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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------
                                    FORM 10-K

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

                     For the Fiscal Year Ended June 30, 1998
                                       OR
          / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission File Number ______

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                    76-0425553
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

1560 Broadway, Denver, Colorado                            80202
(Address of principal executive offices)                 (Zip Code)

       Registrant's telephone number, including area code: (303) 837-0886
           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE

           Securities registered pursuant to Section 12(g) of the Act:
                                      NONE

     Indicate by check mark whether the registrant (1) has filed all reports 
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

     State the aggregate market value of the voting stock held by 
non-affiliates of the registrant. The aggregate market value shall be 
computed by reference to the price at which the stock was sold, or the 
average or the average bid and asked prices of such stock, as of a specified 
date within 60 days prior to the date of filing.

     Class of Voting Stock and Number of Shares               Market Value Held
     Held by Non-affiliates at August 25, 1998                by Non-affiliates
     ------------------------------------------               -----------------
     Class B                     173,576 shares               Unavailable

     The following shares of Common Stock are outstanding at August 25, 1998

                         Class                   Number of Shares
                  ----------------------         -----------------
                  Class B Common Stock                  173,576
                  Class D Common Stock                  664,450
                  Class G Common Stock                  371,960
                  Class GSI Common Stock              1,104,130
                  Class N Common Stock                      230

Documents Incorporated by Reference:  NONE

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                                     PART I

ITEM 1. BUSINESS

GENERAL

     Affiliated Newspapers Investments, Inc. (the "Company" or "ANI"), is one 
of the largest privately controlled newspaper publishing companies in the 
United States. The newspapers currently published by the Company have a 
combined daily and Sunday paid circulation of approximately 1,510,000 and 
1,638,000, respectively, as of March 31, 1998 including the August 22, 1998 
acquisition of the CHARLESTON DAILY MAIL, published in Charleston, West 
Virginia. Garden State Newspapers, Inc. ("Garden State"), a wholly owned 
subsidiary of ANI, founded in March 1985 by William Dean Singleton and 
Richard B. Scudder, currently owns and operates 34 market dominant daily and 
93 non-daily newspapers in ten states (including suburban markets in close 
proximity to the San Francisco Bay area, Los Angeles, Philadelphia, Omaha and 
Boston.) The Company's principal sources of revenue are print advertising and 
circulation sales. Other sources of revenue include commercial printing and 
electronic advertising. Denver Newspapers, Inc. ("Denver Newspapers"), a 60% 
owned subsidiary of ANI, operates, THE DENVER POST, located in Denver, 
Colorado. Denver Newspapers also currently owns 4 daily and 7 weekly 
newspapers published in Colorado.

     The operating results of ANI are the same as the operating results of 
Garden State, except for ANI's income in Denver Newspapers and ANI's separate 
administrative and debt expenses, since ANI historically has had no 
operations of its own other than its investment in Garden State, its only 
consolidated subsidiary. ANI accounts for its investment in Denver Newspapers 
using the equity method of accounting.

     The Company has grown significantly through internal growth and by 
making strategic acquisitions in markets which the Company believes have 
above average growth potential. The Company's primary acquisition focus is on 
newspaper markets contiguous to its own, allowing it to realize certain 
operating synergies. The Company refers to this acquisition strategy as 
clustering. A majority of the Company's newspapers are located in regional 
clusters, allowing them to achieve higher operating margins through efficient 
use of labor and equipment and by providing opportunities to cross-sell 
advertising. Management occasionally divests newspaper properties that no 
longer fit a cluster strategy and, in management's opinion, the value of such 
newspaper properties has been maximized. This strategy has enabled the 
Company to reinvest sale proceeds in newspaper properties that can be 
clustered, allowing the Company to achieve greater internal revenue and 
EBITDA growth in the future, while reducing its leverage ratio (as defined in 
Garden State's Bank Credit Agreement).

     The Company's newspapers are geographically diverse and generally 
positioned in markets with limited direct competition for local newspaper 
advertising. Management believes the Company's newspaper markets, taken as a 
whole, have above average population and sales growth potential. Most 
suburban and small city daily newspapers, such as the newspapers owned by the 
Company, have leading or sole positions in the geographic areas they serve. 
Only a few cities in the United States contain more than one primary daily 
newspaper, the majority of which are in major metropolitan markets. 
Additionally, start-ups of new daily newspapers in suburban markets with a 
pre-existing local newspaper are rare. Suburban newspapers address the 
specific needs of the community by publishing a broad spectrum of local news, 
as well as advertiser-specific editions, which television, because of its 
broader geographic coverage, is unwilling or unable to provide. Thus, in many 
communities the local newspaper provides a combination of social and economic 
services in a way in that only it can provide, making it attractive for both 
consumers and advertisers.

     Sizeable weekly newspapers are generally found in and around 
metropolitan areas in addition to smaller towns and cities. Suburban 
weeklies, such as the weekly newspapers operated by North Jersey Newspaper 
Company, Alameda Newspaper Group and Los Angeles Newspaper Group, divisions 
of Garden State, have several advantages over metropolitan dailies, including 
a lower cost structure, the ability to publish only on their most profitable 
days (i.e., one midweek and one weekend day), the ability to more effectively 
exploit zoned advertising and avoid expensive investments in wire services 
and syndicated feature material. Zoned advertising permits small merchants, 
individual classified and other advertisers to advertise solely in their own 
local areas at a cost lower than that of a full-run metropolitan daily 
newspaper. Thus, the typical suburban weekly newspaper has a broader 
advertiser base and does not rely to the same degree as a metropolitan daily 
on major retailers for advertising revenues.

                                       2
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INDUSTRY BACKGROUND

     Newspaper publishing is the oldest and largest segment of the media 
industry. Due to a focus on local news, newspapers remain the dominant medium 
for local advertising and, in calendar year 1997, accounted for more than 
47.1% of all local media advertising expenditures in the United States. In 
addition, in calendar year 1997, U.S. newspaper advertising expenditures 
reached an all time high of approximately $41.3 billion, representing a 
compounded annual growth rate of 6.2% since 1980. Newspapers continue to be 
the best medium for retail advertising which emphasizes the price of goods, 
in contrast to television which is generally used for image advertising.

     The number of adult readers of daily and Sunday newspapers is reported 
to have increased from 106.0 million and 106.7 million in 1980 to 112.2 
million and 127.6 million in 1997, respectively, representing compounded 
annual growth rates of .33% and 1.06%, respectively. Readers of daily and 
Sunday newspapers tend to be more highly educated and have higher incomes 
than non-newspaper readers. For instance, 67% of college graduates and 69% of 
households with income greater than $75,000 are reported to read a daily 
newspaper, compared to 59% of high school graduates and 53% of households 
with income less than $40,000. Management believes that newspapers continue 
to be the most cost-effective means for advertisers to reach this highly 
targeted demographic group.

     Total morning daily and Sunday national circulation has increased from 
29.4 million and 54.7 million in 1980 to 45.4 million and 60.5 million in 
1997, respectively, representing compounded annual growth rates of 2.6% and 
0.6%, respectively. Total reported daily circulation, including evening 
editions, however, declined nationally from 62.2 million in 1980 to 56.7 
million in 1997, or 0.5% annually. This decrease can be directly attributable 
to the national decline in circulation of evening newspapers, which is 
reported to have decreased from 32.8 million in 1980 to 11.3 million in 1997, 
or 6.1% annually, as a result of an inability to compete with existing 
morning newspapers in the same city, which in most cases caused the evening 
newspaper to shut down, or as a result of evening newspapers converting to 
morning. Circulation statistics for suburban daily newspapers are not 
published separately from circulation statistics for daily newspapers as a 
whole. Reliable circulation statistics for weekly newspapers are not 
available.

     Newspaper advertising revenues are cyclical and are generally affected 
by changes in national and regional economic conditions. Classified 
advertising, which makes up approximately one-third of newspaper advertising 
revenues, is the most sensitive to economic improvements or slowdowns as it 
is primarily affected by the demand for employment, real estate transactions 
and automotive sales. Growth in newspaper advertising has exceeded growth in 
the Gross National Product ("GDP") in every calendar year since 1993 and, in 
calendar year 1997, newspaper advertising spending grew 8.5% while the GDP 
grew by only 5.8%.

RECENT ACQUISITIONS AND DISPOSITIONS

Acquisitions:

     On August 22, 1998, the Company acquired a 50% interest in Charleston 
Newspapers for approximately $47.0 million. Charleston Newspapers is a joint 
venture, which publishes the CHARLESTON GAZETTE, (morning) and CHARLESTON 
DAILY MAIL, (evening) six days a week and the SUNDAY GAZETTE-MAIL, under the 
terms of a Joint Operating Agreement (JOA). The acquisition included rights 
to the masthead of the CHARLESTON DAILY MAIL; thus, Company is responsible 
for the editorial content of the CHARLESTON DAILY MAIL.

     FISCAL 1998

     On May 11, 1998 the Company acquired substantially all the assets used 
in the publication of THE TRI-CITY WEEKLY, a weekly newspaper published in 
Eureka, California for approximately $2.6 million in cash plus a covenant not 
to compete with the prior owners with a discounted value of approximately 
$0.5 million.

     On May 1, 1998, the Company acquired substantially all the assets used 
in the publication of the VALLEY NEWS TODAY, a morning newspaper published 
five times a week in Shenandoah, Iowa and seven weekly publications 
distributed primarily in and around Shenandoah and Dennison, Iowa. These 
assets were purchased for approximately $5.1 million in cash plus an 
adjustment for working capital and covenant not to compete with the prior 
owners, with a discounted value of approximately $0.6 million.

                                       3
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RECENT ACQUISITIONS AND DISPOSITIONS (CONTINUED)

     On January 29, 1998, the Company acquired substantially all the assets 
used in the publication of the DAILY NEWS, a daily newspaper published in the 
San Fernando Valley of Los Angeles, California, for approximately $130.0 
million, which included working capital approximately $2.0 million.

     On December 16, 1997, the Company acquired substantially all the assets 
used in the publication of the PRESS-TELEGRAM, a daily newspaper published in 
Long Beach, California, for approximately $38.2 million in cash, plus an 
adjustment for working capital.

     On July 31, 1997, the Company acquired substantially all the assets used 
in the publication of THE SUN, an evening newspaper published in Lowell, 
Massachusetts. The assets were purchased for $49.0 million in cash plus a 
covenant not to compete with the prior owners with a discounted value of 
approximately $11.8 million.

     FISCAL 1997

     On February 28, 1997, the Company acquired substantially all the assets 
used in the publication of the SENTINEL & ENTERPRISE, LEBANON DAILY NEWS and 
THE DAILY NONPAREIL, daily newspapers distributed primarily in Fitchburg and 
Leominster, Massachusetts; Lebanon, Pennsylvania; and Council Bluffs, Iowa, 
respectively, and five weekly newspapers distributed in and around the same 
cities, for a total of approximately $51.2 million in cash.

     On October 31, 1996, the Company acquired substantially all the assets 
used in the publication of the PASADENA STAR-NEWS, SAN GABRIEL VALLEY 
TRIBUNE, WHITTIER DAILY NEWS, TIMES-STANDARD and THE EVENING SUN, daily 
newspapers distributed primarily in Pasadena, West Covina, Whittier and 
Eureka, California, and Hanover, Pennsylvania, respectively, and seven weekly 
newspapers distributed in and around these same cities, for a total of 
approximately $130.0 million in cash.

     In conjunction with the sale of the Johnstown Tribune Publishing Company 
(discussed below), the Company acquired substantially all the assets used in 
the publication of the NORTH ADAMS TRANSCRIPT and the BRIDGETON NEWS, daily 
newspapers published in North Adams, Massachusetts, and Bridgeton, New 
Jersey, respectively.

     FISCAL 1996

     On March 10, 1996, a subsidiary of the Company acquired substantially 
all the assets used in the publication of the SAN MATEO COUNTY TIMES, a daily 
newspaper, and five weekly newspapers published in San Mateo County, 
California, for approximately $15.0 million, including discounted obligations 
to the seller of approximately $4.3 million and the assumption of newspaper 
subscription obligations of approximately $0.7 million.

     On August 31, 1995, the Company acquired, for approximately $34.6 
million, substantially all of the assets used in the publication of THE 
BERKSHIRE EAGLE, the BRATTLEBORO REFORMER and the BENNINGTON BANNER, daily 
newspapers published in Pittsfield, Massachusetts; Brattleboro and 
Bennington, Vermont, respectively, and THE MANCHESTER JOURNAL, a weekly 
newspaper published in Manchester, Vermont.

Dispositions:

     FISCAL 1998

     On December 5, 1997, the Company sold substantially all the assets used 
in the publication of the NORTH JERSEY HERALD & NEWS and sixteen weekly 
publications for $43.0 million in cash plus an adjustment for working 
capital. The Company recognized a pre-tax gain on the sale of approximately 
$31.8 million, net of selling expenses

                                       4
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     FISCAL 1997

     On February 13, 1997, the Company sold substantially all the assets used 
in the publication of the POTOMAC NEWS and two weekly publications for $47.7 
million in cash plus an adjustment for working capital. The Company 
recognized a pre-tax gain on the sale of approximately $30.6 million, net of 
selling expenses.

     FISCAL 1996

     On May 1, 1996, the Company sold the common stock of the Johnstown 
Tribune Publishing Company, which publishes THE TRIBUNE-DEMOCRAT and two 
weekly newspapers distributed in and around Johnstown, Pennsylvania, for 
$32.6 million in cash and the assets of six daily newspapers and eight weekly 
newspapers. The sale of the Johnstown Tribune Publishing Company resulted in 
a pre-tax gain of approximately $8.3 million. Immediately upon the completion 
of the transaction, four of the daily and seven of the weekly newspapers 
acquired were sold for $15.7 million to The Denver Post Corporation, an 
affiliate of the Company. No gain or loss was recognized on the sale to The 
Denver Post Corporation.

OPERATING STRATEGY

     The Company's strategy is to increase revenues and cash flows through 
geographic clustering; targeted marketing programs; local news leadership; 
high quality editorial content and presentation; circulation growth; cost 
control; and strategic technological investments, as described below:

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

     TARGETED MARKETING PROGRAMS. Through a strong local presence and active
     community relations, the Company is able to develop programs to maximize
     its advertising revenues. The Company utilizes research, demographic
     studies and zoning (marketing directed to a particular sub-segment of a
     local area) to develop marketing programs and meet the unique needs of
     specific advertisers.

     LOCAL NEWS LEADERSHIP. The Company's newspapers generally have the largest
     local news gathering resources in their markets. As a result of emphasizing
     local news, the Company's newspapers generally are able to generate reader
     loyalty and create franchise value. Because the Company's provision of
     local news is a unique product in its markets, its newspapers satisfy the
     demands of both its readers and advertisers.

     HIGH QUALITY EDITORIAL CONTENT AND PRESENTATION. The Company's newspapers
     are committed to editorial excellence, providing the proper mix of local
     and national news to effectively serve the needs of their local markets.
     The Company's newspapers often receive awards for excellence in various
     areas in their respective regions and categories. In addition, the
     Company's newspapers are generally produced on modern offset presses and
     are designed to attract readers through attractive layouts and color
     enhancements.

     CIRCULATION GROWTH. The Company believes that circulation growth is
     essential to the creation of long-term franchise value at its newspapers.
     Accordingly, the Company has and will continue to invest in telemarketing
     and promotional campaigns to increase circulation and readership. The
     Company has also established management incentive programs which reward its
     publishers for circulation growth at each of its daily newspapers. As a
     result of management's commitment to circulation growth, the Company is one
     of the few newspaper groups which has consistently grown in circulation,
     year over year, on a combined basis (excluding the effect of acquisitions).

                                       5
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OPERATING STRATEGY (CONTINUED)

     COST CONTROL. Each of the Company's newspapers emphasizes cost control with
     a particular focus on managing staffing requirements. At newspapers with
     collective bargaining units, management strives to enter into long-term
     agreements with moderate annual increases. In addition, the Company further
     controls labor costs through investments in state-of-the-art production
     equipment that improves production efficiencies. Management is equally
     focused on newsprint cost control. Each of the Company's newspapers
     benefits from discounted newsprint costs through its relationship with
     MediaNews Group, Inc., ("MNG", see MediaNews Group, Inc.'s Management of
     Newspaper Operations) the seventh largest newspaper group in the United
     States in terms of circulation as of September 30, 1997. The Company's
     newspapers buy newsprint from several suppliers, under arrangements
     covering MNG affiliates, resulting in what management believes are some of
     the most favorable newsprint prices in the industry. Through MNG, the
     Company has available to it fixed price newsprint contracts with certain
     suppliers, expiring over the next twelve months to two years, as well as
     newsprint purchasing arrangements with certain of its other suppliers which
     delay the adverse effect of newsprint price increases. Based on expected
     newsprint utilization at Garden State, approximately 41% of the Company's
     annual newsprint consumption for fiscal 1999 will be covered by fixed price
     contracts, at prices which are currently well below market.

     In order to further control newsprint costs while improving customer
     satisfaction, beginning in October of 1995, the Company began converting
     all its newspapers to a 50-inch web width. Prior to such conversions, the
     Company's newspapers had either 54 or 55-inch web widths. These conversions
     have permanently reduced the Company's newsprint consumption in excess of
     8%. At June 30, 1998, all the Company's newspapers, except certain recent
     acquisitions, were printed using a 50-inch web width.

     STRATEGIC TECHNOLOGICAL INVESTMENTS. To take advantage of the increasing
     use of the world wide web and the future advertising growth opportunities,
     MNG established MediaNEWS Technologies ("MNT") to develop and maintain
     websites for each of the Company's daily newspapers. MNT has developed
     websites to provide an online editorial presence and full online classified
     services for each of the Company's daily newspapers. In addition, the
     Company has established a strategic relationship with AD-ONE, which has
     provided greater access to the Company's web site and classified
     advertising. Although the Company believes that providing an online product
     is important to broadening the presence of its newspapers in their
     respective communities and ultimately increasing the Company's revenues
     through such value added services, the Company believes almost all of its
     customers prefer the newspaper in a printed form. By being the leading, and
     in certain instances the sole, provider of local news in most of its
     markets, management believes that its newspapers are well positioned to
     meet and benefit form its customers need for information, whether in print
     or electronic form. The Company's newspaper website can be found at
     www.newschoice.com.

     Management believes that successful implementation of the operating
     strategy described above will position the Company to continue to achieve
     internal growth. The Company may, from time to time, seek strategic or
     targeted newspaper acquisitions and dispositions such as the acquisitions
     previously discussed. The Company continually reviews newspaper acquisition
     candidates that it believes are underperforming in terms of operating cash
     flows but has an established history of strong readership and advertiser
     loyalty and are available at attractive prices. Such acquisitions will only
     be made in circumstances in which management believes that such
     acquisitions would contribute to the Company's overall growth strategy,
     whether through revenue growth and/or cost reduction opportunities, and
     represent attractive values based on price.

MEDIANEWS GROUP, INC.'S MANAGEMENT OF NEWSPAPER OPERATIONS

     MNG provides certain corporate services to the Company and its 
subsidiaries. Garden State and Denver Newspapers have engaged MNG to operate 
and manage their business affairs and newspapers under the terms of a 
management agreement. MNG, which is owned entirely by Messrs. Singleton and 
Scudder, allocates its expenses as management fees to each affiliate based 
upon the amount of time and resources devoted to each affiliate. Management 
fees are based upon MNG's actual expenses.

                                       6
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MEDIANEWS GROUP, INC.'S MANAGEMENT OF NEWSPAPER OPERATIONS (CONTINUED)

     Services provided by MNG to Garden State and Denver Newspapers include 
accounting, tax, merger and acquisition, purchasing, corporate advertising 
sales and administration, human resource and labor administration, treasury 
functions, and budget and operating plan review. In addition, MNT, a division 
of MNG, provides electronic media services, including website development and 
maintenance, to each of the Company's daily newspapers.

     MNG's commitment to editorial quality is an integral part of its overall 
management strategy. While MNG does not maintain any centralized editorial 
control over the newspapers it manages, MNG does maintain high standards for 
local news coverage by utilizing its extensive contacts, trade reputation and 
opportunities for career advancement throughout the Company and its 
affiliates to attract and retain talented editorial personnel. MNG is 
currently constructing a website to post press releases, annual and quarterly 
financial data, as well as additional information on MNG and its affiliates. 
This website is located at www.medianewsgroup.com.

                                       7
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                                 MAP INSERT PAGE







                                       8
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NEWSPAPER PROPERTIES

GARDEN STATE NEWSPAPER PROPERTIES

     The following is a list of newspaper published by the Company as of the 
date of this report. The map on the preceding page, reflects the Company's 
clustering strategy.

     ALAMEDA NEWSPAPER GROUP. The Alameda Newspaper Group is located in 
Alameda County, approximately 20 miles east of San Francisco, California, and 
publishes six morning newspapers. The Alameda Newspaper Group consists of THE 
OAKLAND TRIBUNE, THE DAILY REVIEW, TRI-VALLEY HERALD, THE ARGUS, ALAMEDA 
TIMES-STAR and SAN MATEO COUNTY TIMES. All the newspapers except the SAN 
MATEO COUNTY TIMES also publish a Sunday newspaper. These newspapers cover 
the city of Oaland, California, and affluent suburban markets located 
immediately south, southeast and southwest of Oakland in Alameda County and 
San Mateo County. The Alameda Newspaper Group also publishes THE ALAMEDA 
ACCENT, SAN BRUNO HERALD, DALY CITY RECORD/BRISBANE BEE, TIMES WEEKEND, 
MILLBRAE RECORDER-PROGRESS and THE COASTSIDE CHRONICLE on Saturday. The 
Alameda Newspaper Group had total daily and Sunday paid circulation of 
approximately 214,000 and 171,000 as of March 31, 1998.

     LOS ANGELES NEWSPAPER GROUP. The Los Angeles Newspaper Group is located 
in Los Angeles County, California, and publishes five morning daily 
newspapers. The Los Angeles Newspaper Group consists of the DAILY NEWS, the 
PRESS-TELEGRAM, the PASADENA STAR-NEWS, the SAN GABRIEL VALLEY TRIBUNE, and 
WHITTIER DAILY NEWS. These newspapers cover the San Fernando Valley, Long 
Beach, Pasadena, West Covina and Whittier, California, respectively. The Los 
Angeles Newspaper Group also publishes several weekly newspapers the 
HIGHLANDER newspapers, CHEERS, CLASS FORCE, PASADENA COMMERCE, THE REAL 
ESTATE WEEKLY, STAR WATCH, THE STAR, WHITTIER REVIEW, THE SHOPPER, and EL 
ECONOMICO and VECINOS DEL VALLE, (Spanish language newspapers) which are 
distributed in and around these same cities. The Los Angeles Newspaper Group 
had total daily and Sunday paid circulation of approximately 418,000 and 
450,000, respectively, as of March 31, 1998.

     YORK. York Newspaper Company, a partnership owned 57.5% by York 
Newspaper, Inc. ("YNI"), a wholly owned subsidiary of Garden State 
Investments, Inc. ("GSI"), publishes THE YORK DISPATCH, the YORK SUNDAY NEWS 
and THE YORK DAILY RECORD in York, Pennsylvania, approximately 30 miles south 
of Harrisburg, Pennsylvania. These newspapers are published under the terms 
of a joint operating agreement ("JOA"). Under the terms of the JOA, all 
operations, other than news and editorial, are controlled by the partnership. 
YNI maintains its own editorial staff and produces the editorial content of 
both THE YORK DISPATCH and the YORK SUNDAY NEWS. The York Newspaper Company 
also publishes the WEEKLY RECORD each Tuesday. The York Newspaper Company had 
daily and Sunday paid circulation of approximately 82,000 and 93,000, 
respectively, as of March 31, 1998.

     LOWELL. THE SUN, acquired July 31, 1997, is located in Lowell, 
Massachusetts, approximately 30 miles north of Boston, and publishes an 
evening newspaper five days a week and morning editions on Saturday and 
Sunday. THE SUN had daily and Sunday paid circulation of approximately 52,000 
and 56,000, respectively, as of March 31, 1998.

     EASTON. THE EXPRESS-TIMES is located in Easton, Pennsylvania, 
approximately 60 miles north of Philadelphia, Pennsylvania, and publishes a 
morning newspaper seven days a week. THE EXPRESS-TIMES also publishes five 
weekly newspapers: THE BETHLEHEM STAR, TWO RIVERS SHOPPING TIMES, BANGOR 
HOMETOWN NEWS, THE NAZARETH U.S. and the HUNTERDON MARKETPLACE, which are 
distributed in the area surrounding Easton, Pennsylvania. THE EXPRESS-TIMES 
had total daily and Sunday paid circulation of approximately 50,000 and 
48,000, respectively, as of March 31, 1998.

     PITTSFIELD. THE BERKSHIRE EAGLE is located in Pittsfield, Massachusetts, 
approximately 30 miles southeast of Albany, New York, and publishes a morning 
newspaper seven days a week. THE BERKSHIRE EAGLE also publishes a weekly 
newspaper, THE SHOPPER, a broadsheet shopper circulated free to 
non-subscribers in Berkshire County. THE BERKSHIRE EAGLE had total daily and 
Sunday paid circulation of approximately 30,000 and 35,500, respectively, as 
of March 31, 1998.

     WOODBURY. The GLOUCESTER COUNTY TIMES is located in Woodbury, New 
Jersey, approximately 15 miles south of Philadelphia, Pennsylvania, and 
publishes an evening newspaper five days a week and a Sunday newspaper. The 
GLOUCESTER COUNTY TIMES also publishes THE ADVERTISER, a weekly shopper. The 
GLOUCESTER COUNTY TIMES had total daily and Sunday paid circulation of 
approximately 29,000 and 30,000 respectively as of March 31, 1998.

                                       9
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NEWSPAPER PROPERTIES (CONTINUED)

     LAS CRUCES. The LAS CRUCES SUN-NEWS is located in Las Cruces, New 
Mexico, approximately 45 miles north of El Paso, Texas, and publishes a 
morning newspaper seven days a week. The LAS CRUCES SUN-NEWS also publishes 
the VOZ DEL VALLE, a weekly Spanish language newspaper, and THE SHOPPING 
TIMES, a weekly shopper. The LAS CRUCES SUN-NEWS had total daily and Sunday 
paid circulation of approximately 23,000 and 24,000, respectively, as of 
March 31 1998.

     EUREKA. The TIMES-STANDARD is located in Eureka, California, 
approximately 250 miles north of San Francisco, and publishes a morning 
newspaper seven days a week. The TIMES-STANDARD also publishes three weekly 
newspapers, TIMES-STANDARD PLUS, ON THE MARKET and TRI-CITY WEEKLY, which are 
distributed in and around the areas surrounding Eureka, California. The 
TIMES-STANDARD had daily and Sunday circulation of approximately 22,000 and 
23,000, respectively, as of March 31, 1998.

     LEBANON. The LEBANON DAILY NEWS is located in Lebanon, Pennsylvania, 
approximately 35 miles northeast of York, Pennsylvania, and 30 miles east of 
Harrisburg, Pennsylvania. The LEBANON DAILY NEWS publishes an evening 
newspaper five days a week, and morning editions on Saturday and Sunday. The 
LEBANON DAILY NEWS also publishes the PALM ADVERTISER, a weekly newspaper, 
which is distributed around Lebanon, Pennsylvania. Daily and Sunday paid 
circulation at the LEBANON DAILY NEWS was approximately 21,000 at March 31, 
1998.

     HANOVER. THE EVENING SUN is located in Hanover, Pennsylvania, 
approximately 20 miles southwest of York, Pennsylvania, and 40 miles south of 
Harrisburg, Pennsylvania. THE EVENING SUN publishes an evening newspaper five 
days a week and morning editions on Saturday and Sunday. THE EVENING SUN also 
publishes a weekly newspaper, THE COMMUNITY SUN. THE EVENING SUN had daily 
and Sunday paid circulation of approximately 21,000 at March 31, 1998.

     FITCHBURG. The SENTINEL & ENTERPRISE is located in Fitchburg, 
Massachusetts, approximately 40 miles northwest of Boston, Massachusetts, and 
approximately 30 miles west of Lowell, Massachusetts, and publishes an 
evening newspaper five days a week and morning editions on Saturday and 
Sunday. The SENTINEL & ENTERPRISE also publishes three weekly newspapers: 
NORTH COUNTY LEADER, THE WEEKENDER PLUS and THE INDEPENDENT, which are 
distributed in and around areas surrounding Fitchburg, Massachusetts. The 
SENTINEL & ENTERPRISE had total daily and Sunday paid circulation of 
approximately 20,000 at March 31, 1998.

     COUNCIL BLUFFS. THE DAILY NONPAREIL is located in Council Bluffs, Iowa, 
which is adjacent to Omaha, Nebraska, on the Missouri River. THE DAILY 
NONPAREIL publishes an evening newspaper five days a week and morning 
editions on Saturday and Sunday. THE DAILY NONPAREIL also publishes THE 
VALLEY NEWS TODAY, a morning paper published five days a week distributed in 
and around Shenandoah, Iowa. In addition, THE DAILY NONPAREIL also publishes 
nine weekly newspapers: THE MIDLANDS SHOPPER GUIDE, AD-VISOR, ESSEX 
INDEPENDENT, DENNISON BULLETIN, DENNISON REVIEW, MEAT EMPIRE SAVINGS GUIDE, 
VALLEY NEWS LIFE, WEEKLY TIMES and CLARINDA HERALD-JOURNAL, which are 
distributed in the areas surrounding Council Bluffs, Shenandoah, and 
Dennison, Iowa. At March 31, 1998, THE DAILY NONPAREIL had daily and Sunday 
paid circulation of approximately 17,000 and 18,000, respectively.

     BRATTLEBORO. The BRATTLEBORO REFORMER is located in Brattleboro, 
Vermont, approximately 65 miles east of Albany, New York, and publishes a 
morning newspaper seven days a week. The BRATTLEBORO REFORMER had daily and 
weekend circulation of approximately 11,000 and 12,000 at of March 31, 1998, 
respectively.

     SALEM. TODAY'S SUNBEAM is located in Salem, New Jersey, approximately 35 
miles south of Philadelphia, Pennsylvania, and publishes a morning paper six 
days a week. TODAY'S SUNBEAM also publishes THE RECORD, a weekly newspaper. 
TODAY'S SUNBEAM had total daily and Sunday circulation of approximately 
11,000 as of March 31, 1998.

     BRIDGETON. The BRIDGETON NEWS is located in Bridgeton, New Jersey, 
approximately 40 miles south of Philadelphia, Pennsylvania, and publishes an 
evening newspaper six days a week. The BRIDGETON NEWS also publishes the 
MILLVILLE SHOPPER NEWS, a weekly newspaper. The BRIDGETON NEWS had daily 
circulation of approximately 9,000 as of March 31, 1998.

     NORTH ADAMS. The NORTH ADAMS TRANSCRIPT is located in North Adams, 
Massachusetts, approximately 30 miles east of Albany, New York, and publishes 
an evening newspaper six days a week and a weekly newspaper, THE TRANSCRIPT 
SPOTLIGHT. The NORTH ADAMS TRANSCRIPT had daily circulation of 8,000 at 
March 31, 1998.

                                       10
<PAGE>

NEWSPAPER PROPERTIES (CONTINUED)

     BENNINGTON. The BENNINGTON BANNER is located in Bennington, Vermont, 
approximately 35 miles east of Albany, New York, and publishes a morning 
newspaper seven days a week. The BENNINGTON BANNER also publishes the 
MANCHESTER JOURNAL, a paid weekly newspaper distributed on Wednesdays in 
Manchester, Vermont, and THE BENNINGTON SHOPPER, a free weekly shopper. The 
BENNINGTON BANNER had daily circulation of approximately 8,000 as of March 31,
1998.

     NORTH JERSEY NEWSPAPERS COMPANY. North Jersey Newspapers Company 
publishes twenty-nine weekly newspapers which are distributed primarily in 
central New Jersey. The weeklies, most of which are free distribution 
publications in Warren, Somerset, Morris and Union Counties have a midweek 
and weekend distribution of approximately 38,000 as of March 31, 1998.

     GRAHAM. THE GRAHAM LEADER is located in Graham, Texas, approximately 90 
miles northwest of Fort Worth, Texas. THE GRAHAM LEADER is a biweekly 
newspaper with total paid circulation of approximately 4,900 as of March 31, 
1998. The Graham Leader also publishes the LAKE COUNTRY SUN, the LAKE COUNTRY 
SHOPPER, and THE OLNEY ENTERPRISE each Thursday. In addition, the JACKSBORO 
GAZETTE-NEWS and THE JACK COUNTY HERALD are weekly newspapers published each 
Monday and Thursday, respectively.

RECENT ACQUISITION

     CHARLESTON NEWSPAPERS. On August 22, 1998, Garden State acquired a 50% 
interest in CHARLESTON NEWSPAPERS, a joint venture which publishes CHARLESTON 
DAILY MAIL, CHARLESTON GAZETTE and THE SUNDAY GAZETTE-MAIL, in Charleston, 
West Virginia. These newspapers are published under the terms of a JOA. Under 
the terms of the JOA, all operations, other than news and editorial are 
controlled by the joint venture. Garden State Newspaper is responsible for 
maintaining the editorial staff and producing the editorial content for the 
CHARLESTON DAILY MAIL. Charleston Newspapers had daily and Sunday circulation 
of approximately 93,000 and 102,000, respectively, as of March 31, 1998.

DENVER NEWSPAPERS -- UNCONSOLIDATED SUBSIDIARY

     THE DENVER POST. THE DENVER POST had daily and Sunday paid circulation 
of approximately 354,000 and 491,000, respectively, as of March 31, 1998. THE 
DENVER POST is a traditional broadsheet-formatted newspaper. Management 
believes that THE DENVER POST is one of the most respected newspapers in its 
region, serving as the preferred choice for printed news. Management also 
believes that THE DENVER POST'S editorial quality and content, as well as its 
broadsheet format, provide it with a competitive advantage which has 
contributed to THE DENVER POST being more successful than its primary 
competitor at attracting newspaper readers moving into the Denver 
metropolitan area. As of March 31, 1998, THE DENVER POST had daily and Sunday 
circulation market share of approximately 52.1% and 53.0%, respectively.

     EASTERN COLORADO PUBLISHING COMPANY. Eastern Colorado publishes the FORT 
MORGAN TIMES, the JOURNAL-ADVOCATE and the LAMAR DAILY NEWS, daily newspapers 
published in Fort Morgan, Sterling and Lamar, Colorado, with combined daily 
circulation of approximately 11,900 as of March 31, 1998. Each of these daily 
newspapers also publishes a weekly newspaper which includes the MORGAN TIMES 
REVIEW, J. A. SHOPPER and the TRI-STATE. These weekly newspapers are 
distributed free in and around each of the daily newspaper's geographic 
markets. Eastern Colorado also publishes the AKRON NEWS REPORTER, BRUSH 
NEWS-TRIBUNE, JULESBURG ADVOCATE, THE BURLINGTON RECORD, paid weekly 
newspapers distributed in Akron, Brush, Julesburg and Burlington, Colorado.

ADVERTISING AND CIRCULATION REVENUE

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

                                       11
<PAGE>

     Advertising revenue includes RETAIL (local and national department 
stores, specialty shops and other retailers), NATIONAL (national advertising 
accounts), and CLASSIFIED advertising (employment, automotive, real estate 
and personals). The contributions of Retail, National, Classified and 
Circulation revenues to total revenues for fiscal years 1998, 1997 and 1996 
were as follows:

<TABLE>
<CAPTION>
                                           Fiscal years ended June 30,
                                        --------------------------------
                                        1998          1997          1996
                                        ----          ----          ----
<S>                                     <C>           <C>           <C>
      Retail........................      41%           42%          44%
      National......................       4             3            3
      Classified....................      35            35           34
      Circulation...................      16            16           16
      Other.........................       4             4            3
                                         ----          ----         ----
                                         100%          100%         100%
                                         ----          ----         ----
                                         ----          ----         ----
</TABLE>

     Retail revenues as a percentage of total revenues have declined over the 
last two years as a result of the strong performance of Classified 
advertising associated with a strong economy and low unemployment and strong 
National advertising revenue growth in fiscal 1998.

NEWSPRINT

     Newsprint represents one of the largest costs of producing a newspaper. 
The Company's newspapers buy newsprint from several suppliers under 
arrangements covering MNG affiliates, resulting in what management believes 
are some of the most favorable newsprint prices in the industry. In fiscal 
years 1998, 1997 and 1996, the Company's subsidiaries consumed approximately 
99,900, 76,000, and 62,400 tons of newsprint, respectively, and, during the 
same periods, incurred newsprint expense of approximately $54.4 million, 
$41.1 million, and $42.5 million, respectively. Newsprint expense as a 
percentage of revenue for fiscal year 1998, 1997 and 1996 was 13.1%, 13.6%, 
and 18.5%, respectively. Newsprint expense varies between years because of 
fluctuations in prices and consumption. Newsprint expense as a percentage of 
revenue showed no significant change in fiscal 1998 over fiscal 1997. 
Newsprint expense as a percentage of revenue decreased in fiscal 1997 over 
1996, primarily because of a decrease of approximately 25% in the average 
cost per ton of newsprint consumed and a reduction in consumption from the 
implementation of the 50 inch web-width. See "Near Term Outlook" on page 26 
for additional discussion of newsprint pricing.

EMPLOYEE RELATIONS

     Garden State and Denver Newspapers combined employ approximately 5,200 
full-time and 2,300 part-time employees. Approximately 2,400 full-time and 
part-time employees at subsidiaries are covered by collective bargaining 
agreements, of which approximately 1,500 of these employees are union 
employees at THE DENVER POST. Currently, THE DENVER POST has seven collective 
bargaining units represented by labor unions. The machinist and press 
operators have active contracts that expire on December 31, 1999 and 
August 2, 2002. Contracts with the remaining five collective bargaining 
units have expired and THE DENVER POST is currently involved in ongoing 
negotiation with the unions. Approximately 900 full-time and part-time 
employees are covered by collective bargaining agreements at subsidiaries 
of Garden State.

SEASONALITY

     Newspaper companies tend to follow a distinct and recurring seasonal 
pattern, with higher advertising revenues in months containing significant 
events or holidays. Accordingly, the fourth calendar quarter, or the 
Company's second fiscal quarter, is the Company's strongest revenue quarter 
of the year. Due to generally poor weather and a lack of holidays, the first 
calendar quarter, or the Company's third fiscal quarter, is the Company's 
weakest revenue quarter of the year.

                                       12
<PAGE>

COMPETITION

     GENERAL

     Each of the Company's newspapers competes to varying degrees with 
magazines, radio, television and cable television, as well as with some 
weekly publications and other advertising media, including electronic media, 
for advertising and circulation revenue. Competition for newspaper 
advertising is largely based upon circulation, price and the content of the 
newspaper. A newspaper's coverage of the market, generally determined by 
household penetration, is of significant importance to advertisers and 
directly affects a newspaper's share of total advertising revenues in the 
market. Management believes, however, that advertisers generally regard 
newspaper advertising as the most effective method of advertising promotions 
and pricing as compared to television, which is generally used to advertise 
image. The Company may from time to time, compete with other companies which 
have greater financial resources than the Company.

     GARDEN STATE

     Garden State's suburban and small city daily newspapers are the dominant 
local news and information source, with strong name recognition in their 
market and no direct competition from similar daily newspapers published in 
their markets. However, with most small daily newspapers, some circulation 
competition exists from larger daily newspapers which are usually published 
in nearby metropolitan areas. Management believes larger daily newspapers 
with circulation in Garden State's newspaper markets generally do not compete 
in any meaningful way for local advertising revenues, a newspaper's main 
source of revenues. Garden State's daily newspapers capture the largest share 
of local advertising as a result of their direct coverage of the market. In 
addition, management believes advertisers generally regard newspaper 
advertising as the most effective method of advertising promotions and 
pricing as compared to television, which is generally used to advertise 
image. Free weekly newspapers generally depend solely upon advertising 
revenue and the distribution of preprinted advertising circulars.

     DENVER NEWSPAPERS

     THE DENVER POST competes with the ROCKY MOUNTAIN NEWS, which is owned by 
The E. W. Scripps Company. Competition for newspaper advertising in Denver is 
largely based upon circulation volumes and demographics, price and the 
content of the newspaper. The competition experienced by the Eastern Colorado 
newspapers is similar to that of Garden State, as previously discussed, 
although these markets are more isolated from metropolitan areas than many of 
Garden State's markets.

     ELECTRONIC MEDIA

     Many newspaper companies are now publishing news and other content on 
the world wide web. In addition, there are several new start-up companies 
which have developed sites on the world wide web which are, by design, 
advertising and/or subscription supported. Many of these sites target 
specific types of advertising such as employment and automotive classified.

     Due to many issues associated with advertising on the world wide web, 
such as fragmentation and lack of meaningful research on viewers and 
penetration levels, the Company does not view the world wide web as a 
competitive threat today. However, as the issues mentioned above are 
resolved, advertising on the world wide web is expected to grow to meaningful 
levels. Accordingly, the Company has developed a strategy which it believes 
will allow it to participate in the advertising growth on the world wide web.

     In April 1997, MNG moved the electronic media group of Alameda Newspaper 
Group to its Denver headquarters and established MNT, the electronic 
publishing division of MNG. MNT is responsible for developing and maintaining 
the website for the Company and each of its daily newspapers. In addition, 
MNT has and is continuing to develop strategic alliances to enhance content, 
functionality and delivery. Such strategic alliances include Microsoft, 
Pantheon, Navidec and Ad-One Classified. The Company believes the design, 
functionality and content of its websites will attract viewers to continually 
return to its website(s) for news and information, a key for advertisers. All 
of the Company's newspapers currently on-line can be located at 
www.newschoice.com.

                                       13
<PAGE>

ITEM 2.  PROPERTY

     Garden State's production facilities are, in most cases, complete 
newspaper and office facilities. The principal operating facilities owned by 
Garden State are located in Hayward, San Mateo, Union City, West Covina, Long 
Beach, Woodland Hills, Valencia and Eureka, California; Council Bluffs, Iowa, 
Bridgeton and Woodbury, New Jersey; Easton, York, Hanover and Lebanon, 
Pennsylvania; Pittsfield, North Adams, Lowell and Fitchburg, Massachusetts; 
Las Cruces, New Mexico; Bennington and Brattleboro, Vermont; and Graham, 
Texas. Facilities located in Oakland, Pasadena and Pleasanton, California, 
are operated under long-term leases. The principal operating facilities of 
Denver Newspapers are located in Denver, Fort Morgan, Lamar and Sterling, 
Colorado. Denver Newspapers also leases certain facilities in Denver, 
Colorado.

     The Company's management believes that all of its properties are 
generally well maintained, in good condition and suitable for current 
operations. All of the Company's equipment is adequately insured.

ITEM 3. LEGAL PROCEEDINGS

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

REGULATION AND ENVIRONMENTAL MATTERS

     Substantially all of the Company's facilities are subject to federal, 
state and local laws concerning, among other things, emissions to the air, 
water discharges, handling and disposal of wastes or otherwise relating to 
protection of the environment. Compliance with these laws has not had, and 
management does not expect it to have, a material effect upon the capital 
expenditures, net income or competitive position of the Company. 
Environmental laws and regulations and their interpretation, however, have 
changed rapidly in recent years and may continue to do so in the future. 
Environmental Assessment Reports of the Company's properties have identified 
historic activities on certain of these properties, as well as current and 
historic uses of properties in surrounding areas, which may affect the 
Company's properties and require further study or remedial measures. No 
material remedial measures are currently anticipated or planned by the 
Company or required by regulatory authorities with respect to the Company's 
properties. However, no assurance can be given that existing Environmental 
Assessment Reports reveal all environmental liabilities, that any prior owner 
of the Company's properties did not create a material environmental condition 
not known to the Company, or that a material environmental condition does not 
otherwise exist as to any such property.

     Subsidiaries of the Company which deliver newspapers by second-class 
mail are required to obtain permits from, and to file an annual statement of 
ownership with, the United States Postal Service.

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

     None.

                                       14
<PAGE>

                                     PART II

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

     The Class B common stock has no established trading market and is not 
widely held. As of August 25, 1998, there were 10 holders of record of the 
Company's Class B common stock.

     The Company's Class D, GSI and N common stock is not registered; 
therefore, no public market exists for these classes of common stock. On 
August 25, 1998, the Class D, GSI and N common stock had 7, 11, 10 and 12 
holders of record, respectively.

     ANI has never paid cash dividends on its common stock and does not 
intend to pay any cash dividends on its common stock in the foreseeable 
future. The Company's long-term debt contains covenants which, among other 
things, restrict the payment of dividends by ANI to its stockholders. In 
addition, as a holding company, ANI's ability to pay cash dividends will be 
dependent on the receipt of dividends or other payments from its 
subsidiaries. Certain debt agreements of subsidiaries maturing prior to 
July 1, 1999, prohibit such subsidiaries from paying dividends to ANI. 
Other debt agreements of the subsidiaries restrict the subsidiaries from paying
dividends to ANI prior to July 1, 1999, and then only to the extent the 
Company achieves certain cash flow levels.

                                       15
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                      FISCAL YEARS ENDED JUNE 30,
                                                --------------------------------------------------------------------
                                                   1998           1997         1996            1995           1994            
                                                ----------     ----------    ---------      ----------    ----------
                                                                    (In thousands, except per share data)
<S>                                             <C>            <C>           <C>            <C>           <C>
INCOME STATEMENT DATA(a):
Revenues
   Advertising..........................        $ 331,999      $ 242,914     $ 197,954      $ 179,268     $ 159,653
   Circulation..........................           67,924         48,451        39,930         30,517        25,198
   Other................................           14,383         11,537         7,546          3,260         1,792
                                                ----------     ----------    ---------      ----------    ----------
Total Revenues..........................          414,306        302,902       245,430        213,045       186,643

Cost of Sales...........................          145,412        106,939        98,469         79,098        68,531
Selling, General and Administrative.....          168,092        125,234       100,290         88,889        79,217
Management Fees.........................            2,757          2,205         2,008          1,666         1,552
Depreciation and Amortization...........           38,857         24,689        21,841         18,709        19,900
Interest Expense .......................           63,991         48,370        41,932         38,611        25,982
Gain on Sale of Newspaper...............           31,829         30,575         8,291          4,153         6,536
Income (Loss) in Unconsolidated
  Subsidiary............................            5,558          9,287         2,541          5,748         8,646

Income (Loss) Before Income Taxes,
   Cumulative Effect of Accounting
   Change and Extraordinary gain........           21,198         27,332       (12,789)        (5,436)      (13,260)
Net Income (Loss).......................           16,406         17,494       (10,932)        (8,293)      (10,749)

Earnings Per Share......................        $    7.09      $    7.56     $   (4.72)     $   (3.58)    $   (7.54)

OTHER FINANCIAL DATA:
Capital Expenditures....................        $   9,683      $   8,836     $   8,079      $   4,284     $   3,380
Cash Flow from:
  Operating Activities..................           55,350         31,238         8,658         22,876         7,039
  Investing Activities..................         (207,026)      (148,657)        6,900          1,255       (15,840)
  Financing Activities..................          143,731        121,748       (28,226)       (15,742)        9,305
EBITDA(b)...............................           98,045         68,524        44,663         43,392        37,343

BALANCE SHEET DATA:
Total Assets............................        $ 659,258      $ 428,560     $ 245,665      $ 252,926     $ 251,158
Long-Term Debt  and Capital
   Leases...............................          667,589        482,401       325,700        324,442       322,937
Other Long-Term Liabilities and
   Obligations..........................            6,963          5,488         8,101          5,042         3,852
Total Shareholders' Deficit.............          (97,617)      (114,023)     (131,517)      (120,585)     (112,292)

</TABLE>

---------------------------------
(FOOTNOTES ON THE FOLLOWING PAGE)

                                       16
<PAGE>

(a) Revenues and operating expenses are affected by the following acquisition 
    and disposition transactions. The revenue numbers provided below are from 
    the actual fiscal year results of operations of the respective newspapers 
    since the date of acquisition or prior to their disposition.

    (I)     On May 31, 1994, a subsidiary of the Company purchased the assets 
            of THE EXPRESS-TIMES, which contributed $1.5 million to fiscal 
            1994 revenues of the Company.

    (II)    On June 27, 1994, a subsidiary of the Company closed the 
            YPSILANTI PRESS, a daily newspaper published in Ypsilanti, 
            Michigan, and sold its circulation list for $9.0 million. The 
            sale resulted in a pre-tax gain of approximately $6.5 million. 
            This newspaper contributed approximately $4.3 million in fiscal 
            1993 and $4.1 million of revenues in fiscal 1994 prior to its 
            disposition.

    (III)   On August 1, 1994, a subsidiary of the Company sold substantially 
            all the assets used in the publication of the BRISTOL PRESS and 
            three weekly newspapers distributed in and around Bristol, 
            Connecticut for $14.5 million. The sale resulted in a pre-tax 
            gain of approximately $4.2 million. This newspaper contributed 
            $6.2 million of revenue in fiscal 1994 and $0.5 million of 
            revenue prior to its sale in fiscal 1995.

    (IV)    On November 18, 1994, a subsidiary of the Company acquired 
            substantially all the assets used in the publication of the 
            GLOUCESTER COUNTY TIMES and TODAY'S SUNBEAM, daily newspapers 
            located in Woodbury and Salem, New Jersey, respectively, for 
            $10.9 million. These newspapers contributed $8.4 million of 
            revenues to the Company in fiscal 1995.

    (V)     On August 31, 1995, the Company acquired substantially all the 
            assets used in the publication of THE BERKSHIRE EAGLE, BENNINGTON 
            BANNER and BRATTLEBORO REFORMER, daily newspapers published in 
            Pittsfield, Massachusetts; Bennington and Brattleboro, Vermont, 
            respectively, for approximately $34.6 million. These newspapers 
            contributed approximately $21.6 million of revenues in fiscal 
            year 1996.

    (VI)    On March 10, 1996, the Company acquired substantially all the 
            assets used in the publication of the SAN MATEO COUNTY TIMES, a 
            daily newspaper, and five weekly newspapers published in San 
            Mateo County, California, for approximately $15.0 million. These 
            newspapers contributed approximately $4.0 million of revenue to 
            the Company in fiscal 1996.

    (VII)   On May 1, 1996, the Company sold the common stock of the 
            Johnstown Tribune Publishing Company which publishes THE 
            TRIBUNE-DEMOCRAT and two weekly newspapers distributed in and 
            around Johnstown, Pennsylvania, for $50.6 million. The sale 
            resulted in a pre-tax gain of approximately $8.3 million. These 
            newspaper contributed approximately $14.9 million of revenues in 
            fiscal 1996 prior to its sale and approximately $17.4 million in 
            fiscal 1995. In connection with the sale of the Johnstown Tribune 
            Publishing Company described above, the Company acquired the 
            NORTH ADAMS TRANSCRIPT and the BRIDGETON NEWS, daily newspapers 
            published in North Adams, Massachusetts, and Bridgeton, New 
            Jersey, respectively. These newspapers contributed revenue of 
            approximately $1.2 million in fiscal 1996.

    (VIII)  On October 31, 1996, the Company acquired substantially all the 
            assets used in the publication of the PASADENA STAR-NEWS, SAN 
            GABRIEL VALLEY TRIBUNE, WHITTIER DAILY NEWS, TIMES-STANDARD and 
            THE EVENING SUN, daily newspapers distributed primarily in 
            Pasadena, West Covina, Whittier and Eureka, California, and 
            Hanover, Pennsylvania, respectively, and seven weekly newspapers 
            distributed in and around these same cities, for a total of 
            approximately $130.0 million. These newspapers contributed $45.9 
            million of revenue to the Company in fiscal year 1997.

    (IX)    On February 13, 1997, the Company sold substantially all the 
            assets used in the publication of the POTOMAC NEWS and two weekly 
            publications for $48.0 million in cash plus an adjustment for 
            working capital. The Company recognized a pre-tax gain on the 
            sale of approximately $30.6 million, net of selling expenses, in 
            its third fiscal quarter. These newspapers contributed 
            approximately $7.5 million of revenues in fiscal year 1997 prior 
            to their sale and approximately $12.0 million in fiscal year 1996.

    (X)     On February 28, 1997, the Company acquired substantially all the 
            assets used in the publication of the SENTINEL & ENTERPRISE, 
            LEBANON DAILY NEWS and THE DAILY NONPAREIL, daily newspapers 
            located in Fitchburg and Leominster, Massachusetts; Lebanon, 
            Pennsylvania; and Council Bluffs, Iowa, respectively, and five 
            weekly newspapers distributed in and around the same cities, for 
            a total of approximately $51.2 million in cash. These newspapers 
            combined contributed approximately $7.9 million of revenue to the 
            Company in fiscal year 1997.

    (XI)    On July 31, 1997, the Company acquired substantially all the 
            assets used in the publication of THE SUN, an evening newspaper 
            published in Lowell, Massachusetts. The assets were purchased for 
            approximately $60.8 million. THE SUN contributed $22.3 million of 
            revenue in fiscal 1998.

    (XII)   On December 5, 1997, the Company sold substantially all the 
            assets used in the publication of the NORTH JERSEY HERALD & NEWS 
            and sixteen weekly publications for $43.0 million in cash plus an 
            adjustment for working capital. The Company recognized a pre-tax 
            gain on the sale of approximately $31.8 million, net of selling 
            expenses. These newspapers contributed $16.2 million of revenues 
            prior to the sale and $36.2 million in fiscal year 1997.

    (XIII)  On December 16, 1997, the Company acquired substantially all the 
            assets used in the publication of the PRESS-TELEGRAM, a daily 
            newspaper published in Long Beach, California, for approximately 
            $38.2 million in cash. Proceeds from the sale of the NORTH JERSEY 
            HERALD & NEWS were used to fund the acquisition. This newspaper 
            contributed approximately $22.7 million of revenue in fiscal year 
            1998.

    (XIV)   On January 29, 1998, the Company acquired substantially all the 
            assets used in the publication of the DAILY NEWS, a daily 
            newspaper published in the San Fernando Valley of Los Angeles, 
            California, for approximately $130.0 million. This newspaper 
            contributed approximately $36.9 million of revenue to the Company 
            in fiscal year 1998.

    (FOOTNOTES CONTINUED ON THE FOLLOWING PAGE)

                                       17
<PAGE>

(FOOTNOTES FROM PROCEEDING PAGE)

    (XV)    On May 1, 1998, the Company acquired substantially all the assets 
            used in the publication of the VALLEY NEWS TODAY, a morning 
            newspaper published five times a week in Shenandoah Iowa, and 
            seven weekly publications distributed primarily in Shenandoah and 
            Dennison, Iowa. These assets were purchased for approximately 
            $5.1 million in cash, plus covenants not to compete with a 
            discounted value of $0.6 million. These newspapers contributed 
            approximately $0.3 million of revenue to the Company in fiscal 
            year 1998.

    (XVI)   On May 11, 1998 the Company acquired substantially all the assets 
            used in the publication of THE TRI-CITY WEEKLY, a weekly 
            newspaper published in Eureka, California for approximately $2.6 
            million in cash, plus a covenant not to compete with a discounted 
            value of $0.5 million. This newspaper contributed approximately 
            $0.2 million of revenue to the Company if fiscal year 1998.

(b) EBITDA represents total revenues less cost of sales, selling, general and 
    administrative expense and management fees charged by MNG. Although 
    EBITDA is not a measure of performance calculated in accordance with 
    GAAP, the Company believes that EBITDA is an indicator and measurement of 
    its leverage capacity and debt service ability. EBITDA should not be 
    considered as a measure of profitability, liquidity or as an alternative 
    to net income, cash flows generated by operating, investing or financing 
    activities or other financial statement data presented in the Company's 
    Consolidated Financial Statements or any other GAAP measure as an 
    indicator of the Company's performance.

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

INTRODUCTION

     The following analysis of the financial condition and results of 
operations of the Company should be read in conjunction with the Selected 
Financial Data and the Company's Consolidated Financial Statements. ANI is a 
holding company and has no newspaper operations or sources of income of its 
own. ANI's newspapers are operated through Garden State's indirect 
subsidiaries and its unconsolidated subsidiary, Denver Newspapers.

OVERVIEW

     The Company's Garden State subsidiary is in the business of owning and 
operating market dominant daily and weekly suburban newspapers. Denver 
Newspapers operates THE DENVER POST and several smaller daily and weekly 
newspapers. The Company's newspapers derive their revenues primarily from 
advertising and circulation. The Company's primary operating expenses (before 
depreciation and amortization) are employee salaries, newsprint, marketing, 
and distribution.

     Since its inception in 1985, the Company has made leveraged 
acquisitions. A majority of the value of the assets acquired was allocated to 
intangible assets, principally subscriber accounts and goodwill, which 
management believes are generally the most valuable assets of a newspaper. As 
a result of the amortization expense associated with these intangible assets, 
as well as the interest expense associated with acquisition indebtedness, 
debt fees and make-whole premiums, and historical dividends in connection 
with preferred stock that was redeemed, the Company has accumulated a 
significant deficit since its inception. However, since fiscal 1996 the 
Company has reduced the deficit by approximately $23.0 million.

     Since July 1, 1995, the Company has completed several strategic 
transactions that have affected its financial condition and results of 
operations. The following is a summary of these transactions.

     FISCAL 1998 TRANSACTIONS

     On May 11, 1998, a subsidiary of the Company acquired substantially all 
the assets used in the publication of THE TRI-CITY WEEKLY, a weekly newspaper 
published in Eureka, California for approximately $2.6 million in cash plus a 
covenant not to compete with the prior owners with a discounted value of 
approximately $0.5 million.

     On May 1, 1998, a subsidiary of the Company acquired substantially all 
the assets used in the publication of the VALLEY NEWS TODAY, a morning 
newspaper published five times a week Shenandoah Iowa, and seven weekly 
publications distributed primarily in and around Shenandoah and Dennison, 
Iowa. These assets were purchased for approximately $5.1 million in cash plus 
an adjustment for working capital and covenant not to compete with the prior 
owners, with a discounted value of approximately $0.6 million.

                                       18
<PAGE>

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

     On January 29, 1998, a subsidiary of the Company acquired substantially 
all the assets used in the publication of the DAILY NEWS, a daily newspaper 
published in the San Fernando Valley of Los Angeles, California, for 
approximately $130.0 million, which included working capital of approximately 
$2.0 million.

     On December 16, 1997, a subsidiary of the Company acquired substantially 
all the assets used in the publication of the PRESS-TELEGRAM, a daily 
newspaper published in Long Beach, California, for approximately $38.2 
million in cash, plus an adjustment for working capital. Proceeds from the 
sale of the North Jersey Herald & News (discussed below) were used to fund 
the acquisition.

     On July 31, 1997, a subsidiary of the Company acquired substantially all 
the assets used in the publication of THE SUN, an evening newspaper published 
in Lowell, Massachusetts. The assets were purchased for $49.0 million in cash 
plus a covenant not to compete with the prior owners with a discounted value 
of approximately $11.8 million.

     On December 5, 1997, a subsidiary of the Company sold substantially all 
the assets used in the publication of the NORTH JERSEY HERALD & NEWS and 
sixteen weekly publications for $43.0 million in cash plus an adjustment for 
working capital. The Company recognized a pre-tax gain on the sale of 
approximately $31.8 million, net of selling expenses.

     FISCAL 1997 TRANSACTIONS

     On February 28, 1997, a subsidiary of the Company acquired substantially 
all the assets used in the publication of the SENTINEL & ENTERPRISE, LEBANON 
DAILY NEWS and THE DAILY NONPAREIL, daily newspapers located in Fitchburg and 
Leominster, Massachusetts; Lebanon, Pennsylvania; and Council Bluffs, Iowa, 
respectively, and five weekly newspapers distributed in and around the same 
cities.

     On February 13, 1997, a subsidiary of the Company sold substantially all 
the assets used in the publication of the POTOMAC NEWS and two weekly 
publications. The Company recognized a pre-tax gain on the sale of 
approximately $30.6 million, net of selling expenses, in its third fiscal 
quarter.

     On October 31, 1996, a subsidiary of the Company acquired substantially 
all of the assets used in the publication of the PASADENA STAR-NEWS, SAN 
GABRIEL VALLEY TRIBUNE, WHITTIER DAILY NEWS, TIMES-STANDARD and THE EVENING 
SUN, daily newspapers distributed primarily in Pasadena, West Covina, 
Whittier and Eureka, California, and Hanover, Pennsylvania, respectively, and 
seven weekly newspapers distributed in and around these same cities.

     FISCAL 1996 TRANSACTIONS

     On May 1, 1996, a subsidiary of the Company sold the common stock of the 
Johnstown Tribune Publishing Company which publishes THE TRIBUNE-DEMOCRAT, 
and two weekly newspapers located in Johnstown, Pennsylvania. The sale 
resulted in a pre-tax gain of approximately $8.3 million in fiscal 1996. In 
conjunction with the sale, the Company also acquired the assets used in the 
publication of the NORTH ADAMS TRANSCRIPT and the BRIDGETON NEWS, daily 
newspapers published in North Adams, Massachusetts, and Bridgeton, New 
Jersey, respectively.

     On March 10, 1996, a subsidiary of the Company acquired substantially 
all the assets used in the publication of the SAN MATEO COUNTY TIMES, a daily 
newspaper, and five weekly newspapers published in San Mateo County, 
California.

     On August 31, 1995, a subsidiary of the Company purchased substantially 
all the assets used in the publication of THE BERKSHIRE EAGLE, BRATTLEBORO 
REFORMER and BENNINGTON BANNER, daily newspapers published in Pittsfield, 
Massachusetts; Brattleboro and Bennington, Vermont, respectively, and the 
MANCHESTER JOURNAL, a weekly newspaper published in Manchester, Vermont (the 
"New England Newspapers" acquisition).

                                       19
<PAGE>

RESULTS OF OPERATIONS

     Set forth below is certain summary historical financial data for fiscal 
1998, 1997 and 1996, in each case including the percentage change between 
fiscal years.

<TABLE>
<CAPTION>
                                                                    SUMMARY HISTORICAL FINANCIAL DATA
                                                                       (DOLLARS IN THOUSANDS)

                                              Fiscal Years Ended June 30,           Fiscal Years Ended June 30,
                                           ----------------------------------      ------------------------------
                                             1998          1997        1996        1998 vs.1997     1997 vs.1996
                                           --------      --------    --------      ------------     ------------
<S>                                        <C>           <C>         <C>           <C>              <C>
Total Revenues.....................        $414,306      $302,902    $245,430          36.8%            23.4%

Cost of Sales......................         145,412       106,939      98,469          36.0              8.6
Selling, General and
  Administrative...................         168,092       125,234     100,290          34.2             24.9
Management Fees....................           2,757         2,205       2,008          25.0              9.8
Depreciation & Amortization........          38,857        24,689      21,841          57.4             13.0
Interest Expense...................          63,991        48,370      41,932          32.3             15.3
Other..............................          11,386         7,995       4,511          42.4             77.2
                                           --------      --------    --------      ------------     ------------
   Total Costs and Expenses........         430,495       315,432     269,051          36.5             17.2

Income in Unconsolidated
   Subsidiary......................           5,558         9,287       2,541         (40.2)           265.5

Income (Loss)......................          16,406        17,494     (10,932)         (6.2)              (a)

</TABLE>
-------------------------
(a)  not meaningful


COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1998 AND 1997

REVENUES

     Revenues increased $111.4 million or 36.8% in fiscal year 1998 as 
compared to fiscal year 1997. The increase in revenue was primarily 
attributable to the October 31, 1996 acquisition of the PASADENA STAR NEWS, 
SAN GABRIEL VALLEY TRIBUNE, WHITTIER DAILY NEWS, TIMES-STANDARD, and THE 
EVENING SUN; February 28, 1997, acquisition of the SENTINEL & ENTERPRISE, 
LEBANON DAILY NEWS and THE DAILY NONPAREIL; the July 31, 1997 acquisition of 
THE Sun; the December 16, 1997 acquisition of the PRESS-TELEGRAM; the 
January 29, 1998 acquisition of the DAILY NEWS, and the May 1998 acquisitions 
previously discussed. Combined, the acquisitions discussed above increased 
revenues approximately $128.2 million in fiscal year 1998. These revenue 
increases were partially offset by a $27.6 million decline in revenue 
resulting from the sale of the POTOMAC NEWS and the sale of the NORTH JERSEY 
HERALD & NEWS on February 13, 1997 and December 5, 1997, respectively. 
Excluding acquisition and disposition transactions, the Company's remaining 
newspaper operations ("same newspaper basis") combined posted a $10.8 million 
or 5.3% increase in operating revenues for fiscal year 1998. Advertising 
revenues at these newspapers increased by approximately 6.6%, driven by 
strong classified and national revenue. Circulation and other revenue 
combined on a same newspaper basis decreased by approximately $0.2 million.

COST OF SALES

     Cost of sales increased $38.5 million or 36.0% in fiscal year 1998 
compared to fiscal 1997. The aforementioned acquisitions caused cost of sales 
to increase approximately $44.2 million in fiscal year 1998. However, this 
increase was offset in part by a $9.7 million decrease in cost of sales 
resulting from the sale of the POTOMAC NEWS and NORTH JERSEY HERALD & NEWS. 
On a same newspaper basis, cost of sales increased approximately $4.0 million 
or 5.4%, primarily associated with increased production cost, primarily 
associated with advertising lineage increases.

                                       20
<PAGE>

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1998 AND 1997 (CONTINUED)

SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative ("SG&A") expenses increased $42.9 
million or 34.2% in fiscal year 1998 as compared to fiscal year 1997. The 
aforementioned acquisitions resulted in SG&A expense increases of $54.5 
million; however, this was in part offset by a $14.6 million reduction in 
SG&A expense associated with the sale the POTOMAC NEWS and the NORTH JERSEY 
HERALD & NEWS. On a same newspaper basis, SG&A expense increased $3.0 million 
or 3.8%. The increase in SG&A expense is associated with increases in 
advertising and circulation expenditures, which were primarily related to 
ongoing efforts to increase advertising lineage and paid circulation.

OTHER EXPENSE

     Other expense increased $3.4 million. The majority of the increase is 
attributable to the fiscal year 1998 charge to write off $7.3 million of fees 
and other costs associated with Garden State issuing $300.0 million of Senior 
Subordinated Notes. The increase was partially offset by $4.4 million of fees 
and other cost associated with the Garden State Bank Credit Agreement entered 
into in October, 1996.

DEPRECIATION AND AMORTIZATION

     Depreciation and amortization increased $14.2 million in fiscal year 
1998 as compared to the same period of fiscal year 1997. The aforementioned 
acquisitions caused the majority of the increase in depreciation and 
amortization expense; however, the increase was in part offset by a $0.8 
million reduction in depreciation and amortization expense associated with 
the sale of the POTOMAC NEWS and the NORTH JERSEY HERALD & NEWS.

INTEREST EXPENSE

     Interest expense increased $15.6 million in fiscal year 1998 as compared 
to the same period of fiscal year 1997. Interest expense increased primarily 
as a result of a $164.4 million increase in average debt outstanding, all of 
which is associated with acquisitions. This increase was partially offset by 
a 49 basis point decrease in the average interest rate, mainly associated 
with the refinancing of the Company's 10.89% Notes on October 31, 1996, and a 
reduction in the borrowing spread on bank debt, which was offset in part by 
an increase associated with the replacement of bank debt with the 8.75% 
Senior Subordinated Notes issued on October 1, 1997 and February 12, 998.

DENVER NEWSPAPERS - UNCONSOLIDATED SUBSIDIARY

     Net income applicable to common stock of Denver Newspapers decreased 
$3.7 million in fiscal 1998 compared to fiscal 1997. The decrease in net 
income applicable to common stock at Denver Newspapers was primarily the 
result of a $22.4 million or 12.9% increase in operating expenses that was 
only partially offset by the $13.5 million or 6.6% increase in revenue during 
the same period. The increase in operating expenses were the result of The 
Denver Post expanding its State news coverage by adding eleven new regional 
news bureaus in the third quarter of fiscal year 1998, increased production 
cost associated with the start-up of a new press line in late November 1997, 
higher newsprint expenses associated with increased consumption due to 
circulation and advertising lineage gains and slightly higher average 
newsprint prices, and the start-up in the second quarter of fiscal year 1998 
of a total market coverage ("TMC") product in the form of a mailed 
advertising program which is mailed to non-subscribers. Due to the start-up 
nature of the TMC, expenses exceed revenues.

                                       21
<PAGE>

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1998 AND 1997 (CONTINUED)

NET INCOME

     ANI recorded an adjusted loss of approximately $8.1 million in fiscal 
year 1998 after excluding the effect of the $31.8 million pre-tax gain on the 
sale of the NORTH JERSEY HERALD & NEWS and $7.3 million of debt issuance cost 
compared to an adjusted net income of $0.1 million in fiscal year 1997, after 
excluding $4.4 million of debt issuance cost, the $8.8 million extraordinary 
loss and the $30.6 million pre-tax gain on the sale of the POTOMAC NEWS. The 
increase in the adjusted loss is primarily attributable to a $15.6 million 
increase in interest expense, $3.7 million decrease in the equity pick-up 
from Denver Newspapers and the $3.7 million increase in tax expense, the 
majority of which is associated with the sale of the NORTH JERSEY HERALD & 
NEWS. These increases were offset in part by a $15.4 million increase in 
operating profit at Garden State.

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND 1996

REVENUES

     Revenues increased $57.5 million or 23.4% in fiscal year 1997 as 
compared to fiscal year 1996. The increase in revenue was attributable to the 
New England Newspapers acquisition; the March 1996 acquisition of the SAN 
MATEO COUNTY TIMES ; the April 30, 1996, acquisition of the NORTH ADAMS 
TRANSCRIPT and the BRIDGETON NEWS; the October 31, 1996, acquisition of the 
PASADENA STAR-NEWS, SAN GABRIEL VALLEY TRIBUNE, WHITTIER DAILY NEWS, 
TIMES-STANDARD and THE EVENING SUN; and the February 28, 1997, acquisition of 
the SENTINEL & ENTERPRISE, LEBANON DAILY NEWS and THE DAILY NONPAREIL. 
Combined, the acquisitions discussed above increased revenues approximately 
$78.5 million in fiscal year 1997. These revenue increases were partially 
offset by a $19.4 million decline in revenue resulting from the sale of the 
Johnstown Tribune Publishing Company on May 1, 1996, and the POTOMAC NEWS on 
February 13, 1997. On a same newspaper basis the Company posted a $1.6 
million decrease in operating revenues for fiscal year 1997. However, 
excluding Alameda Newspaper Group (without San Mateo), on a same newspaper 
basis the Company posted a $3.6 million or 3.3% increase in operating 
revenues. The increase in operating revenue at these newspapers was primarily 
attributable to a combined 9.6% and 2.2% gain in classified and retail 
revenue, respectively. Without the acquisition of the SAN MATEO COUNTY TIMES, 
year-over-year comparisons of the Alameda Newspaper Group continued to be 
negatively affected by declines in circulation revenue caused by increased 
use of discounts and a significant number of out-of-business accounts (loss 
of certain accounts as a result of store mergers or bankruptcies); however, 
such comparisons turned positive late in the fourth quarter of fiscal 1997 
and showed substantial improvement throughout fiscal 1998.

COST OF SALES

     Cost of sales increased $8.0 million or 8.1% in fiscal year 1997 
compared to fiscal 1996. The aforementioned acquisitions caused cost of sales 
to increase approximately $25.8 million in fiscal year 1997. However, this 
increase was offset in part by a $7.0 million decrease in cost of sales 
resulting from the sale of the Johnstown Tribune Publishing Company and the 
POTOMAC NEWS. On a same newspaper basis, cost of sales decreased 
approximately $10.6 million or 13.4%. The decrease in cost of sales on a same 
newspaper basis was almost entirely the result of a 25% decrease in the 
average cost of newsprint. Excluding newsprint, cost of sales on a same 
newspaper basis increased approximately $0.4 million or 1.0% in fiscal year 
1997.

SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative ("SG&A") expenses increased $25.4 
million or 25.3% in fiscal year 1997 as compared to fiscal year 1996. The 
aforementioned acquisitions resulted in SG&A expense increases of $29.3 
million; however, this was in part offset by a $6.1 million reduction in SG&A 
expense associated with the sale of the Johnstown Tribune Publishing Company 
and the POTOMAC NEWS. On a same newspaper basis, SG&A expense increased $2.2 
million or 2.4%. The increase in SG&A expense is associated with increases in 
advertising and circulation expenditures, which were primarily related to 
ongoing efforts to increase advertising lineage and paid circulation.

                                       22
<PAGE>

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND 1996 (CONTINUED)

OTHER EXPENSE

     Other expense, net, increased $3.5 million. The majority of the increase 
is attributable to a second quarter fiscal year 1997 charge to write off 
approximately $4.4 million of fees and other costs associated with the Garden 
State Bank Credit Agreement entered into on October 31, 1996. The increase 
was partially offset by $1.1 million of financing costs recorded in the same 
period of fiscal year 1996 associated with the New England Newspapers 
acquisition.

DENVER NEWSPAPERS - UNCONSOLIDATED SUBSIDIARY

     Net income applicable to common stock of Denver Newspapers increased 
$11.2 million in fiscal 1997 compared to fiscal 1996. The increase in fiscal 
1997 was primarily the result of a $17.4 million increase in operating 
profit, offset by a $6.9 million increase in tax expense, as compared to the 
prior year. The increase in operating profit was primarily attributable to a 
$21.4 million or 11.7% increase in revenues and $8.9 million decrease in 
newsprint expense, which was offset by increased operating cost, primarily 
associated with higher sales and circulation at THE DENVER POST and the 
inclusion of a full year's operations of Eastern Colorado (acquired May 1, 
1996). The majority of the increase in operating revenues is attributable to 
a 11% growth in advertising lineage, which was the result of an increase in 
market size as well as market share at THE DENVER POST. Newsprint expense 
decreased at THE DENVER POST primarily as a result of a 24% decrease in the 
average cost of newsprint consumed, which was partially offset by a 11% 
increase in consumption. Denver Newspapers' acquisition of three daily and 
three paid weekly newspapers in Eastern Colorado accounted for approximately 
3.4% of the increase in net income applicable to common stock.

NET INCOME

     ANI recorded net income of approximately $17.5 million in fiscal 1997; 
after excluding the pretax gain on the sale of the POTOMAC NEWS of $30.6 
million, the effect of the $4.4 million charge described above, and the $8.8 
million extraordinary loss from the prepayment of Garden State's Senior 
Notes, ANI would have recorded an adjusted net income of $0.1 million, as 
compared to an adjusted net loss of $17.8 million in fiscal year 1996, after 
excluding the gain on the sale of the Johnstown Tribune Publishing Company, 
the write-off of fees and other costs associated with a Garden State credit 
facility, and start-up costs associated with the acquisition and integration 
of the SAN MATEO COUNTY TIMES. The increase in adjusted net income is 
primarily attributable to a $21.0 million increase in operating profit and a 
$6.7 million increase in the equity pick-up from Denver Newspapers offset by 
a $6.4 million increase in interest expense, primarily associated with 
increased debt related to 1997 acquisitions and a $2.9 million reduction in 
tax benefits.

LIQUIDITY AND CAPITAL RESOURCES

     The principal sources of liquidity for the Company and its subsidiaries 
are existing cash and other working capital, cash flow provided from their 
operating activities and the borrowing capacity under revolving credit 
agreements. The Company's operations, consistent with the newspaper industry, 
require little investment in inventory, as less than 30 days of newsprint is 
generally maintained on hand. The Company may, from time to time increase its 
newsprint inventories in anticipation of price increases. In general, the 
Company's receivables have been collected on a timely basis.

JUNE 30, 1998 COMPARED TO JUNE 30, 1997

     Net cash flows from operating activities were approximately $55.4 
million and $31.2 million for fiscal years ended June 30, 1998 and 1997, 
respectively. The $24.2 million increase in cash flow from operating 
activities was primarily the result of a $29.5 million increase in operating 
profit, excluding depreciation and amortization expense, for the fiscal year 
1998, compared to the fiscal year 1997, combined with a $9.2 million increase 
in the change in operating assets and liabilities, which were offset by a 
$12.5 million increase in cash interest expense.

                                       23
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

JUNE 30, 1998 COMPARED TO JUNE 30, 1997 (CONTINUED)

     Net cash flows from investing activities were ($207.0) million and 
($148.7) million for fiscal years ended June 30, 1998 and 1997, respectively. 
The $58.3 million change was primarily the result of the Company spending a 
net $197.3 million on acquisitions in fiscal year 1998 compared to $140.0 
million in fiscal year 1997.

     Net cash flows from financing activities were $143.7 million and $121.7 
million for fiscal years ended June 30, 1998 and 1997, respectively. The 
change of approximately $22.0 million was primarily attributable to the 
Company borrowing a net $151.0 million in fiscal year 1998, compared to the 
net borrowing of $135.7 million in fiscal year 1997, the majority of which 
was issued in conjunction with the previously discussed acquisitions in each 
fiscal year. A $6.7million reduction in debt issuance and repurchase premium 
also contributed to the increase.

JUNE 30, 1997 COMPARED TO JUNE 30, 1996

     Net cash flows from operating activities were approximately $31.2 
million and $8.7 million for fiscal years ended June 30, 1997 and 1996, 
respectively. The $22.5 million increase in cash flow from operating 
activities was primarily the result of a $23.9 million increase in operating 
profit, before depreciation and amortization expense, for the fiscal year 
ended June 30, 1997, compared to the fiscal year 1996, which was partially 
offset by a $6.4 million increase in interest expense for the same period.

     Net cash flows from investing activities were ($148.7) million and $6.9 
million for fiscal years ended June 30, 1997 and 1996, respectively. The 
$155.6 million change was primarily the result of funds totaling 
approximately $187.6 million used to acquire the PASADENA STAR-NEWS, WHITTIER 
DAILY REVIEW, SAN GABRIEL VALLEY TRIBUNE, TIMES-STANDARD, THE EVENING SUN, 
THE SENTINEL & ENTERPRISE, LEBANON DAILY NEWS and THE DAILY NONPAREIL and 
certain other weekly newspapers, in fiscal year 1997 less proceeds received 
from the sale of the POTOMAC NEWS and other assets of $47.8 million, compared 
to approximately $15.0 million received in fiscal year 1996 related to net 
acquisition and disposition activity. Capital expenditures increased by 
approximately $0.8 million primarily as a result of the previously announced 
press upgrade in Easton and new front-end systems in Potomac and Las Cruces.

     Net cash flows from financing activities were $121.7 million and ($28.2) 
million for fiscal years ended June 30, 1997 and 1996, respectively. The 
change of approximately $149.9 million was primarily attributable to the 
Company borrowing approximately $133.0 million related to net acquisition and 
disposition activity in fiscal 1997 as compared to paydowns of approximately 
$15.0 million related to net acquisition and disposition activity and $13.0 
million of paydowns in the normal course in fiscal 1996. In addition, the 
Company paid make-whole premiums and other financing fees and expenses of 
approximately $14.0 million in fiscal 1997 associated with acquisitions and 
the prepayment of its 10.89% Senior Notes compared to financing fees and 
expenses of $1.1 million paid in fiscal 1996.

CAPITAL EXPENDITURES

     The Company has a capital expenditure plan (not including business 
acquisitions) which includes normal maintenance capital expenditures of 
approximately $1.8 million for fiscal 1999. In addition, the plan anticipates 
additional expenditures during fiscal 1999 of $5.1 million, primarily 
associated with business and front end computer system year 2000 upgrades, a 
press and phone room expansion at the Los Angeles Newspaper Group necessary 
to take advantage of certain clustering efficiencies, and integration and 
consolidation of certain production operations at Alameda Newspaper Group to 
improve production efficiencies. Management reviews the capital expenditure 
plan periodically and modifies it as required to meet the Company's current 
business needs. Capital expenditures related to these projects are expected 
to be funded either through available cash or borrowings under the Garden 
State Bank Credit Agreement.

                                       24
<PAGE>

JUNE 30, 1997 COMPARED TO JUNE 30, 1996 (CONTINUED)

LIQUIDITY

     Giving effect to the issuance of $300.0 million of 8.75% Senior 
Subordinated Notes and the corresponding paydown of bank debt, Garden State 
and its subsidiaries had a combined $242.3 million available for future 
borrowings, net of approximately $4.7 million in outstanding letters of 
credit at June 30, 1998. Approximately $141.0 million of the availability 
under the Bank Credit Agreement is available solely for future business 
acquisitions.

     Subsequent to year end Garden State purchased $36.0 million of its 12% 
Senior Subordinated Notes. Beginning July 1, 1999, the Company can call its 
13.25% Senior Discount Debenture at 106.75% and Garden State can call its 
then remaining outstanding 12.0% Senior Subordinated Secured Notes at 107.5%. 
The Company and Garden State currently expect to call the 13.25% Senior 
Discount Debentures and the 12.0% Senior Subordinated Notes, at the first 
call date, as a result of anticipated annual interest savings in excess of 
$14.0 million. The Company anticipates that it and/or Garden State will enter 
into a new Bank Credit Agreement, proceeds of which would be used to fund the 
call price of the bonds.

     The purchase of Garden State's Class A common stock and the Series A and 
C preferred stock by ANI in May 1994 was financed with debt issued by ANI. 
The repayment of ANI's debt, which does not have scheduled interest payments 
until January 1, 2000, is in part dependent upon Garden State's and/or Denver 
Newspapers' ability to pay dividends to ANI. Garden State's and Denver 
Newspapers' debt agreements prohibit the payment of dividends to the Company 
prior to June 30, 1999. The ANI Senior Discount Debentures restrict the 
Company's ability to incur additional debt and pay dividends.

     The Company currently generates sufficient cash flow to meet its capital 
expenditure and debt service requirements. Such debt service requirements 
increase substantially in fiscal year 2000 as a result of interest on its 
Senior Discount Debentures becoming current and payable on a semi-annual 
basis. However, as discussed above, the Company expects to call certain bonds 
on July 1, 1999, which is expected to reduce annual interest expense in 
excess of $14.0 million. While there can be no assurance, the Company 
currently expects to have sufficient internally generated funds to service 
interest when due; however, a portion of the face amount may be required to 
be refinanced at maturity. There can be no assurance that the Company will be 
able to refinance its debt when due. However, based on current and projected 
cash flows and debt levels, the Company believes there is minimal refinance 
risk.

DENVER NEWSPAPERS - UNCONSOLIDATED SUBSIDIARY

     Denver Newspapers is well capitalized and currently produces cash flows 
significantly in excess of its capital expenditure and debt service 
requirements; accordingly, management does not anticipate making any 
additional capital contributions to Denver Newspapers. At June 30, 1998, 
Denver Newspapers had $15.0 million available under its revolving credit 
facility, excluding $1.6 million in outstanding letters of credit. In 
addition, at June 30, 1998, Denver Newspapers had working capital of 
approximately $6.0 million.

     Denver Newspapers' revolving credit facility and shareholder agreement 
prohibit the payment of common stock dividends to ANI until the revolving 
credit facility and the 9% preferred stock have been repaid in full. Denver 
Newspapers' revolving credit facility expires June 30, 2000. Denver 
Newspapers' preferred stock is mandatorily redeemable on the earlier of (a) 
July 1, 1999; (b) the date on which such redemption is permissible under 
Denver Newspapers' credit agreement; (c) the date on which Denver Newspapers 
ceases to own directly at least 51% of all the outstanding capital stock of 
The Denver Post Corporation; or (d) the date on which Denver Newspapers, 
directly or indirectly, causes or permits The Denver Post Company to dispose 
of substantially all of the assets of The Denver Post Company. Denver 
Newspapers declared and paid a preferred stock dividend of $2.7 million in 
January 1998.

                                       25
<PAGE>

NEAR TERM OUTLOOK

     The majority of the large newsprint suppliers have announced a $40 per 
metric ton price increase on standard 30 pound newsprint, beginning on 
September 1, 1998. If the price increase takes hold, newsprint transaction 
prices will increase to approximately $615 per metric ton for large buyers. 
Upward pressure in newsprint pricing is being fueled by the Abitibi 
Consolidated (the largest newsprint vendor in North America) strike at seven 
newsprint mills which began on June 15, 1998. If the September 1, 1998, price 
increase is successful, the increase is not expected to have a significant 
impact on the Company's cash flows from operations as the Company and Denver 
Newspapers expect to purchase approximately 49% of its fiscal 1999 newsprint 
requirements under fixed price contracts, entered into by MediaNews Group, 
expiring over the next 18 months to 30 months. The weighted average rate for 
contracted newsprint which the Company and Denver Newspapers anticipates 
receiving in fiscal year 1999 will be approximately $556 per metric ton. In 
addition, the Company participates in a contract that allows it to purchase 
36,000 metric tons per year at a price equal to the lowest price which 
newsprint is sold to large North America newsprint purchases, subject to 
quarterly adjustment. While there is no assurance that the Company and Denver 
Newspapers will receive newsprint allocation as described above, based on 
current operations, management does not anticipate material changes in the 
allocation during fiscal year 1999.

     Based upon current and expected operations management believes that the 
Company will have sufficient cash flows from operations to fund scheduled 
payments of principal and interest and to meet anticipated capital 
expenditure and working capital requirements for at least the next twelve 
months. In addition to cash flows from operations, Garden State has 
approximately $6.0 million as of the date of this report, available under a 
working capital facility, which should be more than sufficient to fund 
unanticipated needs.

     The Company and its subsidiaries may, from time to time, consider 
strategic or targeted newspaper acquisitions and dispositions. In the event 
an acquisition opportunity is identified, management expects that it would be 
able to arrange financing on terms and conditions satisfactory to the Company 
to the extent current resources are insufficient.

     The purchase of Garden State's Class A common stock and the Series A and 
C preferred stock by ANI was financed with debt issued by ANI. The repayment 
of ANI's debt, which does not have scheduled interest payments until January 
1, 2000, is in part dependent upon Garden State's ability to pay dividends to 
ANI. Garden State's debt agreements discussed above prohibit the payment of 
dividends to ANI prior to June 30, 1999. The ANI debt can be called beginning 
July 1, 1999 at 106.5%. Based on current interest rates ANI expects to call 
their debt on July 1, 1999. Cash flows from Garden State will be required to 
service ANI's debt.

IMPACT OF YEAR 2000

     The year 2000 issue results from computer programs using two digits 
rather than four to define the applicable year. The Company's computer 
programs that have time-sensitive software may recognize a date using "00" as 
the year 1900 rather than the year 2000. This could result in a system 
failure, disruption of operations, and/or a temporary inability to conduct 
normal business activities. Based on a recent assessment, the Company 
currently believes that with modifications to existing software and 
conversions to new software, the year 2000 issue will not pose significant 
operational problems. If such modifications and conversions are not made, or 
are not completed in a timely way, the year 2000 issue could have a material 
impact on operations.

     The Company's newspapers have completed the process of identifying 
computer systems that require modification or replacement and has begun the 
systematic replacement or modification of all its computer systems which are 
not year 2000 compliant. In addition, the Company has initiated 
communications with its significant suppliers to determine the extent to 
which the Company's interface systems are vulnerable to those third parties' 
failure to resolve their own year 2000 issues.

     The Company estimates that the remaining cost of modifying or replacing 
its computer systems, which are not year 2000 compliant, will be 
approximately $4.0 million. Through the year ended June 30, 1998, the Company 
has spent approximately $2.3 million in conjunction with year 2000 
compliance, the majority of which has been capitalized as it involved the 
replacement of computer hardware and software. The year 2000 compliance cost 
is based on management's best estimate and actual results could differ from 
those anticipated.

                                       26
<PAGE>

IMPACT OF YEAR 2000 (CONTINUED)

     In addition, if the Company or its vendors are unable to resolve the year
2000 issue in a timely manner, such matters could have a material impact on the
Company's results of operations. The Company believes the necessary
modifications and replacement of computer systems will be completed by the end
of fiscal year 1999 and thus no contingency plan has been developed. The year
2000 issue is not expected to pose significant operational or financial problems
for the Company.


MARKET RISK
                            Interest Rate Sensitivity
                      Principal Amount by Expected Maturity
                           Average Interest Swap Rate
                               Year Ended June 30,
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                    1999       2000       2001       2002       2003      Thereafter     Total      1998
                                    ----       ----       ----       ----       ----      ----------     -----      ----
<S>                                <C>        <C>        <C>        <C>        <C>        <C>          <C>         <C>
LIABILITIES
LONG-TERM  DEBT, INCLUDING CURRENT 
 PORTION

  Fixed Rate                           --         --         --         --         --     550,547      550,547     587,038
  Average Interest Rate            10.70%     10.70%     10.70%     10.70%     10.70%      10.70%

  Variable Rate                        --         --         --      3,750      7,500      22,750       34,000      34,000
  Average Interest Rate             6.93%      6.93%      6.93%      6.93%      6.93%       6.93%

INTEREST RATE DERIVATIVE FINANCIAL
  INSTRUMENT RELATED TO DEBT
INTEREST RATE SWAPS
  Pay variable/Receive Fixed       50,000         --         --         --         --          --       50,000       (0.4)
  Average Pay Rate                  6.45%         --         --         --         --          --
  Average Rate Received             5.70%         --         --         --         --          --

</TABLE>

                                       27
<PAGE>

                           FORWARD-LOOKING STATEMENTS

     This 10-K includes "Forward-Looking Statements" within the meaning of 
Section 27A of the Securities Act and Section 21E of the Exchange Act. All 
statements other than statements of historical facts included in this 10-K, 
including without limitation, certain statements under "Management's 
Discussion and Analysis of Financial Condition and Results of Operations," 
"Business" and statements located elsewhere herein regarding the Company's 
financial position and operating strategy, may constitute forward-looking 
statements. Although the Company believes that the expectations reflected in 
such forward-looking statements are reasonable, it can give no assurance that 
such expectations will prove to have been correct. Important factors that 
could cause actual results to differ materially from the Company's 
expectations ("Cautionary Statements") include the following: (1) costs or 
difficulties related to the integration of businesses acquired by the Company 
(including clustering) may be greater than expected; (2) unanticipated 
increases may occur in financing and other costs, such as newsprint or labor 
costs; (3) general economic or business conditions, either nationally or in 
the regions in which the Company conducts business, may be less favorable 
than expected; and (4) competition, including from other newspapers, other 
traditional forms of advertising and newer forms made possible by the 
internet and otherwise. All subsequent written and oral forward-looking 
statements attributable to the Company or persons acting on its behalf are 
expressly qualified in their entirety by the cautionary statements.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The response to this item is filed as a separate part of this report 
(see page 34).

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

     None.

                                       28
<PAGE>

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Executive officers and directors of ANI are as follows:

<TABLE>
<CAPTION>
                 NAME                     AGE                 TITLE
                 ----                     ---                 -----
<S>                                       <C>     <C>
Richard B. Scudder...................     85      Chairman of the Board and Director
William Dean Singleton...............     46      Vice Chairman, President, Chief Executive Officer
                                                    And Director
Joseph J. Lodovic, IV................     37      Executive Vice President, Chief Financial Officer
Anthony F. Tierno....................     53      Executive Vice President, Chief Operating Officer
E. Michael Fluker....................     61      Senior Vice President, Administration
Ronald A. Mayo.......................     36      Vice President of Finance and Controller
James  L. McDougald..................     44      Treasurer
Jean Scudder.........................     46      Director
Patricia Robinson....................     56      Director and Secretary
Howell E. Begle, Jr..................     54      Assistant Secretary and General Counsel

</TABLE>

     Each director is elected annually and serves until the next annual 
meeting of shareholders or until his successor is duly elected and qualified. 
The directors of ANI are not compensated for their service as directors. They 
do, however, receive reimbursement of expenses incurred from the attendance 
at Board of Directors meetings. The executive officers of ANI are appointed 
by and serve at the pleasure of the Board of Directors.

BUSINESS EXPERIENCE

     RICHARD B. SCUDDER was elected Chairman of the Board and a director of 
ANI in February 1994. He has served as Chairman of the Board and a director 
of Garden State since 1985.

     WILLIAM DEAN SINGLETON was elected Vice Chairman, President, Chief 
Executive Officer and a director of ANI in February 1994. He has served as 
Vice Chairman, President, Chief Executive Officer and a director of Garden 
State since 1985.

     JOSEPH J. LODOVIC, IV was appointed Executive Vice President and Chief 
Financial Officer of ANI in February 1994. He has served as Executive Vice 
President and Chief Financial Officer of Garden State since November 1993. 
Prior thereto, he served as Vice President and Treasurer of Garden State from 
1989 to 1993.

     ANTHONY F. TIERNO was appointed Executive Vice President and Chief 
Operating Officer of ANI in February 1994. He has served as Executive Vice 
President and Chief Operating Officer of Garden State since November 1993. 
Prior thereto, he served as Vice President of Garden State's eastern United 
States operations from 1987 to 1993. Mr. Tierno has been with Garden State 
since its inception in 1985.

     E. MICHAEL FLUKER was appointed Senior Vice President, Administration, 
of ANI in February 1994. He has served as Senior Vice President, 
Administration, for Garden State since November 1993. Prior thereto, he 
served as Executive Vice President and Chief Financial Officer of Garden 
State from 1989 to 1993.

     RONALD A. MAYO has served as Vice President of Finance and Controller 
since September 1994. From 1984 to 1994, Mr. Mayo was employed by Ernst & 
Young LLP, most recently as a Senior Manager.

     JAMES L. MCDOUGALD has served as Treasurer since September 1994. Prior 
thereto, he was Controller for Garden State from 1988 to 1994.

                                       29
<PAGE>

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)

     JEAN SCUDDER was elected a Director of ANI in July 1998. Ms. Scudder is 
the daughter of Mr. Richard B. Scudder.

     PATRICIA ROBINSON was elected Secretary of ANI in February 1994, and a 
director of ANI in May 1994. She has also served as Secretary of Garden State 
since 1991 and as Secretary of Denver Newspapers since 1991. Ms. Robinson is 
the sister of Mr. Singleton.

     HOWELL E. BEGLE, JR. was elected Assistant Secretary and General Counsel 
of ANI in February, 1994. Mr. Begle is of Counsel to Verner, Liipfert, 
Bernhard, McPherson and Hand, chartered, which law firm is counsel to the 
Company.

ITEM 11.  EXECUTIVE COMPENSATION

     The business and affairs of the Company are managed by MNG pursuant to 
the terms of a Management Agreement. MNG allocates its expenses as management 
fees to the Company and each affiliate based on the amount of time and 
resources devoted to each affiliate. See "Certain Relationships and Related 
Transactions -- MediaNews Group, Inc." The following table sets forth the 
cash compensation paid or payable to Mr. Singleton and any executive officer 
whose allocated cash compensation exceeded $100,000 for services rendered to 
the Company in fiscal 1998.

<TABLE>
<CAPTION>
NAME AND                                 FISCAL         ANNUAL COMPENSATION           ALL OTHER 
PRINCIPAL POSITION                        YEAR         SALARY           BONUS        COMPENSATION
------------------                       ------       ---------       --------       ------------
<S>                                      <C>          <C>             <C>            <C>
William Dean Singleton(a)                 1998        $660,000        $250,000        $16,430
Vice Chairman, President                  1997         550,000         100,000         11,410
and Chief Executive Officer .........     1996         350,000          80,000          7,800

Joseph J. Lodovic IV(b)                   1998        $302,500        $162,000        $ 5,130
Executive Vice President,                 1997         242,567         138,415          4,642
Chief Financial Officer .............     1996         188,325              --         46,816

Anthony F. Tierno                         1998        $225,000        $ 60,000        $10,310
Executive Vice President                  1997         200,005           7,500         10,396
and Chief Operating Officer .........     1996         192,503           2,500          9,620

E. Michael Fluker(c)
Senior Vice President ...............     1998        $156,000        $  5,000        $ 8,100

Ronald A. Mayo(c)
Vice President Finance, Controller...     1998        $115,500        $ 50,000        $ 3,165

</TABLE>

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

(a)  Compensation paid by Garden State to Mr. Singleton under his Garden 
     State Employment Agreement is offset against any compensation paid to him
     by any other subsidiaries of ANI, which compensation has been, and may 
     continue to be, significant. A portion of Mr. Singleton's 1996 compensation
     was allocated to other affiliated companies managed by MediaNews Group.

(b)  All other compensation in 1996 includes a relocation bonus.

(c)  In fiscal year 1996 and 1997, allocated compensation did not exceed 
     $100,000.

                                       30
<PAGE>

EMPLOYMENT AGREEMENTS

     No executive officer of the Company has an employment agreement with the 
Company except Mr. Singleton. Under the terms of his employment agreement 
with Garden State, which was amended and renewed effective June 30, 1996 (the 
"Employment Agreement"), Mr. Singleton is entitled to receive cash 
compensation at an annual rate of not less than $660,000 (of which Garden 
State is obligated to pay a portion), subject to annual review and adjustment 
by the Board of Directors of Garden State. In addition, Mr. Singleton is 
entitled to receive a bonus of up to $100,000 for each fiscal year based on a 
comparison of actual profits of Garden State to budgeted profits during such 
fiscal year. Other discretionary bonuses may be paid which are not part of 
the employment agreement. The Employment Agreement expires by its terms on 
June 30, 2001, but will be automatically renewed for successive one-year 
terms unless Garden State or Mr. Singleton gives notice terminating the 
Employment Agreement at least 120 days prior to the expiration of the 
existing term. The Employment Agreement contains a five-year non-compete 
covenant for all counties and geographical areas in which newspapers are 
owned or circulated by Garden State or its Subsidiaries (currently or in the 
future).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Decisions regarding annual compensation in excess of $175,000 are made 
by the Board of Directors of Directors of Garden State, as the officers of 
ANI are also officers of Garden State. In addition, the Board of Directors of 
Garden State and Denver Newspapers is responsible for approving Mr. 
Singleton's Employment Agreement, including his compensation. The Board of 
Directors of Garden State does not have a Compensation Committee. 
Compensation of executive officers of MNG, who are also executive officers of 
the Company, is approved by Mr. Singleton. See "Certain Relationships and 
Related Transactions -- MediaNews Group, Inc."

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The authorized capital stock of ANI consists of 2,314,346 shares of 
unissued Class A common stock, $.01 par value, 173,576 shares of Class B 
common stock, $.01 par value, 664,450 shares of Class D common stock, $.01 
par value, 1,476,090 shares of Class G common stock, $0.1 par value, and 230 
shares of Class N common stock $.01 par value (collectively the "ANI Common 
Stock"), all of which have equal voting rights but differ with respect to 
dividends and liquidation. ANI has not declared or paid any cash dividends on 
its common stock in the past and does not intend to do so in the foreseeable 
future. The Company's long-term debt limits the ability of ANI to pay such 
dividends.

     The following table sets forth the number and percentage of shares of 
ANI common stock currently issued and outstanding and beneficially owned by 
(i) each person known to ANI to be the beneficial owner of more than 5.0% of 
any class of ANI's equity securities; and (ii) all directors and executive 
officers of ANI as a group.

<TABLE>
<CAPTION>
                                                          Amount and Nature of Beneficial Ownership(a)
                                                          ---------------------------------------------
                                                     CLASS D        CLASS G       CLASS GSI         CLASS N
                                                     COMMON         COMMON         COMMON           COMMON
                     NAME                           STOCK(n)       STOCK(n)       STOCK(n)         STOCK(n)
                     ----                           --------       --------       ---------        --------
<S>                                                 <C>           <C>            <C>               <C>
William Dean Singleton(c)....................            --            --        552,065(k)(l)        --
Howell E. Begle, Jr.(b)(d)...................       332,225(l)    185,980(l)     552,065             115(l)
Patricia Robinson(b)(e)......................       332,225(l)    185,980(l)          --             115(l)
Jean L. Scudder(f)(j)........................       249,168.75     46,495        138,016.25           28.75
Charles Scudder(g)(j)........................        83,056.25     46,495        138,016.25           28.75
Elizabeth A. Difani(g)(h)(j).................            --        46,495        138,016.25           28.75
Carolyn Miller(g)(i)(j)......................            --        46,495        138,016.25
All directors and executives                             --                                          115
  as a group(m)..............................       332,225       185,980        552,065

</TABLE>

                                       31
<PAGE>

<TABLE>
<CAPTION>

                                                                  Percentage of Class
                                                    --------------------------------------------------
                                                     CLASS D     CLASS G     CLASS GSI       CLASS N
                                                     COMMON      COMMON       COMMON         COMMON
                     NAME                           STOCK(n)    STOCK(n)     STOCK(n)       STOCK(n)
                     ----                           --------    --------     ---------      --------
<S>                                                 <C>         <C>          <C>            <C>
William Dean Singleton(c)....................            --          --        50.00%            --
Howell E. Begle, Jr.(b)(d)...................        50.00%      50.00%        50.00%        50.00%
Patricia Robinson(b)(e)......................        50.00%      50.00%            --        50.00%
Jean L. Scudder(f)(j)........................        37.50%      12.50%        12.50%        12.50%
Charles Scudder(g)(j)........................        12.50%      12.50%        12.50%        12.50%
Elizabeth A. Difani(g)(h)(j).................            --      12.50%        12.50%        12.50%
Carolyn Miller(g)(i)(j)......................            --      12.50%        12.50%        12.50%
All directors and executives
  as a group(m)..............................        100.0%      100.0%        100.0%        100.0%

</TABLE>

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

(a)  Beneficial ownership is determined in accordance with the rules of the
     Commission. Except as indicated by footnote, the persons named in the
     tables above have sole voting and investment power with respect to all
     shares of capital stock indicated as beneficially owned by them. None of
     such shares is known by ANI to be shares with respect to which the
     beneficial owner has the right to acquire such shares.

(b)  The address of each such person is: c/o Howell E. Begle, Jr., Trustee, 901
     15th Street, N.W., Suite 700, Washington, D.C. 20005. Mr. Begle is Of
     Counsel to the law firm of Verner, Liipfert, Bernhard, McPherson and Hand,
     Chartered, which law firm is counsel to the Company.

(c)  These shares are held by a revocable trust for the benefit of the children
     of Mr. Singleton (the "Singleton Revocable Trust"), for which trust Mr.
     Begle and Mr. Singleton are trustees. Mr. Singleton disclaims any
     beneficial ownership in the shares held in the Singleton Revocable Trust.

(d)  Includes the following shares, for which Mr. Begle has sole voting power
     under the Singleton Family Voting Trust Agreement for ANI (the "Singleton
     Family Voting Trust Agreement for ANI") and shared investment power, as a
     trustee for an irrevocable trust for the benefit of Mr. Singleton's
     children (the "Singleton Irrevocable Trust"), held by the Singleton
     Irrevocable Trust: 332,225 shares of Class D common stock, 185,980 Class G
     common stock and 115 shares of Class N common stock. Also includes 552,065
     shares of Class GSI common stock held by the Singleton Revocable Trust, for
     which Mr. Begle is a trustee.

(e)  These shares are held by the Singleton Irrevocable Trust, for which Ms.
     Robinson serves as a trustee and as to which she has shared investment
     power. Ms. Robinson is Mr. Singleton's sister.

(f)  Includes 166,112.5 shares of Class D common stock held by a trust for the
     benefit of Ms. Scudder's nephews, for which trust Ms. Scudder serves as the
     sole trustee. Does not include the shares held by Charles Scudder,
     Elizabeth Difani, as custodian for her minor children, or Carolyn Miller,
     as custodian for her minor children, with respect to which Ms. Scudder has
     sole voting power pursuant to the Scudder Family Voting Trust Agreement for
     ANI (the "Scudder Family Voting Trust Agreement").

(g)  Sole voting power with respect to these shares is held by Ms. Scudder
     pursuant to the Scudder Family Voting Trust Agreement. See note (f) above.

(h)  Ms. Difani holds these shares as custodian for her minor children. Sole
     voting power with respect to these shares is held by Ms. Scudder pursuant
     to the Scudder Family Voting Trust Agreement. See note (f) above.

(i)  Ms. Miller holds those shares as custodian for her minor children. Sole
     voting power with respect to these shares is held by Ms. Scudder pursuant
     to the Scudder Family Voting Trust Agreement. See note (f) above.

(j)  The address of each person is: c/o Jean L. Scudder, Rural Route 1, Box 75,
     Readfield, Maine 04355.

(k)  Indicates shared voting power.

(l)  Indicates shared investment power.

(m)  No directors or officers of ANI beneficially own any shares in ANI except
     Mr. Singleton, Mr. Begle and Ms. Robinson. See note (c) above.

(n)  Assuming conversion of each of the shares of Class D, Class G, Class GSI
     and Class N common stock to shares of Class A common stock, as provided for
     in the ANI Certificate of Incorporation, the shares of Class A common stock
     will be held as follows: 552,065 shares by the Singleton Revocable Trust;
     518,320 shares by the Singleton Irrevocable Trust; 166,112.5 shares by a
     trust for the benefit of Ms. Scudder's nephews; 267,596.25 shares by Mr.
     Scudder; 123,026.66 shares by Ms. Difani, as custodian for her minor
     children; and 184,540 shares by Ms. Miller, as custodian for her minor
     children.

                                       32
<PAGE>

SCUDDER FAMILY VOTING TRUST AGREEMENT FOR ANI

     The children of Richard B. Scudder, Charles A. Scudder, Carolyn S. 
Miller, Elizabeth H. Difani and Jean L. Scudder entered into the Scudder 
Family Voting Trust Agreement for ANI (the "Scudder Family Voting Trust 
Agreement for ANI") in accordance with which Jean L. Scudder (the "Scudder 
Trustee") exercises all voting rights (subject to the consent of shareholders 
holding 50% of the common stock held by the Scudder Family Voting Trust for 
ANI on such matters as election of directors, mergers, dissolution or 
reorganization of ANI, sale, exchange or pledge of all or substantially all 
of the assets of ANI and acquisition or divestiture by ANI of any newspaper 
venture) and substantially all other rights to which such shareholders would 
otherwise be entitled until May 20, 2004, subject to extension by written 
agreement of one or more beneficiaries of the Scudder Family Voting Trust 
Agreement for ANI and the Scudder Trustee.

SINGLETON FAMILY VOTING TRUST AGREEMENT FOR ANI

     The Singleton Irrevocable Trust entered into the Singleton Family Voting 
Trust Agreement for ANI (the "Singleton Family Voting Trust Agreement for 
ANI") in accordance with which (i) the shares of Class D and Class N common 
stock of ANI held by the Singleton Irrevocable Trust were transferred to the 
Singleton Revocable Trust for ANI and (ii) the shares of Class G common stock 
of ANI to be held by the Singleton Revocable Trust will be transferred to the 
Singleton Family Voting Trust for ANI upon the death or incapacity of Mr. 
Singleton. As a result, Howell E. Begle, as Trustee (the "Singleton 
Trustee"), is considered the beneficial owner of 50% of the outstanding Class 
D common stock and Class N common stock of ANI. Under the Singleton Family 
Voting Trust Agreement for ANI, the Singleton Trustee exercises all voting 
and substantially all other rights to which such shareholders would otherwise 
be entitled until May 20, 2004, subject to extension by written agreement of 
one or more beneficiaries of the Singleton Family Voting Trust Agreement for 
ANI and the Singleton Trustee.

ANI SHAREHOLDERS' AGREEMENT

     The Singleton Revocable Trust, the Singleton Family Voting Trust for 
ANI, the Scudder Family Voting Trust for ANI, certain of the beneficiaries of 
such trusts and ANI entered into a Shareholders' Agreement (the "ANI 
Shareholders' Agreement") which provides, among other things, that action by 
the Board of Directors with respect to such matters as the declaration of 
dividends, redemption of capital stock, certain capital expenditures, mergers 
or consolidation, incurring indebtedness or paying compensation to the 
officers of ANI in excess of certain amounts will require the unanimous 
approval of all Directors then serving on the Board of Directors or approval 
by the holders of 75% of the shares of common stock entitled to vote on such 
matters.

     The ANI Shareholders' Agreement also provides that until the earlier of 
(i) the date on which the shares of Class D common stock, Class G common 
stock and Class N common stock of ANI are automatically converted into shares 
of Class A common stock of ANI, pursuant to the terms of the Certificate of 
Incorporation of ANI, or (ii) when ANI's Leverage Ratio is less than 3:1, no 
shareholder may sell, transfer, pledge or otherwise encumber their shares, 
nor their interest in their shares, of ANI common stock (other than Class B 
common stock) to any third party, except certain permitted transfers to 
family members and other shareholders, without the consent of all the 
shareholders of ANI or unless all shares of ANI common stock then outstanding 
are sold in a single transaction or a series of related transactions. Upon 
the expiration of such time period, and in the event of a contemplated sale 
to a third party, ANI, and thereafter the remaining shareholders, may 
exercise a right of first refusal. If any shareholder desires to sell or 
transfer his shares to ANI or the other shareholders without an identified 
third party buyer, then such shareholder may offer to sell his shares to ANI 
at fair market value determined by appraisal, or if ANI declines to purchase 
such shares, such shareholder may offer to sell his shares to the remaining 
shareholders at fair market value.

DENVER NEWSPAPERS SHAREHOLDERS' AGREEMENT

    ANI, Denver Newspapers and Media General, Inc. ("Media General") are 
parties to the Second Amended and Restated Stock and Warrant Purchase and 
Shareholders' Agreement of Denver Newspapers (the "Denver Newspapers 
Shareholders' Agreement") which provides, among other things, that one-half 
of the directors of Denver Newspapers shall be elected by ANI and one-half of 
the directors shall be elected by Media General. Pursuant to such Agreement, 
without the prior unanimous approval of all of the directors of Denver 
Newspapers, the common stockholders and the preferred stockholders (pursuant 
to the ANI Amended and Restated Certificate of Incorporation), Denver 
Newspapers and its subsidiaries are restricted from, among other things, 
paying certain 

                                       33
<PAGE>

DENVER NEWSPAPERS SHAREHOLDERS' AGREEMENT (CONTINUED)

dividends, redeeming its capital stock, making capital expenditures in excess 
of certain amounts, merging, consolidating or liquidating, paying 
compensation in excess of certain amounts, incurring additional debt or 
amending any material term of its existing debt. The Agreement also provides 
that the directors of Denver Newspapers elected by Media General will not 
unreasonably withhold their approval for any dividend on common stock 
proposed by any member of the board of directors as long as payment in full 
of the Denver Newspapers 9% Preferred Stock, including accrued and unpaid 
dividends, shall have been made. The Denver Newspapers Shareholders' 
Agreement contains certain restrictions on the transfer of shares of Denver 
Newspapers' capital stock, as well as certain rights of first refusal and 
tag-along rights, and Media General has certain registration rights with 
respect to the shares of Denver Newspapers Class A common stock.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MEDIANEWS GROUP, INC.

     The Company's subsidiaries have engaged MNG to operate and manage the 
business and affairs of its newspapers under the terms of a management 
agreement. MNG, which is owned entirely by Messrs. Singleton and Scudder, 
also manages other affiliated newspapers. The majority of the executive 
officers of MNG are also executive officers of the Company, and compensation 
of the executive officers of the Company, with the exception of Mr. Singleton 
whose compensation is paid as described under "Executive Compensation," are 
paid by MNG. The Company believes that the salaries paid to its executive 
officers, through either Garden State or MNG, are not greater than those 
which would be paid to executives of an unaffiliated management company. 
Pursuant to the management agreement, MNG allocates its expenses as 
management fees to each affiliate based on the amount of time and resources 
devoted to each affiliate. The weighted average of the salary allocations is 
then used to apportion general overhead of MNG, such as office rent and 
related operating expenses. MNG is also party to a consulting agreement, 
renewable annually, with Mr. Scudder which requires annual payments of 
$150,000. Costs related to such agreement are included in MNG's expenses and, 
thus, are included in the management fee allocation discussed above.

     MNT, a division of MNG, provides electronic media services including 
website development and maintenance, internet access, and online publishing 
capabilities for all the newspapers managed by MNG. The cost of providing 
these services is allocated based on revenue of the newspapers for which such 
services are provided. For fiscal 1998, the Company and Denver Newspapers 
paid a total of approximately $1.8 million to MNT. The Company records 
electronic media advertising revenues earned by the Company's newspapers, in 
its consolidated statement of operations.

     The Company reimburses MNG for any expenses directly incurred by MNG on 
behalf of the Company that are not included in the management fee. For fiscal 
1998, the Company paid approximately $2.7 million to MNG in management fees. 
The Company believes that the management fees paid to MNG are not greater 
than the costs the Company would expect to bear to obtain these services 
elsewhere.

     MNG does not own and does not expect to own any interest in the Company, 
nor has MNG made any direct capital investment in the Company. While MNG's 
principal business is the management of newspaper operations, the Company 
does not believe its success is dependent on MNG. If the Management Agreement 
should terminate, management believes the Company could obtain management 
services from other sources, including current employees of MNG.

TAX SHARING AGREEMENT

     ANI and Garden State are part of the same affiliated group and file 
consolidated returns for federal income tax purposes. ANI and Garden State 
entered into a tax sharing agreement (the "Tax Sharing Agreement") to 
determine the manner in which the members of the consolidated group will 
share federal income tax benefits and costs. Pursuant to the Tax Sharing 
Agreement, the income tax liability of Garden State and any of Garden State's 
consolidated subsidiaries is computed separately from ANI on a consolidated 
return basis. If income tax is due from Garden State and its consolidated 
subsidiaries, Garden State will pay the amount of the tax as a tax sharing 
payment to ANI. In the event that Garden State's federal income tax is 
reduced due to a net operating loss or credit carryback under applicable 
federal income tax law, it will receive credit for the amount of such 
reduction from ANI. 

                                       34
<PAGE>

TAX SHARING AGREEMENT (CONTINUED)

This credit amount(s) will be carried on ANI's financial records as an amount 
payable to Garden State, which credit Garden State will be able to utilize to 
offset future obligations to make tax sharing payments to ANI. Under the 
terms of the Tax Sharing Agreement, Garden State will receive the benefit of 
loss carryforwards which it generates. Similar principles will apply under 
the Tax Sharing Agreement for state and local income tax purposes. Although 
the payments of dividends by Garden State are restricted under the terms of 
its debt instruments, Garden State will be permitted under those agreements 
to make tax sharing payments.

                                     PART IV

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

   (a)   Financial Statements

     1.    The list of financial statements contained in the accompanying Index 
           to Consolidated Financial Statements and Schedules Covered by Report 
           of Independent Auditor is filed as a part of this Report (see 
           page 34).

     2.  Financial Statement Schedules

           The list of financial statement schedules contained in the 
           accompanying Index to Consolidated Financial Statements and Schedules
           Covered by Report of Independent Auditor is filed as part of the 
           Report (see page 34).

     3.  Exhibits

           The exhibits listed in the accompanying index are filed as a part of
           this annual report (See page 76).

   (b)   Reports on Form 8-K

           No reports on Form 8-K were filed during the fourth quarter of fiscal
           1998.

                                       35
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                         ITEMS 8, AND 14(a) (1) AND (2)

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
                   COVERED BY REPORTS OF INDEPENDENT AUDITORS

   The following financial statements of the registrant and its subsidiaries
required to be included in Items 8 and 14(a)(1) are listed below:

AFFILIATED NEWSPAPERS INVESTMENTS, INC.

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Report of Independent Auditors.............................................. 37
Consolidated Balance Sheets as of June 30, 1998 and 1997.................... 38
Consolidated Statements of Operations for the Fiscal
  Years Ended June 30, 1998, 1997 and 1996.................................. 40
Consolidated Statements of Changes in Shareholders' Deficit
  for the Fiscal Years Ended June 30, 1998, 1997 and 1996................... 41
Consolidated Statements of Cash Flows for the
  Fiscal Years Ended June 30, 1998, 1997 and 1996........................... 42
Notes to Consolidated Financial Statements.................................. 43
</TABLE>

   The following financial statement schedules of the registrant and its
subsidiaries required to be included in Item 14(a)(2) are listed below:

<TABLE>
<S>                                                                         <C>
Schedule I            Condensed Financial Information of Registrant........ 59
Schedule II           Valuation and Qualifying Accounts.................... 62
</TABLE>

   All other schedules for which provision is made in the applicable 
accounting regulations of the Securities and Exchange Commission are not 
required under the related instructions or are inapplicable and therefore 
have been omitted or the information is presented in the consolidated 
financial statements or related notes.

DENVER NEWSPAPERS, INC.

<TABLE>
<S>                                                                         <C>
Report of Independent Auditors............................................. 63
Consolidated Balance Sheets as of June 30, 1998 and 1997................... 64
Consolidated Statements of Operations for the Fiscal
  Years Ended June 30, 1998, 1997 and 1996................................. 66
Consolidated Statements of Changes in Shareholders' Equity
  for the Fiscal Years Ended June 30, 1998, 1997 and 1996.................. 67
Consolidated Statements of Cash Flows for the
  Fiscal Years Ended June 30, 1998, 1997 and 1996.......................... 68
Notes to Consolidated Financial Statements................................. 69

Financial Statement Schedule


Schedule II       Valuation and Qualifying Accounts and Reserves........... 77
</TABLE>

                                       36
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To The Shareholders and Board of Directors
Affiliated Newspapers Investments, Inc.

     We have audited the accompanying consolidated balance sheets of 
Affiliated Newspapers Investments, Inc. and subsidiaries (the "Company") as 
of June 30, 1998 and 1997, and the related consolidated statements of 
operations, changes in shareholders' deficit, and cash flows for each of the 
three years in the period ended June 30, 1998. Our audits also included the 
financial statement schedules I and II. These financial statements and 
schedules are the responsibility of the Company's management. Our 
responsibility is to express an opinion on these financial statements and 
schedules based on our audits.

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

   In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position 
of Affiliated Newspapers Investments, Inc. and subsidiaries at June 30, 1998 
and 1997, and the consolidated results of their operations and their cash 
flows for each of the three years in the period ended June 30, 1998, in 
conformity with generally accepted accounting principles. Also, in our 
opinion, the related financial statement schedules, when considered in 
relation to the basic financial statements taken as a whole, present fairly 
in all material respects the information set forth therein.



                                       ERNST & YOUNG LLP

Denver, Colorado
September 4, 1998

                                       37
<PAGE>


            AFFILIATED NEWSPAPERS INVESTMENTS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          June 30,
                                                                                     ------------------
                                                                                     1998          1997
                                                                                     ----          ----
                                                                                       (In thousands)
<S>                                                                               <C>           <C>
                               ASSETS
CURRENT ASSETS
  Cash and cash equivalents ..............................................        $     999     $   8,944
  Trade accounts receivable, less allowance for doubtful
    accounts of $6,239 and $4,252 at June 30, 1998 and 1997,
    respectively .........................................................           48,241        32,849
  Receivable from affiliates .............................................              900         1,983
  Other receivables ......................................................            2,534         1,353
  Inventories of newsprint and supplies ..................................            7,286         6,170
  Prepaid expenses and other assets ......................................            3,475         3,295
  Income taxes receivable ................................................            1,687            -- 
                                                                                  ---------     ---------

     TOTAL CURRENT ASSETS ................................................           65,122        54,594

PROPERTY, PLANT AND EQUIPMENT
  Land ...................................................................           16,658         8,307
  Buildings and improvements .............................................           61,060        43,462
  Machinery and equipment ................................................          179,670       126,450
                                                                                  ---------     ---------
       TOTAL PROPERTY, PLANT AND EQUIPMENT ...............................          257,388       178,219
  Less accumulated depreciation and amortization .........................          (63,588)      (57,670)
                                                                                  ---------     ---------
       NET PROPERTY, PLANT AND EQUIPMENT .................................          193,800       120,549

OTHER ASSETS
  Investment in Denver Newspapers, Inc. ..................................           19,671        14,113
  Investment in partnership ..............................................            7,479         6,365
  Subscriber accounts, less accumulated amortization of
    $53,446 and $45,808 at June 30, 1998 and
    1997, respectively ...................................................           98,712        69,960
  Excess of cost over fair value of net assets acquired, less
    accumulated amortization of $18,492 and $12,718 at
    June 30, 1998 and 1997, respectively .................................          251,196       154,294
  Covenants not to compete and other identifiable intangible
    assets, less accumulated amortization of $19,846 and
    $15,861 at June 30, 1998 and 1997, respectively ......................           15,810         6,685

  Other ..................................................................            7,468         2,000
                                                                                  ---------     ---------
     TOTAL OTHER ASSETS ..................................................          400,336       253,417
                                                                                  ---------     ---------

TOTAL ASSETS .............................................................        $ 659,258     $ 428,560
                                                                                  ---------     ---------
                                                                                  ---------     ---------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       38
<PAGE>

<TABLE>
<CAPTION>
                                                                                          June 30,
                                                                                     ------------------
                                                                                     1998          1997
                                                                                     ----          ----
                                                                             (In thousands, except share data)
<S>                                                                               <C>           <C>
                LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
  Trade accounts payable................................................         $  5,684        $  6,286
  Accrued employee compensation.........................................           13,938           7,208
  Accrued interest......................................................           14,465           7,830
  Accrued liabilities...................................................           20,876           8,676
  Unearned income.......................................................           14,829          10,746
  Income taxes..........................................................               --           1,308
  Current portion of long-term debt and obligations under 
   capital leases.......................................................            5,644           6,247 
                                                                                ----------      ----------
    TOTAL CURRENT LIABILITIES...........................................           75,436          48,301 
                                                                                                     
OBLIGATIONS UNDER CAPITAL LEASES........................................            7,484           7,477 
                                                                                                     
LONG-TERM DEBT..........................................................          654,461         468,677 
                                                                                                     
OTHER LIABILITIES.......................................................            6,479           5,092 
                                                                                                     
DEFERRED INCOME TAXES...................................................           13,015          13,036 

SHAREHOLDERS' DEFICIT
  Common stock, $.01 par value at June 30,
    1998 and 1997, respectively; authorized 5,152,602 shares,
    2,314,346 shares issued and outstanding.............................               23              23 
  Additional paid-in capital............................................            3,611           3,611 
  Deficit...............................................................         (101,251)       (117,657)
                                                                                ----------      ----------
  TOTAL SHAREHOLDERS' DEFICIT...........................................          (97,617)       (114,023)
                                                                                ----------      ----------

  TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT...........................       $  659,258      $  428,560 
                                                                                ----------      ----------
                                                                                ----------      ----------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       39
<PAGE>

            AFFILIATED NEWSPAPERS INVESTMENTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                              Fiscal Years Ended June 30,
                                                                  ----------------------------------------------
                                                                    1998               1997               1996
                                                                  --------           ---------          --------
                                                                       (In thousands, except per share data)
<S>                                                              <C>                <C>               <C>
REVENUES
  Advertising...........................................         $  331,999         $  242,914        $  197,954
  Circulation...........................................             67,924             48,451            39,930
  Other.................................................             14,383             11,537             7,546
                                                                 ----------         ----------        ----------
      TOTAL OPERATING REVENUES..........................            414,306            302,902           245,430

COSTS AND EXPENSES
  Cost of sales.........................................            145,412            106,939            98,469
  Selling, general and administrative...................            168,092            125,234           100,290
  Management fees.......................................              2,757              2,205             2,008
  Depreciation and amortization.........................             38,857             24,689            21,841
  Interest expense......................................             63,991             48,370            41,932
  Other.................................................             11,386              7,995             4,511
                                                                 ----------         ----------        ----------
      TOTAL COSTS AND EXPENSES..........................            430,495            315,432           269,051

GAIN ON SALE OF NEWSPAPER PROPERTY......................             31,829             30,575             8,291
INCOME IN UNCONSOLIDATED SUBSIDIARY.....................              5,558              9,287             2,541
                                                                 ----------         ----------        ----------
INCOME (LOSS) BEFORE INCOME TAXES,
  AND EXTRAORDINARY LOSS................................             21,198             27,332           (12,789)
INCOME TAX BENEFIT (EXPENSE)............................             (4,792)            (1,066)            1,857
                                                                 ----------         ----------        ----------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS....................          16,406             26,266           (10,932)

EXTRAORDINARY LOSS (net of taxes of $689)...............                 --              8,772                --
                                                                 ----------         ----------        ----------
NET INCOME (LOSS).......................................         $   16,406         $   17,494        $  (10,932)
                                                                 ----------         ----------        ----------
                                                                 ----------         ----------        ----------

INCOME (LOSS) PER COMMON SHARE:
  Income (Loss) before extraordinary gain..................      $     7.09         $    11.35        $    (4.72)
  Extraordinary loss....................................                 --              (3.79)               --
                                                                 ----------         ----------        ----------
    Income (Loss) per common share......................         $     7.09         $     7.56        $    (4.72)
                                                                 ----------         ----------        ----------
                                                                 ----------         ----------        ----------
Weighted average number of shares outstanding...........          2,314,346          2,314,346         2,314,346
                                                                 ----------         ----------        ----------
                                                                 ----------         ----------        ----------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       40
<PAGE>


            AFFILIATED NEWSPAPERS INVESTMENTS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT


<TABLE>
<CAPTION>

                                                                  ADDITIONAL                            TOTAL
                                                     COMMON        PAID-IN-                          SHAREHOLDERS'
                                                      STOCK         CAPITAL           DEFICIT           DEFICIT
                                                     ------       ----------          -------        -------------
                                                                           (In thousands)
<S>                                                  <C>          <C>              <C>                <C>
BALANCE AT JUNE 30, 1995....................          $  1            $ 3,633      $  (124,219)          $ (120,585)
  Loss......................................            --                 --          (10,932)             (10,932)
  Change in par value of Common Stock.......            22                (22)              --                   --
                                                      ----            -------      -----------           ----------
BALANCE AT JUNE 30, 1996....................            23              3,611         (135,151)            (131,517)
  Net income................................                               --           17,494               17,494
                                                      ----            -------      -----------           ----------
BALANCE AT JUNE 30, 1997....................            23              3,611         (117,657)            (114,023)
  Net income................................            --                 --           16,406               16,406
                                                      ----            -------      -----------           ----------
BALANCE AT JUNE 30, 1998....................          $ 23             $3,611      $  (101,251)          $  (97,617)
                                                      ----            -------      -----------           ----------
                                                      ----            -------      -----------           ----------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       41
<PAGE>

            AFFILIATED NEWSPAPERS INVESTMENTS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                       Fiscal Years Ended June 30,
                                                                        ---------------------------------------------------
                                                                             1998               1997                1996
                                                                         ----------          ----------          ----------
                                                                                            (In thousands)
<S>                                                                     <C>                  <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)
    Adjustments to reconcile net income (loss) to net cash from
    operating activities:
        Depreciation ..........................................          $  16,406           $  17,494           $ (10,932)
        Amortization ..........................................             16,038              10,707               9,762
        Gain on sale of newspaper assets ......................             22,194              12,775              11,499
        Income from unconsolidated subsidiary .................            (31,539)            (30,579)             (8,622)
        Provision for losses on accounts receivable ...........             (5,558)             (9,287)             (2,541)
        Amortization of debt discount .........................              4,596               3,092               2,510
        Debt issue cost and repurchase premiums ...............             21,617              18,525              16,214
        Distributions in excess of (less than) earnings from ..              7,287              13,969               1,092
        investments in
            partnership .......................................             (1,114)                 23                (610)
        Deferred income tax (benefit) .........................             (1,520)             (3,226)             (2,373)
        Change in operating assets and liabilities:
            Accounts receivable ...............................              1,211              (5,408)             (3,403)
            Inventories .......................................              3,538              (1,163)              1,799
            Prepaid expense and other assets ..................              1,898                (455)               (558)
            Accounts payable and accrued liabilities ..........             (5,550)              5,139              (5,047)
            Unearned income ...................................               (541)                747                  22
            Affiliate account balances ........................              1,083                (580)                363
            Other assets and liabilities ......................              5,304                (535)               (517)
                                                                         ----------          ----------          ----------
NET CASH FLOWS FROM OPERATING ACTIVITIES ......................             55,350              31,238               8,658

CASH FLOWS FROM INVESTING ACTIVITIES:
    Sale of newspaper property and other assets ...............             43,030              47,776              50,647
    Business acquisitions .....................................           (240,373)           (187,597)            (35,668)
    Purchase of machinery and equipment .......................             (9,683)             (8,836)             (8,079)
                                                                         ----------          ----------          ----------
NET CASH FLOWS FROM INVESTING ACTIVITIES ......................           (207,026)           (148,657)              6,900

CASH FLOW FROM FINANCING ACTIVITIES:
    Issuance of long-term debt ................................            490,988             259,450              37,300
    Reduction of long-term debt ...............................           (337,779)           (120,773)            (60,240)
    Reduction of non-operating liabilities ....................             (2,191)             (2,960)             (4,194)
    Debt issuance cost and repurchase premiums ................             (7,287)            (13,969)             (1,092)
                                                                         ----------          ----------          ----------

NET CASH FLOWS FROM FINANCING ACTIVITIES ......................            143,731             121,748             (28,226)
                                                                         ----------          ----------          ----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..........             (7,945)              4,329             (12,668)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................              8,944               4,615              17,283
                                                                         ----------          ----------          ----------

CASH AND CASH EQUIVALENTS AT END OF YEAR ......................          $     999           $   8,944           $   4,615
                                                                         ----------          ----------          ----------
                                                                         ----------          ----------          ----------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       42
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS

PRINCIPLES OF CONSOLIDATION

     The Consolidated Financial Statements include the accounts of Affiliated 
Newspapers Investments, Inc. (the "Company" or "ANI"), Garden State 
Newspapers, Inc. ("Garden State") and its subsidiaries. All intercompany 
accounts have been eliminated upon consolidation.

OPERATING AGENCY

     One of the Company's subsidiaries is a participant in a joint operating 
agency. The joint operating agency performs the production, sales, 
distribution and administrative functions for the subsidiary and another 
newspaper publishing company under a joint operating agreement. The Company 
includes its prorata portion of the revenues and expenses generated by the 
operations of the agency on a line-by-line basis in its statements of 
operations (See Note 2).

CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid investments with a maturity of 
three months or less when purchased to be cash equivalents.

INVENTORIES

     Inventories, which largely consist of newsprint, are valued at the lower 
of cost or market. Cost is generally determined using the first-in, first-out 
method.

PROPERTY, PLANT, AND EQUIPMENT

     Property, plant, and equipment are recorded at cost. Buildings and 
machinery and equipment are depreciated using the straight-line method over 
the expected useful lives of individual assets.

INTANGIBLE ASSETS

     Intangible assets acquired are recorded at their estimated fair values 
as of the date of acquisition. The excess of cost over fair value of net 
assets acquired is being amortized using the straight-line method over a 
period of 40 years. Subscriber accounts are amortized using the straight-line 
method over periods ranging from 6 to 15 years, with a weighted average 
remaining life, based on the dates of acquisitions, of 9 years. Other 
intangibles recognized are being amortized using the straight-line method, 
generally over periods not exceeding 10 years.

LONG-LIVED ASSETS

     The carrying value of long-lived assets is reviewed annually; however, 
if at any time the facts or circumstances at any of the Company's individual 
newspaper operations indicate impairment of asset values, as a result of 
continual declines in performance or as a result of fundamental changes in a 
newspaper's market, a determination is made as to whether the carrying value 
of the newspaper's long-lived assets exceeds estimated realizable value. For 
purposes of this determination, estimated realizable value is evaluated based 
on values placed on comparable newspaper properties, generally based on a 
multiple of revenue and operating profit (before depreciation and 
amortization).

                                       43
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)

DEBT DISCOUNT

     Debt discount is amortized in a manner which results in a constant rate 
of interest over the life of the related debt.

INCOME TAXES

     The Company accounts for income taxes utilizing the liability method of 
accounting for income taxes. Under the liability method, deferred income 
taxes are recognized for the tax consequences of "temporary differences" by 
applying enacted statutory tax rates applicable to differences between the 
financial statement carrying amount and the tax bases of existing assets and 
liabilities.

USE OF ESTIMATES

     The preparation of financial statements in accordance with generally 
accepted accounting principles at times requires the use of estimates and 
assumptions that affect the reported amount of assets, liabilities, revenues 
and expenses. Actual results could differ from these estimates.

NOTE 2: INVESTMENT IN PARTNERSHIP

     Effective March 1990, York Newspapers, Inc. ("YNI"), a subsidiary of the 
Company, entered into a general partnership; York Newspaper Company (the 
"Agency") with York Daily Record, Inc. ("YDR"). YNI, YDR and the Agency 
entered into a joint operating agreement (the "JOA") under which the Agency 
is responsible for all newspaper publishing operations, other than news and 
editorial, including production, sales, distribution and administration. The 
Agency publishes THE YORK DISPATCH, a daily evening paper, THE YORK DAILY 
RECORD, a daily morning paper, and the YORK SUNDAY NEWS. YNI has a 57.5% 
interest in the Agency. YNI's investment in the Agency is recorded in the 
accompanying balance sheets under the equity method. The Company's investment 
in the Agency, which originally represented the net book value of assets and 
liabilities contributed to the Agency, was approximately $7.5 million and 
$6.4 million at each of the fiscal years ended June 30, 1998 and 1997, 
respectively. The Agency made cash distributions to YNI in the amount of $7.3 
million, $7.2 million and $4.9 million in fiscal years 1998, 1997 and 1996.

     In September 1996, a subsidiary of the Company signed a call/put 
agreement under which YNI can purchase YDR's interest in the agency or YDR 
can put its interest in the Agency to YNI. The base call and put price is 
$32.0 million and $25.0 million, respectively, and is adjusted annually based 
on changes in the consumer price index (not to exceed 2-1/2%). The call 
option may be exercised on January 1, 2004, and expires on January 1, 2005. 
The put may be exercised at any time after the expiration of the call through 
June 30, 2008.

     The Company is not currently responsible for any liabilities of the 
Agency, contingent or otherwise. Management believes that the Agency is well 
capitalized and does not anticipate the Agency requiring any capital 
contributions from its partners in the near future.

NOTE 3: ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

     FISCAL 1998

     On May 11, 1998 the Company acquired substantially all the assets used 
in the publication of THE TRI-CITY WEEKLY, a weekly newspaper published in 
Eureka, California for approximately $2.6 million in cash plus a covenant not 
to compete with the prior owners with a discounted value of approximately 
$0.5 million.

                                       44
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

     On May 1, 1998, the Company acquired substantially all the assets used 
in the publication of the VALLEY NEWS TODAY, a morning newspaper published 
five times a week in Shenandoah Iowa, and seven weekly publications 
distributed primarily in Shenandoah and Dennison, Iowa. These assets were 
purchased for approximately $5.1 million in cash plus an adjustment for 
working capital and covenant not to compete with the prior owners, with a 
discounted value of approximately $0.6 million.

     On January 29, 1998, the Company acquired substantially all the assets 
used in the publication of the DAILY NEWS, a daily newspaper published in the 
San Fernando Valley region of Los Angeles, California, and a weekly newspaper 
distributed in the same area, for approximately $130.0 million, which 
included working capital approximately $2.0 million.

     On December 16, 1997, the Company acquired substantially all the assets 
used in the publication of the PRESS-TELEGRAM, a daily newspaper published in 
Long Beach, California, and two weekly newspapers distributed in and around 
Long Beach, for approximately $38.2 million in cash, plus an adjustment for 
working capital. Proceeds from the sale of the NORTH JERSEY HERALD & NEWS 
(discussed below) were used to fund the acquisition.

     On July 31, 1997, the Company acquired substantially all the assets used 
in the publication of THE SUN, an evening newspaper published in Lowell, 
Massachusetts. The assets were purchased for $49.0 million in cash plus a 
covenant not to compete with the prior owners with a discounted value of 
approximately $11.8 million.

     FISCAL 1997

     On February 28, 1997, the Company acquired substantially all the assets 
used in the publication of the SENTINEL & ENTERPRISE, LEBANON DAILY NEWS and 
THE DAILY NONPAREIL, daily newspapers distributed primarily in Fitchburg and 
Leominster, Massachusetts; Lebanon, Pennsylvania; and Council Bluffs, Iowa, 
respectively, and five weekly newspapers distributed in and around the same 
cities, for a total of approximately $51.2 million in cash. Proceeds from the 
sale of the POTOMAC NEWS (discussed below) and borrowings under the Company's 
Bank Credit Agreement were used to fund the acquisition.

     On October 31, 1996, the Company acquired substantially all of the 
assets used in the publication of the PASADENA STAR-NEWS, SAN GABRIEL VALLEY 
TRIBUNE, WHITTIER DAILY NEWS, TIMES-STANDARD and THE EVENING SUN, daily 
newspapers distributed primarily in Pasadena, West Covina, Whittier and 
Eureka, California, and Hanover, Pennsylvania, respectively, and seven weekly 
newspapers distributed in and around these same cities, for a combined total 
of approximately $130.0 million in cash.

     In conjunction with the sale of the Johnstown Tribune Publishing Company 
described below, the Company acquired substantially all the assets used in 
the publication of the NORTH ADAMS TRANSCRIPT and the BRIDGETON NEWS, daily 
newspapers published in North Adams, Massachusetts, and Bridgeton, New 
Jersey, respectively. In conjunction with acquiring the assets of the 
BRIDGETON NEWS, the Company also assumed $0.8 million of payments due on 
non-competition agreements.

     FISCAL 1996

     On March 10, 1996, the Company acquired substantially all the assets 
used in the publication of the SAN MATEO COUNTY TIMES, a daily newspaper, and 
five weekly newspapers published in San Mateo County, California, for 
approximately $15.0 million, including obligations to the seller with a 
discounted value of approximately $4.3 million and the assumption of 
newspaper subscription obligations of approximately $0.7 million.

                                       45
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

     On August 31, 1995, the Company completed the acquisition of 
substantially all the assets used in the publication of THE BERKSHIRE EAGLE, 
the BRATTLEBORO REFORMER and the BENNINGTON BANNER, daily newspapers 
published in Pittsfield, Massachusetts; Brattleboro, Vermont; and Bennington, 
Vermont, respectively, and the MANCHESTER JOURNAL, a weekly newspaper 
published in Manchester, Vermont (collectively referred to as "New England 
Newspapers"). The purchase price consisted of $1.1 million in cash, the 
assumption of $20.5 million of long-term debt and a covenant not to compete 
payable to the prior owners with a discounted value of approximately $2.7 
million. In addition, the Company assumed a working capital deficit of 
approximately $2.0 million and an underfunded pension plan liability and 
other obligations, valued at approximately $8.3 million.

     All the acquisitions described above were accounted for as purchases. 
Accordingly, the results of their operations were included since the date of 
acquisition. The assets acquired and liabilities assumed have been recorded 
at their estimated fair market value at the date of acquisition. The fair 
values of the newspapers acquired in fiscal 1998 are based on independent 
appraisals and management's best estimate and are subject to change in the 
final allocation of the purchase price. The excess of cost over fair value of 
net assets acquired and intangible assets related to subscriber lists are 
being amortized on a straight line basis over 40 and 15 to 6 years, 
respectively.

DISPOSITIONS

     FISCAL 1998

     On December 5, 1997, the Company sold substantially all the assets used 
in the publication of the NORTH JERSEY HERALD & NEWS and sixteen weekly 
publications for $43.0 million in cash plus an adjustment for working 
capital. The Company recognized a pre-tax gain on the sale of approximately 
$31.8 million, net of selling expenses.

     FISCAL 1997

     On February 13, 1997, the Company sold substantially all the assets used 
in the publication of the POTOMAC NEWS and two weekly publications for $47.7 
million in cash plus an adjustment for working capital. The Company 
recognized a pre-tax gain on the sale of approximately $30.6 million, net of 
selling expenses.

     FISCAL 1996

     On May 1, 1996, Garden State sold the common stock of The Johnstown 
Tribune Publishing Company, which publishes THE TRIBUNE-DEMOCRAT, to American 
Publishing (1991), Inc. in exchange for $32.6 million in cash and 
substantially all the assets used in the publication of the following daily 
and weekly newspapers:

<TABLE>
<CAPTION>

        Newspaper Location               Daily Publication                       Weekly Publication
----------------------------------       ---------------------                 --------------------------
<S>                                      <C>                                   <C>
Bridgeton, New Jersey                    BRIDGETON NEWS                        None
Fort Morgan, Colorado                    FORT MORGAN TIMES                     MORGAN TIMES REVIEW(a)
Sterling, Colorado                       JOURNAL-ADVOCATE                      J. A. SHOPPER(a)
Lamar, Colorado                          LAMAR DAILY NEWS                      TRI-STATE TRADER(a)
Sidney, Nebraska                         SIDNEY TELEGRAPH                      HIGH PLAINS SHOPPING GUIDE(a)
North Adams, Massachusetts               NORTH ADAMS TRANSCRIPT                THE TRANSCRIPT SPOTLIGHT(a)
Akron, Colorado                          None                                  AKRON NEWS REPORTER(b)
Brush, Colorado                          None                                  BRUSH NEWS-TRIBUNE(b)
Julesburg, Colorado                      None                                  JULESBURG ADVOCATE(b)

</TABLE>

-----------------------------
(a)  Free weekly distribution
(b)  Paid weekly distribution

                                       46
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

     In connection with the above newspaper acquisitions, Garden State 
assumed non-compete and other long-term obligations with a discounted value 
of approximately $1.0 million. In addition, Garden State purchased net 
working capital for approximately $1.0 million. As a result of the exchange, 
Garden State recognized a pre-tax gain of approximately $8.3 million in its 
fourth quarter.

     Immediately after the purchase of the above described newspapers, Garden 
State contributed all of the newly acquired assets and liabilities of the 
Sidney, Nebraska, and the Akron, Brush, Fort Morgan, Julesburg, Lamar and 
Sterling, Colorado, daily and weekly newspapers to a newly formed 
corporation, Eastern Colorado Publishing Company ("Eastern Colorado"). The 
common stock of Eastern Colorado was then sold to The Denver Post 
Corporation, a 60% owned subsidiary of ANI, for approximately $15.7 million, 
including the assumption of $0.2 million of discounted non-compete payments 
and other long-term obligations associated with the newspapers acquired. No 
gain or loss was realized on the sale of Eastern Colorado common stock. The 
sales price of Eastern Colorado was deemed to be fair based on an independent 
appraisal of the transaction.

UNAUDITED PRO FORMA OPERATING RESULTS

     The following table sets forth the unaudited pro forma operating results 
had the July 31, 1997 and the January 29, 1998 acquisitions, discussed above 
occurred as of July 1, 1997 and 1996 (In thousands):

<TABLE>
<CAPTION>
                                                           June 30, 1998      June 30, 1997
                                                           -------------      -------------
           <S>                                           <C>                  <C>
           Revenues....................................    $   470,593        $  427,947
                                                           -------------      -------------
                                                           -------------      -------------
           Net Income Before Extraordinary Items.......    $    14,515        $   19,782
                                                           -------------      -------------
                                                           -------------      -------------
           Net Income..................................    $    14,515        $   11,010
                                                           -------------      -------------
                                                           -------------      -------------
           Earnings Per Share..........................    $      6.27        $     4.76
                                                           -------------      -------------
                                                           -------------      -------------

</TABLE>

NOTE 4: LONG-TERM DEBT

DEBT RESTRUCTURING

     On October 1, 1997 and February 12, 1998, Garden State issued $250.0 
million and $50.0 million, respectively, of 8.75% Senior Subordinated Notes 
due 2009. Proceeds from the sale of these notes of $300.3 million were used 
to paydown balances then outstanding under Garden State's Bank Credit 
Agreement. In conjunction with the issuance of the 8.75% Senior Subordinated 
Notes, Garden State paid approximately $7.3 million of fees and expenses. 
Garden State elected to charge the $7.3 million of debt issuance cost to 
fiscal year 1998 expense and, accordingly, the cost has been included in 
other expense in the accompanying Consolidated Statement of Operations.

     As a result of certain refinancing and debt prepayments on October 31, 
1996, associated with acquisitions, Garden State incurred debt issuance costs 
of approximately $4.4 million and paid approximately $9.5 million of 
make-whole premiums to the holders of the Senior Secured Notes, who were 
prepaid in full. The make-whole premiums have been included in the 
accompanying Consolidated Statements of Operations as an extraordinary loss 
net of applicable income tax benefits. Garden State elected to charge the 
$4.4 million of the debt issuance cost to fiscal year 1997 expense and, 
accordingly, the cost has been included in other expense in the accompanying 
Consolidated Statements of Operations.

                                       47
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4:  LONG-TERM DEBT (CONTINUED)

<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                              --------------------------
LONG-TERM DEBT CONSISTED OF THE FOLLOWING AT EACH YEAR END:                     1998              1997
                                                                              --------          --------
                                                                                    (In thousands)
<S>                                                           <C>            <C>                <C>
Bank Credit Agreement ....................................       (I)          $ 34,000          $211,000
NJNI bank credit facility ................................      (II)                --            16,750
Various Notes, payable through December, 2002 ............     (III)            24,987            12,966
12.00% Senior Subordinated Secured Notes, due July 1, 2004      (IV)           100,000           100,000
8.75% Senior Subordinated Notes, due 2009 ................       (V)           300,287                -- 
9.00% Subordinated Promissory Note .......................      (VI)            47,600                -- 
Notes payable to certain shareholders of ANI .............     (VII)             2,971             2,629
Senior Discounted Debentures, due 2006 ...................    (VIII)           150,260           131,579
                                                                              --------          --------
                                                                               660,105           474,924
Less current portion of long-term debt ...................                       5,644             6,247
                                                                              --------          --------
                                                                              $654,461          $468,677
                                                                              --------          --------
                                                                              --------          --------

</TABLE>

I.   In conjunction with the October 31, 1996, acquisition previously discussed,
     Garden State entered into a $285.0 million amended and restated bank credit
     facility (the "Bank Credit Agreement") which has been subsequently reduced
     to $271.0 million as a result of required annual reductions. The Bank
     Credit Agreement is comprised of the following components at June 30, 1998:

     a.   A $157.0 million Senior Secured Revolving Credit Facility ("RCA") for
          acquisition financing which matures on June 30, 2003. The commitment
          under RCA is subject to a reduction schedule as follows: $31.0 million
          reduction on June 30, 1999; $31.0 million reduction on June 30, 2000
          through 2002, and a final maturity on June 30, 2003. As of June 30,
          1998, $141.0 million was available under RCA for business
          acquisitions. Borrowings under RCA are secured by the assets acquired
          with the proceeds of the borrowings under RCA.

     b.   A $27.0 million Senior Secured Revolving Credit Facility ("RCB") with
          sublimits of $7.0 million available for standby letters of credit and
          $5.0 million available for same day borrowings under a swingline
          facility. No principal payments are required under RCB until March 31,
          2004, at which time the commitment is terminated and all then
          outstanding balances are due and payable. As of June 30, 1998,
          approximately $22.0 million was available under RCB. RCB is secured by
          a first priority lien on the common stock of GSI and substantially all
          of the assets of GSI.

     c.   A $15.0 million Senior Secured Term Loan ("Term A Loan") with a final
          maturity of March 31, 2004. Term A Loan requires quarterly
          installments beginning June 30, 2002, with total annual payments of
          $3.75 million, $7.5 million and $3.75 million in fiscal years ending
          June 30, 2002, 2003 and 2004, respectively. Proceeds from Term A Loan
          were used to refinance debt assumed in the August 1995 New England
          Newspapers acquisition. Term A Loan is secured by a first priority
          lien on substantially all of the assets of New England Newspapers,
          Inc.

     d.   A $72.0 million Senior Secured Revolving Credit Facility ("RCC") with
          a final maturity of March 31, 2004. The commitment under RCC requires
          quarterly principal payments beginning on September 30, 1997, with
          total annual payments of $7.5 million in fiscal years 1999 and 2000,
          $12.0 million in fiscal years 2001 and 2002, $14.0 million in 2003 and
          $19.0 million in 2004. Proceeds from RCC Loan were used to prepay
          Garden State's 10.89% Senior Secured Notes on October 31, 1996, as
          previously discussed. RCC Loan is secured by a first priority lien on
          the common stock of GSI and substantially all of the assets of GSI.

                                       48
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4:  LONG-TERM DEBT (CONTINUED)

          All borrowings under the Bank Credit Agreement, except loans under the
          swingline facility, bear interest at rates based upon, at Garden
          State's option, Eurodollar or prime, plus a spread based on Garden
          State leverage. Borrowings under the swingline facility bear interest
          at prime plus a spread based on Garden State's leverage. Interest on
          prime borrowings under the Bank Credit Facility is payable quarterly.
          Interest on Eurodollar borrowings is due at the end of the applicable
          interest rate period or quarterly if the interest rate period exceeds
          three months. In addition, Garden State pays an annual commitment fee
          of 0.50% on the unused commitment under RCA and RCB. If the ratio of
          total debt to operating cash flow is less than 4.00 to 1.00, the
          commitment fee is reduced to 0.375%.

II.  In fiscal year 1998, Garden State paid off and terminated the NJNI bank
     credit facility, in conjunction with the previously discussed sale of the
     NORTH JERSEY HERALD & NEWS.

III. In connection with various acquisitions, Garden State has issued notes
     payable to prior owners, including non-compete agreements, and assumed
     certain debt obligations. The notes payable and debt obligations bear
     interest at rates ranging from zero to 9%. Obligations bearing interest at
     below market rates were discounted at rates ranging from 7.8% to 12.0%.

IV.  In May 1994, Garden State issued $100.0 million of 12.0% Senior
     Subordinated Secured Notes due July 1, 2004. Interest accruing on the 12.0%
     Senior Subordinated Secured Notes is payable semi-annually in arrears on
     January 1 and July 1. The indebtedness evidenced by the 12.0% Senior
     Subordinated Secured Notes is subordinated and junior in right of payment
     under the Bank Credit Agreement and notes payable to prior owners. No
     principal payments are required until July 1, 2004, at which time the
     outstanding principal amount is due and payable. The 12.0% Senior
     Subordinated Secured Notes are secured by a second lien on the stock of
     GSI, a subsidiary of Garden State and holding company for certain
     newspapers of Garden State.

V.   On October 1, 1997, and February 12, 1998, Garden State issued $250.0
     million and 50.0 million, respectively of 8.75% Senior Subordinated Notes
     due 2009. The 8.75% Senior Subordinated Notes were issued at a slight
     premium, resulting in net proceeds to Garden State of $300.3 million,
     excluding related debt issuance cost. Interest accruing on the 8.75% Senior
     Subordinated Notes is payable semi-annually in arrears on October 1, and
     April 1. No principal payments are required until October 1, 2009, at which
     time the outstanding principal amount is due and payable. The 8.75% Senior
     Subordinated Notes are general unsecured obligations of Garden State
     ranking PARI PASSU in right of payment with the existing 12.0% Senior
     Subordinated Secured Notes and all other future senior subordinated
     indebtedness of Garden State and senior in right of payment to all existing
     and future subordinated indebtedness of Garden State which is made
     expressly junior thereto; however, Garden State's Senior 12.0% Subordinated
     Secured Notes are secured by a second priority lien only on all of the
     capital stock of GSI. Secured PARI PASSU debt will, to the extent such
     security is then available, have a claim prior to the holders of the 8.75%
     Senior Subordinated Notes with respect to the value of the GSI Stock.
     Garden State used the net proceeds to reduce bank debt at Garden State.

VI.  In the third quarter of fiscal year 1998, Garden State entered into a
     subordinated note purchase agreement pursuant to which Garden State issued
     a $47.6 million, 9.0% Subordinated Promissory Note (the "Promissory Note")
     due January 31, 2010. Interest accruing on the Promissory Note is payable
     quarterly beginning on March 31, 1998, provided that on each interest
     payment date occurring on or prior to 2002, Garden State may elect to defer
     payment of any or all accrued and unpaid interest. However, in calendar
     years 2000, 2001 and 2002 Garden State must pay the lesser of $3.0 million
     or all accrued and unpaid interest due in such year. The Promissory Note is
     subordinated and junior in right of payment to Garden State's Bank Credit
     Agreement, 12.0% Senior Subordinated Secured Notes and the 8.75% Senior
     Subordinated Notes. No scheduled principal payments are required until
     January 31, 2010, at which time the outstanding principal amount is due and
     payable. ANI has guaranteed the Promissory Note. Proceeds from this
     Promissory Note were used for acquisition funding.

                                       49
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4:  LONG-TERM DEBT (CONTINUED)

VII. In connection with the acquisition of the GLOUCESTER COUNTY TIMES and
     TODAY'S SUNBEAM, Garden State assumed notes payable to certain shareholders
     of ANI with a face value of $2.7 million on November 18, 1994. The notes
     bear interest at prime but have been discounted at 13.5%. The notes are
     subordinate to all Garden State's senior indebtedness, and Garden State is
     prohibited from paying principal or interest on the notes until all senior
     debt has been repaid in full.

VIII. In May 1994, the Company issued 173,576 units of 13.25% Senior Discount
     Debentures Units (the "Debenture Units" or "Debentures"), consisting of
     $1,000 principal amount of Senior Discount Debentures and one share of the
     Company's Class B common stock. The Debenture Units were issued at a 48.1%
     discount, resulting in proceeds to the Company of $90.1 million, excluding
     the related debt issuance cost. The Debenture Units were separable 60 days
     after their issuance and, accordingly, the Class B common stock was
     separately valued. The Company allocated $3.6 million of the Debenture Unit
     proceeds to the Class B common stock, which has been included in additional
     paid-in capital in the accompanying consolidated balance sheet.

     The Debentures mature on July 1, 2006 and, beginning July 1, 1999, will
     begin paying interest currently at a rate of 13.25%, payable semi-annually
     in arrears on January 1 and July 1. The original discount of $87.1 million
     is being amortized to recognize a yield to maturity of 13.6% per annum. The
     carrying value represents the principal at maturity of $173.6 million less
     the unamortized discount of $23.3 million at June 30, 1998.

     The Garden State Bank Credit Agreement contains certain restrictive
covenants which relate to the incurrence of additional debt, capital
expenditures and distributions. Additionally, the agreements require the
maintenance of certain financial ratios based on leverage, debt service
coverage, interest coverage and cash flow. The 12.0% Senior Subordinated Secured
Notes, 8.75% Senior Subordinated Notes and the Debentures restrict ANI's ability
to sell certain assets, incur debt and pay dividends.

     Maturities of the Company's long-term debt as of June 30, 1998, for the
five fiscal years ending June 30, 2003 and thereafter are as follows (in
thousands):

<TABLE>
                <S>                            <C>
                1999......................     $  5,644
                2000......................        4,856
                2001......................        4,787
                2002......................        8,106
                2003......................       27,925
                Thereafter................      608,787
                                               --------
                                               $660,105
                                               --------
                                               --------
</TABLE>

     Interest paid during the fiscal years ended June 30, 1998, 1997 and 1996 
was approximately $36.9 million, $30.8 million and $27.2 million, 
respectively.

     Letters of credit have been issued in favor of an insurance company 
providing workers compensation insurance coverage to Garden State totaling 
approximately $2.1 million as of June 30, 1998. In addition, Garden State 
issued approximately $2.5 million of additional letters of credit in support 
of its obligations under non-compete agreements entered into in connection 
with the August 31, 1995, acquisition described in Note 3.

     The fair market value of the 12.0% Senior Subordinated Secured Notes, 
the 8.75% Senior Subordinated Notes, and the Debentures, was approximately 
$112.0 million, $304.5 million, and $170.5 million, respectively, at June 30, 
1998. The carrying value of the Company's long-term debt, which has interest 
rates tied to prime or LIBOR, approximates the fair value of such financial 
instruments. Management cannot practicably estimate the fair value of the 
remaining long-term debt because of the lack of quoted market prices for 
these types of securities and its inability to estimate its fair value 
without incurring the excessive costs of obtaining an appraisal. The carrying 
amount represents the original issue price net of remaining original issue 
discounts, if applicable.

                                       50
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4:  LONG-TERM DEBT (CONTINUED)

INTEREST RATE SWAPS

     Effective April 1, 1997, Garden State entered into a two-year interest 
rate swap agreement with a notional principal amount of $50.0 million and a 
fixed annual interest rate of 6.455%, plus the applicable spread. Garden 
State uses interest rate swaps to manage its floating rate debt to minimize, 
in part, the Company's exposure to the uncertainty of floating interest 
rates. Garden State accounts for the differences paid or received under this 
agreement as an adjustment to interest expense. As of June 30, 1998, the 
interest rate swap had a market loss of $0.4 million. Upon termination of the 
hedge or sale of the interest rate swap agreement, any gain or loss 
associated with the termination or sale will be immediately recognized. 
Garden State is exposed to credit loss related to the interest rate swap to 
the extent such interest rate swap has a market gain and the counterparty to 
the agreement fails to perform under the agreement. Garden State does not 
anticipate that the counterparty will fail to meet its obligation because of 
its high credit rating.

NOTE 5: LEASES

     A subsidiary of Garden State leases an operating facility under a 
capital lease. Assets under capital leases and related accumulated 
amortization are included in property, plant and equipment in the 
accompanying consolidated balance sheets as follows:

<TABLE>
<CAPTION>
                                                              June 30,
                                                       ------------------------
                                                         1998             1997
                                                       -------          -------
                                                            (In thousands)
<S>                                                    <C>              <C>
Building ....................................          $ 6,934          $ 6,934
Accumulated amortization ....................            2,042            1,811
                                                       -------          -------
   Assets under capital leases, net .........          $ 4,892          $ 5,123
                                                       -------          -------
                                                       -------          -------
</TABLE>

   Garden State subsidiaries also lease certain facilities and equipment 
under operating leases, some of which contain renewal and escalation clauses. 
Rent expense was approximately $2.3 million, $2.0 million and $2.1 million 
for the fiscal years ended June 30, 1998, 1997 and 1996, respectively. 
Contingent rentals are not significant. Future minimum payments on capital 
and operating leases are as follows:

<TABLE>
<CAPTION>
                                                       Capital          Operating
FISCAL YEARS ENDING JUNE 30,                            Leases           Leases
----------------------------                           -------          ---------
                                                             (In thousands)
<S>                                                    <C>              <C>
1999 ........................................          $   821          $ 1,968
2000 ........................................              867            1,973
2001 ........................................              931            1,652
2002 ........................................              931            1,043
2003 ........................................              931              485
Thereafter ..................................           14,972              210
                                                       -------          -------
   Total minimum lease payments .............           19,453          $ 7,331
   Less amount representing interest ........           11,990          -------
                                                       -------          -------
   Present value of net future lease payments          $ 7,463
                                                       -------
                                                       -------
</TABLE>

                                       51
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6: CAPITAL STOCK

     ANI has authorized six and issued five classes of common stock 
(collectively, the "Common Stock"), each with $.01 par value, as follows:

<TABLE>
<CAPTION>
   TITLE OF CLASS                               AUTHORIZED SHARES         ISSUED SHARES
   --------------                               -----------------         -------------
<S>                                             <C>                       <C>
Class A Common Stock ........................         2,314,346                   --
Class B Common Stock ........................           173,576              173,576
Class D Common Stock ........................           664,450              664,450
Class G Common Stock ........................           500,000              371,960
Class GSI Common Stock ......................         1,500,000            1,104,130
Class N Common Stock ........................               230                  230

</TABLE>

     The holders of the common stock have the right to vote, as a class, for 
the election of directors and for all other purposes, and all other rights 
with respect to each class of common stock are identical, except rights with 
respect to dividends. Dividends may be declared and paid on (i) the Class B 
common stock only to the extent of the assets of the Company legally 
available; therefore, in an aggregate amount equal to (7.5%) of the sum of: 
(a) the amount of the dividends then being declared upon the Class B common 
stock and (b) the aggregate amounts simultaneously declared and paid as 
dividends on the Class D, G, GSI and N common stock; and (ii) the Class D 
common stock only to the extent of the earned surplus of ANI attributable to 
the Available Separate Consolidated Net Income (as defined in ANI's Amended 
and Restated Certificate of Incorporation) of Denver Newspapers, Inc.; (iii) 
the Class G common stock to the extent of the earned surplus of ANI 
attributable to the Available Separate Consolidated Net Income of Garden 
State; (iv) the Class GSI common stock to the extent of the earned surplus of 
ANI attributable to the Available Separate Consolidated Net Income of Garden 
State Investments, Inc.; and (v) the Class N common stock to the extent of 
the earned surplus of ANI attributable to the Available Separate Consolidated 
Net Income of North Jersey Newspapers Investments, Inc.

     The Board of Directors may, in its discretion, declare dividends on only 
one class of common stock to the exclusion of the other classes except Class 
B. Under certain circumstances, on the fifth anniversary but not later than 
the tenth anniversary of the May 20, 1994 restructuring, the Class D, G, GSI 
and N common stock will be automatically converted to Class A common stock, 
based on the then appraised values.

NOTE 7:  EMPLOYEE BENEFIT PLANS

PENSION PLANS

     In conjunction with the July 31, 1997 and the January 29, 1998 
acquisitions, Garden State assumed overfunded non-contributory defined 
benefit pension plans, which covered substantially all the employees at the 
acquired newspapers. Shortly after the January 29, 1998 acquisition, Garden 
State elected to freeze the plan assumed in conjunction with that 
acquisition. Accordingly all current service cost under that plan has been 
terminated. Participants in the plan assumed in conjunction with the July 31, 
1997 acquisition continue to accrue benefits associated with current 
services, based on years of service, and estimated compensation prior to 
retirement.

     Prior to fiscal year 1998, Garden State had assumed a defined benefit 
pension plan in conjunction with its August 31, 1995 acquisition. The plan 
was frozen in September, 1995, accordingly, all current service costs under 
the plan were terminated. As of June 30, 1997, the net present value of 
accumulated benefits obligations exceeded the fair market value of plan 
assets by approximately $2.0 million. Due to the immateriality of the plan 
assets and liabilities in years prior to fiscal year 1998, and the fact that 
current benefits were frozen, only current year pension plan disclosures have 
been included. Garden State's funding policy for all plans is to make the 
minimum annual contributions required by the Employee Retirement Income 
Security Act of 1974.

                                       52
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7:  EMPLOYEE BENEFIT PLANS (CONTINUED)

     The components of net periodic pension for Garden State's defined benefit
plans for the year ended June 30, 1998, are as follows:

<TABLE>
<CAPTION>
                                                                                1998
                                                                            --------------
                                                                            (IN THOUSANDS)
<S>                                                                         <C>
     Service cost-benefits earned during the period....................      $   270
     Interest cost on projected benefit obligations....................        2,358
     Return on plan assets.............................................       (4,527)
     Net amortization and deferral.....................................        1,923
                                                                             --------
     Net pension expense...............................................      $    24
                                                                             --------
                                                                             --------

</TABLE>

   The following table sets forth the funding status and amounts recognized in
the Company's consolidated balance sheets at June 30, 1998 related to Garden
State's defined benefit plans:

<TABLE>
<CAPTION>
                                                                                1998
                                                                           -------------
                                                                           (IN THOUSANDS)
<S>                                                                         <C>
     Actuarial present value of benefit obligations:
     Accumulated benefit obligations, including vested benefits of
        $43,913, for 1998 .............................................      $ 44,507
                                                                             --------
                                                                             --------
     Plan assets at fair value comprised of common stocks, bonds and
        U.S. Government obligation funds ..............................       48,434
     Projected benefit obligations ....................................       45,027
                                                                             --------
     Excess of plan assets over projected benefit obligations .........        3,407
     Unrecognized gain from past experience different from that assumed          860
                                                                             --------
     Net pension asset recognized in the consolidated balance sheets ..      $ 4,267
                                                                             --------
                                                                             --------
</TABLE>

     The weighted-average discount rate used in determining the actuarial 
present value of the projected benefit obligations was 7.25% at June 30, 
1998. The rate of increase in future compensation levels used in determining 
the actuarial present value of the projected benefit obligations was 4.0% and 
the expected long-term rate of return on plan assets was 8.0% to 8.5%.

OTHER RETIREMENT PLANS

     Garden State and a majority of its newspaper properties participate in 
retirement/savings plans and, in addition, contribute to several 
multi-employer plans on behalf of certain union-represented employee groups. 
Substantially all of Garden State's full-time employees are covered by one of 
these plans. Total expense for these plans for the fiscal years ended June 
30, 1998, 1997 and 1996, was approximately $2.1 million, $2.1 million, and 
$1.4 million, respectively.

     In general, Garden State contributes one or two percent of an employee's 
salary to the plan for each employee who works at least 1,000 hours annually 
and is not covered by a collective bargaining agreement. Garden State, at its 
discretion, may contribute an additional one or two percent for each 
participant in the plan who makes a voluntary contribution of at least two 
percent of his or her salary. Garden State's contribution may be suspended 
annually at management's discretion.

                                       53
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8: INCOME TAXES

     The income tax provision (benefit) for each of the three years ended June
30, 1998, 1997 and 1996, consists of the following:

<TABLE>
<CAPTION>
                                                                    1998           1997         1996
                                                                   ------         -------       ------
                                                                              (IN THOUSANDS)
<S>                                                               <C>             <C>          <C>
Current:
  State .................................................         $ 2,592         $ 3,429      $   441
  Federal ...............................................           3,720             863           75
Deferred:
  State .................................................           1,062            (213)        (539)
  Federal ...............................................          (2,582)         (3,013)      (1,834)
                                                                   ------         -------       ------
Net (benefit) provision .................................         $ 4,792         $ 1,066      $(1,857)
                                                                   ------         -------       ------
                                                                   ------         -------       ------

</TABLE>

   A reconciliation between the actual income tax expense for financial 
statement purposes and income taxes computed by applying the statutory 
Federal income tax rate to financial statement earnings before income taxes 
for the three years ended June 30, 1998, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
                                                                    1998           1997         1996
                                                                   ------         -------       ------
                                                                              (IN THOUSANDS)
<S>                                                               <C>             <C>          <C>
Statutory Federal income tax rate .......................           35%            35%           (35%)
  Effect of:
     Operating losses ...................................          (16)           (21)            29
     State income tax net of federal benefit ............           11             10              3
     Book/tax basis difference associated with
        acquisitions and non-deductible acquisition costs            3              3            (12)
     Sale of assets .....................................          (10)           (25)            --
     Extraordinary loss .................................           --              4             --
     Other, net .........................................           --              -             --
                                                                   ------         -------       ------
Financial statement effective tax rate ..................           23%             6%           (15)%
                                                                   ------         -------       ------
                                                                   ------         -------       ------

</TABLE>

     In fiscal years 1998 and 1997, the Company generated federal taxable 
income, which was offset by operating loss carryforwards. However, since the 
federal tax laws do not allow the Company to completely offset taxable income 
with loss carry forwards, the Company did incur alternative minimum tax which 
can be carried forward as a credit to future taxes payable. Other deferred 
tax assets are the result of timing differences associated with bad debt 
allowances, capital leases, deferred compensation and debt issuance cost.

     At June 30, 1998, the Company has approximately $27.9 million of net 
operating loss carryforwards for tax reporting purposes available to offset 
its future taxable income which expire in 2006 through 2011 and $5.1 million 
of alternative minimum tax credit carryforwards.

     The Company made state and federal tax payments of approximately $9.0 
million, $3.0 million, and $0.6 million during fiscal years 1998, 1997 and 
1996, respectively.

                                       54
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8: INCOME TAXES (CONTINUED)

Components of the long-term deferred tax liabilities as of June 30, 1998 and 
1997 are as follows: 

<TABLE>
<CAPTION>
                                                     1998               1997
                                                    ------            -------
                                                          (In thousands)
<S>                                                <C>             <C>
Deferred tax assets:

   Net operating losses and other credits          $ 14,826           $ 14,566
   Deferred interest ....................            21,272             15,046
   Other ................................            13,665              8,604
                                                   --------           --------
                                                     49,763             38,216
   Valuation allowance ..................           (30,545)           (29,950)
                                                   --------           --------
   Deferred tax assets ..................            19,218              8,266

Deferred tax liabilities:

   Fixed assets .........................            16,624              8,679
   Intangibles ..........................            14,254              8,391
   Other ................................             1,355              4,232
                                                   --------           --------
   Deferred tax liabilities .............            32,233             21,302
                                                   --------           --------
Net deferred tax liabilities ............          $ 13,015           $ 13,036
                                                   --------           --------
                                                   --------           --------
</TABLE>

NOTE 9: RELATED PARTY TRANSACTIONS

     MediaNEWS Group, Inc., an affiliate of certain of the Company's 
shareholders, provides management services to the Company and its 
subsidiaries. Related management fees are shown on the accompanying 
Consolidated Statements of Operations.

NOTE 10: COMMITMENTS AND  CONTINGENCIES

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

     Under the terms of a newsprint contract, Garden State, through MNG, has 
agreed to purchase approximately 4,300 tons per month of newsprint at a fixed 
price under contracts expiring December 31, 1999 and August 31, 2000. 
Management does not expect that it will purchase less than the required 
amount; however, if it should default on the purchase obligation, MNG and/or 
Garden State would be responsible for damages, if any, incurred by the 
seller. Based on the above monthly purchases of newsprint, Garden State is 
expected to purchase $27.3 million and $17.1 million of newsprint during 
fiscal years 1999 and 2000, respectively, under these agreements.

     The Company has guaranteed up to $5.0 million of the Denver Post 
Corporation's bank credit facility through the period ended December 1, 1998. 
Based on the current financial position of the Denver Post Corporation, the 
Company does not believe it has any loss exposure.

     In fiscal year 1998, in exchange for $2.4 million, Garden State granted 
an option to a third party to purchase substantially all the assets used in 
the publication of a certain newspaper beginning in 2003 and expiring in 2010 
at the newspapers fair market value. The holder of the option can also 
require Garden State to repurchase the option anytime beginning in 2003 
through 2010, based on a fixed formula. If the option holder has not 
exercised the option by the twelfth anniversary of the option grant Garden 
State must repurchase the option based on the same fixed formula.

                                       55
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11: INVESTMENT IN UNCONSOLIDATED SUBSIDIARY

BASIS OF ACCOUNTING

     Prior to September 28, 1994, when Media General, Inc. ("Media General") 
exercised its warrant to acquire a 40 percent interest in Denver Newspapers, 
Inc. ("Denver Newspapers"), the Company owned 100 percent of Denver 
Newspapers' common stock. As was the case prior to the exercise of the 
warrant, the Company accounts for its investment in Denver Newspapers using 
the equity method because the Denver Newspapers shareholder agreement 
provides Media General with a 50 percent representation on the board of 
directors.

     The Company has not provided for deferred taxes on the gain on sale of 
common stock or on the undistributed earnings of Denver Newspapers due to the 
Company's recognition of operating loss carryforwards for financial reporting 
purposes as offsets to deferred tax liabilities. Such operating loss 
carryforwards are expected to be realized prior to the expiration of the loss 
carryforwards.

     The Company's investment in Denver Newspapers at June 30, 1998, was less 
than the book value of the underlying 60 percent of common equity in Denver 
Newspapers as a result of the gain of approximately $1.0 million on the sale 
of the 40 percent interest in Denver Newspapers not being sufficient to fully 
offset the Denver Newspapers' losses previously recorded at 100 percent prior 
to Media General's exercise of its warrant. Media General also owns 100 
percent of Denver Newspapers' 9.0% preferred stock. Annual preferred stock 
dividends of $2.7 million were paid in fiscal years 1998 and 1997. Denver 
Newspapers has never paid a common stock dividend.

SUMMARIZED FINANCIAL INFORMATION OF DENVER NEWSPAPERS, INC.

     The following is summarized balance sheet information for Denver 
Newspapers as of June 30, 1998 and 1997, and summarized statements of 
operations for the fiscal years ended June 30, 1998, 1997 and 1996 (in 
thousands):

SUMMARIZED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            June 30,
                                                                       -------------------
                                                                       1998           1997
                                                                       ----           ----
<S>                                                                 <C>           <C>
                             ASSETS
Current assets.................................................     $  44,991     $  43,807
Noncurrent assets..............................................       130,031       116,292
                                                                    ---------     ---------
  Total assets.................................................     $ 175,022     $ 160,099
                                                                    ---------     ---------
                                                                    ---------     ---------
              LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities............................................     $  38,947     $  40,243
Mandatorily redeemable preferred stock.........................        53,175        53,175
Noncurrent liabilities.........................................        46,161        39,206
Shareholders' equity...........................................        36,739        27,475
                                                                    ---------     ---------
  Total liabilities and shareholders' equity...................     $ 175,022     $ 160,099
                                                                    ---------     ---------
                                                                    ---------     ---------
</TABLE>

SUMMARIZED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                         Fiscal Years ended June 30,
                                                       ------------------------------
                                                       1998          1997        1996
                                                       ----          ----        ----
<S>                                                 <C>          <C>          <C>
Total revenues.................................     $ 217,996    $ 204,453    $ 183,037
                                                    ---------    ---------    ---------
                                                    ---------    ---------    ---------
Cost of sales..................................     $ 115,231    $ 102,042    $ 106,368
                                                    ---------    ---------    ---------
                                                    ---------    ---------    ---------

Net income.....................................     $  11,964    $  18,177    $   6,936
                                                    ---------    ---------    ---------
                                                    ---------    ---------    ---------
Net income applicable to common stock..........     $   9,264    $  15,477    $   4,236
                                                    ---------    ---------    ---------
                                                    ---------    ---------    ---------
</TABLE>

                                       56
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12: COMBINED SUMMARIZED FINANCIAL INFORMATION OF AFFILIATED NEWSPAPERS
         INVESTMENTS, INC. AND DENVER NEWSPAPERS, INC.

     The combined summarized financial statements include the accounts of ANI 
and Denver Newspapers. The companies have common ownership, management, and 
each have the same fiscal year-end. All significant intercompany balances and 
transactions have been eliminated. The summarized combined financial 
information has been presented to supplement the presentation contained in 
the consolidated financial statements of the Company. The Company has a 
significant economic interest in Denver Newspapers and may be dependent, in 
part, upon dividends from Denver Newspapers to service its debt in the future.

     The following is the combined summarized balance sheet information for 
ANI and Denver Newspapers as of June 30, 1998 and 1997 (in thousands):

SUMMARIZED COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            June 30,
                                                                       -------------------
                                                                       1998           1997
                                                                       ----           ----
<S>                                                                 <C>           <C>
                             ASSETS
Current assets.................................................     $  110,113    $  98,401
Noncurrent assets..............................................        704,496      476,146
                                                                    ----------    ---------
  Total assets.................................................     $  814,609    $ 574,547
                                                                    ----------    ---------
                                                                    ----------    ---------

              LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities............................................     $  114,383    $  88,544
Mandatorily redeemable preferred stock.........................         53,175       53,175
Noncurrent liabilities.........................................        727,600      533,488
Minority interest..............................................         17,068       13,363
Shareholders' deficit..........................................        (97,617)    (114,023)
                                                                    ----------    ---------
  Total liabilities and combined shareholders' deficit.........     $  814,609    $ 574,547
                                                                    ----------    ---------
                                                                    ----------    ---------
</TABLE>

   The following is the combined summarized statements of operations for ANI 
and Denver Newspapers for the fiscal years ended June 30, 1998, 1997 and 1996 
(in thousands):

SUMMARIZED COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        Fiscal Years ended June 30,
                                                                        ----------------------------------
                                                                           1998        1997         1996
                                                                        ---------   ---------    ---------
<S>                                                                     <C>         <C>          <C>
Revenues...........................................................     $ 632,302   $ 507,355    $ 428,467
                                                                        ---------   ---------    ---------
                                                                        ---------   ---------    ---------
Cost of sales......................................................     $ 260,643   $ 208,518    $ 204,837
                                                                        ---------   ---------    ---------
                                                                        ---------   ---------    ---------
Gain on sale of newspaper property.................................     $  31,829   $  30,575    $   8,291
                                                                        ---------   ---------    ---------
                                                                        ---------   ---------    ---------
Minority interest in (income) applicable to common stock...........     $  (3,705)  $  (6,191)   $  (1,695)
                                                                        ---------   ---------    ---------
                                                                        ---------   ---------    ---------
Income (loss) before extraordinary loss............................     $  16,406   $  26,266    $ (10,932)
                                                                        ---------   ---------    ---------
                                                                        ---------   ---------    ---------
Extraordinary loss.................................................     $      --   $   8,772    $      --
                                                                        ---------   ---------    ---------
                                                                        ---------   ---------    ---------
Net income (loss) applicable to common stock.......................     $  16,406   $  17,494    $ (10,932)
                                                                        ---------   ---------    ---------
                                                                        ---------   ---------    ---------
</TABLE>

                                       57
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13: SUBSEQUENT EVENTS

ACQUISITION

     On August 21, 1998, Garden State acquired a 50% interest in Charleston 
Newspapers, a joint venture, which publishes the CHARLESTON GAZETTE, 
(morning) and CHARLESTON DAILY MAIL (evening) newspapers six days a week and 
the SUNDAY GAZETTE-MAIL, under the terms of a JOA. The acquisition included 
rights to the masthead of the CHARLESTON DAILY MAIL; thus, Garden State is 
responsible for the editorial content of the CHARLESTON DAILY MAIL. 
Charleston Newspapers had daily and Sunday circulation of approximately 
93,000 and 102,000, respectively, at March 31, 1998. The acquisition price of 
approximately $47.0 million was funded with borrowings under the RCC of the 
Garden State's Bank Credit Agreement.

     Garden State has agreed to acquire substantially all the assets used in 
publication of a morning newspaper in New Mexico. The assets will be 
purchased for $5.0 million in cash, a note with discounted value of $7.7 
million, plus a covenant not to compete with the prior owners with a 
discounted value of approximately $3.2 million. The cash portion of the 
acquisition will be funded with borrowings under the Garden State Bank Credit 
Agreement. The newspaper has daily and Sunday circulation of approximately 
17,000 and 18,000, respectively, as of March 31, 1998. Closing is expected to 
occur on September 30, 1998.

     The acquisitions above will be accounted for as purchases; accordingly, 
the consolidated financial statements will include the operations of the 
acquired newspapers from the date of acquisition.

LONG-TERM DEBT

     In the first quarter of fiscal 1999, Garden State repurchased $36.0 
million of its 12.0% Senior Subordinated Secured Notes at a premium of 
approximately $3.6 million. The premium will be recognized as an 
extraordinary loss in the first quarter of fiscal year 1999. Proceeds from 
borrowings under RCC and RCB of Garden State's Bank Credit Agreement were 
used to repurchase the 12.0% Senior Subordinated Secured Notes.

                                       58
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
           Schedule I - Condensed Financial Information of Registrant
                              (Parent Company Only)

                                 BALANCE SHEETS

<TABLE>

                                                                                      June 30,
                                                                               ----------------------
                                                                                  1998       1997
                                                                               ---------   ----------
                                                                               (Dollars in thousands,
                                                                                 except share data)
<S>                                                                            <C>         <C>
ASSETS
Other assets...............................................................    $       1   $       1
Investment in subsidiaries.................................................       53,218      18,059
                                                                               ---------   ----------
  Total Assets.............................................................    $  53,219   $  18,060
                                                                               ---------   ----------
                                                                               ---------   ----------

LIABILITIES
Due to (from) affiliate....................................................    $      56   $     (15)
Long-term debt.............................................................      150,260     131,578
Long-term deferred taxes...................................................          520         520
                                                                               ---------   ----------
Total Liabilities..........................................................      150,836     132,083

SHAREHOLDERS' DEFICIT:
Common stock, $.01 par value; 5,152,602 shares authorized 
  at June 30, 1998 and 1997, respectively; 2,314,346 shares 
  issued and outstanding...................................................           23          23
Additional paid-in capital.................................................        3,611       3,611
Deficit....................................................................     (101,251)   (117,657)
                                                                               ---------   ----------
  Total shareholders' deficit..............................................      (97,617)   (114,023)
                                                                               ---------   ----------
Total Liabilities and Shareholders' Deficit................................    $  53,219   $  18,060
                                                                               ---------   ----------
                                                                               ---------   ----------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       59
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
           Schedule I - Condensed Financial Information of Registrant
                              (Parent Company Only)

                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                            Fiscal Years Ended June 30,
                                                                       ----------------------------------
                                                                          1998       1997          1996
                                                                       ---------  ----------    ---------
                                                                                (In thousands)
<S>                                                                    <C>        <C>           <C>
Income in subsidiaries............................................     $ 35,158   $  42,797     $  3,802
Interest expense..................................................      (18,682)    (16,466)     (14,518)
Other.............................................................          (70)        (65)         (60)
                                                                       ---------  ----------    ---------
 Income (loss) before income taxes and extraordinary credit.......       16,406      26,266      (10,776)
 Income tax expense...............................................           --          --         (156)
                                                                       ---------  ----------    ---------
 Income (loss) before extraordinary loss..........................       16,406      26,266      (10,932)
 Extraordinary loss from subsidiary...............................           --       8,772           --
                                                                       ---------  ----------    ---------
Net Income (loss).................................................     $ 16,406   $  17,494     $(10,932)
                                                                       ---------  ----------    ---------
                                                                       ---------  ----------    ---------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       60
<PAGE>

                     AFFILIATED NEWSPAPERS INVESTMENTS, INC.
           Schedule I - Condensed Financial Information of Registrant
                              (Parent Company Only)

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       Years Ended June 30,
                                                                  --------------------------------
                                                                    1998       1997        1996
                                                                  ---------  ---------   ---------
                                                                          (In thousands)
<S>                                                               <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss).............................................  $ 16,406   $ 17,494    $(10,932)
  Net income from subsidiaries..................................   (35,158)   (34,025)     (3,802)
  Amortization of debt discount.................................    18,682     16,466      14,518
  Deferred tax expense..........................................        --         --         156
  Change in affiliated account balance..........................        70       (135)         60
                                                                  ---------  ---------   ---------
    NET CASH FLOWS FROM OPERATING ACTIVITIES....................        --       (200)         --

 CASH AT BEGINNING OF YEAR......................................        --        200         200
                                                                  ---------  ---------   ---------
 CASH AT END OF YEAR............................................  $     --   $     --    $    200
                                                                  ---------  ---------   ---------
                                                                  ---------  ---------   ---------

</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       61
<PAGE>

                    AFFILIATED NEWSPAPERS INVESTMENTS, INC.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                 FISCAL YEARS ENDED JUNE 30, 1998, 1997 AND 1996
                                 (In thousands)

<TABLE>
<CAPTION>
                                      Balance at     Additions                                   Balance at
                                     Beginning of    charged to        Net       Acquisitions      End of
                                        Period      Expense, Net    Deductions   (Dispositions)    Period
                                     ------------   ------------    ----------   --------------  ----------
<S>                                  <C>            <C>             <C>          <C>             <C>
YEAR ENDED JUNE 30, 1998
  Reserves and allowances deducted
    from asset accounts:

  Allowance for doubtful
   accounts.....................       $4,252        $4,596         $3,636        $1,027        $6,239

YEAR ENDED JUNE 30, 1997
  Reserves and allowances deducted
    from asset accounts:

  Allowance for doubtful
   accounts.....................       $2,426        $3,567         $3,595        $1,854        $4,252

YEAR ENDED JUNE 30, 1996
  Reserves and allowances deducted
    from asset accounts:

  Allowance for doubtful
   accounts.....................       $1,931        $2,510         $2,474        $ 459         $2,426

</TABLE>

                                       62
<PAGE>

                         Report of Independent Auditors

The Board of Directors
Denver Newspapers, Inc.

We have audited the accompanying consolidated balance sheets of Denver 
Newspapers, Inc. and subsidiaries (the "Company") as of June 30, 1998 and 
1997, and the related consolidated statements of operations, changes in 
shareholders' equity, and cash flows for each of the three years in the 
period ended June 30, 1998. Our audits also included the financial statement 
schedule II. These financial statements and schedule are the responsibility 
of the Company's management. Our responsibility is to express an opinion on 
these financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. 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 consolidated financial position of Denver 
Newspapers, Inc. and subsidiaries at June 30, 1998 and 1997, and the 
consolidated results of their operations and their cash flows for each of the 
three years in the period ended June 30, 1998, in conformity with generally 
accepted accounting principles. Also, in our opinion, the related financial 
statement schedule, when considered in relation to the basic financial 
statements taken as a whole, presents fairly in all material respects the 
information set forth therein.



                                       ERNST & YOUNG LLP

Denver, Colorado
August 28, 1998

                                       63
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                                 ------------------------
                                                                                   1998             1997
                                                                                 ---------       --------
                                                                                      (In thousands)
<S>                                                                             <C>              <C>
                                  ASSETS

CURRENT ASSETS
  Cash and cash equivalents..............................................        $   1,079       $  3,974
  Trade accounts receivable, less allowance for doubtful
    accounts (1998--$3,170; 1997--$2,917)................................           23,989         25,742
  Inventories of newsprint and supplies..................................           11,662         10,158
  Prepaid expenses and other assets......................................            1,717          1,501
  Due from affiliates....................................................              195             --
  Current income tax receivable..........................................            4,554             --
  Deferred income taxes..................................................            1,795          2,432
                                                                                 ---------       --------
     TOTAL CURRENT ASSETS................................................           44,991         43,807

PROPERTY, PLANT AND EQUIPMENT
  Land...................................................................            6,953          6,925
  Buildings and improvements.............................................           32,901         21,924
  Machinery and equipment................................................          106,275         84,846
  Construction-in-progress...............................................              340         16,164
                                                                                 ---------       --------
                                                                                   146,469        129,859
  Accumulated depreciation and amortization..............................          (53,654)       (47,354)
                                                                                 ---------       --------
     Net property, plant and equipment...................................           92,815         82,505

OTHER ASSETS
  Subscriber accounts less accumulated amortization of
    $216 and $114 at June 30, 1998 and 1997, respectively................            1,316          1,383
  Excess of cost over fair value of net assets acquired,
    less accumulated amortization of $559 and $301
    at June 30, 1998 and 1997, respectively..............................           11,003         10,368
  Net pension asset .....................................................           22,740         21,147
  Other..................................................................            2,157            889
                                                                                 ---------       --------
     TOTAL OTHER ASSETS..................................................           37,216         33,787
                                                                                 ---------       --------

TOTAL ASSETS.............................................................        $ 175,022       $160,099
                                                                                 ---------       --------
                                                                                 ---------       --------

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       64
<PAGE>

<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                                 ------------------------
                                                                                   1998             1997
                                                                                 ---------       --------
                                                                                   (IN THOUSANDS EXCEPT 
                                                                                        SHARE DATE)
<S>                                                                             <C>              <C>
                   LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Trade accounts payable.................................................        $  20,495      $  15,157
  Accrued employee compensation..........................................            4,764          4,603
  Accrued liabilities....................................................            3,231          6,882
  Due to affiliates......................................................               --             38
  Income taxes payable...................................................               --          3,738
  Unearned income........................................................            9,041          8,960
  Current portion of long-term debt and capital leases...................            1,416            865
                                                                                 ---------       --------
     TOTAL CURRENT LIABILITIES...........................................           38,947         40,243
OBLIGATIONS UNDER CAPITAL LEASES.........................................            3,269          2,238

LONG-TERM DEBT...........................................................           11,015          9,500

OTHER LIABILITIES........................................................            8,034          7,778

DEFERRED INCOME TAXES....................................................           23,843         19,690
MANDATORILY REDEEMABLE 9% CUMULATIVE
  PREFERRED STOCK, PAR VALUE $25,000 PER
  SHARE; 1,200 SHARES AUTHORIZED, ISSUED AND
  OUTSTANDING............................................................           53,175         53,175
SHAREHOLDERS' EQUITY:
  Common stock, par value $1 per share; Class A, authorized 120 shares; 40
    shares issued and outstanding; Class B, authorized 120 shares;
    60 shares issued and outstanding.....................................               --             --
  Additional paid-in capital.............................................            7,762          7,762
  Retained earnings......................................................           28,977         19,713
                                                                                 ---------       --------
     TOTAL SHAREHOLDERS' EQUITY..........................................           36,739         27,475
                                                                                 ---------       --------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY...............................        $ 175,022      $ 160,099
                                                                                 ---------       --------
                                                                                 ---------       --------

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       65
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Fiscal Years ended June 30,
                                                             -----------------------------------
                                                                1998        1997         1996
                                                             ---------    ---------    ---------
                                                                          (IN THOUSANDS)
<S>                                                          <C>          <C>          <C>
REVENUES                                                     $ 217,996    $ 204,453    $ 183,037
COSTS AND EXPENSES:
  Cost of sales......................................          115,231      102,042      106,368
  Selling, general and administrative................           72,817       65,495       57,190
  Management fees....................................            1,032          740          641
  Depreciation and amortization......................            7,468        5,860        6,577
  Interest expense...................................            1,528          741          805
  Other expense (income).............................              306         (122)        (147)
                                                             ---------    ---------    ---------
TOTAL COSTS AND EXPENSES.............................          198,382      174,756      171,434

INCOME BEFORE INCOME TAXES...........................           19,614       29,697       11,603

INCOME TAX EXPENSE...................................           (7,650)     (11,520)      (4,667)
                                                             ---------    ---------    ---------


NET INCOME...........................................           11,964       18,177        6,936

ACCRETION OF DIVIDENDS ON
 PREFERRED STOCK.....................................           (2,700)      (2,700)      (2,700)
                                                             ---------    ---------    ---------

NET INCOME APPLICABLE TO
 COMMON STOCK........................................        $   9,264    $  15,477    $   4,236
                                                             ---------    ---------    ---------
                                                             ---------    ---------    ---------

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       66
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                Additional           Total
                                                                Retained         Paid-in         Shareholders'
                                                                Earnings         Capital           Equity
                                                               ----------       ----------       -------------
<S>                                                            <C>              <C>              <C>
BALANCE AT JUNE 30, 1995..................................     $    --            $ 7,762           $  7,762
  Net income..............................................       6,936                 --              6,936
  Accretion of dividends on preferred stock...............      (2,700)                --             (2,700)
                                                               --------           -------           ---------
BALANCE AT JUNE 30, 1996..................................       4,236              7,762             11,998
  Net income..............................................      18,177                 --             18,177
  Accreted and paid dividends on preferred stock..........      (2,700)                --             (2,700)
                                                               --------           -------           ---------
BALANCE AT JUNE 30, 1997..................................      19,713              7,762             27,475
  Net income..............................................      11,964                 --             11,964
  Accreted and paid dividends on preferred stock..........      (2,700)                --             (2,700)
                                                               --------           -------           ---------
BALANCE AT JUNE 30, 1998..................................     $28,977            $ 7,762           $ 36,739
                                                               --------           -------           ---------
                                                               --------           -------           ---------

</TABLE>

          SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       67
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Fiscal Years ended June 30,
                                                            ------------------------------------------
                                                              1998             1997            1996
                                                            --------         --------        --------
<S>                                                         <C>              <C>             <C>
                                                                         (In Thousands)
OPERATING ACTIVITIES:
 Net income ........................................        $ 11,964         $ 18,177         $  6,936
 Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation ...................................           7,089            5,500            6,510
    Amortization ...................................             379              360               67
    Deferred income tax (benefit) expense ..........           4,790            1,540             (256)
    Change in operating assets and liabilities:
      Accounts receivable, net .....................           1,849           (4,302)          (4,220)
      Inventories ..................................          (1,475)          (4,888)           2,100
      Income taxes receivable ......................          (4,554)              --               --
      Prepaid expenses and other current assets ....          (1,480)            (496)            (106)
      Pension assets ...............................          (1,602)          (1,051)          (1,053)
      Accounts payable and current liabilities .....          (1,938)           8,699           (1,819)
      Other ........................................             (60)             370              746
                                                            --------         --------         --------
   NET CASH FROM OPERATING ACTIVITIES ..............          14,962           23,909            8,905

INVESTING ACTIVITIES:
 Purchase of newspaper properties ..................            (583)              --          (15,716)
 Sale of newspaper property ........................              --            1,987               --
 Purchases of property, plant and equipment, net
      of capital leases ............................         (13,334)         (18,907)          (3,745)
 Short-term investments ............................              --               --            1,327
                                                            --------         --------         --------
   NET CASH FROM INVESTING ACTIVITIES ..............         (13,917)         (16,920)         (18,134)

FINANCING ACTIVITIES:
 Issuance of long-term debt ........................          16,800            9,000           17,500
 Principal payments on long-term debt ..............         (16,566)         (15,099)          (6,007)
 Principal payments on capital lease obligations ...          (1,474)          (3,163)          (1,086)
 Preferred stock dividend ..........................          (2,700)          (2,700)              --
                                                            --------         --------         --------
   NET CASH FROM FINANCING ACTIVITIES ..............          (3,940)         (11,962)          10,407
                                                            --------         --------         --------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS          (2,895)          (4,973)           1,178

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .....           3,974            8,947            7,769
                                                            --------         --------         --------

CASH AND CASH EQUIVALENTS AT END OF YEAR ...........        $  1,079         $  3,974         $  8,947
                                                            --------         --------         --------
                                                            --------         --------         --------

</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       68
<PAGE>


                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS

     Denver Newspapers, Inc. ("Denver Newspapers") and its subsidiaries are 
in the business of publishing daily and weekly newspapers.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Denver 
Newspapers and its wholly owned subsidiary, The Denver Post Corporation 
("DPC"), and DPC's wholly owned subsidiary, Eastern Colorado Publishing 
Company ("Eastern Colorado"), collectively referred to as "the Company". At 
June 30, 1998, 60 percent of the Company's common stock was held by 
Affiliated Newspapers Investments, Inc. and 40 percent was held by Media 
General, Inc. All intercompany accounts were eliminated upon consolidation.

CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid investments with a maturity of 
three months or less when purchased to be cash equivalents.

INVENTORIES

     Inventories, which largely consist of newsprint, are valued at the lower 
of cost or market. Effective July 1, 1996, the Company elected to change its 
method of determining the cost of inventories from last in, first out to 
first in, first out. The effect of the accounting change was not material.

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are recorded at cost. Buildings and 
machinery and equipment are depreciated using the straight-line method over 
the expected useful lives of the individual assets.

INTANGIBLE ASSETS

     Intangible assets acquired are recorded at their estimated fair values 
as of the date of acquisition. The excess of cost over fair value of net 
assets acquired is being amortized using the straight-line method over a 
period of 40 years. Subscriber accounts are amortized using the straight-line 
method over 15 years.

IMPAIRMENT OF LONG-LIVED ASSETS

     The carrying value of long-lived assets is reviewed annually; however, 
if at any time the facts or circumstances at any of the Company's individual 
newspaper operations indicate impairment of asset values as a result of 
continual declines in performance or as a result of fundamental changes in a 
newspaper's market, a determination is made as to whether the carrying value 
of the newspaper's long-lived assets exceeds its estimated realizable value. 
For purposes of this determination, estimated realizable value is evaluated 
based on values placed on comparable newspaper properties, generally based on 
a multiple of revenue and operating profit (before depreciation and 
amortization).

INCOME TAXES

    The Company accounts for income taxes using the asset and liability 
method of accounting. Deferred taxes are recognized for the tax consequences 
of temporary differences by applying enacted statutory rates to differences 
between the financial statement carrying amount and the tax basis of existing 
assets and liabilities. The effect on deferred taxes of a change in tax rates 
is recognized in income in the period that includes the enactment date.

                                       69
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS (CONTINUED)

FINANCIAL INSTRUMENTS

     The carrying value of long-term debt at June 30, 1998 approximates the 
fair value of such financial instruments. Management cannot practicably 
estimate the fair value of its mandatory redeemable preferred stock because 
of the lack of quoted market prices for this type of security and its 
inability to estimate its fair value without incurring the excessive costs of 
obtaining an appraisal. The carrying amount represents its original issue 
price plus accumulated and unpaid dividends.

ADVERTISING COSTS

     The Company expenses all advertising cost as incurred. Advertising costs 
included in the Consolidated Statements of Operations for the years ended 
June 30, 1998, 1997 and 1996, were approximately $6.4 million, $5.3 million 
and $4.0 million, respectively.

USE OF ESTIMATES

     The preparation of financial statements in accordance with generally 
accepted accounting principles at times requires the use of estimates and 
assumptions that affect the reported amount of assets, liabilities, revenues 
and expenses. Actual results could differ from these estimates.

2.   ACQUISITIONS AND DISPOSITION

     ACQUISITIONS

     On July 1, 1997, Eastern Colorado purchased substantially all the assets 
used in the publication of THE BURLINGTON RECORD and THE PLAINS DEALER, 
weekly newspapers located in Burlington, Colorado, for $0.4 million in cash 
and seller notes with a discounted value of approximately $1.2 million.

     On May 1, 1996, DPC purchased from Garden State Newspapers, Inc., an 
affiliate of the Company, the common stock of Eastern Colorado, and the daily 
and weekly newspapers listed below:

<TABLE>
<CAPTION>

Newspaper Location              Daily Publication           Weekly Publication
------------------              -----------------           ------------------
<S>                             <C>                         <C>
Fort Morgan, Colorado           Fort Morgan Times           Morgan Times Review(a)
Sterling, Colorado              Journal-Advocate            J. A. Shopper(a)
Lamar, Colorado                 Lamar Daily News            Tri-State Trader(a)
Sidney, Nebraska                Sidney Telegraph            High Plains Shopping Guide(a)
Akron, Colorado                 None                        Akron News Reporter(b)
Brush, Colorado                 None                        Brush News-Tribune(b)
Julesburg, Colorado             None                        Julesburg Advocate(b)

</TABLE>

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

(a)   Free weekly distribution
(b)   Paid weekly distribution

                                       70
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.   ACQUISITIONS AND DISPOSITION (CONTINUED)

     The common stock of Eastern Colorado was purchased for approximately 
$15.7 million, including the assumption of $0.2 million of discounted 
non-compete payments and other long-term obligations associated with the 
newspapers acquired. The sales price of Eastern Colorado was deemed to be 
fair, based on an independent appraisal of the transaction.

     The acquisitions referred to above were accounted for as purchases; 
accordingly, the operations have been included since the date of acquisition. 
The assets acquired and liabilities assumed have been recorded at their 
estimated fair value at the date of acquisition. These fair values are based 
on management's best estimate. The excess of cost over fair value of net 
assets acquired and intangible assets related to subscriber lists are being 
amortized on a straight line basis over 40 and 15 years, respectively.

     DISPOSITION

     On July 31, 1996, DPC sold substantially all the assets used in the 
publication of the SIDNEY TELEGRAPH and the HIGH PLAINS SHOPPING GUIDE for 
approximately $2.0 million in cash. The sales price approximated the value 
allocated to the assets as of May 1, 1996, in the acquisitions discussed 
above.

3.   LONG-TERM DEBT

     On June 30, 1996, the Company restructured its existing revolving bank 
credit facility (the "Agreement") to increase the credit commitment to $27.0 
million, which includes a $25.0 million revolving loan commitment and a $2.0 
million letter of credit commitment. At June 30, 1998, $10.0 million was 
outstanding under the revolving loan commitment and $1.6 million of the 
letter of credit commitment was used in support of workers' compensation 
insurance. The principal borrowings under the Agreement bear interest at a 
variable rate based on either the bank's prime rate of interest or a LIBOR 
rate. The Company also pays an annual fee of one-fourth of one percent on the 
unused commitment, payable quarterly. On June 30, 2000, all letters of credit 
drawings (if any) and any outstanding balance under the revolving loan 
commitment are due and payable. The Agreement contains restrictions and 
limitations with respect to additional debt, capital expenditures and lease 
arrangements. In addition, the Agreement requires the maintenance of certain 
financial ratios, operating statistics and cash flow levels. All of DPC and 
its subsidiaries' assets and common stock are pledged as collateral under the 
Agreement.

     In conjunction with the acquisition of THE BURLINGTON RECORD and THE 
PLAINS DEALER, discussed above, Eastern Colorado issued promissory notes with 
a discounted value of $1.2 million, The notes do not bear interest and were 
discounted at 8.5%. The notes are payable in 10 annual installments of 
$180,000, beginning July 1, 1998.

     Maturities of the Company's long-term debt as of June 30, 1998, for the 
five fiscal years ending June 30, 2003 and thereafter, are shown below.

<TABLE>
<S>                            <C>
1999......................     $    135
2000......................       10,086
2001......................           94
2002......................          102
2003......................          110
Thereafter................          623
                               --------
                               $ 11,150
                               --------
                               --------

</TABLE>

     Interest paid during the fiscal year ended June 30, 1998, 1997 and 1996 
was approximately $1.0 million, $0.7 million and $0.8 million, respectively. 
In fiscal year 1998, the Company capitalized $0.5 million of interest.

                                       71
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.   LEASES

     The Company leases certain equipment, vehicles and office space under 
various operating and capital leases. Several of these leases contain renewal 
and purchase options and escalation clauses. Accumulated amortization on 
capital leases is included in accumulated depreciation in the accompanying 
consolidated balance sheets.

     Property, plant and equipment includes the following amounts for assets 
under capital leases:

<TABLE>
<CAPTION>
                                                                           June 30,
                                                                     -------------------
                                                                       1998        1997
                                                                     -------     -------
                                                                        (In Thousands)
<S>                                                                  <C>         <C>
Machinery and equipment.....................................         $ 9,620     $ 7,391
Accumulated amortization....................................          (3,589)     (2,896)
                                                                     -------     -------
Machinery and equipment under capital leases, net...........         $ 6,031     $ 4,495
                                                                     -------     -------
                                                                     -------     -------

</TABLE>

    Future minimum lease payments, by year and in the aggregate, for 
non-cancelable operating and capital leases with initial or remaining terms 
of one year or more, consisted of the following at June 30, 1998:

<TABLE>
<CAPTION>
                                                           Capital      Operating
                                                            Leases        Leases
                                                           -------      --------
                                                                (In thousands)
<S>                                                        <C>          <C>
1999..................................................     $ 1,611      $  2,578
2000..................................................       1,242         2,879
2001..................................................       1,061         2,566
2002..................................................         710         2,289
2003..................................................         464         2,096
Thereafter............................................         310         1,835
                                                           -------      --------
Total minimum obligations.............................       5,389      $ 14,243
                                                                        --------
Less amount representing interest.....................         848      --------
                                                           -------
Present value of net minimum obligations..............       4,550
Less current portion..................................       1,281
                                                           -------
Long-term obligations under capital lease.............     $ 3,269
                                                           -------
                                                           -------

</TABLE>

     Rental expense was approximately $2.4 million, $2.9 million and $2.6
million for the years ended June 30, 1998, 1997, and 1996, respectively.

5.   EMPLOYEE PENSION PLANS

     The Company sponsors two noncontributory defined benefit pension plans 
which cover substantially all employees other than certain union employees 
covered by multi-employer pension plans under collective bargaining 
agreements. The plan covering salaried and management employees provides 
benefits based on employees' years of service and compensation during the 
years immediately preceding retirement. The plan covering certain union 
employees provides benefits of stated amounts based on length of service. The 
Company's funding policy for both plans is to make the minimum annual 
contributions required by the Employee Retirement Income Security Act of 1974.

                                       72
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   EMPLOYEE PENSION PLANS (CONTINUED)

     The components of net periodic pension income for the Company's two
qualified defined benefit plans for the years ended June 30 1998, 1997 and 1996
are as follows:

<TABLE>
<CAPTION>
                                                         1998          1997         1996
                                                      --------       -------      --------
                                                                (In thousands)
<S>                                                   <C>            <C>          <C>
Service cost-benefits earned during the period....    $  1,477      $  1,498      $  1,282
Interest cost on projected benefit obligations....       2,668         2,484         2,240
Return on plan assets.............................     (10,410)       (9,094)       (6,470)
Net amortization and deferral.....................       4,672         4,061         1,895
                                                      --------      --------      --------
Net pension income................................    $ (1,593)     $ (1,051)     $ (1,053)
                                                      --------      --------      --------
                                                      --------      --------      --------
</TABLE>

     The following table sets forth the funding status and amounts recognized in
the Company's consolidated balance sheets at June 30, 1998, 1997 and 1996
related to the Company's defined benefits plans:

<TABLE>
<CAPTION>
                                                                 1998         1997          1996
                                                               --------     --------      --------
                                                                          (In thousands)
<S>                                                            <C>          <C>           <C>
Actuarial present value of benefit obligations:
   Accumulated benefit obligations, including vested
   benefits of $31,893, $31,005 and $29,542 for 1998,
   1997 and 1996, respectively..............................   $ 33,377     $ 32,279      $ 29,904
                                                               --------     --------      --------
                                                               --------     --------      --------
Plan Assets at fair value comprised of common stocks,
    bonds and U.S. Government obligation funds..............   $ 68,241     $ 59,817      $ 52,940
Projected benefit obligations...............................     37,944       36,540        32,460
                                                               --------     --------      --------
Excess of plan assets over projected benefit
   obligations..............................................     30,297       23,277        20,480
Unrecognized gain from past experience
   different from that assumed..............................     (8,978)      (3,716)       (2,134)
Unamortized balance of prior service liability..............      1,421        1,586         1,750
                                                               --------     --------      --------
   Net pension asset recognized in the
     consolidated balance sheets............................   $ 22,740      $ 21,147     $ 20,096
                                                               --------     --------      --------
                                                               --------     --------      --------
</TABLE>

     The weighted-average discount rate used in determining the actuarial 
present value of the projected benefit obligations was 7.5%, 7.5%, and 8.5% 
at June 30, 1998, 1997, and 1996, respectively. The rate of increase in 
future compensation levels used in determining the actuarial present value of 
the projected benefit obligations was 6.25% and the expected long-term rate 
of return on plan assets was 10.0% for all periods.

     Certain union employees are covered under multi-employer defined benefit 
plans administered by the unions. The amounts contributed and charged to 
pension cost for these plans totaled approximately $1.0 million, $1.2 million 
and $0.7 million for the years ended June 30, 1998, 1997 and 1996, 
respectively.

6.   POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

     The Company's post-retirement health care and life insurance plans (the 
"Plans") provide certain of the Company's union employees and their spouses 
with varying amounts of subsidized medical coverage upon retirement and, in 
some instances, continued life insurance benefits until age 65, if the 
employee retires prior to age 65.

                                       73
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)

     The unfunded accumulated postretirement benefits obligation as of July 1,
1998 and July 1, 1997 consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                   July 1,      July 1,
                                                     1998         1997
                                                   -------      -------
<S>                                                <C>          <C>
Retirees.....................................      $ 2,124      $ 2,652
Fully eligible active plan participants......          134          499
Other active plan participants...............        1,265        1,898
                                                   -------      -------
Accumulated postretirement benefit
   obligation................................        3,523        5,049
Unrecognized net gain (loss).................        1,392          (56)
Unrecognized prior service cost..............           21           --
                                                   -------      -------
Accrued postretirement benefit obligation....      $ 4,936      $ 4,993
                                                   -------      -------
                                                   -------      -------
</TABLE>

    Net periodic postretirement benefit cost for the years ended July 1, 
1998, 1997, and 1996, included the following components (in thousands):

<TABLE>
<CAPTION>
                                                   July 1,       July 1,     July 1,
                                                    1998          1997        1996
                                                   -------      -------      -------
<S>                                                <C>          <C>          <C>
Service Cost.................................        $  44       $   96       $  123
Interest cost on accumulated post-
   retirement benefit obligations............          241          352          396
Net amortization and deferral................         (207)          --           46
                                                     -----       ------       ------
Net postretirement benefit expense...........        $  78       $  448       $  565
                                                     -----       ------       ------
                                                     -----       ------       ------
</TABLE>

     In determining the Accumulated Postretirement Benefit Obligation ("APBO"),
the weighted average discount rate of 7.5% was assumed at July 1, 1998 and 1997.
The July 1, 1998 and 1997, assumed health care cost trend rate was 7.0%
declining to 5.0% in fiscal year 2001 and thereafter. A 1.0% increase in the
assumed health care cost trend rate would increase the accumulated
postretirement benefit obligation by approximately $0.3 million and the service
cost and interest cost components of the net postretirement benefit expense for
fiscal year 1998 by an immaterial amount. The Company's policy is to fund the
cost of providing postretirement health care and life insurance benefits when
they are entitled to be received.

     The Company has also accrued $1.0 million for early retirement incentives
which consist of supplemental retirement benefits for certain employees who
retire between the age of sixty-two and sixty-five. These supplemental
retirement benefits consist of cash payments to supplement the retiree's
pension.

7.   INCOME TAXES

     The income tax provision (benefit) for each of the three years ended June
30, 1998, 1997 and 1996 consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                    1998       1997      1996
                                                 ---------  ---------  --------
<S>                                              <C>        <C>        <C>
Current:
 Federal......................................    $2,826     $ 9,363    $4,922
 State........................................        34         617        --

Deferred:
 State........................................       821         691       488
 Federal......................................     3,969         849      (743)
                                                  ------     -------    ------
                                                  $7,650     $11,520    $4,667
                                                  ------     -------    ------
                                                  ------     -------    ------
</TABLE>

                                       74
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.   INCOME TAXES (CONTINUED)

     A reconciliation between the actual income tax expense for financial
statement purposes and income taxes computed by applying the statutory federal
income tax rate to financial statement earnings before taxes is as follows:

<TABLE>
<CAPTION>
                                                                Fiscal Years Ended June 30
                                                             -----------------------------
                                                               1998       1997       1996 
                                                             --------   --------   -------
<S>                                                          <C>        <C>        <C>
Statutory federal income tax rate                              35%          35%          35%
Effect of:
 State income taxes, net of federal benefit.......              3            3            3
 Other, net.......................................              1            1            2
                                                              ---          ---          --- 
                                                               39%          39%          40%
                                                              ---          ---          --- 
                                                              ---          ---          --- 
</TABLE>

     Temporary differences which give rise to significant components of the
Company's deferred tax liabilities and assets at June 30, 1998 and 1997, are as
follows:

<TABLE>
<CAPTION>
                                                                                 June 30,
                                                                       ------------------------------
                                                                           1998             1997
                                                                       -------------     ------------
                                                                                (IN THOUSANDS)
<S>                                                                    <C>               <C>
Deferred tax assets:
   Allowance for bad debt .........................................        $  1,077         $    967
   Postretirement and other pension ...............................           2,207            2,312
   Other ..........................................................           1,449            3,020
                                                                           --------         --------
Total deferred tax assets .........................................           4,733            6,299

Deferred tax liabilities:
   Capital lease and fixed assets .................................         (17,412)         (14,421)
   Pension asset ..................................................          (9,319)          (7,769)
   Other ..........................................................             (50)          (1,367)
                                                                           --------         --------

Deferred tax liabilities, net .....................................         (22,048)         (17,258)
Current deferred tax assets, net ..................................           1,795            2,432
                                                                           --------         --------
Long-term deferred tax liabilities ................................        $(23,843)        $(19,690)
                                                                           --------         --------
                                                                           --------         --------
</TABLE>

     The Company made federal and state income tax payments of $11.0 million,
$8.6 million and $3.8 million during the fiscal years ended June 30, 1998, 1997
and 1996, respectively. The Company has state enterprise zone credits of $1.3
million expiring in 2000 through 2005. The Company has no federal or state
operating loss carryforwards.

8.   MANDATORILY REDEEMABLE PREFERRED STOCK

     The Company previously authorized and issued 1,200 shares of 9% non-voting
cumulative preferred stock with a stated value of $30.0 million (the "9%
Preferred Stock"), which is currently held by Media General, Inc. The holder of
the 9% Preferred Stock is entitled to receive yearly dividends at the rate of 9%
or $2.7 million per year. The carrying value of the 9% Preferred Stock includes
the accretion of accumulated and unpaid dividends as of June 30, 1998, in the
amount of $23.2 million.

                                       75
<PAGE>

                    DENVER NEWSPAPERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.   MANDATORILY REDEEMABLE PREFERRED STOCK (CONTINUED)

     Since January 1, 1997, the Company has paid an annual preferred stock
dividend of $2.7 million and will continue to pay annual preferred stock
dividends. The Company's 9% Preferred Stock is mandatorily redeemable on the
earlier of (a) July 1, 1999, (b) the date on which such redemption is
permissible under DPC's credit agreement, (c) the date on which the Company
ceases to own directly at least 51% of all the outstanding capital stock of DPC,
or (d) the date on which the Company, directly or indirectly, causes or permits
DPC to dispose of substantially all of its assets.

9.   RELATED PARTY TRANSACTIONS

     MediaNews Group, Inc., ("MNG") an affiliate of the Company, provides
management services to the Company for a fee. The cost of management services
provided has been included as management fees in the Consolidated Statements of
Operations.

10.  COMMITMENTS AND CONTINGENCIES

     CONTINGENCIES

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

     COMMITMENTS

     Under the terms of a newsprint contract, the Company, through MNG, has
agreed to purchase 5,500 tons per month of newsprint at a fixed price under
contracts expiring on August 31, 2000 and December 31, 2000. Management does not
expect that it will purchase less than the required amount; however, if it
should default on the purchase obligation, MNG and/or the Company would be
responsible for damages, if any, incurred by the seller.

11.  IMPACT OF THE YEAR 2000 (UNAUDITED)

     The Company has conducted an assessment and review of its computer systems
to identify those areas that could be affected by the "Year 2000" issue and is
in the process of modifying existing software and converting to new software
which is expected to be completed by June 30, 1999. The Company believes that
the year 2000 problem will not pose significant operational problems and the
total costs of such modifications and conversion will not be material to its
financial position.

     The Company has initiated formal communications with the companies with
which it conducts business. The Company is currently unable to determine the
impact on its operations if systems of other companies are not timely converted
to the year 2000.

                                       76
<PAGE>

                             Denver Newspapers, Inc.

           Schedule II--Valuation and Qualifying Accounts and Reserves

                 Fiscal Years ended June 30, 1998, 1997 and 1996
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                      Balance at     Additions                                  Balance at
                                     Beginning of   charged to        Net                         End of
                                         Period    Expense, Net    Deductions   Acquisitions      Period
                                     ------------  ------------    ----------   ------------    -----------
<S>                                  <C>           <C>              <C>         <C>             <C>
YEAR ENDED JUNE 30, 1998
 Reserves and allowances deducted
  from asset accounts:
   Allowance for doubtful
    accounts....................         $  2,917       $  3,124     $ (2,871)          $ --        $3,170
                                         --------       --------     ---------          -----        ------
                                         --------       --------     ---------          -----        ------

YEAR ENDED JUNE 30, 1997
 Reserves and allowances deducted
  from asset accounts:
   Allowance for doubtful
    accounts....................         $  2,055       $  3,079     $ (2,217)          $  --      $  2,917
                                         --------       --------     ---------          -----        ------
                                         --------       --------     ---------          -----        ------

YEAR ENDED JUNE 30, 1996
 Reserves and allowances deducted
  From asset accounts:
   Allowance for doubtful
    accounts....................         $  2,239       $  3,029     $ (3,243)         $  30       $  2,055
                                         --------       --------     ---------          -----        ------
                                         --------       --------     ---------          -----        ------
</TABLE>

                                       77
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
  NO.     DESCRIPTION
-------   -----------
<S>       <C>
3.1*      -Second Amended and Restated Certificate of Incorporation
3.2*      -Form of Fourth Amended and Restated Certificate of Incorporation.
3.3*      -Restated Bylaws.
3.4*      -Form of Restated Bylaws.
3.5*      -Form of Certificate of Incorporation of Garden State Investments,
             Inc.
4.1*      -Form of Indenture.
4.2*      -Form of Second Pledge Agreement to be dated as of the Closing Date
             between Garden State Investments, Inc., Bank of New York, Wilmington
             Trust Company and William J. Wade.
10.1*     -Form of New Senior Note Agreement between Garden State Newspapers,
             Inc. and certain of its subsidiaries, as obligors, and John Hancock
             Mutual Life Insurance Company, Lender.
10.2*     -Form of New Garden State Credit Facility Agreement.
10.3*     -Form of New NJNI Credit Facility Agreement.
10.4*     -Management Agreement dated July 1, 1988 between MediaNews Group, Inc.
             and the Registrant.
10.5*     -Employment Agreement dated April 26, 1985 between Garden State
             Newspapers, Inc. and William Dean Singleton, with April 30, 1986,
             October 1, 1988, and February 10, 1993 Amendments.
10.6*     -Amended and Restated Partnership Agreement of North Jersey Newspapers
             Company dated December 31, 1991 between North Jersey Newspapers, Inc.,
             and Affiliated Newspapers Investment Company.
10.7*     -Joint Operating Agreement dated January 13, 1989 among York Daily
             Record, Inc., York Newspapers, Inc., and The York Newspapers Company.
10.8*     -Form of Tax Sharing Agreement by and between Garden State Newspapers,
             Inc. and Affiliated Newspapers Investments, Inc.
10.9*     -Form of Used Equipment Trade Agreement between Alameda Newspaper
             Group and Man Roland, Inc.
10.10*    -Form of Used Equipment Trade Agreement between North Jersey
             Newspapers Company and Man Roland, Inc.
10.11*    -Form of Agreement between Garden State Newspapers, Inc. and North
             Jersey Newspapers Company for an option to purchase three Colormatic
             Presses.
10.12*    -Consulting Agreement dated November 16, 1993 between J. Allan Meath
             and Garden State Newspapers, Inc.
10.13*    -Letter Agreement between Media General, Garden State Newspapers, Inc.
             and Affiliated Newspapers Investment Company, dated as of March 16,
             1994.
10.14*    -Purchase Agreement dated March 25, 1994 between Thomson Newspapers
             and Affiliated Newspapers Investments, Inc.
10.15*    -Amendment dated May 3, 1994 to Letter Agreement between Media
             General, Garden State Newspapers, Inc. and Affiliated Newspapers
             Investment Company dated as of March 16, 1994.
10.16*    -Form of Amendment and Restatement of Trust Agreement among Garden
             State Newspapers, Inc., Alameda Newspapers, Inc., Graham Newspapers,
             Inc., The Johnstown Tribune Publishing Company, Mid-States Newspapers,
             Inc., and York Newspapers, Inc.; John Hancock Mutual Life Insurance
             Company, John Hancock Variable Life Insurance Company and Mellon Bank
             N.A., as Trustee of AT&T Master Pension Trust; Bankers Trust Company,
             a New York banking corporation; Wilmington Trust Company, a Delaware
             banking corporation; and William J. Wade.
10.17*    -Form of Amended and Restated Pledge Agreement among Garden State
             Newspapers, Inc., its subsidiaries, John Hancock Mutual Life Insurance
             Company, John Hancock Variable Life Insurance Company and Mellon Bank,
             N.A., as Trustee of AT&T Master Pension Trust, Bankers Trust Company,
             a New York banking corporation, Wilmington Trust Company, a Delaware
             banking corporation, and William J. Wade.
10.18*    -Form of Asset Purchase Agreement dated July 15, 1994 among Mid-State
             Newspapers, Inc., as Seller; Garden State Newspapers, Inc., as
             guarantor; Bristol Acquisition Corp., as Purchaser.
</TABLE>

                                       78
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
  NO.     DESCRIPTION
-------   -----------
<S>       <C>
10.19*    -Consulting Agreement dated November 16, 1993 between J. Allan Meath
          and Garden State Newspapers, Inc.
10.20*    -Letter Agreement dated November 9, 1993 by and among The Times Mirror
             Company, Affiliated Newspapers Investment Company, Denver Newspapers,
             Inc., Denver Media Holdings, Inc., NJN Holdings, L.P., The Singleton
             Family Irrevocable Trust, The Scudder Family Voting Trust for Denver
             Newspapers, Inc.; The Singleton Family Revocable Trust, The Scudder
             Family Voting Trust for Affiliated Newspapers Investment Company,
             Media General, Inc., Garden State Newspapers, Inc., North Jersey
             Newspapers, Inc., and Montclair Newspapers, Inc., as amended February
             3, 1994.
10.21*    -Management Agreement dated July 1, 1988 between MediaNews Group, Inc.
             and Garden State Newspapers,Inc.
10.22*    -Management Agreement dated July 1, 1988 between MediaNews Group, Inc.
             and Denver Newspapers, Inc.
10.23*    -Letter Agreement dated March 17, 1994 between Norwest Bank Colorado,
             N.A. and the Denver Post Corporation.
10.24*    -Purchase Agreement dated March 25, 1994 between Thomson Newspapers
             and Affiliated Newspapers Investments, Inc.
10.25*    -Amendment dated May 3, 1994 to Letter Agreement between Media
             General, Garden State Newspapers, Inc. and Affiliated Newspapers
             Investment Company dated March 16, 1994.
10.26*    -Amendment dated April 29, 1994 between The Times Mirror Company and
             Denver Newspapers, Inc. to Letter Agreement dated November 9, 1993 by
             and among The Times Mirror Company, Affiliated Newspapers Investment
             Company, Denver Newspapers, Inc., Denver Media Holdings, Inc., NJN
             Holdings, L.P., TheSingleton Family Irrevocable Trust, The Scudder
             Family Voting Trust for Denver Newspapers, Inc., The Singleton Family
             Revocable Trust, The Scudder Family Voting Trust for Affiliated
             Newspapers Investment Company, Media General, Inc., Garden State
             Newspapers, Inc., North Jersey Newspapers, Inc., and Montclair
             Newspapers, Inc., as amended February 3, 1994.
10.27*    -Asset purchase agreement and assumed debt agreements related to THE
             GLOUCESTER COUNTY TIMES and TODAY'S SUNBEAM asset acquisition.
10.28*    -Denver Newspapers, Inc. warrant exercise subscription notice dated
             September 27, 1994.
10.29**   -Asset Purchase Agreement dated July 31, 1995, by and among EPC
             Holding, Inc., The Eagle Publishing Company, Reformer Publishing
             Corporation, Middletown Press Publishing Corporation, and Eagle Street
             Realty Trust, as Sellers, and New England Newspapers, Inc.,
             Brattleboro Publishing Company, Connecticut Newspapers, Inc. and
             Pittsfield Publications, Inc., as Purchasers.
10.30**   -Asset Purchase Agreement dated July 31, 1995, by and among Banner
             Publishing Corporation and Eagle Street Realty Trust, as Sellers, and
             New England Newspapers, Inc. and North Eastern Publishing Company, as
             Purchasers.
10.31**   -Asset Purchase Agreement dated August 24, 1995, by and among
             Connecticut Newspapers, Inc., as Seller, and Middletown Acquisition
             Corp., as Purchaser.
10.32**   -$42.0 million Credit Agreement dated August 31, 1995, among Garden
             State Newspapers, Inc., The Bank of New York and Bankers Trust
             Company, as Agents.
10.33**   -Agreement dated April 29, 1996, by and among American Publishing
             (1991) Inc., Berkshire Newspapers, Inc., Evening News Company, Sidney
             Publication Company, Sterling Publishing Company and Garden State
             Investments, Inc.
10.34**   -Agreement dated April 30, 1996, by and among Garden State
             Investments, Inc. and The Denver Post Corporation for the
             sale/purchase of the capital stock of Eastern Colorado Publishing
             Company.
12.1*     -Computation of Ratio Earnings to Fixed Charges.
27        -Financial Data Schedule
</TABLE>
-----------------
    *     Previously filed as exhibits to registration statement of
          Form S-1 (No. 33-75158), amendments thereto and Garden State
          Form 8-K.
   **     Previously filed.

                                       79
<PAGE>

                                   SIGNATURES

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



                          AFFILIATED NEWSPAPERS INVESTMENTS, INC.


Date:  September 18, 1998                   By:   /S/ Joseph J. Lodovic, IV
                                                  -----------------------------
                                                  Joseph J. Lodovic, IV
                                                  Executive Vice
                                                  President and
                                                  Chief Financial Officer


     Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>

     SIGNATURE                                                  TITLE                              DATE
--------------                                                 ------                              ----
<S>                                              <C>                                            <C>
          /s/ William Dean Singleton                  Vice Chairman, President,                  September 18, 1998
------------------------------------------       Chief Executive Officer and Director
         (William Dean Singleton)                     (Chief Executive Officer)

         /s/ Joseph J. Lodovic, IV                Executive Vice President and Chief             September 18, 1998
------------------------------------------        Financial Officer (Chief Financial
         (Joseph J. Lodovic, IV)                               Officer)

          /s/ Richard B. Scudder                               Director                          September 18, 1998
------------------------------------------
         (Richard B. Scudder)

         /s/ Jean L. Scudder                                   Director                          September 18, 1998
------------------------------------------
         (Jean L. Scudder)

         /s/Patricia Robinson                                  Director                          September 18, 1998
------------------------------------------
         (Patricia Robinson)

         /s/Ronald A. Mayo                            Vice President Finance and                 September 18, 1998
------------------------------------------         Controller (Principal Accounting
         (Ronald A. Mayo)                                      Officer)
</TABLE>

                                       80