<PAGE>
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                       FOR ANNUAL AND TRANSITIONAL REPORTS
                    PURSUANT TO SECTIONS 13 AND 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

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

                 |X| FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

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

                 | | FOR THE TRANSITION PERIOD FROM         TO

                        COMMISSION FILE NUMBER: 333-46957

                         LIBERTY GROUP PUBLISHING, INC.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                        36-4197635
   (State or Other jurisdiction of                         (I.R.S. Employer
   Incorporation or organization)                        Identification No.)

     3000 DUNDEE ROAD, SUITE 203
        NORTHBROOK, ILLINOIS                                    60062
   (Address of principal offices)                             (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (847) 272-2244

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

                                   ----------

      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 (or for such shorter period that the
registrant was required to file such reports and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No | |

      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. |X|

      The number of shares outstanding of the registrant's common stock, par
value $.01 per share, as of March 30, 2002 was 2,158,833, all of which is owned
by affiliates of the registrant. There is no public market for the common stock.

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<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>               <C>
PART I
Item 1.           Business
Item 2.           Properties
Item 3.           Legal Proceedings
Item 4.           Submission of Matters to a Vote of Security Holders

PART II
Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters
Item 6.           Selected Financial Data
Item 7.           Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.          Quantitative and Qualitative Disclosures about Market Risk
Item 8.           Financial Statements and Supplementary Data
Item 9.           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III
Item 10.          Directors and Executive Officers of the Registrant
Item 11.          Executive Compensation
Item 12.          Security Ownership of Certain Beneficial Owners and Management
Item 13.          Certain Relationships and Related Transactions

PART IV
Item 14.          Exhibits, Financial Statement Schedule and Reports on Form 8-K

                  (a)  Consolidated Financial Statements, Financial Statement Schedule and Exhibits
</TABLE>

<PAGE>

                                     PART I

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains certain "forward-looking statements" (as defined in
Section 21E of the Securities Exchange Act of 1934) that reflect the Company's
expectations regarding its future growth, results of operations, performance and
business prospects and opportunities. Words such as "anticipates," "believes,"
"plans," "expects," "estimates" and similar expressions have been used to
identify these forward-looking statements, but are not the exclusive means of
identifying these statements. These statements reflect the Company's current
beliefs and expectations and are based on information currently available to the
Company. Accordingly, these statements are subject to known and unknown risks,
uncertainties and other factors that could cause the Company's actual growth,
results, performance and business prospects and opportunities to differ from
those expressed in, or implied by, these statements. As a result, no assurance
can be given that the future results covered by such forward-looking statements
will be achieved. These risks, uncertainties and other factors include: (i) the
Company's ability to serve and retain existing customers as well as its ability
to attract and retain new advertising and subscription customers; (ii) the
Company's ability to continue its acquisition strategy; (iii) the Company's
ability to adjust to changes in technology, customer preferences, enhanced
competition and new competitors in its community markets; (iv) the Company's
ability to collect receivables; and (v) general economic and business conditions
which may reduce demand for advertising and the Company's ability to attract and
retain key employees. For purposes of this Annual Report, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. The Company is not obligated to update or revise
these forward-looking statements to reflect new events or circumstances.

ITEM 1. BUSINESS

OVERVIEW

Liberty Group Publishing, Inc. ("LGP" or "Registrant") is a Delaware corporation
formed on January 27, 1998 for purposes of acquiring a portion of the daily and
weekly newspapers owned by American Publishing Company or its subsidiaries
("APC"), a wholly-owned subsidiary of Hollinger International Inc.
("Hollinger"). LGP is a holding company for its wholly-owned subsidiary, Liberty
Group Operating, Inc. ("Operating Company", "LGO", or "Registrant's
Subsidiary"). The consolidated financial statements include the accounts of LGP
and Operating Company and its consolidated subsidiaries (the "Company").

The Company is a leading U.S. publisher of local newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. At December 31, 2001, the Company owned and operated 339
publications in 17 states. The Company's 2001 total revenues were derived from
advertising (75%), circulation (18%) and job print and other (7%). The majority
of the Company's paid daily newspapers have been published for more than 100
years and are typically the only paid daily newspapers of general circulation in
their respective markets. The Company's newspapers generally face limited
competition as a result of operating in markets that are distantly located from
large metropolitan areas and that can support only one primary newspaper. The
Company has increased revenues primarily by acquiring new publications and
saturating existing markets and has increased profitability by aggressively
pursuing cost reduction opportunities.

The Company's newspapers are comprised of 66 paid daily newspapers and 165 paid
non-daily newspapers. In addition, the Company publishes 108 free circulation
and "total market coverage" ("TMC") publications with limited or no news or
editorial content. TMC publications are distributed free of charge and generally
provide 100% penetration in their areas of distribution. The Company believes
that its paid newspapers, together with its free circulation and TMC
publications, are an effective medium for advertisers to reach substantially all
of the households in the markets served by the Company. The Company's
publications focus on local content, including coverage of local youth, high
school and college sports, as well as local business, politics, entertainment
and cultural news. Each of the Company's publications is tailored to its market
in order to provide local content that radio, television and large metropolitan
newspapers are unable to provide on a cost-effective


                                       2
<PAGE>

basis because of their broader geographic coverage. The local newspapers also
differentiate themselves from other forms of media by providing a cost-effective
medium for local advertisers to target their customers.

The Company maintains its principal executive offices at 3000 Dundee Road, Suite
203, Northbrook, Illinois 60062, and its telephone number is (847) 272-2244.

INITIAL ACQUISITION

On January 27, 1998, the Company acquired from APC virtually all of the assets
that were used primarily in the business of publishing, marketing and
distributing APC's local newspapers (the "Initial Acquisition").

The Initial Acquisition, including the payment of related fees and expenses, was
financed from: (i) proceeds of $180.0 million from the issuance and sale of
LGO's 9.375% Senior Subordinated Notes due February 1, 2008 (the "Notes"); (ii)
proceeds of $50.5 million from the issuance and sale of LGP's 11.625% Senior
Discount Debentures due February 1, 2009 (the "Debentures"); (iii) proceeds of
$45.0 million from the issuance and sale of LGP's 14.75% Senior Redeemable
Exchangeable Cumulative Preferred Stock, liquidation preference $25 per share
(the "Senior Preferred Stock"); (iv) proceeds of $49.0 million from the issuance
and sale of LGP's Series B 10% Junior Redeemable Cumulative Preferred Stock
("Junior Preferred Stock"); and (v) proceeds of $8.0 million from the issuance
and sale of shares of LGP's common stock, par value $0.01 per share (the "Common
Stock").

The Company has accounted for the Initial Acquisition using the purchase method
of accounting. Accordingly, the costs of the Initial Acquisition have been
allocated to the assets acquired and liabilities assumed based upon their
respective fair values using independent valuations. The fair values of certain
identifiable intangible assets acquired are being amortized over periods ranging
from 5 to 40 years. Through the end of 2001, any goodwill allocated to the
Initial Acquisition was amortized over 40 years. Beginning in 2002, and for
subsequent years, the Company will discontinue this goodwill amortization in
accordance with Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets" (see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Critical Accounting
Policy Disclosure").

Prior to the Initial Acquisition, the Company operated as a business unit of APC
("the Predecessor") and as such did not file separate tax returns. The income
tax provision included in the Predecessor's financial data, included in Item 6.
"Selected Financial Data", was computed as if the Predecessor were a separate
company. Since the Initial Acquisition, the Company has been and anticipates
that it will be, for the foreseeable future, in a tax loss position. Given the
uncertainty as to the timing of the Company's ability to utilize such losses to
offset future taxable income, the Company does not presently anticipate
recording any tax benefit associated with its pre-tax losses. In addition, due
to the acquisition of the Company's assets from APC, the Company's asset values
and capital structure are materially different than those set forth in the
Predecessor's financial data for periods preceding the Initial Acquisition and,
accordingly, historical interest expense is not indicative of the interest
expense that the Company has incurred or will continue to incur.

OVERVIEW OF OPERATIONS

The Company's operations consist of 339 local newspapers and publications
strategically positioned in markets in 17 states. The Company's publications are
comprised of 66 paid daily and 165 paid non-daily newspapers. In addition, the
Company publishes 108 free circulation publications with limited or no news or
editorial content.

The following is a summary of the publications owned by the Company as of
December 31, 2001, separated by state, region and the name and type of
publication (as abbreviated below):

         (D=DAILY, W=WEEKLY, S=SHOPPER, T=TOTAL MARKET COVERAGE, F=FREE,
                     A=ANNUAL, BI-A=BI-ANNUAL, MAG=MAGAZINE)


                                       3
<PAGE>

ARIZONA
     GLOBE
       ARIZONA SILVER BELT (W)
       GILA COUNTY ADVANTAGE (S)
       MOCCASIN (W)

ARKANSAS
     HEBER SPRINGS
       THE SUN TIMES (W)
     HELENA
       THE DAILY WORLD (D)
       DAILY WORLD TMC (T)
       RICE WORLD (W)
     NEWPORT
       NEWPORT INDEPENDENT (D)
       NEWPORT DAILY INDEPENDENT TMC (T)
     STUTTGART
       STUTTGART DAILY LEADER (D)
       THE STUTTGART DAILY TMC (T)

CALIFORNIA
     GRIDLEY
       THE GRIDLEY HERALD (W)
       THE GRIDLEY SHOPPING NEWS (S)
     MOUNT SHASTA
       DUNSMUIR NEWS (W)
       MOUNT SHASTA HERALD (W)
       SUPERSAVER ADVERTISER (S)
       VOICE OF THE MOUNTAIN (T)
       WEED PRESS (W)
     TAFT
       DAILY MIDWAY DRILLER (D)
       THE WESTSIDE SHOPPING NEWS (T)
     YREKA
       SISKIYOU DAILY NEWS (D)
       SISKIYOU DAILY NEWS "EXTRA" (T)

IDAHO
     BURLEY
       SOUTH IDAHO PRESS (D)
       THE NEWS REVIEW (S)
       THE ADVERTISER (S)
     HAILEY
       WOOD RIVER JOURNAL (W)
       YOUR HOME MAGAZINE (M)
       WOOD RIVER JOURNAL DINING (BI-A)
       EXPLORER (A)


                                       4
<PAGE>

     JEROME
       NORTH SIDE NEWS (W)
       THE GOODING COUNTY LEADER (W)
       LINCOLN COUNTY JOURNAL (W)
     MINODOKA
       MINIDOKA COUNTY NEWS (W)

ILLINOIS
     ALEDO
       TIMES RECORD (W)
       TOWN CRIER (S)
       THE RIDGE (S)
     BENTON
       BENTON EVENING NEWS (D)
       THE BENTON STANDARD (W)
     CANTON
       DAILY LEDGER (D)
       SPOON RIVER ADVERTISER (S)
       FULTON COUNTY SHOPPER (S)
     CARMI
       THE CARMI TIMES (D)
       THE WEEKLY TIMES (W)
       WHITE COUNTY SHOPPER NEWS (S)
     CHESTER
       CHESTER HERALD TRIBUNE (W)
     CHRISTOPHER
       CHRISTOPHER PROGRESS (W)
     DUQUOIN
       DUQUOIN EVENING CALL (D)
       THE ASHLEY NEWS (W)
       DUQUOIN NEWS (W)
     DWIGHT
       DWIGHT STAR & HERALD (W)
       THE REGISTER (S)
       GARDNER CHRONICLE (W)
       COURIER PRESS (HERSCHER) (W)
     FAIRBURY
       THE BLADE (W)
     FLORA
       CCAP SPECIAL (T)
       DAILY ADVOCATE PRESS (D)
     GALATIA
       MONEY STRETCHER (S)
     GALESBURG
       PENNYSAVER PRESS (S)
     GENESEO
       HENRY COUNTY ADVERTIZER (S)
       THE GENESEO REPUBLIC (W)
       CAMBRIDGE GAZETTE (W)


                                       5
<PAGE>

       ORION GAZETTE (W)
       THE SHOPPER (S)
     HARRISBURG
       ELDORADO DAILY JOURNAL (D)
       HARRISBURG DAILY REGISTER (D)
     HERRIN
       THE SPOKESMAN (W)
       THE SPOKESMAN SUNDAY (T)
     KEWANEE
       STAR COURIER (D)
       ATKINSON-ANNAWAN NEWS (W)
       STAR EXTRA (T)
     MACOMB
       MACOMB JOURNAL (D)
       JOURNAL EXTRA (T)
       MCDONOUGH COUNTY SHOPPER (S)
     MARION
       MARION DAILY REPUBLICAN (D)
       MARION DAILY EXTRA (T)
     MONMOUTH
       DAILY REVIEW ATLAS (D)
       OQUAWKA CURRENT (W)
       PENNYSAVER (S)
     MURPHYSBORO
       MURPHYSBORO AMERICAN (W)
       AMERICAN MONDAY (T)
     NEWTON
       NEWTON PRESS-MENTOR (W)
     NORRIS CITY
       NORRIS CITY BANNER (W)
     OLNEY
       JASPER COUNTY NEWS EAGLE, ADVANTAGE (T)
       THE OLNEY DAILY MAIL (D)
       THE WEEKLY MAIL (W)
     PEKIN
       PEKIN DAILY TIMES (D)
       TIMES REVIEW (T)
     PONTIAC
       DAILY LEADER (D)
       HOME TIMES (W)
       LIVINGSTON SHOPPING NEWS (S)
     SHAWNEETOWN
       GALLATIN DEMOCRAT (W)
       RIDGWAY NEWS (W)
     SPRINGFIELD
       SPRINGFIELD SHOPPER (S)
     SUBURBAN CHICAGO NEWSPAPERS
       BERWYN/STICKNEY/ FOREST VIEW LIFE (W)
       CICERO LIFE (W)


                                       6
<PAGE>

       BROOKFIELD/LYONS SUBURBAN LIFE (W)
       COUNTRYSIDE/HODGKINS/INDIAN HEAD PARK/BROOKFIELS SUBURBAN LIFE (W)
       HILLSIDE/BROADVIEW/BERKELEY PRESS (W)
       LAGRANGE/LAGRANGE PARK SUBURBAN LIFE (W)
       NORTH RIVERSIDE/RIVERSIDE SUBURBAN LIFE (W)
       WESTCHESTER SUBURBAN LIFE (W)
       WESTERN SPRINGS SUBURBAN LIFE (W)
       WESTCHESTER NEWS (W)
       LAGRANGE PRESS(W)
       ADDISON PRESS (W)
       BENSENVILLE/WOODDALE PRESS (W)
       ELMHURST PRESS (W)
       LOMBARD SPECTATOR (W)
       OAKBROOK TERRACE/VILLA PARK PRESS (W)
       ELMHURST SUBURBAN LIFE (W)
       LOMBARD SUBURBAN LIFE (W)
       VILLA PARK SUBURBAN LIFE (W)
       BURR RIDGE/WILLOWBROOK SUBURBAN LIFE (W)
       CLARENDON HILLS SUBURBAN LIFE (W)
       DARIEN SUBURBAN LIFE (W)
       DOWNERS GROVE REPORTER (W)
       HINSDALE/OAK BROOK SUBURBAN LIFE (W)
       WESTMONT SUBURBANLIFE (W)
       LISLE/NAPERVILLE REPORTER (W)
       WOODRIDGE PROGRESS (W)
       LEMONT REPORTER/METROPOLITAN (W)
       BOLINGBROOK/ROMEOVILLE REPORTER/METROPOLITAN (W)
       BURR RIDGE PROCESS (W)
       CLARENDON HILLS PROGRESS (W)
       DARIEN PROGRESS (W)
       HINSDALE PROGRESS (W)
       WESTMONT PROGRESS (W)
       WILLOWBROOK PROGRESS (W)
       DOWNERS GROVE PROGRESS (W)
       GLEN ELLYN NEWS (W)
       WHEATON LEADER (W)
       WARRENVILLE POST (W)
       WEST CHICAGO PRESS (W)
       WINFIELD PRESS (W)
       BARTLETT/HANOVER PARK/STREAMWOOD PRESS (W)
       BLOOMINGDALE PRESS (W)
       CAROL STREAM/GLENDALE HEIGHTS PRESS (W)
       ITASCA/ROSELLE PRESS (W)
       BATAVIA REPUBLICAN (W)
       ELBURN REPUBLICAN (W)
       GENEVA REPUBLICAN (W)
       NORTH AURORA REPUBLICAN (W)
       ST. CHARLES/WAYNE REPUBLICAN (W)
       SUGAR GROVE REPUBLICAN (W)


                                       7
<PAGE>

       HUNTLEY FARMSIDE PRESS (W)
       MARENGO/UNION PRESS (W)
       LIFE'S EXTRA (MAG)
       LIFE CAREER MOVES (MAG)
       HOMETOWN (MAG)
       PRIME TIMES (MAG)
       SELECT HOMES (MAG)
      TEUTOPOLIS
       TEUTOPOLIS PRESS (W)
      WEST FRANKFORT
       DAILY AMERICAN (D)
       TRADER (W)
       FRANKLIN PRESS (T)

IOWA
     CHARLES CITY
       CHARLES CITY PRESS (D)
       THE EXTRA (T)
       SIX COUNTY SHOPPER (T)
     CRESCO
       TIMES-PLAIN DEALER (W)
       THE EXTRA (S)
     ELDORA
       ELDORA HERALD-LEDGER (W)
       HARDIN COUNTY INDEX (S)
     NEW HAMPTON
       NEW HAMPTON TRIBUNE (W)
       THE ADVERTISER (S)
     OTTUMWA
       OTTUMWA COURIER (D)
       WAPELLO COUNTY SHOPPER (S)
       FOREVER YOUNG (MAG)
       AREA VISITORS GUIDE (MAG)
       NEIGHBORS (MAG)
       HOMES (MAG)

KANSAS
     ANDOVER
       ANDOVER SHOPPER (S)
     AUGUSTA
       AUGUSTA DAILY GAZETTE (D)
       AUGUSTA ADVERTISER (T)
     DERBY
       DAILY REPORTER (D)
       THE RECORD JOURNAL (W)
       THE WEEKLY SHOPPER (S)
     EL DORADO
       THE EL DORADO TIMES (D)
       EL DORADO TIMES WEEKLY (T)


                                       8
<PAGE>

       SHOPPERS GUIDE (S)
     KANSAS CITY
       KANSAS CITY KANSAN (D)
       KANSAS CITY KANSAN "SUNDAY" (W)
       WYNADOTT COUNTY SHOPPER (S)
    LEAVENWORTH
       THE LEAVENWORTH TIMES (D)
       THE LEAVENWORTH TIMES SUNDAY (W)
       RIVER BEND JOURNAL (T)
       CHRONICLE SHOPPER (S)
       LANSING CHRONICLE (S)
       SOUTH COUNTY CHRONICLE (S)
       THE LEAVENWORTH LAMP (W)
     MCPHERSON
       MCPHERSON SENTINEL (D)
       THE SENTINEL AD-VISER (T)
       MAC SHOPPER (S)
     PRATT
       THE PRATT TRIBUNE (D)
       BARBER COUNTY INDEX (W)
       ST. JOHNS NEWS (W)
       KIOWA COUNTY SIGNAL (W)
       SUNFLOWER SHOPPER TMC (T)
     SHAWNEETOWN
       JOURNAL-HERALD (W)
     WELLINGTON
       DAILY NEWS (D)

LOUISIANA
     BASTROP
       THE BASTROP DAILY ENTERPRISE (D)
       THE EXTRA (T)
     DERIDDER
       BEAUREGARD DAILY NEWS (D)
     DONALDSONVILLE
       THE DONALDSONVILLE CHIEF (W)
       THE CAJUN GAZETTE (W)
     GONZALES
       ASCENSION CITIZEN (W)
       NICKEL ADS (S)
       THE MARKETEER (T)
     IOWA
       IOWA NEWS (W)
     LEESVILLE
       LEESVILLE DAILY LEADER (D)
     MOSS BLUFF
       MOSS BLUFF NEWS (W)
     PLAQUEMINE
       POST SOUTH (W)


                                       9
<PAGE>

       WEST BANK SHOPPER (S)
     SULPHUR
       SOUTHWEST DAILY NEWS (D)
       GUARDIAN (S)
     VINTON
       VINTON NEWS (W)
     WESTLAKE
       WESTLAKE NEWS (W)

MICHIGAN
     ADRIAN
       THE DAILY TELEGRAM (D)
       ADRIAN MEDLEY (T)
       ADRIAN ACCESS SHOPPER (S)
     BRONSON
       BRONSON JOURNAL (W)
     CHEBOYGAN
       CHEBOYGAN DAILY TRIBUNE (D)
       SHOPPERS FAIR (S)
     COLDWATER
       THE DAILY REPORTER (D)
       THE REPORTER EXTRA (T)
       COLDWATER SHOPPERS GUIDE (S)
     COLON
       COLON EXPRESS (W)
     IONIA
       SENTINEL-STANDARD (D)
       SENTINEL STANDARD TMC (T)
     JONESVILLE
       JONESVILLE INDEPENDENT (W)
     SAULT STE. MARIE
       THE EVENING NEWS (D)
       TRI COUNTY BUYERS GUIDE (T)
    STURGIS
       STURGIS JOURNAL (D)
       THE WEEKENDER (T)
       STURGIS GATEWAY SHOPPER (S)
    UNION CITY
       UNION CITY REGISTER-TRIBUNE (W)
    VICKSBURG
       THE VICKSBURG COMMERCIAL EXPRESS (W)
       THE VICKSBURG BROADCAST (S)

MINNESOTA
     COTTONWOOD
       TRI-COUNTY NEWS (W)
     CROOKSTON
       CROOKSTON DAILY TIMES (D)
       CROOKSTON VALLEY SHOPPER (S)


                                       10
<PAGE>

     GRANITE FALLS
       GRANITE FALLS/CLARKFIELD ADVOCATE-
         TRIBUNE (W)
     HALSTAD
       THE HALSTAD SHOPPER (S)
     MONTEVIDEO
       MONTEVIDEO AMERICAN NEWS (W)
       THE STAR ADVISOR (S)
     REDWOOD FALLS
       REDWOOD FALLS GAZETTE (W)
       REDWOOD FALLS LIVEWIRE (S)
     ST. JAMES
       ST. JAMES PLAIN DEALER (W)
       TOWN AND COUNTRY SHOPPER (S)
     SLEEPY EYE
       SLEEPY EYE HERALD DISPATCH (W)
       THE SLEEPY EYE REMINDER (S)
     WABASSO
       THE WABASSO STANDARD (W)

MISSOURI
     ALBANY
       GENTRY COUNTY SHOPPER (S)
     BOONVILLE
       BOONVILLE DAILY NEWS (D)
       THE RECORD (T)
     BROOKFIELD
       DAILY NEWS BULLETIN (D)
       DAILY NEWS BULLETIN EXTRA (T)
     CAMDENTON
       LAKE SUN LEADER (D)
       PENNYSAVER (T)
     CARTHAGE
       THE CARTHAGE PRESS (D)
       THE CARTHAGE PRESS SCOPE (T)
     CHILLICOTHE
       C.T. EXTRA (S)
       CONSTITUTION TRIBUNE (D)
     GREENFIELD
       LAKE STOCKTON SHOPPER (S)
       MILLER PRESS (W)
       THE VEDETTE (W)
     JOPLIN
       BIG NICKEL (S)
       COUPON CLIPPER (T)
     KIRKSVILLE
       KIRKSVILLE CRIER (S)
       KIRKSVILLE DAILY EXPRESS & NEWS (D)
     LAKE OZARKS


                                       11
<PAGE>

       LAKE AREA NEWS FOCUS (S)
       TUBE TAB (S)
       LAKE OF THE OZARKS BOATS (S)
       LAKE OF THE OZARKS REAL ESTATE (S)
     MACON
       CHRONICLE HERALD (D)
       MACON JOURNAL (T)
     MARCELINE
       MARCELINE PRESS (W)
       SHO-ME SHOPPER (T)
     MARYVILLE
       MARYVILLE DAILY FORUM (D)
       WEEKLY BARGAIN SHOPPER (S)
       PENNY PRESS 2 (S)
     MEXICO
       THE MEXICO LEDGER (D)
       THE MEXICO LEDGER TMC (T)
     MOBERLY
       MOBERLY MONITOR INDEX (D)
     NEOSHO
       NEOSHO DAILY NEWS (D)
       NEOSHO DAILY NEWS "ETC." (T)
       NEOSHO DAILY NEWS "SUNDAY" (W)
       NEOSHO POST (W)
     OSAGE BEACH
       VACATION NEWS (F)
     ROLLA
       ROLLA DAILY NEWS (D)
       ROLLA DAILY NEWS "PLUS" (T)
     SAINT JAMES
       ADVERTISER (T)
       ST. JAMES LEADER JOURNAL (W)
     WAYNESVILLE
       THE DAILY GUIDE (D)
       DAILY GUIDE EXTRA (T)
       FORT WOOD CONSTITUTION (F)

NEVADA
     ELKO
       ELKO DAILY FREE PRESS (D)
       THE FREE PRESS EXTRA (T)

NEW YORK
     BATH
       STEUBEN COURIER ADVOCATE (F)
     CANISTEO
       HORNELL CANSITEO PENN-E-SAVER (S)
     DANSVILLE
       GENESEE COUNTY EXPRESS (W)


                                       12
<PAGE>

       GENESEEWAY SHOPPER (S)
       DANSVILLE-WAYLAND PENNYSAVER (S)
     FT. PLAIN
       MOHAWK VALLEY PENNYSAVER (S)
     HERKIMER
       THE EVENING TELEGRAM (D)
       IMAGES (F)
     HORNELL
       EVENING TRIBUNE (D)
       THE SPECTATOR (SUNDAY) (W)
       THE TRIBUNE EXTRA (T)
     HORSEHEADS
       THE SHOPPER (S)
     LIBERTY
       CATSKILL SHOPPER (S)
     LITTLE FALLS
       THE EVENING TIMES (D)
     OSWEGO
       THE PALLADIUM TIMES (D)
       COMMUNITY PREVIEW TMC (T)
     PAINTED POST
       CORNING-ELMIRA PENNYSAVER (S)
     PENN YAN
       CHRONICLE AD-VISER (S)
       THE CHRONICLE-EXPRESS (W)
     SAUGERTIES
       MOUNTAIN PENNYSAVER (F)
       SAUGERTIES PENNYSAVER (S)
       SAUGERTIES POST STAR (W)
     SYRACUSE
       THE BUSINESS RECORD (W)
     WELLSVILLE
       ALLEGANY CO. PENNYSAVER (S)
       WELLSVILLE DAILY REPORTER (D)
       WELLSVILLE DAILY TMC (T)

NORTH DAKOTA
     DEVILS LAKE
       DEVILS LAKE DAILY JOURNAL (D)
       THE COUNTY PEDDLER (W)

PENNSYLVANIA
     CARBONDALE
       THE CARBONDALE NEWS (W)
     HONESDALE
       THE INDEPENDENT EXTRA (T)
       THE WAYNE INDEPENDENT (D)
     MILTON
       LEWISBURG DAILY JOURNAL (D)


                                       13
<PAGE>

       MILTON DAILY STANDARD (D)
       THE STANDARD-JOURNAL (T)
     MOSCOW/HAMLIN
       THE VILLAGER (W)
     SAYRE
       THE EVENING TIMES (D)
       THE TIMES EXTRA (T)
     WAYNESBORO
       THE RECORD HERALD (D)

WEST VIRGINIA
     KEYSER
       MINERAL DAILY NEWS TRIBUNE (D)
       NEWS TRIBUNE & MOUNTAIN
         ECHO (W)
       TODAY'S SHOPPER (S)

WISCONSIN
     CLINTONVILLE
        CLINTONVILLE TRIBUNE-GAZETTE (W)

INDUSTRY

Newspaper publishing is the oldest and largest segment of the media industry.
Due to their focus on local news, newspapers remain the dominant medium for
local advertising. Newspapers continue to be the best medium for retail
advertising, which emphasizes the price of goods, in contrast to television,
which is generally used for image advertising.

Readers of daily and Sunday newspapers tend to be more highly educated and have
higher incomes than non-newspaper readers. Management believes that newspapers
continue to be the most cost-effective means for advertisers to reach this
highly targeted demographic group.

Advertising revenues are the largest component of a newspaper's revenues
followed by circulation revenues. Advertising rates at each newspaper are based
upon market size, circulation, readership, demographic makeup of the market and
the availability of alternative advertising media in the marketplace. While
circulation revenue is not as significant as advertising revenue, circulation
trends can impact the decisions of advertisers and advertising rates.

Newspaper advertising revenues are cyclical and are generally affected by
changes in national and regional economic conditions. Classified advertising,
which generally makes up approximately 40% of U.S. newspaper advertising
revenues as a whole, is the most sensitive to economic improvements or slowdowns
as it is primarily affected by the demand for employment, real estate
transactions and automotive sales.

OPERATING STRATEGY

The Company's strategy is to increase revenues and cash flows through: (i) local
news and other content leadership; (ii) revenue enhancement; (iii) strategic
technological investments; (iv) geographic clustering; (v) high quality
editorial content; and (vi) presentation; circulation growth; and cost control,
as described below:

Local News and Other Content Leadership. The Company's newspapers generally have
the largest local news gathering resources in their markets. As a result of
emphasizing local content, including youth sports, community events, business,
politics,


                                       14
<PAGE>
and entertainment, the Company's newspapers generate reader loyalty and create
franchise value. Because the Company's vision of local news is typically a
unique product in its markets, its newspapers differentiate themselves from
other forms of media and satisfy the demands of both its readers and
advertisers.

Revenue Enhancement. The Company aggressively capitalizes on the good name and
reputation it has built in each of its local communities to reach out to
non-traditional newspaper customers through the development of special sections,
community oriented events, Internet activities and other successful marketing
ideas that are constantly shared by and among the Company's newspapers.

Strategic Technological Investments. The Company has committed to develop and
maintain Internet websites for all of its daily newspapers and certain of its
weekly papers. The websites provide an Internet editorial presence and full
Internet classified services for the Company's newspapers and should allow the
Company to take advantage of the increasing use of the Internet and the
potential advertising opportunities. Although the Company believes that
providing an Internet product is an important part of broadening the presence of
its newspapers in their respective communities and ultimately increasing the
Company's revenues through such value added services, the Company believes that
most of its customers prefer the newspaper in printed form. Management believes
that by being the leading provider of local news and other content in most of
its markets, its newspapers are well positioned to maintain their leadership
position among local advertisers, whether in print or electronic form.

Geographic Clustering. The Company has acquired and assembled newspapers, and
may continue to acquire newspapers, in contiguous markets ("Clustering").
Clustering enables the Company to realize operating efficiencies and economic
synergies, such as the sharing of management, accounting and production
functions. In addition, the Company seeks to increase operating cash flows at
acquired newspapers through cost reductions, including labor and web width
reductions, as well as overall improved cost management. Clustering also enables
management to maximize revenues through the cross selling of advertising among
contiguous newspaper markets. As a result of Clustering, management believes
that the Company's newspapers are able to obtain higher operating margins than
they would otherwise be able to achieve on a stand-alone basis.

High Quality Editorial Content and Presentation. The Company's newspapers are
committed to editorial excellence, providing the proper mix of local and
national news to effectively serve the needs of their local markets. The
Company's newspapers often receive awards for excellence in various areas in
their respective regions and categories. In addition, the Company's newspapers
are designed to attract readers through attractive layouts and color
enhancements. Geographic clustering allows for better quality personnel and
equipment than smaller markets might otherwise attract, resulting in a
significant increase in newspaper quality.

Circulation Growth. The Company believes that circulation growth is important to
the creation of long-term franchise value at its newspapers. Accordingly, the
Company has and will continue to invest in telemarketing and promotional
campaigns where appropriate to increase circulation and readership.

Cost Control. Each of the Company's newspapers emphasizes cost control with a
particular focus on managing staffing requirements. In addition, the Company
further controls labor costs through investments in state-of-the-art production
equipment that improves production efficiencies. Management is equally focused
on newsprint cost control.

The Company takes advantage of group discounts for its major operating and
capital costs including newsprint, ink, supplies, computers, software and
printing equipment.

Management believes that successful implementation of the operating strategy
described above should position the Company to continue to optimize its
operating cash flow. The Company may also continue to seek strategic newspaper
acquisitions that would contribute to the Company's overall growth strategy,
whether through revenue growth and/or cost reduction opportunities that meet the
Company's acquisition criteria.


                                       15
<PAGE>

ADVERTISING, CIRCULATION AND PRINTING REVENUES

Advertising revenues include Display (local and national department stores,
specialty shops and other retailers), National (national advertising accounts)
and Classified advertising (employment, automotive, real estate and personals).
Management believes that classified and national advertising revenues are more
volatile than display advertising revenues. Classified and national advertising
for the Company represents a smaller portion of its revenues than other
newspapers in the industry. As a result, management believes its advertising
revenue stream is more predictable than other newspaper companies. The
contribution of Display, National, Classified, Circulation, and Job Printing &
Other revenues to total revenues for fiscal years 2000 and 2001 were as follows:

<TABLE>
<CAPTION>

                                                        YEARS ENDED DECEMBER 31,
                                                         2000            2001
                                                         ----            ----
<S>                                                     <C>              <C>
Display ......................................            56%             57%
National .....................................             3%              3%
Classified ...................................            18%             15%
Circulation ..................................            17%             18%
Job Printing & Other .........................             6%              7%
                                                         ---             ---
                                                         100%            100%
</TABLE>

Newsprint. Newsprint represents one of the largest costs of producing a
newspaper. The Company's newspapers buy newsprint from a number of suppliers,
resulting in an adequate supply of newsprint at market prices. The Company
incurred newsprint expense with respect to the Company's internal publications
of approximately $12.2 million in 2000 and $13.8 million in 2001. Newsprint
expense as a percentage of advertising and circulation revenue for 2000 and 2001
was 6.7% and 7.4%, respectively. Newsprint expense as a percentage of revenue
increased in 2001 due to higher newsprint prices and lower revenues during the
year.

Employee Relations. The Company employs approximately 2,100 full-time employees
and approximately 1,400 part-time employees. Less than 4% of its employees
belong to labor unions. There has never been a strike or work stoppage against
any of the Company's newspapers during the Company's ownership and the Company
considers its relations with its employees to be good.

Seasonality. Newspaper companies tend to follow a distinct and recurring
seasonal pattern, with high advertising revenues in months containing
significant events or holidays. Accordingly, due to fewer holidays and more
inclement weather compared to other quarters, the Company's first fiscal quarter
is historically the Company's weakest revenue quarter of the year.

Competition. Each of the Company's newspapers competes to varying degrees for
advertising and circulation revenue with magazines, radio, television and cable
television, as well as with some weekly publications and other advertising
media, including electronic media. Competition for newspaper advertising is
largely based upon circulation, price and the content of the newspaper. The
Company's newspapers are the dominant source for local news and other content,
with strong name recognition in their market and minimal direct competition from
similar daily newspapers published in their markets. However, as with most
suburban and smaller daily newspapers, some circulation competition exists from
larger daily newspapers which are usually published in nearby metropolitan
areas. Management believes larger daily newspapers with circulation in the
Company's newspaper markets generally do not compete in any meaningful way for
local advertising revenues, a newspaper's main source of revenues. The Company's
daily newspapers generally capture the largest share of local advertising as a
result of their direct coverage of the market. In addition, management believes
advertisers generally regard newspaper advertising as the most effective method
of advertising promotions and pricing as compared to television, which is
generally used to advertise image. The Company may from time to time compete
with other companies which have greater financial resources than the Company.


                                       16
<PAGE>

Electronic Media. Many newspaper companies are now publishing news and other
content on the Internet. In addition, there are several companies which have
developed sites on the Internet which are, by design, advertising and/or
subscription supported. Many of these sites target specific types of advertising
such as employment and automotive classified.

The Company believes it has the most effective means of gathering and
distributing its local news and other content. All of the Company's daily
publications and certain of the weekly publications have their own web sites,
currently numbering 77 in all.

The Company's web sites have a consistent format providing a selection of local
and other news along with classified advertising, features and details of local
events and activities.

The Company has been able to expand the reach of its classified reader ads by
placing the ads on line as well as in the newspapers.

The Company believes that its ability to self-promote its websites in its
printed newspapers as Internet portals for the community and its focus on local
content limits the competitive threat to its core newspaper business from new
media businesses. Additionally, the Company considers its local display
advertising revenues to be less threatened by new media than larger metropolitan
newspaper classified advertising which lends itself more to sifting and
searching. Classified advertising represents a lower proportion of the Company's
revenues than is the case for larger market publications representing 20% of the
Company's advertising revenues in 2001 compared with 40% for the U.S newspaper
industry as a whole.

ITEM 2. PROPERTIES

The Company's executive offices are located in an office park in Northbrook,
Illinois, where the Company leases approximately 4,879 square feet under a lease
terminating in 2004. The Company also maintains locations and offices at
numerous locations throughout the United States for its publications and
printing operations. The Company does not believe any individual property is
material to the Company's consolidated financial position or results of
operations.

ITEM 3. LEGAL PROCEEDINGS

The Company is involved from time to time in a number of legal proceedings which
have arisen in the ordinary course of business. In the opinion of management,
the outcome of these legal proceedings will not have a material adverse impact
on the Company's financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                       17
<PAGE>
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION AND HOLDERS

There is no public market for the Company's Common Stock. As set forth in Item
12, Security Ownership of Certain Beneficial Owners and Management, 1,964,605
shares (91% of the total shares outstanding) are owned by Green Equity Investors
II, L.P. ("Green II" or "GEI II") and Green Equity Investors III, L.P. ("Green
III" or "GEI III"). The remaining shares of the Common Stock are owned by
certain officers and other management personnel of the Company.

DIVIDENDS

The Company did not pay any dividends on its Common Stock in 2000 or 2001, is
subject to certain covenants that limit its ability to pay dividends and make
other restricted payments and does not expect to pay cash dividends in the
foreseeable future (see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. -- Liquidity and Capital
Resources").

RECENT SALES OF UNREGISTERED SECURITIES

On April 18, 2000, the Company raised approximately $7.4 million in cash, net of
issuance costs, from the issuance of 524,605 shares of common stock at $15 per
share and approximately $20.6 million in cash, net of issuance costs, from the
issuance of 22,131 shares of its Junior Preferred Stock to Green III at $1,000
per share.

On August 11, 2000, Operating Company, Kenneth L. Serota (the "Executive"), LGP,
Green II and Green III entered into an Amendment to Employment Agreement, dated
as of such date (the "Employment Agreement Amendment"), pursuant to which the
Employment Agreement, dated as of November 21, 1997, between the Registrant's
Subsidiary, the Executive and the Company was amended. Pursuant to the
Employment Agreement Amendment, the Company issued and sold to the Executive
4,372 shares of Common Stock of the Registrant and 184.42 shares of Series B 10%
Junior Redeemable Cumulative Preferred Stock of the Registrant (collectively,
the "Loan Equity") for an aggregate purchase price of $250,000 in the form of
notes. In addition, the Company issued and sold to the Executive 23,174 shares
of Common Stock (collectively, the "Additional Equity") for a purchase price per
share of $15.00 for an aggregate purchase price of $347,610 in the form of
notes.

On December 15, 2000, the Company issued and sold to management 28,626 shares of
Common Stock for an aggregate purchase price of $429,389. The purchase price was
paid through the issuance of notes.

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth selected historical financial data of the
Company. The data presented below should be read in conjunction with the
consolidated financial statements, including the notes thereto, and with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Annual Report.

The combined historical financial information of the newspapers acquired from
APC prior to the Initial Acquisition on January 1, 1998 is referred to as
"Predecessor" while the consolidated financial information of the newspapers
subsequent to the date of the Initial Acquisition is referred to as "Successor."


                                       18
<PAGE>
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                          --------------------------------------------------------------------------------
                                            1997             1998               1999               2000            2001
                                          --------         ---------          ---------          ---------       ---------
                                       (PREDECESSOR)      (SUCCESSOR)        (SUCCESSOR)        (SUCCESSOR)     (SUCCESSOR)
                                                                           (IN THOUSANDS)
<S>                                    <C>                <C>              <C>                  <C>             <C>
STATEMENT OF
OPERATIONS DATA:
Revenues:
   Advertising ....................       $ 69,602         $  82,062          $ 121,430          $ 150,247       $ 152,382
   Circulation ....................         21,451            22,844             27,543             32,318          35,347
   Job printing and other .........          7,666             7,625             12,382             12,119          14,251
                                          --------         ---------          ---------          ---------       ---------
Total revenues ....................         98,719           112,531            161,355            194,684         201,980
Operating costs ...................         39,309            45,976             68,351             83,843          89,885
Selling, general and administrative         29,171            32,329             45,631             54,979          57,837
                                          --------         ---------          ---------          ---------       ---------
Newspaper EBITDA ..................         30,240(2)         34,226(2)          47,373(2)          55,862(2)       54,258(2)
Corporate expenses ................             --             3,736(1)           5,668(1)           8,548(1)        9,130(1)
Non cash compensation .............             --               238                223                163             109
                                          --------         ---------          ---------          ---------       ---------
EBITDA ............................         30,240            30,252             41,482             47,151          45,019
Depreciation and amortization .....          7,470            11,917             16,657             19,864          21,997
                                          --------         ---------          ---------          ---------       ---------
Income from operations ............         22,769            18,335             24,825             27,287          23,022
Interest expense and amortization .
   of debt issuance costs .........         10,551            25,234             32,313             40,229          40,710
Net gain on exchange
   and disposition of properties ..             --                --              6,196                 --              --
                                          --------         ---------          ---------          ---------       ---------
Income (loss) before income
   taxes, and extraordinary item ..         12,218            (6,899)            (1,291)           (12,942)        (17,688)
Income taxes ......................          5,271                --                295                491           2,004
                                          --------         ---------          ---------          ---------       ---------
Income (loss) before
   extraordinary item .............          6,949            (6,899)            (1,586)           (13,433)        (19,692)
Extraordinary gain on
   insurance proceeds .............             --                --                485                 --              --
                                          --------         ---------          ---------          ---------       ---------
Net income (loss) .................       $  6,949         $  (6,899)         $  (1,101)         $ (13,433)      $ (19,692)
                                          --------         ---------          ---------          ---------       ---------
Dividends on preferred stock ......             --           (11,152)           (13,595)           (17,018)        (19,989)
                                                           ---------          ---------          ---------       ---------
Net loss available to
   common stockholders ............       $  6,949          $(18,051)         $ (14,696)         $ (30,451)      $ (39,681)
                                          ========         =========          =========          =========       =========
</TABLE>

(1)   Corporate expenses consist of costs to maintain the corporate office
      including salaries, bonuses, and management fees (see Item 11,
      Compensation of Directors and Management Fees) as well as group insurance
      expenses in excess of costs allocated to operating units.

(2)   Newspaper EBITDA includes income from operations adjusted to exclude
      depreciation and amortization expense, corporate expenses, and non-cash
      compensation.

<TABLE>
<CAPTION>
                                                                       AS OF DECEMBER 31,
                                      ----------------------------------------------------------------------------------
                                          1997             1998              1999             2000              2001
                                      -------------     -----------       -----------      -----------       -----------
                                      (PREDECESSOR)     (SUCCESSOR)       (SUCCESSOR)      (SUCCESSOR)       (SUCCESSOR)

                                                                         (IN THOUSANDS)
<S>                                   <C>               <C>               <C>              <C>               <C>
BALANCE SHEET DATA:
Cash and cash equivalents ........      $  1,452        $   1,025         $   1,860         $   1,036         $   1,474
Total assets .....................       109,700          410,068           479,160           563,501           542,537
Total debt .......................            --          283,936           344,231           402,746           402,689
Senior Preferred Stock ...........            --           51,460            59,481            68,752            79,467
Junior Preferred Stock ...........            --           53,692            59,266            89,328            98,601
Stockholders' equity (deficit)....        99,139          (10,392)          (25,087)          (48,026)          (87,661)
</TABLE>


                                       19
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion should be read in conjunction with the historical
financial statements of the Company, including the notes thereto. The discussion
and analysis below includes certain "forward-looking statements" (as such terms
are defined in Section 21E of the Securities Exchange Act of 1934) pertaining
to, among other things, competition in the Company's markets, availability of
adequate acquisition opportunities, price and availability of newsprint,
significant use of leverage, general economic conditions, and environmental
matters. These statements are based on the beliefs, assumptions made by, and
information currently available to, the Company's management. The Company's
actual growth, results, performance and business prospects in 2002 and beyond
could differ materially from those expressed in, or implied by, such
forward-looking statements. See Item 1, "Business -- Disclosure Regarding
Forward-Looking Statements" for certain factors that could cause or contribute
to such material differences.

OVERVIEW

Liberty Group Publishing, Inc. ("LGP" or "Registrant") is a Delaware corporation
formed on January 27, 1998 for purposes of acquiring a portion of the daily and
weekly newspapers owned by American Publishing Company or its subsidiaries
("APC"), a wholly-owned subsidiary of Hollinger International Inc.
("Hollinger"). LGP is a holding company for its wholly-owned subsidiary, Liberty
Group Operating, Inc. ("Operating Company" or "Registrant's Subsidiary" or
"LGO"). The consolidated financial statements include the accounts of LGP and
Operating Company and its consolidated subsidiaries (the "Company").

The Company is a leading U.S. publisher of local newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. At December 31, 2001, the Company owned and operated 339
publications in 17 states. The Company's 2001 total revenues were derived from
advertising (75%), circulation (18%) and job print and other (7%). The majority
of the Company's paid daily newspapers have been published for more than 100
years and are typically the only paid daily newspapers of general circulation in
their respective markets. The Company's newspapers generally face limited
competition as a result of operating in markets that are distantly located from
large metropolitan areas and that can support only one primary newspaper. The
Company has increased revenues primarily by acquiring new publications and
saturating existing markets and has increased profitability by aggressively
pursuing cost reduction opportunities.

The Company's newspapers are comprised of 66 paid daily newspapers and 165 paid
non-daily newspapers. In addition, the Company publishes 108 free circulation
and "total market coverage" ("TMC") publications with limited or no news or
editorial content. TMC publications are distributed free of charge and generally
provide 100% penetration in their areas of distribution. The Company believes
that its paid newspapers, together with its free circulation and TMC
publications, are an effective medium for advertisers to reach substantially all
of the households in the markets served by the Company. The Company's
publications focus on local content, including coverage of local youth, high
school and college sports, as well as local business, politics, entertainment
and cultural news. Each of the Company's publications is tailored to its market
in order to provide local content that radio, television and large metropolitan
newspapers are unable to provide on a cost-effective basis because of their
broader geographic coverage. The local newspapers also differentiate themselves
from other forms of media by providing a cost-effective medium for local
advertisers to target their customers.

The Company maintains its principal executive offices at 3000 Dundee Road, Suite
203, Northbrook, Illinois 60062, and its telephone number is (847) 272-2244.

On January 27, 1998, the Company acquired from APC virtually all of the assets
and assumed certain liabilities that were used primarily in the business of
publishing, marketing and distributing certain local newspapers (the "Initial
Acquisition"). The initial purchase price including fees and expenses was $322.4
million. The effective date of the Initial Acquisition was January 1, 1998.


                                       20
<PAGE>
The Company has accounted for the Initial Acquisition using the purchase method
of accounting. Accordingly, the costs of the Initial Acquisition have been
allocated to the assets acquired and liabilities assumed based upon their
respective fair values using independent valuations. The fair values of certain
identifiable assets acquired and goodwill of $296.5 million are being amortized
over periods ranging from 5 to 40 years.

In 1998, the Company acquired 91 additional publications in 18 transactions for
a total acquisition cost of $61.8 million. The Company acquired 49 and 43
publications, in 13 and 12 transactions, for a total acquisition cost of $54.8
million and $84.5 million, during 1999 and 2000, respectively.

On January 7, 2002, the Company disposed of six publications in one transaction
for proceeds of $26.5 million.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

Total revenues for the year ended December 31, 2001 ("2001") increased by $7.3
million, or 4%, to $202.0 million. The increase in revenues was primarily due to
revenue from properties acquired in 2000 and same store increases in circulation
partially offset by decreases in same store printing and advertising revenue.
The increase in total revenues for 2001 was comprised of a $2.2 million, or 1%
increase, in advertising revenue, a $3.0 million, or 9% increase, in circulation
revenue, and a $2.1 million, or 18% increase, in job printing and other revenue.

Operating costs for 2001 were $90.4 million, or 45% of revenue, which was an
increase of $6.7 million over the year ended December 31, 2000 ("2000") when
operating costs were $83.7 million, or 43% of revenue. The increase in operating
costs as a percentage of revenue for 2001 was primarily due to higher same store
delivery and newsprint costs and lower revenues partially offset by lower labor
costs.

Selling, general and administrative expenses for 2001 increased by $2.8 million,
to $66.6 million, or 33% of revenues, from $63.8 million for 2000 when expenses
were also 33% of revenues.

EBITDA for 2001 decreased by $2.2 million to $45.0 million, from $47.2 million
for 2000. The decrease was primarily driven by a decrease in same store
advertising and higher same store delivery and newsprint costs, partially offset
by lower labor costs. EBITDA as a percentage of revenue declined from 24% to
22%.

Depreciation and amortization expenses for 2001 increased by $2.1 million to
$22.0 million, from $19.9 million for 2000. The increase was due to depreciation
of assets acquired in 2000, depreciation on capital expenditures made in 2001,
and a full year of amortization of intangibles from 2000 acquisitions.

Income from operations decreased by $4.3 million from $27.3 million, or 14% of
revenues, for 2000 to $23.0 million, or 11% of revenues, for 2001. The decrease
was primarily driven by a decrease in same store advertising revenue, higher
newsprint and delivery costs, and higher depreciation and amortization expenses
partially offset by lower labor costs.

Total interest expense (including amortization of debt issuance costs) increased
by $0.5 million to $40.7 million for 2001 from $40.2 million for 2000, primarily
due to higher accretion of the Company's Senior Discount Debentures, which was
partially offset by lower interest rates on bank debt.

For 2001, the Company recognized a net loss of $19.7 million compared to a net
loss of $13.4 million for 2000. The increase and loss of $6.3 million was due
primarily to lower same store advertising revenues, higher newsprint and
delivery costs as well as higher depreciation, amortization, and interest
expense, which was partially offset by lower labor costs.


                                       21
<PAGE>
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Total revenues for 2000 increased by $33.3 million, or 21%, to $194.7 million.
The increase in revenue was primarily due to revenue from acquired properties
and same store increases in advertising partially offset by decreases in same
store printing and circulation revenue. The increase in total revenues for 2000
was comprised of a $28.8 million, or 24%, increase in advertising revenue, a
$4.8 million, or 17%, increase in circulation revenue, and a $0.3 million, or
2%, decrease in job printing and other revenue.

Operating costs for 2000 were $83.7 million, or 43% of revenue, which was an
increase of $15.4 million over the year ended December 31, 1999 ("1999") when
operating costs were $68.4 million or 42% of revenue. The increase in operating
costs as a percentage of revenue for 2000 was primarily due to higher cost
structures of acquired properties and higher same store labor, delivery, and
newsprint costs.

Selling, general and administrative expenses for 2000 increased by $12.3 million
to $63.8 million, or 33%, of revenues from $51.5 million for 1999 when expenses
were 32% of revenues. The increase in selling, general, and administrative
expenses for 2000 was primarily due to higher same store labor costs.

EBITDA for 2000 increased by $5.7 million to $47.2 million, from $41.5 million
for 1999. The increase was primarily driven by acquisitions and growth in same
store advertising revenue, which was partially offset by lower same store print
and circulation revenue and higher same store labor, delivery and newsprint
costs. EBITDA as a percentage of revenue declined from 26% to 24% due to lower
margins at properties acquired during 2000.

Depreciation and amortization expenses for 2000 increased by $3.2 million to
$19.9 million from $16.7 million for 1999. The increase was due to depreciation
of assets acquired in 2000, depreciation on capital expenditures made in 2000,
and amortization of intangibles from 2000 acquisitions.

Income from operations increased by $2.5 million from $24.8 million, or 15%, of
revenues for 1999 to $27.3 million, or 14%, of revenues for 2000. The increase
was primarily driven by acquisitions and growth in same store advertising
revenue, which was offset by same store reductions in printing and circulation
revenue, higher labor, newsprint and delivery costs and higher depreciation and
amortization expenses.

Total interest expense (including amortization of debt issuance costs) increased
by $7.9 million to $40.2 million for 2000 from $32.3 million for 1999, primarily
due to higher debt balances borrowed to fund acquisitions, higher interest rates
on bank debt, and higher accretion of the Company's Senior Discount Debentures.

For 2000, the Company recognized a net loss of $13.4 million compared to a net
loss of $1.1 million for the same period in 1999. The increase in the net loss
of $12.3 million, was due primarily to decreases in print and circulation
revenue; higher labor, newsprint, and delivery costs; higher depreciation,
amortization, and interest expenses; a 1999 net gain from the exchange and
disposition of certain publications and a 1999 extraordinary gain on insurance
proceeds.

CRITICAL ACCOUNTING POLICY DISCLOSURE

Valuation of long-lived and intangible assets and goodwill. We assess the
impairment of identifiable intangibles, long-lived assets and related goodwill
and enterprise level goodwill whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Factors we consider
important which could trigger an impairment review include the following:

      -     significant underperformance relative to expected historical or
            projected future operating results;

      -     significant changes in the manner of our use of the acquired assets
            or the strategy for our overall business; and


                                       22
<PAGE>
      -     significant negative industry or economic trends.

When we determine that the carrying value of intangibles, long-lived assets and
related goodwill and enterprise level goodwill may not be recoverable based upon
the existence of one or more of the above indicators of impairment, we measure
any impairment based on the excess of the expected fair market value, which is
consistent with the current methods used in valuing newspaper companies, over
the carrying amount of the asset. Net intangible assets, long-lived assets and
goodwill amounted to $514.9 million as of December 31, 2001.

In 2002, SFAS No. 142, "Goodwill and Other Intangible Assets" became effective
and as a result, we will cease to amortize approximately $196.1 million of
goodwill. We had recorded approximately $3.9 million of amortization expense on
these amounts during 2001 and would have recorded approximately $3.9 million of
amortization during 2002. In lieu of amortization, we are required to perform an
initial impairment review of our goodwill in 2002 and an annual impairment
review thereafter. We expect to complete our initial review prior to the release
of our first quarter earnings.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows From Operating Activities. Cash flows provided by operating
activities for 2001 decreased by $2.8 million to $12.9 million compared with
cash provided of $15.7 million for 2000. The decrease is primarily due to lower
EBITDA and higher interest payments. Cash flows provided by operating activities
in 1999 were $8.5 million primarily due to depreciation and amortization, and
interest expense partially offset by the net gain on exchange and disposition of
properties.

Cash Flows from Investing Activities. Cash flows used in investing activities
were $60.5 million, $92.1 million, $3.3 million in 1999, 2000 and 2001,
respectively. The increase of $31.6 million from 1999 to 2000 was primarily due
to additional acquisition costs related to 2000 acquisitions. The decrease of
$88.8 million from 2000 to 2001 relates to a decrease in the number and size of
acquisitions from 2000 to 2001 and a decrease in capital expenditures. The
Company's capital expenditures in 2001 consist of the purchase of machinery,
equipment, furniture and fixtures relating to its publishing operations. The
Company has no material commitments for capital expenditures. The Company will
continue to pursue its strategy of opportunistically purchasing community
newspapers in contiguous markets and clusters of community newspapers in new
markets. The Company will only pursue acquisitions that it believes would
contribute to the Company's overall cash flow growth.

Cash Flows from Financing Activities. Cash provided by financing activities was
$52.9 million in 1999 and $75.5 million in 2000 compared to cash used in
financing activities of $9.2 million in 2001. Cash provided by financing
activities primarily resulted from borrowings under the revolving credit
facility in 1999. Cash provided by financing activities in 2000 resulted from
the issuance of preferred stock and common stock, long-term debt, as well as,
borrowings under the revolving credit facility, partially offset by the
repayment of the prior revolving credit facility. Net cash used in financing
activities in 2001, related to the repayment under the revolving credit facility
and other long term debt. The Company is subject to certain covenants that limit
its ability to pay dividends and make other restricted payments and does not
expect to pay cash dividends in the foreseeable future.

Amended Revolving Credit Facility. On April 18, 2000, the Company entered into
an agreement to amend and restate its $175.0 million credit facility. The
amendment and restatement extended the maturity date of the revolving credit
facility from January 2003 to March 2005, and included the issuance of a $100.0
million Term Loan B. The Term Loan B matures in March 2007, and requires annual
principal payments of $0.5 million in 2000, $1.0 million from 2001 through 2004,
$36.1 million in 2005, $47.5 million in 2006, and $11.9 million in 2007. On May
10, 2001, the Company entered into an amendment to its $175.0 million revolving
credit facility, (the "Amended Revolving Credit Facility"). The Amended
Revolving Credit Facility decreased the aggregate commitment available under the
revolving credit facility from $175.0 million to $135.0 million and amended the
Cash Coverage Ratio and Senior Leverage Ratio as defined within the Amended
Revolving Credit Facility.


                                       23
<PAGE>
The Term Loan B and the Amended Revolving Credit Facility bear interest at the
Company's option equal to the Base Rate (as defined in the Amended Revolving
Credit Facility) or the Eurodollar Rate (as defined in the Amended Revolving
Credit Facility) plus a margin that varies based upon a ratio set forth in the
Amended Revolving Credit Facility. There is an individual margin for the Term
Loan B and the Amended Revolving Credit Facility. The Company pays a fee equal
to the Applicable Margin or Eurodollar advances (as defined in the Amended
Revolving Credit Facility) per annum on the aggregate amount of outstanding
letters of credit. The Company also pays a fee on the unused portion of the
Amended Revolving Credit Facility. No principal payments are due on the Amended
Revolving Credit Facility until the maturity date, except with respect to the
Term Loan B noted above.

LGP is highly leveraged and has indebtedness that is substantial in relation to
its stockholders' deficit, tangible equity and cash flow. Total interest expense
for 2001 was $40.7 million, including non-cash interest of $8.4 million in
respect to the Notes and amortization of debt issuance costs of $2.4 million.
The degree to which LGP is leveraged could have important consequences,
including the following: (i) for the fiscal year ending December 31, 2002, a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of interest on the Notes and interest on its other indebtedness,
thereby reducing the funds available to the Company for other purposes; (ii)
indebtedness under the Amended Revolving Credit Facility is at variable rates of
interest, which causes the Company to be vulnerable to increases in interest
rates; (iii) the Company is substantially more leveraged than certain of it
competitors, which might place the Company at a competitive disadvantage; (iv)
the Company may be hindered in its ability to adjust rapidly to changing market
conditions; (v) the Company's substantial degree of leverage could make it more
vulnerable in the event of a downturn in general economic conditions or other
adverse events in its business; and (vi) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions or
general corporate purposes may be impaired.

As of December 31, 2001, $141.5 million was outstanding under the Amended
Revolving Credit Facility including Term Loan B.

Liquidity. The Company's principal sources of funds will be cash provided by
operating activities and borrowings under its Amended Revolving Credit Facility.
The Company's ability to fully utilize its Amended Revolving Credit Facility is
limited by certain financial covenants, including the Senior Leverage Ratio and
Cash Interest Coverage Ratio as said terms are defined in the Amended Revolving
Credit Facility.

LGP has no operations of its own and accordingly has no independent means of
generating revenue. As a holding company, LGP's internal sources of funds to
meet its cash needs, including payment of expenses, are dividends and other
permitted payments from its subsidiaries, in particular from Operating Company.
The Indenture relating to the Notes and the Amended Revolving Credit Facility
impose upon the Company certain financial and operating covenants, including,
among others, requirements that the Company satisfy certain financial tests,
limitations on capital expenditures and restrictions on the ability of the
Company to incur debt, pay dividends or take certain other corporate actions.

Management believes that the Company has adequate capital resources and
liquidity to meet its borrowing obligations, all required capital expenditures
and pursue its business strategy for at least the next 12 months.

SUMMARY DISCLOSURE ABOUT CONTRACTURAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table reflects a summary of the Company's contractual cash
obligations:


<Table>
<Caption>
                                         2002     2003    2004      2005     2006    Thereafter    Total
                                         ----     ----    ----      ----     ----    ----------    -----
<S>                                      <C>      <C>     <C>      <C>       <C>       <C>        <C>
Senior Subordinated 9 3/8% Notes                                                       180,000    180,000
Senior Discount 11 5/8% Notes                                                           78,740     78,740
Term Loan B                              1,000    1,000   1,000    12,375    11,875     71,250     98,500
Revolving Credit Facility                                                    42,950                42,950
Non-compete payments                       517      382     282       282       177        262      1,902
Finder fee payments                        350      125                                               475
Other                                      114        4       4         -         -          -        122
                                        -----------------------------------------------------------------
                                         1,981    1,511   1,286    12,657    55,002    330,252    402,689
                                        =================================================================
</Table>

SUMMARY DISCLOSURES REGARDING RELATED PARTIES

EXECUTIVE STOCK INVESTMENTS

Upon the commencement of his employment in January 1998 the Company loaned the
Chief Executive Officer $250,000 pursuant to an Unsecured Promissory Note. The
loan was forgiven on a pro rata daily basis from January 28, 1998 to January 28,
2001.

In addition, certain other executives were given the opportunity to purchase
common stock in the Company. Under the plan, each executive paid cash for 50% of
their stock investment and executed a five year note for the remaining 50%. The
Board of Directors approved the forgiveness of these loans including accrued
interest, in 3 equal installments in January 1999, 2000, and 2001. The Company
has the right to repurchase the common stock at the original cost if the
executive terminates his employment or is terminated for cause.

On August 11, 2000, Operating Company, Inc., Kenneth L. Serota (the
"Executive"), LGP, Green Equity Investors II, L.P. ("Green II") and Green Equity
Investors III, L.P. ("Green III") entered into that certain Amendment to
Employment Agreement, dated as of such date (the "Employment Agreement
Amendment"), pursuant to which that certain Employment Agreement, dated as of
November 21, 1997, between the Registrant's Subsidiary, the Executive and the
Company was amended. Under and pursuant to the Employment Agreement Amendment,
the Company issued and sold to the Executive 4,372 shares of Common Stock of the
Registrant and 184.42 shares of Series B 10% Junior Redeemable Cumulative
Preferred Stock of the Registrant for an aggregate purchase price of $250. In
addition, the Company issued and sold to the Executive 23,174 shares of Common
Stock of the Company for a purchase price per share of $15.00 for an aggregate
purchase price of $348,000.

On December 15, 2000, the Company issued and sold to management investors 28,626
shares of common stock of the Company for an aggregate purchase price of $429.

During 2001, the Company repurchased 22,344 shares of common stock from former
management stockholders. The purchase price was paid through loan forgiveness
and cash.

MAJORITY STOCKHOLDER FEES

The Company paid $1,320 and $1,480 in management fees in 2000 and 2001,
respectively and $356,000 and $475,000, in 2000 and 2001, respectively, in
acquisition finders fees to its majority common stockholder and is obligated to
pay acquisition finders fees of $375,000 at December 31, 2001 as a result of
prior years' acquisitions.

NEW ACCOUNTING PRONOUNCEMENTS

On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS 142 replaces the
requirement to amortize intangible assets with indefinite lives and goodwill
with a requirement for an impairment test.

SFAS No. 142 also requires an evaluation of intangible assets and their useful
lives and a transitional impairment test for goodwill and certain intangible
assets upon adoption. After transition, the impairment tests will be performed
annually. SFAS 142 is effective for fiscal years beginning after December 15,
2001, as of the beginning of the year. The Company has not yet determined the
impact of the new accounting standards on its financial reporting.

In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment of
Long-Lived Assets." The new standard supercedes FASB Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." Although retaining many of the fundamental recognition and
measurement provisions of SFAS No. 121, the new rules significantly change the
criteria that would have to be met to classify an asset as held-for-sale. The
new standard


                                       24
<PAGE>
also supercedes the provisions of Accounting Principles Board Opinion No. 30
(APB No. 30), "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," and will require expected future operating
losses from discontinued operations to be displayed in discontinued operations
in the period(s) in which the losses are incurred rather than as of the
measurement date as presently required by APB No. 30. The provisions of SFAS No.
144 are effective for financial statements beginning after December 15, 2001,
but allow for early application. We plan to adopt this standard as of the
beginning of our fiscal 2002. The provisions of SFAS No. 144 generally are to be
applied prospectively. Therefore, the adoption of this standard will not affect
previously reported financial information. We are currently evaluating the
impact SFAS No. 144 will have on our results of operations and financial
condition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to changes in its LIBOR-based interest rates on its
Amended Revolving Credit Facility. At December 31, 2001, based on a hypothetical
10% decrease in interest rates related to such facility, the Company estimates
that the fair value of its debt would have increased by approximately $1.2
million. At December 31, 2001, the Company had $141.5 million of borrowings
outstanding under its Amended Revolving Credit Facility. A hypothetical 10%
increase in interest rates would increase interest expense by approximately
$1.2 million.

Additional information regarding the Company's Amended Revolving Credit Facility
is contained in Item 7 of this Form 10-K under "Liquidity and Capital
Resources."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information in response to this Item 8 is included in the consolidated
financial statements and notes thereto, and related Independent Auditors'
Report, appearing on pages F-1 to F-19 of this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.

                                    PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

The following table sets forth the name, age and position of individuals who
serve as directors of LGP and executive officers of LGP. Each director of LGP
will hold office until the next annual meeting of the stockholders or until his
successor has been elected. Qualified officers of LGP and the Company are
elected by their respective Boards of Directors and serve at the discretion of
such Boards.

<TABLE>
<CAPTION>

NAME                   AGE       POSITION
----                   ---       --------
<S>                    <C>       <C>
Kenneth L. Serota       40       President, CEO, and Director
Scott T. Champion       42       Executive Vice President - Operations, and Director
Gene A. Hall            50       Senior Vice President - Midwestern Region
Daniel D. Lewis         38       Vice President and Secretary
Randy Cope              41       Vice President - Missouri, Kansas, Arkansas
Kelly Luvison           42       Vice President - Western New York Region
Theodore G. Mike        55       Vice President - Eastern Region
Leonard I. Green        67       Chairman of the Board of Directors
John G. Danhakl         46       Director
Peter J. Nolan          43       Director
Jonathan Seiffer        30       Director
</TABLE>


                                       25
<PAGE>

Kenneth L. Serota is President and Chief Executive Officer. Mr. Serota is also a
Director of LGP. He served as Vice President - Law & Finance and Secretary of
Hollinger from May 1995 to December 1997 and as a director of its APC Division,
which owned the publications initially acquired by the Company, from 1996 to
1997. Prior thereto, Mr. Serota served as Senior Vice President of a privately
held frozen food manufacturer from June 1992 through March 1995. Previously, Mr.
Serota served as an attorney and a certified public accountant in private
practice. Mr. Serota has significant experience negotiating and closing
acquisitions of newspaper publications and primarily focuses his efforts on
executing the Company's acquisition program and overseeing all administrative
functions of LGP.

Scott T. Champion is Executive Vice President - Operations and has primary
responsibility for all community newspaper publications. Mr. Champion is also a
Director of LGP. Prior to 1998, he served as a Senior Vice President, Regional
Manager, and District Manager of APC and had been employed at APC since 1988.
Prior to his employment at APC, Mr. Champion served as the publisher of a group
of privately owned newspaper publications. Mr. Champion served as the publisher
of the Daily Review Atlas and Pennysaver in Monmouth, Illinois, which
publications were acquired by the Company in the Initial Acquisition, from 1984
to January 1999. Mr. Champion has more than 19 years experience in the newspaper
industry.

Gene A. Hall is Senior Vice President and has primary responsibility for
newspaper publications in the Midwestern region of the United States. He served
as a Senior Vice President of APC from 1992 to 1998. Prior thereto, he served as
a regional manager and had been employed at APC since 1988. Prior to his
employment at APC, Mr. Hall was the owner and publisher of the Charles City
Press, Six County Shopper and The Extra in Charles City, Iowa. Mr. Hall
currently serves as the publisher of the Charles City Press, Six County Shopper
and The Extra, which publications were acquired by the Company in the Initial
Acquisition, and has served in such positions since 1986. Mr. Hall has more than
33 years of experience in the newspaper industry. Mr. Hall is also a director of
First Security Bank & Trust.

Daniel D. Lewis is Vice President and Secretary with primary responsibility over
the Company's financial and accounting activites. Prior to May 2001, Mr. Lewis
served as corporate controller for LGP. Prior to joining the Company, Mr. Lewis
served as a management consultant for PriceWaterhouseCoopers. In addition, Mr.
Lewis has held management positions with Kraft Foods and Berkshire Hathaway. Mr.
Lewis is a certified public accountant and graduate of Indiana University.

Randy Cope is Vice President responsible for newspaper operations in Missouri,
Arkansas, and Kansas since December of 1998. Mr. Cope also oversees the
Company's national classified advertising network. From 1991 to 1998, Mr. Cope
was regional manager and publisher of the Northwest Arkansas Times in
Fayetteville, Arkansas, which was owned by American Publishing Company. Mr. Cope
has 20 years of experience covering all areas of newspaper operations.

Kelly M. Luvison is Vice President responsible for newspaper operations in
western New York, Pennsylvania and West Virginia, as well as Liberty Business
Development Group. Mr. Luvison has served as regional manager for the Company
since the Initial Acquisition and was appointed a Vice President in January
2000. Prior to this, he was a regional manager for APC. An 18-year newspaperman,
Mr. Luvison began his career in Pennsylvania as a reporter and editor. From 1987
to 1996 he was publisher of the Company's property in Waynesboro, Pa., and
served as district manager for two other Pennsylvania newspapers. Since 1996 he
has been publisher of the Evening Tribune in Hornell, NY, in addition to his
duties as a regional manager and Vice President.

Theodore G. Mike is Vice President and has primary responsibility for many the
Company's newspaper operations in the eastern region of the United States. Mr.
Mike served as regional manager for the Company since the Initial Acquisition
and was appointed as Vice President in January 1999. Mr. Mike served as a
regional manager for American Publishing Company since 1992. Mr. Mike currently
serves as the publisher of The Evening Times and The Evening Times Extra in
Sayre, Pennsylvania,


                                       26
<PAGE>
publications which were acquired by the Company in the Initial Acquisition, and
has served in such position since 1992. Mr. Mike has more than 35 years of
experience in the newspaper industry.

Leonard I. Green has been a Director since 1998. Mr. Green has been an
executive officer of Leonard Green & Partners, L.P. ("LGP") since its formation
in 1994. Mr. Green has also been, individually or through a corporation, a
partner in a merchant banking firm affiliated with LGP since its inception in
1989. Mr. Green is also a director of Rite Aid Corporation, Communications &
Power Industries, Inc. and Dollar Financial Group, Inc.

John G. Danhakl has been a Director since 1998. Mr. Danhakl has been a partner
of LGP since 1995. Mr. Danhakl had previously been a Managing Director at
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") and had been with
DLJ since 1990. Prior to joining DLJ, Mr. Danhakl was a Vice President at Drexel
Burnham Lambert Incorporated ("Drexel"). Mr. Danhakl is also a director of
Diamond Triumph Auto Glass, Inc., Twinlab Corporation, The Arden Group, Inc.,
Petco Animal Supplies, Inc., Leslie's Poolmart, Inc., Big 5 Corporation,
Communications and Power Industries, Inc., VCA Antech, Inc. and several private
companies.

Peter J. Nolan. Mr. Nolan has been a Director since 1998. Mr. Nolan has been a
partner of LGP since 1997. Mr. Nolan previously served as Managing Director and
Co-Head of DLJ's Los Angeles Investment Banking Division since 1990. Prior to
joining DLJ, Mr. Nolan had been a First Vice President at Drexel. Mr. Nolan is
also a director of VCA Antech, Inc. and several private companies.

Jonathan A. Seiffer has been a Director since 1998. Mr. Seiffer has been a
partner of LGP since 1999. From 1997 through 1999, Mr. Seiffer was a Vice
President of LGP and from 1994 through 1997, Mr. Seiffer was an Associate at
LGP. Prior to joining LGP, Mr. Seiffer was a member of corporate finance
department of DLJ. Mr. Seiffer is also a director of Diamond Triumph Auto
Glass, Inc., Gart Sports Company, Dollar Financial Group, Inc. and several
private companies.

ITEM 11. EXECUTIVE COMPENSATION.

<TABLE>
<CAPTION>
                                                           ANNUAL COMPENSATION
                                                         ------------------------
NAME AND POSITION                           YEAR         SALARY             BONUS              OTHER             TOTAL
-----------------                           ----         -------            -----              -----             -----
<S>                                         <C>          <C>               <C>               <C>                <C>
Kenneth L. Serota......................     1999        $375,000          $400,000          $121,013(1)        $896,013
President and CEO......................     2000         400,000           300,000           140,653(2)         840,653
........................................     2001         450,000                --            47,456(3)         497,456

Theodore G. Mike.......................     1999         102,025            29,245             8,330            139,600
Vice President.........................     2000         112,450            15,500             9,621            137,571
........................................     2001         114,663            17,337             9,634            141,634

Scott T. Champion......................     1999         125,000            75,000            18,520            218,520
Executive V.P. - Operations............     2000         150,000            85,000            24,808            259,808
........................................     2001         170,000            25,000            19,365            214,365

Gene A. Hall...........................     1999         125,000            50,000            18,723            193,723
Senior V.P.............................     2000         132,788            38,200            24,808            195,808
........................................     2001         145,000            30,000            19,427            194,427

Randy Cope ............................     1999         120,000            45,750             5,154            170,904
Vice President.........................     2000         130,000            62,000             5,808            197,807
........................................     2001         145,000            25,000            12,393            182,393
</TABLE>


                                       27
<PAGE>

(1)   Mr. Serota's 1999 other compensation consists of $110,013 in loan
      forgiveness pursuant to his employment agreement, plus a $5,000
      contribution to a deferred compensation plan and a car allowance of
      $6,000.

(2)   Mr. Serota's 2000 other compensation consists of $109,973 in loan
      forgiveness, plus a $5,500 contribution to a deferred compensation plan, a
      car allowance of $3,000, $22,000 in common shares, and $180 in life
      insurance.

(3)   Mr. Serota's 2001 other compensation consists of $32,844 in loan
      forgiveness, plus a $5,500 contribution to a deferred compensation plan, a
      car allowance of $8,600, and $512 in life insurance.

COMPENSATION OF DIRECTORS AND MANAGEMENT FEES

Individuals who are officers of Operating Company and LGP, as well as Messrs.
Green, Seiffer, Danhakl and Nolan, do not receive any compensation directly for
their service on LGP's and Operating Company's Boards of Directors. Operating
Company has agreed, however, to pay Leonard Green Partners, L.P. ("Leonard
Green") an annual management fee of $1.5 million. Such fee is payable in equal
monthly installments, but is subordinated in right of payment to the Senior
Discount Debentures and the Senior Subordinated Notes for various management,
consulting and financial planning services, including assistance in strategic
planning, providing market and financial analyses, negotiating and structuring
financing and exploring expansion opportunities. Leonard Green also received
acquisition finders' fees of $375,000 in 2001 and is owed $475,000 at December
31, 2001.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee consisted of Peter Nolan, Jonathan Seiffer
and Kenneth Serota.

EMPLOYMENT AGREEMENT

LGP and Kenneth Serota (the "Executive") entered into an employment agreement,
dated as of November 21, 1997 (the "Employment Agreement"), whereby the
Executive agreed to serve as President and Chief Executive Officer of the
Company for a period of three years commencing January 1, 1998 and for
additional successive one-year periods thereafter, unless either party gives
timely notice to the other that the employment term shall not be so extended.

The Employment Agreement provided for a base salary of $350,000, $375,000 and
$400,000 for the years 1998, 1999 and 2000, respectively, and those benefits
generally available to the employees of the Company, including life insurance,
health insurance, deferred compensation and profit sharing. In addition to
receiving a base salary, the Executive is eligible to receive a bonus based on
the attainment of applicable performance standards agreeable to the Company and
the Executive, including standards based on annual revenue growth, EBITDA
growth, completion of reasonably acceptable acquisitions and growth of acquired
properties. The Employment Agreement also provided, subject to certain
exceptions, that upon a termination of the Executive 's employment during the
term thereof (other than for "cause" as defined therein or voluntary
resignation), the Company is generally obligated to pay the Executive the
greater of one year's salary or an amount equal to his base salary for the
remaining term under the Employment Agreement plus, in either case, a portion of
his bonus for the year of termination.

On August 11, 2000, the Registrant's Subsidiary, the Executive, the Registrant,
Green II and Green III entered into an Amendment to Employment Agreement, dated
as of such date (the "Employment Agreement Amendment"), pursuant to which the
Employment Agreement was amended as follows: (i) the term of the Employment
Agreement was extended for an additional three-year period until January 1,
2004; (ii) the annual base salary payable to the Executive thereunder for the
fourth, fifth and sixth years of the extended term thereof was established at
$450,000, $475,000 and $500,000, respectively; (iii) the Registrant's


                                       28
<PAGE>

Subsidiary agreed to pay, in arrears, to the Executive thereunder an automobile
allowance of $500 per month for each month during the extended term thereof
ending on or prior to December 31, 2000 and $800 per month for each month of the
extended term thereof thereafter; and (iv) the Registrant's Subsidiary agreed to
pay to the Executive eighteen (18) months of base salary at the then current
annual base salary payable to the Executive thereunder in the event that the
Executive's employment with the Registrant's Subsidiary is terminated by the
Registrant's Subsidiary without Cause or by the Executive for Good Reason, each
as defined in such Employment Agreement, as amended by the Employment Agreement
Amendment (as so amended, the "Employment Agreement").

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER.

The compensation package of Mr. Kenneth L. Serota, the Company's President and
Chief Executive Officer, primarily consists of base salary and bonus components.
Mr. Serota earned a base salary of $450,000 in 2001. In addition, Mr. Serota
received certain other customary perquisites and benefits. As of December 31,
2001, Mr. Serota beneficially owned 93,746 shares, or 4%, of the Company's
Common Stock. See Note 12, " Security Ownership of Certain Beneficial Owners and
Management."

As of August 11, 2000, the Company and Mr. Serota entered into the Employment
Agreement Amendment. See "Item 11. Executive Compensation--Employment
Agreements." In establishing the terms of Mr. Serota employment agreement, the
Compensation Committee took into account both the position and expertise of Mr.
Serota. Mr. Serota's bonus, if any, in respect of fiscal year 2002 will be
determined in accordance with economic performance of the Company including
acquisitions and divestures.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

<TABLE>
<CAPTION>
                                                                                    NO.
                                                             % OWNED             OF SHARES
                                                             -------             ---------
<S>                                                          <C>                 <C>
COMMON STOCK:

Green Equity Investors II, L.P...........................        67%              1,440,000
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025

Green Equity Investors III, L.P..........................        24%                524,605
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025

Kenneth L. Serota........................................         4%                 93,746
President and CEO

Scott T. Champion........................................         1%                 22,344
Executive V.P.- Operations

Gene A. Hall.............................................         1%                 22,344
Senior V.P.

Other Management Stockholders............................         3%                 55,794

TOTAL OUTSTANDING........................................       100%              2,158,833

Directors and Executive Officers own 97% of the outstanding Common Stock as a
group.
</TABLE>


                                       29
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

EMPLOYMENT AGREEMENT

The Company has employment agreements and arrangements with its Chief Executive
Officer. See "Item 11. Executive Compensation-- Employment Agreements."

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

(a)1. Consolidated Financial Statements.

      Independent Auditors' Report.

      Consolidated Balance Sheets as of December 31, 2000 and 2001.

      Consolidated Statements of Operations for the years ended December 31,
      1999, 2000, and 2001.

      Consolidated Statements of Stockholders' Deficit for the years ended
      December 31, 1999, 2000, and 2001.

      Consolidated Statements of Cash Flows for the years ended December 31,
      1999, 2000, and 2001.

      Notes to Consolidated Financial Statements.

2.    The following consolidated financial statement schedule of the Company and
      the related Independent Auditors' Report are included in this Form 10-K on
      pages S-1 and S-2: Independent Auditors' Report - Schedule II - Valuation
      and Qualifying Accounts. All other financial statement schedules are
      omitted because such schedules are not required or the information
      required has been presented in the aforementioned consolidated financial
      statements.

3.    The exhibits filed as a part of this report are listed in the following
      Exhibit Index.

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
No.                                        Items
-------                                    -----
<S>           <C>                                                                         <C>
2.1           Asset Purchase Agreement dated as of November 21, 1997, among Liberty       Incorporated by reference to
              Group Publishing, Inc., Green Equity Investors II, L.P. (as guarantor),     Exhibit 2.1 included on the
              Liberty Group Operating , Inc., Hollinger International Inc., APAC-90       Company's Registration Statement
              Inc., American Publishing, and APAC-95, Inc.                                on Form S-4 (Registration No.
                                                                                          333-46957) (the "Company's S-4").

2.2           Asset Purchase Agreement dated as of November 21, 1997, among Liberty       Incorporated by reference to
              Group Publishing, Inc., Green Equity Investors II, L.P. (as guarantor),     Exhibit 2.2 included on the
              Liberty Group Operating, Inc., Hollinger International Inc., American       Company's S-4.
              Publishing Company of Illinois, APAC-90 Inc., and APAC-95, Inc.

2.3           Exchange Agreement dated as of November 21, 1997, between American          Incorporated by reference to
              Publishing Company of Illinois and Chicago Deferred Exchange                Exhibit 2.3 included on the
              Corporation.                                                                Company's S-4.
</TABLE>


                                       30
<PAGE>

<TABLE>
<S>           <C>                                                                         <C>
2.4           Qualified Exchange Trust Agreement, dated as of November 21, 1997 among     Incorporated by reference to
              the Chicago Trust Company, as Trustee under Trust No. 38347501, Chicago     Exhibit 2.4 included on the
              Deferred Exchange Corporation, and American Publishing Company of           Company's S-4.
              Illinois.

2.5           Amendment to Asset Purchase Agreement dated as of January 14, 1998,         Incorporated by reference to
              among Liberty Group Publishing, Inc., Green Equity Investors II, L.P.       Exhibit 2.5 included on the
              (as guarantor), Liberty Group Operating, Inc., Hollinger International      Company's S-4.
              Inc., APAL-90 Inc., American Publishing (1991) Inc. and APAC-95 Inc.

2.6           Amendment to Asset Purchase Agreement, dated as of January 14, 1998,        Incorporated by reference to
              among Liberty Group Publishing, Inc., Green Equity Investors II, L.P.       Exhibit 2.6 included on the
              (as guarantor), Liberty Group Operating, Inc., Hollinger International      Company's S-4.
              Inc., American Publishing Company of Illinois, APAC-90 Inc., American
              Publishing (1991) Inc. and APAC-95 Inc.

2.7           Amendment to Exchange Agreement, dated as of January 14, 1998, between      Incorporated by reference to
              American Publishing Company of Illinois and Chicago Deferred Exchange       Exhibit 2.7 included on the
              Corporation.                                                                Company's S-4.

2.8           Amendment to Qualified Exchange Trust Agreement, dated as of January        Incorporated by reference to
              14, 1998, among The Chicago Trust Company, as Trustee under No.             Exhibit 2.8 included on the
              38347501, Chicago.                                                          Company's S-4.

2.9           Agreement dated as of January 15, 1998, among Liberty Group Publishing,     Incorporated by reference to
              Inc., Green Equity Investors II, L.P. (as guarantor), Liberty Group         Exhibit 2.9 included on the
              Operating, Inc., Hollinger International, Inc., American Publishing         Company's S-4.
              Company of Illinois, APAC-90 Inc., American Publishing (1991) Inc., and
              APAC-95 Inc.

2.10          Agreement dated as of January 23, 1998, among  American Publishing          Incorporated by reference to
              Company of Illinois, Chicago Deferred Exchange Corporation and The          Exhibit 2.10 included on the
              Chicago Trust Company.                                                      Company's S-4.

2.11          Agreement dated as of January 26, 1998, among Liberty Group Publishing,     Incorporated by reference to
              Inc., Green Equity Investors II, L.P. (as guarantor), Liberty Group         Exhibit 2.11 included on the
              Operating, Inc. Hollinger International, Inc., American Publishing          Company's S-4.
              Company of Illinois, APAC-90 Inc., American Publishing (1991) Inc., and
              APAC-95 Inc.

3.1           Amended and Restated Certificate of Incorporation of Liberty Group          Incorporated by reference to
              Publishing, Inc.                                                            Exhibit 3.1 included on the
                                                                                          Company's Annual Report on Form
                                                                                          10-K for the year ending
                                                                                          December 31, 1999 (the
                                                                                          "Company's 1999 10-K").

3.2           By-laws of Liberty Group Publishing, Inc.                                   Incorporated by reference to
                                                                                          Exhibit 3.2 included on the
                                                                                          Company's S-4.

4.1           Indenture dated as of January 27, 1998 among Liberty Group Publishing,      Incorporated by reference to
              Inc. and State Street Bank and Trust Company, as Trustee, including         Exhibit 4.1 included on the
              form of 11-5/8% Senior Discount Debentures due 2009.                        Company's S-4.

4.2           Indenture, dated as of January 27, 1998, among, Liberty Group               Incorporated by reference to
              Publishing, Inc. and State Street Bank and Trust Company, as Trustee,       Exhibit 4.3 included on the
              including form of 14-3/4% Senior Subordinated Debentures due 2010.          Company's S-4.

*10.1         Employment Agreement dated as of November 27, 1997, between Liberty         Incorporated by reference to
              Group Publishing, Inc. and Kenneth L. Serota.                               Exhibit 10.1 included on the
                                                                                          Company's S-4.

*10.2         Amendment to Employment Agreement, dated as of August 11, 2000, between     Incorporated by reference to
              Liberty Group Operating, Inc., Kenneth L. Serota, Liberty Group             Exhibit 10.2 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Green Equity          Company's Annual Report on Form
              Investors III, L.P.                                                         10-K for the year ending
                                                                                          December 31, 2000 (the
                                                                                          "Company's 2000 10-K").
</TABLE>


                                       31
<PAGE>

<TABLE>
<S>           <C>                                                                         <C>
*10.3         Management Stockholders Agreement , dated as of January 27, 1998, among     Incorporated by reference to
              Liberty Group Publishing, Inc., Green Equity Investors II, L.P. and         Exhibit 10.2 on the Company's
              Kenneth L. Serota.                                                          S-4.

*10.4         Amended and Restated Management Subscription and Stockholders               Incorporated by reference to
              Agreement, dated as of February 1, 2000, by and between Liberty Group       Exhibit 10.3 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Scott T. Champion.    Company's 1999 10-K.

*10.5         Amended and Restated Management Subscription and Stockholders               Incorporated by reference to
              Agreement, dated as of February 1, 2000, by and between Liberty Group       Exhibit 10.4 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Kevin O'Shea.         Company's 1999 10-K..

*10.6         Amended and Restated Management Subscription and Stockholders               Incorporated by reference to
              Agreement, dated as of February 1, 2000, by and between Liberty Group       Exhibit 10.5 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Gene A. Hall.         Company's 1999 10-K.

*10.7         Master Amendment, dated as of April 18, 2000, between Green Equity          Incorporated by reference to
              Investors II, L.P., Green Equity Investors III, L.P., Liberty Group         Exhibit 10.7 included on the
              Publishing, Inc. and persons listed on Schedule 1 attached thereto.         Company's 2000 10-K.

*10.8         Management Stock Purchase Agreement, dated as of December 15, 2000,         Incorporated by reference to
              between Liberty Group Publishing, Inc., Green Equity Investors II,          Exhibit 10.8 included on the
              L.P., Green Equity Investors III, L.P. and Kevin O'Shea.                    Company's 2000 10-K.

*10.9         Management Stock Purchase Agreement, dated as of December 15, 2000,         Incorporated by reference to
              between Liberty Group Publishing, Inc., Green Equity Investors II,          Exhibit 10.9 included on the
              L.P., Green Equity Investors III, L.P. and Scott T. Champion.               Company's 2000 10-K.

*10.10        Management Stock Purchase Agreement, dated as of December 15, 2000,         Incorporated by reference to
              between Liberty Group Publishing, Inc., Green Equity Investors II,          Exhibit 10.10 included on the
              L.P., Green Equity Investors III, L.P. and Gene A. Hall.                    Company's 2000 10-K.

10.11         Non-Competition Agreement dated as of January 27, 1998 between Liberty      Incorporated by reference to
              Group Operating, Inc. and Hollinger International, Inc.                     Exhibit 10.3 included on the
                                                                                          Company's S-4.

10.12         Stock Purchase Agreement, dated as of April 18, 2000, between Liberty       Incorporated by reference to
              Group Publishing, Inc. and Green Equity Investors III, L.P.                 Exhibit 10.12 included on the
                                                                                          Company's 2000 10-K.

10.13         Management Services Agreement, dated as of April 18, 2000, between          Incorporated by reference to
              Liberty Group Operating, Inc. and Leonard Green & Partners, L.P.            Exhibit 10.13 included on the
                                                                                          Company's 2000 10-K.

10.14         Amended and Restated Credit Agreement dated as of April 18, 2000, among     Incorporated by reference to
              Liberty Group Operating, Inc., Liberty Group Publishing, Inc., Citicorp     Exhibit 10.14 included on the
              USA, Inc. Citibank N.A. DB Banc Alex Brown, LLC, Wells Fargo Bank,          Company's 2000 10-K.
              N.A., and Bank of America, N.A.

10.15         Pledge Agreement dated as of January 27, 1998 from Liberty Group            Incorporated by reference to
              Publishing, Inc., Liberty Group Arizona Holdings, Inc., Liberty Group       Exhibit 10.6 included on the
              Arkansas Holdings, Inc., Liberty Group California Holdings, Inc.,           Company's S-4.
              Liberty Group Illinois Holdings, Inc., Liberty Group Iowa Holdings,
              Inc., Liberty Group Kansas Holdings, Inc., Liberty Group Missouri
              Holdings, Inc., Liberty Group New York Holdings, Inc., Liberty Group
              Pennsylvania Holdings, Inc., Liberty Group Management Services, Inc. to
              the lenders under the Credit Agreement.

10.16         Pledge Agreement dated as of January 27, 1998 from Liberty Group            Incorporated by reference to
              Operating, Inc. to the lenders under the Credit Agreement.                  Exhibit 10.7 included on the
                                                                                          Company's S-4.
</TABLE>


                                       32
<PAGE>

<TABLE>
<S>           <C>                                                                         <C>
10.17         Stock Purchase Agreement, dated as of December 16, 1998, by and between     Incorporated by reference to
              the shareholders of Life Printing & Publishing Co., Inc., Jongo Real        Exhibit 2.1 included on the
              Estate Partnership and Liberty Group Operating, Inc.                        Company's Current Report on Form
                                                                                          8-K (the "Company's 8-K") filed
                                                                                          on January 28, 1999.

10.18         Asset Exchange Agreement, dated as of July 1, 1999, among Liberty Group     Incorporated by reference to
              Operating, Inc., Liberty Group Pennsylvania Holdings, Inc. and              Exhibit 2.1 included on the
              Newspaper Holdings, Inc.                                                    Company's 8-K filed on July 16,
                                                                                          1999.

10.19         Asset Exchange Agreement, dated as of August 26, 1999, between Liberty      Incorporated by reference to
              Group Publishing, Inc.and Lee Enterprises, Incorporated.                    Exhibit 2.1 included on the
                                                                                          Company's 8-K filed on October
                                                                                          15, 1999.

10.20         Asset Purchase Agreement, dated as of August 26, 1999, between Liberty      Incorporated by reference to
              Group Publishing, Inc., and Lee Enterprises, Incorporated.                  Exhibit 2.2 included on the
                                                                                          Company's 8-K filed on October
                                                                                          15, 1999.

10.21         Asset Purchase Agreement, dated as of June 29, 2000, by and between         Incorporated by reference to
              Midwest Publishing Statutory Trust and Liberty Group Michigan Holdings,     Exhibit 2.1 included on the
              Inc.                                                                        Company's 8-K filed on July 14,
                                                                                          2000.

10.22         Joinder and Assumption Agreement, dated as of June 30, 2000, by IMG         Incorporated by reference to
              Holdings, Inc., Independent Media Holdings, Inc. and  Independent Media     Exhibit 2.2 included on the
              Group, Inc., and acknowledged by Midwest Publishing Statutory Trust and     Company's 8-K filed on July 14,
              Liberty Group Michigan Holdings, Inc.                                       2000.

10.23         Asset Purchase Agreement, dated as of October 31, 2000, by and between      Incorporated by reference to
              Mid-Illinois Newspapers, Inc. and Liberty Group Illinois Holdings, Inc.     Exhibit 2.1 included on the
                                                                                          Company's 8-K filed on November
                                                                                          16, 2000.

*10.24        Liberty Group Publishing, Inc.'s Publisher's Deferred Compensation Plan.    Incorporated by reference to
                                                                                          Exhibit 10.10 included on the
                                                                                          Company's Annual Report on Form
                                                                                          10-K for the period ended
                                                                                          December 31, 1998 (the
                                                                                          "Company's 1998 10-K").

*10.25        Liberty Group Publishing, Inc.'s Executive Benefit Plan.                    Incorporated by reference to
                                                                                          Exhibit 10.11 included on the
                                                                                          Company's 1998 10-K.

*10.26        Liberty Group Publishing, Inc.'s Executive Deferral Plan.                   Incorporated by reference to
                                                                                          Exhibit 10.12 included on the
                                                                                          Company's 1998 10-K.

*10.27        Liberty Group Publishing, Inc.'s 1999 Stock Option Plan.                    Incorporated by reference to
                                                                                          Exhibit 10.15 included on the
                                                                                          Company's 1999 10-K.

 10.28        First Admentment (of 2001) to Amended and Restated Revolving Credit         Incorporated by reference to
              Facility dated May 10, 2001, between Liberty Group Operating, Inc.          Exhibit 99 included on the
              (Borrower), Liberty Group Publishing, Inc. (Holdings), the Lenders,         Company's March 31, 2001 10-Q.
              Citibank, N.A. (Issuing Bank) and Citicorp USA, Inc. (Administrative
              Agent).

 10.29        First Supplemental Indenture dated December 13, 2001, between Liberty       Included herewith.
              Group Publishing, Inc. and State Street Bank and Trust Company Trustee)

 10.30        Second Amendment (of 2001) to Credit Agreement and Limited Waiver dated     Included herewith.
              December 14, 2001 between Liberty Group Operating, Inc. (Borrower),
              Liberty Group Publishing, Inc. (Holdings), the Lenders, Citibank, N.A.
              (Issuing Bank) and Citicorp USA, Inc. (Administrative Agent).

21            Subsidiaries of Liberty Group Publishing, Inc.                              Included herewith.
</TABLE>

----------
*     Management Contract/Compensatory Plan or Arrangement

The Company has agreed to furnish to the Commission, upon request, a copy of
each agreement defining the rights of holders of long-term debt not filed
herewith in reliance upon the exemption from filing applicable to any such
agreement pursuant to which the total amount of securities authorized does not
exceed 10% of the total consolidated assets of the Company.


                                       33
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Liberty Group Publishing, Inc.:

We have audited the accompanying consolidated balance sheets of Liberty Group
Publishing, Inc. and subsidiaries as of December 31, 2000 and 2001, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for each of the years in the three-year period ended December 31, 2001.
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 auditing standards generally accepted
in the United States of America. 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 present fairly, in all
material respects, the financial position of Liberty Group Publishing, Inc. and
subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.


                                        /s/ KPMG LLP

Chicago, Illinois
March 18, 2002


                                      F-1
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                                       DECEMBER 31,
                                                                                                  ----------------------
                                                                                                    2000         2001
                                                                                                  ---------    ---------
<S>                                                                                               <C>          <C>
Assets
Current assets:
   Cash and cash equivalents ..................................................................   $   1,036    $   1,474
   Accounts receivable, net of allowance for doubtful accounts of $1,523 and $1,458
        in 2000 and 2001, respectively ........................................................      22,605       21,398
   Inventory ..................................................................................       3,042        2,824
  Prepaid expenses ............................................................................       1,169        1,602
  Other current assets ........................................................................         144           25
                                                                                                  ---------    ---------
   Total current assets .......................................................................      27,996       27,323
   Property, plant and equipment, net .........................................................      55,817       52,536
   Intangible assets, net .....................................................................     467,604      452,418
   Deferred financing costs, net ..............................................................      11,682        9,924
   Other assets ...............................................................................         402          336
                                                                                                  ---------    ---------
   Total assets ...............................................................................   $ 563,501    $ 542,537
                                                                                                  =========    =========
Liabilities and stockholders' deficit
Current liabilities:
   Current  portion of Term Loan B ............................................................   $   1,000    $   1,000
   Current portion of long-term liabilities ...................................................       1,181          981
   Accounts payable ...........................................................................       2,253        2,244
   Accrued expenses ...........................................................................      16,305       13,394
   Deferred revenue ...........................................................................       9,117        9,217
                                                                                                  ---------    ---------
Total current liabilities .....................................................................      29,856       26,836
Long-term liabilities:
   Senior subordinated notes ..................................................................     180,000      180,000
   Senior discount debentures, redemption value $89,000 .......................................      70,327       78,740
   Term Loan B, less current portion ..........................................................      98,500       97,500
   Borrowings under revolving credit facility .................................................      49,400       42,950
   Long-term liabilities, less current portion ................................................       2,338        1,518
   Deferred income taxes ......................................................................      23,026       24,586
                                                                                                  ---------    ---------
Total liabilities .............................................................................     453,447      452,130
   Senior mandatorily redeemable exchangeable cumulative preferred stock, $0.01 par value,
      21,000,000 shares authorized, 2,684,086 and 3,102,430 shares issued and outstanding at
      December 31, 2000 and 2001, respectively ................................................      68,752       79,467
      Aggregate involuntary liquidation preference $25 plus accrued dividends
   Junior mandatorily redeemable cumulative preferred stock, $0.01 par value,
      250,000 shares authorized, 87,864 and 96,984 shares
      issued and outstanding at December 31, 2000 and 2001, respectively ......................      89,328       98,601
                                                                                                  ---------    ---------
   Total mandatorily redeemable preferred stock ...............................................     158,080      178,068
Stockholders' deficit:
   Common stock, $0.01 par value, 2,655,000 and 2,185,177 shares
      authorized and issued 2000 and 2001, respectively 2,181,177 and 2,158,833 outstanding
      in 2000 and 2001, respectively ..........................................................          22           22
   Additional paid in capital .................................................................      16,444       16,444
   Notes receivable ...........................................................................      (1,183)        (987)
   Accumulated deficit ........................................................................     (63,278)    (102,959)
   Treasury stock at cost, 4,000 and 26,344 shares in 2000 and 2001, respectively .............         (31)        (181)
                                                                                                  ---------    ---------
   Total stockholders' deficit ................................................................     (48,026)     (87,661)
                                                                                                  ---------    ---------
Total liabilities and stockholders' deficit ...................................................   $ 563,501    $ 542,537
                                                                                                  =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2

<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                  YEARS ENDED DECEMBER 31,
                                            -----------------------------------
                                              1999         2000          2001
                                            ---------    ---------    ---------
<S>                                         <C>          <C>          <C>
REVENUES:
   Advertising ..........................   $ 121,430    $ 150,247    $ 152,382
   Circulation ..........................      27,543       32,318       35,347
   Job printing and other ...............      12,382       12,119       14,251
                                            ---------    ---------    ---------
Total revenues ..........................     161,355      194,684      201,980
OPERATING COSTS AND EXPENSES:
   Operating costs ......................      68,351       83,716       90,380
   Selling, general and administrative ..      51,522       63,817       66,581
   Depreciation and amortization ........      16,657       19,864       21,997
                                            ---------    ---------    ---------
Income from operations ..................      24,825       27,287       23,022
Interest expense ........................      30,818       38,412       38,348
Amortization of debt issue costs ........       1,495        1,817        2,362
Net gain on exchange and
   disposition of properties ............       6,196           --           --
                                            ---------    ---------    ---------
Loss before income taxes
   and extraordinary item ...............      (1,291)     (12,942)     (17,688)
Income taxes ............................         295          491        2,004
                                            ---------    ---------    ---------
Loss before extraordinary item ..........      (1,586)     (13,433)     (19,692)
Extraordinary gain on
   insurance proceeds ...................         485           --           --
                                            ---------    ---------    ---------
Net loss ................................      (1,101)     (13,433)     (19,692)
                                            ---------    ---------    ---------
Dividends on preferred stock ............     (13,595)     (17,018)     (19,989)
                                            ---------    ---------    ---------
Net loss available to common stockholders   $ (14,696)   $ (30,451)   $ (39,681)
                                            =========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3

<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                          COMMON     COMMON   ADDITIONAL   TREASURY
                                                                                          STOCK      STOCK     PAID-IN      STOCK
                                                                                          SHARES     AMOUNT    CAPITAL      SHARES
                                                                                        ---------    ------   ----------   ---------
<S>                                                                                     <C>          <C>      <C>          <C>
Balances at 12/31/98 ..............................................................     1,600,000     $16     $ 8,144           --
   Repurchase of common shares ....................................................            --      --          --       32,000
   Dividends on senior mandatory redeemable exchangeable
     cumulative preferred stock ...................................................            --      --          --           --
   Dividends on junior mandatory redeemable cumulative preferred stock ............            --      --          --           --
   Net income .....................................................................            --      --          --           --
   Repayment of notes receivable through forgiveness of debt and cash received ....            --      --          --           --
                                                                                       --------------------------------------------
Balances at 12/31/99 ..............................................................     1,600,000     $16     $ 8,144       32,000
   Stock options exercised ........................................................            --      --          --      (28,000)
   Issuance of common shares to Green III .........................................       524,605       5       7,414           --
   Issuance of common shares to management
         including shares issued under Employment Agreement Amendment .............        60,572       1         886           --
   Dividends on senior mandatory redeemable exchangeable cumulative preferred
       stock ......................................................................            --      --          --           --
   Dividends on junior mandatory redeemable cumulative preferred stock ............            --      --          --           --
   Net loss .......................................................................            --      --          --           --
   Repayment of notes receivable through forgiveness of debt and cash
       received ...................................................................            --      --          --           --
                                                                                       --------------------------------------------
Balances at 12/31/00 ..............................................................     2,185,177     $22     $16,444        4,000
   Repurchase of common shares ....................................................            --      --          --       22,344
   Dividends on senior mandatory redeemable exchangeable cumulative preferred
       stock ......................................................................            --      --          --           --
   Dividends on junior mandatory redeemable cumulative preferred stock ............            --      --          --           --
   Net loss .......................................................................            --      --          --           --
   Repayment of notes receivable through forgiveness of debt and cash
       received ...................................................................            --      --          --           --
                                                                                       --------------------------------------------
Balances at 12/31/01 ..............................................................     2,185,177     $22     $16,444       26,344
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                                                                                   TREASURY
                                                                                    STOCK       NOTES      ACCUMULATED
                                                                                    AMOUNT    RECEIVABLE     DEFICIT         TOTAL
                                                                                   --------   ----------   -----------     ---------
<S>                                                                                <C>        <C>          <C>             <C>
Balances at 12/31/98 ..........................................................     $  --      $  (501)     $ (18,051)     $(10,392)
   Repurchase of common shares ................................................      (250)          --             --          (250)
   Dividends on senior mandatory redeemable
       exchangeable cumulative preferred stock ................................        --           --         (8,021)       (8,021)
   Dividends on junior mandatory redeemable cumulative preferred stock ........        --           --         (5,574)       (5,574)
   Net loss ...................................................................        --           --         (1,101)       (1,101)
   Repayment of notes receivable through
       forgiveness of debt and cash received ..................................        --          251             --           251
                                                                                    ------------------------------------------------
Balances at 12/31/99 ..........................................................     $(250)     $  (250)     $ (32,747)     $(25,087)
   Stock options exercised ...................................................        219          (70)           (80)           69
   Issuance of common shares to Green III .....................................        --           --             --         7,419
   Issuance of common shares to management investors including shares
       issued under Employment Agreement Amendment ............................        --       (1,026)            --          (139)
   Dividends on senior mandatory redeemable exchangeable cumulative
       preferred stock ........................................................        --           --         (9,271)       (9,271)
   Dividends on junior mandatory redeemable cumulative preferred stock ........        --           --         (7,747)       (7,747)
   Net loss ...................................................................        --           --        (13,433)      (13,433)
   Repayment of notes receivable through forgiveness of debt and cash
       received ...............................................................        --          163             --           163
                                                                                    ------------------------------------------------
Balances at 12/31/00 ..........................................................     $ (31)     $(1,183)     $ (63,278)     $(48,026)
   Repurchase of common shares ................................................      (150)          --             --          (150)
   Dividends on senior mandatory redeemable exchangeable cumulative
       preferred stock ........................................................        --           --        (10,716)      (10,716)
   Dividends on junior mandatory redeemable cumulative preferred stock ........        --           --         (9,273)       (9,273)
   Net loss ...................................................................        --           --        (19,692)      (19,692)
   Repayment of notes receivable through forgiveness of debt and cash
       received ...............................................................        --          196             --           196
                                                                                    ------------------------------------------------
Balances at 12/31/01 ..........................................................     $(181)     $  (987)     $(102,959)     $(87,661)
                                                                                    ================================================
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                   YEARS ENDED DECEMBER 31,
                                                                                            ---------------------------------------
                                                                                              1999           2000            2001
                                                                                            --------       ---------       --------
<S>                                                                                         <C>            <C>             <C>
Cash flows from operating activities:
   Net loss ..........................................................................      $ (1,101)      $ (13,433)      $(19,692)
Adjustments to reconcile net loss to net cash provided by operating activities:
   Depreciation and amortization .....................................................        16,657          19,864         21,997
   Amortization of debt issue costs ..................................................         1,495           1,817          2,362
   Accretion of senior discount notes ................................................         6,711           7,518          8,413
   Non-cash compensation .............................................................           223             163            109
   Net gain on exchange and disposition of properties ................................        (6,196)             --             --
   Deferred taxes ....................................................................            --              --          1,560
   Extraordinary gain ................................................................          (485)             --             --
   Changes in assets and liabilities, net of acquisitions and dispositions:
      Accounts receivable, net .......................................................        (1,326)            372          1,354
      Inventory ......................................................................           139            (467)           218
      Prepaid expenses and other assets ..............................................        (2,552)           (417)          (314)
      Accounts payable ...............................................................        (2,338)            (38)          (242)
      Accrued expenses ...............................................................        (3,173)            427         (2,932)
      Deferred revenue ...............................................................           445             (72)            92
                                                                                            --------       ---------       --------
Net cash flows provided by operating activities ......................................         8,499          15,734         12,925
                                                                                            --------       ---------       --------
Cash flows from investing activities:
   Purchases of property, plant and equipment ........................................        (5,687)         (9,654)        (2,715)
   Proceeds on sale of properties ....................................................            --           2,103             --
   Acquisitions, net of cash acquired ................................................       (54,822)        (84,541)          (615)
                                                                                            --------       ---------       --------
Net cash flows used in investing activities ..........................................       (60,509)        (92,092)        (3,330)
                                                                                            --------       ---------       --------
Cash flows from financing activities:
   Net proceeds from issuing long-term debt ..........................................            --          98,505             --
   Borrowings (repayments) under revolving credit facility, net of fees ..............        53,500          71,750         (7,065)
   Net proceeds from issuing preferred stock .........................................            --          20,631             --
   Net proceeds from issuing common stock ............................................            --           7,444             --
   Repurchase of common stock ........................................................          (250)             --            (63)
   Payments of long term debt ........................................................            --              --         (1,000)
   Payments on long term liabilities .................................................          (405)           (945)        (1,029)
   Payment of debt on prior revolving credit facility ................................            --        (121,850)            --
                                                                                            --------       ---------       --------
   Net cash provided by (used in) financing activities ...............................        52,845          75,535         (9,157)
                                                                                            --------       ---------       --------
Net increase (decrease) in cash and cash equivalents .................................           835            (824)           438
Cash and cash equivalents, at beginning of period ....................................         1,025           1,860          1,036
                                                                                            --------       ---------       --------
Cash and cash equivalents, at end of period ..........................................      $  1,860       $   1,036       $  1,474
                                                                                            ========       =========       ========
Supplemental cash flow disclosure -
   Non cash gain on exchange of properties ...........................................      $  7,899       $      --       $     --
   Cash interest paid ................................................................        24,107          28,388         32,130
   Income taxes paid .................................................................           130             532            505
Repayment of notes receivable through forgiveness of debt ............................           223             163            109
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(1)   DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (A)   DESCRIPTION OF BUSINESS

Liberty Group Publishing, Inc. and subsidiaries is a leading U.S. publisher of
local newspapers and related publications that are the dominant source of local
news and print advertising in their markets. The Company owns and operates 339
publications in 17 states. The Company's total revenues in 2001 were derived
from advertising (75%), circulation (18%) and job printing and other (7%). Raw
materials, mainly newsprint and ink, are readily available from a number of
suppliers. No single customer accounts for a significant percentage of revenues.

      (B)   BASIS OF PRESENTATION

Liberty Group Publishing, Inc. ("LGP") was formed for purposes of acquiring a
portion of the daily and weekly newspapers owned by American Publishing Company
or its subsidiaries ("APC"), a wholly-owned subsidiary of Hollinger
International Inc. LGP is a holding company for its wholly-owned subsidiary,
Liberty Group Operating, Inc. ("Operating Company"). The consolidated financial
statements include the accounts of LGP and Operating Company and their
consolidated subsidiaries (the "Company"). All significant intercompany accounts
and transactions have been eliminated.

On January 27, 1998, the Company acquired from Hollinger virtually all of the
assets and assumed certain liabilities that were used primarily in the business
of publishing, marketing and distributing certain local newspapers (the "Initial
Acquisition"). The initial purchase price including fees and expenses was
$322,378. The effective date of the Initial Acquisition was January 1, 1998.

      (C)   USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

      (D)   INVENTORIES

Inventories consist principally of newsprint, which is valued at the lower of
cost or net realizable value. Cost is determined using the first-in, first-out
(FIFO) or moving-average method.

      (E)   PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is recorded at cost. Routine maintenance and
repairs are expensed as incurred.

Depreciation is calculated under the straight-line method over the estimated
useful lives, principally 25 years for buildings and improvements and 5 to 10
years for machinery and equipment. Leasehold improvements are amortized using
the straight-line method over the shorter of the lease term or estimated useful
life of the asset.


                                       F-7
<PAGE>
      (F)   INTANGIBLE ASSETS

Intangible assets consist principally of circulation-related assets,
noncompetition agreements with former owners of acquired newspapers, and the
excess of acquisition costs over estimated fair value of net assets acquired
(goodwill). The fair value of intangible assets acquired is determined primarily
through the use of independent appraisals. Amortization is calculated using the
straight-line method over the respective estimated useful lives ranging from 33
years for circulation related assets, up to 10 years for noncompetition
agreements depending upon the specifics of the agreement, and 40 years for
advertiser lists and goodwill.

The Company assesses the recoverability of its long-lived assets, such as
property, plant and equipment and intangible assets, whenever events or changes
in business circumstances indicate the carrying amount of the assets, or related
group of assets, may not be fully recoverable. Factors leading to impairment
include significant under performance relative to expected historical or
projected future operating losses, significant changes in the manner of use of
the acquired assets or the strategy for the Company's overall business, and
significant negative industry or economic trends. The assessment of
recoverability is based on management's estimate. If undiscounted future
operating cash flows do not exceed the net book value of the long-lived assets,
then a permanent impairment has occurred. The Company would record the
difference between the net book value of the long-lived asset and the fair value
of such asset as a charge against income in the consolidated statement of
operations if such a difference arose.

      (G)   REVENUE RECOGNITION

Circulation revenue, which is billed to the customers at the beginning of the
subscription period, is recognized on a straight-line basis over the term of the
related subscription. Advertising revenue is recognized upon publication of the
advertisements. The revenue for job printing is recognized upon delivery.

      (H)   INCOME TAXES

The Company has been, and anticipates that it will be for the foreseeable
future, in a tax loss position. Given the uncertainty as to the timing of the
Company's ability to utilize such losses to offset future taxable income, the
Company does not presently anticipate recording any tax benefit associated with
its pre-tax losses.

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
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.

      (I)   FAIR VALUE OF FINANCIAL INSTRUMENTS AND LONG-LIVED ASSETS

The Company has reviewed the following financial instruments and determined that
their fair values approximated their carrying values as of December 31, 2001:
cash equivalents; borrowings under revolving credit facility; accounts
receivable; accounts payable and accrued expenses; and long-term liabilities. It
is not practical to determine the fair value of Senior subordinated notes and
the Senior discount debentures as such securities are not actively traded.

      (J)   CASH EQUIVALENTS

Cash equivalents represent highly liquid certificates of deposit with a maximum
term at origination of three months or less.

      (K)   RECLASSIFICATIONS

Certain amounts in prior years' consolidated financial statements and related
notes have been reclassified to conform to the 2001 presentation.


                                      F-8
<PAGE>

      (L)   STOCK OPTIONS

The Company accounts for its stock options under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation". SFAS 123 permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS 123 also allows entities to apply the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and provide pro forma net income (loss) disclosures for
employee stock option grants made as if the fair value-based method defined in
SFAS 123 had been applied. Under APB 25, compensation expense would be recorded
on the date of the grant only if the current market price of the underlying
stock exceeded the exercise price. The Company has elected to apply the
provisions of APB 25 and provide the pro forma disclosures of SFAS 123.

(2) ACQUISITIONS AND DISPOSITIONS

During 1999, the Company acquired (net of exchanges and divestitures) 49
newspapers in 13 transactions for an aggregate purchase price of approximately
$54,822. The excess of the purchase prices over the estimated fair value of the
tangible and identifiable intangible assets acquired (goodwill) was
approximately $48,195.

In 2000, the Company acquired 43 publications in 12 transactions for an
aggregate cash purchase price of $84,541. The excess of purchase prices over the
estimated fair value of tangible and identifiable intangible assets acquired
(goodwill) was approximately $39,685.

The Company has accounted for these acquisitions using the purchase method of
accounting. Accordingly, the costs of each acquisition has been allocated to the
assets acquired and liabilities assumed based upon their respective fair values
using independent valuations where appropriate. The costs of certain intangible
assets acquired are being amortized over periods ranging from 5 to 40 years. The
results of operations are included in the consolidated financial statements
since the dates of acquisition.


                                      F-9
<PAGE>

(3)   PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                      DECEMBER 31,
                                                 ---------------------
                                                   2000        2001
                                                 --------    --------
<S>                                              <C>         <C>
Land .........................................   $  8,112    $  8,125
Buildings and improvements ...................     26,410      26,841
Machinery and equipment ......................     26,992      28,965
Furniture and fixtures .......................      2,932       3,199
                                                 --------    --------
                                                   64,446      67,130
Less accumulated depreciation and amortization     (8,629)    (14,594)
                                                 --------    --------
                                                 $ 55,817    $ 52,536
                                                 ========    ========
</TABLE>

(4)   INTANGIBLE ASSETS

Intangible assets consisted of the following:

<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                            --------------------------
                                               2000             2001
                                            ---------        ---------
<S>                                         <C>              <C>
Non-compete agreements ..................   $  17,351        $  17,536
Subscriber lists ........................      53,348           53,385
Advertiser lists ........................     202,606          202,756
Archives ................................      19,149           19,168
Goodwill ................................     212,103          212,528
                                            ---------        ---------
                                              504,557          505,373
Less accumulated amortization                 (36,953)         (52,955)
                                            ---------        ---------
                                            $ 467,604        $ 452,418
                                            =========        =========
</TABLE>

(5)   ACCRUED EXPENSES

Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                      --------------------------
                                                        2000               2001
                                                      -------            -------
<S>                                                   <C>                <C>
Accrued payroll ..........................            $ 1,500            $ 1,823
Accrued vacation .........................                646                594
Accrued bonus ............................              1,509                853
Accrued interest .........................             10,160              7,949
Accrued other ............................              2,490              2,175
                                                      -------            -------
                                                      $16,305            $13,394
                                                      =======            =======
</TABLE>


                                      F-10
<PAGE>

(6)   SENIOR SUBORDINATED NOTES AND SENIOR DISCOUNT DEBENTURES

The Senior Subordinated Notes and Senior Discount Debentures at December 31,
2000 and 2001 consist of the following:

<TABLE>
<CAPTION>
                                                                                      2000       2001
                                                                                    --------   --------
<S>                                                                                 <C>        <C>
Liberty Group Operating, Inc.
9.375% Senior Subordinated Notes
Due February 1, 2008 ............................................................   $180,000   $180,000

Liberty Group Publishing, Inc.
11.625% Senior Discount Debentures
$89,000 Redemption Value
Due February 1, 2009 ............................................................     70,327     78,740
                                                                                    --------   --------
Total Senior Subordinated Notes and Senior Discount Debentures ..................    250,327    258,740
Less current installments .......................................................         --         --
                                                                                    --------   --------

Total Senior Subordinated Notes and Senior Discount Debentures,
  excluding current .............................................................   $250,327   $258,740
                                                                                    ========   ========
</TABLE>

The acquisition of 166 newspapers from Hollinger in January 1998 was financed in
part by: (i) $180,000 from the issuance and sale by the Operating Company of
$180,000 aggregate principal amount of 9.375% Senior Subordinated Notes (the
"Notes") due February 1, 2008 and (ii) $50,500 from the issuance and sale by LGP
of $89,000 aggregate principal amount of 11.625% Senior Discount Debentures (the
"Debentures") due February 1, 2009.

The Notes were issued by the Operating Company and are general unsecured
obligations of the Operating Company. The Notes are irrevocably and
unconditionally jointly and severally guaranteed by each of the Operating
Company's existing and future subsidiaries. The Notes are redeemable for cash at
the option of the Operating Company anytime after February 1, 2003 at stipulated
redemption amounts. In the event of a change in control (as defined in the
Notes) of the Operating Company or the Company, the Company must offer to
repurchase the Notes at 101% of their principal amount.

The Debentures issued by LGP are general unsecured obligations and pay no cash
interest until February 1, 2003. The Debentures will, however, accrete on a
semi-annual equivalent bonds basis to a full principal amount of $89,000 on
February 1, 2003. Thereafter, cash interest on the Debentures will accrue and be
payable semi-annually on February 1 and August 1 of each year. The Debentures
are redeemable for cash at the option of LGP any time after February 1, 2003 at
stipulated redemption amounts. In the event of a change in control of LGP, LGP
must offer to repurchase the Debentures at 101% of their accreted value. LGP is
dependent upon the cash flows of the Operating Company to service these debt
repayment requirements.

(7)   REVOLVING CREDIT FACILITY AND TERM LOAN B

On April 18, 2000, the Company entered into an agreement to amend and restate
its $175,000 credit facility. The amendment and restatement extended the
maturity date of the revolving credit facility from January 2003 to March 2005,
and included the issuance of a $100,000 Term Loan B. The Term Loan B matures in
March 2007 and requires annual principal payments of $500 in 2000, $1,000 from
2001 through 2004, $36,125 in 2005, $47,500 in 2006, and $11,875 in 2007.

On May 10, 2001, the Company entered into an amendment to its $175.0 million
Revolving Credit Facility (the "Amended Revolving Credit Facility"). The Amended
Revolving Credit Facility decreased the aggregate commitment available under the
revolving credit facility $175.0 million to $135.0 million and amended the Cash
Coverage Ratio and Senior Leverage Ratio as defined within the Amended
Revolving Credit Facility.


                                      F-11
<PAGE>
The Term Loan B and the Amended Revolving Credit Facility bear interest at the
Company's option equal to the Base Rate (as defined in the Amended Revolving
Credit Facility) or the Eurodollar Rate (as defined in the Amended Revolving
Credit Facility) plus a margin that varies based upon a ratio set forth in the
Amended Revolving Credit Facility. Total year 2001 interest expense for the Term
B and the Revolving Credit Facility was $13,044. There is an individual margin
applicable to each of the Term Loan B and the Amended Revolving Credit Facility.
The Company pays a fee on the aggregate amount of outstanding letters of credit.
The Operating Company also pays a fee on the unused portion of the Amended
Revolving Credit Facility. No principal payments are due on the Amended
Revolving Credit Facility until the maturity date. At December 31, 2001, the
Operating Company had utilized $42,950 of the Amended Revolving Credit Facility
and $98,500 of the Term Loan B. The average interest rate on borrowings under
revolving credit facilities for 2001 was 7.85%.

(8)   LONG-TERM LIABILITIES

Long-term liabilities principally represent amounts due under
non-interest-bearing non-compete agreements, deferred acquisition consideration
and principal payments on capital leases through 2008.

      The aggregate amount of payments related to long-term liabilities at
December 31, 2001 are as follows:

<TABLE>
<S>                                            <C>
2002...................................        $  981
2003...................................           511
2004...................................           286
2005...................................           282
2006...................................           177
Thereafter.............................           262
                                               ------
                                               $2,499
</TABLE>

(9)   COMMON STOCK

In February 2000, the Company effected a 20-to-1 stock split of its Common
Stock. All share data has been retroactively restated to account for this stock
split. The Company then authorized the issuance of 55,000 additional shares of
Common Stock, of which 49,500 shares were made available in the form of stock
options for local publishers. Management investors also received 4,400 of these
new shares to eliminate any dilution of their original holdings that will result
from the issuance of shares under the Company's stock option plan.

On April 18, 2000, the Company approved the authorization of an additional
1,000,000 shares of Common Stock. Also on this date, the Company raised
approximately $7,419, net of issuance costs of $450, from the issuance of
524,605 shares of Common Stock at $15 per share to Green Equity Investors III,
L.P. ("Green III").

On August 11, 2000, Operating Company, Kenneth L. Serota (the "Executive"), LGP,
Green Equity Investors II, L.P. ("Green II") and Green III entered into an
Amendment to the Employment Agreement, dated as of such date (the "Employment
Agreement Amendment"), pursuant to which the Employment Agreement, dated as of
November 21, 1997, between Operating Company, the Executive, and LGP was
amended. Under and pursuant to the Employment Agreement Amendment, LGP issued
and sold to the Executive 4,372 shares of Common Stock of the Registrant and
184.42 shares of Series B 10% Junior Redeemable Cumulative Preferred Stock of
the Registrant (collectively, the "Loan Equity") for an aggregate purchase price
of $250. In addition, LGP issued and sold to the Executive 23,174 shares of
Common Stock of the Company for a purchase price per share of $15.00 for an
aggregate purchase price of $348.

On December 15, 2000, the Company issued and sold to management 28,626 shares of
Common Stock of the Company for an aggregate purchase price of $429.


                                      F-12
<PAGE>

During 2001, the Company repurchased 22,344 shares of Common Stock from former
management stockholders, the purchase price was paid through loan forgiveness
and $63 in cash.

(10)  REDEEMABLE PREFERRED STOCK

LGP has the authority to issue up to 23,905,000 shares of capital stock, of
which 21,250,000 shares are designated as Preferred Stock, par value $0.01 per
share, and 2,655,000 shares are designated as Common Stock. The acquisition of
166 newspapers from APC in January 1998, was financed in part from the proceeds
of (i) $45,000 from the issuance and sale of 1,800,000 shares of 14.75% Senior
Mandatory Redeemable Exchangeable Cumulative Preferred Stock (the "Senior
Preferred Stock"), (ii) $49,000 from the issuance and sale of 49,000 shares of
10% Junior Mandatory Redeemable Cumulative Preferred Stock (the "Junior
Preferred Stock"), and (iii) $8,000 from the issuance and sale of 1,600,000
shares of Common Stock.

On April 18, 2000, the Company raised approximately $20,631, net of issuance
costs of $1,500, from the issuance of 22,131 shares of its Junior Preferred
Stock to Green III at $1,000 per share.

On August 18, 2000, under and pursuant to the Employment Agreement Amendment,
the Company issued and sold to the Executive 4,372 shares of Common Stock of the
Registrant and 184.42 shares of Series B 10% Junior Redeemable Cumulative
Preferred Stock of the Registrant (collectively, the "Loan Equity") for an
aggregate purchase price of $250. See further discussion under Note 9.

The Senior Preferred Stock issued by the Company is senior to the Common Stock
and Junior Preferred Stock, with respect to dividend distributions and
distributions upon the liquidation, winding up or dissolution of the Company.
Dividends may be paid, at the Company's option, at any dividend payment date in
cash or in additional shares of Senior Preferred Stock having a liquidation
preference equal to the dividend amount. The liquidation preference of the
Senior Preferred Stock is $25 per share.

The Senior Preferred Stock is redeemable at the option of the Company any time
after February 1, 1999 at stipulated redemption amounts and is mandatorily
redeemable, subject to certain conditions, on February 1, 2010 at a price equal
to 100% of its liquidation preference per share. The Company has no obligation
to redeem the Senior Preferred Stock at any time prior to February 1, 2010. In
the event of a change in control of the Company, the Company must offer to
repurchase the Senior Preferred Stock at 100% of its liquidation preference per
share, plus accrued but unpaid dividends. LGP is dependent upon the cash flows
of the Operating Company to service these redemption requirements.

Except as required by law, the holders of shares of Senior Preferred Stock are
generally not entitled or permitted to vote on any matters voted upon by the
stockholders of the Company. Subject to certain conditions, the Senior Preferred
Stock is exchangeable, on any dividend payment date, in whole, but not in part,
at the option of the Company for 14.375% Senior Subordinated Debentures (the
"Exchange Debentures") of the Company maturing February 1, 2010. The Exchange
Debentures are redeemable prior to maturity on substantially the same terms as
the Senior Preferred Stock. Since inception, the Company has elected to pay all
of its Senior Preferred Dividends in additional shares of Senior Preferred
Stock. At December 31, 2001, the Company had accumulated but undeclared
dividends of $1,907.

The Junior Preferred Stock issued by LGP is senior to the Common Stock of LGP,
with respect to dividend distributions and distributions upon the liquidation,
winding up or dissolution of the Company. Dividends may be paid, at the
Company's option, at any dividend payment date in cash or in additional shares
of Junior Preferred Stock having a liquidation preference equal to the dividend
amount.

The Junior Preferred Stock is redeemable at the option of the Company at a price
equal to 100% of its liquidation preference per share and is mandatorily
redeemable on February 1, 2010 at a price equal to 100% of its Liquidation
preference per share. The Company has no obligation to redeem the preferred
shares at any time prior to February 1, 2010. In the event of a change in
control of the Company, the Company must offer to repurchase the Junior
Preferred Stock at 100% of its liquidation preference


                                      F-13
<PAGE>

per share, plus accrued but unpaid dividends. LGP is dependent upon the cash
flows of the Operating Company to service these redemption requirements.

Except as required by law, the holders of shares of Junior Preferred Stock are
generally not entitled or permitted to vote on any matters voted upon by the
stockholders of the Company. Since inception, the Company has elected to pay all
of its Junior Preferred Dividends in additional shares of Junior Preferred
Stock. At December 31, 2001, the Company had accumulated but undeclared
dividends of $1,616.


(11)  INCOME TAXES

Income taxes for the periods shown below consisted of:

<TABLE>
<CAPTION>
                                               CURRENT     DEFERRED       TOTAL
                                               -------     --------       ------
<S>                                            <C>         <C>            <C>
Year ended December 31, 1999:
  U.S. Federal ..........................       $   --       $   --       $   --
  State and local .......................          295           --          295
                                                ------       ------       ------
                                                $  295       $   --       $  295
                                                ======       ======       ======
Year ended December 31, 2000:
  U.S. Federal ..........................       $   --       $   --       $   --
  State and local .......................          491           --          491
                                                ------       ------       ------
                                                $  491       $   --       $  491
                                                ======       ======       ======
Year ended December 31, 2001:
  U.S. Federal ..........................       $   --       $1,205       $1,205
  State and local .......................          444          355          799
                                                ------       ------       ------
                                                $  444       $1,560       $2,004
                                                ======       ======       ======
</TABLE>

Income tax expense differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% to loss before income taxes and extraordinary
item as a result of the following:


                                      F-14
<PAGE>
<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                       ----------------------------
                                                        1999     2000        2001
                                                       ------   -------    --------
<S>                                                    <C>      <C>        <C>
Computed "expected" tax benefit....................... $(274)   $(4,400)   $ (6,014)
Increase in income taxes resulting from:
   Amortization of nondeductible goodwill ............   233        394       1,687
   State and local income taxes ......................   195        324         527
   Nondeductible meals and entertainment .............    40        110          96
   Cancellation of debt resulting in income for tax
     purposes.........................................    --         --      12,023
   Nondeductible expenses ............................     3          4          87
Change in Federal valuation allowance ................    98      4,059      (6,402)
                                                       -----    -------    --------
   ................................................... $ 295    $   491    $  2,004
                                                       =====    =======    ========
</TABLE>

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at 2000 and 2001 are presented below:

<TABLE>
<CAPTION>
                                                                                       2000        2001
                                                                                     --------    -------
<S>                                                                                  <C>         <C>
Deferred tax assets:
   Accounts receivable, principally due to allowance for doubtful accounts .......   $    622    $   408
   Accrued expenses ..............................................................      1,207      2,119
   Net operating losses ..........................................................     20,776     16,979
                                                                                     --------    -------
Gross deferred tax assets ........................................................     22,605     19,506
Less: valuation allowance ........................................................     (7,531)        --
                                                                                     --------    -------
Net deferred tax assets ..........................................................     15,074     19,506
                                                                                     --------    -------
Deferred tax liabilities:
Long-lived assets, principally due to differences in depreciation
  and amortization ...............................................................      8,789     19,200
Intangible assets, principally due to differences in amortization ................     29,311     24,892
                                                                                     --------    -------
                                                                                       38,100     44,092
                                                                                     --------    -------
   Net deferred tax liability ....................................................   $ 23,026    $24,586
                                                                                     ========    =======
</TABLE>

During 2001, an aggregate of approximately of the Company's Senior discount
notes was purchased in the open market at a discount by GEI II and GEI III. This
discount resulted in a cancellation of indebtedness for Federal income tax
purposes.

The valuation allowance increased by $7,531 in 2000 and decreased by $7,531 in
2001. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary difference become deductible. Management
considers the scheduled reversals of deferred tax Liability and tax planning
strategies in making this assessment.

At December 31, 2001, the Company has net operating loss carry-forwards
for Federal and state income tax purposes of $42,448, which are available to
offset future taxable income, if any. These federal and state net operating loss
carry-forwards begin to expire in 2018 and 2003, respectively.

The Company acquired deferred tax liabilities of $5,996 in 2000 through
corporate acquisitions.


                                      F-15
<PAGE>

(12)  EMPLOYEE BENEFIT PLANS

The Company maintains certain benefit plans for its employees.

The Company maintains a defined contribution plan conforming to IRS rules for
401(k) plans, for all of its employees satisfying minimum service requirements
as set forth under the plan. The plan allows for a matching contribution at the
discretion of the Company. The Company recorded $129, $271, and $296 in expenses
related to the plan in 1999, 2000 and 2001, respectively.

The Company maintains three non-qualified deferred compensation plans, as
described below, for certain of its employees.

The Company maintains the Liberty Group Publishing, Inc. Publishers' Deferred
Compensation Plan ("Publishers Plan"), a non-qualified deferred compensation
plan for the benefit of certain designated publishers of the Company's
newspapers. Under the Publishers' Plan, the Company credits an amount to a
bookkeeping account established for each participating publisher pursuant to a
pre-determined formula which is based upon the gross operating profits of each
such publisher's newspaper. The bookkeeping account is credited with earnings
and losses based upon the investment choices selected by the participant. The
amounts credited to the bookkeeping account on behalf of each participating
publisher vest on an installment basis over a period of 15 years. A
participating publisher forfeits all amounts under the Publishers' Plan in the
event that the publisher's employment with the Company is terminated for "cause"
as defined in the Publishers' Plan. Amounts credited to a participating
publisher's bookkeeping account are distributable upon termination of the
publisher's employment with the Company and will be made in a lump sum or
installments as elected by the publisher. The Company recorded $133, $160 and
$146 of compensation expense related to the plan in 1999, 2000 and 2001,
respectively.

The Company maintains the Liberty Group Publishing, Inc. Executive Benefit Plan
("Executive Benefit Plan"), a non-qualified deferred compensation plan for the
benefit of certain key employees of the Company. Under the Executive Benefit
Plan, the Company credits an amount, determined at the Company's sole
discretion, to a bookkeeping account established for each participating key
employee. The bookkeeping account is credited with earnings and losses based
upon the investment choices selected by the participant. The amounts credited to
the bookkeeping account on behalf of each participating key employee vest on an
installment basis over a period of 5 years. A participating key employee
forfeits all amounts under the Executive Benefit Plan in the event that the key
employee's employment with the Company is terminated for "cause" as defined in
the Executive Benefit Plan. Amounts credited to a participating key employee's
bookkeeping account are distributable upon termination of the key employee's
employment with the Company, and will be made in a lump sum or installments as
elected by the key employee. The Company recorded $65, $66 and $61 of
compensation expense related to the plan in 1999, 2000 and 2001, respectively.

The Company maintains the Liberty Group Publishing, Inc. Executive Deferral Plan
("Executive Deferral Plan"), a non-qualified deferred compensation plan for the
benefit of certain key employees of the Company. Under the Executive Deferral
Plan, eligible key employees may elect to defer a portion of their compensation
for payment at a later date. Currently, the Executive Deferral Plan allows a
participating key employee to defer up to 100% of his or her annual compensation
until termination of employment or such earlier period as elected by the
participating key employee. Amounts deferred are credited to a bookkeeping
account established by the Company for this purpose. The bookkeeping account is
credited with earnings and losses based upon the investment choices selected by
the participant. Amounts deferred under the Executive Deferral Plan are fully
vested and nonforfeitable. The amounts in the bookkeeping account are payable to
the key employee at the time and in the manner elected by the key employee.

(13)  STOCK OPTION PLANS

In February 1999, the Company adopted an Incentive Stock Option Plan, a
Non-Qualified Stock Option Plan (for Publishers), and a Non-Qualified Stock
Option Plan (for Corporate employees) (collectively, the "Plans") under which
certain employees may be granted the right to purchase shares of Common Stock.
The Company has reserved an aggregate of 49,480 shares of common stock for
issuance under the Plans. Stock options may be exercised only to the extent they
have vested in accordance


                                      F-16
<PAGE>
with the provisions described in the Plans. Options vest under the Incentive
Stock Option Plan on the first anniversary of the grant date. Options vest under
the Non-Qualified Stock Option Plan (for Publishers) on the eighth anniversary
of the grant date, however, the vesting period may be accelerated if certain
financial targets are met. Options vest under the Non-Qualified Stock Option
Plan (for Corporate employees) on the third anniversary of the grant date. Stock
options in the Plans, may be exercised only to the extent they have vested in
accordance with the provisions in the plans.

The Company applies APB 25 in accounting for the Plans. All options under the
Plans have been granted at exercise prices not less than the fair value at the
date of grant. Accordingly, no compensation expense has been recognized in the
financial statements for the Plans. Had the Company determined compensation cost
based on the fair value at the grant date for its stock option plan under SFAS
123, the Company's net loss for each of the years in the three-year period ended
December 31, 2001 would have been the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                         1999            2000           2001
                                       --------       ----------     ----------
<S>                                    <C>            <C>            <C>
Net loss             As reported       $(1,101)       $ (13,433)     $ (19,692)
                     Pro forma          (1,162)         (13,449)       (19,701)
</TABLE>

Under the Plans, the exercise price of each option equals the fair value of the
Company's Common Stock on the date of grant. The per share weighted-average fair
value of stock options granted during 1999 and 2000 using the Black-Scholes
option pricing model was $1.87 and $4.79, respectively. For purposes of
calculating compensation costs consistent with SFAS 123, the fair value of each
grant was estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions: expected dividend yield
of 0%, expected volatility of approximately 0%, risk-free interest rate of 4.75%
and 6.62% for 1999 and 2000, respectively, and an expected life of 10 years.
Stock option activity for the periods indicated is as follows:

<TABLE>
<CAPTION>
                                                                      WEIGHTED-AVERAGE
                                                          SHARES       EXERCISE PRICE
                                                         -------      ----------------
<S>                                                     <C>           <C>
Outstanding at date of adoption ................              --          $   --
  Granted ......................................          59,075            5.00
  Canceled .....................................             400            5.00
                                                         -------          ------
Outstanding on December 31, 1999 ...............          58,675          $ 5.00
                                                         =======          ======

  Granted ......................................          11,650          $10.00
  Canceled .....................................           6,700            7.54
  Exercised ....................................          28,000            5.00
                                                         -------          ------
Outstanding on December 31, 2000 ...............          35,625          $ 6.16
                                                         =======          ======

  Canceled .....................................           9,050            7.52
                                                         -------          ------
Outstanding on December 31, 2001 ...............          26,575          $ 5.62
                                                         =======          ======
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2001:


                                      F-17
<PAGE>
<TABLE>

<CAPTION>

                                             WEIGHTED-         WEIGHTED-                       WEIGHTED-
                                             AVERAGE           AVERAGE                         AVERAGE
EXERCISE                OPTIONS             REMAINING          EXERCISE         OPTIONS        EXERCISE
PRICE                 OUTSTANDING        CONTRACTUAL LIFE       PRICE         EXERCISABLE       PRICE
--------              -----------        ----------------     ---------       -----------     ---------
<S>                   <C>                <C>                  <C>             <C>             <C>
$ 5.00                  23,400              7.08 Years        $    5.00          5,087        $   5.00
$ 10.00                  3,175              8.08              $   10.00             --              --
                        ------              ----------        ---------          -----        --------
                        26,575              7.20 Years        $    5.62          5,087        $   5.00
                        ======                                                   =====
</TABLE>

(14)  RELATED PARTY TRANSACTIONS

SUMMARY DISCLOSURES REGARDING RELATED PARTIES
EXECUTIVE STOCK INVESTMENTS

Upon the commencement of his employment in January 1998 the Company loaned the
Chief Executive Officer $250,000 pursuant to an Unsecured Promissory Note. The
loan was forgiven on a pro rata daily basis from January 28, 1998 to January 28,
2001.

In addition, certain other executives were given the opportunity to purchase
common stock in the Company. Under the plan, each executive paid cash for 50% of
their stock investment and executed a five year note for the remaining 50%. The
Board of Directors approved the forgiveness of these loans including accrued
interest, in 3 equal installments in January 1999, 2000, and 2001. The Company
has the right to repurchase the common stock at the original cost if the
executive terminates his employment or is terminated for cause.

On August 11, 2000, Operating Company, Inc., Kenneth L. Serota (the
"Executive"), LGP, Green Equity Investors II, L.P. ("Green II") and Green Equity
Investors III, L.P. ("Green III") entered into an Amendment to the Employment
Agreement, dated as of such date (the "Employment Agreement Amendment"),
pursuant to which the Employment Agreement, dated as of November 21, 1997,
between the Registrant's Subsidiary, the Executive and the Company was amended.
Under and pursuant to the Employment Agreement Amendment, the Company issued and
sold to the Executive 4,372 shares of Common Stock of the Registrant and 184.42
shares of Series B 10% Junior Redeemable Cumulative Preferred Stock of the
Registrant for an aggregate purchase price of $250. In addition, the Company
issued and sold to the Executive 23,174 shares of Common Stock of the Company
for a purchase price per share of $15.00 for an aggregate purchase price of
$348,000.

On December 15, 2000, the Company issued and sold to management investors 28,626
shares of common stock of the Company for an aggregate purchase price of $429.

During 2001, the Company repurchased 22,344 shares of common stock from former
management stockholders. The purchase price was paid through loan forgiveness
and $63 in cash.

MAJORITY STOCKHOLDER FEES

The Company paid $1,320 and $1,480 in management fees in 2000 and 2001,
respectively and $356,000 and $475,000, in 2000 and 2001, respectively, in
acquisition finders fees to its majority common stockholder and is obligated to
pay acquisition finders fees of $475,000 at December 31, 2001 as a result of
prior years' acquisitions.

(15)  NEW ACCOUNTING PRONOUNCEMENTS

On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 142, "Goodwill and Other Intangible Assets". SFAS 142 replaces the
requirement to amortize intangible assets with indefinite lives and goodwill
with a requirement for an annual impairment test.


                                      F-18
<PAGE>
SFAS No. 142 also requires an evaluation of intangible assets and their useful
lives and a transitional impairment test for goodwill and certain intangible
assets upon adoption. After transition, the impairment tests will be performed
annually. SFAS 142 is effective for fiscal years beginning after December 15,
2001, as of the beginning of the year. The Company has not yet determined the
impact of the new accounting standards on its financial reporting.

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 144 "Accounting for Impairment of
Long-Lived Assets." The new standard supercedes FASB Statement No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." Although retaining many of the fundamental
recognition and measurement provisions of SFAS No. 121, the new rules
significantly change the criteria that would have to be met to classify an asset
as held-for-sale. The new standard also supercedes the provisions of Accounting
Principles Board Opinion No. 30 (APB No. 30), "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," and
will require expected future operating losses from discontinued operations to be
displayed in discontinued operations in the period(s) in which the losses are
incurred rather than as of the measurement date as presently required by APB No.
30. The provisions of SFAS No. 144 are effective for financial statements
beginning after December 15, 2001, but allow for early application. We plan to
adopt this standard as of the beginning of our new fiscal year on January 1,
2002. The provisions of SFAS No. 144 generally are to be applied prospectively,
therefore, the adoption of this standard will not affect previously reported
financial information. We are currently evaluating the impact of SFAS No. 144
will have on our results of operations and financial condition.

(16)  SUBSEQUENT EVENTS

On January 7, 2002, the Company sold the assets of The Ottumwa Courier, a daily
newspaper with a circulation of approximately 15,000. Along with the Courier,
the property publishes four other shopper publications. The total sales price
was $26,519 resulting in a gain for financial statement purposes of $7,060.


                                      F-19
<PAGE>

INDEPENDENT AUDITORS' REPORT ON SCHEDULE II

The Board of Directors
Liberty Group Publishing, Inc.:

Under date of March 18, 2002, we reported on the consolidated balance sheets of
Liberty Group Publishing, Inc. and subsidiaries as of December 31, 2000 and
2001, and the related consolidated statements of operations, stockholders'
deficit and cash flows for each of the years in the three-year period ended
December 31, 2001. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule. This consolidated financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on the consolidated financial statement schedule based on our audits.

In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.


                                        /s/ KPMG LLP

Chicago, Illinois
March 18, 2002


                                      S-1
<PAGE>

                                   SCHEDULE II

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
               ALLOWANCE FOR
                 DOUBTFUL                                        BEGINNING      BAD DEBT                        ENDING
                 ACCOUNTS                                         BALANCE       EXPENSE     WRITE-OFFS          BALANCE
                 --------                                        ---------      -------     ----------         --------
<S>                                                              <C>            <C>         <C>                <C>
Year ended December 31, 1999.................................     $  1,182      $   912      $  (953)          $  1,141
Year ended December 31, 2000.................................     $  1,141      $ 1,771      $(1,389)          $  1,523
Year ended December 31, 2001.................................     $  1,523      $ 1,249      $(1,314)          $  1,458
</TABLE>

See accompanying Independent Auditors' Report on Schedule II.


                                      S-2
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated: April 1, 2002                    LIBERTY GROUP PUBLISHING, INC.
                                        (Registrant)


                                        By /s/ KENNETH L. SEROTA
                                           -------------------------------------
                                           Kenneth L. Serota,
                                           President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant in
the capacities on the dates indicated.

Dated: April 1, 2002                    /s/ KENNETH L. SEROTA
                                        ----------------------------------------
                                        Kenneth L. Serota,
                                        President and Chief Executive
                                        Officer and Director

Dated: April 1, 2002                    /s/ DANIEL D. LEWIS
                                        ----------------------------------------
                                        Daniel D. Lewis,
                                        Vice President and Secretary,
                                        Vice President and Secretary,

Dated: April 1, 2002                    /s/ LEONARD GREEN
                                        ----------------------------------------
                                        Leonard Green, Director

Dated: April 1, 2002                    /s/ PETER NOLAN
                                        ----------------------------------------
                                        Peter Nolan, Director

Dated: April 1, 2002                    /s/ JONATHAN SEIFFER
                                        ----------------------------------------
                                        Jonathan Seiffer, Director

Dated: April 1, 2002                    /s/ JOHN DANHAKL
                                        ----------------------------------------
                                        John Danhakl, Director

Dated: April 1, 2002                    /s/ SCOTT T. CHAMPION
                                        ----------------------------------------
                                        Scott T. Champion, Director

<PAGE>

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
No.           Items
<S>           <C>                                                                         <C>
2.1           Asset Purchase Agreement dated as of November 21, 1997, among Liberty       Incorporated by reference to
              Group Publishing, Inc., Green Equity Investors II, L.P. (as guarantor),     Exhibit 2.1 included on the
              Liberty Group Operating , Inc., Hollinger International Inc., APAC-90       Company's Registration Statement
              Inc., American Publishing, and APAC-95, Inc.                                on Form S-4 (Registration No.
                                                                                          333-46957) (the "Company's S-4").

2.2           Asset Purchase Agreement dated as of November 21, 1997, among Liberty       Incorporated by reference to
              Group Publishing, Inc., Green Equity Investors II, L.P. (as guarantor),     Exhibit 2.2 included on the
              Liberty Group Operating, Inc., Hollinger International Inc., American       Company's S-4.
              Publishing Company of Illinois, APAC-90 Inc., and APAC-95, Inc.

2.3           Exchange Agreement dated as of November 21, 1997, between American          Incorporated by reference to
              Publishing Company of Illinois and Chicago Deferred Exchange                Exhibit 2.3 included on the
              Corporation.                                                                Company's S-4.

2.4           Qualified Exchange Trust Agreement, dated as of November 21, 1997 among     Incorporated by reference to
              the Chicago Trust Company, as Trustee under Trust No. 38347501, Chicago     Exhibit 2.4 included on the
              Deferred Exchange Corporation, and American Publishing Company of           Company's S-4.
              Illinois.

2.5           Amendment to Asset Purchase Agreement dated as of January 14, 1998,         Incorporated by reference to
              among Liberty Group Publishing, Inc., Green Equity Investors II, L.P.       Exhibit 2.5 included on the
              (as guarantor), Liberty Group Operating, Inc., Hollinger International      Company's S-4.
              Inc., APAL-90 Inc., American Publishing (1991) Inc. and APAC-95 Inc.

2.6           Amendment to Asset Purchase Agreement, dated as of January 14, 1998,        Incorporated by reference to
              among Liberty Group Publishing, Inc., Green Equity Investors II, L.P.       Exhibit 2.6 included on the
              (as guarantor), Liberty Group Operating, Inc., Hollinger International      Company's S-4.
              Inc., American Publishing Company of Illinois, APAC-90 Inc., American
              Publishing (1991) Inc. and APAC-95 Inc.

2.7           Amendment to Exchange Agreement, dated as of January 14, 1998, between      Incorporated by reference to
              American Publishing Company of Illinois and Chicago Deferred Exchange       Exhibit 2.7 included on the
              Corporation.                                                                Company's S-4.

2.8           Amendment to Qualified Exchange Trust Agreement, dated as of January        Incorporated by reference to
              14, 1998, among The Chicago Trust Company, as Trustee under No.             Exhibit 2.8 included on the
              38347501, Chicago.                                                          Company's S-4.

2.9           Agreement dated as of January 15, 1998, among Liberty Group Publishing,     Incorporated by reference to
              Inc., Green Equity Investors II, L.P. (as guarantor), Liberty Group         Exhibit 2.9 included on the
              Operating, Inc., Hollinger International, Inc., American Publishing         Company's S-4.
              Company of Illinois, APAC-90 Inc., American Publishing (1991) Inc., and
              APAC-95 Inc.

2.10          Agreement dated as of January 23, 1998, among  American Publishing          Incorporated by reference to
              Company of Illinois, Chicago Deferred Exchange Corporation and The          Exhibit 2.10 included on the
              Chicago Trust Company.                                                      Company's S-4.

2.11          Agreement dated as of January 26, 1998, among Liberty Group Publishing,     Incorporated by reference to
              Inc., Green Equity Investors II, L.P. (as guarantor), Liberty Group         Exhibit 2.11 included on the
              Operating, Inc. Hollinger International, Inc., American Publishing          Company's S-4.
              Company of Illinois, APAC-90 Inc., American Publishing (1991) Inc., and
              APAC-95 Inc.

3.1           Amended and Restated Certificate of Incorporation of Liberty Group          Incorporated by reference to
              Publishing, Inc.                                                            Exhibit 3.1 included on the
                                                                                          Company's Annual Report on Form
                                                                                          10-K for the year ending
                                                                                          December 31, 1999 (the
                                                                                          "Company's 1999 10-K").
</TABLE>

<PAGE>

<TABLE>
<S>           <C>                                                                         <C>
3.2           By-laws of Liberty Group Publishing, Inc.                                   Incorporated by reference to
                                                                                          Exhibit 3.2 included on the
                                                                                          Company's S-4.

4.1           Indenture dated as of January 27, 1998 among Liberty Group Publishing,      Incorporated by reference to
              Inc. and State Street Bank and Trust Company, as Trustee, including         Exhibit 4.1 included on the
              form of 11-5/8% Senior Discount Debentures due 2009.                        Company's S-4.

4.2           Indenture, dated as of January 27, 1998, among, Liberty Group               Incorporated by reference to
              Publishing, Inc. and State Street Bank and Trust Company, as Trustee,       Exhibit 4.3 included on the
              including form of 14-3/4% Senior Subordinated Debentures due 2010.          Company's S-4.

*10.1         Employment Agreement dated as of November 27, 1997, between Liberty         Incorporated by reference to
              Group Publishing, Inc. and Kenneth L. Serota.                               Exhibit 10.1 included on the
                                                                                          Company's S-4.

*10.2         Amendment to Employment Agreement, dated as of August 11, 2000, between     Incorporated by reference to
              Liberty Group Operating, Inc., Kenneth L. Serota, Liberty Group             Exhibit 10.2 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Green Equity          Company's Annual Report on Form
              Investors III, L.P.                                                         10-K for the year ending
                                                                                          December 31, 2000 (the
                                                                                          "Company's 2000 10-K").

*10.3         Management Stockholders Agreement , dated as of January 27, 1998, among     Incorporated by reference to
              Liberty Group Publishing, Inc., Green Equity Investors II, L.P. and         Exhibit 10.2 on the Company's
              Kenneth L. Serota.                                                          S-4.

*10.4         Amended and Restated Management Subscription and Stockholders               Incorporated by reference to
              Agreement, dated as of February 1, 2000, by and between Liberty Group       Exhibit 10.3 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Scott T. Champion.    Company's 1999 10-K.

*10.5         Amended and Restated Management Subscription and Stockholders               Incorporated by reference to
              Agreement, dated as of February 1, 2000, by and between Liberty Group       Exhibit 10.4 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Kevin O'Shea.         Company's 1999 10-K..

*10.6         Amended and Restated Management Subscription and Stockholders               Incorporated by reference to
              Agreement, dated as of February 1, 2000, by and between Liberty Group       Exhibit 10.5 included on the
              Publishing, Inc., Green Equity Investors II, L.P. and Gene A. Hall.         Company's 1999 10-K.

*10.7         Master Amendment, dated as of April 18, 2000, between Green Equity          Incorporated by reference to
              Investors II, L.P., Green Equity Investors III, L.P., Liberty Group         Exhibit 10.7 included on the
              Publishing, Inc. and persons listed on Schedule 1 attached thereto.         Company's 2000 10-K.

*10.8         Management Stock Purchase Agreement, dated as of December 15, 2000,         Incorporated by reference to
              between Liberty Group Publishing, Inc., Green Equity Investors II,          Exhibit 10.8 included on the
              L.P., Green Equity Investors III, L.P. and Kevin O'Shea.                    Company's 2000 10-K.

*10.9         Management Stock Purchase Agreement, dated as of December 15, 2000,         Incorporated by reference to
              between Liberty Group Publishing, Inc., Green Equity Investors II,          Exhibit 10.9 included on the
              L.P., Green Equity Investors III, L.P. and Scott T. Champion.               Company's 2000 10-K.

*10.10        Management Stock Purchase Agreement, dated as of December 15, 2000,         Incorporated by reference to
              between Liberty Group Publishing, Inc., Green Equity Investors II,          Exhibit 10.10 included on the
              L.P., Green Equity Investors III, L.P. and Gene A. Hall.                    Company's 2000 10-K.

10.11         Non-Competition Agreement dated as of January 27, 1998 between Liberty      Incorporated by reference to
              Group Operating, Inc. and Hollinger International, Inc.                     Exhibit 10.3 included on the
                                                                                          Company's S-4.

10.12         Stock Purchase Agreement, dated as of April 18, 2000, between Liberty       Incorporated by reference to
              Group Publishing, Inc. and Green Equity Investors III, L.P.                 Exhibit 10.12 included on the
                                                                                          Company's 2000 10-K.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>                                                                         <C>
10.13         Management Services Agreement, dated as of April 18, 2000, between          Incorporated by reference to
              Liberty Group Operating, Inc. and Leonard Green & Partners, L.P.            Exhibit 10.13 included on the
                                                                                          Company's 2000 10-K.

10.14         Amended and Restated Credit Agreement dated as of April 18, 2000, among     Incorporated by reference to
              Liberty Group Operating, Inc., Liberty Group Publishing, Inc., Citicorp     Exhibit 10.14 included on the
              USA, Inc. Citibank N.A. DB Banc Alex Brown, LLC, Wells Fargo Bank,          Company's 2000 10-K.
              N.A., and Bank of America, N.A.

10.15         Pledge Agreement dated as of January 27, 1998 from Liberty Group            Incorporated by reference to
              Publishing, Inc., Liberty Group Arizona Holdings, Inc., Liberty Group       Exhibit 10.6 included on the
              Arkansas Holdings, Inc., Liberty Group California Holdings, Inc.,           Company's S-4.
              Liberty Group Illinois Holdings, Inc., Liberty Group Iowa Holdings,
              Inc., Liberty Group Kansas Holdings, Inc., Liberty Group Missouri
              Holdings, Inc., Liberty Group New York Holdings, Inc., Liberty Group
              Pennsylvania Holdings, Inc., Liberty Group Management Services, Inc. to
              the lenders under the Credit Agreement.

10.16         Pledge Agreement dated as of January 27, 1998 from Liberty Group            Incorporated by reference to
              Operating, Inc. to the lenders under the Credit Agreement.                  Exhibit 10.7 included on the
                                                                                          Company's S-4.

10.17         Stock Purchase Agreement, dated as of December 16, 1998, by and between     Incorporated by reference to
              the shareholders of Life Printing & Publishing Co., Inc., Jongo Real        Exhibit 2.1 included on the
              Estate Partnership and Liberty Group Operating, Inc.                        Company's Current Report on Form
                                                                                          8-K (the "Company's 8-K") filed
                                                                                          on January 28, 1999.

10.18         Asset Exchange Agreement, dated as of July 1, 1999, among Liberty Group     Incorporated by reference to
              Operating, Inc., Liberty Group Pennsylvania Holdings, Inc. and              Exhibit 2.1 included on the
              Newspaper Holdings, Inc.                                                    Company's 8-K filed on July 16,
                                                                                          1999.

10.19         Asset Exchange Agreement, dated as of August 26, 1999, between Liberty      Incorporated by reference to
              Group Publishing, Inc.and Lee Enterprises, Incorporated.                    Exhibit 2.1 included on the
                                                                                          Company's 8-K filed on October
                                                                                          15, 1999.

10.20         Asset Purchase Agreement, dated as of August 26, 1999, between Liberty      Incorporated by reference to
              Group Publishing, Inc., and Lee Enterprises, Incorporated.                  Exhibit 2.2 included on the
                                                                                          Company's 8-K filed on October
                                                                                          15, 1999.

10.21         Asset Purchase Agreement, dated as of June 29, 2000, by and between         Incorporated by reference to
              Midwest Publishing Statutory Trust and Liberty Group Michigan Holdings,     Exhibit 2.1 included on the
              Inc.                                                                        Company's 8-K filed on July 14,
                                                                                          2000.

10.22         Joinder and Assumption Agreement, dated as of June 30, 2000, by IMG         Incorporated by reference to
              Holdings, Inc., Independent Media Holdings, Inc. and  Independent Media     Exhibit 2.2 included on the
              Group, Inc., and acknowledged by Midwest Publishing Statutory Trust and     Company's 8-K filed on July 14,
              Liberty Group Michigan Holdings, Inc.                                       2000.

10.23         Asset Purchase Agreement, dated as of October 31, 2000, by and between      Incorporated by reference to
              Mid-Illinois Newspapers, Inc. and Liberty Group Illinois Holdings, Inc.     Exhibit 2.1 included on the
                                                                                          Company's 8-K filed on November
                                                                                          16, 2000.

*10.24        Liberty Group Publishing, Inc.'s Publisher's Deferred Compensation Plan.    Incorporated by reference to
                                                                                          Exhibit 10.10 included on the
                                                                                          Company's Annual Report on Form
                                                                                          10-K for the period ended
                                                                                          December 31, 1998 (the
                                                                                          "Company's 1998 10-K").

*10.25        Liberty Group Publishing, Inc.'s Executive Benefit Plan.                    Incorporated by reference to
                                                                                          Exhibit 10.11 included on the
                                                                                          Company's 1998 10-K.
</TABLE>

<PAGE>

<TABLE>
<S>           <C>                                                                         <C>
*10.26        Liberty Group Publishing, Inc.'s Executive Deferral Plan.                   Incorporated by reference to
                                                                                          Exhibit 10.12 included on the
                                                                                          Company's 1998 10-K.

*10.27        Liberty Group Publishing, Inc.'s 1999 Stock Option Plan.                    Incorporated by reference to
                                                                                          Exhibit 10.15 included on the
                                                                                          Company's 1999 10-K.

 10.28        First Amendment to Amended and Restated Revolving Credit                    Incorporated by reference to
              Facility dated on May 10, 2001, between Liberty Group                       Exhibit 99 included on the
              Operating, Inc. (Borrower), Liberty Group Publishing, Inc.                  Company's March 31, 2001 10-Q.
              (Holdings), the Lenders, Citibank, N.A. (Issuing Bank) and
              Citicorp, USA, Inc. (Administrative Agent).

 10.29        First Supplemental Indenture dated December 13, 2001, between               Included herewith.
              Liberty Group Publishing, Inc. and State Street Bank and Trust
              Company (Trustee).

 10.30        Second Amendment to Credit Agreement and Limited Waiver dated               Included herewith.
              December 14, 2001 between Liberty Group Operating, Inc.
              (Borrower), Liberty Group Publishing, Inc. (Holdings), the
              Lenders, Citibank, N.A. (Issuing Bank) and Citicorp USA, Inc.
              (Administrative Agent).

21            Subsidiaries of Liberty Group Publishing, Inc.                              Included herewith.
</TABLE>

------------------
*     Management Contract/Compensatory Plan or Arrangement

The Company has agreed to furnish to the Commission, upon request, a copy of
each agreement defining the rights of holders of long-term debt not filed
herewith in reliance upon the exemption from filing applicable to any such
agreement pursuant to which the total amount of securities authorized does not
exceed 10% of the total consolidated assets of the Company.