<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

          (Mark One)               ANNUAL REPORT PURSUANT TO SECTION 13 OR
                                   15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
             (X)                   For the Fiscal Year Ended March 26, 2001
                                                     OR
             ( )                   TRANSITION REPORT PURSUANT TO SECTION 13 OR
                                   15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                                   Commission file number 1-11112

                        AMERICAN MEDIA OPERATIONS, INC.
          (Exact name of the registrant as specified in its charter)

          Delaware                                       59-2094424
(State or other jurisdiction of              (IRS Employee Identification No.)
incorporation or organization)

  5401 N.W. Broken Sound Blvd., Boca Raton, Florida          33487
    (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code (561) 997-7733

  Securities registered pursuant to Section 12(b) and 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/

As of June 25, 2001, 7,507.6 shares of registrant's common stock were
outstanding. The common stock is privately held and, to the knowledge of
registrant, no shares have been sold in the past 60 days.

                      Documents Incorporated by Reference
                                     None

                                       1

<PAGE>

                       AMERICAN MEDIA OPERATIONS, INC.
                                  FORM 10-K
                       FOR THE YEAR ENDED MARCH 26, 2001

PART I

    Item 1.  Business

    Item 2.  Properties

    Item 3.  Legal Proceedings

    Item 4.  Submission of Matters to a Vote of Security Holders

PART II

    Item 5.  Market for Registrant's Common Equity and Related Security Holders

    Item 6.  Selected Financial Data

    Item 7.  Management's Discussion and Analysis of Financial Condition and
             Results of Operations

    Item 8.  Financial Statements and Supplementary Data

    Item 9.  Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure

PART III

    Item 10. Directors and Executive Officers

    Item 11. Executive Compensation

    Item 12. Security Ownership of Certain Beneficial Owners and Management

    Item 13. Certain Relationships and Related Transactions

PART IV

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

             Signatures

                                       2
<PAGE>

                                    PART I

ITEM 1.  BUSINESS

    Unless the context otherwise requires, references in this Form 10-K to the
"Company" or "us", "we" or "our" are to American Media Operations, Inc. and
its subsidiaries. All references to a particular fiscal year are to the four
fiscal quarters ended the last Monday in March of the fiscal year specified.

    We were incorporated under the laws of Delaware in February 1981 and are a
wholly-owned subsidiary of American Media, Inc. ("Media"). We conduct all of
Media's operations and represent substantially all of Media's assets. Our
headquarters and principal executive offices are located at 5401 N.W. Broken
Sound Blvd, Boca Raton, FL 33487 and the telephone number is (561) 997-7733.

    In February 1999, we ceased publication of Soap Opera News and Soap Opera
Magazine and sold certain of the trademarks and other soap opera publishing
assets relating to these magazines (collectively, the "Soap Opera Assets") to
Primedia, Inc. for $10 million in cash. In addition, we may receive future
consideration through February 2002 based upon increased financial performance
above certain levels of Primedia, Inc.'s Soap Opera Digest and Soap Opera Weekly
publications. There can be no assurance however that we will receive any such
future consideration.  As of June 25, 2001, we have not received any such
consideration.

    On May 7, 1999 all of the common stock of Media was purchased by EMP Group
LLC (the "LLC"), a Delaware limited liability company, pursuant to a merger of
Media and EMP Acquisition Corp. ("EMP"), a wholly owned subsidiary of the LLC.
Proceeds to finance the acquisition included (a) a cash equity investment of
$235 million by the LLC, (b) borrowings of approximately $350 million under a
new $400 million senior bank facility (the "New Credit Agreement") and (c)
borrowings of $250 million in the form of senior subordinated notes (the "New
Subordinated Notes"). These proceeds were used to (d) acquire all of the
outstanding common stock of Media for $299.4 million, (e) repay $267 million
then outstanding under the existing credit agreement (the "Credit Agreement")
with our banks, (f) retire approximately $199 million of our $200 million Senior
Subordinated Notes due 2004 and (g) pay transaction costs (all such transactions
in (a) through (g) are collectively referred to as the "Transactions"). Upon
consummation of the Transactions, EMP was merged with and into Media (the
"Merger") resulting in a change in ownership control of both Media and the
Company. As a result of this change in control, as of the Merger date we
reflected a new basis of accounting that included the elimination of historical
amounts of certain assets and liabilities and the revaluation of certain of our
tangible and intangible assets.

    On November 1, 1999 the Company acquired all of the common stock of Globe
Communications Corp. and certain of the publishing assets and liabilities of
Globe International, Inc. (collectively, the "Globe Properties") for total
consideration of approximately $105 million, including approximately $100
million in cash and $5 million in equity of the LLC (the "Globe Acquisition").
The Globe Properties consist of several tabloid style magazines, including
Globe, National Examiner and Sun as well as other titles including Mini Mags.
Proceeds to finance the acquisition of the Globe Properties included an
expansion of our New Credit Agreement by $90 million, approximately $14 million
from the Company's existing revolving line of credit, which has since been
repaid in full, and the issuance to the sellers of $5 million of equity in the
LLC.  These proceeds were used to acquire the Globe Properties and to pay
transaction costs.

                                       3
<PAGE>

    On July 11, 2000, the Company and the former owner of the Globe Properties
signed an agreement whereby the existing voting shareholders of the LLC
repurchased the $5 million of equity in the LLC originally issued to the former
owner.  Concurrent with this purchase, the former owner and his son resigned
their positions as directors of the board of American Media.

    Additionally, the Company bought out the remaining term of the former
owner's five year employment agreement and collected the amount due per the net
asset calculation as required in the initial purchase agreement.  The net amount
paid to the former owner for these items and miscellaneous other items was
approximately $3.2 million.  This adjustment was a part of the Globe Acquisition
and was therefore accounted for as an increase in goodwill.

    On August 1, 2000, the Company acquired certain publishing assets and
liabilities of Country Music Magazine for total cash consideration of $600,000.
Country Music Magazine is a bi-monthly special interest magazine presenting
various aspects of country music, lifestyles, events and personalities.


Industry Data and Circulation Information

    Unless otherwise specifically indicated, all statements presented in this
Form 10-K regarding (a) circulation rankings in the United States and Canada of
National Enquirer, Star, Globe, National Examiner, Weekly World News and Sun
relative to other magazines are based on weekly single copy circulation and of
Country Weekly in its category based on bi-weekly circulation, (b) rankings in
the United States and Canada of National Enquirer, Star, Globe and National
Examiner relative to other magazines based on total magazine retail dollars
generated, (c) our publications' share of total weekly single copy circulation
in the United States and Canada and (d) the percentage that average weekly
single copy circulation of our publications in the United States, Canada or
outside of North America represents of total average weekly single copy
circulation of our publications are based upon statistical data obtained from
the report of the Audit Bureau of Circulations for the six months ended December
31, 2000 (which information has not been independently verified by us). Unless
otherwise indicated, all average weekly circulation information for our
publications is an average of actual weekly circulation for the twelve months
ended March 26, 2001. All references to "circulation" are to single copy and
subscription circulation, unless otherwise specified. All information regarding
National Enquirer, Star, Country Weekly, and Country Music is based on Spring
2001 Mediamark Research Inc. syndicated research data (which information has not
been independently verified by us). Information regarding magazine audience
estimates (i.e. multiple readers per copy) and reader demographics for all other
AMI titles are based on research conducted by outside independent research
companies and the individual publishers' estimates.


                                  The Company

Overview

    We are a leading publisher in the field of general interest magazines,
publishing National Enquirer, Star, Globe, National Examiner, Weekly World News,
Sun, Country Weekly, Country Music Magazine, MIRA!, Auto World Monthly and other
smaller monthly publications  with a current aggregate weekly newsstand
circulation of approximately 4.6 million copies. National Enquirer, Star, and
Globe, our premier titles, have the first, fifth and sixth  highest weekly
single copy circulation, respectively, of any weekly periodical in the United
States. We are the leader in total weekly single copy circulation of magazines
in the United States and Canada with approximately 36% of total U.S. and
Canadian circulation for audited weekly publications. We

                                       4
<PAGE>

derive approximately 85% of our revenues from circulation, predominantly single
copy sales in retail outlets, and the remainder from advertising and other
sources. National Enquirer, Star, Globe and National Examiner are distributed in
approximately 165,000 retail outlets in the United States and Canada,
representing, in the opinion of management, substantially complete coverage of
periodical outlets in these countries. Distribution Services, Inc. ("DSI"), our
subsidiary, arranges for the placement and merchandising of our publications and
third-party publications at retail outlets throughout the United States and
Canada. In addition, DSI provides marketing, merchandising and information-
gathering services for third parties.

     Our tabloid publications are among the most well-known and widely
distributed titles in the publishing industry. While our tabloid publications
have a current aggregate weekly newsstand circulation of approximately 4.6
million copies, they enjoy a weekly readership of over 30 million people due to
multiple readers per copy sold. Our other titles (including the Mini Mags, Micro
Mags and Digests) contribute an additional readership of over 20 million, giving
AMI titles a total readership in excess of 50 million. As a result, we believe
our publications enjoy strong consumer brand awareness with a large and loyal
readership base. Our publications include the following titles:

     .    National Enquirer is a weekly general interest periodical with a
          editorial content devoted to investigative reporting, celebrity gossip
          & features, human interest stories and articles covering lifestyle
          topics such as health, food and household affairs. National Enquirer
          is the highest selling weekly periodical in the United States and
          Canada based on single copy circulation, selling on average 1,657,000
          copies per week. National Enquirer has a total average weekly
          circulation of 2,041,000 copies, including subscriptions, with a total
          readership in the U.S. and Canada of 14.1 million. The median age of
          the National Enquirer's readership is 41 and almost 70% of the readers
          are women. National Enquirer's cover price is $1.89 in the United
          States and the 72 page expanded issues (versus a regular issue of 48
          pages) are priced at $2.89. In Fiscal 2001, there were nine such
          issues. Excluding these nine expanded issues, average single copy and
          total average weekly circulation was 1,680,000 and 2,064,000
          respectively.

     .    Star is a weekly celebrity news-based periodical dedicated to covering
          the stars of television, movies and music, as well as the lives of the
          rich and famous from politics, business, royalty and other areas.
          Star's editorial also incorporates fashion, health, fitness, diet, all
          with a celebrity spin. Star is the fifth highest selling weekly
          periodical in the United States and Canada based on single copy
          circulation, selling on average 1,301,000 copies per week. Star has a
          total average weekly circulation of 1,612,000 copies, including
          subscriptions, with a total readership in the U.S. and Canada of 7.8
          million. The median age of the Star's readership is 40 and over 70% of
          the readers are women. Star's cover price is $1.89 in the United
          States and the 72 page expanded issues (versus a regular issue of 48
          pages) are priced at $2.89. In fiscal 2001, there were nine such
          issues. Excluding these nine expanded issues, average single copy and
          total average weekly circulation was 1,321,000 and 1,632,000,
          respectively.

     .    Globe is a weekly tabloid with content that is much edgier than the
          National Enquirer and Star, with a greater emphasis on investigative
          crime stories. Globe is the sixth highest selling weekly periodical in
          the United States and Canada based on single copy circulation, selling
          on average 663,000 copies per week. Globe has a total average weekly
          circulation of 730,000 copies, including subscriptions, with an
          estimated readership of over 4.2 million. Over 70% of the readers are
          women, with an estimated median age of 47. Globe's cover price is
          $1.89 in the United States and the

                                       5
<PAGE>

          72 page expanded issues (versus a regular issue of 48 pages) were
          priced at $2.89. In fiscal 2001, there were seven such issues.
          Excluding these seven expanded issues, average single copy and total
          average weekly circulation was 671,000 and 738,000, respectively.

     .    National Examiner's editorial content consists of celebrity and human-
          interest stories, differentiating itself from the other titles through
          its upbeat positioning as the "gossip, games and good news" tabloid.
          The National Examiner sells an average 335,000 copies per week, with a
          average weekly circulation of 358,000 copies, including subscriptions.
          Total readership is estimated at 1 million, 85% female, with an
          estimated median age in their early 50s. National Examiner's cover
          price is $1.89 in the United States.

     .    Weekly World News is a tabloid devoted to the publication of
          entertaining, bizarre and strange but true stories. There is much
          humorous original content and the paper has created several characters
          that have become staples of pop culture. Weekly World News has an
          average weekly single copy circulation of 254,000 copies, with a total
          average weekly circulation of 275,000 copies, including subscriptions.
          Readership is estimated at 1.5 million. The young (40% of the
          readership is under 30) and old (45% is over 60) are drawn to the
          funny and unusual mix of stories found in Weekly World News. Weekly
          World News' cover price is $1.69 in the United States.

     .    Sun's editorial content is skewed to an older target audience and
          focuses on religion, health, holistic remedies, predictions and
          prophecies. Sun also includes entertaining and unusual articles from
          around the world. Sun has an average weekly single copy circulation of
          approximately 167,000 copies, with a total readership estimated at
          550,000. 80% of Sun's readers are women, with a median age approaching
          60. The Sun has a cover price of $1.69 in the United States.

     .    Country Weekly is a special interest magazine presenting various
          aspects of country music, lifestyles, events and personalities, and
          has the highest weekly circulation of any such magazine in its
          category. On October 5, 1999 a newly re-designed and expanded Country
          Weekly was re-launched as a biweekly publication. Concurrent with the
          change to a biweekly format the cover price was raised from $1.99 to
          $2.49. Country Weekly has an average single copy circulation of
          224,000 copies, with a total average bi-weekly circulation of 447,000
          copies, including subscriptions. Total readership is 2.8 million, and
          67% of the readers are women. The median age is 40.

     .    Country Music Magazine is a bi-monthly publication that is also a
          special interest magazine presenting various aspects of country music,
          lifestyles, events and personalities. The Company acquired Country
          Music Magazine on August 1, 2000. Since the acquisition date, Country
          Music Magazine had an average single copy circulation of approximately
          18,000 copies with a total average circulation of 319,000 copies and a
          cover price of $2.99 in the United States. Country Music Magazine has
          a total readership of 4.8 million, and 64% of the readers are women.
          The median age is 43.

     .    Micro Mags. We publish pocket-sized books under the name of Micro Mags
          covering such topics as diets, horoscopes, health and psychic
          phenomena. Thirteen releases are published annually, each with four
          titles, at a current price of $1.79. In fiscal 2001, revenues for
          Micro Mags were approximately $5.3 million.

                                       6
<PAGE>

     .    Mini-Mags and Digest. Our Mini-Mags and Digest business was added in
          the Globe Acquisition. The unit publishes a series of booklets ranging
          in price from $0.99 to $2.59 and covering such topics as diets,
          health, astrology and pets. Mini-Mags and Digests are similar to our
          Micro Mags publications. The Mini-Mags and Digest business produces
          approximately 81 million booklets and approximately $19.0 million in
          sales. The combination of Globe's former Mini-Mags unit and our Micro
          Mags has created the largest unit of its kind in the publishing
          business. The combined unit is expected to cover 616,000 pockets at
          supermarket checkouts.

     .    Mira. Launched in June of 2000 as a bi-weekly, Mira is a Spanish
          language magazine that features exclusive news, gossip and goings-on
          about the hottest stars in the Latino community, along with interviews
          and in-depth stories spotlighting them at work and at play. It is
          distributed at checkout in supermarkets, bodegas and mass
          merchandisers in the top 43 Hispanic markets in the U.S. Based on
          single copy sales growth, Mira shifted to a weekly frequency in
          January 2001. The magazine has a cover price of $1.79 and a weekly
          circulation of 200,000. Total readership is estimated at 800,000. 74%
          of the readers are women and the median age is 37.

     .    AMI Auto World Magazine. Launched as a biweekly in June 2000, Auto
          World targets the in-market buyer and is the only automotive magazine
          sold at checkout in supermarket and mass merchandisers. The readership
          is 33% female, giving Auto World by far the highest number of women
          readers of any automotive title. Articles focus on buying new and pre-
          owned cars, road tests, comparison tests, news, pricing, recalls and
          rebates. Auto World shifted to a monthly frequency in July 2001. The
          magazine has a cover price $3.95 and a projected monthly circulation
          of 100,000.

     .    New Media. There are web sites for the National Enquirer
          (nationalenquirer.com), Star (starmagazine.com), Country Weekly
          (countryweekly.com), Weekly World News (weeklyworldnews.com) and Auto
          World Monthly (amiautoworld.com). The company is currently syndicating
          its content to Lycos, Iwon, Keen and E-universe, and is working on
          similar agreements with numerous other web sites. Syndication fees are
          based on shared subscription and advertising revenues.



Circulation

     Our tabloid publications have an aggregate weekly newsstand circulation of
approximately 4.6 million copies and a weekly readership of over 30 million
people due to multiple readers per copy sold. We derive approximately 85% of our
revenues from circulation and the remainder from advertising and other sources.
Approximately 90% of our circulation revenues are generated by single copy
circulation at retail outlets and the remainder by subscriptions. The United
States, Canada and areas outside of North America represented approximately 87%,
10% and 3% of average weekly single copy circulation, respectively.

                                       7
<PAGE>

     Single Copy Circulation.   The following table sets forth average weekly
single copy circulation and U.S. cover prices for our publications for the three
fiscal years 1999, 2000 and 2001.


Average Weekly Single Copy Circulation and U.S. Cover Price

<TABLE>
<CAPTION>
                                                                      For Fiscal Year Ended
                                                       ----------------------------------------------------
                                                       March 29,            March 27,               March 26,
                                                          1999                2000                    2001
                                                       ---------            ---------               ---------
                                                                  (circulation data in thousands)
<S>                                                    <C>                   <C>                    <C>
National Enquirer
   Single Copy Circulation                               1,766                1,743 (3)               1,657 (4)
   Cover Price                                          $ 1.49 (1)           $ 1.69 (1)              $ 1.89 (1)

Star
   Single Copy Circulation                               1,445                1,407 (3)               1,301 (4)
   Cover Price                                          $ 1.49 (1)           $ 1.69 (1)              $ 1.89 (1)

Globe
   Single Copy Circulation                                 759                  741                     663 (4)
   Cover Price                                          $ 1.49 (1)           $ 1.69                  $ 1.89 (1)

National Examiner
   Single Copy Circulation                                 430                  401                     335
   Cover Price                                          $ 1.49 (1)           $ 1.69                  $ 1.89 (1)

Weekly World News
   Single Copy Circulation                                 350                  306                     254
   Cover Price                                          $ 1.39 (1)           $ 1.59 (1)              $ 1.69 (1)

Sun
   Single Copy Circulation                                 219                  207                     167
   Cover Price                                          $ 1.39 (1)           $ 1.59 (1)              $ 1.69 (1)

Country Weekly
   Single Copy Circulation                                 169                  175 (2)                 224
   Cover Price                                          $ 1.99 (1)           $ 2.49 (1)              $ 2.49 (1)
</TABLE>

____________________________________

(1)  We increased the U.S. cover price on each of the National Enquirer, Star,
     Globe and National Examiner from $1.49 to $1.59 on July 27, 1999, to $1.69
     on February 8, 2000 and to $1.79 on October 3, 2000, and then to $1.89 on
     March 13, 2001. We increased the U.S. cover price on Weekly World News and
     Sun from $1.25 to $1.39 on September 1, 1998, to $1.49 on July 27, 1999, to
     $1.59 on January 4, 2000 and then to $1.69 on January 2, 2001. We increased
     the U.S. cover price on Country Weekly on April 7, 1998 from $1.69 to
     $1.79, to $1.99 on March 2, 1999 then to $2.49 on October 5, 1999
     simultaneously with its re-launch as a bi-weekly publication.

(2)  Bi-weekly average circulation from October 5, 1999 through March 27, 2000
     was 205,000.

(3)  Amount includes six expanded issues for both the National Enquirer and Star
     that include 72 pages versus a regular issue of 48 pages and are priced at
     $2.69.  Excluding these six issues,

                                       8
<PAGE>

     single copy circulation was 1,767,000 and 1,428,000 for both the National
     Enquirer and Star, respectively.

(4)  Amount includes nine expanded issues for both the National Enquirer and
     Star and seven expanded issues for the Globe that include 72 pages versus a
     regular issue of 48 pages and are priced at $2.89.  Excluding these nine
     issues, single copy circulation was 1,680,000, 1,321,000 and 671,000 for
     the National Enquirer,  Star, and Globe, respectively.

     For fiscal 2001, single copy circulation for each of our six tabloids
experienced a decline.  Overall our tabloid titles were down 8.9% in units while
the overall magazine industry was down 11.1%.    In what was called by industry
experts the "worst year ever" for single copy sales (verified by the December
2000 ABC report), ten of the top twenty five newsstand titles suffered double
digit declines in newsstand sales.  Additionally, newsstand sales decreased for
nearly two thirds of all ABC magazines.

     The root cause of these declines lies primarily with the wholesalers that
physically distribute our magazines (i.e. deliver to the retailer, fill the
pockets at checkout, etc.). There has been an industry wide consolidation in the
wholesaler distribution industry that has resulted in four wholesalers
representing 81% of the market today and 55 smaller wholesalers representing the
remaining 19%. In an effort to gain further market share, these four wholesalers
negotiated contracts with the major retailers that resulted in increased share,
but lower margins. To economize, the wholesalers have had to cut expenses, which
in turn resulted in very poor service levels. Minimal time spent in stores meant
pockets were not properly stocked. Allotments were reduced to speed up returns
processing and over 20 thousand retail outlets were dropped from delivery routes
to save on time and expenses.

     For example, our research showed that an average of 14% of our pockets
either did not have any copies of our publications or were occupied by a
competitive title. These pocket violations are as high as 22% for our secondary
titles such as the Weekly World News and Sun. We believe that these pocket
violations and overall recent distribution issues are a major reason behind our
circulation declines in the past year, and that correcting them could recapture
lost retail sales for our titles. As we are the largest and most profitable
publisher to both the retail and wholesale trade, we are in a unique position to
lead the industry in further studying and resolving these issues. Currently, we
are working with all the wholesalers, as well as other large publishers and
retailers on improving service levels. After witnessing the decline in overall
unit sales in calendar year 2000, the entire industry of publishers, wholesalers
and retailers are now keenly focused on improving distribution to regain lost
sales.

     Despite the unit circulation declines during fiscal 2001, we have been able
to increase our total tabloid retail dollars (the total amount of gross revenue
generated by retailers) by 5.7% through prudent increases in our cover prices.
We continue to believe and our in-depth consumer research shows that increasing
cover prices prudently over time does not have a material impact on circulation.

     In order to build our brand names and support our price increases we have
continued our multi- tiered advertising campaign, which includes television,
print and outdoor advertising for the National Enquirer and Star.  These
campaigns emphasize each publications strong journalistic content and
investigative nature.   For the fiscal years ended March 26, 2001 and March 27,
2000 we spent approximately $9.5 million and $9.6 million, respectively on our
advertising campaigns.

     Mainstream recognition of the tabloids has never been higher. After the
National Enquirer broke the Jessie Jackson mistress affair, the Washington Post
called it "the hottest

                                       9
<PAGE>

paper in America". The Star was recently cited by Fox News for its revelations
about Congressman Gary Condit and missing Washington intern Chandra Levy.

     This type of mass media advertising and PR exposure has significantly
benefited the overall readership of both papers, which in turn has driven ad
sales to unprecedented levels. According to the Spring MRI syndicate research,
the National Enquirer readership increased by 16.6% and the Star by 9.2%. Ad
pages for the period January-April 2001, as measured by the Publishers
Information Bureau, have grown by 27% for National Enquirer and 26% for Star
over prior year. These increases were the highest among ABC titles for that
period.


Subscription Sales.

     Our strategy with respect to subscriptions seeks to optimize subscription
revenues and profitability as opposed to subscription circulation. We accomplish
this strategy by focusing on direct sales of our titles by us through inserts
and direct mailings. From time to time, however, we utilize agents, such as
Publishers Clearing House, to maintain and expand our subscriber base
subscription circulation. In fiscal 2001, approximately 10% (or $35.0 million)
of our total revenues from circulation were from subscription sales. Average
weekly subscription circulation for fiscal 2001 were 384,000 copies for National
Enquirer, 311,000 copies for Star, 67,000 copies for Globe,  23,000 copies for
National Examiner,  21,000 copies for Weekly World News,  5,000 copies for Sun
and  223,000 copies for Country Weekly as a bi-weekly publication.

     Subscription renewal rates for our publications (exclusive of subscriptions
sold by direct mail agents) were 85% for National Enquirer, 85% for Star, 73%
for the Globe, 70% for the National Examiner, 62% for the Sun, 78% for Weekly
World News and 70% for Country Weekly for subscriptions which expired during the
2000 calendar year. In calendar 2000, approximately two-thirds of our
subscribers purchased their subscriptions directly from us. We believe that our
core subscribers are those who do not purchase through direct mail agents due to
the fact that renewals by people who subscribe through direct mail agents are
low.

Advertising Revenues

     We had approximately $37.1 million in advertising revenues in fiscal 2001.
Our advertising revenues are generated by national advertisers, including
consumer product and broadcasting companies, direct response and classified
advertisers. We employ advertising sales people and maintain advertising sales
offices in New York City, Chicago, Los Angeles, Detroit, Nashville,  Miami  and
Boca Raton.


Editorial

     The editorial departments of our publications operate independently. The
editorial headquarters for National Enquirer, Star, Globe, National Examiner,
Sun and  Weekly World News are in Boca Raton, Florida.  The tabloids also have
editorial bureaus in Los Angeles and New York.  MIRA's editorial headquarters is
located in Miami, Florida.  Country Weekly and Country Music Magazine's
editorial headquarters are located in Nashville, Tennessee.  Auto World
Magazine's editorial headquarters is located in Pass Christian, Mississippi.

     The editorial news gathering operation of National Enquirer, Star and Globe
are each directed by an editor-in-chief,  an executive editor who supervises
article editors, including a Los Angeles and New York bureau chief. The article
editors are responsible for developing and

                                       10
<PAGE>

gathering news stories and story ideas. The article editors also have staff
reporters, as well as photo editors who work under the direction of a head photo
editor. Stories brought in for publication are processed through a skilled team
of writers and a design layout department. Each story is checked during the
process by a research department before actual publication.

     In addition to their editorial staffs, National Enquirer, Globe and Star
pay outside sources for story leads. In addition to their editorial staffs the
National Enquirer, Globe and Star have networks of free-lance reporters and
free-lance photographers to whom they can assign stories. Because a significant
amount of our editorial content is based on investigative reporting, our
publications are "first source" or "breaking story" magazines for our readers  .

     The editorial staffs of Weekly World News, National Examiner, Sun, Country
Weekly, Country Music Magazine, MIRA! and Auto World are each managed by an
editor-in-chief.

     Due to the nature of the investigative reporting, National Enquirer, Globe
and Star have internal procedures of having legal counsel (outside and internal)
review any articles, photographs and headlines before any story is published.
We believe that this pre-publication "vetting" has been important in mitigating
the risk and occurrence of libel-based suits against the publications. There are
currently no claims pending that we believe would have a material adverse effect
on our operations.

Production and Distribution

     An unrelated third-party performs most of the pre-press operations for our
publications and is responsible for transmitting them electronically to printing
plants. We have a long-term printing agreement with an unrelated domestic
printer to print National Enquirer, Star, Globe, National Examiner, Weekly World
News, Sun and Country Weekly through December 2010 for sales in the United
States, Canada and, to the extent applicable, outside of North America (except
for the United Kingdom). This same printer also prints the majority of our other
publications. National Enquirer has a special United Kingdom edition, which is
printed by another unrelated printer. Once printed, the copies are distributed
primarily by 4 regional wholesalers, who represent 81% of the market, as well as
55 smaller wholesalers who represent the remaining 19%, in the United States and
Canada, who deliver the requisite number of copies to approximately 165,000
retail sales locations. We believe our relationships with our printing companies
are adequate and that there are printing facilities available elsewhere, should
the need arise. The principal raw materials utilized by our publications are
paper and ink. Paper is purchased directly by us from several suppliers based
upon pricing and, to a lesser extent, availability. Ink utilized by our
publications is purchased by the printers from at least two different ink
suppliers. Both paper and ink are commodity products with pricing affected by
demand, capacity and economic conditions. We believe that adequate sources of
supply are, and will continue to be, available to fulfill our requirements.

     Our operating income may be significantly affected by the price of paper
used in our publications. If paper prices increase in the future and we cannot
pass these costs on to our customers, such increases may have a material adverse
effect on us. We have currently committed our volume requirements with our major
suppliers through March 2002; however, we have not locked in prices beyond June
of 2001 as we believe that the price of paper will be declining based on current
market conditions.

Marketing and Merchandising

     We have established, through DSI, our own marketing organization whose
primary function is to coordinate the placement and merchandising of our
publications and third-party

                                       11
<PAGE>

publications in retail outlets throughout the United States and Canada. In
addition to the services DSI provides for our publications, DSI acts as a
"quarterback" for approximately 45% (based on our estimates) of new front-end
racking programs initiated annually in the United States and Canada by
supermarkets and other retailers. Recently, DSI has begun to leverage its
network of field representatives, which are regularly in retail outlets
performing its services, by expanding its services to provide merchandising,
resetting of rack programs and other information services to consumer product
companies outside the publishing industry. DSI's field representatives visit
approximately 17,000 locations weekly, representing 40% of AMI's volume.

     Approximately every three years, supermarkets and other retailers typically
redesign their front-end racks, generally as part of store renovations or new
store openings. As a "quarterback," DSI is selected by retailers to coordinate
the design and installation of the front-end racks and the positioning of
magazines for increased sales. Publishers, including the Company, which are
allocated space on a rack enter into contracts directly with the retailer for
the payment of fees (rack display payments) or other charges with respect to
that space. DSI uses its role as quarterback of new front-end rack programs
initiated annually by retailers in the United States to achieve better placement
of our publications and of the publications of DSI's third-party publishing
clients. DSI is not paid by the retailers for the services it renders as
quarterback.

     DSI provides marketing services for the Company and third-party publishing
clients to achieve favorable placement of their respective publications at
supermarkets and other retail outlets. DSI also provides merchandising,
resetting of rack programs and other information services such as checking
retail stock displays and repositioning and restocking in-store inventories for
the Company and its other clients. DSI's staff is equipped with handheld
computers in order to enhance the timeliness and accuracy of its information-
gathering services.

     Some of DSI's third-party clients include Hachette, which publishes Woman's
Day, Woman's Day Specials and Elle; Gruner & Jahr USA/Publishing, which
publishes Family Circle, Family Circle Specials, Rosie (formerly McCall's),
Fitness, Parents and YM; Wenner Media, Inc., which publishes US Weekly Magazine,
Rolling Stone Magazine and Men's Journal; Newsweek, Inc., which publishes
Newsweek; and Rodale Press, Inc., which publishes Prevention and Prevention
Guides.

     DSI's contracts to provide marketing and merchandising services to third-
party clients generated approximately $15.6 million in revenues in fiscal 2001,
as compared to $14.2 million and $13.6 million in fiscal 2000 and fiscal 1999,
respectively.


Other Businesses

     On November 27, 2000, the Company solid its 80% owned subsidiary, Frontline
Marketing,  ("FMI") to the minority shareholder for a $2.5 million note
receivable (See Note 9 to the Consolidated Financial Statements).

     Through FMI, we sold in-store advertising space to various product
manufacturers and other national advertisers. FMI owns signage consisting of
elevated light displays at checkout counters in about 5,100 supermarkets and
considers itself a premier advertising vehicle for new products and front-end
brands. FMI is responsible for maintaining the signage and pays retailers
commissions on advertising sales. In fiscal 2001, revenues from FMI were $2.1
million or approximately 0.5% of total operating revenues.

     We also had ancillary sales (primarily licensing and syndication sales) of
$1.9 million in fiscal 2001.

                                       12
<PAGE>

Competition

     National Enquirer, Globe, Star, National Examiner, Weekly World News, Sun,
MIRA!, Country Music Magazine and Country Weekly compete in varying degrees with
other publications sold at retailers' checkout counters, as well as forms of
media concentrating on celebrity news, such as certain newspapers, magazines and
television and radio programs. We believe that historical declines in single
copy circulation of National Enquirer, Globe, Star and National Examiner have
resulted in part from increased competition from these publications and forms of
media. Competition for circulation is largely based upon the content of the
publication, its placement in retail outlets and, to a lesser extent, its price.
Competition for advertising revenues is largely based upon circulation levels,
readership, demographics, price and advertising results. We believe that
currently our most significant direct competitors in the print media are Time
Warner Inc. (which publishes People, In Style and Entertainment Weekly), Wenner
Media, Inc. (which publishes US Weekly Magazine), and TV Guide, Inc. (which
publishes TV Guide).

     DSI competes with many other companies providing marketing and distribution
services, such as full-service national distributors, wholesalers and publishers
with their own marketing organizations.

Employee Relations

     We currently employ approximately 627 full-time employees and 1,407 part-
time employees. Approximately 1,519 of our employees, including almost all of
our part-time employees, work for DSI. None of our employees is represented by
any union or other labor organization. We have had no strikes or work stoppages
during the last five years. We believe that our relations with our employees are
good.

ITEM 2.  PROPERTIES

     We own our headquarters building, which was acquired as part of the Globe
Acquisition in Boca Raton, Florida.  This premise is a three story, 70,000
square foot free standing building.  This building houses the editorial staffs
of the National Enquirer, Star, Globe, National Examiner, Weekly World News,
Sun, and Mini-Mags, as well as our corporate office.

     We also lease 11,800 square feet in New York, New York for advertising,
editorial, and new media personnel, 16,400 square feet in Delray Beach, Florida
for certain back office functions, 12,500 square feet in West Palm Beach,
Florida for DSI and 3,000 square feet for Country Weekly and Country Music
Magazine in Nashville, Tennessee.  Various other smaller properties are leased
primarily in New York, Los Angeles, Detroit, Miami, and Pass Christian,
Mississippi for certain of our other operations. We believe that all of our
properties are in generally good condition and are adequate for current
operations.


ITEM 3.  LEGAL PROCEEDINGS

     We are involved in a number of litigation matters, which have arisen, in
the ordinary course of business. Because the focus of our publications often
involves controversial celebrities or subjects, the risk of defamation or
invasion of privacy litigation arises in the ordinary course of our business.
Our experience suggests that the claims for damages made in such lawsuits are
heavily inflated and, in any event, any reasonably foreseeable liability or
settlement would be covered by insurance. During the five fiscal years ended
March 26, 2001, we paid approximately

                                       13
<PAGE>

$21 million in the aggregate for legal fees (including prepublication review and
litigation), litigation related insurance premiums and, to a lesser extent,
litigation settlements, including amounts covered by insurance payments. We have
not experienced any difficulty obtaining such insurance and do not expect to
experience any material difficulty in the future. There are currently no claims
pending that we believe would have a material adverse effect on our operations.

     Multiple sources as well as documentation are sought for all stories that
are potentially controversial or subject to dispute. In addition, because of
their high level of investigative reporting, prior to publication, we retain
special libel counsel for National Enquirer and we utilize six full-time
attorneys for the prepublication review of all sensitive stories and celebrity
news and photos for the Globe, Star and National Examiner.  Before publishing
book excerpts, we generally obtain indemnification from the publisher, author
and/or agent concerning publication rights and defamation.


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

  No matters were submitted to a vote of our security holders during fiscal
2001.

                                       14
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDERS

    All of the Company's common stock is owned by Media.  Accordingly, there is
no established public trading market for our common stock.

ITEM 6.  SELECTED FINANCIAL DATA

    The selected financial data for each of the five fiscal years in the period
ended March 26, 2001 below have been derived from the consolidated financial
statements of the Company, which have been audited by independent certified
public accountants. The following selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations", the Company's Consolidated Financial Statements and
Notes thereto and other financial information appearing elsewhere in this Form
10-K. As discussed above, the parent of American Media Operations, Inc. was
purchased on May 7, 1999 resulting in a change in the historical cost basis of
various assets and liabilities.  Accordingly, the historical financial
information provided herein, for periods prior to May 7, 1999 is not comparable
to post acquisition financial information.  For purposes of presentation, all
historical financial information for periods prior to May 7, 1999 will be
referred to as the "Predecessor Company" and all periods subsequent to May 6,
1999 will be referred to as the "Company".  The period from May 7, 1999 through
March 27, 2000 will be referred to as the "Inception Period".  A solid black
vertical line has been inserted in tables where financial information may not be
comparable across periods.

<TABLE>
<CAPTION>
                                                           Predecessor Company
                                          -----------------------------------------------------
                                                     Fiscal Years Ended                                        The Company
                                          ----------------------------------------               ------------------------------
                                                                                    Six Weeks       Forty-Six
                                                                                    from March      Weeks from       Fiscal Year
                                                                                       30,         May 7, 1999          Ended
                                          March 31,    March 30,     March 29,       through         through          March 26,
                                           1997 (1)      1998          1999        May 6, 1999    March 27, 2000        2001
                                          ---------    ---------     ---------     -----------    --------------    -----------
                                                                  (dollars in thousands)
<S>                                       <C>          <C>            <C>          <C>             <C>              <C>
Statement of Income Data:
Operating Revenues                         $315,988     $307,684      $293,459       $  31,163       $  294,046      $  397,783
Operating Expenses (2)                      228,817      237,104       228,060          24,399          254,274         335,213
                                          ---------    ---------     ---------     -----------    -------------     -----------
Operating Income                             87,171       70,580        65,399           6,764           39,772          62,570
Interest Expense                            (56,284)     (50,486)      (46,897)         (4,837          (57,466)        (71,742)
Other Income (Expense), Net (3)              (1,705)      (1,641)        2,943              25              125             751
                                          ---------    ---------     ---------     -----------    -------------     -----------
Income before Income Taxes and
  Extraordinary Charge                       29,182       18,453        21,445           1,952          (17,569)         (8,421)
Income Taxes                                 16,716       12,437        13,559           1,365            1,361           6,875
                                          ---------    ---------     ---------     -----------    -------------     -----------
Income (Loss) before Extraordinary Charge    12,466        6,016         7,886             587          (18,930)        (15,296)
Extraordinary Charge, net of Income
   Taxes (4)                                     --           --        (2,161)             --           (2,581)             --
                                          ---------    ---------     ---------     -----------    -------------      ----------
Net Income (Loss)                          $ 12,466     $  6,016      $  5,725        $    587       $  (21,511)     $ ( 15,296)
                                          =========    =========     =========     ===========    =============      ==========
Balance Sheet Data:
Total Assets                               $670,850     $647,930      $616,838             N/M       $1,166,964      $1,134,990
Total Debt                                  528,662      497,535       471,134             N/M          680,874         680,874
Total Stockholder's Equity                   48,457       54,473        60,198             N/M          201,698         186,493
Other Data:
EBITDA (5)                                 $114,593     $ 99,926      $ 96,347        $ 10,467       $   96,982         139,303
Depreciation                                  8,145        9,252        11,035           1,272           10,281          19,154
Amortization of Intangibles                  21,075       21,075        21,075           2,431           46,928          57,579
Capital Expenditures                          8,526       11,018        15,019             717           13,330          27,875
</TABLE>

                                       15
<PAGE>

(1)  Fiscal 1997 includes 53 weeks as compared to 52 weeks for all other fiscal
     years presented.
(2)  Fiscal 1999 is net of a gain of $6.5 million from the sale of the Soap
     Opera Assets.
(3)  Other income (expense) for the periods from March 25, 1996 through March
     29, 1999 is comprised of the management fee accrued during such period and
     miscellaneous nonrecurring items and includes for the period ended March
     29, 1999, a net gain of $4.4 million from the favorable settlement of
     certain litigation.  The fiscal year ended March 27, 2000 and the six weeks
     ended May 6, 1999 includes miscellaneous non-recurring items.  The fiscal
     year ended March 26, 2001 includes minority interest income of $376,000 and
     interest income of $570,000.
(4)  In connection with the Transactions, a fee related to an unused bridge loan
     commitment totaling approximately $4.1 million ($2.6 million net of income
     taxes) was charged to extraordinary loss in the Inception Period.  During
     fiscal 1999, we recorded an extraordinary charge totaling approximately
     $3.4 million ($2.2 million net of income taxes) related to the write-off of
     deferred debt issuance costs and other charges relating to the refinancing
     of indebtedness.
(5)  EBITDA is defined as net income (loss) before extraordinary charges,
     interest expense, income taxes, depreciation and amortization and other
     income (expense) (other than management fees).  The management fees
     included in other income (expense) were $1.8 million, $1.7 million and $1.2
     million respectively, for fiscal 1997, 1998 and 1999.  Beginning in fiscal
     2000, a new monitoring fee of $750,000 per annum, of which $663,000 and
     $750,000 were charged in fiscal 2000 and 2001, respectively,  is included
     in selling, general and administrative operating expense and therefore is
     included in the calculation of EBITDA.  EBITDA is not a measure of
     performance defined by GAAP.  EBITDA should not be considered in isolation
     or as a substitute for net income or a statement of cash flows, which have
     been prepared in accordance with GAAP or as a measure of our operating
     performance, profitability or liquidity.  We believe EBITDA provides useful
     information regarding our ability to service our debt, and we understand
     that such information is considered by certain investors to be an
     additional basis for evaluating a company's ability to pay interest and
     repay debt.  EBITDA measures presented herein may not be comparable to
     similarly titled measures of other companies due to differences in methods
     of calculation.


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

      The following is a discussion of our financial condition and results of
operations for the three fiscal years ended March 26, 2001. This discussion
should be read in conjunction with our consolidated financial statements and the
related notes thereto.

Overview

     In connection with the Transactions and Merger, which were accounted for
under the purchase method of accounting, we reflected a new basis of accounting
for various assets and liabilities.   Accordingly, the historical financial
information provided herein, for periods prior to May 7, 1999 is not comparable
to post acquisition financial information.   To facilitate a meaningful
discussion of the comparative operating performance for the fiscal years ended
March 26, 2001 and March 27, 2000, the financial information in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" is presented on a traditional comparative basis unless otherwise
indicated.  We believe the traditional comparative presentation provides the
best financial information as the only material change in the historical
operations for periods before and after May 6, 1999, other than the sale of
certain properties as

                                       16
<PAGE>

discussed below, is an increase in interest expense related to higher levels of
indebtedness and increased amortization expense resulting from a substantial
increase in intangible assets.

     The Globe Acquisition, which was consummated on November 1, 1999, was
accounted for using the purchase method of accounting.   Accordingly, the
Company's financial statements for the fiscal year ended March 27, 2000, include
twenty-one weeks of results attributable to the Globe Properties.

     In February 1999, we ceased publication of Soap Opera News and Soap Opera
Magazine (collectively, the  "Soap Opera Assets") and sold certain of the
trademarks and other soap opera publishing assets relating to these magazines to
Primedia, Inc.   Accordingly, operations of the Soap Opera Assets are included
in operations for the fiscal year ended March 29, 1999, but are not included in
operations for the fiscal years ended March 26, 2001 and  March 27, 2000.

     We are a leading publisher in the field of general interest magazines,
publishing National Enquirer, Star, Globe, National Examiner, Weekly World News,
Sun, MIRA, Country Weekly, Country Music Magazine and other monthly
publications. We generate revenues from circulation, predominantly single copy
sales in supermarkets and other retail outlets, as well as from advertising and
other sources.

     In fiscal 2001 and 2000, approximately 85% of our total operating revenues
were from circulation. Single copy sales accounted for approximately 90% and 87%
of such circulation revenues in fiscal years 2001 and 2000, respectively, and
the remainder was from subscription sales. Over the past five years, circulation
revenues have been generally stable as circulation declines have been offset in
part by increases in the cover prices of our publications.

     Our primary operating costs and expenses are comprised of editorial,
production, distribution, circulation and other costs of sales and selling,
general and administrative expenses. The largest components of our costs are
related to production, which includes printing and paper expenses, and to
distribution, circulation and other costs of sales. Distribution, circulation
and other costs of sales primarily include the costs associated with operating
DSI, rack display payments made to retailers for our publications and
subscription postage.


Results of Operations

Comparison of Fiscal Year Ended March 26, 2001 to Fiscal Year Ended March 27,
2000

     Total operating revenues were $397,783,000 for fiscal 2001.  Operating
revenues increased by $72,574,000, or 22.3%, from the prior fiscal year
primarily due to circulation revenues from the Globe Properties and Country
Music Magazine acquisitions, new circulation revenues from our start-up
publications (Auto World Magazine and MIRA!), the impact of our October 3, 2000
cover price increase of $0.10 for the National Enquirer, Star, Globe and
National Examiner and also the impact of three additional special expanded
issues for the National Enquirer and Star magazines versus the prior year.
Additionally, operating revenues increased due to an increase in advertising
revenue primarily due to the Globe Properties and Country Music Magazine
acquisitions, additional advertising revenues from our core tabloids (National
Enquirer and Star) and new advertising revenues from our start-up publications
(Auto World Magazine and MIRA!).

     Circulation revenues (which include all single copy and subscription sales)
were $340,079,000 for the current fiscal year.  Circulation revenues increased
by $62,526,000 or 22.5%, when compared to the prior fiscal year, primarily due
to circulation revenues from the

                                       17
<PAGE>

Globe Properties and Country Music Magazine acquisitions, new circulation
revenues from our start-up publications (Auto World Magazine and MIRA!), the
impact of our October 3, 2000 cover price increase of $0.10 for the National
Enquirer, Star, Globe and National Examiner and also the impact of three
additional special expanded issues for the National Enquirer and Star magazines
versus the prior year.

     On October 5, 1999 a newly re-designed and expanded Country Weekly was re-
launched as a biweekly publication.  Concurrent with the change to a biweekly
format the cover price was raised from $1.99 to $2.49.  The new frequency and
format has resulted in an increase in average single copy unit sales of 38% for
fiscal years 2000 and 2001 following the redesign as compared to the 26 issues
in fiscal 2000 prior to the redesign. This increase in circulation units coupled
with the price increase resulted in single copy revenues  to be almost
comparable  to the prior year despite the biweekly format.

     Subscription revenues decreased by $1,191,000 (3.3%) primarily due to the
change in Country Weekly's frequency from weekly to bi-weekly in October 1999
($1.4 million), industry wide declines in agency production which affected the
National Enquirer and Star ($2.3 million) which was offset by the full year
impact of the Globe Properties ($1.6 million) and the August 2000 acquisition of
Country Music Magazine ($0.9 million).

     Advertising revenues were $37,141,000 for the current fiscal year.
Advertising revenues increased by $11,980,000 or 47.6%, when compared to the
prior fiscal year of $25,161,000.  This increase is primarily due to the Globe
Properties and Country Music Magazine acquisitions, additional advertising
revenues from our core tabloids (National Enquirer and Star magazines, which
increased 15% and 24%, respectively) and new advertising revenues from our
start-up publications (Auto World Magazine and MIRA!).

     Total operating expenses for the current fiscal year increased by
$56,540,000 when compared to the prior fiscal year. This increase is primarily
due to additional expenses related to the Globe Properties and Country Music
Magazine acquisition costs related to the launches of Auto World Magazine and
MIRA!, increased amortization expense and an asset impairment charge of $2.3
million recognized in October 2000 related to FMI (see Note 8 to the
Consolidated Financial Statements).  Included in selling, general and
administrative is the reversal of $614,000 of excess and unnecessary purchase
accounting reserves established in connection with the Transactions and Merger
primarily related to pre-acquisition litigation and lease related costs.
Amortization expense increased by $8,219,000 due to the increase in intangible
asset balances from the Transactions and the Globe Acquisition as well as a
reduction in the related amortizable lives, primarily goodwill, from 40 years to
20 years.  This increase in amortization expense solely relates to the period
subsequent to the Transactions.

     Interest expense increased for the current fiscal year by $9,439,000 to
$71,742,000 compared to the same prior fiscal year. This increase in interest
expense solely relates to the period subsequent to the Transactions as a result
of a higher average effective interest rate and higher levels of indebtedness as
a result of the Transactions and the Globe Acquisition.

     Other income was $751,000 for fiscal 2001, compared to other income of
$150,000 for fiscal 2000.  Included in other income is minority interest income
(expense) of $376,000 and $(120,000) related to FMI for fiscal 2001 and 2000,
respectively.

     Our effective income tax rates exceed the federal statutory income tax rate
of 35% because of the effect of goodwill amortization, which is not deductible
for income tax reporting purposes.

                                       18
<PAGE>

     In connection with the Transactions, a fee related to an unused bridge loan
commitment totaling approximately $4.1 million ($2.6 million net of income
taxes) was charged to extraordinary loss in the Inception Period.  During fiscal
1999, we recorded an extraordinary charge totaling approximately $3.4 million
($2.2 million net of income taxes) related to the write-off of deferred debt
issuance costs and other charges relating to the refinancing of indebtedness.

Comparison of Fiscal Year Ended March 27, 2000 to Fiscal Year Ended March 29,
1999

     Total operating revenues were $325,209,000 for fiscal 2000, which included
$39,742,000 of revenues from the Globe Properties.  Excluding revenues related
to the Soap Opera Assets and to the Globe Properties, operating revenues
increased by $13,284,000, or 4.9%, from fiscal 1999, primarily due to an
increase in single copy revenues.

     Circulation revenues (which include all single copy and subscription sales)
were $277,553,000 for fiscal 2000, which included $36,926,000 of circulation
revenues from the Globe Properties.  Excluding circulation revenues related to
the Soap Opera Assets and the Globe Properties, circulation revenues in fiscal
2000 increased $12,384,000, or 5.4%, when compared to the prior year period.
This increase is primarily due to two $.10 cover price increase effective as of
the July 27, 1999 and February 8, 2000 issues, respectively, for National
Enquirer, and in part due to the release of twelve special expanded issues.
Single-copy unit sales for the National Enquirer and Star for fiscal 2000
remained  relatively flat when compared to the same prior year period.

     On October 5, 1999, a newly re-designed and expanded Country Weekly was re-
launched as a biweekly publication.   Additionally, management named a new
editor and publisher of Country Weekly during the Company's second quarter.
At the time of the change to a biweekly format, the cover price was raised from
$1.99 to $2.49.    The new frequency and format has resulted in an increase in
average single copy unit sales of 31%.   This increase in circulation units,
coupled with the price increase, resulted in single copy revenues  to be almost
comparable  to the prior year in light of the biweekly format  despite having
published 25% fewer issues ($9,607,000 in fiscal 2000 versus $10,202,000 in
fiscal 1999).

     Subscription revenues were $36,172,000 for fiscal 2000, which included
$955,000 of subscription revenues from the Globe Properties.  Excluding
subscription revenues related to the Soap Opera Assets and the Globe Properties,
subscription revenues decreased $3,611,000 compared to the same prior year
period primarily the result of the reduction in the frequency of Country Weekly
from weekly to bi-weekly.  One method of increasing the subscription bases of
our publications has been to offer discounted subscriptions through an agent;
however, management's new direction is to be more newsstand driven.

     Advertising revenues were $25,161,000 for fiscal 2000, which included
$2,586,000 of advertising revenues from the Globe Properties.   Excluding
revenues related to the Soap Opera Assets and the Globe Properties advertising
revenues were flat compared to the previous fiscal year.  National advertising,
excluding the Globe Properties, increased by $1.2 million from fiscal 1999 to
fiscal 2000.  However, this increase was offset by a decrease in mail order
advertising due to management's decision not to accept certain mail order and
fractional advertising to correspond with the new design of the publications.

     Total operating expenses for  fiscal 2000 increased by $50,613,000 when
compared to the same prior year period.  Excluding expenses related to the Soap
Opera Assets, Globe Properties, depreciation and amortization expense, operating
expenses increased by $9,486,000. This increase relates primarily to increased
TV advertising and is in line with management's plan to

                                       19
<PAGE>

increase brand awareness of its two flagship publications, the National Enquirer
and Star. Amortization expense increased by $28,285,000 due to the increase in
intangible asset balances from the Transactions and the Globe Acquisition as
well as a reduction in the related amortizable lives, primarily goodwill, from
40 years to 20 years. This increase in amortization expense solely relates to
the period subsequent to the Transactions.

     Interest expense increased for fiscal 2000 by $15,406,000 to $62,303,000
compared to the same prior year period. This increase in interest expense solely
relates to the period subsequent to the Transactions as a result of a higher
average effective interest rate and higher levels of indebtedness as a result of
the Transactions and the Globe Acquisition.

     Other income was $150,000 for fiscal 2000, compared to other income of
$2,943,000 for fiscal 1999.  Other income in fiscal 1999 included a net gain of
$4.4 million from the favorable settlement of certain litigation.

     Our effective income tax rates exceed the federal statutory income tax rate
of 35% because of the effect of goodwill amortization, which is not deductible
for income tax reporting purposes.

     In connection with the Transactions, a fee related to an unused bridge
loan commitment totaling approximately $4.1 million ($2.6 million net of income
taxes) was charged to extraordinary loss in the Inception Period.  During fiscal
1999, we recorded an extraordinary charge totaling approximately $3.4 million
($2.2 million net of income taxes) related to the write-off of deferred debt
issuance costs and other charges relating to the refinancing of indebtedness.


Liquidity and Capital Resources

     We have substantially increased our indebtedness in connection with the
Transactions and the Globe Acquisition.   As a result of the New Credit
Agreement and the Notes, our liquidity requirements have been significantly
increased, primarily due to increased interest and principal payment obligations
under the New Credit Agreement, which, other than certain excess cash flow
payment obligations, will commence in fiscal 2002 (see Note 5 to the
Consolidated Financial Statements).  We believe that the net cash generated from
operating activities and amounts available under the $60.0 million revolving
credit facility will be sufficient to fund our debt service requirements under
the New Credit Agreement and the Notes, to make capital expenditures and to
cover working capital requirements.  As of March 26, 2001, there were no amounts
outstanding on the revolving credit facility. We believe, however, that based
upon our current level of operations and anticipated growth, it will be
necessary to refinance the Notes upon their maturity. To the extent we make
future acquisitions, we may require new sources of funding, including additional
debt,  equity financing or some combination thereof. There can be no assurances
that such additional sources of funding will be available to us on acceptable
terms.

     Our ability to make scheduled payments of principal and interest under the
New Credit Agreement and the Notes, as well as our other obligations and
liabilities, is subject to our future operating performance which is dependent
upon general economic, financial, competitive, legislative, regulatory, business
and other factors beyond our control.

     At March 26, 2001, we had cash and cash equivalents of $21.0 million and a
working capital deficit of $48.5  million.  We do not consider our working
capital deficit as a true measure of our liquidity position as our working
capital needs typically are met by cash generated by our business. Our working
capital deficits result principally from:

                                       20
<PAGE>

     .   our policy of using available cash to reduce borrowings which are
         recorded as noncurrent liabilities, thereby reducing current assets
         without a corresponding reduction in current liabilities;

     .   our minimal accounts receivable level relative to revenues, as most of
         our sales revenues are received from national distributors as advances
         based on estimated single copy circulation; and

     .   accounting for deferred revenues as a current liability. Deferred
         revenues are comprised of deferred subscriptions, advertising and
         single copy revenues and represent payments received in advance of the
         period in which the related revenues will be recognized.

     Historically, our primary sources of liquidity have been cash generated
from operations and amounts available under our credit agreements, which have
been used to fund shortfalls in available cash. For the Inception Period, cash
provided by financing activities totaling $430 million was primarily used to
fund the Transactions and the Globe Acquisition.  Cash from operations of $41.9
million generated from operations for the Inception Period was used to fund
capital expenditures as well as pay down the revolving credit facility.  For the
fiscal year ended March 29, 1999, cash provided by operating activities totaling
$29.8 million was used primarily to fund capital expenditures totaling $15.0
million and reduce borrowings under the credit agreements.  Cash generated from
operations for the fiscal year ended March 26, 2001 was used to fund capital
expenditures and to fund the buy out of the remaining term of the former owner
of the Globe Properties' five year employment agreement.

     We made capital expenditures in the fiscal years ended March 26, 2001 and
March 27, 2000 totaling $27.9 million and $14.0 million, respectively.  The
higher levels of capital spending for the current year are primarily related to
the Globe Acquisition.

     At March 26, 2001, our outstanding indebtedness totaled $680.9 million, of
which $430.0 million represented borrowings under the New Credit Agreement. In
connection with the acquisition of the Globe Properties as discussed in Note 2
to the Consolidated Financial Statements, we expanded our New Credit Agreement
by $90 million.   The effective interest rates under the Credit Agreement and
Prior Credit Agreement, including amounts borrowed under the term loan
commitments and revolving credit commitment, as of March 26, 2001, and for the
fiscal years 1999, 2000 and 2001 were 9.3%, 7.7%, 9.1% and 10.0%, respectively.

     In order to reduce our exposure to interest rate risk, we entered into a
three-year $100 million notional amount interest rate swap agreement which
effectively converts a portion of our variable-rate debt to fixed-rate debt.
This interest rate swap agreement, which expired in November 2000, had a fixed
interest rate of 5.95%. In November 2000, we entered into a new $90 million
interest rate swap agreement expiring in May 2002 under which we pay a fixed
rate of 6.53%.  The carrying amounts for the interest rate swap agreement
represents net interest payable (receivable) as of period end. Net interest
expense (income) related to the interest rate swap agreement totaled  $584,000,
$434,000 and $(344,000) for the fiscal years 1999, 2000 and 2001, respectively.

     We have no material assets or operations other than the investments in our
subsidiaries. The Notes are unconditionally guaranteed, on a senior subordinated
basis, by all of our material subsidiaries. Each subsidiary that will be
organized in the future by us, unless such subsidiary is designated as an
unrestricted subsidiary, will jointly, severally, fully and unconditionally
guarantee the Notes on a senior subordinated basis.  Note guarantees are joint
and several, full and unconditional and general unsecured obligations of the
note guarantors.  The note guarantors

                                       21
<PAGE>

are our wholly owned subsidiaries. At present, the note guarantors comprise all
of our direct and indirect subsidiaries, other than one inconsequential
subsidiary. Note guarantees are subordinated in right of payment to all existing
and future senior debt of the note guarantors, including the New Credit
Facility, and are also effectively subordinated to all secured obligations of
note guarantors to the extent of the assets securing such obligations, including
the New Credit Facility. Furthermore, the Notes indenture permits note
guarantors to incur additional indebtedness, including senior debt, subject to
certain limitations. We have not presented separate financial statements and
other disclosures concerning each of the note guarantors because management has
determined that such information is not material to investors.

     So long as the factors set forth in the paragraph immediately above remain
true and correct, under applicable SEC rules and regulations, the Company's note
guarantors will not need to individually comply with the reporting requirements
of the Exchange Act, nor will we have to include separate financial statements
and other disclosures concerning each of the note guarantors in its Exchange Act
reports.

Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA")

     The following table and discussion summarizes EBITDA for the fiscal years
ended March 26, 2001, March 27, 2000 and March 29, 1999.

                             (dollars in thousands)
         --------------------------------------------------------------

              Predecessor Company                     The Company
         ----------------------------       ---------------------------
            Fiscal         March 30,           May 7,         Fiscal
             Year            1999               1999           Year
            Ended          through            through         Ended
          March 29,         May 6,           March 27,      March 26,
             1999            1999               2000           2001
         ------------   -------------       -------------  ------------

           $95,391         $10,467             $96,982       $139,303

     The Company defines EBITDA as net income (loss) before extraordinary
charges, interest expense, income taxes, depreciation and amortization and other
income (expense) (other than management fees).  For the fiscal year ended March
29, 1999, a management fee of $1,162,000 was included in other income (expense)
and therefore was included as a reduction of EBITDA in 1999.  For fiscal years
2001 and 2000, a $750,000 and $663,000 management fee, respectively, is included
in selling general and administrative expense and therefore is included in the
calculation of EBITDA.  EBITDA is presented and discussed because the Company
considers EBITDA an important indicator of the operational strength and
performance of its business including the ability to provide cash flows to
service debt and fund capital expenditures.  EBITDA, however, should not be
considered an alternative to operating or net income (loss), as an indicator of
the performance of the Company, or as an alternative to cash flows from
operating activities as a measure of liquidity, in each case determined in
accordance with generally accepted accounting principles ("GAAP").


New Accounting Pronouncements

     In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities-an amendment of SFAS 133.
SFAS 138 amends the accounting and reporting standards for certain derivative
instruments and hedging activities.  The Company will be required to adopt SFAS
No. 133 for fiscal year 2002.  This statement

                                       22
<PAGE>

establishes a new model for accounting for derivatives and hedging activities.
Under SFAS No. 133, all derivative instruments must be recognized as either an
asset or liability measured at its fair value. Management believes the impact of
adopting this statement will not have a material effect upon the Company's
results of operations or financial position.

     In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provide guidance for disclosure
related to revenue recognition policies. We believe our revenue recognition
practices are in conformity with the guidelines prescribed in SAB 101.

Forward-Looking Statements

     Some of the information presented in this Form 10-K constitutes forward-
looking statements, including, in particular, the statements about our plans,
strategies and prospects under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations."  We have based these
forward-looking statements on our current assumptions, expectations and
projections about future events. We caution you that a variety of factors could
cause business conditions and results to differ materially from what is
contained in the forward-looking statements. These forward-looking statements
are subject to risks, uncertainties and assumptions about us, including, among
other things:


     . our high degree of leverage and        . increasing competition by
       significant debt service obligations,    domestic and foreign media
                                                companies,

     . our ability to increase circulation    . changes in the costs of paper
       and advertising revenues,                used by us,

     . market conditions for our              . any future changes in
       publications,                            management and

     . our ability to develop new             . general risks associated with
       publications and services,               the publishing industry.

     . outcomes of pending and future
       litigation

                                       23
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     We are exposed to certain market risks that are inherent in our financial
statements.  We are subject to interest risk on our credit facilities and any
future financing requirements.  Our fixed rate debt consists primarily of Senior
Subordinated Notes, as well as an interest rate swap agreement on our term loan
and revolving loan.  The interest rate swap agreements effectively convert a
portion of our variable rate debt to fixed-rate debt.  The interest rate swap
agreement, which expired in November 2000, had a fixed interest rate of 5.95%.
In November 2000, we entered into a new $90 million interest rate swap agreement
expiring in May 2002 under which we pay a fixed rate of 6.53%.

     The following table presents the future principal payment obligations and
weighted average interest rates (excluding any amounts that may be borrowed
under the credit commitment or required to be prepaid under the excess cash flow
provision) associated with our existing long-term instruments assuming our
actual level of long-term indebtedness (dollars in 000's):

<TABLE>
<CAPTION>
                                               2001       2002      2003         2004        Thereafter
                                               ----       ----      ----         ----        ----------
  <S>                                        <C>        <C>        <C>          <C>          <C>
  Liabilities:
  Long-Term Debt

  $250,000 Fixed Rate (10.25%)                  -            -           -            -       $250,000

  $740 Fixed Rate (11.63%)                      -            -           -            -       $    740

  $134 Fixed Rate (10.38%)                      -            -     $   134            -              -

  Term Loan and Revolving Loan
  Variable Rate (9.95% for the Fiscal
     Year Ended March 26, 2001)                 -       $9,975     $17,050      $22,050       $380,925
   Interest Rate Derivatives:
      Interest Rate Swaps:
         Variable to Fixed                   $90,000
         Average Pay Rate                      (6.53%)
         Average Receive Rate                  (6.17%)
</TABLE>

     Interest rate changes result in increases or decreases in our income before
taxes and cash provided from operating activities.  A 1% change in our weighted
interest rate on our variable debt net of the effect of our interest rate swap
would have resulted in a change of $3.4 million in our interest expense for the
year ended March 26, 2001.

     Our primary market risk exposures relate to (1) the interest rate risk on
long-term and short-term borrowings, (2) our ability to refinance our Senior
Subordinated Notes at maturity at market rates, (3) the impact of interest rate
movements on our ability to meet interest expense requirements and comply with
financial covenants and (4) the impact of interest rate movements on our ability
to obtain adequate financing to fund acquisitions.  We manage the interest rate
risk on our outstanding long-term and short-term debt through our use of fixed
and variable rate debt.  While we cannot predict or manage our ability to
refinance existing debt or the impact interest rate movements will have on our
ability to refinance existing debt or the impact interest rate movements will
have on our existing debt, we continue to evaluate our financial position on an
ongoing basis.


                                       24
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
FINANCIAL STATEMENTS:                                                                 Page(s)
                                                                                      -------
<S>                                                                                   <C>
Report of Independent Public Accountants..........................................       26

Consolidated Balance Sheets as of March 27, 2000 and March 26, 2001 ..............       27

Consolidated Statements of Income (Loss) for the Three Fiscal
  Periods Ended March 26, 2001....................................................       28

Consolidated Statements of Stockholder's Equity for the Three Fiscal
  Periods Ended March 26, 2001....................................................       29

Consolidated Statements of Cash Flows for the Three Fiscal
  Periods Ended March 26, 2001....................................................       30

Notes to Consolidated Financial Statements........................................     31 - 44
</TABLE>

     Schedules have been omitted since the information is not applicable, not
required or because the required information is included in the Consolidated
Financial Statements or Notes thereto.

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

                                     NONE

                                       25
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholder of
 American Media Operations, Inc.:

    We have audited the accompanying consolidated balance sheets of American
Media Operations, Inc. (a Delaware corporation) and subsidiaries (the "Company")
as of March 26, 2001 and March 27, 2000 and the related consolidated statements
of income (loss), stockholder's equity and cash flows for the year ended March
26, 2001 and for the period from May 7, 1999 through March 27, 2000. We have
also audited the accompanying consolidated statements of income (loss),
stockholder's equity and cash flows of the Predecessor Company  of American
Media Operations, Inc. (the "Predecessor Company") for the period from March 30,
1999 through May 6, 1999 and for the year ended March 29, 1999.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States.  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 financial statements referred to above present fairly,
in all material respects, the financial position of American Media Operations,
Inc. and subsidiaries as of March 26, 2001 and March 27, 2000, and the results
of their operations and their cash flows for the year ended March 26, 2001 and
for the period from May 7, 1999 through March 27, 2000 and the  results of the
Predecessor Company's operations and cash flows for the period from March 30,
1999 through May 6, 1999 and  for the year ended March 29, 1999 in conformity
with accounting standards generally accepted in the United States.



ARTHUR ANDERSEN LLP

New York, New York
  May 9, 2001

                                       26
<PAGE>

               AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                    As of March 27, 2000 and March 26, 2001
                     (in 000's, except share information)

<TABLE>
<CAPTION>
                                                                                                      March 27,        March 26,
                                                                                                         2000             2001
                                                                                                    ------------       ----------
<S>                                                                                                 <C>               <C>
                                        ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                                           $   23,404       $   20,999
  Receivables, net                                                                                        16,862           25,412
  Inventories                                                                                             12,974           14,101
  Short term note receivable                                                                                   -              322
  Prepaid expenses and other                                                                               8,748            5,015
                                                                                                    ------------       ----------
      Total current assets                                                                                61,988           65,849
                                                                                                    ------------       ----------
PROPERTY AND EQUIPMENT, at cost:
  Land and buildings                                                                                       5,735           10,076
  Machinery, fixtures and equipment                                                                       17,258           19,990
  Display racks                                                                                           27,474           35,380
                                                                                                    ------------       ----------
                                                                                                          50,467           65,446
  Less - accumulated depreciation                                                                         (9,353)         (18,651)
                                                                                                    ------------       ----------
                                                                                                          41,114           46,795
                                                                                                    ------------       ----------

LONG TERM NOTE RECEIVABLE,  net                                                                                -              427
                                                                                                    ------------       ----------

DEFERRED DEBT COSTS, net                                                                                  22,153           19,126
                                                                                                    ------------       ----------

GOODWILL, net of accumulated amortization of $22,299 and $48,232                                         536,369          482,256
                                                                                                    ------------       ----------

OTHER INTANGIBLES, net of accumulated amortization of $24,629 and $56,275                                507,683          520,537
                                                                                                    ------------       ----------
                                                                                                      $1,169,307       $1,134,990
                                                                                                    ============       ==========

                              LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
  Current portion of term loan                                                                        $       --       $   14,281
  Accounts payable                                                                                        25,262           30,157
  Accrued expenses                                                                                        62,920           36,035
  Deferred revenues                                                                                       33,054           33,842
                                                                                                    ------------       ----------
      Total current liabilities                                                                          121,236          114,315
                                                                                                    ------------       ----------

PAYABLE TO PARENT COMPANY                                                                                  1,307            2,110
                                                                                                    ------------       ----------

LONG TERM DEBT:
  Term Loan, net of current portion                                                                      430,000          415,719
  10.25% Senior Subordinated Notes Due 2009                                                              250,000          250,000
  11.63% Senior Subordinated Notes Due 2004                                                                  740              740
  10.38% Senior Subordinated Notes Due 2002                                                                  134              134
                                                                                                    ------------       ----------
                                                                                                         680,874          666,593
                                                                                                    ------------       ----------

DEFERRED INCOME TAXES                                                                                    164,192          165,479
                                                                                                    ------------       ----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDER'S EQUITY:
  Common stock, $.20 par value; 7,507 shares issued and outstanding                                            2                2
  Additional paid-in capital                                                                             223,207          223,298
  Retained deficit                                                                                       (21,511)         (36,807)
                                                                                                    ------------       ----------
      Total stockholder's equity                                                                         201,698          186,493
                                                                                                    ------------       ----------
                                                                                                      $1,169,307       $1,134,990
                                                                                                    ============       ==========
</TABLE>

  The accompanying notes to consolidated financial statements are an integral
                   part of these consolidated balance sheets.

                                       27
<PAGE>

               AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF INCOME (LOSS)
               For the Three Fiscal Periods Ended March 26, 2001
                                  (in 000's)

      The financial statements of the Company and the Predecessor Company
              are not comparable in certain respects (see Note 1)




<TABLE>
<CAPTION>
                                                      Predecessor Company                             The Company
                                            -----------------------------------          -----------------------------------
                                                                    Six Weeks               Forty-Six
                                                                      From                 Weeks From
                                              Fiscal Year           March 30,              May 7, 1999         Fiscal Year
                                                 Ended               Through                 Through              Ended
                                               March 29,             May 6,                 March 27,           March 26,
                                                  1999                1999                    2000                 2001
                                            ----------------     --------------          ---------------     ---------------
<S>                                         <C>                  <C>                     <C>                 <C>
OPERATING REVENUES:
   Circulation                                      $248,630            $26,215                 $251,338            $340,079
   Advertising                                        23,460              2,640                   22,521              37,141
   Other                                              21,369              2,308                   20,187              20,563
                                            ----------------     --------------          ---------------     ---------------
                                                     293,459             31,163                  294,046             397,783
                                            ----------------     --------------          ---------------     ---------------

OPERATING EXPENSES:
   Editorial                                          28,906              3,040                   29,567              39,286
   Production                                         79,691              7,784                   71,465             103,132
   Distribution, circulation and other
    cost of sales                                     67,640              6,624                   58,168              75,012
   Selling, general and administrative
    expenses                                          26,212              3,248                   37,865              41,050
   Gain on sale of Soap Opera Properties              (6,499)                --                       --                  --
   Depreciation and amortization                      32,110              3,703                   57,209              76,733
                                            ----------------     --------------          ---------------     ---------------
                                                     228,060             24,399                  254,274             335,213
                                            ----------------     --------------          ---------------     ---------------

   Operating income                                   65,399              6,764                   39,772              62,570

INTEREST EXPENSE                                     (46,897)            (4,837)                 (57,466)            (71,742)
OTHER INCOME (EXPENSE), net                            2,943                 25                      125                 751
                                            ----------------     --------------          ---------------     ---------------
   Income (loss) before provision for
    income taxes and extraordinary charge             21,445              1,952                  (17,569)             (8,421)

 PROVISION FOR INCOME TAXES                           13,559              1,365                    1,361               6,875
                                            ----------------     --------------          ---------------     ---------------
   Income (loss) before extraordinary
    charge                                             7,886                587                  (18,930)            (15,296)

EXTRAORDINARY CHARGE, net of income
   tax benefit of $1,269 and $1,517,
    respectively (Note 7)                             (2,161)                --                   (2,581)                 --
                                            ----------------     --------------          ---------------     ---------------

   Net income (loss)                                $  5,725            $   587                 $(21,511)           $(15,296)
                                            ================     ==============          ===============     ===============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
                       of these consolidated statements.

                                       28
<PAGE>

               AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
              For the Three Fiscal Periods Ended March 26, 2001
                     (in 000's, except share information)


<TABLE>
<CAPTION>
                                                Common Stock                 Additional             Retained
                                     --------------------------------          Paid-In              Earnings
                                         Shares             Amount             Capital             (Deficit)               Total
                                     -------------     --------------     ---------------      -----------------      --------------
<S>                                  <C>               <C>                <C>                  <C>                    <C>
Balance, March 30, 1998                      7,507                 $2            $ 26,039               $ 28,432           $ 54,473

Net income                                      --                 --                  --                  5,725              5,725
                                     -------------     --------------     ---------------      -----------------      --------------

Balance, March 29, 1999                      7,507                  2              26,039                 34,157             60,198

Net income (for the period from
       March 30, 1999 through
       May 6, 1999)                             --                 --                  --                    587                587

Recapitalization on May 7, 1999                 --                 --             192,218                (34,744)           157,474

Issuance of equity in connection
       with Globe Acquisition,
       net of issuance costs                    --                 --               4,950                     --              4,950

Net loss (for the period from
       May 7, 1999 through
       March 27, 2000)                          --                 --                  --                (21,511)           (21,511)
                                     -------------     --------------     ---------------      -----------------      --------------

Balance, March 27, 2000                      7,507                  2             223,207                (21,511)           201,698

Net loss                                        --                 --                  --                (15,296)           (15,296)

Non-cash compensation charge                    --                 --                  91                     --                 91
                                     -------------     --------------     ---------------      -----------------      --------------

Balance, March 26, 2001                      7,507                 $2            $223,298               $(36,807)          $186,493
                                     =============     ==============     ===============      =================      ==============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
                       of these consolidated statements.

                                       29
<PAGE>

               AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Three Fiscal Periods Ended March 26, 2001
                                  (in 000's)

  The financial statements of the Company and the Predecessor Company are not
                  comparable in certain respects (see Note 1)

<TABLE>
<CAPTION>
                                                                    Predecessor Company                       The Company
                                                             --------------------------------      ---------------------------------
                                                                                                     Forty-Six
                                                              Fiscal Year       Six Weeks           Weeks From
                                                                 Ended         From March           May 7, 1999        Fiscal Year
                                                               March 29,       30 Through             Through             Ended
                                                                 1999          May 6, 1999        March 27, 2000      March 26, 2001
                                                             -------------- -----------------    ------------------ ----------------
<S>                                                          <C>            <C>                  <C>                <C>
Cash Flows from Operating Activities:
    Net income (loss)                                          $   5,725         $    587           $ (21,511)          $(15,296)
                                                             -------------- -----------------    ------------------ ----------------
Adjustments to reconcile net income to net cash
    provided from operating activities:
   Gain on sale of Soap Opera Properties                          (6,499)              --                  --                 --
   Extraordinary charge, net of income tax benefit                 2,161               --               2,581                 --
   Depreciation and amortization                                  32,110            3,703              57,209             76,733
   Non-cash compensation charge                                       --               --                  --                 91
   Deferred debt cost amortization                                 1,506              147               2,807              3,027
   Deferred income tax provision (benefit)                        (3,592)            (207)              3,906             (1,517)
   Decrease (increase) in - net of acquisition -
        Receivables, net                                            (125)            (369)             (7,675)           (15,851)
        Inventories                                                  560            1,163              (3,826)            (1,127)
        Prepaid income taxes                                       2,612               --                  --                 --
        Prepaid expenses and other                                 1,289            1,793              (7,846)             2,947
    Increase (decrease) in - net of acquisition -
        Accounts payable                                          (5,203)          (2,184)             10,407              4,949
        Accrued expenses                                          (1,486)            (164)            (14,322)           (15,445)
        Payable to Parent Company                                   (324)              --               1,307                803
       Accrued interest                                           (1,010)              --               6,023             (3,015)
       Accrued and current deferred income taxes                   4,658            1,474               6,823             (1,567)
       Deferred revenues                                          (2,580)          (3,159)              5,999                788
                                                             -------------- -----------------    ------------------ ----------------
          Total adjustments                                       24,077            2,197              63,393             50,816
                                                             -------------- -----------------    ------------------ ----------------
          Net cash provided from operating activities             29,802            2,784              41,882             35,520
                                                             -------------- -----------------    ------------------ ----------------
   Cash Flows from Investing Activities:
       Capital expenditures                                      (15,019)            (717)            (13,330)           (27,875)
       Acquisition of business, net of cash acquired                  --               --            (435,214)           (10,050)
       Cash proceeds from sale of Soap Opera Assets               10,000               --                  --                 --
                                                             -------------- -----------------    ------------------ ----------------
           Net cash used in investing activities                  (5,019)            (717)           (448,544)           (37,925)
                                                             -------------- -----------------    ------------------ ----------------
   Cash Flows from Financing Activities:
       Issuance of common stock                                       --               --             240,000                 --
       Term loan and revolving credit facility
          principal repayments                                  (382,401)         (10,000)           (299,000)           (12,000)
       Proceeds from term loan and revolving credit facility     356,000            6,000                  --                 --
       Repayment of senior subordinated indebtedness                  --               --            (199,260)                --
       Proceeds from new term loan and credit facility                --               --             462,000             12,000
       Proceeds from new senior subordinated indebtedness             --               --             250,000                 --
       Payment of deferred debt costs                             (1,964)              --             (23,674)                --
                                                             -------------- -----------------    ------------------ ----------------
           Net cash provided by (used in) financing
            activities                                           (28,365)          (4,000)            430,066                 --
                                                             -------------- -----------------    ------------------ ----------------
   Net Increase (Decrease) in Cash and Cash Equivalents           (3,582)          (1,933)             23,404             (2,405)
   Cash and Cash Equivalents, Beginning of Period                  7,405            3,823                  --             23,404
                                                             -------------- -----------------    ------------------ ----------------
   Cash and Cash Equivalents, End of Period                    $   3,823         $  1,890           $  23,404           $ 20,999
                                                             ============== =================    ================== ================

   Supplemental Disclosures of Cash Flow Information:
      Cash paid during the period for -
         Income taxes                                          $   9,570         $     80           $   3,435           $    288
         Interest                                              $  46,389         $  3,142           $  52,602           $ 71,530
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these consolidated statements.

                                       30
<PAGE>

               AMERICAN MEDIA OPERATIONS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (dollars in thousands in all tables)

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Basis of Consolidation -

     The consolidated financial statements include the accounts of the American
Media Operations, Inc. ("the Company"), a wholly-owned subsidiary of American
Media, Inc., ("Media") and its subsidiaries (National Enquirer, Inc., Star
Editorial, Inc., Weekly World News, Inc., Country Weekly, Inc., Globe
Communications Corp., DSI and Frontline, among others).  The Company publishes
seven weekly publications: National Enquirer, Globe, Star, National Examiner,
Weekly World News, Sun, MIRA, one bi-weekly publication, Country Weekly and
other monthly magazines, including Auto World Magazine.  Distribution Services,
Inc. ("DSI") arranges for the placement and merchandising of our publications
and third party publications at retail outlets throughout the United States and
Canada.  All significant intercompany transactions and balances have been
eliminated in consolidation.

     Basis of Presentation -

     Media was purchased on May 7, 1999 resulting in a change in the historical
cost basis of various assets and liabilities.  Accordingly, the historical
financial information provided herein for periods prior to May 7, 1999 is not
comparable to financial information after that date.  For purposes of
presentation, all historical financial information for periods prior to May 7,
1999 will be referred to as the "Predecessor Company" and all periods subsequent
to May 6, 1999 will be referred to as the "Company".  The period from May 7,
1999 through March 27, 2000 is defined as the "Inception Period".  A solid black
vertical line has been inserted in tables where financial information may not be
comparable across periods.

     Certain prior year amounts have been reclassified to conform with the
fiscal 2001 presentation.

     Revenue Recognition -

     Substantially all publication sales, except subscriptions, are made through
unrelated distributors.  Issues, other than special topic issues, are placed on
sale approximately one week prior to the issue date; however, circulation
revenues and related expenses are recognized for financial statement purposes on
an issue date basis (i.e., off sale date).  Special topic and monthly issues
revenue and related expenses are recognized at the on sale date.  On the date
each issue is placed on sale, we receive a percentage of the issue's estimated
sales proceeds for our publications as an advance from the distributors. All of
our publications are sold with full return privileges.

     Revenues from copy sales are net of reserves provided for expected sales
returns, which are established in accordance with generally accepted accounting
principles after considering such factors as sales history and available market
information. We continually monitor the adequacy of the reserves and make
adjustments when necessary.

     Subscriptions received in advance of the issue date are recognized as
income over the term of the subscription on a straight-line basis. Advertising
revenues are recognized in the period in which the related advertising appears
in the publications.

                                       31
<PAGE>

    Deferred revenues were comprised of the following:

                                                      2000        2001
                                                     -------     -------

Single copy                                          $ 9,578     $10,139
Subscriptions                                         22,895      23,176
Advertising                                              581         527
                                                     -------     -------
                                                     $33,054     $33,842
                                                     =======     =======

     Other revenues, primarily from marketing services performed for third
parties by DSI, are recognized when the service is performed.

     In December 1999, the U.S. Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin 101, "Revenue Recognition" ("SAB 101"), which
provides guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. SAB 101 outlines the basic criteria
that must be met to recognize revenue and provide guidance for disclosure
related to revenue recognition policies. The accounting and disclosures
prescribed by SAB 101 were effective for the fiscal year ended March 26, 2001
and did not have a significant impact on the Company's financial position or
results of operations.

     Property and Equipment-

     We use the straight-line depreciation method for financial reporting.  The
estimated lives used in computing depreciation for financial reporting purposes
are 22 years for buildings, 3 years for display racks and 3 to 10 years for all
other depreciable fixed assets.    Maintenance and repair costs are charged to
expense as incurred; significant renewals and betterments are capitalized.

     Internal-Use Software

     In compliance with American Institute of Certified Public Accountants
("AICPA") Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," the Company expenses
costs incurred in the preliminary project stage and, thereafter, capitalizes
costs incurred in the developing or obtaining of internal use software and
includes them in property and equipment. Certain costs, such as maintenance and
training, are expensed as incurred. Capitalized costs are amortized over a
period of not more than five years using the straight-line method. In addition,
in compliance with SOP No. 98-1 and Emerging Issues Task Force ("EITF") No. 00-
2, "Accounting for Web Site Development Costs," direct internal and external
costs associated with the development of the features and functionality of the
Company's web sites, incurred during the application and infrastructure
development phase, have been capitalized, and are included in property and
equipment. Capitalized software costs are subject to impairment evaluation in
accordance with the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Total
capitalized costs as a result of adoption of these statements have not had a
material impact on the Company's consolidated financial position, results of
operations or cash flows for the fiscal years 2000 and 2001.


                                       32
<PAGE>

    Inventories-

    Inventories are stated at the lower of cost or market.  We use the first-in,
first-out (FIFO) cost method of valuation, which approximates market value.
Inventories are comprised of the following:

                                                           2000           2001
                                                       --------       --------

    Raw materials - paper                               $ 7,958        $ 8,559
    Finished product - paper, production
     and distribution costs of future issues              5,016          5,542
                                                       --------       --------

                                                        $12,974        $14,101
                                                       ========       ========

     Accrued Expenses-

     A summary of accrued expenses consists of the following:

                                                         2000           2001
                                                       --------       --------

    Personnel and related costs                         $19,231        $ 3,113
    Retail display allowance                             10,275          8,133
    Profit sharing                                          590             17
    Interest                                             14,853         11,838
    Accrued taxes                                             -          6,442
    Other                                                17,971          6,492
                                                       --------       --------

                                                        $62,920        $36,035
                                                       ========       ========

    Use of Estimates-

    The preparation of financial statements in conformity with generally
accepted accounting principles requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
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.

    Consolidated Statements of Cash Flows-

    For purposes of the accompanying consolidated statements of cash flows, we
consider cash and cash equivalents to be cash on hand or deposited in demand
deposit accounts with financial institutions and highly liquid investments with
a maturity of three months or less.

    Impairment of Long-Lived Assets

    We review long-lived assets, including goodwill, for impairment whenever
events or changes in business circumstances indicate that the carrying amount of
the assets may not be fully recoverable or that the useful lives of these assets
are no longer appropriate.  Each impairment test is based on a comparison of the
undiscounted cash flows to the recorded value of the asset.  If an impairment is
indicated, the asset is written down to its estimated fair value on a discounted
cash flow basis.

                                       33
<PAGE>

    Income Taxes -

    The Company accounts for income taxes under the liability method in
accordance with SFAS No. 109, "Accounting for Income Taxes".  The provision
for income taxes includes deferred income taxes resulting from items reported in
different periods for income tax and financial statement purposes. Deferred tax
assets and liabilities represent the expected future tax consequences of the
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. The effects of changes in tax
rates on deferred tax assets and liabilities are recognized in the period that
includes the enactment date.

    Advertising Costs -

    Media advertising costs included in selling, general and administrative
expense are expensed as incurred.   The amounts charged to operations for media
advertising during fiscal 2001,  the period from March 30, 1999 through May 6,
1999, the Inception Period and fiscal 1999 were approximately $9.5 million, $0
million, $9.6 million and $1.0 million, respectively.

    Deferred Debt Costs -

    Costs incurred in connection with obtaining financing are deferred and
amortized as a charge to interest expense over the terms of the related
borrowings using the interest rate method.


    Comprehensive Income -

    In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income" (SFAS No. 130").  SFAS No. 130
established standards for the reporting and display of comprehensive income and
its components in the financial statements.  The following types of items are to
be considered in computing comprehensive income:  foreign currency translation
adjustments, pension liability adjustments and unrealized gain/loss on
securities available for sale.  For all periods presented herein, there were no
differences between net income and comprehensive income.

    Segment Information -

    In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". This statement establishes standards for
the way that public enterprises report information about operating segments in
annual financial statements and interim financial stockholders' reports.  The
statement requires information to be reported by operating segment on the same
basis, which we use to evaluate performance internally.  We have determined that
we have only one operating segment.


                                       34
<PAGE>

    In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities-an amendment of SFAS 133".
SFAS 138 amends the accounting and reporting standards for certain derivative
instruments and hedging activities. The Company will be required to adopt SFAS
No. 133 for fiscal year 2002. This statement establishes a new model for
accounting for derivatives and hedging activities. Under SFAS No. 133, all
derivative instruments must be recognized as either an asset or liability
measured at its fair value. Management believes the impact of adopting this
statement will not have a material effect upon the Company's results of
operations or financial position.

(2) CERTAIN TRANSACTIONS AND MERGER:

    On May 7, 1999, all of the common stock of Media was purchased by EMP Group
LLC (the "LLC"), a Delaware limited liability company, for $837 million pursuant
to a merger of Media and EMP Acquisition Corp. ("EMP"), a wholly owned
subsidiary of the LLC (the "Acquisition"). Proceeds to finance the Acquisition
included (a) a cash equity investment of $235 million by the LLC, (b) borrowings
of $352 million under a new $400 million senior bank facility (the "New Credit
Facility") and (c) borrowings of $250 million in the form of senior subordinated
notes  (the "Notes"). These proceeds were used to (d) acquire all of the
outstanding common stock of Media for $299.4 million, (e) repay $267 million
then outstanding under the existing credit agreement with our banks (the "Prior
Credit Agreement"), (f) retire approximately $199.3 million of Senior
Subordinated Notes due 2004 and (g) pay transaction costs (collectively (a)
through (g), the "Transactions"). Upon consummation of the Transactions, EMP was
merged with and into Media (the "Merger") resulting in a change in ownership
control of both Media and the Company. The Transactions are summarized as
follows:

    Proceeds from:
          Equity contribution                                        $ 235,000
          New credit facility                                          352,000
          Notes                                                        250,000
                                                                    ----------
                                                                     $ 837,000
                                                                    ----------
    Proceeds used to repay:
          Existing credit facility                                   $(267,000)
          Existing subordinated notes                                 (199,300)
          Existing equity                                             (299,400)
                                                                    ----------
                                                                     $(765,700)
                                                                    ----------
          Balance used to pay debt issuance costs, debt
           tender offer premium, accrued interest
           and other costs                                           $ (71,300)
                                                                    ==========

    Preliminary allocation of purchase price is as follows:
          Cash proceeds                                              $ 837,000
          Less repayment of existing debt                             (466,300)
          Less cash assumed                                             (1,900)
                                                                    ----------
                Net cash paid                                          368,800
          Fair value of liabilities                                    (77,796)
          Fair value of tangible assets acquired                        41,973
                                                                    ----------
    Goodwill and other intangible assets acquired                    $ 332,977
                                                                    ==========


                                       35
<PAGE>

    The Acquisition has been accounted for under the purchase method of
accounting in accordance with Accounting Principles Board No. 16 ("APB No. 16").
The excess of purchase price over the fair value of net tangible assets acquired
("Goodwill") has been allocated between identified intangible assets including
the value of the tradenames and subscription lists of the Company's
publications, as determined through an independent appraisal, with the remainder
allocated to goodwill. For the period ended March 26, 2001 and for the Inception
Period, intangible assets, including goodwill, are being amortized on a
straight-line basis over 20 years for tradenames and goodwill and 9-15 years for
subscription lists. Goodwill for fiscal 1999 and 1998 and for the period from
March 30, 1999 to May 6, 1999, was amortized on a straight-line basis over 40
years.  Other intangible assets for these periods were amortized on a straight-
line basis over 25 years.

    On November 1, 1999, the Company acquired all of the common stock of Globe
Communications Corp. and certain of the publishing assets and liabilities of
Globe International, Inc. (collectively, the "Globe Properties") for total
consideration of approximately $105 million, including approximately $100
million in cash and $5 million in equity of the LLC (the "Globe Acquisition").
The Globe Properties consist of several tabloid style magazines, including
Globe, National Examiner and Sun as well as other titles including Mini Mags.
Proceeds to finance the acquisition of the Globe Properties included an
expansion of our existing senior bank facility of $90 million, approximately $14
million from the Company's existing revolving line of credit and the issuance of
$5 million of equity in the LLC.  These proceeds were used to acquire the Globe
Properties and to pay transaction costs.

    On July 11, 2000, the Company and the former owner of the Globe Properties
signed an agreement whereby the existing voting shareholders of the LLC
repurchased the $5 million of equity in the LLC originally issued to the former
owner.  Concurrent with this purchase, the former owner and his son resigned
their positions as directors of the board of Media.

    Additionally, the Company bought out the remaining term of the former
owner's five-year employment agreement and collected the amount due per the net
asset calculation as required in the initial purchase agreement.  The net amount
paid to the former owner for these items and miscellaneous other items was
approximately $3.2 million.  This adjustment was a part of the Globe Acquisition
and was therefore accounted for as an increase in goodwill.

    The Globe Acquisition has been accounted for under the purchase method of
accounting in accordance with "APB No. 16", and accordingly, results of
operations are included in the financial statements from the date of
acquisition, and the assets and liabilities have been recorded based upon their
fair values at the date of acquisition.  The excess of purchase price over the
fair value of net tangible assets acquired has been allocated to goodwill and is
being amortized on a straight-line basis over 20 years.  During the quarter
ended December 25, 2000, the Company finalized the fair values of the assets and
liabilities acquired.  Goodwill and tradenames related to the Globe Acquisition
are being amortized over 20 years on a straight-line basis.

    The following unaudited pro forma financial information gives effect to the
Transactions, the Globe Acquisition and excludes the results of Soap Opera
Magazine and Soap Opera News (collectively, the "Soap Opera Properties") which
were sold in February 1999 for $10 million cash and possible additional
consideration based upon the future performance of certain of the buyer's titles
(of which no additional consideration has been received through March 26, 2001),
as if each had occurred as of the beginning of each period presented:

                                       36
<PAGE>

<TABLE>
<CAPTION>
                                                          Predecessor Company                       The Company
                                                          -------------------                       -----------
                                                           Fiscal Year Ended                     Fiscal Year Ended
                                                            March 29, 1999                        March 27, 2000
                                                            --------------                        --------------
<S>                                                       <C>                                    <C>
    Operating revenues                                         $379,959                              $389,460

    Operating expenses                                         $272,558                              $277,057

    Depreciation and amortization                              $ 71,680                              $ 71,902

    Operating income                                           $ 35,721                              $ 40,501

    Interest expense                                           $ 67,600                              $ 67,600

    Loss before                                                $(34,920)                             $(27,344)
      extraordinary charge
</TABLE>

     Included as a reduction to selling, general and administrative expenses in
the fiscal year ended March 27, 2000 is an additional gain of $450,000 resulting
from settlement of certain liabilities in connection with the sale of the Soap
Opera Properties.

(3) FAIR VALUE OF FINANCIAL INSTRUMENTS:

     The estimated fair value of our financial instruments as of year-end is as
follows:

<TABLE>
<CAPTION>
                                                                     2000                              2001
                                                        ------------------------------     -----------------------------
                                                          Carrying            Fair           Carrying         Fair
                                                           Amount            Value            Amount          Value
                                                        -------------    -------------     -------------   -------------
<S>                                                     <C>              <C>               <C>             <C>
     Term loan and revolving credit
       facility, including current portion                 $430,000         $430,000          $430,000        $430,000
     Subordinated indebtedness                             $250,000         $242,500          $250,000        $244,851
     Interest rate swap agreement
       liability (receivable)                              $    (13)        $   (364)         $    102        $  2,065
</TABLE>

     The fair value of our financial instruments is estimated based on the
quoted market prices for the same or similar issues or on the current rate
offered to us for financial instruments of the same remaining maturities. The
carrying amount for cash equivalents approximates fair value because of the
short maturity of those instruments.

     On occasion we enter into interest rate swap agreements to reduce the
interest rate exposure associated with a portion of our variable rate
indebtedness. Interest rate swap agreements modify the interest characteristics
of our variable rate indebtedness by synthetically converting a portion of the
indebtedness to fixed rate. Interest earned (payable) under the interest rate
swap is credited (charged) to interest expense using the accrual method. The
related accrued receivable or payable is included in accrued interest payable.
The fair market value of the interest rate swap agreement is not reflected in
the accompanying consolidated financial statements. We do not utilize derivative
financial instruments for trading or other speculative purposes.

     We entered into a three-year $100 million notional amount interest rate
swap agreement which effectively converts a portion of our variable-rate debt to
fixed-rate debt. This interest rate swap agreement, which expired in November
2000, had a fixed interest rate of 5.95%. In

                                       37
<PAGE>

November 2000, we entered into a new $90 million interest rate swap agreement
expiring in May 2002 under which we pay a fixed rate of 6.53%. The carrying
amounts for the interest rate swap agreement represents net interest payable
(receivable) as of period end. Net interest expense (income) related to the
interest rate swap agreement totaled $584,000, $434,000 and $(344,000) for the
fiscal years 1999, 2000 and 2001, respectively.

(4) INCOME TAXES:

     We file a consolidated Federal income tax return with Media and calculate
our income tax on a separate return basis. The provision for income taxes
consists of the following:

<TABLE>
<CAPTION>
                                               Predecessor Company                             The Company
                                      -------------------------------------         ----------------------------------
                                                                                       Forty-six
                                                              Six weeks               weeks from
                                                              from March              May 7, 1999
                                                               30, 1999                 through
                                                               through                 March 27,
                                            1999             May 6, 1999                 2000                2001
                                      ---------------     -----------------         ---------------     --------------
<S>                                   <C>                 <C>                       <C>                 <C>
   Current:
    Federal                                   $15,693             $   1,441                 $(2,333)           $ 7,694
    State                                       1,458                   131                    (212)               698
                                      ---------------     -----------------         ---------------     --------------
          Total current                        17,151                 1,572                  (2,545)             8,392
                                      ---------------     -----------------         ---------------     --------------
   Deferred:
    Federal                                    (3,287)                 (190)                  3,580             (1,394)
    State                                        (305)                  (17)                    326               (123)
                                      ---------------     -----------------         ---------------     --------------
          Total deferred                       (3,592)                 (207)                  3,906             (1,517)
                                      ---------------     -----------------         ---------------     --------------
                                              $13,559             $   1,365                 $ 1,361            $ 6,875
                                      ===============     =================         ===============     ==============
</TABLE>

          A reconciliation of the expected income tax provision (benefit) at
the statutory Federal income tax rate of 35% to the reported income tax
provision is as follows:

<TABLE>
<CAPTION>
                                              Predecessor Company                             The Company
                                      ------------------------------------        ----------------------------------
                                                                                       Forty-six
                                                              Six weeks               weeks from
                                                             from March               May 7, 1999
                                                              30, 1999                  through
                                                               through                 March 27,
                                            1999             May 6, 1999                 2000                 2001
                                      ---------------     -----------------        ----------------      -------------
<S>                                   <C>                 <C>                      <C>                   <C>
   Expected income tax
    provision (benefit) at
    statutory rate                            $ 7,506             $     683                 $(6,149)           $(2,947)
   Nondeductible goodwill                       5,304                   612                   7,432              9,254
   State income taxes,
    net of Federal benefit                        749                    70                      78                373
   Other, net                                      --                    --                      --                195
                                      ---------------     -----------------        ----------------      -------------

                                              $13,559             $   1,365                 $ 1,361            $ 6,875
                                      ===============     =================        ================      =============
</TABLE>

                                       38
<PAGE>

     Deferred taxes reflect the impact of temporary differences between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. The net deferred tax assets and
liabilities are comprised of the following:

<TABLE>

                                                               2000                 2001
     <S>                                                  <C>                <C>
                                                          --------------     -----------------
     Gross non-current deferred income tax assets              $   1,983             $      77
                                                          --------------     -----------------

     Intangibles                                                (155,070)             (147,181)
     Expense recognition differences                              (1,440)                 (402)
     Subscription acquisition costs                                 (454)                   --
     Accelerated depreciation                                     (2,901)               (3,149)
     Book over tax basis of non-depreciable assets                  (439)                 (439)
     Other deferred tax liabilities                               (5,782)              (14,385)
     Inventory capitalization                                        (89)                   --
                                                          --------------     -----------------
          Gross non-current deferred tax liabilities            (166,175)             (165,556)
                                                          --------------     -----------------

          Net non-current deferred tax liabilities             $(164,192)            $(165,479)
                                                          ==============     =================
</TABLE>

     In accordance with the Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes", deferred taxes are recognized for
temporary differences related to identified intangible assets other than
goodwill. The temporary difference is calculated based on the difference between
the new book bases of the amounts allocated to tradenames and subscription lists
and their historical tax bases. Accordingly, as of May 7, 1999, a deferred tax
liability of approximately $162 million has been recorded with a corresponding
increase in goodwill. Included in prepaid expenses in the accompanying
consolidated balance sheet for fiscal year 2000 are net current deferred tax
assets of $3.2 million. Included in accrued expenses in the accompanying
consolidated balance sheet for fiscal 2001 are net current deferred tax
liabilities of $508,000 and current taxes payable of $5,934,000.

(5) CREDIT AGREEMENTS:

     In connection with the Transactions and Merger, on May 7, 1999 we repaid
all amounts outstanding under the Prior Credit Agreement and entered into a New
Credit Facility with a bank syndicate whose agent bank is the Chase Manhattan
Corporation (the "Agent Bank" and, collectively, the "Banks"). The New Credit
Agreement, which was comprised of a $340 million term loan commitment, was
amended on November 1, 1999 in connection with the Globe Acquisition to increase
the amount to $430 million and a $60 million revolving credit commitment,
includes the following:

          (a)  Term Loan Commitments -- The term loans consist of a $100 million
     (original amount) commitment (the "Tranche A" loans), a $240 million
     (original amount) commitment (the "Tranche B" loans) and a $90 million
     (original amount) commitment (the "Tranche B-1 loans). Amounts borrowed
     under the Tranche A commitment bear interest at rates based upon either the
     Alternate Base Rate plus 3/4% to 2% or the LIBO Rate plus 1-3/4% to 3%,
     predicated upon satisfaction of certain Credit Agreement covenants related
     to operating results. Tranche B and B-1 loans bear interest at either the
     Alternate Base Rate plus 2-1/2% or the LIBO Rate plus 3-1/2%.

                                       39
<PAGE>

          Borrowings under the term loan commitments are payable in varying
     quarterly installments from July 2001 through April 2007. Beginning as of
     the fiscal year ending March 2001 and for each fiscal year thereafter we
     will be required to make Excess Cash Flow payments (as defined), which will
     be applied ratably to the then outstanding term loans. Included in the
     current portion of term loan in the accompanying consolidated balance sheet
     for fiscal 2001 is $4,306,000 of required Excess Cash Flow relating to
     fiscal 2001.

          (b)  Revolving Credit Commitment -- The New Credit Agreement also
     provides for additional borrowings up to a maximum of $60 million, bearing
     interest at the Tranche A rates described above. This commitment, which
     expires in April 2006, allows funds to be borrowed and repaid from time to
     time with permanent reductions in the revolving credit commitment permitted
     at our option. As of March 26, 2001, no amounts were outstanding under the
     revolving credit facility.

          (c)  Commitment Fees - We are required to pay a commitment fee ranging
     from 3/8% to 1/2% of the unused portion of the revolving commitment.
     Commitment fees under the New Credit Agreement totaled $303,000 and
     $292,000 for fiscal 2001 and 2000, and $246,000 under the Prior Credit
     Agreement for fiscal year 1999.

          (d)  Guarantees, Collateral and Financial Covenants - The Company's
     obligations under the New Credit Agreement are guaranteed by all of its
     subsidiaries and Media. The obligations and such guarantees are secured by
     (i) a pledge by the Company of all of the capital stock of its
     subsidiaries, (ii) a pledge of all of the capital stock of the Company and
     (iii) a security interest in substantially all of the assets of the
     Company's subsidiaries.

     In addition to the above, the New Credit Agreement also contains certain
covenants that, among others, restrict paying cash dividends, incurring
additional indebtedness, entering into certain mergers or consolidations, making
capital expenditures and selling or otherwise disposing of assets. We are also
required to satisfy certain financial tests relating to operating cash flow and
debt coverage ratios. We plan to pay no cash dividends on our common stock in
the foreseeable future, instead using cash generated from operating results
principally to make principal and interest payments on its indebtedness.

     As permitted under the covenants of the New Credit Agreement and the Prior
Credit Agreement, management fees to affiliates totaled $750,000 for fiscal year
2001, $663,000 for the Inception Period, $0 for the period from March 30, 1999
to May 6, 1999 and $1.2 million for  fiscal year 1999.  These fees were included
in selling, general and administrative expense for  fiscal 2001 and the
Inception Period and in other (income) expense, net for the period from March
30, 1999 to May 6, 1999, and fiscal 1999.

     The effective interest rates under the Credit Agreement and Prior Credit
Agreement, including amounts borrowed under the term loan commitments and
revolving credit commitment, as of March 26, 2001, and for the fiscal years
1999, 2000 and 2001 were 9.3%, 7.7%, 9.1% and 10.0%, respectively.

(6) SUBORDINATED INDEBTEDNESS:

     In connection with the Transactions and Merger, on May 7, 1999 we repaid
approximately $199.3 million in face amount of the 11.63% Senior Subordinated
Notes due 2004; including the tender premium and consent fee the total amount
paid was approximately $214.2 million. Our

                                       40
<PAGE>

New Subordinated Notes (the "Notes"), which mature on May 1, 2009, bear interest
at 10-1/4% per annum payable in semi-annual installments on May 1st and November
1st of each year. These notes are redeemable at our option at prices ranging
from 105.1% to 100% of their face amount after April 2004. The indenture under
which the Notes were issued includes certain restrictive covenants that limit,
among other things, our ability to incur indebtedness, give guarantees, pay
dividends, make investments, sell assets and merge or consolidate.

     Payments of principal due under the New Credit Agreement (excluding any
amounts that may be borrowed under the credit commitment or required to be
prepaid under the excess cash flow provision), the New Subordinated Notes and
other long-term indebtedness follows:

                    Fiscal Year
                    -----------
                       2002            $   9,975
                       2003               17,184
                       2004               22,050
                       2005               27,790
                       2006               32,050
                    Thereafter           571,825
                                       ---------
                                       $ 680,874
                                       =========

     The Company has no material assets or operations other than investments in
its subsidiaries.  The Notes are unconditionally guaranteed, on a senior
subordinated basis, by all of its subsidiaries.  Each subsidiary that will be
organized in the future by the Company, unless such subsidiary is designated as
an unrestricted subsidiary, will jointly, severally, fully and unconditionally
guarantee the Notes on a senior subordinated basis.  Note guarantees are joint
and several, full and unconditional and general unsecured obligations of the
note guarantors.  The note guarantors are the Company's wholly owned
subsidiaries.  At present, the note guarantors comprise all of the Company's
direct and indirect subsidiaries.  Note guarantees are subordinated in right of
payment to all existing and future senior debt of the note guarantors, including
the New Credit Facility, and are also effectively subordinated to all secured
obligations of note guarantors to the extent of the assets securing such
obligations, including the New Credit Facility.  Furthermore, the Notes
indenture permits note guarantors to incur additional indebtedness, including
senior debt, subject to certain limitations.  We have not presented separate
financial statements and other disclosures concerning each of the note
guarantors because management has determined that such information is not
material to investors.

     So long as the factors set forth in the paragraph immediately above remain
true and correct, under applicable SEC rules and regulations, the Company's note
guarantors will not need to individually comply with the reporting requirements
of the Securities Exchange Act of 1934 ("Exchange Act"), nor will the Company
have to include separate financial statements and other disclosures concerning
each of the note guarantors in its Exchange Act reports.

(7) DEFERRED DEBT COSTS:

     Certain costs incurred in connection with the issuance of our long-term
debt have been deferred and are amortized as part of interest expense over
periods from 7 to 10 years. For fiscal year 2001, the period from March 30, 1999
through May 6, 2000, the Inception Period and for fiscal year 1999 ,
amortization of deferred debt costs which is included in interest expense in the
accompanying consolidated statements of income (loss) totaled approximately $3.0
million, $0.1 million, $2.8 million, and $1.5 million, respectively.

                                       41
<PAGE>

     In fiscal 1999, approximately $3.4 million ($2.2 million net of income tax
benefit) was charged to extraordinary loss related to the write-off of deferred
debt costs as a result of the refinancing of the Prior Credit Facility. In
connection with the Transactions and Merger, a fee related to an unused bridge
loan commitment totaling approximately $4.1 million ($2.6 million net of income
tax benefit) was charged to extraordinary loss in the Inception Period.

(8)  ASSET IMPAIRMENT CHARGE:

     During October 2000 the Company reviewed the long-lived assets of its 80%
owned subsidiary, Frontline Marketing, Inc. ("FMI"), for impairment due to
changes in circumstances indicating that the carrying amount of these long-lived
assets may not be recoverable.  Management determined that as a result of
significant deterioration in the operations of FMI that certain long-lived
assets were not properly valued.

     Accordingly, an asset impairment charge of $2.3 million recognized in
October 2000 related to these long-lived assets. Fair value of these assets was
based on the Company's estimate of expected future cash flows of FMI as
supported by reasonable and supportable assumptions and projections. The asset
impairment loss is included in depreciation expense for fiscal year 2001.

(9)  SALE OF SUBSIDIARY:

     On November 27, 2000 the Company sold its 80% owned subsidiary, FMI, to the
minority shareholder for a $2.5 million note receivable ("The Note"). The Note
has a short-term component of $500,000 and a long-term component of $2.0 million
which is payable to the Company based on defined cash flow of FMI. Additionally,
The Note bears interest at 9%. Due to the uncertainty of FMI's ability to
generate defined cash flow for the repayment of The Note, the Company has
reserved approximately $1.6 million of The Note until collectiblity has been
assured. No gain or loss has been recognized on this transaction. Management
intends to periodically review the collectiblity of The Note and may record a
gain or loss in future periods. Included in Other Income (Expense), net is
minority interest income related to FMI of $376,000 for fiscal 2001.

(10) NON-CASH COMPENSATION CHARGE

     The Company's common stock is owned by Media and all of Media's common
stock is owned by the LLC. The interests in the LLC are represented by units of
various classes. The units of the LLC are exchangeable for the common stock of
Media under certain circumstances and with restrictions. Certain members of
management purchased non-voting units in the LLC at an amount below appraised
fair market value. Additionally, certain members of managements were granted
another non-voting class of units in the LLC, which vest over a five-year
period, at below appraised fair market value. Included in selling, general and
administrative expense in the accompanying consolidated statement of income
(loss) for the year ended March 26, 2001 is a non-cash compensation charge of
$91,000 which represents the vested portion of the appraised fair value of these
units over the amount paid.

                                       42
<PAGE>

(11) COMMITMENTS AND CONTINGENCIES:

     Litigation-

     Various suits and claims arising in the ordinary course of business have
been instituted against us.  We have insurance policies available to recover
potential legal costs. We periodically evaluate and assess the risks and
uncertainties associated with litigation independent from those associated with
our potential claim for recovery from third party insurance carriers.  At
present, in the opinion of management, after consultation with outside legal
counsel, the liability resulting from litigation, if any, will not have a
material effect on our consolidated financial statements.

     Printing agreement-

     We have entered into a 15-year printing agreement expiring in fiscal 2011
with an unrelated printer to print National Enquirer and Star. In connection
with the Globe Acquisition, this agreement was amended to include the Globe,
National Examiner, Weekly World News, Sun and Country Weekly.  Based on current
pricing and production levels this contract, which requires pricing adjustments
based on changes in the Consumer Price Index, is estimated to cost approximately
$276 million over its remaining life as follows:

     Fiscal Year
     -----------
     2002                               $  27,906
     2003                                  27,906
     2004                                  27,906
     2005                                  27,669
     2006                                  27,499
     Thereafter                           137,497
                                        ---------
                                        $ 276,383
                                        =========

     Operating Leases -

     Minimum annual commitments under operating leases at March 26, 2001 are as
     follows:

     Fiscal Year
     -----------
     2002                               $   2,195
     2003                                   1,991
     2004                                   1,642
     2005                                   1,256
     2006                                     878
     Thereafter                               444
                                        ---------
                                        $   8,406
                                        =========

                                       43
<PAGE>

(12)  VALUATIONS AND QUALIFYING ACCOUNT:

      The table below summarizes the activity in the valuation account,
allowance for possible uncollectible accounts receivable for the periods
indicated:

<TABLE>
<CAPTION>
                                                                             Purchase
                                                                            Accounting
                                           Balance,         Charges         Additions,         Deductions,         Balance,
                                           Beginning          to          (Utilization),       Write-Offs,          End of
                                           of Period        Expense             Net                Net              Period
                                         -------------    -----------    ----------------     -------------     --------------
<S>                                     <C>              <C>            <C>                  <C>               <C>
Trade Accounts Receivable
  Valuation Account:

  For the fiscal year ended
      March 29, 1999                        $  266           $  3              $   -               $   -            $  269

  For the six weeks from
      March 30 through
      May 6, 1999                              269              -                  -                   -               269

  For the forty-six weeks from
      May 7, 1999 through
      March 27, 2000                           269            528                367                   -             1,164

  For the fiscal year
      ended March 26, 2001                  $1,164           $178              $(302)              $(674)           $  366
</TABLE>

                                       44
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

     Upon consummation of the Transactions, the following individuals became the
directors and executive officers of Media and the Company. All officers serve at
the pleasure of the applicable Board of Directors.

<TABLE>
<CAPTION>
Name                                       Age            Position (s)
----                                       ---            ------------
<S>                                   <C>       <C>
David J. Pecker..........................   49  Chairman, Chief Executive Officer, President
                                                And Director of Media and the Company

Austin M. Beutner........................   41  Director of Media and the Company

Neeraj Mital.............................   34  Director of Media and the Company

Saul D. Goodman..........................   33  Director of Media and the Company

Robert V. Seminara.......................   29  Director of Media and the Company

Paul G. Yovovich.........................   47  Director of Media and the Company

Helene Belanger..........................   46  Director of Media and the Company

Brian J. Richmand .......................   47  Director of Media and the Company

J. William Grimes .......................   60  Director of Media and the Company

John A. Miley............................   45  Executive Vice President and Chief
                                                Financial Officer of Media and the Company

Sandra Koo...............................   47  Director of Media
</TABLE>

     David J. Pecker became Chairman, Chief Executive Officer, President and a
Director of Media and the Company upon consummation of the Transactions on May
7, 1999.  Prior to that, Mr. Pecker had been the Chief Executive Officer since
1992, and President since 1991, of Hachette Filipacchi Magazines, Inc.. Prior to
1991, he was Executive Vice President/Publishing and Chief Operating and Chief
Financial Officer of Hachette. Mr. Pecker has over 20 years of publishing
industry experience having worked as the Director of Financial Reporting at CBS,
Inc. Magazine Group and as the Vice President and Controller of Diamandis
Communications Inc.

     Austin M. Beutner is co-chairman of Evercore Capital Partners, President of
Evercore and Chairman and CEO of Evercore Ventures. From 1994 to 1996, Mr.
Beutner was Chief Executive Officer and President of the U.S. Russia Investment
Fund, and in January 1997, Mr. Beutner was named Vice Chairman of its Board of
Directors. Before his affiliation with the U.S. Russia Investment Fund, he was a
General Partner of The Blackstone Group.  Mr. Beutner is currently a director of
Energy Partners, Ltd., Business.com, Continental Energy Services, Inc.,
eCompanies L.L.C., Earthlink, Encoda Systems, Telenet Holdings N.V. and Vertis,
Inc. and an observer to the Board of Callahan Associates International L.L.C.

                                       45
<PAGE>

     Neeraj Mital is a Partner of Evercore. Prior to joining Evercore, Mr. Mital
was at The Blackstone Group from 1992 to 1998, most recently as a Managing
Director. Prior to joining The Blackstone Group, he was at Salomon Brothers Inc.

     Saul D. Goodman is Managing Director of Evercore. Prior to joining
Evercore, Mr. Goodman was an investment banker at Lehman Brothers, Inc. from
1994 to 1998, most recently as a  Vice President. Prior to that, Mr. Goodman was
at Ark Asset Management.

     Robert V. Seminara is a Vice President of Evercore. Prior to joining
Evercore, Mr. Seminara was a Financial Analyst at Lazard Freres & Co. LLC from
1994 to 1996.

     Paul G. Yovovich is a principal of Lake Capital, a private investment
company. From 1993 to 1996 he was President of Advance Ross Corporation, whose
business was international transactions services. Prior to 1993, Mr. Yovovich
held a variety of executive positions at Centel Corporation, most recently as
President of its Central Telephone Company unit. Mr. Yovovich is currently a
Director of 3Com Corporation, Focal Communications Corporation, APAC Customer
Services, Inc. and Lante Corporation.

     Helene Belanger is a Vice-President in the Private Investments Group of
Capital Communications CDPQ ("Capital Communications''). Ms. Belanger has been
affiliated with Capital Communications since 1990 holding various positions
including the position of Director. Prior to her affiliation with Capital
Communications, Ms. Belanger was with the Royal Bank of Canada, occupying
various positions in the commercial loans sector, and at the Federal Business
Development Bank. Ms. Belanger is a corporate director sitting on the Board of
Directors of NetStar Communications, CFCF-12 and Groupe Coscient.

     Brian J. Richmand has served as a Special Partner of JP Morgan Partners
(formerly Chase Capital Partners) ("JPMP") since January 2000 and as a General
Partner of JPMP from August 1993 through December 1999.  Prior to joining JPMP,
Mr. Richmand headed the Corporate Group of the Washington, D.C. office of the
law firm of Kirkland & Ellis.  Mr. Richmand received a B.S. degree in 1976 from
The Wharton School of Finance and Commerce and a J.D. degree in 1979 from
Stanford Law School.  Mr. Richmand currently serves on the Boards of Directors
of LaPetite Academies, Inc., Reiman Publishing, LLC, Riverwood International
Corporation and Transtar Metals, LLC and on the Executive Committee of Falcon
Mezzanine Partners, L.P.

     J. William Grimes is a General Partner at BG Media Investors. Prior to
joining BG Media Investors, Mr. Grimes served from 1994 to 1997 as a media and
communications consultant to several high-tech new media companies and is a
principal of Incontext, Inc., a Washington, D.C.-based information database
company. From 1994 to September 1996, Mr. Grimes was Chief Executive Officer and
President of Zenith Media, USA. Before 1994, Mr. Grimes served in senior
positions at several media companies including Chief Executive Officer and
President of Multimedia, Inc. and Chief Executive Officer and President of
Univision Holdings, Inc. and Chief Executive Officer and President of ESPN.

     John A. Miley joined the Company in October 1999 as Executive Vice
President and Chief Financial Officer. Prior to joining the Company, Mr. Miley
held the position of Vice President Controller at Hachette Filipacchi Magazines,
Inc. Mr. Miley has over 20 years of publishing industry experience.

     Sandra Koo is an Assistant Controller at Evercore.  Prior to joining
Evercore, Ms, Koo was an accounting manager with the Blackstone Group.

                                       46
<PAGE>

ITEM 11.  EXECUTIVE COMPENSATION

    The following table sets forth the compensation paid by us to our chief
executive officer and our three most highly compensated executive officers at
March 26, 2001 for services rendered during the fiscal years 2001, 2000, and
1999.

<TABLE>
<CAPTION>

SUMMARY COMPENSATION TABLE

                                                                           Long-Term
                                       Annual Compensation                   Options
                                       ----------------------------------------------------------------------
                                                                           Other Annual      Shares          All Other
                               Fiscal     Salary             Bonus         Compensation    Underlying       Compensation
                                Year       ($)                ($)              ($)           Options            ($)
                                ----       ---                ---              ---           -------            ---
Name and Principal
------------------
Position
--------

<S>                            <C>       <C>              <C>              <C>             <C>              <C>
David J. Pecker                2001      1,500,000                0             0                  0        2,864,000 (4)
  Chairman, President &        2000      1,500,000          250,000 (5)         0                  0        1,955,152 (4)
  Chief Executive Officer      1999              0 (2)            0 (2)         0 (2)              0                0 (2)

John A. Miley                  2001        250,000          250,000 (5)         0                  0           14,781 (1)
  Executive VP &               2000        110,577          213,500 (5)         0                  0                0
  Chief Financial Officer      1999              0 (2)            0 (2)         0 (2)              0                0 (2)

Michael R. Roscoe    (6)       2001        298,558          101,320 (5)         0                  0            3,196 (1)
  Chairman of DSI              2000        322,115          130,000 (5)         0                  0          168,009 (1)(3)
                               1999        296,193           37,000             0             50,000 (3)       18,472 (1)

Michael Porche       (6)       2001        219,615           75,070 (5)         0                  0            3,883 (1)
  Chief Executive Officer
   & President of DSI
</TABLE>

1)  Amounts related to Mr. Miley, Mr. Roscoe and Mr. Porche for all periods
    presented relate to certain other taxable employment benefits.
2)  Messrs. Pecker and Miley were all first employed by the Company and Media
    during fiscal 2000.
3)  Upon consummation of the Transaction on May 7, 1999, Mr. Roscoe received $7
    for each underlying share of common stock represented by his options. After
    deducting for the exercise price of the underlying stock options, Mr. Roscoe
    received net proceeds of $167,709.
4)  The amount for fiscal 2000 includes the first portion of the make-whole
    payment to Mr. Pecker in the amount of $1,857,167, discussed below as well
    as certain other taxable employment benefits in the amount of $97,985. The
    amount for fiscal 2001 includes the final portion of the make-whole payment
    to Mr. Pecker in the amount of $2,332,818, discussed below, as well as
    certain other taxable employment benefits in the amount of $241,242.
5)  Includes annual bonus for Messrs. Pecker, Miley, Roscoe and Porche. The
    amount received in fiscal 2000 by Mr. Pecker and a portion of the bonus
    received by Mr. Miley relate to a signing bonus paid upon the consummation
    of the Transaction.
6)  Mr. Roscoe was Chief Executive Officer & President of DSI during fiscal
    1999, 2000 and until January 1, 2001. Effective January 1, 2001, Mr. Roscoe
    became Chairman of DSI and Mr. Porche became the President & CEO of DSI.

                                       47
<PAGE>

     All of our common stock is owned by Media and all of Media's common stock
is owned by EMP Group LLC (the "LLC").  Equity interests in the LLC are owned by
Evercore and certain investors, including Mr. Pecker and certain members of
management.  For a discussion of the distributions Mr. Pecker and the other
Executive Officers listed above may receive as the owners of certain units in
the LLC as compensation for their employment, see "Item 13.  Certain
Relationships and Related Transactions".

     Our executive officers are elected by our Board of Directors and serve at
the discretion of our Board of Directors or pursuant to an employment agreement.
Media is party to an employment agreement with Mr. Pecker that has a five-year
term expiring May 6, 2004 and, after the initial term, will be automatically
extended each year for successive one-year periods, unless either party provides
60 days' prior written notice before the next extension date.  The employment
agreement also provided that, upon Mr. Pecker's termination of employment with
Hachette, the LLC was obligated to make payments related to compensation
forfeited upon such termination (the "Make-Whole Payments").  The Make-Whole
Payments, in the aggregate, equal approximately $4.2 million, a portion of which
was paid upon Mr. Pecker's termination of employment with Hachette on March 13,
1999, and the remainder of which was paid on April 15, 2000.  During his term of
employment, Mr. Pecker shall be entitled to a base salary equal to $1,500,000
and certain other customary employee benefits.  Upon termination of employment
by Media without cause or by Mr. Pecker for good reason, Mr. Pecker shall be
entitled to the following subject to certain restrictions: (a) continued payment
of base salary and continued health, life insurance and disability benefits; (b)
immediate vesting of plan benefits; (c) outplacement services for 12 months
following such termination; (d) a golden parachute excise tax gross-up payment,
if applicable, in connection with a "change in control" (as defined in the
employment agreement); and (e) such employee benefits as to which Mr. Pecker may
be entitled under the employee benefit plans and arrangements of Media.

     Media is party to employment agreements with Messrs. Miley and Roscoe which
call for (i) base salaries of $250,000 and $200,000, respectively, (ii)  annual
bonus opportunities of $250,000 and $-0-, respectively and (iii) certain other
customary employee benefits.  The contract for Mr. Roscoe  expires on December
31, 2001.  Media is party to an employment agreement with Mr. Porche which calls
for (i) base salary of $225,000, (ii) annual bonus opportunity of $75,000 and
(iii) certain other customary employee benefits.  The term of Mr. Porche's
contract expires on September 29, 2004.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT

     All of our common stock is owned by Media and all of Media's common stock
is owned by the LLC. Equity interests in the LLC are owned by Evercore and
certain investors, including Mr. Pecker, as well as certain members of
management.  Pursuant to the LLC Agreement (as defined herein), Evercore has
control over the LLC, Media and the Company by virtue of its right to appoint a
majority of the Board of Managers of the LLC and a majority of the Board of
Directors of Media, irrespective of the amount of Evercore's equity interests in
the LLC. See "Item 13. Certain Relationships and Related Transactions."

                                       48
<PAGE>

     The following table presents, as of June 25, 2001, information relating to
the beneficial ownership of the LLC (the parent of Company and Media), held by
each director of the Company, by each executive officer of the Company named in
the Summary Compensation Table above and by all of the executive officers and
directors of the Company as a group.

<TABLE>
<CAPTION>
Name and Address of                                                        Number              Percent
Beneficial Owner                              Title of Class              of Units            Of Class
----------------                              --------------              --------            --------
<S>                                               <C>                   <C>                 <C>
Evercore Partners LLC (1), (2)                       Class A               92,000               39.2%
65 East 55/th/ Street                                Class A-1              2,663               53.3%
New York, New York 10022                             Class B                  ---                ---
          Austin M. Beutner (1), (2)                 Class C                  ---                ---
                                                     Class D                  ---                ---
                                                     Class E                  ---                ---

B.G. Media Investors LLC (3)                         Class A               25,000               10.6%
399 Park Avenue                                      Class A-1                531               10.6%
19/th/ Floor                                         Class B                  ---                ---
New York, New York 10026                             Class C                  ---                ---
          J. William Grimes (3)                      Class D                  ---                ---
                                                     Class E                  ---                ---

David J. Pecker                                      Class A                5,000                2.1%
                                                     Class A-1                106                2.1%
                                                     Class B               26,854               83.4%
                                                     Class C                  ---                ---
                                                     Class D                2,716              100.0%
                                                     Class E                1,343              100.0%

John A. Miley                                        Class A                  ---                ---
                                                     Class A-1                ---                ---
                                                     Class B                1,039                3.2%
                                                     Class C                  225                4.5%
                                                     Class D                  ---                ---
                                                     Class E                  ---                ---

Michael R. Roscoe                                    Class A                  ---                ---
                                                     Class A-1                ---                ---
                                                     Class B                   51                0.2%
                                                     Class C                   25                0.5%
                                                     Class D                  ---                ---
                                                     Class E                  ---                ---

Michael J. Porche                                    Class A                  ---                ---
                                                     Class A-1                ---                ---
                                                     Class B                  166                 .5%
                                                     Class C                  100                2.0%
                                                     Class D                  ---                ---
                                                     Class E                  ---                ---

All executive officers and                           Class A              122,000               51.9%
  directors as a group                               Class A-1              3,300               66.0%
  (15 persons)                                       Class B               28,110               87.3%
                                                     Class C                  350                7.0%
                                                     Class D                2,716              100.0%
                                                     Class E                1,343              100.0%
</TABLE>

                                       49
<PAGE>

(1)  Class A Units shown as beneficially owned by Evercore Partners LLC are held
     by Evercore Capital Partners, Evercore Capital Partners (NQ) L.P. and
     Evercore Co-Investment Partnership L.P.   Evercore Partners LLC is the
     general partner of Evercore Capital Partners L.P., the general partner of
     Evercore Capital Partners (NQ) L.P., the investment general partner of
     Evercore Capital Offshore Partners L.P. and the managing member of Evercore
     Co-Investment Partnership G.P., LLC (which in turn is the general partner
     of Evercore Co-Investment Partnership L.P.).  The managing members of
     Evercore Partners LLC include Mr. Beutner, who also is a director of Media
     and the Company.   Mr. Beutner may be deemed to share beneficial ownership
     of the Class A Units shown as beneficially owned by Evercore Partners LLC
     Mr. Beutner disclaims beneficial ownership of such units.

(2)  The LLC Agreement provides that the LLC will be managed by a Board of
     Managers, a majority of which will be appointed by Evercore, irrespective
     of Evercore's ownership interest.  All action by such Board of Managers are
     made by majority vote except for transactions involving the transfer of LLC
     assets to Evercore or its affiliates and certain other specified corporate
     transactions.  In addition, Evercore has the right to appoint a majority of
     the Board of Directors of Media.

(3)  Class A Units shown as beneficially owned by BG Media Investors LLC are
     held by BG Media Investors L.P.  BG Media Investors LLC is the general
     partner of BG Media Investors LLC The managing members of BG Media
     Investors LLC include Mr. Grimes, who also is a director of Media and the
     Company.   Mr. Grimes may be deemed to share beneficial ownership of the
     Class A Units shown as beneficially owned by Evercore Partners LLC   Mr.
     Grimes disclaims beneficial ownership of such units.


     The Class C Units represent 2% of the aggregate number of Class A Units,
Class A-1 Units and Class C Units outstanding as of June 25, 2001.

     Unless otherwise indicated, beneficial owners listed above may be contacted
at the Company's corporate address 5401 N.W. Broken Sound Blvd., Boca Raton, FL
33487. Under the rules of the SEC, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power, which includes the
power to vote or to direct the voting of such security, or investment power,
which includes the power to dispose of or to direct the disposition of such
security. A person is also deemed to be the beneficial owner of any securities
of which that person has the right to acquire beneficial ownership within 60
days. Under these rules, more than one person may be deemed to be a beneficial
owner of the same securities and a person may be deemed to be a beneficial owner
of securities as to which that person has no beneficial interest.

     Helene Belanger, Saul Goodman, Sandra Koo, Neeraj Mital, Brian Richmand,
Robert V. Seminara, Paul Yovovich (all of whom are directors of Media and the
Company) do not beneficially own any shares of the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     As part of their investment in the LLC, Evercore and the other investors
and Media, have entered into the LLC Agreement (the "LLC Agreement"). Interests
in the LLC are represented by units of various classes. Evercore and the other
investors, including Mr. Pecker, own Class A Units or Class A-1 Units. Class A
Units and Class A-1 Units are the only units with voting power. Certain members
of management own Class C Units, which are similar to the Class A Units except
that, among other things, the Class C Units have no voting rights. Other classes
of units, one class of which has been issued to Mr. Pecker (Class E Units) and
one class was issued to Mr. Pecker and other members of management (Class B
Units), are eligible to share in the profits of the LLC, pro rata, only after
all the holders of the Class A Units, Class A-1 Units and Class C Units have
received the return of their aggregate investment in such classes of units. Mr.
Pecker also has been issued a class of units (Class D Units) that will vest and
share in the profits of the LLC, pro rata, only in certain circumstances and
only after all the holdings of the Class A

                                       50
<PAGE>

Units, Class A-1 Units and Class C Units have received the return of their
aggregate investment in such classes of units.

     The units of the LLC are exchangeable for the common stock of Media under
certain circumstances, including pursuant to demand and piggyback registration
rights granted to Evercore and certain other investors, including Mr. Pecker,
under the LLC Agreement.  The LLC Agreement grants each investor certain demand
registration rights with respect to common stock of Media, the exercise of
which, in general, is controlled by Evercore and grants unlimited piggyback
registration rights.

     In general, the investors, including Mr. Pecker, may not transfer their
interests in the LLC without the consent of Evercore.  Below a certain ownership
percentage, if Evercore transfers its units, all the other investors are
required to transfer a pro rata number of securities on the same terms as the
Evercore transfer.

     Pursuant to a management agreement, dated as of May 7, 1999 (the
"Management Agreement"), among Evercore Advisors Inc. ("Evercore Advisors"), an
affiliate of Evercore, and Media, Evercore Advisors will be paid an annual
monitoring fee of $750,000 if the financial performance of Media meets certain
predetermined targets.

                                    PART IV


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

     The following documents are filed with, or incorporated by reference in,
and as part of, this Annual Report on Form 10-K.

1. Financial Statements

     For a complete list of the Financial Statements filed with this Annual
Report on Form 10-K, see the Index to Consolidated Financial Statements on Page
25.

                                       51
<PAGE>

Exhibit
Number                           Description of Exhibit
-------

   *2.1 --     Agreement and Plan of Merger dated as of February 16, 1999, by
               and between EMP Acquisition Corp., a Delaware corporation, and
               American Media, Inc., a Delaware corporation.

   *2.2 --     Certificate of Merger of EMP Acquisition Corp. with and into
               American Media, Inc. (Under Section 251 of the General
               Corporation Law of the State of Delaware).

  **2.3 --     Stock and Asset Purchase Agreement, dated as of November 1, 1999,
               among Mike Rosenbloom, Globe International Publishing, Inc.,
               Globe International, Inc., EMP Group LLC and American Media
               Operations, Inc.

    3.1 --     Certificate of Incorporation of Enquirer/Star, Inc and amendments
               thereto (incorporated by reference to Operation's Registration
               Statement on Form S-1, Registration No. 33-46676, Part II, Item
               16, Exhibit 3.5, as filed on March 25, 1992). (1)

    3.2 --     Amended By-laws of Enquirer/Star, Inc. (incorporated by reference
               to Operation's Registration Statement on Form S-1, Registration
               No. 33-46676, Part II, Item 16, Exhibit 3.6, as filed on March
               25, 1992). (1)

    3.3 --     Amendment of Certificate of Incorporation of Operations dated
               November 7, 1994 changing its name to American Media Operations,
               Inc. from Enquirer/Star, Inc. (incorporated by reference from
               Operation's Annual Report on Form 10-K for the year ended March
               27, 1995, filed as Exhibit 3.3, File No. 1-11112).

 ***4.1 --     Purchase Agreement, dated as of April 30, 1999, among American
               Media Operations, Inc., National Enquirer, Inc., Star Editorial,
               Inc., SOM Publishing, Inc., Weekly World News, Inc., Country
               Weekly, Inc., Distribution Services, Inc., Fairview Printing,
               Inc., NDSI, Inc., Biocide, Inc., American Media Marketing, Inc.
               and Marketing Services, Inc.

   *4.2 --     Indenture dated as of May 7, 1999, among American Media
               Operations, Inc., National Enquirer, Inc., Star Editorial, Inc.,
               SOM Publishing, Inc., Weekly World News, Inc., Country Weekly,
               Inc., Distribution Services, Inc., Fairview Printing, Inc., NDSI,
               Inc., Biocide, Inc., American Media Marketing, Inc., and
               Marketing Services, Inc., and The Chase Manhattan Bank, a New
               York banking corporation, as trustee.

   *4.3 --     Indemnity, Subrogation and Contribution Agreement dated as of May
               7, 1999, among American Media Operations, Inc., each subsidiary
               of American Media, Inc. listed on Schedule I thereto and The
               Chase Manhattan Bank, as collateral agent for the Secured Parties
               (as defined in the Security Agreement).



                                       52
<PAGE>

    *4.4 --    Pledge Agreement dated as of May 7, 1999, among American Media
               Operations, Inc., American Media, Inc., each subsidiary of
               Holdings listed on Schedule I thereto and The Chase Manhattan
               Bank, as collateral agent for the Secured Parties

    *4.5 --    Security Agreement dated as of May 7, 1999, among American Media
               Operations, Inc., American Media, Inc., each subsidiary of
               Holdings listed on Schedule I thereto and The Chase Manhattan
               Bank, as collateral agent for the Secured Parties (as defined
               herein).

   **4.6 --    Credit Agreement dated as of May 7, 1999, as Amended and Restated
               as of November 1, 1999, among American Media, Inc., American
               Media Operations, Inc., the Lenders party hereto and The Chase
               Manhattan Bank, as Administrative Agent.

    10.1 --    Tax Sharing Agreement dated as of March 31, 1992, among Group and
               its subsidiaries (incorporated by reference from Media's Annual
               Report on Form 10-K for the year ended March 30, 1992, filed as
               Exhibit 10.15, File No. 1-10784).(1)

 ***10.2 --    Management Agreement dated as of May 7, 1999, between American
               Media, Inc., a Delaware Corporation and Evercore Advisors, Inc.,
               a Delaware limited liability company.

  **10.3 --    David J. Pecker Employment Agreement, dated as of February 16,
               1999.

 ***10.4 --    Side Letter regarding David J. Pecker Employment Agreement to
               David Pecker from EMP Group LLC, dated as of April 13, 1999

  **10.5 --    Mike Rosenbloom Employment Agreement, dated as of November 1,
               1999.

      21 --    Subsidiaries of American Media Operations, Inc
--------------------------------------

(1)  Enquirer/Star, Inc. is now named American Media Operations, Inc.
     ("Operations"); Enquirer/Star Group, Inc. ("Group") is now named American
     Media, Inc. ("Media").


 *  Incorporated by reference to our Registration Statement on Form S-4, dated
    August 3, 2000.
    Filed with the U.S. Securities and Exchange Commission
    (Registration Statement No. 333-83637).
**  Incorporated by reference to the March 27, 2000 Form 10-K of Media dated
    June 26, 2000.
*** Incorporated by reference to the March 29, 1999 Form 10-K of Media dated
    June 28, 1999.

                                       53
<PAGE>

3. Form 8-K

     SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15 (d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.

     No annual report or proxy material has been sent to security holders in
fiscal year 2001.

                                       54
<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
it's behalf by the undersigned, thereto duly authorized on June 25, 2001.

                                             AMERICAN MEDIA OPERATIONS, INC.


                                             By:    /s/ DAVID J. PECKER
                                             ---------------------------------
                                                          David J. Pecker
                                               Chairman of the Board, President
                                                  and Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on behalf of the registrant and in the capacities
indicated on June 25, 2001.

          Signature                                  Title
          ---------                                  -----

     /s/ DAVID J. PECKER              Chairman of the Board, President,
-----------------------------
       David J. Pecker                 Chief Executive Officer and Director
                                       (Principal Executive Officer)

     /s/ JOHN A. MILEY                Executive Vice President and Chief
-----------------------------
       John A. Miley                  Financial Officer (Principal Financial and
                                      Accounting Officer)

    /s/ AUSTIN M. BEUTNER             Director
-----------------------------
      Austin M. Beutner

      /s/ NEERAJ MITAL                Director
-----------------------------
        Neeraj Mital

    /s/ SAUL D. GOODMAN               Director
-----------------------------
     Saul D. Goodman

   /s/ ROBERT V. SEMINARA             Director
-----------------------------
     Robert V. Seminara

                                       55
<PAGE>

     Exhibit Index

     Exhibit 21 - Subsidiaries of
                  American Media
                  Operations, Inc.