Hollinger Inc.

Hollinger Inc.

March 22, 2005 19:23 ET

Hollinger Inc.: Status Update




MARCH 22, 2005 - 19:23 ET

Hollinger Inc.: Status Update

TORONTO, ONTARIO--(CCNMatthews - March 22, 2005) - Hollinger Inc.
("Hollinger") (TSX:HLG.C)(TSX:HLG.PR.B) provides the following update in
accordance with the guidelines pursuant to which the June 1, 2004
management and insider cease trade order was issued. These guidelines
contemplate that Hollinger will normally provide bi-weekly updates on
its affairs until such time as it is current with its filing obligations
under applicable Canadian securities laws. Reference should be made to
Status Update Reports and other press releases that have been previously
filed by Hollinger and which are available on SEDAR at www.sedar.com.

Recent Events

On March 11, 2005, the Honourable Blanche M. Manning, United States
District Court Judge in the Northern District of Illinois, issued a
Memorandum and Order in which she denied the Motions brought by
Hollinger and others to dismiss the Second Amended Complaint of
Hollinger International Inc. ("Hollinger International") for claims
totalling approximately US$425 million, plus interest. Judge Manning's
decision does not reflect the merits of the claims in the Second Amended
Complaint, which Hollinger and others continue to contest.

Hollinger International stated in a filing with the United States
Securities and Exchange Commission (the "SEC") made on March 17, 2005
that expenses related to its investigation of alleged wrongdoing at
Hollinger International and disputes with former executive officers
totalled US$58.5 million through December 31, 2004.

On March 18, 2005, Hollinger received a Notice of Hearing and Statement
of Allegations issued by the staff of the Ontario Securities Commission
(the "OSC") to commence an administrative proceeding against Hollinger
and others. The allegations in the Notice relate only to the period
between 1998 and 2002, except for those that relate to Hollinger's
inability to file financial statements. Even though most of the
allegations in the Notice occurred prior to the changes to the
management and board of Hollinger, the new directors of Hollinger do not
believe that Hollinger has committed any breach of Ontario securities
law. Hollinger also does not believe that it has acted contrary to the
public interest. Most importantly, because of the many changes and
improvements that have been put into place over the last year at
Hollinger, including implementing a comprehensive reform of corporate
governance practices, its new management and directors are highly
confident that there is little or no chance that Hollinger's conduct in
the future will be a cause for concern. Hollinger immediately filed a
Reply with the Secretary of the OSC disputing staff's allegations made
in the Notice of Hearing.

On March 21, 2005, the United States Attorney's Office for the Northern
District of Illinois (the "USAO") filed a motion to intervene in the
lawsuit by the SEC against Conrad Black, F. David Radler and Hollinger
pending in the United States District Court for the Northern District of
Illinois. In its filing, the USAO indicated that it "is conducting a
criminal investigation of Black, Radler, Hollinger Inc. (collectively,
"the SEC defendants") and others relating to their conduct as to
Hollinger International. The criminal investigation seeks to determine
whether the SEC defendants and others fraudulently diverted corporate
assets and opportunities owned by Hollinger International to themselves
and to companies they controlled".

Proposed Going Private Transaction

A special meeting (the "Meeting") of the holders of Hollinger's
retractable Common Shares and the Series II Preference Shares is to be
held at 10:00 a.m. at the TSX Broadcast and Conference Centre, The
Exchange Tower, 130 King Street West, Toronto, Ontario on Thursday,
March 31, 2005. On March 7, 2005, Hollinger's Board unanimously
determined to call the Meeting so that shareholders could consider a
proposed going private transaction by way of a consolidation (the "Going
Private Transaction") originally announced on October 28, 2004, on the
terms disclosed on March 7, 2005. A Notice of the Meeting and Management
Proxy Circular prepared in connection with Going Private Transaction
have been mailed to Hollinger's shareholders.

On March 21, 2005, a hearing was held by the OSC regarding the standing
of certain parties who seek to intervene in connection with applications
made by Hollinger and others to the OSC for variations to the management
and insider cease trade orders issued by the OSC relating to certain
directors, officers and insiders of Hollinger and Hollinger
International in order to permit the Going Private Transaction to
proceed. The OSC determined that the Independent Directors of Hollinger
and certain holders of Common Shares, being Lawrence & Company Inc. and
Kenneth McLaren, would be granted full party status whereas Hollinger
International and Catalyst Fund General Partner I Inc. would be
restricted to a limited role. A hearing before the OSC on the merits of
the applications is scheduled to take place on March 23 and 24, 2005.

Financial Statements

Hollinger and Hollinger International continue to pursue, on a without
prejudice basis, the conclusion of mutually acceptable arrangements to
permit the audit of Hollinger's 2003 annual financial statements to
begin as soon as possible.

As previously reported, Hollinger's 2003 annual financial statements
could not be completed and audited until Hollinger International's 2003
annual financial statements were completed. On January 18, 2005,
Hollinger International filed its 2003 Form 10-K with the SEC, which
included audited financial statements and related MD&A for the fiscal
year ended December 31, 2003 and restated audited financial results for
the fiscal years ended December 31, 1999, 2000, 2001 and 2002. Hollinger
International stated that the restated financial results were to correct
accounting errors in prior periods and to reflect reclassifications
arising from the adoption of a new audit standard. On January 21, 2005,
Hollinger International filed its audited financial statements (and
related MD&A) and its renewal Annual Information Form for the year ended
December 31, 2003 with the Canadian securities regulatory authorities.
The foregoing were necessary but not sufficient conditions to permit
Hollinger to complete and file its 2003 annual financial statements as
the completion and audit of such financial statements will require a
level of co-operation from Hollinger International, which is still in
negotiation, and Hollinger International's auditors.

Hollinger has released financial information in the form of an unaudited
consolidated balance sheet as at September 30, 2004, together with notes
thereto, prepared on an alternative basis, as described below (the
"Alternative Financial Information"). The Alternative Financial
Information, which may be found as part of Hollinger's press release
issued on March 4, 2004, was prepared by management of Hollinger and was
not audited or reviewed by Hollinger's auditors. The 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 Hollinger International, are not consolidated but
rather are carried as investments and are accounted for at their market
value. The Alternative Financial Information has been prepared in
accordance with Hollinger's traditional accounting policies with the
exception that it has been prepared as though Hollinger had always
accounted for its assets and liabilities at their market values.

In its news release of March 16, 2005, Hollinger International indicated
that it would not be able to file its interim financial statements for
the fiscal quarters ended March 31, June 30 and September 30, 2004 or
its 2004 Annual Report on Form 10-K (which would include its audited
financial statements and related MD&A for the fiscal year ended December
31, 2004) by March 31, 2005. Hollinger International stated that it is
working with its external auditors to conclude the work involved in the
filing of the outstanding financial statements as expeditiously as


Ernst & Young Inc. (the "Inspector") is continuing the inspection of
Hollinger's related party transactions pursuant to an Order of Justice
Colin L. Campbell of the Ontario Superior Court of Justice. The
Inspector has provided six interim Reports with respect to its
inspection of Hollinger. Hollinger and its staff continue to give their
full and unrestricted assistance to the Inspector in order that it may
carry out its duties, including access to all files and electronic data.
The Inspector is to present to the Court its priorities for the
inspection by the end of March.

To March 18, 2005, the cost to Hollinger of the inspection (including
the costs associated with the Inspector and its legal counsel and
Hollinger's legal counsel) is in excess of C$5.25 million.

Supplemental Financial Information

As of the close of business on March 18, 2005, Hollinger and its
subsidiaries (other than Hollinger International and its subsidiaries)
had approximately US$82.97 million of cash or cash equivalents,
including restricted cash, on hand and Hollinger owned, directly or
indirectly, 782,923 shares of Class A Common Stock and 14,990,000 shares
of Class B Common Stock of Hollinger International. Based on the March
18, 2005 closing price of the shares of Class A Common Stock of
Hollinger International on the New York Stock Exchange of US$11.30, the
market value of Hollinger's direct and indirect holdings in Hollinger
International was US$178,234,029. All of Hollinger's direct and indirect
interest in the shares of Class A Common Stock of Hollinger
International are being held in escrow in support of future retractions
of its Series II Preference Shares. All of Hollinger's direct and
indirect interest in the shares of Class B Common Stock of Hollinger
International are pledged as security in connection with Hollinger's
outstanding 11.875% Senior Secured Notes due 2011 (the "Senior Notes")
and 11.875% Second Priority Secured Notes due 2011 (the "Second Priority
Notes"). In addition to the cash or cash equivalents on hand noted
above, Hollinger has previously deposited: (a) C$2.0 million in trust
with the law firm of Aird & Berlis LLP, as trustee, in support of
Hollinger's indemnification obligations to certain current and former
independent directors; and (b) approximately US$5.5 million in cash with
the trustee under the indenture (the "Senior Indenture") governing the
Senior Notes as collateral in support of the Senior Notes (which cash
collateral is also collateral in support of the Second Priority Notes,
subject to being applied to satisfy future interest payment obligations
on the outstanding Senior Notes as permitted by amendments to the Senior
Indenture). Consequently, there is currently in excess of US$174.8
million aggregate collateral securing the US$78 million principal amount
of the Senior Notes and the US$15 million principal amount of the Second
Priority Notes outstanding.

Company Background

Hollinger's principal asset is its interest in Hollinger International
which is a newspaper publisher, the assets of which include the Chicago
Sun-Times, a large number of community newspapers in the Chicago area
and a portfolio of news media investments. Hollinger also owns a
portfolio of revenue-producing and other commercial real estate in
Canada, including its head office building located at 10 Toronto Street,
Toronto, Ontario.


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