three Quarters of
2004 and its related Management's Discussion and Analysis ("MD&A") for
each period as a result of a series of difficulties it has experienced.

These difficulties include Hollinger's loss of control of Hollinger in
or about November, 2003 and continued insufficient co-operation by
International and its auditors. GAAP requires the consolidation of
Hollinger's operations with those of International to the date of
Hollinger's loss of control of International. Hollinger has not yet been
able to arrange for International's cooperation to facilitate such
consolidation.

Hollinger's Alternative Financial Reporting

On March 4, 2005, Hollinger released financial information in the form
of an unaudited consolidated balance sheet as at September 30, 2004,
together with notes, prepared on an alternative basis (the "Hollinger
Alternative Financial Information").

The Hollinger Alternative Financial Information may be reviewed online
at www.sedar.com.

The Hollinger Alternative Financial Information includes the accounts of
Hollinger and those wholly-owned subsidiaries which carry out head
office functions and which do not represent investments.

Investments in other companies and subsidiaries such as International
are not consolidated but rather are carried as investments and are
accounted for at their market value.

The Hollinger Alternative Financial Information is not audited or
reviewed by the auditor of Hollinger. It was prepared by management of
Hollinger.

International's Current Financial Reporting

On March 16, 2005, International stated that it would not be able to
file with the U.S. Securities and Exchange Commission (the "SEC") its
2004 Annual Report on Form 10-K, including its audited financial
statements for 2004, or its Quarterly Reports on Form 10-Q for the first
three Quarters of 2004, including its financial results for those
Quarters, by March 31, 2005.

International advised that it is working with its external auditors to
conclude the work involved in the filing of the 10-Qs and 10-K for 2004
as expeditiously as possible though it did not set a possible filing
date or dates.

International had earlier stated on January 18, 2005 that it expected to
file its three 10-Q Reports for 2004 within a two-month period. It had
further indicated that the filing of its 2004 Annual Report on 10-K
could be delayed beyond March 31, 2005 due to the work involved in the
auditing process. I

International filed its audited financial statements for the fiscal year
ended December 31, 2003 with a Form 10-K with the SEC on January 18,
2005 and with Canadian securities regulatory authorities on January 21,
2005 with an Annual Information Form. Those filings included restated
results for the years ended December 31, 1999, 2000, 2001 and 2002.

Argus' Current Financial Reporting (GAAP)

Argus filed its 2003 audited financial statements in compliance with
GAAP. Statements prepared on a market valuation basis as Argus had
historically provided were acceptable.

However, Argus has been unable to prepare financial statements in
compliance with GAAP for each of the first three Quarters of 2004 and
will be unable to prepare audited financial statements for the year
ended December 31, 2004 when they are due at the end of March, 2005 due
to a change in GAAP.

The change requires that Argus consolidate its financial statements with
those of Hollinger for fiscal periods beginning after January 1, 2004.
As Hollinger has not prepared its financial statements for each of the
first three Quarters of 2004, Argus has been unable to provide the
required consolidated statements

Argus' Alternative Financial Reporting

Without Hollinger financial statements on which to prepare consolidated
statements, Argus has been providing its Reports pursuant to the Order.
Argus has additionally filed financial statements for the first three
Quarters of 2004 that were presented as alternative financial
information.

These statements were appended to its Reports dated August 19 and
November 12, 2004 and may be reviewed online at www.sedar.com. The last
such alternative financial information that Argus publicly provided was
for the Third Quarter of 2004 and was presented on a market valuation
basis.

Future Financial Reporting

Each of International, Hollinger and Argus need to prepare and file
their financial statements as required by GAAP and related MD&As in
order to normalize its financial reporting and to have its respective
Management and Insider Cease Trade Order lifted.

Hollinger's Future Financial Reporting

Hollinger and International continue to negotiate with respect to
arrangements that would permit Hollinger to complete and file its
financial statements for the year ended December 31, 2003 and the first
three Quarters of 2004.

Argus' Future Financial Reporting

Argus will be unable to prepare financial statements consolidated with
those of Hollinger and bring its financial reporting up to date until
Hollinger has prepared its financial statements. Argus is however unable
to determine when it may complete its financial statements consolidated
with those of Hollinger.

Argus' intention is to prepare consolidated financial statements with
those of Hollinger as soon as practicable after Hollinger files its
statements.

Argus is planning to prepare and file alternative financial information
for the fiscal year ended December 31, 2004 at the end of March, 2005.

Argus expects that it will need to continue to file alternative
financial information for current and upcoming financial periods in 2005
that do not consolidate Hollinger.

Financial Position of Argus

Cash

Argus had Cdn. $131,516 of cash as of the close of business on March 18,
2005.

Shareholdings

Argus indirectly owns 21,596,387 Common Shares of Hollinger with a
market value at the close of trading on March 18, 2005 on the Toronto
Stock Exchange of Cdn. $7.31 per share or an aggregate of Cdn.
$157,869,589.

The market value of Argus' shareholdings is subject to the minority
interest of Ravelston, the parent of Argus. The amount of that minority
interest was last stated at September 30, 2004 to be Cdn. $20,585,670.
At that date, the value of Argus' investment in Common Shares of
Hollinger was Cdn. $86,385,548.

The market value of Argus' shareholdings is also subject to future
income taxes on unrealized net capital gains. That amount was stated to
be Cdn. $14,793,176 at September 30, 2004.

Ravelston holds all of the Common Shares and Class C Preference Shares
of Argus and 2,900 of Argus' 55,893 issued Class A Preference Shares
$2.60 Series.

Debt

Argus is indebted to Ravelston in the amount of Cdn. $251,703 in respect
of a loan provided by Ravelston on January 31, 2005 to permit Argus to
pay dividends on its Class A and Class B Preference Shares. The loan
bears no interest and is due to be repaid on February 28, 2006.

Dividends

Argus presently requires additional funds to be able to pay the next
dividends that are due to be paid on its Class A and Class B Preference
Shares when they are due to be paid on May 1, 2005 and future dividends
on an uninterrupted basis.

Argus intends to make efforts to ensure that it will be able to pay its
next scheduled regular quarterly dividends which are currently estimated
to be Cdn. $251,703.

Hollinger's Financial Position

Cash

Hollinger announced on March 8, 2005 that it and its subsidiaries
(excluding International and its subsidiaries) had approximately US
$86.42 million of cash or cash equivalents at the close of business on
March 4, 2005.

Certain of these funds are subject to an escrow arrangement with the SEC.

Hollinger also had at that date approximately US $5.5 million of cash
that was deposited as collateral for its Senior Notes and Second
Priority Notes borrowings. It is entitled to apply this amount towards
future interest payments on certain these borrowings as it applied US
$5,021,250 of that cash to pay interest on its US $78 million of Senior
Notes when it became due on March 1, 2005.

Shareholdings

Hollinger announced on March 8, 2005 that it continued to directly or
indirectly hold 782,923 shares of Class A Common Stock and 14,990,000
shares of Class B Common Stock of International as of March 4, 2005.

Based on the closing price of the Class A Common Stock of International
on the New York Stock Exchange (the "NYSE") at the close of business on
March 18, 2005 of US $11.30 and the number of shares of Class A Common
Stock and Class B Common Stock of International owned by Hollinger at
March 4, 2005, the market value of Hollinger's direct and indirect
holdings in International is US $178,234,030.

Security Given

All of Hollinger's interest in the shares of Class A Common Stock of
International is being held in escrow with a licensed trust company in
support of future retractions of its Series II Shares.

All of Hollinger's interest in the shares of Class B Common Stock of
International is pledged as security in connection with US $78 million
of Senior Secured Notes and US $15 million of Second Priority Notes
issued by it.

Current Excess of Collateral to Certain Security

On March 8, 2005, Hollinger advised that, on the basis of the closing
price of the Class A Common Stock of International on the NYSE on March
4, 2005 of US $11.50 per share and its cash position at March 4, 2005,
it then had in excess of US $177.8 million aggregate collateral securing
the US $78 million principal amount of the Senior Secured Notes and the
US $15 million principal amount of the Second Priority Notes that were
outstanding.

Inspection of Hollinger

The Inspector is to present to the Court its priorities for the
Inspection by the end of March.

Hollinger announced on March 8, 2005 that its costs of the Inspection
(including those of the Inspector and legal counsel for the Inspector
and Hollinger) was then in excess of Cdn. $5.25 million.

As Argus owns approximately 61.8 percent of the Common Shares of
Hollinger, it is a related party for purposes of the Inspection. Argus
has cooperated with the Inspector in connection with the Inspection and
has provided access to its documents and records to the Inspector.

Litigation Developments

Illinois

On March 11, 2005, The Honourable Blanche M. Manning, United States
District Judge in the Northern District of Illinois, issued a Memorandum
and Order in which she denied all of the Motions brought by the
defendants to dismiss International's Second Amended Complaint for
claims totalling approximately US $425 million plus interest.

The defendants to the Complaint include Hollinger, Ravelston, Lord
Black, Mr. Radler, Mr. Boultbee and other former directors and officers
of International (the "Defendants").

Ravelston noted in a News Release issued on March 14, 2005 that Judge
Manning's decision does not reflect on the merits of the claims in
Second Amended Complaint which the Defendants are continuing to
vigorously contest.

With the dismissal of the Motions to Dismiss, the Answers of the
Defendants would be due on or before March 28, 2005. However, on March
17, 2005, the Defendants filed an agreed Motion requesting an extension
until April 25, 2005 by when the Answers of the Defendants would be due.
International has consented to that Motion which is to be heard on March
22, 2005.

Ontario

Hollinger has filed a Statement of Claim dated February 23, 2005 and
commenced an Application dated March 4, 2005 against American Home
Assurance Company ("American Home") and Chubb Insurance Company of
Canada ("Chubb") with respect to certain of its claims pursuant to an
executive and organization liability insurance policy.

A Hearing was held before Justice Campbell on March 14, 2005 with
respect to Hollinger's insurance claims.

In addition to claims for specified amounts, Inc. is seeking an
injunction restraining American Home and Chubb from entering into a
settlement agreement for the settlement of any claims without an Order
of the Court.

Inc. has been informed that American Home and Chubb are negotiating a
settlement agreement whereby a derivative complaint on behalf of
International that was filed in the State of Delaware would be settled
in such a way that the American Home and Chubb policy limits in the
amount of US $50 million would be paid to the defendants who were the
former independent directors of International.

At the Hearing on March 14, 2005, Justice Campbell ordered American Home
and Chubb to advise of the status of the Delaware action and the
settlement and for them and Hollinger to prepare a list of issues for
the Court's disposition. The parties are to return for a further Hearing
on March 29, 2005. American Home and Chubb undertook to Justice Campbell
that no formal approval would be sought from a Delaware court for
approval before that Hearing.

Other International Developments

International stated on March 17, 2005 that expenses related to its
investigation of alleged wrongdoing at International and disputes with
former executive officers totalled US $58.5 million through December 31,
2004, an increase of US $12.2 million in the Fourth Quarter of 2004.

For additional information on developments respecting International,
reference can be made to its online public filings at either
www.hollingerinternational.com or http://www.sec.gov/edgar.shtml.

Other Hollinger Developments

For additional information on developments respecting Hollinger,
including a more-detailed review of the terms of the proposed share
consolidation and privatization, reference can be made to its public
filings online at www.hollingerinc.com, www.hollinger.com or
www.sedar.com.

There has been no other material change from the information contained
in the Status Update Report of Argus issued on March 4, 2005.

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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Argus Corporation Limited
    Monique L. Delorme
    Chief Financial Officer
    416-363-8721
    or
    Argus Corporation Limited
    Peter G. White
    Executive Vice-President and Secretary
    416-363-8721