<PAGE>
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   Form 10-K/A
                                 Amendment No. 1

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

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 |X| FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                      |_| FOR THE TRANSITION PERIOD FROM TO


                        COMMISSION FILE NUMBER: 333-46957
                         LIBERTY GROUP PUBLISHING, INC.
             (Exact name of registrant as specified in its charter)

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

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

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

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


         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

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

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

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                                EXPLANATORY NOTE

     This Amendment No. 1 to the Annual Report on Form 10-K for Liberty Group
Publishing, Inc. for the year ended December 31, 2001 is being filed to, among
other things, include a definition of EBITDA and to make certain other changes
with respect to the presentation of EBITDA in the Annual Report on Form 10-K
originally filed with the Securities and Exchange Commission on April 2, 2002.

     This Report speaks as of the date of the original filing, and the Company
has not updated the disclosures in this Report to speak as of a later date.



<PAGE>

                                TABLE OF CONTENTS



<TABLE>
<S>                                                                                                           <C>
                                                     PART I

Item 1.   Business.............................................................................................2
Item 2.   Properties..........................................................................................16
Item 3.   Legal Proceedings...................................................................................16
Item 4.   Submission of Matters to a Vote of Security Holders.................................................16

                                                     PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters...............................17
Item 6.   Selected Financial Data.............................................................................17
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations...............20
Item 7A.  Quantitative and Qualitative Disclosures about Market Risk..........................................26
Item 8.   Financial Statements and Supplementary Data.........................................................27
Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................27

                                                    PART III

Item 10.  Directors and Officers of the Registrant............................................................28
Item 11.  Executive Compensation..............................................................................30
Item 12.  Security Ownership of Certain Beneficial Owners and Management......................................34
Item 13.  Certain Relationships and Related Transactions......................................................35

                                                     PART IV

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K......................................36

          (a)  Consolidated Financial Statements, Financial Statement Schedule and Exhibits
          (b)  Reports on Form 8-K
</TABLE>

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                                     PART I

                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

         This amended Annual Report contains certain "forward-looking
statements" (as defined in Section 21E of the Securities Exchange Act of 1934)
that reflect the Company's expectations regarding its future growth, results of
operations, performance and business prospects and opportunities. Words such as
"anticipates," "believes," "plans," "expects," "intends," "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 of operations, performance and
business prospects and opportunities to differ from those expressed in, or
implied by, these statements. As a result, no assurance can be given that the
Company's future growth, results of operations, performance and business
prospects and opportunities covered by such forward-looking statements will be
achieved. Such factors include, among others: (1) the Company's dependence on
local economies and vulnerability to general economic conditions; (2) the
Company's substantial indebtedness; (3) the Company's holding company structure;
(4) the Company's ability to implement its acquisition strategy; (5) the
Company's competitive business environment, which may reduce demand for
advertising; and (6) the Company's ability to attract and retain key employees.
For purposes of this amended Annual Report, any statements contained herein that
are not statements of historical fact may be deemed to be forward-looking
statements. The Company is not obligated to update or revise these
forward-looking statements to reflect new events or circumstances.

ITEM 1.  BUSINESS

OVERVIEW

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

         The Company is a leading U.S. publisher of local newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. At December 31, 2001, the Company owned and operated 328
publications in 17 states. The Company's 2001 total revenues were derived from
advertising (75%), circulation (18%) and job print and other (7%). The majority
of the Company's paid daily newspapers have been published for more than 100
years and are typically the only paid daily newspapers of general circulation in
their respective non-metropolitan markets. The Company's newspapers generally
face limited competition as a result of operating in markets that are distantly
located from large metropolitan areas and that can typically support only one
primary newspaper, with the exception of the Company's publications in the
Chicago suburban market. The Company has increased revenues and income from
operations since 1998 primarily by acquiring new publications, saturating
existing markets and aggressively pursuing cost reduction opportunities.

         The Company's newspapers are comprised of 67 paid daily newspapers and
147 paid non-daily newspapers. In addition, the Company publishes 114 free
circulation and "total market coverage" ("TMC") publications with limited or no
news or editorial content. TMC publications are distributed free of charge and
generally provide 100% penetration in their areas of distribution. The Company
believes that its paid newspapers, together with its free circulation and TMC
publications, are an effective medium for advertisers to reach substantially all
of the households in the markets served by the Company. The Company's
publications focus on local content, including coverage of local youth, high
school and college sports, as well as local business, politics, entertainment
and cultural news. Each of the Company's publications is tailored to its market
in order to provide local content that radio, television and large metropolitan
newspapers are generally unable to provide on a cost-effective basis because of
their broader geographic coverage.


                                       2
<PAGE>

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

INITIAL ACQUISITION

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

         The Initial Acquisition, including the payment of related fees and
expenses, was financed from: (1) proceeds of $180.0 million from the issuance
and sale of LGO's 9 3/8% Senior Subordinated Notes due February 1, 2008 (the
"Notes"); (2) proceeds of $50.5 million from the issuance and sale of LGP's
11 5/8% Senior Discount Debentures due February 1, 2009 (the "Debentures"); (3)
proceeds of $45.0 million from the issuance and sale of LGP's 14 3/4% Senior
Redeemable Exchangeable Cumulative Preferred Stock, liquidation preference $25
per share (the "Senior Preferred Stock"); (4) proceeds of $49.0 million from the
issuance and sale of LGP's Series B 10% Junior Redeemable Cumulative Preferred
Stock ("Junior Preferred Stock"); and (5) proceeds of $8.0 million from the
issuance and sale of shares of LGP's common stock, par value $0.01 per share
(the "Common Stock").

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

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

OVERVIEW OF OPERATIONS

         The Company's operations consist of 328 local newspapers and
publications strategically positioned in markets in 17 states. The Company's
publications are comprised of 67 paid daily and 147 paid non-daily newspapers.
In addition, the Company publishes 114 free circulation publications with
limited or no news or editorial content.

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

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

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


                                       3
<PAGE>

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

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

IDAHO
      BURLEY
             SOUTH IDAHO PRESS (D)
             SUPER TUESDAY (S)
      HAILEY
             WOOD RIVER JOURNAL (W)
             WOOD RIVER JOURNAL DINING (W)
      JEROME
             NORTH SIDE NEWS (W)
             THE GOODING COUNTY LEADER (W)
             LINCOLN COUNTY JOURNAL (W)
      MINODOKA
             MINIDOKA COUNTY NEWS (W)


                                       4
<PAGE>



ILLINOIS
      ALEDO
             TIMES RECORD (W)
             TOWN CRIER (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)
             GARDNER CHRONICLE (W)
             COURIER PRESS (HERSCHER) (W)
      FAIRBURY
             THE BLADE (W)
      FLORA
             CCAP SPECIAL (T)
             DAILY ADVOCATE PRESS (D)
      GALATIA
             MONEY STRETCHER (S)
      GENESEO
             HENRY COUNTY ADVERTIZER (S)
             THE GENESEO REPUBLIC (W)
             CAMBRIDGE GAZETTE (W)
             ORION GAZETTE (W)
      HARRISBURG
             ELDORADO DAILY JOURNAL (D)
             HARRISBURG DAILY REGISTER (D)
      HERRIN
             THE SPOKESMAN (W)
             THE SPOKESMAN SUNDAY (T)


                                       5
<PAGE>

      KEWANEE
             STAR COURIER (D)
             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)
             THE PAPER (S)
      MURPHYSBORO
             MURPHYSBORO AMERICAN (W)
             AMERICAN MONDAY (T)
      NEWTON
             NEWTON PRESS-MENTOR (W)
      NORRIS CITY
             NORRIS CITY BANNER (W)
      OLNEY
             ADVANTAGE (S)
             JASPER COUNTY NEWS EAGLE, ADVANTAGE (F)
             THE OLNEY DAILY MAIL (D)
             THE WEEKLY MAIL (W)
      PEKIN
             PEKIN DAILY TIMES (D)
             TIMES REVIEW (T)
      PONTIAC
             DAILY LEADER (D)
             HOME TIMES (W)
             LIVINGSTON SHOPPING NEWS (S)
      SHAWNEETOWN
             GALLATIN DEMOCRAT (W)
             RIDGWAY NEWS (W)
      SPRINGFIELD
             SPRINGFIELD SHOPPER (S)
      SUBURBAN CHICAGO NEWSPAPERS
             BERWYN/STICKNEY/FOREST VIEW LIFE (W)
             CICERO LIFE (W)
             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)


                                       6
<PAGE>

             LOMBARD SPECTATOR (W)
             OAKBROOK TERRACE/VILLA PARK PRESS (W)
             ELMHURST SUBURBAN LIFE (W)
             LOMBARD SUBURBAN LIFE (W)
             VILLA PARK SUBURBAN LIFE (W)
             BURR RIDGE/WILLOWBROOK SUBURBAN LIFE (W)
             CLARENDON HILLS SUBURBAN LIFE (W)
             DARIEN SUBURBAN LIFE (W)
             DOWNERS GROVE REPORTER (W)
             HINSDALE/OAK BROOK SUBURBAN LIFE (W)
             WESTMONT SUBURBANLIFE (W)
             LISLE/NAPERVILLE REPORTER (W)
             WOODRIDGE PROGRESS (W)
             LEMONT REPORTER/METROPOLITAN (W)
             BOLINGBROOK/ROMEOVILLE REPORTER/METROPOLITAN (W)
             BURR RIDGE PROCESS (W)
             CLARENDON HILLS PROGRESS (W)
             DARIEN PROGRESS (W)
             HINSDALE PROGRESS (W)
             WESTMONT PROGRESS (W)
             WILLOWBROOK PROGRESS (W)
             DOWNERS GROVE PROGRESS (W)
             GLEN ELLYN NEWS (W)
             WHEATON LEADER (W)
             WARRENVILLE POST (W)
             WEST CHICAGO PRESS (W)
             WINFIELD PRESS (W)
             BARTLETT/HANOVER PARK/STREAMWOOD PRESS (W)
             BLOOMINGDALE PRESS (W)
             CAROL STREAM/GLENDALE HEIGHTS PRESS (W)
             ITASCA/ROSELLE PRESS (W)
             BATAVIA REPUBLICAN (W)
             ELBURN REPUBLICAN (W)
             GENEVA REPUBLICAN (W)
             NORTH AURORA REPUBLICAN (W)
             ST. CHARLES/WAYNE REPUBLICAN (W)
             HUNTLEY FARMSIDE PRESS (W)
             LIFE'S EXTRA (MAG)
             LIFE CAREER MOVES (MAG)
             HOMETOWN (MAG)
             SELECT HOMES (MAG)
      TEUTOPOLIS
             TEUTOPOLIS PRESS (W)
      WEST FRANKFORT
             DAILY AMERICAN (D)
             SI TRADER (W)
             FRANKLIN PRESS (T)


                                       7
<PAGE>



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 (W)
      NEW HAMPTON
             NEW HAMPTON TRIBUNE (W)
             THE ADVERTISER (S)

KANSAS
      ANDOVER
             ANDOVER SHOPPER (S)
      AUGUSTA
             AUGUSTA DAILY GAZETTE (D)
             AUGUSTA ADVERTISER (T)
      DERBY
             DAILY REPORTER (D)
             THE RECORD JOURNAL (W)
             SHOPPER'S GUIDE (S)
      EL DORADO
             THE EL DORADO TIMES (D)
             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)
             THE LEAVENWORTH LAMP (W)
      MCPHERSON
             MCPHERSON SENTINEL (D)
             THE SENTINEL AD-VISER (T)
             MAC SHOPPER (S)


                                       8
<PAGE>


      PRATT
             THE PRATT TRIBUNE (D)
             BARBER COUNTY INDEX (W)
             ST. JOHNS NEWS (W)
             KIOWA COUNTY SIGNAL (W)
             SUNFLOWER SHOPPER TMC (T)
      SHAWNEE
             JOURNAL-HERALD (W)
      WELLINGTON
             DAILY NEWS (D)

LOUISIANA
      BASTROP
             THE BASTROP DAILY ENTERPRISE (D)
             THE EXTRA (T)
      DERIDDER
             BEAUREGARD DAILY NEWS (D)
      DONALDSONVILLE
             THE DONALDSONVILLE CHIEF (W)
      GONZALES
             ASCENSION CITIZEN (W)
             NICKEL ADS (S)
             THE MARKETEER (T)
      LEESVILLE
             LEESVILLE DAILY LEADER (D)
      PIERRE PART
             THE CAJUN GAZETTE (W)
      PLAQUEMINE
             POST SOUTH (W)
             WEST BANK SHOPPER (S)
      SULPHUR
             SOUTHWEST DAILY NEWS (D)
             GUARDIAN (S)
             CALCASLEU SHOPPER (S)
      VINTON
             VINTON 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)


                                       9
<PAGE>


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

MINNESOTA
      COTTONWOOD
             TRI-COUNTY NEWS (W)
      CROOKSTON
             CROOKSTON DAILY TIMES (D)
             CROOKSTON VALLEY SHOPPER (S)
      GRANITE FALLS
             GRANITE FALLS/CLARKFIELD ADVOCATE-
             TRIBUNE (W)
      HALSTAD
             THE HALSTAD SHOPPER (S)
             THE VALLEY JOURNAL (W)
      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)


                                       10
<PAGE>



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)
             HOMES (W)
             PENNYSAVER (T)
      CARTHAGE
             THE CARTHAGE PRESS (D)
             THE CARTHAGE PRESS SCOPE (T)
      CHILLICOTHE
             C.T. EXTRA (S)
             CONSTITUTION TRIBUNE (D)
      GREENFIELD
             LAKE STOCKTON SHOPPER (S)
             THE VEDETTE (W)
      JOPLIN
             BIG NICKEL (S)
             COUPON CLIPPER (T)
             THE LITTLE NICKEL (T)
      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)
             LAKE LIFE STYLES MAGAZINE (W)
      MACON
             CHRONICLE HERALD (D)
             MACON JOURNAL (T)
      MARCELINE
             MARCELINE PRESS (W)
             SHO-ME SHOPPER (T)
      MARYVILLE
             MARYVILLE DAILY FORUM (D)
             PENNY PRESS 2 (S)
      MEXICO
             THE MEXICO LEDGER (D)
             THE MEXICO LEDGER TMC (T)
      MOBERLY
             MOBERLY MONITOR INDEX (D)
      NEOSHO
             NEOSHO DAILY NEWS (D)
             NEIGHBORHOOD NEWS (T)
             NEOSHO DAILY NEWS "SUNDAY" (W)
             NEOSHO POST (W)


                                       11
<PAGE>

      OSAGE BEACH
             VACATION NEWS (F)
      ROLLA
             ROLLA DAILY NEWS (D)
             ROLLA DAILY NEWS "PLUS" (T)
      SAINT JAMES
             ST. JAMES LEADER JOURNAL (W)
      WAYNESVILLE
             THE DAILY GUIDE (D)
             DAILY GUIDE CONSTITUTION (T)
             FORT WOOD CONSTITUTION (F)
             AT EASE (S)

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

NEW YORK
      BATH
             STEUBEN COURIER ADVOCATE (F)
      CANISTEO
             HORNELL CANSITEO PENN-E-SAVER (S)
      DANSVILLE
             GENESEE COUNTY EXPRESS (W)
             GENESEEWAY SHOPPER (S)
             DANSVILLE-WAYLAND PENNYSAVER (S)
      FT. PLAIN
             MOHAWK VALLEY PENNYSAVER (S)
      HERKIMER
             THE EVENING TELEGRAM (D)
             IMAGES (F)
      HORNELL
             EVENING TRIBUNE (D)
             THE SPECTATOR (SUNDAY) (W)
             THE TRIBUNE EXTRA (T)
      HORSEHEADS
             THE SHOPPER (S)
      LIBERTY
             CATSKILL SHOPPER (S)
      LITTLE FALLS
             THE EVENING TIMES (D)
      OSWEGO
             THE PALLADIUM TIMES (D)
             COMMUNITY PREVIEW TMC (T)
      PAINTED POST
             CORNING-ELMIRA PENNYSAVER (S)
      PENN YAN
             CHRONICLE AD-VISER (S)
             THE CHRONICLE-EXPRESS (W)


                                       12
<PAGE>

      SAUGERTIES
             MOUNTAIN PENNYSAVER (F)
             SAUGERTIES PENNYSAVER (S)
             SAUGERTIES POST STAR (W)
      SYRACUSE
             THE BUSINESS RECORD (W)
      WELLSVILLE
             ALLEGANY CO. PENNYSAVER (S)
             WELLSVILLE DAILY REPORTER (D)
             WELLSVILLE DAILY TMC (T)

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

PENNSYLVANIA
      CARBONDALE
             THE CARBONDALE NEWS (W)
      HONESDALE
             THE INDEPENDENT EXTRA (T)
             THE WAYNE INDEPENDENT (D)
      MILTON
             LEWISBURG DAILY JOURNAL (D)
             MILTON DAILY STANDARD (D)
             THE STANDARD-JOURNAL (T)
      MOSCOW/HAMLIN
             THE VILLAGER (W)
      SAYRE
             THE EVENING TIMES (D)
             THE TIMES EXTRA (T)
      WAYNESBORO
             THE RECORD HERALD (D)

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

WISCONSIN
      CLINTONVILLE
             CLINTONVILLE TRIBUNE-GAZETTE (W)


INDUSTRY

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

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

         Advertising revenues are the largest component of a newspaper's
revenues followed by circulation revenues.

                                       13
<PAGE>

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

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


OPERATING STRATEGY

         The Company's strategy is to increase revenues and cash flows through:
(1) local news and other content leadership; (2) strategic technological
investments; (3) geographic clustering; (4) high quality editorial content and
presentation; (5) circulation growth; and (6) cost control, as described below:

         Local News and Other Content Leadership. The Company believes that its
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 believes
that its newspapers generate reader loyalty and create franchise value. Because
the Company's vision of local news is typically a unique product in its markets,
its newspapers differentiate themselves from other forms of media and satisfy
the demands of both its readers and advertisers.

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

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

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

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

                                       14
<PAGE>

         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 department stores, local
accounts at 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 and other revenues to total revenues
for fiscal years 2000 and 2001 were as follows:

                                                        YEARS ENDED DECEMBER 31,
                                                        ------------------------
                                                          2000          2001
                                                          ----          ----

Display..............................................       56%           57%
National.............................................        3%            3%
Classified...........................................       18%           15%
Circulation..........................................       17%           18%
Job printing and other...............................        6%            7%
                                                          ----          ----
                                                           100%          100%

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

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

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

         Competition. Each of the Company's newspapers competes to varying
degrees for advertising and circulation revenue with magazines, radio,
television and cable television, as well as with some weekly publications and
other advertising media, including electronic media. Competition for newspaper
advertising is largely based upon circulation,


                                       15
<PAGE>

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,
the main source of revenues for the Company's newspapers. 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 of gathering and
distributing its local news and other content. All of the Company's daily
publications and certain of the weekly publications have their own web sites,
currently numbering 77 in all.

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

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

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

ITEM 2.  PROPERTIES


         The Company has 143 operating and production facilities for its
publications in the United States. The Company owns 107 of these facilities and
leases the remaining 36 for terms ranging from one to five years. These
facilities range in size from approximately 1,000 to 55,000 square feet. The
Company's executive offices are located in Northbrook, Illinois, where the
Company leases approximately 4,879 square feet under a lease terminating in
2004. The Company does not believe any individual property is material to its
financial condition or results of operations.

ITEM 3.  LEGAL PROCEEDINGS


         The Company is involved from time to time in legal proceedings relating
to claims arising out of its operations in the ordinary course of business. The
Company is not party to any legal proceedings that, in the opinion of
management, are reasonably expected to have a material adverse effect on the
Company's business, financial condition or cash flows.

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


         None.


                                       16
<PAGE>

                                     PART II


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

MARKET INFORMATION AND HOLDERS

         There is no public market for the Common Stock. As set forth in Item
12. "Security Ownership of Certain Beneficial Owners and Management," 1,964,605
shares (91% of the total shares outstanding) are owned by Green Equity Investors
II, L.P. ("Green II" or "GEI II") and Green Equity Investors III, L.P. ("Green
III" or "GEI III"). The remaining shares of the Common Stock are owned by
certain officers and other management personnel of the Company. As of March 30,
2002, there were 13 holders of Common Stock.

DIVIDENDS

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

RECENT SALES OF UNREGISTERED SECURITIES

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

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

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

ITEM 6.  SELECTED FINANCIAL DATA


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

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




                                       17
<PAGE>

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                        ---------------------------------------------------------------------
                                           1997           1998           1999           2000           2001
                                        ---------      ---------      ---------      ---------      ---------
                                      (PREDECESSOR)
                                                                    (IN THOUSANDS)
<S>                                     <C>            <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
   Advertising ....................     $  69,602      $  82,062      $ 121,430      $ 150,247      $ 152,382
   Circulation ....................        21,451         22,844         27,543         32,318         35,347
   Job printing and other .........         7,666          7,625         12,382         12,119         14,251
                                        ---------      ---------      ---------      ---------      ---------
Total revenues ....................        98,719        112,531        161,355        194,684        201,980
Operating costs ...................        39,309         45,976         68,351         83,716         90,380
Selling, general and
   administrative .................        29,171         36,303         51,522         63,817         66,581
Depreciation and amortization .....         7,470         11,917         16,657         19,864         21,997
                                        ---------      ---------      ---------      ---------      ---------
Income from operations ............        22,769         18,335         24,825         27,287         23,022
Interest expense and
   amortization of deferred
   financing costs ................        10,551         25,234         32,313         40,229         40,710
Net gain on exchange and
   disposition of properties ......            --             --          6,197             --             --
                                        ---------      ---------      ---------      ---------      ---------
Income (loss) before income
   taxes and extraordinary
   item ...........................        12,218         (6,899)        (1,291)       (12,942)       (17,688)
Income taxes ......................         5,271             --            295            491          2,004
                                        ---------      ---------      ---------      ---------      ---------
Income (loss) before
   extraordinary item .............         6,947         (6,899)        (1,586)       (13,433)       (19,692)
Extraordinary gain on
   insurance proceeds .............            --             --            485             --             --
                                        ---------      ---------      ---------      ---------      ---------
Net income (loss) .................     $   6,947      $  (6,899)     $  (1,101)     $ (13,433)     $ (19,692)
                                        ---------      ---------      ---------      ---------      ---------
Dividends on preferred stock ......            --        (11,152)       (13,595)       (17,018)       (19,989)
                                        ---------      ---------      ---------      ---------      ---------
Net income (loss) available
   to common stockholders .........     $   6,947      $ (18,051)     $ (14,696)     $ (30,451)     $ (39,681)
                                        =========      =========      =========      =========      =========

STATEMENT OF CASH FLOWS DATA:
Capital expenditures ..............     $   1,713      $   2,232      $   5,687      $   9,654      $   2,715
Net cash provided by
   operating activities ...........        14,577         21,865          8,499         15,734         12,925
Net cash used in investing
   activities .....................        (3,370)      (388,678)       (60,509)       (92,092)        (3,330)
Net cash provided by (used in)
   financing activities ...........       (11,523)       366,386         52,845         75,535         (9,157)

OTHER FINANCIAL DATA:
   (unaudited)
EBITDA(1) .........................     $  30,239      $  30,252      $  41,482      $  47,151      $  45,019
</TABLE>


(1)  EBITDA is defined as earnings before interest, taxes, depreciation and
     amortization, which for the Company is income from operations plus
     depreciation and amortization. EBITDA is not a measurement of financial
     performance under accounting principles generally accepted in the United
     States of America, or GAAP, and should not be considered as an alternative
     to income from operations, net income (loss), cash flows from operating
     activities or any other measure of performance or liquidity derived in
     accordance with GAAP. The Company believes that EBITDA is a standard
     measure commonly reported and widely used by analysts, investors and other
     interested parties in the Company's industry. Accordingly, this information
     has been


                                       18
<PAGE>

     disclosed herein to permit a more complete comparative analysis of the
     Company's operating performance relative to other companies in its
     industry. However, not all companies calculate EBITDA using the same
     methods; therefore, the EBITDA figures set forth herein may not be
     comparable to EBITDA reported by other companies. A substantial portion of
     the Company's EBITDA must be dedicated to the payment of interest on its
     outstanding indebtedness and to service other commitments, thereby reducing
     the funds available to the Company for other purposes. Accordingly, EBITDA
     does not represent an amount of funds that is available for management's
     discretionary use. See Item 7. "Management's Discussion and Analysis of
     Financial Condition and Results of Operations."



<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                             -------------------------------------------------------
                                               1997        1998        1999        2000        2001
                                             -------     -------     -------     -------     -------
                                                                 (IN THOUSANDS)
<S>                                          <C>         <C>         <C>         <C>         <C>
     Income from operations ............     $22,769     $18,335     $24,825     $27,287     $23,022
     Depreciation and amortization .....       7,470      11,917      16,657      19,864      21,997
                                             -------     -------     -------     -------     -------
          EBITDA .......................     $30,239     $30,252     $41,482     $47,151     $45,019
</TABLE>


<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                          --------------------------------------------------------------------
                                             1997          1998           1999           2000           2001
                                          ---------     ---------      ---------      ---------      ---------
                                        (PREDECESSOR)
                                                                     (IN THOUSANDS)
<S>                                       <C>           <C>            <C>            <C>            <C>
BALANCE SHEET DATA:
Cash and cash equivalents ...........     $   1,452     $   1,025      $   1,860      $   1,036      $   1,474
Total assets ........................       109,700       410,068        479,160        563,501        542,537
Total long-term obligations
    including current maturities ....            --       283,936        344,231        402,746        402,689
Total mandatorily redeemable
    preferred stock .................            --       105,152        118,747        158,080        178,068
Stockholders' equity (deficit)/
    Predecessor's net assets ........        99,139       (10,392)       (25,087)       (48,026)       (87,661)
</TABLE>


                                       19
<PAGE>

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

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

OVERVIEW

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

         The Company is a leading U.S. publisher of local newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. At December 31, 2001, the Company owned and operated 328
publications in 17 states. The Company's 2001 total revenues were derived from
advertising (75%), circulation (18%) and job print and other (7%). The majority
of the Company's paid daily newspapers have been published for more than 100
years and are typically the only paid daily newspapers of general circulation in
their respective non-metropolitan markets. The Company's newspapers generally
face limited competition as a result of operating in markets that are distantly
located from large metropolitan areas and that can typically support only one
primary newspaper, with the exception of the Company's publications in the
Chicago suburban market. The Company has increased revenues and income from
operations since 1998 primarily by acquiring new publications, saturating
existing markets and aggressively pursuing cost reduction opportunities.

         The Company's newspapers are comprised of 67 paid daily newspapers and
147 paid non-daily newspapers. In addition, the Company publishes 114 free
circulation and "total market coverage" ("TMC") publications with limited or no
news or editorial content. TMC publications are distributed free of charge and
generally provide 100% penetration in their areas of distribution. The Company
generates revenues from advertising, circulation and job printing. Advertising
revenue is recognized upon publication of the advertisements. Circulation
revenue, which is billed to customers at the beginning of the subscription
period, is recognized on a straight-line basis over the term of the related
subscription. The revenue for job printing is recognized upon delivery. The
Company's operating costs consist primarily of newsprint, labor and delivery
costs. The Company's selling, general and administrative expenses consist
primarily of labor costs.

                                       20
<PAGE>

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

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

         In 1998, the Company acquired 91 additional publications in 18
transactions for a total acquisition cost of $61.8 million. The Company acquired
49 and 43 publications, in 13 and 12 transactions, for a total acquisition cost
of $54.8 million and $84.5 million, during 1999 and 2000, respectively. The
Company has not acquired any significant publications since December 2000.

         On January 7, 2002, the Company disposed of the assets of six related
publications (acquired in 1999) in one transaction for proceeds of $26.5
million.

RESULTS OF OPERATIONS

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

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

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

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

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

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

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

         Interest expense (including amortization of deferred financing costs)
increased by $0.5 million to $40.7 million for 2001 from $40.2 million for 2000,
primarily due to higher accretion of the Company's Senior Discount Debentures,
which was partially offset by lower interest rates on borrowings under the
Company's Amended Credit Facility.

         Income tax expense for the year ended December 31, 2001 increased by
$1.5 million to $2.0 million from $0.5 million for the year ended December 31,
2000. The increase in income tax expense was due to higher state and local


                                       21
<PAGE>

income taxes and an increase in the Company's deferred tax liability. During the
fourth quarter of 2001, a portion of the Company's Senior Discount Debentures
was purchased in the open market at a discount by related parties. This
transaction resulted in a deemed cancellation and reissuance of the debentures
for Federal income tax purposes, and thus a portion of the discount and interest
relating to these debentures will not be deductible for Federal income tax
purposes.

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

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

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

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

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

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

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

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

         Interest expense (including amortization of deferred financing costs)
increased by $7.9 million to $40.2 million for 2000 from $32.3 million for 1999,
primarily due to higher debt balances borrowed to fund acquisitions, higher
interest rates on borrowings under the Amended Credit Facility, and higher
accretion on the Company's Senior Discount Debentures.

         Income tax expense for the year ended December 31, 2000 increased by
$0.2 million to $0.5 million from $0.3 million for the year ended December 31,
1999. The increase in income tax expense was due to higher state and local
income taxes.

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


                                       22
<PAGE>

CRITICAL ACCOUNTING POLICY DISCLOSURE

         The preparation of financial statements in conformity with GAAP
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.

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

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

         -   significant changes in the manner of the Company's use of the
             acquired assets or the strategy for the its overall business; and

         -   significant negative industry or economic trends.

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

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

LIQUIDITY AND CAPITAL RESOURCES

         Cash Flows from Operating Activities. Cash provided by operating
activities in 1999 was $8.5 million and increased $7.2 million to $15.7 million
in 2000. Cash provided by operating activities decreased by $2.8 million to
$12.9 million in 2001. The decrease in 2001 was primarily due to lower EBITDA
and higher interest payments.

         Cash Flows from Investing Activities. Cash used in investing activities
was $60.5 million, $92.1 million and $3.3 million in 1999, 2000 and 2001,
respectively. The increase of $31.6 million from 1999 to 2000 was primarily due
to costs related to 2000 acquisitions. The decrease of $88.8 million from 2000
to 2001 relates to a decrease in the number and size of acquisitions from 2000
to 2001 and a decrease in capital expenditures. The Company's capital
expenditures in 2001 consisted of the purchase of machinery, equipment,
furniture and fixtures relating to its publishing operations. The Company has no
material commitments for capital expenditures. The Company intends to continue
to pursue its strategy of opportunistically purchasing community newspapers in
contiguous markets and new markets.

         Cash Flows from Financing Activities. Cash provided by financing
activities was $52.9 million in 1999 and $75.5 million in 2000 compared to cash
used in financing activities of $9.2 million in 2001. Cash provided by financing
activities primarily resulted from borrowings under the Company's revolving
credit facility in 1999. Cash provided by financing activities in 2000 resulted
from the issuance of preferred stock, common stock and long-term debt, as well
as borrowings under the Amended Credit Facility, partially offset by the
repayment of the previous revolving credit facility. Net cash used in financing
activities in 2001 related to the repayment of a portion of the Amended Credit
Facility and other long-term debt.

         Amended Revolving Credit Facility. LGO is a party to an Amended and
Restated Credit Agreement, dated as of April 18, 2000, as further amended, with
a syndicate of financial institutions led by Citibank, N.A, with Citicorp USA,
Inc.


                                       23
<PAGE>

as administrative agent (the "Amended Credit Facility"). The Amended Credit
Facility provides for a $100.0 million principal amount Term Loan B that matures
in March 2007 and a revolving credit facility with a $135.0 million aggregate
commitment amount available, including a $10.0 million sub-facility for letters
of credit, that matures in March 2005. The Amended Credit Facility is secured by
a first-priority security interest in substantially all of the tangible and
intangible assets of LGO, the Company and the Company's other present and future
direct and indirect subsidiaries. Additionally, the loans under the Amended
Credit Facility are guaranteed, subject to specified limitations, by the Company
and all of the future direct and indirect subsidiaries of LGO and the Company.
The Company is required to permanently reduce the Term Loan B and/or revolving
commitment amount with disposition proceeds in excess of $1.5 million if the
proceeds are not reinvested in Permitted Acquisitions (as defined under the
Amended Credit Facility) within 300 days of receipt of such proceeds.

         The Term Loan B and the revolving credit facility bear interest, at
LGO's option, equal to the Alternate Base Rate for an ABR loan (as defined in
the Amended Credit Facility) or the Adjusted LIBO Rate for a eurodollar loan (as
defined in the Amended Credit Facility) plus an applicable margin. The
applicable margin is based on: (1) whether the loan is an ABR loan or eurodollar
loan; and (2) the ratio of (a) indebtedness of the Company and its subsidiaries
that requires interest to be paid in cash to (b) pro forma EBITDA for the
12-month period then ended. LGO also pays an annual fee equal to the applicable
eurodollar margin for the aggregate amount of outstanding letters of credit.
Additionally, LGO pays a fee on the unused portion of the revolving credit
facility. No principal payments are due on the revolving credit facility until
the maturity date, while the Term Loan B requires annual principal payments of
$1.0 million each year from 2002 through 2004, $36.1 million in 2005, $47.5
million in 2006 and $11.9 million in 2007. The Amended Credit Facility contains
financial covenants that require LGO and LGP to satisfy specified quarterly
financial tests, including a maximum senior leverage ratio, a minimum cash
interest coverage ratio and a maximum leverage ratio. The Amended Credit
Facility also contains affirmative and negative covenants customarily found in
loan agreements for similar transactions.

         LGP is highly leveraged and has indebtedness that is substantial in
relation to its stockholders' deficit, tangible equity and cash flow. Interest
expense for 2001 was $40.7 million, including non-cash interest of $8.4 million
with respect to the Debentures and amortization of deferred financing costs of
$2.4 million. The degree to which LGP is leveraged could have important
consequences, including the following: (1) 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; (2) indebtedness under the Amended
Credit Facility is at variable rates of interest, which causes the Company to be
vulnerable to increases in interest rates; (3) the Company is more leveraged
than certain competitors in its industry, which might place the Company at a
competitive disadvantage; (4) the Company may be hindered in its ability to
adjust rapidly to changing market conditions; (5) 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 (6) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired.

         As of December 31, 2001, $141.5 million was outstanding under the
Amended Credit Facility, the aggregate principal amount of the Notes outstanding
was $180.0 million, and the accreted principal amount of the Debentures was
approximately $78.7 million.

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

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

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


                                       24
<PAGE>

SUMMARY DISCLOSURE ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

         The following table reflects a summary of the Company's contractual
cash obligations as of December 31, 2001:

<TABLE>
<CAPTION>
                                             2002         2003         2004         2005         2006      THEREAFTER      TOTAL
                                             ----         ----         ----         ----         ----      ----------      -----
<S>                                        <C>          <C>          <C>          <C>          <C>         <C>           <C>
9 3/8% senior subordinated notes .......   $     --     $     --     $     --     $     --     $     --     $180,000     $180,000
11 5/8% senior discount debentures .....         --           --           --           --           --       78,740       78,740
Term Loan B ............................      1,000        1,000        1,000       12,375       11,875       71,250       98,500
Revolving credit facility ..............         --           --           --       42,950           --           --       42,950
Non-compete payments ...................        517          382          282          282          177          262        1,902
Real estate lease payments .............        519          326          244          199          139           84        1,511
Finder fee payments ....................        350          125           --           --           --           --          475
Other ..................................        114            4            4           --           --           --          122
                                           --------     --------     --------     --------     --------     --------     --------
                                           $  2,500     $  1,837     $  1,530     $ 55,806     $ 12,191     $330,336     $404,200
                                           ========     ========     ========     ========     ========     ========     ========
</TABLE>


SUMMARY DISCLOSURES REGARDING RELATED PARTIES

EXECUTIVE STOCK INVESTMENTS

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

         In addition, certain other executives were given the opportunity to
purchase Common Stock. 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, LGP,
Green II and Green III entered into that certain Amendment to Employment
Agreement, dated as of such date, pursuant to which that certain Employment
Agreement, dated as of November 21, 1997, between LGO, Mr. Serota and the
Company was amended. Under and pursuant to the amendment, LGP issued and sold to
Mr. Serota 4,372 shares of Common Stock and 184.42 shares of Series B 10% Junior
Redeemable Cumulative Preferred Stock of LGP ("Junior Preferred Stock") for an
aggregate purchase price of $250,000. In addition, the Company issued and sold
to Mr. Serota 23,174 shares of Common Stock for a purchase price of $15.00 per
share for an aggregate purchase price of $348,000.

         On December 15, 2000, the Company issued and sold to management
investors 28,626 shares of Common Stock for an aggregate purchase price of
$429,000.

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


OTHER RELATED PARTY TRANSACTIONS

         The Company paid $1.3 million and $1.5 million in management fees in
2000 and 2001, respectively, and $356,000 and $475,000 in other fees in 2000 and
2001, respectively, to Leonard Green & Partners, L.P. The Company is obligated
to pay other fees to Leonard Green & Partners, L.P. of $475,000, of which
$350,000 will be paid in 2002 and the remaining $125,000 will be paid in 2003.


                                       25
<PAGE>

NEW ACCOUNTING PRONOUNCEMENTS

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

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

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and for the associated asset retirement costs. SFAS No. 143 must be
applied starting with fiscal years beginning after June 15, 2002. The Company is
currently evaluating the impact that the adoption of SFAS No. 143 will have on
its consolidated financial statements.

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


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company has a $135.0 million revolving credit facility and a
separate Term Loan B that mature in March 2005 and 2007, respectively.
Borrowings under the revolving credit facility and the Term Loan B bear interest
at an annual rate, at the Company's option, equal to the Alternate Base Rate (as
defined in the Amended Credit Facility) or the Adjusted LIBO Rate (as defined in
the Amended Credit Facility) plus a margin that varies based upon a ratio set
forth in the Amended Credit Facility. As a result, the Company's interest
expense will be affected by changes in the Alternate Base Rate or in the
Adjusted LIBO Rate. At December 31, 2001, the Company had borrowings outstanding
of $43.0 million under the revolving credit facility and $98.5 million under the
Term Loan B. A hypothetical 100 basis point change in interest rates would
impact annual interest expense by approximately $1.4 million based on the
amount outstanding at December 31, 2001.

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

                                       26
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The information in response to this Item 8 is included in the
consolidated financial statements and notes thereto, and related Independent
Auditors' Report, appearing on pages F-1 to F-20 of this Form 10-K/A.

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

         None.




                                       27
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

         The following table sets forth the name, age and position of
individuals who served as directors of LGP and executive officers of LGP as of
March 30, 2002. 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.....  40  President, CEO, and Director
Scott T. Champion.....  42  Executive Vice President - Operations, and Director
Gene A. Hall..........  50  Senior Vice President - Midwestern Region
Daniel D. Lewis.......  38  Vice President and Secretary
Randy Cope............  41  Vice President - Missouri, Kansas, Arkansas
Kelly Luvison.........  42  Vice President - Western New York Region
Theodore G. Mike......  55  Vice President - Eastern Region
Leonard I. Green......  67  Chairman of the Board of Directors
John G. Danhakl.......  46  Director
Peter J. Nolan........  43  Director
Jonathan Seiffer......  30  Director

         Kenneth L. Serota is President and Chief Executive Officer and has
served in that capacity since January 1998. Mr. Serota has also been a Director
since January 1998. Previously, he served as Vice President -- Law & Finance and
Secretary for 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. Previously, Mr. Serota served as an attorney and a certified
public accountant. Mr. Serota has significant experience negotiating and closing
acquisitions of publications and primarily focuses his efforts on executing its
acquisition functions and overseeing all of the Company's administrative and
finance functions.

         Scott T. Champion is Executive Vice President-Operations and has
primary responsibility for all community publications. Mr. Champion has also
been a Director since January 2000. In 1998, he served as LGP's Senior Vice
President. Prior to 1998, he served as 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 publications. Mr. Champion has more than 19 years of experience
in the newspaper industry.

         Gene A. Hall is Senior Vice President and has primary responsibility
for publications in the Midwestern region of the United States. He was appointed
LGP's Senior Vice President in January 1998. Prior to his employment with LGP,
he served as a Senior Vice President of APC from 1992 to 1998. Prior to 1992, 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, which the Company
currently owns. Mr. Hall has more than 33 years of experience in the newspaper
industry.

         Daniel D. Lewis is Vice President and Secretary and has had primary
responsibility over the Company's financial and accounting activities since
September 1999. Prior to joining LGP, Mr. Lewis served as a management
consultant for PricewaterhouseCoopers LLP. In addition, Mr. Lewis has held
management positions with Kraft Foods Inc. and Berkshire Hathaway Inc. Mr. Lewis
is a certified public accountant.

         Randall W. Cope is Vice President and has been responsible for
newspaper operations in Missouri, Kansas and Arkansas since December 1998. Mr.
Cope also oversees the Company's national classified advertising network. From
1995 to 1998, Mr. Cope was regional manager and publisher of the Northwest
Arkansas Times in Fayetteville, Arkansas, which was owned by APC. Mr. Cope has
20 years of experience covering all areas of newspaper operations.

                                       28
<PAGE>

         Kelly 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 served as regional manager for LGP since January
1998, was appointed a Vice President in January 2000. Prior to January 1998, Mr.
Luvison was a regional manager for APC. Since 1996, Mr. Luvison has been
publisher of the Evening Tribune in Hornell, New York, a newspaper the Company
currently owns, in addition to his duties as a regional manager and Vice
President.

         Theodore G. Mike is Vice President and has primary responsibility for
many of the Company's newspaper operations in the eastern region of the United
States. Mr. Mike served as regional manager since January 1998, and was
appointed Vice President in January 1999. Mr. Mike served as a regional manager
for APC from 1992 to 1997. Mr. Mike has also been publisher of The Evening Times
in Sayre, Pennsylvania, a newspaper the Company currently owns, since 1992. Mr.
Mike has more than 35 years of experience in the newspaper industry.

         Leonard I. Green has been a Director since January 1998 and served as
the Chairman of the Board of Directors since January 1998. Mr. Green has been a
partner of Leonard Green & Partners, L.P. since its formation in 1994. Mr. Green
has also been, individually or through a corporation, a partner in a merchant
banking firm affiliated with Leonard Green & Partners, L.P. since its inception
in 1989. Mr. Green is also a director of Rite Aid Corporation, Communications &
Power Industries Inc. and Dollar Financial Group, Inc.

         John G. Danhakl has been a Director since January 1998. Mr. Danhakl has
been a partner of Leonard Green & Partners, L.P. 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 from 1985 to
1990. Mr. Danhakl is also a director of Arden Group, Inc., Big 5 Sporting Goods
Corporation, Communications & Power Industries Inc., Twinlab Corporation,
Diamond Triumph Auto Glass, Inc., Leslie's Poolmart, Inc., VCA Antech, Inc.,
PETCO Animal Supplies, Inc. and MEMC Electronic Materials Inc.

         Peter J. Nolan. Mr. Nolan has been a Director since January 1998. Mr.
Nolan has been a partner of Leonard Green & Partners, L.P. since 1997. Mr. Nolan
previously served as Managing Director and Co-Head of DLJ's Los Angeles
Investment Banking Division since 1990. Prior to joining DLJ, Mr. Nolan had been
a Vice President at Drexel Burnham Lambert Incorporated and a First Vice
President at Prudential Securities Incorporated. Mr. Nolan is also a director of
VCA Antech, Incorporated and several private companies.

         Jonathan A. Seiffer has been a Director since January 1998. Mr. Seiffer
has been a partner of Leonard Green & Partners, L.P. since 1999. From 1994
through 1999, Mr. Seiffer was a Vice President and Associate of Leonard Green &
Partners, L.P. Prior to joining Leonard Green & Partners, L.P., Mr. Seiffer was
a member of the corporate finance department of DLJ. Mr. Seiffer is also a
director of Diamond Triumph Auto Glass, Inc., Gart Sports Company, Dollar
Financial Group, Inc. and several private companies.



                                       29
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION


COMPENSATION OF EXECUTIVE OFFICERS

         The following table sets forth the cash and non-cash compensation paid
to the Company's chief executive officer and each of the four other most highly
compensated executive officers of the Company and LGO who earned more than
$100,000 in salary and bonus during 2001 (each a named executive officer and,
collectively, the named executive officers):


Summary Compensation Table


<TABLE>
<CAPTION>
                                                                                                     LONG-TERM
                                                              ANNUAL COMPENSATION                  COMPENSATION
                                              ---------------------------------------------------  ------------
                                                                                     OTHER ANNUAL   SECURITIES
                                              FISCAL                                 COMPENSATION   UNDERLYING
NAME AND POSITION                              YEAR    SALARY ($)     BONUS ($)          ($)        OPTIONS (#)
-----------------                             ------   ----------     ---------      ------------   -----------
<S>                                           <C>      <C>            <C>            <C>            <C>
Kenneth L. Serota ........................     2001     455,500             --             --             --
    President and CEO ....................     2000     405,500        300,000        112,973(1)          --
                                               1999     380,000        400,000        116,013(2)          --

Scott T. Champion ........................     2001     171,654         25,000             --             --
    Executive Vice President -- Operations     2000     155,500         85,000             --             --
                                               1999     130,000         75,000             --             --

Gene H. Hall .............................     2001     150,500         30,000             --             --
    Senior Vice President -- Midwestern ..     2000     138,289         28,200             --             --
    Region ...............................     1999     130,000         50,000             --             --

Randall W. Cope ..........................     2001     150,500         25,000             --             --
    Vice President -- Missouri, Kansas ...     2000     135,500         62,000             --             --
    and Arkansas .........................     1999     125,000         45,750             --          8,000

Daniel D. Lewis ..........................     2001     117,308         25,000             --             --
    Vice President and Secretary .........     2000      99,000         15,000             --          1,000
                                               1999      33,558(3)       8,000             --             --
</TABLE>

(1)  Includes $109,973 of loan forgiveness for fiscal year 2000.
(2)  Includes $110,013 of loan forgiveness for fiscal year 1999.
(3)  Mr. Lewis commenced employment with the Company in September 1999.

Aggregated Option Exercise in Last Fiscal Year and Stock Option Year-End Value

         The following table sets forth, for each of the Company's named
executive officers, information regarding the number of shares of Common Stock
underlying stock options held at December 31, 2001. Options to purchase shares
of the Common Stock were not granted to, or exercised by, any named executive
officer during fiscal year 2001. None of the outstanding unexercised options at
December 31, 2001 held by named executive officers was in-the-money.

                                        NUMBER OF SECURITIES UNDERLYING
                                    UNEXERCISED OPTIONS AT DECEMBER 31, 2001
                                    ----------------------------------------
NAME                                EXERCISABLE                UNEXERCISABLE
----                                -----------                -------------
Kenneth L. Serota...............        --                          --
Scott T. Champion...............        --                          --
Gene A. Hall....................        --                          --
Randall W. Cope.................        --                          --
Daniel D. Lewis.................        --                        1,000


                                       30
<PAGE>

COMPENSATION OF DIRECTORS AND MANAGEMENT FEES

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Mr. Nolan, Mr. Seiffer and Mr. Serota, who also serves as the President
and Chief Executive Officer of the Company, served on the Company's compensation
committee during the last fiscal year. The Company provided Mr. Serota a loan in
the principal amount of $250,000 in January 1998, which, together with all
accrued interest, was forgiven on a pro rata daily basis from January 1, 1998 to
January 1, 2001. The Company also provided Mr. Serota with three additional
loans on August 11, 2000, in the principal amounts of $250,000, $225,947 and
$121,663, the proceeds of which were used by Mr. Serota to purchase an aggregate
of 4,372 shares of Common Stock and 184.42 shares of Junior Preferred Stock.
Each of these loans accrues interest at a rate of 6.22% per annum until each
loan matures. The Company is required to forgive the $250,000 loan, including
all accrued interest, under certain circumstances. The $225,947 and $121,663
loans become due, including unpaid accrued interest, when Mr. Serota sells all
or part of the Common Stock purchased with the proceeds of such loans in an
amount proportional to the number of shares of Common Stock sold. See Item 11.
"Executive Compensation -- Employment Agreement" and Item 13. "Certain
Relationship and Related Transactions." Messrs. Nolan and Seiffer are partners
in Leonard Green & Partners, L.P., which acts as the manager under the
management services agreement. See Item 13. "Certain Relationships and Related
Transactions."

         None of the Company's executive officers currently serves, or in the
past, has served, on the board of directors or compensation committee of any
other company that has one or more executive officers serving on the Company's
board of directors or compensation committee.

EMPLOYMENT AGREEMENT

         LGP, LGO and Kenneth Serota entered into an employment agreement, dated
as of November 21, 1997, whereby Mr. Serota agreed to serve as President and
Chief Executive Officer of LGP, LGO and any of LGP's other subsidiaries for a
period of three years commencing January 1, 1998 and for additional successive
one-year periods thereafter, unless either LGO or Mr. Serota gives timely notice
to the other that the employment term shall not be so extended.

         The employment agreement provided for a base salary of $350,000,
$375,000 and $400,000 for the years 1998, 1999 and 2000, respectively, and
provided for those benefits generally available to LGO's employees, 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 LGO 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 provided, subject to certain
exceptions, that upon a termination of Mr. Serota's employment during the term
thereof (other than for "cause" or voluntary resignation without "good reason,"
as defined therein, but including a "change of control" as defined therein), LGO
was 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 employment agreement provides that during its term Mr. Serota
shall be a member of the board of directors of LGP and each of its subsidiaries
and he shall also be a member of any executive or similar committee of LGP and
its subsidiaries that has executive functions or responsibilities.

                                       31
<PAGE>

         On August 11, 2000, LGP, LGO, Mr. Serota, Green II and Green III
entered into an amendment to the employment agreement, pursuant to which: (1)
the term of the employment agreement was extended for an additional three-year
period until January 1, 2004 and for additional successive one-year periods
thereafter, unless either LGO or Mr. Serota gives timely notice to the other
that the employment term shall not be so extended; (2) the annual base salary
payable to Mr. Serota thereunder for years 2001, 2002 and 2003 of the extended
term thereof was established at $450,000, $475,000 and $500,000, respectively;
(3) LGO agreed to pay, in arrears, to Mr. Serota an automobile allowance of $500
per month for each month from January 1, 1998 through December 31, 2000 and $800
per month for each month thereafter; (4) Mr. Serota's severance package was
amended whereby LGO agreed to pay to Mr. Serota eighteen (18) months of base
salary at the then current annual base salary payable to Mr. Serota in the event
that Mr. Serota's employment with LGO is terminated by LGO without cause or by
Mr. Serota for good reason (including a change of control, as defined therein);
(5) LGP issued and sold to Mr. Serota (a) 4,372 shares of Common Stock and
184.42 shares of Junior Preferred Stock for an aggregate purchase price of
$250,000 and (b) 23,174 shares of Common Stock for a purchase price of $15.00
per share, for an aggregate purchase price of $347,610; and (6) LGP provided Mr.
Serota with (a) an unsecured full-recourse loan in the principal amount of
$250,000 to pay the consideration for the shares of Common Stock and 184.42
shares of Junior Preferred Stock, (b) a secured non-recourse loan in the
principal amount of $225,947 to pay a portion of the consideration for the
23,174 shares of Common Stock and (c) a secured recourse loan in the amount of
$121,663 to pay the remaining consideration for the 23,174 shares of Common
Stock. To secure repayment of the secured loans, LGP retained a security
interest in the Common Stock described in clause 5(b) above. Each of these loans
accrues interest at a rate of 6.22% per annum, which accrues until such loan
matures. LGP is required under the amendment to the employment agreement to
forgive the unsecured loan, including all accrued interest, upon the
consummation of a public offering of Common Stock. The secured loans become due,
including unpaid accrued interest, when Mr. Serota sells all or part of the
Common Stock purchased with the proceeds of such loans in an amount proportional
to the number of shares of Common Stock sold.

COMPENSATION PLANS

         Stock Option Plan

         Effective February 1999, the Company adopted the Liberty Group
Publishing, Inc. 1999 Stock Option Plan under which certain employees may be
granted options to purchase shares of its Common Stock. The Company reserved an
aggregate of 49,480 shares of Common Stock for issuance under this plan, of
which options to acquire 26,575 shares were issued and outstanding with a
weighted average exercise price of $5.62 per share as of December 31, 2001.
Under the plan, the Company has granted incentive stock options to certain of
its employees and non-qualified stock options to certain of its publishers and
corporate employees. Stock options may be exercised only to the extent they have
vested in accordance with the provisions described in individual option award
agreements. Generally, options vest under the incentive stock option awards on
the first anniversary of the grant date. Generally, options vest under the
non-qualified stock option awards for publishers with respect to 50% of the
shares on the third anniversary of the grant date and with respect to the
remaining 50% on the eighth anniversary of the grant date. However, the vesting
period for the remaining 50% may be accelerated if certain financial targets are
met. Generally, options vest under the non-qualified stock option awards for
corporate employees on the third anniversary of the grant date.

         Deferred Compensation Plans

         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, a non-qualified deferred compensation plan for the
benefit of certain designated publishers of its 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 that 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


                                       32
<PAGE>

distributable upon termination of the publisher's employment with the Company
and will be made in a lump sum or installments as elected by the publisher. The
Company recorded $133,000, $160,000 and $146,000 of compensation expense related
to the plan in 1999, 2000 and 2001, respectively.

         The Company maintains the Liberty Group Publishing, Inc. Executive
Benefit Plan, a non-qualified deferred compensation plan for the benefit of
certain of its key employees. Under the executive benefit plan, the Company
credits an amount, determined in its sole discretion, to a bookkeeping account
established for each participating key employee. The bookkeeping account is
credited with earnings and losses based upon the investment choices selected by
the participant. The amounts credited to the bookkeeping account on behalf of
each participating key employee vest on an installment basis over a period of 5
years. A participating key employee forfeits all amounts under the executive
benefit plan in the event that the key employee's employment with the Company is
terminated for "cause" as defined in the executive benefit plan. Amounts
credited to a participating key employee's bookkeeping account are distributable
upon termination of the key employee's employment with the Company, and will be
made in a lump sum or installments as elected by the key employee. The Company
recorded $65,000, $66,000 and $61,000 of compensation expense related to the
plan in 1999, 2000 and 2001, respectively.

         The Company maintains the Liberty Group Publishing, Inc. Executive
Deferral Plan, a non-qualified deferred compensation plan for the benefit of
certain of its key employees. 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
us 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.



                                       33
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


         The following table provides summary information regarding the
beneficial ownership of shares of LGP's Common Stock as of March 30, 2002.
Beneficial ownership of shares is determined under the rules of the Securities
and Exchange Commission and generally includes any shares over which a person
exercises sole or shared voting or investment power. Except as indicated by
footnote, and subject to applicable community property laws, each person
identified in the table possesses sole voting and investment power with respect
to all shares of Common Stock held by them. Unless otherwise noted, the address
for each of the stockholders listed below is c/o Liberty Group Publishing, Inc.,
3000 Dundee Road, Suite 203, Northbrook, Illinois 60062.


<TABLE>
<CAPTION>
                                                                                        NUMBER
NAME AND ADDRESS OF BENEFICIAL OWNERS                                                 OF SHARES       % OWNED
-------------------------------------                                                 ---------       -------
<S>                                                                                   <C>             <C>
Green Equity Investors II, L.P..................................................      1,440,000          67%
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025

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

Leonard I. Green (1)(2).........................................................      1,964,605          91%
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025

John G. Danhakl (1)(2)..........................................................      1,964,605          91%
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025

Peter J. Nolan (1)(2)...........................................................      1,964,605          91%
11111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025

Jonathan A. Seiffer (1)(2)......................................................      1,964,605          91%
1111 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025

Kenneth L. Serota...............................................................         93,746           4%

Scott T. Champion...............................................................         22,344           1%

Gene A. Hall....................................................................         22,344           1%

Randall W. Cope.................................................................         10,725            *

Daniel D. Lewis................................................................              --            *

All directors and executive officers as a group (11 persons) (3)................      2,124,936          98%
</TABLE>


                                       34
<PAGE>

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

*    Less than one percent.

(1)  The shares shown as beneficially owned by Messrs., Green, Danhakl, Nolan
     and Seiffer represent 1,440,000 shares owned of record by Green Equity
     Investors II, L.P., or GEI II. GEI II is a Delaware limited partnership
     managed by Leonard Green & Partners, L.P., which is an affiliate of the
     general partner of GEI II. Each of Leonard I. Green, Jonathan D. Sokoloff,
     John G. Danhakl, Peter J. Nolan, Jonathan A. Seiffer and John M. Baumer,
     either directly (whether through ownership interest or position) or through
     one or more intermediaries, may be deemed to control Leonard Green &
     Partners, L.P. and such general partner. Leonard Green & Partners, L.P. and
     such general partner may be deemed to control the voting and disposition of
     the shares of Common Stock owned by GEI II. As such, Messrs. Green,
     Danhakl, Nolan and Seiffer may be deemed to have shared voting and
     investment power with respect to all shares held by GEI II. However, such
     individuals disclaim beneficial ownership of the securities held by GEI II,
     except to the extent of their respective pecuniary interests therein.

(2)  The shares shown as beneficially owned by Messrs. Green, Danhakl, Nolan and
     Seiffer represent 524,605 shares owned of record by Green Equity Investors
     III, L.P., or GEI III. GEI III is a Delaware limited partnership managed by
     Leonard Green & Partners, L.P., which is an affiliate of the general
     partner of GEI III. Green Equity Investors Side III, L.P. ("GEI Side") is a
     Delaware limited partnership with the same general partner and manager as
     GEI III, and which invests in tandem with GEI III, with GEI Side's
     investments representing less than 1% of the amount invested in each
     transaction. Accordingly, references to GEI III herein include references
     to GEI Side. Each of Leonard I. Green, Jonathan D. Sokoloff, John G.
     Danhakl, Peter J. Nolan, Jonathan A. Seiffer and John M. Baumer, either
     directly (whether through ownership interest or position) or through one or
     more intermediaries, may be deemed to control Leonard Green & Partners,
     L.P. and the general partner of GEI III and GEI Side. Leonard Green &
     Partners, L.P. and such general partner may be deemed to control the voting
     and disposition of the shares of Common Stock owned by GEI III and GEI
     Side. As such, Messrs. Green, Danhakl, Nolan and Seiffer may be deemed to
     have shared voting and investment power with respect to all shares held by
     GEI III and GEI Side. However, such individuals disclaim beneficial
     ownership of the securities held by GEI III, except to the extent of their
     respective pecuniary interests therein.

(3)  Includes the shares referred to in notes 1 and 2 above.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


EMPLOYMENT AGREEMENT

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

MANAGEMENT SERVICES AGREEMENT

         On April 18, 2000, LGO entered into a management services agreement
with Leonard Green & Partners, L.P., an affiliate of each of GEI II and GEI III,
which acts as the manager under the agreement. The management services agreement
provides that the manager will provide management, consulting and financial
planning services and transaction-related financial advisory and investment
banking services to LGO. The manager receives an annual fee of approximately
$1.5 million as compensation for its management, consulting and financial
planning services, which is payable in equal monthly installments and is
subordinated in right of payment to the Notes, the Debentures and the Amended
Credit Facility. The manager also receives reasonable and customary fees for
transaction-related services and is reimbursed for out-of-pocket expenses. The
management services agreement terminates on January 27, 2010.

         The Company paid approximately $1.3 million and $1.5 million in
management fees in 2000 and 2001, respectively, and $356,000 and $475,000 in
other fees, in 2000 and 2001, respectively, to the manager. The Company is also
obligated to pay other fees of $475,000 to the manager, of which $350,000 will
be paid in 2002 and the remaining $125,000 will be paid in 2003.


                                       35
<PAGE>

                                     PART IV

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

(a)      Consolidated Financial Statements.

         Independent Auditors' Report.

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

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

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

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

         Notes to Consolidated Financial Statements.

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

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

                                  EXHIBIT INDEX

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

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

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

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.
</TABLE>



                                       36
<PAGE>


<TABLE>
<CAPTION>
EXHIBIT
NO.                        ITEMS
---                        -----
<S>      <C>                                                                              <C>
2.6      Amendment to Asset Purchase Agreement, dated as of January 14, 1998,             Incorporated by reference to
         among Liberty Group Publishing, Inc., Green Equity Investors II, L.P.            Exhibit 2.6 included on the
         (as guarantor), Liberty Group Operating, Inc., Hollinger International           Company's S-4.
         Inc., American Publishing Company of Illinois, APAC-90 Inc., American
         Publishing (1991) Inc. and APAC-95 Inc.

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

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

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

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

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

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

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

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

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

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

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


                                       37
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO.                        ITEMS
---                        -----
<S>      <C>                                                                              <C>
*10.3    Management Stockholders Agreement, dated as of January 27, 1998, among           Incorporated by reference to
         Liberty Group Publishing, Inc., Green Equity Investors II, L.P. and              Exhibit 10.2 on the Company's
         Kenneth L. Serota.                                                               S-4.

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

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

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

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

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

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

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

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

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

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

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

10.15    Guarantor Pledge and Security Agreement dated as of January 27, 1998             Incorporated by reference to
         among Liberty Group Publishing, Inc., Liberty Group Arizona Holdings, Inc.,      Exhibit 10.6 included on the
         Liberty Group Arkansas Holdings, Inc., Liberty Group California Holdings,        Company's S-4.
         Inc., Liberty Group Illinois Holdings, Inc., Liberty Group Iowa Holdings,
         Inc., Liberty Group Kansas Holdings, Inc., Liberty Group Michigan Holdings, Inc.
         Liberty Group Minnesota Holdings, Inc., Liberty Group Missouri Holdings, Inc.,
         Liberty Group New York Holdings, Inc., Liberty Group Pennsylvania Holdings, Inc.,
         Liberty Group Management Services, Inc. and Citicorp USA, Inc.
</TABLE>



                                       38
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO.                        ITEMS
---                        -----
<S>      <C>                                                                              <C>
10.16    Borrower Pledge and Security Agreement dated as of January 27, 1998              Incorporated by reference to
         between Liberty Group Operating, Inc. and Citicorp USA, Inc.                     Exhibit 10.7 included on the
                                                                                          Company's S-4.

*10.17   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").

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

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

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

10.21    First Amendment to Credit Agreement dated as of May 10, 2001,                    Incorporated by reference to
         among Liberty Group Operating, Inc., Liberty Group Publishing, Inc.,             Exhibit 99 included on the
         the lenders party thereto, Citibank, N.A. and Citicorp USA, Inc.                 Company's March 31, 2001 10-Q.

10.22    First Supplemental Indenture dated December 13, 2001, between Liberty            Previously filed.
         Group Publishing, Inc. and State Street Bank and Trust Company.

10.23    Second Amendment to Credit Agreement and Limited Waiver and Consent              Previously filed.
         dated as of December 14, 2001 among Liberty Group Operating, Inc.,
         Liberty Group Publishing, Inc. the lenders party thereto, Citibank, N.A. and
         Citicorp USA, Inc.

10.24    Guaranty, Indemnity and Subordination Agreement, dated as of                     Included herewith.
         January 27, 1998, entered into by Liberty Group Publishing, Inc.,
         Liberty Group Arizona Holdings, Inc., 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 Michigan Holdings, Inc., Liberty Group
         Minnesota Holdings, Inc., Liberty Group Missouri Holdings, Inc., Liberty Group
         New York Holdings, Inc., Liberty Group Pennsylvania Holdings, Inc. and
         Liberty Group Management Services, Inc., for the benefit of the Beneficiaries
         (as defined therein).

21       Subsidiaries of Liberty Group Publishing, Inc.                                   Previously filed.
</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.

(b)      The Company did not file any current reports on Form 8-K during the
         fourth quarter of the year ended December 31, 2001.



                                       39
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Liberty Group Publishing, Inc.:

We have audited the accompanying consolidated balance sheets of Liberty Group
Publishing, Inc. and subsidiaries as of December 31, 2000 and 2001, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for each of the years in the three-year period ended December 31, 2001.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of Liberty Group Publishing, Inc. and
subsidiaries as of December 31, 2000 and 2001, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America.

                                        /s/ KPMG LLP

Chicago, Illinois
March 18, 2002



                                      F-1
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                               DECEMBER 31,
                                                                                               ------------
                                                                                           2000           2001
                                                                                           ----           ----
<S>                                                                                     <C>            <C>
Assets
Current assets:
   Cash and cash equivalents ......................................................     $   1,036      $   1,474
   Accounts receivable, net of allowance for doubtful accounts of $1,523 and
      $1,458 at December 31, 2000 and 2001, respectively ..........................        22,605         21,398
   Inventory ......................................................................         3,042          2,824
   Prepaid expenses ...............................................................         1,169          1,602
   Other current assets ...........................................................           144             25
                                                                                        ---------      ---------
Total current assets ..............................................................        27,996         27,323
   Property, plant and equipment, net .............................................        55,817         52,536
   Intangible assets, net .........................................................       467,604        452,418
   Deferred financing costs, net ..................................................        11,682          9,924
   Other assets ...................................................................           402            336
                                                                                        ---------      ---------
Total assets ......................................................................     $ 563,501      $ 542,537
                                                                                        =========      =========
Liabilities and stockholders' deficit
Current liabilities:
   Current portion of Term Loan B .................................................     $   1,000      $   1,000
   Current portion of long-term liabilities .......................................         1,181            981
   Accounts payable ...............................................................         2,253          2,244
   Accrued expenses ...............................................................        16,305         13,394
   Deferred revenue ...............................................................         9,117          9,217
                                                                                        ---------      ---------
Total current liabilities .........................................................        29,856         26,836
Long-term liabilities:
   Borrowings under revolving credit facility .....................................        49,400         42,950
   Term Loan B, less current portion ..............................................        98,500         97,500
   Long-term liabilities, less current portion ....................................         2,338          1,518
   Senior subordinated notes ......................................................       180,000        180,000
   Senior discount debentures, redemption value $89,000 ...........................        70,327         78,740
   Deferred income taxes ..........................................................        23,026         24,586
                                                                                        ---------      ---------
Total liabilities .................................................................       453,447        452,130
Mandatorily Redeemable Preferred Stock:
   Series A 14 3/4 Senior Redeemable Exchangeable Cumulative Preferred Stock,
      $0.01 par value, 21,000,000 shares authorized, 2,684,086 and 3,102,430
      shares issued and outstanding at December 31, 2000 and 2001, respectively.
      Aggregate involuntary liquidation preference $25 plus accrued dividends .....        68,752         79,467
   Series B 10% Junior Redeemable Cumulative Preferred Stock, $0.01 par value,
      250,000 shares authorized, 87,864 and 96,984 shares issued and outstanding
      at December 31, 2000 and 2001, respectively .................................        89,328         98,601
                                                                                        ---------      ---------
Total mandatorily redeemable preferred stock ......................................       158,080        178,068
Stockholders' deficit:
   Common stock, $0.01 par value, 2,655,000 shares authorized, 2,185,177 shares
      issued and 2,181,177 and 2,158,833 shares outstanding at December 31, 2000
      and 2001, respectively ......................................................            22             22
   Additional paid in capital .....................................................        16,444         16,444
   Notes receivable ...............................................................        (1,183)          (987)
   Accumulated deficit ............................................................       (63,278)      (102,959)
   Treasury stock at cost, 4,000 and 26,344 shares at December 31, 2000 and
      2001, respectively ..........................................................           (31)          (181)
                                                                                        ---------      ---------
Total stockholders' deficit .......................................................       (48,026)       (87,661)
                                                                                        ---------      ---------
Total liabilities and stockholders' deficit .......................................     $ 563,501      $ 542,537
                                                                                        =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>

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


<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31,
                                                                    ------------------------
                                                               1999           2000           2001
                                                               ----           ----           ----
<S>                                                         <C>            <C>            <C>
REVENUES:
   Advertising ........................................     $ 121,430      $ 150,247      $ 152,382
   Circulation ........................................        27,543         32,318         35,347
   Job printing and other .............................        12,382         12,119         14,251
                                                            ---------      ---------      ---------
Total revenues ........................................       161,355        194,684        201,980

OPERATING COSTS AND EXPENSES:
   Operating costs ....................................        68,351         83,716         90,380
   Selling, general and administrative ................        51,522         63,817         66,581
   Depreciation and amortization ......................        16,657         19,864         21,997
                                                            ---------      ---------      ---------
Income from operations ................................        24,825         27,287         23,022
Interest expense ......................................        30,818         38,412         38,348
Amortization of deferred financing costs ..............         1,495          1,817          2,362
Net gain on exchange and disposition of properties ....        (6,197)            --             --
                                                            ---------      ---------      ---------

Loss before income taxes and extraordinary item .......        (1,291)       (12,942)       (17,688)
Income taxes ..........................................           295            491          2,004
                                                            ---------      ---------      ---------
Loss before extraordinary item ........................        (1,586)       (13,433)       (19,692)
Extraordinary gain on insurance proceeds ..............           485             --             --
                                                            ---------      ---------      ---------
Net loss ..............................................        (1,101)       (13,433)       (19,692)
                                                            ---------      ---------      ---------
Dividends on preferred stock ..........................       (13,595)       (17,018)       (19,989)
                                                            ---------      ---------      ---------
Net loss available to common stockholders .............     $ (14,696)     $ (30,451)     $ (39,681)
                                                            =========      =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                                    COMMON         COMMON      ADDITIONAL     TREASURY
                                                    STOCK          STOCK        PAID-IN        STOCK
                                                    SHARES         AMOUNT       CAPITAL        SHARES
                                                    ------         ------       -------        ------
<S>                                                <C>           <C>           <C>           <C>
Balances at 12/31/98 ...........................   1,600,000     $      16     $   8,144            --
   Repurchase of common shares .................          --            --            --        32,000
   Dividends on senior preferred stock .........          --            --            --            --
   Dividends on junior preferred stock .........          --            --            --            --
   Net loss ....................................          --            --            --            --
   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 preferred stock .........          --            --            --            --
   Dividends on junior preferred stock .........          --            --            --            --
   Net loss ....................................          --            --            --            --
   Repayment of notes receivable through
      forgiveness of debt and cash received ....          --            --            --            --
                                                   ---------     ---------     ---------     ---------
Balances at 12/31/00 ...........................   2,185,177     $      22     $  16,444         4,000
   Repurchase of common shares .................          --            --            --        22,344
   Dividends on senior preferred stock .........          --            --            --            --
   Dividends on junior preferred stock .........          --            --            --            --
   Net loss ....................................          --            --            --            --
   Repayment of notes receivable through
      forgiveness of debt and cash received ....          --            --            --            --
                                                   ---------     ---------     ---------     ---------
Balances at 12/31/01 ...........................   2,185,177     $      22     $  16,444        26,344
                                                   =========     =========     =========     =========
</TABLE>

          See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>


<TABLE>
<CAPTION>
                                                       TREASURY
                                                         STOCK           NOTES       ACCUMULATED
                                                        AMOUNT        RECEIVABLE       DEFICIT         TOTAL
                                                        ------        ----------       -------         -----
<S>                                                 <C>               <C>            <C>            <C>
Balances at 12/31/98 .............................  $         --      $    (501)     $ (18,051)     $ (10,392)
   Repurchase of common shares ...................          (250)            --             --           (250)
   Dividends on senior preferred stock ...........            --             --         (8,021)        (8,021)
   Dividends on junior 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 preferred stock ...........            --             --         (9,271)        (9,271)
   Dividends on junior preferred stock ...........            --             --         (7,747)        (7,747)
   Net loss ......................................            --             --        (13,433)       (13,433)
   Repayment of notes receivable through
      forgiveness of debt and cash received ......            --            163             --            163
                                                       ---------      ---------      ---------      ---------

Balances at 12/31/00 .............................     $     (31)     $  (1,183)     $ (63,278)     $ (48,026)
   Repurchase of common shares ...................          (150)            --             --           (150)
   Dividends on senior preferred stock ...........            --             --        (10,716)       (10,716)
   Dividends on junior preferred stock ...........            --             --         (9,273)        (9,273)
   Net loss ......................................            --             --        (19,692)       (19,692)
   Repayment of notes receivable through
      forgiveness of debt and cash received ......            --            196             --            196
                                                       ---------      ---------      ---------      ---------

Balances at 12/31/01 .............................     $    (181)     $    (987)     $(102,959)     $ (87,661)
                                                       =========      =========      =========      =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

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

<TABLE>
<CAPTION>
                                                                              YEARS ENDED DECEMBER 31,
                                                                              ------------------------
                                                                         1999           2000           2001
                                                                         ----           ----           ----
<S>                                                                   <C>            <C>            <C>
Cash flows from operating activities:
   Net loss .....................................................     $  (1,101)     $ (13,433)     $ (19,692)
Adjustments to reconcile net loss to net cash provided by
   operating activities:
   Depreciation and amortization ................................        16,657         19,864         21,997
   Amortization of deferred financing costs .....................         1,495          1,817          2,362
   Accretion of senior discount notes ...........................         6,711          7,518          8,413
   Non-cash compensation ........................................           223            163            109
   Net gain on exchange and disposition of properties ...........        (6,197)            --             --
   Deferred taxes ...............................................            --             --          1,560
   Extraordinary gain ...........................................          (485)            --             --
   Changes in assets and liabilities, net of acquisitions and
      dispositions:
      Accounts receivable, net ..................................        (1,325)           372          1,354
      Inventory .................................................           139           (467)           218
      Prepaid expenses and other assets .........................        (2,552)          (417)          (314)
      Accounts payable ..........................................        (2,338)           (38)          (242)
      Accrued expenses ..........................................        (3,173)           427         (2,932)
      Deferred revenue ..........................................           445            (72)            92
                                                                      ---------      ---------      ---------
Net cash provided by operating activities .......................         8,499         15,734         12,925
                                                                      ---------      ---------      ---------

Cash flows from investing activities:
   Purchases of property, plant and equipment ...................        (5,687)        (9,654)        (2,715)
   Proceeds on sale of properties ...............................            --          2,103             --
   Acquisitions, net of cash acquired ...........................       (54,822)       (84,541)          (615)
                                                                      ---------      ---------      ---------
Net cash used in investing activities ...........................       (60,509)       (92,092)        (3,330)
                                                                      ---------      ---------      ---------

Cash flows from financing activities:
   Net proceeds from issuing long-term debt .....................            --         98,505             --
   Borrowings (repayments) under revolving credit facility,
      net of fees ...............................................        53,500         71,750         (7,065)
   Net proceeds from issuing preferred stock ....................            --         20,656             --
   Net proceeds from issuing common stock .......................            --          7,419             --
   Repurchase of common stock ...................................          (250)            --            (63)
   Payments of long term debt ...................................            --             --         (1,000)
   Payments on long term liabilities ............................          (405)          (945)        (1,029)
   Payment of debt on prior revolving credit facility ...........            --       (121,850)            --
                                                                      ---------      ---------      ---------
   Net cash provided by (used in) financing activities ..........        52,845         75,535         (9,157)
                                                                      ---------      ---------      ---------
Net increase (decrease) in cash and cash equivalents ............           835           (824)           438
Cash and cash equivalents, at beginning of period ...............         1,025          1,860          1,036
                                                                      ---------      ---------      ---------
Cash and cash equivalents, at end of period .....................     $   1,860      $   1,036      $   1,474
                                                                      =========      =========      =========

Supplemental cash flow disclosure -
   Non cash gain on exchange of properties ......................     $   6,197     $       --      $      --
   Cash interest paid ...........................................        24,107         28,388         32,130
   Income taxes paid ............................................           130            532            505
   Repayment of notes receivable through forgiveness of debt ....           223            163            109
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

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


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

         (A)   DESCRIPTION OF BUSINESS

         Liberty Group Publishing, Inc. and subsidiaries is a leading U.S.
publisher of local newspapers and related publications that are the dominant
source of local news and print advertising in their markets. The Company owns
and operates 328 publications in 17 states. The Company's total revenues in 2001
were derived from advertising (75%), circulation (18%) and job printing and
other (7%). Raw materials, mainly newsprint and ink, are readily available from
a number of suppliers. No single display advertiser accounted for greater than
one percent, and no single display, accounted for greater than 10%, of the
Company's total revenues in 2001.

         (B)   BASIS OF PRESENTATION

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

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

         (C)   USE OF ESTIMATES

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

         (D)   INVENTORIES

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

         (E)   PROPERTY, PLANT AND EQUIPMENT

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

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


                                      F-7
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


         (F)   INTANGIBLE ASSETS

         Intangible assets consist of subscriber and advertiser relationships,
mastheads, non-compete agreements with former owners of acquired newspapers, and
the excess of acquisition costs over the 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 subscriber intangibles, up to 10 years for
noncompetition agreements depending upon the specifics of the agreement, and 40
years for mastheads, advertiser intangibles and goodwill.

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

         (G)   REVENUE RECOGNITION

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

         (H)   INCOME TAXES

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

         Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.

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

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

         (J)   CASH EQUIVALENTS

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


                                      F-8
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


         (K)   RECLASSIFICATIONS

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

         (L)   STOCK OPTIONS

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

(2)      ACQUISITIONS AND DISPOSITIONS

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

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

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

(3)      PROPERTY, PLANT AND EQUIPMENT

         Property, plant and equipment consisted of the following:

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

                                      F-9
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


(4)      INTANGIBLE ASSETS

         Intangible assets consisted of the following:

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

(5)      ACCRUED EXPENSES

         Accrued expenses consisted of the following:

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

(6)      SENIOR SUBORDINATED NOTES AND SENIOR DISCOUNT DEBENTURES

         The Senior Subordinated Notes and Senior Discount Debentures consist of
the following:

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31
                                                                                           -----------
                                                                                       2000            2001
                                                                                       ----            ----
<S>                                                                                 <C>            <C>
Liberty Group Operating, Inc.
   9 3/8% Senior Subordinated Notes Due February 1, 2008.......................     $  180,000     $   180,000
Liberty Group Publishing, Inc.
   11 5/8% Senior Discount Debentures $89,000 Redemption Value
   Due February 1, 2009 .......................................................         70,327          78,740
                                                                                    ----------     -----------
Total Senior Subordinated Notes and Senior Discount Debentures.................        250,327         258,740
Less current installments .....................................................             --              --
                                                                                    ----------     -----------
Total Senior Subordinated Notes and Senior Discount
   Debentures, excluding current installments..................................     $  250,327     $   258,740
                                                                                    ==========     ===========
</TABLE>



                                      F-10
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


         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 3/8% 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 5/8% Senior Discount
Debentures (the "Debentures") due February 1, 2009.

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

         The indenture governing the Debentures contains covenants that, among
other things, limit the ability of LGP and its subsidiaries, including the
Operating Company, to make investments or other loans or to pay dividends or
make other specified restricted payments. These provisions generally prohibit,
subject to certain exceptions and financial performance criteria, dividend
payments, loans or advances by LGP or by the Operating Company to LGP without
the consent of the holders of the Debentures.

         The Debentures issued by LGP are general unsecured obligations and pay
no cash interest until February 1, 2003. The Debentures will, however, accrete
on a semi-annual equivalent bonds basis to a full principal amount of $89,000 on
February 1, 2003. Thereafter, cash interest on the Debentures will accrue and be
payable semi-annually on February 1 and August 1 of each year. The Debentures
are redeemable for cash at the option of LGP any time after February 1, 2003 at
stipulated redemption amounts. In the event of a change in control of LGP, and
subject to certain conditions, the holders of the Debentures have the right to
require LGP to repurchase all of the Debentures at a price equal to 101% of the
accreted value thereof, plus accrued and unpaid interest, to the repurchase
date, if purchased prior to February 1, 2003, and at a price of 101% of the
principal amount at maturity thereof, plus accrued and unpaid interest to the
repurchase date if purchased on or after February 1, 2003. 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 revolving credit facility. The amendment and restatement
extended the maturity date of the revolving credit facility from January 2003 to
March 2005, and included the issuance of a $100,000 Term Loan B. The Term Loan B
matures in March 2007 and requires annual principal payments of $500 in 2000,
$1,000 from 2001 through 2004, $36,125 in 2005, $47,500 in 2006, and $11,875 in
2007.

         On May 10, 2001, the Operating Company entered into an amendment to its
Amended Credit Facility. The amendment decreased the aggregate commitment
available under the revolving credit facility from $175,000 to $135,000 and
amended the Cash Coverage Ratio and Senior Leverage Ratio as defined within the
Amended Credit Facility.

         The Term Loan B and the revolving credit facility bear interest at the
Operating Company's option equal to the Base Rate (as defined in the Amended
Credit Facility) or the adjusted LIBO Rate for a eurodollar loan (as defined in
the Amended Credit Facility) plus a margin that varies based upon a ratio set
forth in the Amended Credit Facility. There is an individual margin applicable
to each of the Term Loan B and the revolving credit facility. The Operating
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 revolving credit
facility. No principal payments are due on the revolving credit facility until
the maturity date. At December 31, 2001, the Operating Company had utilized
$42,950 of the revolving credit facility and $98,500 of the Term Loan B. The
average interest rate on borrowings under the Amended Credit Facility for 2001
was 8.1%.

         The Amended Credit Facility contains certain financial covenants and
other limitations on LGP and the Operating Company, including restrictions on
the ability of LGP and its subsidiaries, including the Operating Company, to
make investments or other loans or to pay dividends or make other specified
restricted payments. These provisions generally prohibit dividend payments,
loans or advances by LGP or by the Operating Company to LGP without the consent
of the lenders under the Amended Credit Facility.

                                      F-11
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


(8)      LONG-TERM LIABILITIES

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

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

         2002......................................................  $    981
         2003......................................................       511
         2004......................................................       286
         2005......................................................       282
         2006......................................................       177
         Thereafter................................................       262
                                                                     --------
                                                                     $  2,499
                                                                     ========
(9)      COMMON STOCK

         In February 2000, the Company effected a 20-to-1 stock split of LGP's
common stock, par value $0.01 per share (the "Common Stock"). All share data has
been retroactively restated to account for this stock split. The Company then
authorized the issuance of 55,000 additional shares of Common Stock, of which
49,500 shares were made available in the form of stock options for local
publishers. Management investors also received 4,400 of these new shares to
eliminate any dilution of their original holdings that will result from the
issuance of shares under the Company's stock option plan.

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

         On August 11, 2000, Operating Company, Kenneth L. Serota (the
"Executive"), LGP, Green Equity Investors II, L.P. ("Green II") and Green III
entered into an Amendment to the Employment Agreement, dated as of such date
(the "Employment Agreement Amendment"), pursuant to which the Employment
Agreement, dated as of November 21, 1997, between Operating Company, the
Executive, and LGP was amended. Under and pursuant to the Employment Agreement
Amendment, the Company issued and sold to the Executive 4,372 shares of Common
Stock and 184.42 shares of Series B 10% Junior Redeemable Cumulative Preferred
Stock (the "Junior Preferred Stock") (collectively, the "Loan Equity") for an
aggregate purchase price of $250. In addition, the Company issued and sold to
the Executive 23,174 shares of Common Stock 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 for an aggregate purchase price of $429.

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


                                      F-12
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


(10)     MANDATORILY REDEEMABLE PREFERRED STOCK

         LGP has the authority to issue up to 23,905,000 shares of capital
stock, of which 21,250,000 shares are designated as Preferred Stock, par value
$0.01 per share, and 2,655,000 shares are designated as Common Stock. The
acquisition of 166 newspapers from APC in January 1998, was financed in part
from the proceeds of (i) $45,000 from the issuance and sale of 1,800,000 shares
of 14 3/4% Senior Redeemable Exchangeable Cumulative Preferred Stock (the
"Senior Preferred Stock"), (ii) $49,000 from the issuance and sale of 49,000
shares of 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 $1,000.00 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 Junior Preferred Stock
(collectively, the "Loan Equity") for an aggregate purchase price of $250. See
further discussion under Note 9.

         The Senior Preferred Stock issued by the Company is senior to the
Common Stock and Junior Preferred Stock, with respect to dividend distributions
and distributions upon the liquidation, winding up or dissolution of the
Company. Dividends may be paid, at the Company's option, at any dividend payment
date in cash or in additional shares of Senior Preferred Stock having a
liquidation preference equal to the dividend amount. The liquidation preference
of the Senior Preferred Stock is $25.00 per share.

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

         Except as required by law, the holders of shares of Senior Preferred
Stock are generally not entitled or permitted to vote on any matters voted upon
by the stockholders of the Company. Subject to certain conditions, the Senior
Preferred Stock is exchangeable, on any dividend payment date, in whole, but not
in part, at the option of the Company for 14 3/4% Senior Subordinated Debentures
(the "Exchange Debentures") of the Company maturing February 1, 2010. The
Exchange Debentures are redeemable prior to maturity on substantially the same
terms as the Senior Preferred Stock. Since inception, the Company has elected to
pay all of its Senior Preferred Dividends in additional shares of Senior
Preferred Stock. At December 31, 2001, the Company had accumulated but
undeclared dividends of $1,907.

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


                                      F-13
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


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

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

(11)     INCOME TAXES

         Income taxes for the periods shown below consisted of:

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

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

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



                                      F-14
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


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

<TABLE>
<CAPTION>
                                                                                                DECEMBER 31
                                                                                                -----------
                                                                                             2000          2001
                                                                                             ----          ----
<S>                                                                                        <C>           <C>
Deferred tax assets:
   Accounts receivable, principally due to allowance for doubtful accounts ...........     $    622      $    408
   Accrued expenses ..................................................................        1,207         2,119
   Net operating losses ..............................................................       20,776        16,979
                                                                                           --------      --------
Gross deferred tax assets ............................................................       22,605        19,506
Less: valuation allowance ............................................................       (7,531)           --
                                                                                           --------      --------
Net deferred tax assets ..............................................................       15,074        19,506
                                                                                           --------      --------

Deferred tax liabilities:
Long-lived assets, principally due to differences in depreciation and amortization ...        8,789        19,200
Intangible assets, principally due to differences in amortization ....................       29,311        24,892
                                                                                           --------      --------
                                                                                             38,100        44,092
                                                                                           --------      --------
Net deferred tax liability ...........................................................     $ 23,026      $  4,586
                                                                                           ========      ========
</TABLE>

         During 2001, an aggregate of approximately 78% of the Debentures were
purchased in the open market at a discount by GEI II and GEI III. This discount
resulted in a cancellation of indebtedness for Federal income tax purposes.

         The valuation allowance increased by $7,531 in 2000 and decreased by
$7,531 in 2001. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary difference become deductible. In
assessing the realizability of the Company's deferred tax assets, which are
principally net operating loss carry-forwards, management considers the reversal
of deferred tax liabilities which are scheduled to reverse during the
carry-forward period and tax planning strategies.

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

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

(12)     EMPLOYEE BENEFIT PLANS

         The Company maintains certain benefit plans for its employees.

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

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


                                      F-15
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


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

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

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

(13)     STOCK OPTION PLANS

         In February 1999, the Company adopted its 1999 Stock Option Plan (the
"Plan") under which certain employees may be granted the right to purchase
shares of Common Stock. Pursuant to the Plan, the Company has granted incentive
stock options and two types of non-qualified stock options, one type for
publishers and the other type for corporate employees. The Company has reserved
an aggregate of 49,480 shares of Common Stock for issuance under the Plan. Stock
options may be exercised only to the extent they have vested in accordance with
the provisions described in the individual option award agreements. Generally,
options vest under the incentive stock option awards on the first anniversary of
the grant date. Generally, under the non-qualified stock option awards for
publishers, options vest with respect to 50% of the shares on the third
anniversary of the grant date and with respect to the remaining 50% on the
eighth anniversary of the grant date. However, the vesting period for the
remaining 50% may be accelerated if certain financial targets are met.
Generally, options vest under the non-qualified stock option awards for
corporate


                                      F-16
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

employees on the third anniversary of the grant date.

         The Company applies APB 25 in accounting for the Plan. All options
under the Plan 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 Plan. Had the Company determined
compensation cost based on the fair value at the grant date for its stock option
plan under SFAS 123, the Company's net loss for each of the years in the
three-year period ended December 31, 2001 would have been the pro forma amounts
indicated below:

                                              1999         2000         2001
                                              ----         ----         ----
             Net loss
                As reported.............    $(1,101)    $(13,433)     $(19,692)
                Pro forma...............     (1,162)     (13,449)      (19,701)

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

                                                             WEIGHTED-AVERAGE
                                                  SHARES      EXERCISE 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
                                                  ======           ======
   Canceled .................................      9,050             7.52
                                                  ------           ------
Outstanding on December 31, 2001 ............     26,575           $ 5.62
                                                  ======           ======

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

<TABLE>
<CAPTION>
                                                WEIGHTED-          WEIGHTED-                     WEIGHTED-
                                                 AVERAGE            AVERAGE                       AVERAGE
EXERCISE                        OPTIONS         REMAINING          EXERCISE        OPTIONS       EXERCISE
PRICE                         OUTSTANDING    CONTRACTUAL LIFE        PRICE       EXERCISABLE       PRICE
-----                         -----------    ----------------        -----       -----------       -----
<S>                           <C>            <C>                   <C>           <C>             <C>
$ 5.00.....................      23,400         7.08  Years        $    5.00          4,805      $    5.00
$ 10.00....................       3,175         8.08               $   10.00            149          10.00
                                -------         ----               ---------      ---------      ---------
                                 26,575         7.20  Years        $    5.62          4,954      $    5.15
                                =======         ====               =========      =========      =========
</TABLE>


                                      F-17
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)


(14)     RELATED PARTY TRANSACTIONS

EXECUTIVE STOCK INVESTMENTS

         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 was forgiven on a pro rata daily basis from January 28, 1998 to
January 28, 2001.

         In addition, certain other executives were given the opportunity to
purchase Common Stock. 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., the Executive, LGP, Green
II and Green III entered into the Employment Agreement Amendment, pursuant to
which the Employment Agreement, dated as of November 21, 1997, between the
Operating Company, the Executive and LGP was amended. Under and pursuant to the
Employment Agreement Amendment, the Company issued and sold to the Executive
4,372 shares of Common Stock and 184.42 shares of Junior Preferred Stock for an
aggregate purchase price of $250. In addition, the Company issued and sold to
the Executive 23,174 shares of Common Stock 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 for an aggregate purchase price of $429.

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

OTHER RELATED PARTY TRANSACTIONS

         The Company paid $1,320 and $1,480 in management fees in 2000 and 2001,
respectively, and $356 and $475 in other fees in 2000 and 2001, respectively, to
Leonard Green & Partners, L.P. The Company is obligated to pay other fees to
Leonard Green & Partners, L.P. of $475 at December 31, 2001.

(15)     NEW ACCOUNTING PRONOUNCEMENTS

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

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


                                      F-18
<PAGE>

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and for the associated asset retirement costs. SFAS No. 143 must be
applied starting with fiscal years beginning after June 15, 2002. The Company is
currently evaluating the impact that the adoption of SFAS No. 143 will have on
its consolidated financial statements.

         In August 2001, the FASB issued SFAS No. 144 "Accounting for Impairment
of Long-Lived Assets." The new standard supercedes FASB Statement No. 121 (SFAS
No. 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." Although retaining many of the fundamental
recognition and measurement provisions of SFAS No. 121, the new rules
significantly change the criteria that would have to be met to classify an asset
as held-for-sale. The new standard also supercedes the provisions of Accounting
Principles Board Opinion No. 30 (APB No. 30), "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," and
will require expected future operating losses from discontinued operations to be
displayed in discontinued operations in the period(s) in which the losses are
incurred rather than as of the measurement date as presently required by APB No.
30. The provisions of SFAS No. 144 are effective for financial statements
beginning after December 15, 2001, but allow for early application. The Company
plans to adopt this standard as of the beginning of its new fiscal year on
January 1, 2002. The Company is currently evaluating the impact of SFAS No. 144
will have on its results of operations and financial condition.

(16)     SUBSEQUENT EVENTS

         On January 7, 2002, the Company sold the assets of The Ottumwa Courier,
a daily newspaper with a circulation of approximately 15,000. Along with the
Courier, the property publishes five other shopper publications. The total sales
price was $26,519 resulting in a gain for financial statement purposes of
$7,117, or a gain of $4,342, net of the tax effect of $2,775.



                                      F-19
<PAGE>

                   INDEPENDENT AUDITORS' REPORT ON SCHEDULE II

The Board of Directors
Liberty Group Publishing, Inc.:

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

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

                                          /s/ KPMG LLP

Chicago, Illinois
March 18, 2002



                                      S-1
<PAGE>

                                   SCHEDULE II

                 LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS


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

          See accompanying Independent Auditors' Report on Schedule II.




                                      S-2
<PAGE>
                                   SIGNATURES

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

Dated: November 20, 2002             LIBERTY GROUP PUBLISHING, INC. (Registrant)

                                     By /s/ KENNETH L. SEROTA
                                        ----------------------------------------
                                     Kenneth L. Serota,
                                     President, Chief Executive Officer and
                                     Chairman of the Board of Directors

         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: November 20, 2002             /s/ KENNETH L. SEROTA
                                     -------------------------------------------
                                     Kenneth L. Serota,
                                     President, Chief Executive Officer and
                                     Chairman of the Board of Directors

Dated: November 20, 2002             /s/ DANIEL D. LEWIS
                                     -------------------------------------------
                                     Daniel D. Lewis,
                                     Chief Financial Officer

Dated: November 20, 2002             /s/ SCOTT T. CHAMPION
                                     -------------------------------------------
                                     Scott T. Champion, Director

Dated: November 20, 2002             /s/ LEONARD I. GREEN
                                     -------------------------------------------
                                     Leonard I. Green, Director

Dated: November 20, 2002             /s/ JOHN G. DANHAKL
                                     -------------------------------------------
                                     John G. Danhakl, Director

Dated: November 20, 2002             /s/ PETER J. NOLAN
                                     -------------------------------------------
                                     Peter J. Nolan, Director

Dated: November 20, 2002             /s/ JONATHAN A. SEIFFER
                                     -------------------------------------------
                                     Jonathan A. Seiffer, Director


<PAGE>
                                  CERTIFICATION


I, Kenneth L. Serota, certify that:

1. I have reviewed this annual report on Form 10-K/A of Liberty Group
Publishing, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Dated: November 20, 2002


                                      /s/ KENNETH L. SEROTA
                                     -------------------------------------------
                                      Name:  Kenneth L. Serota
                                      Title: President, Chief Executive Officer
                                             and Chairman of the Board of
                                             Directors

<PAGE>

                                  CERTIFICATION


I, Daniel D. Lewis, certify that:

1. I have reviewed this annual report on Form 10-K/A of Liberty Group
Publishing, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.


Dated: November 20, 2002


                                      /s/ DANIEL D. LEWIS
                                     -------------------------------------------
                                      Name:  Daniel D. Lewis
                                      Title: Chief Financial Officer


<PAGE>

                                INDEX TO EXHIBITS

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

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

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

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

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

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

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

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

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

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

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


<PAGE>


<TABLE>
<CAPTION>
EXHIBIT
NO.               ITEMS
---               -----
<S>      <C>                                                                              <C>
3.1      Amended and Restated Certificate of Incorporation of Liberty Group               Incorporated by reference to
         Publishing, Inc.                                                                 Exhibit 3.1 included on the
                                                                                          Company's Annual Report on Form
                                                                                          10-K for the year ending
                                                                                          December 31, 1999 (the
                                                                                          "Company's 1999 10-K").

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

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

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

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

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

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

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

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

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

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

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

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


<PAGE>


<TABLE>
<CAPTION>
EXHIBIT
NO.               ITEMS
---               -----
<S>      <C>                                                                              <C>
*10.10   Management Stock Purchase Agreement, dated as of December 15, 2000,              Incorporated by reference to
         between Liberty Group Publishing, Inc., Green Equity Investors II,               Exhibit 10.10 included on the
         L.P., Green Equity Investors III, L.P. and Gene A. Hall.                         Company's 2000 10-K.

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

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

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

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

10.15    Guarantor Pledge and Security Agreement dated as of January 27, 1998             Incorporated by reference to
         among Liberty Group Publishing, Inc., Liberty Group Arizona Holdings, Inc.,      Exhibit 10.6 included on the
         Liberty Group Arkansas Holdings, Inc., Liberty Group California Holdings,        Company's S-4.
         Inc., Liberty Group Illinois Holdings, Inc., Liberty Group Iowa Holdings,
         Inc., Liberty Group Kansas Holdings, Inc., Liberty Group Michigan Holdings, Inc.
         Liberty Group Minnesota Holdings, Inc., Liberty Group Missouri Holdings, Inc.,
         Liberty Group New York Holdings, Inc., Liberty Group Pennsylvania Holdings, Inc.,
         Liberty Group Management Services, Inc. and Citicorp USA, Inc.

10.16    Borrower Pledge and Security Agreement dated as of January 27, 1998              Incorporated by reference to
         between Liberty Group Operating, Inc. and Citicorp USA, Inc.                     Exhibit 10.7 included on the
                                                                                          Company's S-4.

*10.17   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").

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

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

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

10.21    First Amendment to Credit Agreement dated as of May 10, 2001,                    Incorporated by reference to
         among Liberty Group Operating, Inc., Liberty Group Publishing, Inc.,             Exhibit 99 included on the
         the lenders party thereto, Citibank, N.A. and Citicorp USA, Inc.                 Company's March 31, 2001 10-Q.

10.22    First Supplemental Indenture dated December 13, 2001, between                    Previously filed.
         Liberty Group Publishing, Inc. and State Street Bank and Trust
         Company.

10.23    Second Amendment to Credit Agreement and Limited Waiver and Consent              Previously filed.
         dated as of December 14, 2001 among Liberty Group Operating, Inc.,
         Liberty Group Publishing, Inc. the lenders party thereto, Citibank, N.A. and
         Citicorp USA, Inc.
</TABLE>


<PAGE>

<TABLE>
<S>      <C>                                                                              <C>
10.24    Guaranty, Indemnity and Subordination Agreement, dated as of                     Included herewith.
         January 27, 1998, entered into by Liberty Group Publishing, Inc.,
         Liberty Group Arizona Holdings, Inc., 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 Michigan Holdings, Inc., Liberty Group
         Minnesota Holdings, Inc., Liberty Group Missouri Holdings, Inc., Liberty Group
         New York Holdings, Inc., Liberty Group Pennsylvania Holdings, Inc. and
         Liberty Group Management Services, Inc., for the benefit of the Beneficiaries
         (as defined therein).

25       Subsidiaries of Liberty Group Publishing, Inc.                                   Previously filed.
</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.