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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

              FOR THE YEAR ENDED                        COMMISSION FILE NUMBER
               DECEMBER 31, 2000                             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 EXECUTIVE 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:

   14.75% SENIOR MANDATORY REDEEMABLE EXCHANGEABLE CUMULATIVE PREFERRED STOCK
                   11.625% SENIOR DISCOUNT DEBENTURES DUE 2009

  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, 2001 was 2,181,177. All Common Stock is owned by
affiliates of the Registrant and there is no public market for the Common Stock.


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                                TABLE OF CONTENTS

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

                  (b)  Reports on Form 8-K


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                         LIBERTY GROUP PUBLISHING, INC.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K 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. These risks, uncertainties
and other factors include the Company's ability to serve and retain existing
customers as well as its ability to attract and retain new advertising and
subscription customers; the Company's ability to continue its acquisition
strategy; the Company's ability to adjust to changes in technology, customer
preferences, enhanced competition and new competitors in its community markets;
collection of receivables; general economic and business conditions which may
reduce demand for advertising and its ability to attract and retain key
employees. The Company is not obligated to update or revise these
forward-looking statements to reflect new events or circumstances.

ITEM 1. BUSINESS

OVERVIEW

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, 2000, the Company owns and operates 336
publications in 16 states. The Company's total revenues are derived from
advertising (77% of 2000 total revenues), circulation (17%) and job printing and
other (6%).

The Company's primary costs and expenses are comprised of operating costs and
selling, general and administrative expenses. Compensation and employee benefits
are the Company's largest operating costs. The Company has been able to control
compensation and employee benefit expenses through the implementation of new
technologies and through the achievement of synergies from its strategy of
clustering its newspaper operations.

INITIAL ACQUISITION

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"). The
consolidated financial statements include the accounts of LGP and Operating
Company and its consolidated subsidiaries (the "Company").

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 $322.4
million. The effective date of the Initial Acquisition was January 1, 1998.
Revenues from the Initial Acquisition represented 54% and 45% of the Company's
total revenue in 1999 and 2000, respectively.

In Item 6. Selected Financial Data, the term "Company" when used with respect to
periods prior to January 1, 1998 refers to the combined group of newspapers sold
by APC (the Local Newspaper Group of American Publishing Company) and when used
with respect to periods subsequent to January 1, 1998 refers to Liberty Group
Publishing, Inc. and its consolidated subsidiaries. The combined historical
financial information of the newspapers acquired from APC prior to the Initial
Acquisition on January 1,




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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."

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 and goodwill are being amortized over
periods ranging from 5 to 40 years. Because of the purchase price allocation,
the accompanying selected financial data of Successor within Item 6 are not
directly comparable to those of Predecessor.

Prior to the Initial Acquisition, the Company operated as a business unit of APC
and as such did not file separate tax returns. The income tax provision included
in the Predecessor's financial data was computed as if the Predecessor were a
separate company. Subsequent to 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 incur
as a separate company.

The results of operations and cash flows of the Predecessor have been
consolidated with those of the Company from January 1, 1998, the effective date
upon which the Company and APC agreed as to the change of control of the
newspapers to the Company.


CAPITALIZATION - BORROWINGS

The Initial Acquisition, including the payment of related fees and expenses, was
financed in part by: (i) $180.0 million from the issuance and sale by the
Operating Company of $180.0 million aggregate principal amount of 9.375% Senior
Subordinated Notes (the "Notes") due February 1, 2008 and (ii) $50.5 million
from the issuance and sale by LGP of $89.0 million 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 joint 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 or, in certain limited circumstances, are partially
redeemable on or prior to February 1, 2001 at a redemption amount of 109.375% of
their principal amount. In the event of a change in control 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 $89.0 million
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 or, in certain limited circumstances, are
partially redeemable on or prior to February 1, 2001 at a redemption amount of
111.625% of their accreted value. 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.

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 ("Amended 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. The Term Loan B and the Amended Revolving Credit Facility bear



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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.

CAPITALIZATION - EQUITY

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, par value $0.01 per
share.

The Initial Acquisition, including the payment of related fees and expenses, was
financed in part from the proceeds of (i) $45.0 million 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) $49.0 million
from the issuance and sale of 49,000 shares of 10% Junior Mandatory Redeemable
Cumulative Preferred Stock (the "Junior Preferred Stock"), and (iii) $8.0
million from the issuance and sale of 1,600,000 shares of Common Stock.

The Senior Preferred Stock issued by LGP is senior to the Common Stock and
Junior Preferred Stock of the Company 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. 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. 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.

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. 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 per share. 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.

In February 2000, the Company effected a 20-to-1 stock split of its common
stock. All share and per share data included within this Form 10-K has been
retroactively restated to account for this stock split. The Company then
authorized the issuance of 55,000 additional common shares to be made available
in the form of stock options to local publishers. Management also received a
small portion 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.





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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 $7.4 million, net of issuance costs, from the issuance of 524,605
shares of common stock at $15 per share and approximately $20.6 million, net of
issuance costs, from the issuance of 22,131 shares of its Junior Preferred Stock
to Green Equity Investors III, L.P., at $1,000 per share.

On August 11, 2000, Operating Company, 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
(collectively, the "Loan Equity") for an aggregate purchase price of $250,000.
In addition, the Company issued and sold to the Executive 23,174 shares of
Common Stock of the Company (collectively, the "Additional Equity") for a
purchase price per share of $15.00 for an aggregate purchase price of $347,610.

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 $429,389. The
purchase price was paid through the issuance of notes.

After giving effect to the stock split, the Green III investment, the Employment
Agreement amendment, and the Management Investor issuance, 73% of the Junior
Preferred Stock and 66% of the common stock is owned by Green II, the
controlling stockholder of the Company. 27% of the Junior Preferred stock and
24% of the common stock is owned by Green III, 10% of the common stock and the
remaining portion of the Junior Preferred Stock (0.2%) is owned by the Company's
senior management team and publishers. These percentages are in effect as of
12/31/00.

Recent Acquisitions

The following publications with a combined total circulation of approximately
293,000 were acquired by the Company during 2000:

TITLE                                   LOCATION            TYPE OF PUBLICATIONS
-----                                   --------            --------------------

New Hampton Tribune                  New Hampton, IA             Weekly
The Advertiser                       New Hampton, IA             Shopper
Elko Daily Free Press                Elko, NV                    Daily
The Free Press Extra                 Elko, NV                    TMC
North Side News                      Jerome, ID                  Weekly
The Gooding County Leader            Jerome, ID                  Weekly
Lincoln County Journal               Jerome, ID                  Weekly
Dansville-Wayland Pennysaver         Dansville, NY               Shopper
Post South                           Plaquemine, LA              Weekly
West Bank Shopper                    Plaquemine, LA              TMC
Downers Grove Reporter (Wednesday)   Downers Grove, IL           Weekly
Downers Grove Reporter (Friday)      Downers Grove, IL           Weekly
Woodridge Progress                   Woodridge, IL               Weekly
Darien Progress                      Darien, IL                  Weekly
Westmont Progress                    Westmont, IL                Weekly
Lemont Reporter                      Lemont, IL                  Weekly
Clarendon Hills Progress             Clarendon Hills, IL         Weekly
Lisle Reporter                       Lisle, IL                   Weekly
Willowbrook Progress                 Willowbrook, IL             Weekly
Fulton County Shopper                Canton, IL                  Shopper





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McDonough County Shopper             Macomb, IL                    Shopper
The Geneseo Republic                 Geneseo, IL                   Weekly
Cambridge Chronicle                  Geneseo, IL                   Weekly
Orion Gazette                        Geneseo, IL                   Weekly
The Shopper                          Geneseo, IL                   Shopper
The Daily Telegram                   Adrian, MI                    Daily
Adrian Medley                        Adrian, MI                    TMC
Adrian Access Shopper                Adrian, MI                    Shopper
The Daily Reporter                   Coldwater, MI                 Daily
The Reporter Extra                   Coldwater, MI                 TMC
Coldwater Shoppers Guide             Coldwater, MI                 Shopper
Sturgis Journal                      Sturgis, MI                   Daily
The Weekender                        Sturgis, MI                   TMC
Sturgis Gateway Shopper              Sturgis, MI                   Shopper
Bronson Journal                      Bronson, MI                   Weekly
Clintonville Tribune-Gazette         Clintonville, WI              Weekly
Colon Express                        Colon, MI                     Weekly
Jonesville Independent               Jonesville, MI                Weekly
Union City Register-Tribune          Union City, MI                Weekly
Vicksburg Commercial Express         Vicksburg, MI                 Weekly
The Vicksburg Broadcast              Vicksburg, MI                 Shopper
Pekin Daily Times                    Pekin, IL                     Daily
Times Review                         Pekin, IL                     TMC








INDUSTRY BACKGROUND

Newspaper publishing is the oldest and largest segment of the media industry.
Due to a 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.





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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 newspaper advertising revenues, 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 local news
and other content leadership; revenue enhancement; strategic technological
investments; geographic clustering; high quality editorial content and
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, and entertainment, the Company's newspapers generate reader loyalty
and create franchise value. Because the Company's provision of local news is a
typically unique product in its markets, its newspapers differentiate themselves
from other forms of media and satisfy the demands of both its reader 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 important to 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 a 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.







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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.

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 1999 and 2000 were as follows:

                                               YEARS ENDED DECEMBER 31,
                                               ------------------------
                                             1999                  2000
                                             ----                  ----

Display.................................        54%                   56%
National................................         3%                    3%
Classified..............................        18%                   18%
Circulation.............................        17%                   17%
Job Printing & Other....................         8%                    6%
                                          ---------              --------
                                               100%                  100%







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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. In 1999 and 2000,
the Company incurred newsprint expense of approximately $7.2 million in 1999 and
$9.8 million in 2000. Newsprint expense as a percentage of revenue for 1999 and
2000 was 4.5% and 5.1%, respectively. Newsprint expense as a percentage of
revenue increased in 2000 due to higher newsprint prices during the year.

Employee Relations. The Company employs approximately 2,400 full-time employees
and approximately 1,300 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 with
magazines, radio, television and cable television, as well as with some weekly
publications and other advertising media, including electronic media, for
advertising and circulation revenue. 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.

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 to gather and distribute
its local news and other content. All of the Company's daily publications and
certain of the weeklies have their own web sites, currently numbering 83 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; classified advertising
represents 23% of the Company's advertising revenues compared with 40% for the
U.S newspaper industry as a whole.







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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.

The following table summarizes the publications owned by the Company as of
December 31, 2000:

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

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)
     NEWPORT
       NEWPORT DAILY 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)





                                       10

<PAGE>   12
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)
     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)





                                       11
<PAGE>   13

       DAILY ADVOCATE PRESS (D)
     GALATIA
       MONEY STRETCHER (S)
     GALESBURG
       PENNYSAVER PRESS (S)
     GENESEO
       HENRY COUNTY ADVERTIZER (S)
       THE GENESEO REPUBLIC (W)
       CAMBRIDGE GAZETTE (W)
       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)






                                       12
<PAGE>   14

       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)
       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)




                                       13
<PAGE>   15

      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)
      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)





                                       14
<PAGE>   16

       AREA VISITORS GUIDE (MAG)
       NEIGHBORS (MAG)
       HOMES (MAG)

KANSAS
     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)
       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





                                       15
<PAGE>   17

       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)
       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)






                                       16
<PAGE>   18

       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)
     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)






                                       17
<PAGE>   19

       CONSTITUTION TRIBUNE (D)
     GREENFIELD
       LAKE STOCKTON SHOPPER (S)
       MILLER PRESS (W)
       THE VEDETTE (W)
     JOPLIN
       BIG NICKEL (S)
     KIRKSVILLE
       KIRKSVILLE CRIER (S)
       KIRKSVILLE DAILY EXPRESS & NEWS (D)
     LAKE OZARKS
       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)
     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)





                                       18
<PAGE>   20

       THE FREE PRESS EXTRA (T)

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




                                       19
<PAGE>   21

     THE COUNTY PEDDLER (W)

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

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

                                     PART II

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

There is no public market for the Company's Common Stock. As set forth in Item
12, 1,964,605 shares (90% of the total shares outstanding) are owned by Green
Equity Investors II, L.P., and Green Equity Investors III, L.P. The remaining
shares of the Common Stock are owned by certain officers and other management
personnel of the Company, or held as treasury shares.






                                       20
<PAGE>   22
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
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this annual report on Form 10-K.


<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                            -----------------------
                                            1996          1997        1998         1999          2000
                                            ----          ----        ----         ----          ----
                                        (PREDECESSOR) (PREDECESSOR) (SUCCESSOR) (SUCCESSOR)   (SUCCESSOR)
                                                            (DOLLARS IN THOUSANDS)
<S>                                       <C>          <C>          <C>          <C>          <C>
STATEMENT OF
OPERATIONS DATA:
Revenues:
   Advertising .......................    $  67,756    $  69,602    $  82,062    $ 121,430    $ 150,247
   Circulation .......................       21,064       21,451       22,844       27,543       32,318
   Job printing and other ............        8,722        7,666        7,625       12,382       12,119
                                          ---------    ---------    ---------    ---------    ---------
Total revenues .......................       97,542       98,719      112,531      161,355      194,684
Operating costs ......................       39,660       39,309       45,976       68,351       84,056
Selling, general and administrative...       29,919       29,171       32,329       45,631       54,973
                                          ---------    ---------    ---------    ---------    ---------
Newspaper EBITDA .....................       27,963       30,240       34,226       47,373       55,655
Corporate expenses ...................            -            -        3,736        5,668        8,341
Non cash compensation ................            -            -          238          223          163
                                          ---------    ---------    ---------    ---------    ---------
EBITDA ...............................       27,963       30,240       30,252       41,482       47,151
Depreciation and amortization ........        7,854        7,470       11,917       16,657       19,864
                                          ---------    ---------    ---------    ---------    ---------
Income from operations ...............       20,109       22,769       18,335       24,825       27,287
Interest expense .....................       10,961       10,551       25,234       32,313       40,229
Net gain on exchange
   and disposition of properties .....            -            -            -        6,197            -
                                          ---------    ---------    ---------    ---------    ---------
Income (loss) before income
   taxes, and extraordinary items ....        9,141       12,218       (6,899)      (1,291)     (12,942)
Income taxes .........................        4,006        5,271            -          295          491
                                          ---------    ---------    ---------    ---------    ---------
Income (loss) before
   extraordinary item ................        5,135        6,949       (6,899)      (1,586)     (13,433)
Extraordinary gain on
   insurance proceeds ................            -            -            -          485            -
                                          ---------    ---------    ---------    ---------    ---------
Net income (loss) ....................    $   5,135    $   6,949    $  (6,899)   $  (1,101)   $ (13,433)
                                          ---------    ---------    ---------    ---------    ---------
Dividends on preferred stock .........                                (11,152)     (13,595)     (17,018)
                                                                    ---------    ---------    ---------
Net loss available to
   common stockholders ...............                              $ (18,051)   $ (14,696)   $ (30,451)
                                                                    =========    =========    =========
</TABLE>

Newspaper EBITDA includes income from operations adjusted to exclude
depreciation and amortization expense, corporate expenses, and non-cash
compensation and to also include amortization of debt issuance costs.




                                       21

<PAGE>   23
<TABLE>
<CAPTION>

                                                 YEAR ENDED DECEMBER 31,
                                                 -----------------------
                                    1996       1997         1998        1999          2000
                                    ----       ----         ----        ----          ----
                               (PREDECESSOR)(PREDECESSOR)(SUCCESSOR)  (SUCCESSOR) (SUCCESSOR)
                                                        (DOLLARS IN THOUSANDS)
<S>                                   <C>          <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
Cash and cash equivalents ....   $   1,768   $   1,452   $   1,025    $   1,860    $   1,036

Total assets .................     112,974     109,700     410,068      479,160      563,501
Total debt ...................           -           -     283,936      344,231      402,746
Senior Preferred Stock .......           -           -      51,460       59,481       68,752
Junior Preferred Stock .......           -           -      53,692       59,266       89,328
Stockholders' equity (deficit)     102,980      99,139     (10,392)     (25,087)     (48,026)
</TABLE>



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 its 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 2001, and beyond could differ
materially from those expressed in, or implied by, such forward-looking
statements. See "Disclosure Regarding Forward-Looking Statements" on page 1 for
a discussion of factors that could cause or contribute to such material
differences.

OVERVIEW

The Company is a leading U.S. publisher of local newspapers and related
publications that are a dominant source of local news and print advertising in
their markets. The Company's revenues are derived from advertising (77% of 2000
total revenues), circulation (17%) and job printing and other (6%).

The Company's primary costs and expenses are comprised of operating costs and
selling, general and administrative expenses. Salaries and employee benefits are
the Company's largest operating costs. The Company has been able to control
salaries and employee benefit expenses by realizing efficiencies from the
implementation of new technologies and the achievement of synergies from its
strategy of geographically clustering its newspaper operations.

Liberty Group Publishing, Inc. ("LGP") was formed for purposes of acquiring a
portion of the daily and weekly newspapers owned by APC. 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 its consolidated subsidiaries (the
"Company").

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 $322.4
million. The effective date of the Initial Acquisition was January 1, 1998.

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





                                       22
<PAGE>   24

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.




                                       23

<PAGE>   25
RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Total revenues for the year ended December 31, 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 the year ended December 31, 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 the year ended December 31, 2000 were $84.7 million or 44%
of revenue which was an increase of $16.3 million over the year ended December
31, 1999 when operating costs were $68.4 million or 42% of revenue. The increase
in operating costs as a percentage of revenue for the year ended December 31,
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 the year ended December 31,
2000 increased by $11.4 million, to $62.9 million or 32% of revenues from $51.5
million for the year ended December 31, 1999 when expenses were also 32% of
revenues.

EBITDA for the year ended December 31, 2000 increased by $5.7 million, to $47.2
million from $41.5 million for the year ended December 31, 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 the year ended December 31, 2000
increased by $3.2 million to $19.9 million from $16.7 million for the year ended
December 31, 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 the year ended December 31, 1999 to $27.3 million or 14% of
revenues for the year ended December 31, 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 deferred financing fees)
increased by $7.9 million to $40.2 million for the year ended December 31, 2000
from $32.3 million for the year ended December 31, 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 the year ended December 31, 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 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.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Total revenues for the year ended December 31, 1999 increased by $48.8 million,
or 43%, to $161.4 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 revenue. The increase in total
revenues for the year ended December 31, 1999, was comprised of





                                       24
<PAGE>   26

a $39.4 million or 48% increase in advertising revenue, a $4.8 million or 21%
increase in circulation revenue, and a $4.8 million or 62% increase in job
printing and other revenue.

Operating costs for the year ended December 31, 1999 were $68.4 million or 42%
of revenue which was an increase of $22.4 million over the year ended December
31, 1998 when operating costs were $46.0 million or 41% of revenue. The increase
in operating costs as a percentage of revenue for the year ended December 31,
1999 was primarily due to higher cost structures of acquired properties and
higher labor costs, which is partially offset by lower newsprint prices.

Selling, general and administrative expenses for the year ended December 31,
1999 increased by $15.2 million, to $51.5 million or 32% of revenues from $36.3
million for the year ended December 31, 1998 when expenses were 32% of revenues.
The stability in selling, general, and administrative expenses for the year
ended December 31, 1999 was primarily due to the implementation of cost controls
at the Company's publications.

EBITDA for the year ended December 31, 1999 increased by $11.2 million, to $41.5
million from $30.3 million for the year ended December 31, 1998. The increase
was primarily driven by acquisitions, same store growth in advertising revenue,
and lower newsprint prices, which was partially offset by same store reductions
in print revenue and rising labor costs. EBITDA as a percentage of revenue
declined from 27% to 26% due to lower margins at properties acquired during
1999.

Depreciation and amortization expenses for the year ended December 31, 1999
increased by $4.8 million to $16.7 million from $11.9 million for the year ended
December 31, 1998. The increase was due to depreciation of assets acquired in
1999, depreciation on capital expenditures made in 1999, and amortization of
intangibles from 1999 acquisitions.

Income from operations for the year ended December 31, 1999 increased by $6.5
million from $18.3 million or 16% of revenues to $24.8 million or 15% of
revenues. The increase was primarily driven by acquisitions, and on a same store
basis, growth in advertising revenue, and lower newsprint prices, which was
offset by same store reductions in printing revenue, higher labor costs and
higher depreciation and amortization expenses.

Total interest expense (including amortization of deferred financing fees)
increased by $7.1 million to $32.3 million from $25.2 million in 1998, 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 the year ended December 31, 1999, the Company recognized net loss of $1.1
million compared to a net loss of $6.9 million for the same period in 1998. This
change, $5.8 million, was due primarily to acquisitions, same store growth in
advertising revenue, lower newsprint prices, a net gain from the exchange and
disposition of certain publications and an extraordinary gain on insurance
proceeds.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows From Operating Activities. Cash flows provided by operating
activities for the year ended December 31, 2000 increased by $7.2 million to
$15.7 million compared with cash provided of $8.5 million for the year ended
December 31, 1999. The increase was primarily due to acquisitions.

Cash Flows From Investing Activities. Net cash used in investing activities for
the year ended December 31, 2000 reflects the acquisition of an additional 43
publications during 2000 for $84.5 million. Acquisitions are a key part of the
Company's strategy and will fluctuate over time due to the availability of
publications that meet the Company's acquisition strategy and the Company's
borrowing capacity. The Company's capital expenditures consist of the purchase
of machinery, equipment, furniture and fixtures relating to its publishing
operations. The Company has no material commitments for capital expenditures,
but may continue to pursue its strategy of opportunistically purchasing local
newspapers in contiguous markets and clusters of local






                                       25
<PAGE>   27

newspapers in new markets. The Company will pursue acquisitions that it believes
will contribute to the Company's overall cash flow growth.

Cash Flows From Financing Activities. Net cash flows provided by financing
activities for the year ended December 31, 2000 reflect borrowings made under
the Company's revolving credit facilities to fund acquisition costs, proceeds
from issuing common and preferred stock, proceeds from acquiring Term Loan B,
which were partially offset by a payment to extinguish a prior revolving credit
facility balance at April 18, 2000. 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.

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 believes that it has access to sufficient liquidity and capital
resources to meet its financial obligations for the foreseeable future. Under
the terms of the Company's Amended Revolving Credit Facility, the ratio of cash
interest paid to earnings before interest, taxes, depreciation, and amortization
("EBITDA") for the 12 month period increases from 1.5: 1 to 1.65: 1 on March 31,
2001. The Company believes there is a risk that it may not be in compliance with
the covenant as of March 31, 2001, and has obtained a waiver of any Event of
Default (as defined in the Amended Revolving Credit Facility) from the Lenders
(as defined in the Amended Revolving Credit Facility). See Note 7 to the
Consolidated Financial Statements for a summary of the terms of the Amended
Revolving Credit Facility. The Company is dependent upon the cash flows of the
Operating Company to fund the repayment of its borrowings and the redemption
requirements under its respective preferred stock agreements.

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 the year ended December 31, 2000 was $40.2 million including non-cash
interest of $7.5 million and amortization of debt issuance costs of $1.8
million. The degree to which LGP is leveraged could have important consequences,
including the following: (i) for the fiscal year ending December 31, 2001, 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.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 ("Amended 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. 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 and restated credit agreement. 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.






                                       26
<PAGE>   28

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information in response to this item 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

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.

NAME                  AGE   POSITION
----                  ---   --------

Kenneth L. Serota      39   President, CEO, and Director
Scott T. Champion      41   Executive Vice President - Operations, and Director
Kevin O'Shea           41   Senior Executive Vice President, CFO, and Director
Gene A. Hall           49   Senior Vice President - Midwestern Region
Randy Cope             40   Vice President - Missouri, Kansas, Arkansas
Kelly Luvison          41   Vice President - Western New York Region
Ted Mike               54   Vice President - Eastern Region
Leonard I. Green       66   Chairman of the Board of Directors
Gregory J. Annick      37   Director
John G. Danhakl        45   Director
Peter J. Nolan         42   Director

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.

Kevin O'Shea is Executive Vice President and the Chief Financial Officer. Mr.
O'Shea is also a Director of LGP. Mr. O'Shea served as Vice President and
Corporate Treasurer of Bell & Howell Company from February 1996 to March 1998.
From 1989 to 1996, Mr. O'Shea served as Vice President and Corporate Treasurer
of Spencer Stuart, a global consulting firm. Prior thereto, Mr. O'Shea served as
Vice President and treasurer/group controller for The Pritzker Organization, a
large and diversified family holding company.





                                       27
<PAGE>   29
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
29 years of experience in the newspaper industry. Mr. Hall is also a director of
First Security Bank & Trust.

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.

Ted 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 1991. Mr. Mike currently serves as
the publisher of The Evening Times and The Evening Times Extra in Sayre,
Pennsylvania, publications which were acquired by the Company in the Initial
Acquisition, and has served in such position since 1991. Mr. Mike has more than
31 years of experience in the newspaper industry.

Leonard Green is the Chairman of the Board of Leonard Green & Partners, L.P.
("Partners"), a merchant banking firm that manages Green Equity Investors II,
L.P. ("GEI") since the inception of Partners and Green II in 1994. Since 1989,
Mr. Green has been individually, or through a corporation, a partner in a
merchant banking firm affiliated with Partners. Prior to 1989, Mr. Green had
been a partner at Gibbons, Green, van Amorongen for more than six years. Mr.
Green is also a director of Rite Aid Corporation and several private companies.

Gregory J. Annick serves as a Director of the Company. He has been an executive
officer of Partners since the formation of Partners and GEI in 1994. He joined a
merchant-banking firm affiliated with Partners as an associate in 1989, became a
principal in 1993, and through a corporation became a partner in 1994. From 1988
to 1989, he was an associate with the merchant banking firm of Gibbons, Green,
van Amerongen. Before that time, Mr. Annick was a financial analyst in mergers
and acquisitions with Goldman, Sachs & Co. Mr. Annick is also a director of
several private companies.

John G. Danhakl serves as a Director of the Company. He has been an executive
officer of Partners 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 Twinlab Corporation, The Arden Group, Inc., and several private
companies.

Peter J. Nolan is a Director of the Company. He has been an executive officer
and an equity owner of Partners, a merchant-banking firm that manages GEI, since
April 1997. Mr. Nolan had previously been a Managing Director of DLJ and Co-Head
of DLJ's Los Angeles Investment Banking Division and had been with DLJ since
1990. Prior to joining DLJ, Mr. Nolan was a First Vice President at Drexel. Mr.
Nolan is also a director of several private companies.





                                       28
<PAGE>   30
ITEM 11. EXECUTIVE COMPENSATION.

                             ANNUAL
                         COMPENSATION
                         ------------
NAME AND POSITION             YEAR    SALARY     BONUS       OTHER      TOTAL
-----------------             ----    ------     -----       -----      -----

Kenneth L. Serota .........   1998   $338,242   $150,000   $380,175(1) $868,417
President and CEO .........   1999    375,000    400,000    121,013(2)  896,013
                              2000    400,000    300,000    140,653(3)  840,653

Kevin O'Shea ..............   1998    116,923     75,000      5,106     197,029
Executive V.P. - CEO ......   1999    171,429    200,000     18,656     390,085
                              2000    200,000    150,000     24,808     374,808

Scott T. Champion .........   1998     58,344     94,455     26,680     179,479
Executive V.P. - Operations   1999    125,000     75,000     18,520     218,520
                              2000    150,000     85,000     24,808     259,808

Gene A. Hall ..............   1998     45,538     83,751     30,386     159,675
Senior V.P ................   1999    125,000     50,000     18,723     193,723
                              2000    132,788     38,200     24,808     195,808

Randy Cope ................   1998     10,000          0          0      10,000
Vice President ............   1999    120,000     45,750      5,154     170,904
                              2000    130,000     62,000      5,808     197,807


(1)  Mr. Serota's 1998 other compensation consists of a transfer of 1,600 common
     shares from the controlling shareholder valued at $160,000, plus the
     related tax gross-up of $132,237, upon the commencement of his employment,
     plus $77,169 in loan forgiveness pursuant to his employment agreement, plus
     a $5,000 contribution to a deferred compensation plan and a car allowance
     of $5,769.

(2)  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.

(3)  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 .





                                       29
<PAGE>   31
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                                                                     No.
                                                       % Owned    of Shares
                                                       -------    ---------

10% Junior Mandatory Redeemable
Preferred Stock:

Green Equity Investors II, L.P.
11111 Santa Monica Boulevard ...................          73%      64,346
Suite 2000
Los Angeles, CA 90025

Green Equity Investors III, L.P.
11111 Santa Monica Boulevard ...................          27%      23,329
Suite 2000
Los Angeles, CA 90025

Kenneth L. Serota ..............................         -0-%         189
President and CEO

TOTAL ..........................................         100%      87,864

Common Stock:

Green Equity Investors II, L.P. ................          66%   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

Kevin O'Shea ...................................           1%      22,344
Executive V.P. - CFO

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

Other Management Stockholders and
Treasury Stock .................................           3%      59,794

TOTAL ..........................................         100%   2,185,177

Directors and Executive Officers own 97% of the outstanding common stock as a
group.




                                       30
<PAGE>   32

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

EMPLOYMENT AGREEMENT

LGP and Kenneth Serota have entered into an employment agreement, dated as of
November 21, 1997 (the "Employment Agreement"), whereby Mr. Serota has 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 provides 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, Mr. Serota is eligible to receive a bonus based on the
attainment of applicable performance standards agreeable to the Company and Mr.
Serota, including standards based on annual revenue growth, EBITDA growth,
completion of reasonably acceptable acquisitions and growth of acquired
properties. The Employment Agreement also provides, subject to certain
exceptions, that upon a termination of Mr. Serota's employment during the term
thereof (other than for "cause" as defined therein or voluntary resignation),
the Company is generally obligated to pay Mr. Serota 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. The Company has also loaned to Mr. Serota $250,000 pursuant to
an Unsecured Promissory Note dated January 27, 1998. The amount of the loan will
be forgiven by the Company pro rata on a daily basis during the initial
three-year term of the Employment Agreement and shall be forgiven in its
entirety if Mr. Serota is terminated by the Company without cause, if Mr. Serota
terminates his employment for good reason (as defined therein), death or
disability, or upon the consummation of an initial public offering of securities
of the Company.

On January 27, 1998, in satisfaction of the Company's obligations under the
terms of the Employment Agreement, GEI transferred to Mr. Serota 2% of the
fully-diluted equity of LGP and, in addition, Mr. Serota purchased from GEI an
additional 2% of the fully-diluted equity of the Company for the price and on
the terms and conditions such equity was purchased by GEI. The Company loaned to
Mr. Serota 50% of the purchase price of such shares pursuant to a Secured
Recourse Promissory Note dated January 27, 1998. Such loan bears interest at a
rate equal to the applicable federal rate for loans of the same maturity as of
the date of the loan. The outstanding principal amount of the loan, together
with all interest accrued thereon, will be due and payable in full upon the
earlier of (i) a change in control (as defined in the Employment Agreement) or
(ii) January 1, 2001. The Employment Agreement provides certain "call" rights to
the Company, which are generally exercisable upon Mr. Serota's termination of
employment with the Company.

On August 11, 2000, Liberty Group Operating, Inc. (the "Registrant's
Subsidiary"), Kenneth L. Serota (the "Executive"), Liberty Group Publishing,
Inc. (the "Registrant"), 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
Registrant 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 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






                                       31
<PAGE>   33

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").

In addition, under and pursuant to the Employment Agreement Amendment, the
Registrant 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, payable in the form of a full recourse,
unsecured promissory note of the Executive which promissory note shall, subject
to acceleration on certain specific events specified therein, mature on December
31, 2025, and shall be subject to forgiveness at the times and on the conditions
specified in the Employment Agreement in the event that certain performance
standards of the Registrant's Subsidiary or other events specified in the
Employment Agreement are satisfied or occur. In the event that the Executive's
employment with the Registrant's Subsidiary is terminated by the Registrant's
Subsidiary for Cause or by the Executive for Good Reason (each as defined in the
Employment Agreement), the Registrant, Green II or Green III shall have the
option under the Employment Agreement Amendment to purchase the Loan Equity at a
purchase price per share of $15.00 per share of Common Stock and $1,000 per
share of Junior Redeemable Cumulative Preferred Stock, plus accrued and unpaid
dividends on each such share of Common Stock or Junior Redeemable Cumulative
Preferred Stock; provided, however, that such repurchase option shall expire (a)
with respect to 33.33% of such Loan Equity on each of January 1, 2002 and
January 1, 2003 and with respect to the remainder of such Loan Equity on January
1, 2004 provided that the Executive is employed by the Registrant's Subsidiary
on each such date and (b) with respect to 100% of such Loan Equity on a
Liquidity Event (as defined in the Employment Agreement Amendment) provided that
the Executive is employed by the Registrant's Subsidiary immediately prior to
such Liquidity Event.

In addition, under and pursuant to the Employment Agreement Amendment, the
Registrant issued and sold to the Executive 23,174 shares of Common Stock of the
Registrant (collectively, the "Additional Equity") for a purchase price per
share of $15.00 for an aggregate purchase price of $347,610, payable in the form
of a non-recourse, secured promissory note of the Executive in the original
principal amount of $225,947 and a full recourse, secured promissory note of the
Executive in the original principal amount of $121,663 (collectively, the
"Additional Equity Notes"), each of which Additional Equity Notes shall, subject
to acceleration on certain specific events specified therein, mature on December
31, 2025 and is secured by the Additional Equity. The Registrant, Green II and
Green III shall have the option under the Employment Agreement Amendment to
purchase the Additional Equity at a purchase price per share of $15.00 (a) in
the event that the aggregate internal rate of return realized by Green III on
the Common Stock of the Registrant and the Junior Redeemable Cumulative
Preferred Stock of the Registrant purchased by Green III pursuant to that
certain Stock Purchase Agreement, dated as of April, 18, 2000, between the
Registrant and Green III does not equal or exceed twenty-five percent (25%)
under the circumstances and on the conditions specified in the Employment
Agreement Amendment or (b) in the event that the Executive's employment with the
Registrant's Subsidiary is terminated by the Registrant's Subsidiary for Cause
or by the Executive for Good Reason (each as defined in the Employment
Agreement), provided, however, that the repurchase option described in this
clause (b) shall expire (i) with respect to 33.33% of such Additional Equity on
each of January 1, 2002 and January 1, 2003 and with respect to the remainder of
such Additional Equity on January 1, 2004 provided that the Executive is
employed by the Registrant's Subsidiary on each such date and (ii) with respect
to 100% of such Additional Equity on a Liquidity Event (as defined in the
Employment Agreement Amendment) provided that the Executive is employed by the
Registrant's Subsidiary immediately prior to such Liquidity Event.

The foregoing summary of the terms of the Employment Agreement Amendment is
qualified in its entirety by reference to the provisions thereof, a copy of
which is filed as an exhibit to the Form 10-Q filing as of September 30, 2000,
and is hereby incorporated herein by reference.





                                       32
<PAGE>   34
MANAGEMENT SHARES

On January 27, 1998, Green II transferred an aggregate of 64,000 shares of
Common Stock ("Management Shares") to the Chief Executive Officer of the
Company, Mr. Serota, pursuant to a management stockholders agreement (the
"Management Stockholders Agreement"). The Management Stockholders Agreement
contains a "call" option exercisable by LGP upon termination of Mr. Serota's
employment with LGP or Operating Company, a right of first refusal in favor of
Mr. Serota, certain "piggyback" registration rights, "tag-along" sale rights and
"drag-along" sale obligations consistent with the terms of the Employment
Agreement. In addition, LGP or Green II may sell shares of LGP Common Stock to
other current or prospective officers and employees of Operating Company
(together with the Senior Management Investors, the "Management Investors").
During 1999, LGP repurchased 32,000 outstanding common shares for a total price
of $250,000 from management shareholders who terminated their employment with
the Company.

Shares of LGP Common Stock were sold to Management Investors pursuant to
Management Subscription and Stockholders Agreements among LGP, Green II and the
respective Management Investor (each such agreement, a "Management Share
Agreement"). Pursuant to the Management Share Agreements, transfers of the
Management Shares (other than transfers to certain related transferees) are
subject to various restrictions, including a right of first refusal in favor of
LGP. Each Management Share Agreement also contains a "call" option exercisable
by LGP upon termination of the Management Investor's employment with LGP,
Liberty Group Operating and their subsidiaries. The Management Share Agreements
also contain certain "piggyback" registration rights, "tag-along" sale rights
and "drag-along" sale obligations. These rights and obligations lapse upon the
occurrence of certain events. Each Management Share Agreement contains a
noncompetition provision which prohibits a Management Investor from competing,
directly or indirectly, with the Company's publications located within certain
designated communities for a period of three years from the termination date of
such Management Investor's employment with the Company or its subsidiaries.

In February 2000, the Company effected a 20-to-1 stock split for its common
stock, bringing the total shares of common stock issued to 1,600,000. All share
and per share data included within this Registration Statement has been
retroactively restated to account for this stock spilt. The Company then
authorized the issuance of 55,000 additional common shares, of which 49,500
shares were made available in the form of stock options for local publishers.
Members of the management team 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 August 11, 2000, Liberty Group Operating, Inc., Kenneth L. Serota (the
"Executive"), Liberty Group Publishing, Inc. ("Company"), 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 (collectively, the "Loan
Equity") for an aggregate purchase price of $250,000. In addition, the Company
issued and sold to the Executive 23,174 shares of Common Stock of the Company
(collectively, the "Additional Equity") for a purchase price per share of $15
for an aggregate purchase price of $347,610.

Under and pursuant to the Management Stock Purchase Agreement, dated December
15, 2000, the Registrant issued and sold to management 28,626 shares of Common
Stock of the Registrant (collectively, the "Additional Equity") for a purchase
price per share of $15.00 for an aggregate purchase price of $429,389, payable
in the form of a non-recourse, secured promissory note of the Management
Investor in the original principal amount of $279,103 and a full recourse,
secured promissory note of the Management Investor in the original principal
amount of $150,286 (collectively, the "Additional Equity Notes"), each of which
Additional Equity Notes shall, subject to acceleration on certain specific
events specified therein, mature on December 31, 2025 and is secured by the
Additional Equity. The Registrant, Green II and Green III shall have the option
under the Management Stock Purchase Agreement to purchase the Additional Equity
at a purchase price per share of $15 (a) in the event that the





                                       33
<PAGE>   35

aggregate internal rate of return realized by Green III on the Common Stock of
the Registrant and the Junior Redeemable Cumulative Preferred Stock of the
Registrant purchased by Green III pursuant to that certain Stock Purchase
Agreement, dated as of April, 18, 2000, between the Registrant and Green III
does not equal or exceed twenty-five percent (25%) under the circumstances and
on the conditions specified in the Management Stock Purchase Agreement or (b) in
the event that the management employment with the Registrant's Subsidiary is
terminated by the Registrant's Subsidiary for Cause or by the Management
Investor for Good Reason (each as defined in the Management Stock Purchase
Agreement), provided, however, that the repurchase option described in this
clause (b) shall expire (i) with respect to 33.33% of such Additional Equity on
each of January 1, 2002 and January 1, 2003 and with respect to the remainder of
such Additional Equity on January 1, 2004 provided that the Management Investor
is employed by the Registrant's Subsidiary on each such date and (ii) with
respect to 100% of such Additional Equity on a Liquidity Event (as defined in
the Management Stock Purchase Agreement) provided that the Management Investor
is employed by the Registrant's Subsidiary immediately prior to such Liquidity
Event.

COMPENSATION OF DIRECTORS AND MANAGEMENT FEES

Individuals who are officers of Operating Company and LGP, as well as Messrs.
Green, Annick, 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 and Partners an annual
management fee of $1.5 million. The total fee paid in 2000 was $1.3 million due
to an increase from $1.0 million to $1.5 million taking effect in May 2000. 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 and Partners also received acquisition finders fees of $356,000 in
2000 and is owed $850,000 at December 31, 2000.





                                       34

<PAGE>   36
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, 1999 and 2000.

         Consolidated Statements of Operations for the years ended December 31,
         1998, 1999, and 2000.

         Consolidated Statements of Stockholders' Equity (Deficit) for the years
         ended December 31, 1998, 1999, and 2000.

         Consolidated Statements of Cash Flows for the years ended December 31,
         1998, 1999, and 2000.

         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
         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.

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.

</TABLE>





                                       35
<PAGE>   37
<TABLE>

<S>           <C>                                                                         <C>
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           Certificate of Incorporation of Liberty Group Publishing, Inc.              Incorporated   by   reference  to
                                                                                          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    Included herewith.
              Liberty  Group  Operating,   Inc.,  Kenneth  L.  Serota,  Liberty  Group
              Publishing,  Inc.,  Green  Equity  Investors  II, L.P.  and Green Equity
              Investors III, L.P.

*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.
</TABLE>




                                       36
<PAGE>   38
<TABLE>
<S>           <C>                                                                         <C>
*10.7         Master  Amendment,  dated as of April 18,  2000,  between  Green  Equity    Included herewith.
              Investors II, L.P.,  Green Equity  Investors  III,  L.P.,  Liberty Group
              Publishing, Inc. and persons listed on Schedule 1 attached thereto.

*10.8         Management  Stock  Purchase  Agreement,  dated as of December  15, 2000,    Included herewith.
              between  Liberty  Group  Publishing,  Inc.,  Green Equity  Investors II,
              L.P., Green Equity Investors III, L.P. and Kevin O'Shea.

*10.9         Management  Stock  Purchase  Agreement,  dated as of December  15, 2000,    Included herewith.
              between  Liberty  Group  Publishing,  Inc.,  Green Equity  Investors II,
              L.P., Green Equity Investors III, L.P. and Scott T. Champion.

*10.10        Management  Stock  Purchase  Agreement,  dated as of December  15, 2000,    Included herewith.
              between  Liberty  Group  Publishing,  Inc.,  Green Equity  Investors II,
              L.P., Green Equity Investors III, L.P. and Gene A. Hall.

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    Included herewith.
              Group Publishing, Inc. and Green Equity Investors III, L.P.

10.13         Management  Services  Agreement,  dated as of April  18,  2000,  between    Included herewith.
              Liberty Group Operating, Inc. and Leonard Green & Partners, L.P.

10.14         Amended and Restated Credit  Agreement dated as of April 18, 2000, among    Included herewith.
              Liberty Group Operating, Inc., Liberty Group Publishing,  Inc., Citicorp
              USA,  Inc.  Citibank  N.A.  DB Banc Alex Brown,  LLC,  Wells Fargo Bank,
              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.

</TABLE>


                                       37
<PAGE>   39
<TABLE>


<S>            <C>                                                                         <C>
 10.21         Asset Purchase Agreement, dated as of June 29, 2000, by and                 Incorporated by reference to
               between Midwest Publishing Statutory  Trust and Liberty Group               Exhibit 2.1 included on the
               Michigan Holdings, 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.
 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.





                                       38
<PAGE>   40
(b)     Reports on Form 8-K.

On November 16, 2000, the Company filed Form 8-K to report its purchase of
substantially all of the assets of the Mid-Illinois Newspapers, Inc. an Illinois
Corporation. On January 12, 2001, the Company filed Form 8-K/A on which it
included the required financial statements in connection with the acquisition of
the assets.










                                       39

<PAGE>   41
                          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, 1999 and 2000, and the
related consolidated statements of operations, stockholders' equity (deficit)
and cash flows for each of the years in the three-year period ended December 31,
2000. These 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, 1999 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America.


                                       /s/ KPMG LLP

Chicago, Illinois
March 15, 2001




                                      F-1

<PAGE>   42
                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                                  ------------
                                                                                            1999                 2000
                                                                                            ----                 ----
<S>                                                                                      <C>             <C>
Assets
Current assets:
   Cash and cash equivalents...........................................................  $       1,860   $        1,036
Accounts receivable, net of allowance for doubtful accounts of $1,141 and $1,523
        in 1999 and 2000, respectively.................................................         19,561           22,605
   Inventory...........................................................................          2,130            3,042
Prepaid expenses.......................................................................            507            1,169
Other current assets...................................................................            306              144
                                                                                         -------------   --------------
   Total current assets................................................................         24,364           27,996
Property, plant and equipment, net.....................................................         39,356           55,817
   Intangible assets, net..............................................................        402,748          467,604
   Deferred financing costs, net.......................................................         10,475           11,682
Other assets...........................................................................          2,217              402
                                                                                         -------------   --------------
   Total assets........................................................................  $     479,160   $      563,501
                                                                                         =============   ==============
Liabilities and stockholders' equity (deficit) Current liabilities:
   Current  portion of Term Loan B.....................................................  $           -   $        1,000
   Current portion of long-term liabilities............................................            419            1,181
   Accounts payable....................................................................          1,993            2,253
   Accrued expenses....................................................................         14,445           16,305
   Deferred revenue....................................................................          7,801            9,117
                                                                                         -------------   --------------
Total current liabilities..............................................................         24,658           29,856
Long-term liabilities:
   Senior subordinated notes...........................................................        180,000          180,000
   Senior discount debentures, redemption value $89,000................................         62,813           70,327
   Term Loan B, less current portion...................................................              -           98,500
   Borrowings under revolving credit facility..........................................         99,500           49,400
   Long-term liabilities, less current portion.........................................          1,499            2,338
   Deferred income taxes...............................................................         17,030           23,026
                                                                                         -------------   --------------
Total liabilities......................................................................        385,500          453,447
   Senior mandatory redeemable exchangeable cumulative preferred stock, $0.01
      par value, 21,000,000 shares authorized, 2,332,153 and 2,684,086 shares
      issued and outstanding at December 31, 1999 and 2000, respectively...............         59,481           68,752
      Aggregate involuntary liquidation preference $25 plus accrued dividends
   Junior mandatory redeemable cumulative preferred stock, $0.01 par value, 175,000
      and 250,000 shares authorized at December 31, 1999 and 2000, respectively,
      58,294 and 87,864 shares issued and outstanding at December 31, 1999 and 2000,
      respectively.....................................................................         59,266           89,328
                                                                                         -------------   --------------
   Total mandatory redeemable preferred stock..........................................        118,747          158,080
Stockholders' equity (deficit):
   Common stock, $0.01 par value, 1,600,000 shares
      authorized and issued and 1,568,000 shares outstanding in 1999 and
      2,655,000 shares authorized, 2,185,177 issued, and 2,181,177 outstanding
      in 2000..........................................................................             16               22
   Additional paid in capital..........................................................          8,144           16,444
   Notes receivable....................................................................           (250)          (1,183)
   Accumulated deficit.................................................................        (32,747)         (63,278)
   Treasury stock at cost, 32,000 and 4,000 shares in 1999 and 2000, respectively......           (250)             (31)
                                                                                         --------------  ---------------
   Total stockholders' equity (deficit)................................................        (25,087)         (48,026)
                                                                                         -------------   ---------------
Total liabilities and stockholders' equity (deficit)...................................  $     479,160   $      563,501
                                                                                         =============   ===============

</TABLE>

          See accompanying notes to consolidated financial statements.





                                      F-2
<PAGE>   43
                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                                      YEARS ENDED DECEMBER 31,
                                                                                      ------------------------
                                                                            1998                1999            2000
                                                                            ----                ----            ----
<S>                                                                    <C>              <C>               <C>
REVENUES:
   Advertising.....................................................    $       82,062   $      121,430    $      150,247
   Circulation.....................................................            22,844           27,543            32,318
   Job printing and other..........................................             7,625           12,382            12,119
                                                                       --------------   --------------    --------------
Total revenues.....................................................           112,531          161,355           194,684
OPERATING COSTS AND EXPENSES:
   Operating costs.................................................            45,976           68,351            84,646
   Selling, general and administrative.............................            36,303           51,522            62,887
   Depreciation and amortization...................................            11,917           16,657            19,864
                                                                       --------------   --------------    --------------
Income from operations.............................................            18,335           24,825            27,287
Interest expense...................................................            25,234           30,818            38,412
Amortization of debt issue costs...................................                 -            1,495             1,817
Net gain on exchange and
   disposition of properties.......................................                 -            6,197                 -
                                                                       --------------   --------------    --------------
Loss before income taxes
   and extraordinary item..........................................            (6,899)          (1,291)          (12,942)
Income taxes.......................................................                 -              295               491
                                                                       --------------   --------------    --------------
Loss before extraordinary item.....................................            (6,899)          (1,586)          (13,433)
Extraordinary gain on
   insurance proceeds..............................................                 -              485                 -
                                                                       --------------   --------------    --------------
Net loss...........................................................            (6,899)          (1,101)          (13,433)
                                                                       --------------   --------------    --------------
Dividends on preferred stock.......................................           (11,152)         (13,595)          (17,018)
                                                                       --------------   --------------    --------------
Net loss available to common stockholders..........................    $      (18,051)  $      (14,696)   $      (30,451)
                                                                       ==============   ==============    ==============
</TABLE>


          See accompanying notes to consolidated financial statements.






                                      F-3
<PAGE>   44
                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (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 12/31/97............................................             -    $        -    $        -             -
   Reorganization of company....................................             -             -             -             -
   Issuance of common stock.....................................     1,600,000            16         7,984             -
   Common stock issued in exchange for services.................             -             -           160             -
   Dividends on senior mandatory redeemable
       exchangeable cumulative preferred stock..................             -             -             -             -
   Dividends on junior mandatory redeemable cumulative
       preferred stock .........................................             -             -             -             -
   Net loss.....................................................             -             -             -             -
   Notes receivable.............................................             -             -             -             -
   Repayment of notes receivable through forgiveness of debt....             -             -             -             -
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
</TABLE>





                                      F-4
<PAGE>   45
<TABLE>
<CAPTION>
                                                             TREASURY
                                                               STOCK       NOTES          NET      ACCUMULATED
                                                              AMOUNT     RECEIVABLE      ASSETS      DEFICIT         TOTAL
                                                             --------    ----------      ------    -----------       -----

<S>                                                         <C>          <C>           <C>          <C>          <C>
Balances at 12/31/97......................................  $       -    $        -    $  99,139    $       -    $   99,139
   Reorganization of company..............................          -             -      (99,139)           -       (99,139)
   Issuance of common stock...............................          -             -            -            -         8,000
   Common stock issued in exchange for services...........          -             -            -            -           160
   Dividends on senior mandatory redeemable
       exchangeable cumulative preferred stock............          -             -            -       (6,460)       (6,460)
   Dividends on junior mandatory redeemable
       cumulative preferred stock.........................          -             -            -       (4,692)       (4,692)
   Net loss...............................................          -             -            -       (6,899)       (6,899)
   Notes receivable.......................................          -          (579)           -            -          (579)
   Repayment of notes receivable through forgiveness
       of debt ...........................................          -            78            -            -            78
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)

</TABLE>


          See accompanying notes to consolidated financial statements.




                                      F-5

<PAGE>   46
                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                          ------------------------
                                                                                      1998          1999          2000
<S>                                                                                <C>           <C>           <C>
Cash flows from operating activities:
   Net loss....................................................................    $   (6,899)   $   (1,101)   $   (13,433)
Adjustments to reconcile net loss to net cash provided by
 operating activities: ........................................................
   Depreciation and amortization...............................................        11,917        16,657         19,864
   Amortization of debt issue costs............................................         1,282         1,495          1,817
   Accretion of senior discount notes..........................................         5,580         6,711          7,518
   Noncash compensation........................................................           238           223            163
   Net gain on exchange and disposition of properties..........................             -        (6,197)             -
   Extraordinary gain..........................................................             -          (485)             -
   Changes in assets and liabilities, net of acquisitions and dispositions:
      Accounts receivable, net.................................................          (805)       (1,325)           372
      Inventory................................................................           103           139           (467)
      Prepaid expenses and other assets........................................           972        (2,552)          (417)
      Accounts payable.........................................................           292        (2,338)           (38)
      Accrued expenses.........................................................         9,072        (3,173)           427
      Deferred revenue.........................................................           113           445            (72)
                                                                                   ----------    ----------    -----------
Net cash flows provided by operating activities................................        21,865         8,499         15,734
                                                                                   ----------    ----------    -----------
Cash flows from investing activities:
   Purchases of property, plant and equipment..................................        (2,232)       (5,687)        (9,654)
   Proceeds on sale of properties..............................................             -             -          2,103
   Acquisitions, net of cash acquired..........................................      (386,446)      (54,822)       (84,541)
                                                                                   ----------    ----------    -----------
Net cash flows used in investing activities....................................      (388,678)      (60,509)       (92,092)
                                                                                   ----------    ----------    -----------
Cash flows from financing activities:
   Net proceeds from issuing long-term debt....................................       221,217             -         98,505
   Net borrowings under revolving credit facility..............................        46,000        53,500         71,750
   Net proceeds from issuing preferred stock...................................        91,750             -         20,631
   Net proceeds from issuing common stock......................................         7,419             -          7,444
   Repurchase of common stock..................................................             -          (250)             -
   Payments on long term liabilities...........................................             -          (405)          (945)
   Payment of debt on prior revolving credit facility..........................             -             -       (121,850)
                                                                                   ----------    ----------    -----------
   Net cash provided by financing activities...................................       366,386        52,845         75,535
                                                                                   ----------    ----------    -----------
Net increase (decrease) in cash and cash equivalents...........................          (427)          835           (824)
Cash and cash equivalents, at beginning of period..............................         1,452         1,025          1,860
Cash and cash equivalents, at end of period....................................    $    1,025    $    1,860    $     1,036
Supplemental cash flow disclosure -
   Non cash gain on exchange of properties.....................................             -         7,899              -
   Common stock issued in exchange for services................................           160             -              -
   Cash interest paid..........................................................        10,913        24,107         28,388
   Income taxes paid...........................................................             -           130            532
Repayment of notes receivable through forgiveness of debt......................            78           223            163
</TABLE>



          See accompanying notes to consolidated financial statements.





                                      F-6
<PAGE>   47
                 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 336
publications in 16 states. The Company's total revenues are derived from
advertising (77% of 2000 total revenues), circulation (17%) and job printing and
other (6%). 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 or the "Registrant") 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.-("Hollinger") 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>   48

         (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 a combination of historical losses, anticipated future losses and
inadequate cash flow. 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, 2000:
cash equivalents; borrowings under line of credit; accounts receivable; accounts
payable and accrued expenses; Senior subordinated notes; Senior discount
debentures; and long-term liabilities.

         (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' financial statements and related notes have been
reclassified to conform to the 2000 presentation.

         (L)     STOCK OPTIONS

The Company accounts for its stock options under the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (Statement 123). Statement 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, Statement 123 also allows entities to




                                      F-8
<PAGE>   49

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 Statement 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 Statement 123.

(2) ACQUISITIONS AND DISPOSITIONS

During January 1998, the Company acquired substantially all of the assets of 166
newspapers from Hollinger for $322,378. The Company also acquired 91 other
newspapers during 1998 for an aggregate purchase price of approximately $61,787.
The excess of the purchase prices over the estimated fair value of the tangible
and identifiable intangible assets acquired (goodwill) was $125,496 for the year
ended December 31, 1998.

During 1999, the Company acquired (net of exchanges and divestitures) 49
newspapers 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.

The following unaudited pro forma summary presents the Company's results of
operations as if the acquisitions accounted for as purchases had occurred at
January 1, 1999. This summary is provided for informational purposes only. It
does not necessarily reflect the actual results that would have occurred had the
acquisitions been made as of January 1, 1999, or results that may occur in the
future.

<TABLE>
<CAPTION>
                                                                1999         2000
                                                                ----         ----
                                                             (Unaudited)  (Unaudited)
<S>                                                         <C>           <C>
Revenues................................................... $   207,390   $  209,374
Net income (loss) before net gains on exchange
     and disposition of properties and
     extraordinary gain on insurance proceeds..............      (4,670)     (13,271)
Net income (loss)..........................................       1,922      (13,271)
</TABLE>




                                      F-9

<PAGE>   50
(3) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

                                                       DECEMBER 31,
                                                   1999             2000
                                                   ----             ----

Land.........................................   $    6,891       $    8,112
Buildings and improvements...................       16,840           26,410
Machinery and equipment......................       17,646           26,992
Furniture and fixtures.......................        1,832            2,932
                                                ----------       ----------
                                                    43,209           64,446
Less accumulated depreciation and
  amortization...............................       (3,853)          (8,629)
                                                ----------       ----------
                                                $   39,356       $   55,817
                                                ==========       ==========

(4) INTANGIBLE ASSETS

Intangible assets consisted of the following:

                                                       DECEMBER 31,
                                                   1999             2000
                                                   ----             ----

Non-compete agreements.......................   $   16,902       $   17,351
Subscriber lists.............................       46,058           53,348
Advertiser lists.............................      173,691          202,606
Archives ....................................       15,492           19,149
Goodwill.....................................      172,456          212,103
                                                ----------       ----------
                                                   424,599          504,557
Less accumulated amortization................      (21,851)         (36,953)
                                                ----------       ----------
                                                $  402,748       $  467,604
                                                ==========       ==========

(5) ACCRUED EXPENSES

Accrued expenses consisted of the following:

                                                       DECEMBER 31,
                                                   1999             2000
                                                   ----             ----

Accrued payroll..............................   $    1,182       $    1,500
Accrued vacation.............................          476              646
Accrued bonus................................        1,958            1,509
Accrued interest.............................        7,654           10,160
Accrued other................................        3,175            2,490
                                                ----------       ----------
                                                $   14,445       $   16,305
                                                ==========       ==========




                                      F-10

<PAGE>   51
(6) SENIOR SUBORDINATED NOTES AND SENIOR DISCOUNT DEBENTURES

The Senior Subordinated Notes and Senior Discount Debentures at December 31,
1999 and 2000 consists of the following:

<TABLE>
<CAPTION>

                                                                         1999       2000
                                                                         ----       ----
<S>                                                                    <C>         <C>
Liberty Group Operating, Inc.
9.375% Senior Subordinated Notes
Due February 1, 2000.................................................. $180,000    $180,000

Liberty Group Publishing, Inc.
11.625% Senior Discount Debentures
$89,000 Redemption Value
Due February 1, 2009..................................................   62,813      70,327
                                                                       --------    --------
Total Senior Subordinated Notes and Senior Discount Debentures........  242,813     250,327
Less current installments.............................................        -           -
                                                                       --------    --------

Total Senior Subordinated Notes and Senior Discount
     Debentures, excluding current.................................... $242,813    $250,327
                                                                       ========    ========
</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 joint 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 or, in certain limited circumstances, are partially
redeemable on or prior to February 1, 2001 at a redemption amount of 109.375% of
their principal amount. In the event of a change in control 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 or, in certain limited circumstances, are
partially redeemable on or prior to February 1, 2001 at a redemption amount of
111.625% of their accreted value. 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 ("Amended Revolving Credit
Facility") from January 2003 to March 2005, and included the issuance of a
$100,000 Term Loan B. The Amended Revolving Credit Facility is secured by
substantially all of the tangible and intangible assets of the Operating
Company. 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. 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 2000 interest expense for the Term B and the Revolving Credit Facility was
$13,300. There is an individual margin applicable to each





                                      F-11
<PAGE>   52
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, 2000, the Operating Company had
utilized $49,400 of the Amended Revolving Credit Facility and $99,500 of the
Term Loan B. The average interest rate on borrowings under revolving credit
facilities for 2000 was 9.76%.

(8) LONG-TERM LIABILITIES

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

         The aggregate amount of principal payments at December 31, 2000 are as
follows:

             2001...................................         1,181
             2002...................................           581
             2003...................................           572
             2004...................................           322
             2005...................................           318
             Thereafter.............................           545
                                                      ------------
                                                      $      3,519

(9) COMMON STOCK

During January 1998, the Company issued 1,600,000 shares of Common Stock, par
value $0.01 per share.

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 common
shares, of which 49,500 shares was 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 $7,444, 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..

On August 11, 2000, Operating Company, 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
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>   53
(10)  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, par value $0.01 per
share. The acquisition of 166 newspapers from American Publishing Company 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 of the Company, 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 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 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, 2000, the Company had accumulated but undeclared
dividends of $1,650.

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

                                      F-13
<PAGE>   54

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, 2000, the Company had accumulated but undeclared
dividends of $1,464.

At December 31, 2000, 73% and 27% of the Junior Preferred Stock and 66% and 24%
of the Common Stock is owned by Green Equity Investors II, L.P. and Green Equity
Investors III, L.P., the controlling stockholders of the Company. 10% of the
Common Stock and -0-% of the Junior Preferred Stock is owned by the Company's
management team and Ken Serota, respectively.

(11) INCOME TAXES

Income tax expense for the periods shown below consisted of:

                                          CURRENT     DEFERRED      TOTAL
                                          -------     --------      -----

Year ended December 31, 1998:
  U.S. Federal.......................... $      -     $      -    $       -
  State and local.......................        -            -            -
                                         --------     --------    ---------
                                                -            -            -
                                         --------     --------    ---------
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
                                         ========     ========    =========

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




                                      F-14

<PAGE>   55
<TABLE>
<CAPTION>

                                                                   YEARS ENDED DECEMBER 31,
                                                                   ------------------------
                                                                1998         1999         2000
                                                                ----         ----         ----
<S>                                                         <C>           <C>          <C>
Computed "expected" tax expense (benefit)...............    $    (2,346)  $     (274)  $  (4,400)
Increase in income taxes resulting from:
   Amortization of nondeductible goodwill...............             89          233         394
   State and local income taxes.........................              -          195         324
   Nondeductible meals and entertainment................             12           40         110
   Nondeductible expenses...............................              -            3           4
Change in Federal valuation allowance...................          2,245           98       4,059
                                                            -----------   ----------   ---------
                                                            $         -   $      295   $     491
                                                            ===========   ==========   =========
</TABLE>

The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at 1999 and 2000 are presented below:


<TABLE>
<CAPTION>

                                                                         1999            2000
                                                                         ----            ----
<S>                                                                  <C>            <C>
Deferred tax assets:
   Accounts receivable, principally due to allowance
     for doubtful accounts.......................................... $      457     $       622
   Accrued expenses.................................................      2,579           1,207
   Net operating losses.............................................      9,230          20,776
                                                                     ----------     -----------
Gross deferred tax assets...........................................     12,265          22,605
less: valuation allowance...........................................     (2,756)         (7,531)
                                                                     ----------     -----------
Net deferred tax assets.............................................      9,509          15,074
                                                                     ----------     -----------
Deferred tax liabilities:
Long-lived assets, principally due to differences
     in depreciation and amortization...............................      6,534           8,789
Intangible assets, principally due to differences
     in amortization................................................     20,005          29,311
                                                                     ----------     -----------
                                                                         26,539          38,100
                                                                     ----------     -----------
   Net deferred tax liability....................................... $   17,030     $    23,026
                                                                     ==========     ===========
</TABLE>

At December 31, 2000, the Company maintains net operating loss carry-forwards
for Federal and state income tax purposes of $51,939, 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.

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 differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the lack of
historical taxable income and projections for future taxable income over the
periods which the deferred tax assets are deductible, management believes that a
portion of the recorded deferred tax assets will not be recoverable.
Accordingly, the Company has recorded a valuation allowance against certain
Federal and state deferred tax assets as of December 31, 2000 amounting to
$7,531.

The Company acquired deferred tax liabilities of $8,455, $8,575, and $5,996 in
1998, 1999 and 2000, respectively, through corporate acquisitions.





                                      F-15

<PAGE>   56
(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 discretionary matching
contribution. The Company recorded $0, $129, and $271 in expenses related to the
plan in 1998, 1999 and 2000, 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 $111, $133 and
$160 of compensation expense related to the plan in 1998, 1999 and 2000,
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 by 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 $35, $65 and $66 of
compensation expense related to the plan in 1998, 1999 and 2000, 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 PLAN

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 with the provisions described in the Plans. Options
vest under the Incentive Stock Option Plan on the first anniversary of the grant
date.





                                      F-16
<PAGE>   57
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
Statement 123, the Company's net income (loss) for the years ended December 31,
2000 would have been the pro forma amounts indicated below:

                                                 1999           2000
Net income (loss)             As reported     $ (1,101)     $  (13,433)
                              Pro forma         (1,162)        (13,449)

Under the Plans, the exercise price of each option equals the fair value of the
Company's 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 Statement 123, the fair value of each grant
is 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:

                                                                   WEIGHTED-
                                                                    AVERAGE
                                                                   EXERCISE
                                                   SHARES            PRICE
                                                   ------          ---------

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
                                               =============      ========

     The following table summarizes information about stock options outstanding
at December 31, 2000:

                       WEIGHTED-          WEIGHTED-                   WEIGHTED
RANGE OF               AVERAGE            AVERAGE                     AVERAGE
EXERCISE  OPTIONS      REMAINING          EXERCISE       OPTIONS      EXERCISE
PRICE     OUTSTANDING  CONTRACTUAL LIFE   PRICE        EXERCISABLE    PRICE
--------  -----------  ----------------   ---------    -----------    --------

$  5.00   27,375           8.08 Years      $  5.00        4,212        $5.00
$ 10.00    8,250           9.08            $ 10.00            0            0
          ------           ----            -------        -----        -----
          35,625           8.31 Years      $  6.16        4,212        $5.00





                                      F-17
<PAGE>   58
(14) RELATED PARTY TRANSACTIONS

EXECUTIVE STOCK INVESTMENTS

During 1998, the majority common stockholder transferred 64,000 common shares to
the Chief Executive Officer upon the commencement of his employment. This
transaction was treated as a compensation expense and an additional contribution
to paid in capital.

Upon the commencement of his employment in January 1998 the Company loaned the
Chief Executive Officer $250 pursuant to an Unsecured Promissory Note. The Loan
will be forgiven on a pro rata Daily Basis from January 28, 1998 to January 28,
2001. The Loan will be forgiven in its entirety if the Chief Executive Officer
is terminated by the Company without cause or if the Chief Executive Officer
terminates his employment for good reason (as defined in the agreement) death,
disability, or upon the consummation of an initial public offering of securities
of the Company.

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.

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.

MAJORITY COMMON STOCKHOLDER FEES

The Company paid $1,000 and $1,320 in management fees in 1999 and 2000,
respectively and $375 and $356, in 1999 and 2000, respectively, in acquisition
finders fees to its majority common stockholder and is obligated to pay
acquisition finders fees of $850 at December 31, 2000. Additionally, the
Company paid $1,950 in capital raising costs to the majority stockholder.

(15) EXTRAORDINARY ITEM

During 1999, the Company's facility in Augusta, Kansas was damaged by a severe
flood. The cost of the machinery and equipment and furniture and fixtures
destroyed was $235, net of accumulated depreciation of $18. The Company received
insurance proceeds sufficient to replace these assets in the amount of $702, and
reported the resulting gain of $485 as an extraordinary item.





                                      F-18
<PAGE>   59
                   INDEPENDENT AUDITORS' REPORT ON SCHEDULE II

The Board of Directors
Liberty Group Publishing, Inc.:

Under date of March 15, 2001, we reported on the consolidated balance sheets of
Liberty Group Publishing, Inc. and subsidiaries as of December 31, 1999 and
2000, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the years in the three-year period
ended December 31, 2000. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related financial
statement schedule. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits.

In our opinion, such 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 15, 2001






                                      S-1

<PAGE>   60
                                   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, 1998.............     $  1,014      $   694      $  (526)     $   1,182
Year ended December 31, 1999.............     $  1,182      $   912      $  (953)     $   1,141
Year ended December 31, 2000.............     $  1,141      $ 1,771      $(1,389)     $   1,523
</TABLE>


See accompanying Independent Auditors' Report on Schedule II.





                                      S-2

<PAGE>   61
                                   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 2, 2001                      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 2, 2001                      /s/ KENNETH L. SEROTA
                                          Kenneth L. Serota,
                                          President and
                                          Chief Executive Officer
                                          and Director

Dated: April 2, 2001                      /s/ KEVIN O'SHEA
                                          Kevin O'Shea,
                                          Executive Vice President,
                                          Chief Financial Officer,
                                          Secretary and Director

Dated: April 2, 2001                      /s/ LEONARD GREEN
                                          Leonard Green, Director

Dated: April 2, 2001                      /s/ PETER NOLAN
                                          Peter Nolan, Director

Dated: April 2, 2001                      /s/ GREG ANNICK
                                          Greg Annick, Director

Dated: April 2, 2001                      /s/ JOHN DANHAKL
                                          John Danhakl, Director

Dated: April 2, 2001                      /s/ SCOTT T. CHAMPION
                                          Scott T. Champion, Director







<PAGE>   62
                                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           Certificate of Incorporation of Liberty Group Publishing, Inc.              Incorporated   by   reference  to
                                                                                          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>   63
<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    Included herewith.
              Liberty  Group  Operating,   Inc.,  Kenneth  L.  Serota,  Liberty  Group
              Publishing,  Inc.,  Green  Equity  Investors  II, L.P.  and Green Equity
              Investors III, L.P.

*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 S-4.
              Kenneth L. Serota.

*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    Included herewith.
              Investors II, L.P.,  Green Equity  Investors  III,  L.P.,  Liberty Group
              Publishing, Inc. and persons listed on Schedule 1 attached thereto.

*10.8         Management  Stock  Purchase  Agreement,  dated as of December  15, 2000,    Included herewith.
              between  Liberty  Group  Publishing,  Inc.,  Green Equity  Investors II,
              L.P., Green Equity Investors III, L.P. and Kevin O'Shea.

*10.9         Management  Stock  Purchase  Agreement,  dated as of December  15, 2000,    Included herewith.
              between  Liberty  Group  Publishing,  Inc.,  Green Equity  Investors II,
              L.P., Green Equity Investors III, L.P. and Scott T. Champion.

*10.10        Management  Stock  Purchase  Agreement,  dated as of December  15, 2000,    Included herewith.
              between  Liberty  Group  Publishing,  Inc.,  Green Equity  Investors II,
              L.P., Green Equity Investors III, L.P. and Gene A. Hall.

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    Included herewith.
              Group Publishing, Inc. and Green Equity Investors III, L.P.

10.13         Management  Services  Agreement,  dated as of April  18,  2000,  between    Included herewith.
              Liberty Group Operating, Inc. and Leonard Green & Partners, L.P.

10.14         Amended and Restated Credit  Agreement dated as of April 18, 2000, among    Included herewith.
              Liberty Group Operating, Inc., Liberty Group Publishing,  Inc., Citicorp
              USA,  Inc.  Citibank  N.A.  DB Banc Alex Brown,  LLC,  Wells Fargo Bank,
              N.A., and Bank of America, N.A.


</TABLE>
<PAGE>   64
<TABLE>

<S>           <C>                                                                         <C>
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 Midwest Publishing Statutory                                        Incorporated by reference to
              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.
</TABLE>

<PAGE>   65
<TABLE>
<S>           <C>                                                                         <C>
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.
<PAGE>   66
                         LIBERTY GROUP PUBLISHING, INC.

                               Index Of Exhibits


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

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

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

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

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

2.6    Amendment to Asset Purchase Agreement, dated   Incorporated by reference
       as of January 14, 1998, among Liberty          to Exhibit 2.6 included
       Group Publishing, Inc., Green Equity           on the Company's S-4.
       Investors II, L.P. (as guarantor), Liberty
       Group Operating, Inc., Hollinger
       International 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   Incorporated by reference
       January 14, 1998, between American             to Exhibit 2.7 included
       Publishing Company of Illinois and Chicago     on the Company's S-4.
       Deferred Exchange Corporation.

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

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

                        1

<PAGE>   67

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

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

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

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

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

*10.2  Amendment to Employment Agreement, dated as    Included herewith.
       of August 11, 2000, between Liberty Group
       Operating, Inc., Kenneth L. Serota, Liberty
       Group Publishing, Inc., Green Equity
       Investors II, L.P. and Green Equity
       Investors III, L.P.

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

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

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

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

                        2
<PAGE>   68
*10.7  Master Amendment, dated as of April 18,        Included herewith.
       2000, between Green Equity Investors II,
       L.P., Green Equity Investors III, L.P.,
       Liberty Group Publishing, Inc. and
       persons listed on Schedule 1 attached
       thereto.

*10.8  Management Stock Purchase Agreement, dated     Included herewith.
       as of December 15, 2000, between Liberty
       Group Publishing, Inc., Green Equity
       Investors II, L.P., Green Equity Investors
       III, L.P. and Kevin O'Shea.

*10.9  Management Stock Purchase Agreement, dated     Included herewith.
       as of December 15, 2000, between Liberty
       Group Publishing, Inc., Green Equity
       Investors II, L.P., Green Equity Investors
       III, L.P. and Scott T. Champion.

*10.10 Management Stock Purchase Agreement, dated     Included herewith.
       as of December 15, 2000, between Liberty
       Group Publishing, Inc., Green Equity
       Investors II, L.P., Green Equity Investors
       III, L.P. and Gene A. Hall.

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

10.12  Stock Purchase Agreement, dated as of April    Included herewith.
       18, 2000, between Liberty Group Publishing,
       Inc. and Green Equity Investors III, L.P.

10.13  Management Services Agreement, dated as of     Included herewith.
       April 18, 2000, between Liberty Group
       Operating, Inc. and Leonard Green &
       Partners, L.P.

10.14  Amended and Restated Credit Agreement dated    Included herewith.
       as of April 18, 2000, among Liberty Group
       Operating, Inc., Liberty Group Publishing,
       Inc., Citicorp USA, Inc. Citibank N.A. DB
       Banc Alex Brown, LLC, Wells Fargo Bank,
       N.A., and Bank of America, N.A.

10.15  Pledge Agreement dated as of January 27,       Incorporated by reference
       1998 from Liberty Group Publishing, Inc.,      to Exhibit 10.6 included
       Liberty Group Arizona Holdings, Inc.,          on the Company's S-4.
       Liberty Group Arkansas Holdings, Inc.,
       Liberty Group California Holdings, Inc.,
       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,       Incorporated by reference
       1998 from Liberty Group Operating, Inc. to     to Exhibit 10.7 included
       the lenders under the Credit Agreement.        on the Company's S-4.

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

                        3
<PAGE>   69
10.18  Asset Exchange Agreement, dated as of July     Incorporated by reference
       1, 1999, among Liberty Group Operating,        to Exhibit 2.1 included
       Inc., Liberty Group Pennsylvania Holdings,     on the Company's 8-K
       Inc. and Newspaper Holdings, Inc.              filed on July 16, 1999.

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

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

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


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

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

*10.24 Liberty Group Publishing, Inc.'s               Incorporated by reference
       Publisher's Deferred Compensation              to Exhibit 10.10 included
       Plan.                                          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               Incorporated by reference
       Executive Benefit Plan.                        to Exhibit 10.11 included
                                                      on the Company's 1998
                                                      10-K.

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

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

21     Subsidiaries of Liberty Group Publishing, Inc. Included herewith.


-----------------------------------------------

*  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.

                        4