November 3, 2005
Excerpt From Hollinger International year end 10-K report 2004 (pages 12 and 20)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Filed November 3, 2005
Washington , DC 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended December 31, 2004
Hollinger International Inc.
(Page 12)
Black's renunciation of his Canadian citizenship could negatively affect the Canadian Operations. Under the Canadian Income Tax Act (the ""ITA''), there are limits on the deductibility by advertisers ofthe cost of advertising in newspapers that are not considered Canadian-owned. The Canada Revenue Agency (""CRA'') may find that, as a consequence of Black's renunciation of his Canadian citizenship in June 2001, certain of the Company's Canadian newspapers are no longer considered to be Canadian-owned for purposes of the ITA. Although the Company believes that it has 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 CRA. Should any challenge be successful, advertisers might seek compensation from the Company for any advertising costs disallowed or otherwise seek a reduction of advertising rates for certain Canadian newspaper publications.
On October 27, 2005, a claim 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, the Minister of National Revenue for Canada , and others. The plaintiff alleges that one of the Company's magazines made certain misrepresentations to customers regarding the magazine'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.
Additionally, one or more of the Company's Canadian subsidiaries has received funding under a Canadian governmental program that is intended to benefit entities that are Canadian owned or controlled. The Canadian government could seek the return of approximately Cdn.$3.5 million as a result of Black's renunciation of his Canadian citizenship.
(Page 20)
Regulatory Matters . The publication, distribution and sale of newspapers and magazines in Canada is regarded as a ""cultural business'' under the Investment Canada Act and consequently, any acquisition of control of the Canadian Newspaper Group by a non-Canadian investor would be subject to the prior review and approval of the Minister of Industry of Canada.
Ownership. During 2001, HCPH Co. became the successor to the operations of XSTM Holdings (2000) Inc. Hollinger International Inc. indirectly owns a 100% interest in HCPH Co. and indirectly owns an 87% interest in Hollinger L.P. There are limits on the deductibility by advertisers of the cost of advertising in newspapers that are not considered Canadian-owned under the ITA. It is possible the CRA may find that, as a consequence of Black's renunciation of his Canadian citizenship in June 2001, certain of the Company's Canadian newspapers are no longer considered Canadian-owned for purposes of the ITA. Although the Company believes that it has 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 CRA. Should any challenge be successful, advertisers might seek compensation from the Company for any advertising costs disallowed or otherwise seek a reduction of advertising rates for certain Canadian newspaper publications. Additionally, one or more of the Company's Canadian subsidiaries has received funding under a Canadian governmental program that is intended to benefit entities that are Canadian owned or controlled. The Canadian government could seek the return of approximately Cdn.$3.5 million as a result of Black's renunciation of his Canadian citizenship.