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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, 1997
                                          OR

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

                       Commission File Number  _______________

                            GARDEN STATE NEWSPAPERS, INC.
                (Exact name of registrant as specified in its charter)

              Delaware                           22-2675173
    (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, 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.   N/A

    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 market value shall be
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within 60 days prior
to the date of filing.  NONE

    Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the close of the latest practicable date.   N/A

    Documents Incorporated by Reference:  NONE

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                                        PART I
ITEM 1. BUSINESS

GENERAL

    Garden State Newspapers, Inc. ("the Company" or "Garden State"), a wholly
owned subsidiary of Affiliated Newspapers Investments, Inc. ("ANI"), is one of
the largest privately held suburban newspaper publishing companies in the United
States.  Garden State, founded in March 1985 by William Dean Singleton and
Richard B. Scudder, currently owns and operates 26 market dominant daily and 69
weekly newspapers in eight states (including suburban markets in close proximity
to the San Francisco Bay area, Los Angeles, New York City, Philadelphia, and
Boston). The Company's principal sources of revenue are advertising and
circulation sales. Other sources of revenue include commercial printing and
electronic media operations. The Company's newspapers had a combined daily and
Sunday paid circulation of approximately 821,000 and 774,000 respectively,
including the July 31, 1997, acquisition of THE SUN published in Lowell,
Massachusetts (the "Lowell Acquisition"), as of March 31, 1997. The Company had
revenue and EBITDA of $302.9 million and $68.6 million, respectively, for fiscal
1997.

    Garden State's newspapers are geographically diverse and generally
positioned in markets with limited direct competition for local newspaper
advertising. Management believes the Company's markets, taken as a whole, have
above average population and sales growth potential. The Company's newspapers
are established franchises with strong local identities and often serve as the
primary source of local news and information in the communities they serve. The
Company's newspapers address the specific needs of the community, providing a
unique combination of social and economic services in a way in which only they
can provide, making them an attractive purchase for both the reader and the
advertiser.

    Garden State has grown significantly through internal growth and by making
strategic acquisitions in markets which have above average growth potential. The
Company's main 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
which 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 which can be
clustered, allowing the Company to achieve greater revenue and EBITDA growth
while reducing its leverage ratio (as defined in the Company's Bank Credit
Agreement).

    Management believes that one of the keys to the Company's improved
financial position and future growth prospects is the successful implementation
of its clustering and acquisition strategy. Implementation of this strategy may
include selective dispositions from time to time. Since May 31, 1994, the
Company has acquired 18 daily and 23 weekly newspapers for $322.9 million.
During the same period, the Company disposed of four daily and nine weekly
newspapers for a combined $122.1 million, resulting in realized pre-tax gains of
$49.6 million. These same acquisitions and dispositions would have resulted in a
net increase in debt of $200.8 million if such transactions had occurred on June
30, 1997, and pro forma net EBITDA of $46.4 million for the year then ended,
representing a debt to EBITDA ratio of 4.3x. Combined with internal growth, the
aforementioned acquisitions and dispositions have resulted in revenue and EBITDA
growth from $186.6 million and $37.3 million in fiscal 1994 to $302.9 million
and $68.6 million in fiscal 1997, respectively, which has allowed the Company to
reduce its leverage ratio from 6.0x at June 30, 1994 to 4.5x at June 30, 1997.
Furthermore, management believes that its cluster acquisitions and its selected
dispositions of newspapers (those which had limited growth prospects and no
longer fit a cluster strategy) have positioned the Company to achieve greater
internal growth in the future than it would have otherwise been able to achieve.


                                          1

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    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 pre-existing local newspapers 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 which only it can
provide, making it attractive for both consumers and advertisers.

    Sizeable weekly newspapers are generally found in and around metropolitan
areas rather than in smaller towns and cities.  Suburban weeklies, such as the
weekly newspapers operated by the Company's subsidiary, North Jersey Newspaper
Company, 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.

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 1996 accounted for more than 47.6% of
all local media advertising expenditures in the United States. In addition, in
calendar year 1996 U. S. newspaper advertising expenditures reached an all time
high of approximately $38.2 billion, representing a compounded annual growth
rate of 6.1% since 1980. In the first six months of calendar 1997, newspaper
advertising revenues increased by 9.5%, representing a gain of approximately
$1.7 billion over the same six-month period in 1996.  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 112.1 million and
128.6 million in 1996, respectively, representing compounded annual growth rates
of 0.4% and 1.2%, respectively. Readers of daily and Sunday newspapers tend to
be more highly educated and have higher incomes than non-newspaper readers. For
instance, 71% of college graduates and 66% of households with income greater
than $40,000 are reported to read a daily newspaper, compared to 61% of high
school graduates and 52% of households with incomes 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 44.8 million and 60.8 million in 1996,
respectively, representing compounded annual growth rates of 2.7% and 0.7%,
respectively. Total reported daily national circulation, including evening
editions, however, declined from 62.2 million in 1980 to 57.0 million in 1996,
or 0.5% annually. This decrease can be directly attributable to the declining
national circulation of evening newspapers, which is reported to have decreased
from 32.8 million in 1980 to 12.2 million in 1996, or 6.0% annually, as a result
of an inability to compete with existing morning newspapers and from increased
competition by evening broadcast news programming and specialized cable
programming such as CNN and Headline News. 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.


                                          2

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    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 Domestic
Product ("GDP") in every calendar year since 1993 and, in calendar year 1996,
newspaper advertising spending grew 5.8% while the GDP grew only by 4.5%.

RECENT ACQUISITIONS & DISPOSITIONS

    ACQUISITIONS:

    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.

    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.

    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.

    On November 18, 1994, the Company acquired from an affiliate substantially
all the assets used in the publication of the GLOUCESTER COUNTY TIMES and
TODAY'S SUNBEAM, daily newspapers distributed in Woodbury and Salem, New Jersey,
respectively, for $9.0 million in cash and the assumption of subordinated debt
with a discounted value of $1.9 million, which is due to certain shareholders of
ANI.

    DISPOSITIONS:

    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.


                                          3

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    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.

    On August 1, 1994, the Company sold substantially all the assets used in
the publication of the BRISTOL PRESS and three weekly newspapers located in
Bristol, Connecticut, and a covenant not to compete for $14.5 million in cash.
The sale resulted in a fiscal year 1995 pre-tax gain of approximately $4.2
million.

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 circulation, year
    over year, on a combined basis (excluding the effects of acquisitions).


                                          4

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    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 minimal 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) and its buying power as
    the 13th largest newspaper group in the United States in terms of
    circulation as of September 30, 1996.  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 two and one-half to three 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 two-thirds of the
    Company's annual newsprint consumption for fiscal 1998 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, 1997, all the Company's newspapers, except certain recent
    acquisitions, (all but one of which are expected to be converted by
    December 1997), were printed using a 50-inch web width.

    STRATEGIC TECHNOLOGICAL INVESTMENTS.  In the past, MNG has tested the
    electronic delivery of news and advertising to consumers through websites
    at Alameda Newspaper Group and Denver Newspapers, Inc., an affiliate of
    Garden State and owner of THE DENVER POST ("Denver Newspapers"). Based on
    the success of its initial online projects and the rate at which electronic
    advertising as a whole is beginning to grow, MNG established MediaNEWS
    Technologies ("MNT") to develop and maintain websites for each of the
    Company's daily newspapers. MNT is currently developing websites to provide
    an online editorial presence and full online classified services for each
    of the Company's daily newspapers. The Company expects that it will have
    all its daily newspapers online by March 31, 1998. Although the Company
    believes that providing an online product service is important to
    broadening the presence of the newspapers in the communities served and
    ultimately to 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 poised to respond and to benefit from any
    changes in the manner in which news and information are delivered in the
    future.

    As a result of the implementation of the operating strategy described
above, management believes the Company is positioned to continue to achieve
internal growth. The Company may, from time to time, seek strategic or targeted
newspaper acquisitions and dispositions such as the recently completed Lowell
Acquisition. The Company continually reviews newspaper acquisition candidates
that it believes are underperforming in terms of operating cash flows but have
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.


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MEDIANEWS GROUP, INC.'S, MANAGEMENT OF NEWSPAPER OPERATIONS

    MNG provides certain corporate services to Garden State and other newspaper
companies controlled by Messrs. Singleton and Scudder, which provide the Company
the economic efficiencies of sharing corporate overhead with other newspaper
companies.  Garden State has engaged MNG to operate and manage its business
affairs and its 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, and MNG earns only a nominal profit.

    Services provided by MNG to the Company include accounting, tax, merger and
acquisition, newsprint purchasing, advertiser contracts and relations
management, human resource and labor relations, debt administration, budget and
operating plan review, cash management and some retail advertising billing
services. In addition, MNT, a division of MNG, provides electronic media
services, including website development and maintenances, to each of the
Company's daily newspapers.  A significant portion of MNG's time and resources
are devoted to the Company's affairs. Messrs. Singleton and Scudder currently
plan to use Garden State and its subsidiaries as the principal vehicle to
acquire additional daily and weekly newspapers in the future, to the extent
permitted by debt covenants and such acquisitions meet the Company's investment
criteria.

    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.

NEWSPAPER PROPERTIES

    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 Oakland,
California, and five 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,
MILBRAE RECORD PROGRESS, DALY CITY RECORD/BRISBANE BEE, TIMES WEEKEND and THE
COASTSIDE CHRONICLE on Saturday. The Alameda Newspaper Group had total daily and
Sunday paid circulation of approximately 234,000 and 196,000 as of March 31,
1997.

    SAN GABRIEL VALLEY NEWSPAPER GROUP.  The San Gabriel Valley Newspaper Group
is located in West Covina, California, approximately 10 miles east of Los
Angeles, California, and publishes three morning daily newspapers.  The San
Gabriel Valley Newspaper Group consists of the PASADENA STAR-NEWS, SAN GABRIEL
VALLEY TRIBUNE, and WHITTIER DAILY NEWS. These newspapers cover the cities of
Pasadena, West Covina and Whittier, California.  The San Gabriel Valley
Newspaper Group also publishes the HIGHLANDER newspapers, CHEERS, CLASS FORCE,
THE STAR, WHITTIER REVIEW, and THE SHOPPER, weekly newspapers distributed in and
around these same cities.  The San Gabriel Valley Newspaper Group had total
daily and Sunday paid circulation of approximately 119,500 and 120,000,
respectively, as of March 31, 1997.

    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


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Newspaper Company also publishes the WEEKLY RECORD each Tuesday. The York
Newspaper Company had a daily and Sunday paid circulation of approximately
83,000 and 93,000, respectively, as of March 31, 1997.

    NORTH JERSEY NEWSPAPERS COMPANY.  North Jersey Newspapers Company is
located in Passaic, New Jersey, approximately 15 miles west of New York City,
and publishes a morning daily newspaper, the HERALD NEWS, seven days a week, and
30 weekly newspapers. The HERALD NEWS had a daily and Sunday paid circulation of
approximately 55,000 and 41,000, respectively, as of March 31, 1997. The
weeklies, most of which are free distribution publications in Bergen, Warren,
Union, Middlesex and Passaic Counties, have a midweek and weekend distribution
of approximately 680,000 and 150,000, respectively, as of March 31, 1997.

    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, at March 31, 1997.

    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 three
weekly newspapers: THE BETHLEHEM STAR, TWO RIVERS SHOPPING TIMES 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, 1997.

    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 30,500 and 35,000, respectively, as of March 31,
1997.

    WOODBURY.  The GLOUCESTER COUNTY TIMES is located in Woodbury, New Jersey,
approximately 15 miles south of Philadelphia, Pennsylvania, and publishes an all
day 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 as of
March 31, 1997.

    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 22,000 and 22,500, respectively, as of March 31 1997.

    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 two weekly newspapers, THE BUYER'S GUIDE
and ON THE MARKET, which are distributed in and around the areas surrounding
Eureka, California. The TIMES-STANDARD had daily and Sunday circulation of
approximately 21,500 and 23,000, respectively, as of March 31, 1997.

    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, 1997.


                                          7

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    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 and 20,500, at March 31, 1997, respectively.

    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 two weekly newspapers: NORTH COUNTY LEADER
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 19,500 and 20,000, respectively, as of March
31, 1997.

    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. In addition, THE DAILY NONPAREIL also publishes two weekly
newspapers: THE MIDLANDS SHOPPER GUIDE and THE POTTAWATOMIE BULLETIN. At March
31, 1997, THE DAILY NONPAREIL had daily and Sunday paid circulation of
approximately 16,000 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 Sunday
circulation of approximately 11,000 and 12,500, respectively, as of March 31,
1997.

    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 10,000
as of March 31, 1997.

    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 had daily circulation of
approximately 9,000 as of March 31, 1997.

    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, 1997.

    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 and Sunday circulation of approximately 8,000 as of March 31,
1997.

    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, 1997.  The
Graham Leader also publishes the LAKE COUNTRY SUN and the LAKE COUNTRY SHOPPER
each Thursday.  In addition, the  JACKSBORO GAZETTE-NEWS and THE JACK COUNTY
HERALD are weekly newspapers published each Monday and Thursday, respectively.
Graham Newspapers recently purchased THE OLNEY ENTERPRISE, a weekly newspaper.


                                          8

<PAGE>

ADVERTISING AND CIRCULATION REVENUES

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

    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 revenue to
total revenues for fiscal years 1997, 1996, and 1995 were as follows:

                                       Fiscal year ended June 30,
                                       ---------------------------
                                        1997        1996    1995
                                       ------     -------  ------

    Retail . . . . . . . . . . . .        42%        44%      47%
    National . . . . . . . . . . .         3          3        3
    Classified . . . . . . . . . .        35         34       34
    Circulation. . . . . . . . . .        16         16       14
    Other. . . . . . . . . . . . .         4          3        2
                                         100%       100%     100%
                                         ----       ----     ----
                                         ----       ----     ----

    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. In addition, circulation
grew at a higher rate as a result of price increases in fiscal 1996 associated
with higher newsprint prices.

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 1997, 1996 and
1995, the Company consumed approximately 76,000, 62,400 and 61,600 tons of
newsprint, respectively, and during the same periods incurred newsprint expense
of approximately $41.1 million, $42.5 million and $30.5 million, respectively.
Newsprint expense as a percentage of revenue for fiscal year 1997, 1996 and 1995
was 13.6%, 18.5% and 14.3%, respectively.  Newsprint expense varies between
years because of fluctuations in prices and consumption.  Newsprint expense as a
percentage of revenue decreased in fiscal 1997 over fiscal 1996 because of a
decrease of approximately 25.0% in the average cost per ton of newsprint
consumed. The increase between 1996 and 1995 was due to an increase of
approximately 37.6% in the average cost per ton of newsprint consumed at all of
the Company's newspapers.

    The steady increase in newsprint prices came to a halt in the second
quarter of calendar 1996 and, beginning in May, 1996, newsprint suppliers began
lowering prices.  From May, 1996 to December, 1996, the discounts offered by
newsprint suppliers continued to accelerate as newsprint supply outpaced demand.
Believing that newsprint demand was beginning to strengthen, several newsprint
suppliers announced a $75 per metric ton increase in newsprint effective March
1, 1997, which was only partially successful as it has taken the newsprint
suppliers several months to obtain the full $75 per ton increase and not all
publishers, including the Company, are currently paying the full increase.
However, because of an industry wide year-over-year increase in newsprint
consumption and a strike at Fletcher Challenge, several suppliers have announced
a $35 to $40 per ton increase effective October 1, 1997, which would bring
average transaction prices to approximately $600 per metric ton on the East
Coast and $610 per metric ton on the West Coast.  To hedge the historically
volatile and cyclical nature of newsprint prices, MNG has entered into fixed
price contracts with certain of its newsprint suppliers. MNG


                                          9

<PAGE>

currently has 86,000 tons of newsprint available under these fixed price
contracts with a weighted average price of $532 per metric ton over the next two
and one-half to three years. MNG expects to allocate approximately 60,000 metric
tons of the fixed price newsprint for fiscal 1998 to the Company, with the
remaining being allocated to Denver Newspapers. These fixed price contracts and
the allocations thereunder currently allow Garden State to purchase the majority
of its newsprint at prices below the announced October 1, 1997, price increase,
as well as below current prices. Accordingly, announced and future newsprint
price increases during the periods of the fixed price contracts are not expected
to have a significant impact on the Company's future cash flows from operations.
While there can be no assurance that Garden State will receive the above
allocations under the fixed price contracts in fiscal 1998 and thereafter, based
on current circumstances, management does not expect actual allocations to be
materially different from those currently planned.

EMPLOYEE RELATIONS

    The Company employs approximately 3,100 full-time and 1,600 part-time
employees, of which approximately 600 are unionized.  There has never been a
strike or work stoppage against any of the Company's newspapers during the
Company's ownership, and the Company believes that its relations with its
employees are generally good.

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.

COMPETITION

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

ELECTRONIC MEDIA

    Many newspaper companies have begun 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 or auto 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



                                          10

<PAGE>

competitive threat today. However, as the issues mentioned above are resolved,
advertising on the world wide web will likely 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 a world wide 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 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. The Company expects to have websites
developed for all of its daily newspapers by March 31, 1998.

ITEM 2.  PROPERTY

    The Company's production facilities are, in most cases, complete newspaper
and office facilities.  The principal operating facilities owned by the Company
are located in Hayward, San Mateo, Union City, West Covina, Whittier and Eureka,
California; Council Bluffs, Iowa; Passaic, Butler, Westwood, Paramus, Bridgeton
and Woodbury, New Jersey; Easton, York, Hanover and Lebanon, Pennsylvania;
Pittsfield, North Adams 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 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.

    The Company and its subsidiaries 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.


                                          11

<PAGE>

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

    None.



                                       PART II

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

    None.





                                          12

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
 
                                                           FISCAL YEAR ENDED JUNE 30,
                                       ---------------------------------------------------------------------
                                        1997           1996           1995           1994           1993
                                       -------        -------        -------        -------        ---------
                                                                 (In thousands)
<S>                                     <C>            <C>            <C>            <C>            <C>
INCOME STATEMENT DATA(a):

Revenues
  Advertising . . . . . . . . . . .     $242,914       $197,954       $179,268       $159,653       $148,237
  Circulation . . . . . . . . . . .       48,451         39,930         30,517         25,198         25,642
  Other . . . . . . . . . . . . . .       11,537          7,546          3,260          1,792          1,931
                                         --------       --------       --------       --------       --------
Total Revenues. . . . . . . . . . .      302,902        245,430        213,045        186,643        175,810

Cost of Sales . . . . . . . . . . .      106,476         98,469         79,098         68,531         63,930
Selling, General and Administrative.     125,632        100,230         88,847         79,217         76,864
Management Fees . . . . . . . . . .        2,205          2,008          1,666          1,552          1,402
Depreciation and Amortization . . .       24,689         21,841         18,710         19,900         21,094
Interest Expense. . . . . . . . . .       31,903         27,414         25,806         24,623         24,064
Gain on Sale of Newspaper
 Property . . . . . . . . . . . . .       30,575          8,291          4,153          6,536             --
Income (Loss) Before Income Taxes
  and Extraordinary Items . . . . .       34,577           (752)           684        (15,253)       (13,794)
Net Income (Loss) . . . . . . . . .     $ 24,739       $  1,260       $  1,048       $ 18,716       $(10,992)

OTHER FINANCIAL DATA:
Capital Expenditures. . . . . . . .     $  8,836       $  8,079       $  4,284       $  3,380      $   6,564
Cash Flow from:
 Operating Activities . . . . . . .       31,438          8,658         22,876          7,039          4,971
 Investing Activities . . . . . . .     (148,657)         6,900          1,255         (9,840)       (12,734)
 Financing Activities . . . . . . .      121,748        (28,226)       (15,742)         3,105          7,841
EBITDA(b) . . . . . . . . . . . . .       68,589         44,723         43,434         37,343         33,614

BALANCE SHEET DATA:
Total Assets
Long-Term Debt and. . . . . . . . .     $414,431       $240,759       $250,500       $252,561       $263,073
 Capital Leases . . . . . . . . . .      350,822        210,589        223,847        235,147        231,341
Other Long-Term Liabilities and
 Obligations. . . . . . . . . . . .        5,488          8,101          5,042          3,852         14,051
Total Shareholder's Equity (Deficit)       3,947        (20,792)       (22,052)       (23,100)      (114,847)
 
</TABLE>

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



                                          13

<PAGE>

(a) Revenues and operating expenses are affected by the following acquisition
    and disposition transactions:

    (i)     On November 30, 1992, the Company acquired the circulation list and
            the rights to the name of THE OAKLAND TRIBUNE.  Concurrently, the
            former owner ceased its publication of THE OAKLAND TRIBUNE, and the
            Company began publishing its own version of THE OAKLAND TRIBUNE,
            using the existing facilities and resources of the Alameda
            Newspaper Group.  THE OAKLAND TRIBUNE, in its current form, has
            substantial editorial and advertising overlap with other
            publications of the Alameda Newspaper Group and, thus, is not run
            as a stand-alone newspaper.

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

    (iii)   On June 27, 1994, 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.

    (iv)    On August 1, 1994, 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
            approximately $6.2 million of revenue in fiscal 1994 and $0.5
            million of revenue prior to its sale in fiscal 1995.

    (v)     On November 18, 1994, 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 approximately $8.4 million of revenues to the Company
            in fiscal 1995.

    (vi)    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.

    (vii)   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.

    (viii)  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.

    (ix)    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.

    (x)     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, 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.

    (xi)    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.

(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.


                                          14

<PAGE>

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 Consolidated Financial Statements of Garden State and the notes thereto
appearing elsewhere herein.

OVERVIEW

    The Company is in the business of owning and operating market dominant
daily and weekly suburban 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 several 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.

    Since July 1, 1994, 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. The revenue
numbers provided below are from the actual results of operations of the
respective newspapers since their date of acquisition or prior to their
disposition.

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. These newspapers combined contributed approximately $7.9 million of
revenues in fiscal year 1997.

    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. These
newspapers contributed approximately $7.5 million of revenue in fiscal year 1997
prior to its sale and approximately $12.0 million in fiscal year 1996.

    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. These newspapers combined contributed
approximately $45.9 million in revenues in fiscal year 1997.


                                          15

<PAGE>

FISCAL 1996 TRANSACTIONS

    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 located in Johnstown, Pennsylvania.  The sale resulted in a pre-tax
gain of approximately $8.3 million in fiscal 1996.  THE TRIBUNE-DEMOCRAT and two
weekly newspapers contributed combined revenues of approximately $14.9 million
and approximately $17.4 million in fiscal years ended June 30, 1996 and 1995,
respectively. 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. The NORTH ADAMS TRANSCRIPT and the BRIDGETON NEWS
contributed combined revenues of $1.2 million in fiscal year 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.
These publications contributed combined revenues of approximately $4.0 million
in fiscal year 1996.

    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).  These publications contributed combined revenues of approximately
$21.6 million in fiscal year 1996.

FISCAL 1995 TRANSACTIONS

    On November 18, 1994, a subsidiary of the Company purchased substantially
all the assets used in the publication of the GLOUCESTER COUNTY TIMES and
TODAY'S SUNBEAM, daily newspapers published in Woodbury and Salem, New Jersey,
respectively.  These publications contributed combined revenues of approximately
$8.4 million in fiscal year 1995.

    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
located in Bristol, Connecticut.  The sale resulted in a pre-tax gain of
approximately $4.2 million in fiscal 1995.  The BRISTOL PRESS and the three
weekly newspapers contributed combined revenues of approximately $0.5 million
and $6.2 million in fiscal years ended June 30, 1995 and 1994.




                                          16

<PAGE>

RESULTS OF OPERATIONS

    Set forth below is certain summary historical financial data for fiscal
1997, 1996 and 1995, 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,
                                  ----------------------------------------     ----------------------------
                                     1997           1996           1995        1997 vs. 1996  1996 vs. 1995
                                  ----------     ----------     ----------     -------------  -------------
<S>                               <C>            <C>            <C>            <C>            <C>
Total Revenues. . . . . . . .      $302,902       $245,430       $213,045            23.4%        15.2%

Cost of Sales . . . . . . . .       106,476         98,469         79,098             8.1         24.5
Selling, General and
  Administrative. . . . . . .       125,632        100,230         88,847            25.3         12.8
Management Fees . . . . . . .         2,205          2,008          1,666             9.8         20.5
Depreciation and
  Amortization. . . . . . . .        24,689         21,841         18,710            13.0         16.7
Interest Expense. . . . . . .        31,903         27,414         25,806            16.4          6.2
Other . . . . . . . . . . . .         7,995          4,511          2,387            77.2         89.0
                                    --------        -------        -------         -------        -----
  Total Costs and Expenses. .       298,900        254,473        216,514            17.5         17.5
Net Income. . . . . . . . . .      $ 24,739       $  1,260       $  1,048         1,863.4%        20.2%

</TABLE>

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 Newspaper 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. Excluding the newspaper
operations described above, the Company's remaining newspaper operations ("same
newspaper basis") combined 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 are expected to show continued improvement throughout fiscal 1998.


                                          17

<PAGE>

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.
Excluding acquisition and disposition transactions, 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.  Excluding the acquisition and disposition transactions, 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
circulation.

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 Company's
credit facility 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.

NET INCOME

    Garden State recorded adjusted net income of approximately $24.7 million in
fiscal year 1997; however, 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 the
Company's senior notes, the Company recorded adjusted net income of $7.3
million, as compared to an adjusted net loss of $5.6 million in fiscal year
1996, as adjusted to exclude the gain on sale of the Johnstown Tribune
Publishing Company, the write-off of fees and other costs associated with the
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
offset by a $4.5 million increase in interest expense and a $3.1 million
reduction in tax benefits.


COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1996 AND 1995

REVENUES

    Revenues increased $32.4 million or 15.2% in fiscal year 1996 as compared
to fiscal year 1995.  The increase in revenue was primarily attributable to the
November 18, 1994, acquisition of the GLOUCESTER COUNTY TIMES and TODAY'S
SUNBEAM; the New England Newspapers acquisition; the March, 1996, acquisition of
the SAN MATEO COUNTY TIMES; and the April 30, 1996, acquisition of the NORTH
ADAMS TRANSCRIPT and BRIDGETON NEWS. Combined, the acquisitions discussed above
accounted for a $31.7 million increase in revenues in fiscal 1996. These revenue
increases were partially offset by a $3.1 million decline in revenue resulting
from the sale of the BRISTOL PRESS on August 1, 1994, and the sale of the
Johnstown Tribune Publishing Company on April 30, 1996.  Excluding the


                                          18

<PAGE>

newspaper operations described above, the Company's remaining newspaper
operations posted a combined increase in revenues of approximately $3.8 million
or 2.0%. All of the Company's newspapers were impacted by a soft retail market
in the last half of the Company's fiscal year; however, retail advertising at
Alameda Newspaper Group and North Jersey Newspapers Company was particularly
hard hit because of major retailers filing for bankruptcy and/or store closings
in their markets. The Company's newspapers located in the northeastern United
States were also affected by the heavy snow in the winter of 1996.  While retail
advertising declined slightly on a same newspaper basis, the Company experienced
3.9% and 7.5% growth in classified and circulation revenue, respectively.
Overall revenue growth, on a same newspaper basis, ranged from 0.4% to 10.2% for
fiscal year 1996 compared to fiscal year 1995.

COST OF SALES

    Cost of sales increased $19.4 million or 24.5% in fiscal 1996 compared to
fiscal 1995.  Approximately $12.3 million of the increase was attributable to
the aforementioned acquisitions.  However, this increase was offset in part by a
$0.8 million decrease in cost of sales resulting from the sale of the BRISTOL
PRESS and the Johnstown Tribune Publishing Company. Excluding acquisition and
disposition transactions, cost of sales increased approximately $7.9 million or
11.1%.  The increase in cost of sales at existing newspapers was entirely the
result of increased newsprint cost associated with a 43% increase in the average
cost per ton of newsprint for fiscal 1996 as compared to fiscal 1995. However,
the newsprint price increase was partially offset by an approximate 3,500 ton or
6.0% decrease in usage at the Company's existing newspapers, primarily
associated with efforts to conserve newsprint and the conversion to the 50-inch
web width at the majority of newspapers during fiscal 1996.  Excluding
newsprint, cost of sales on a same newspaper basis decreased $0.9 million in
fiscal 1996.

SELLING, GENERAL AND ADMINISTRATIVE

    Selling, general and administrative ("SG&A") expenses increased $11.4
million or 12.8% in fiscal 1996 compared to fiscal 1995.  The aforementioned
acquisitions resulted in SG&A expense increases of $11.7 million; however, this
was in part offset by a $1.3 million reduction in SG&A expense associated with
the sale of the BRISTOL PRESS and the Johnstown Tribune Publishing Company.
Excluding the acquisition and disposition transactions, SG&A expense increased
$1.0 million or 1%.  The small increase in SG&A expense at the Company's
existing newspapers was the result of the Company's continuing efforts to
control its operating expenses.

OTHER EXPENSE

    Other expense, net, increased $2.1 million as a result of writing off
approximately $1.1 million of fees and other costs associated with the Company's
term loan and revolving credit facility entered into on August 31, 1995, which
was used in the aforementioned August 31, 1995, and March, 1996, acquisitions.
Other expense also increased $0.3 million as a result of certain start-up costs
incurred in conjunction with the combination and integration of the SAN MATEO
COUNTY TIMES operations with those of Alameda Newspaper Group.

NET INCOME

    Garden State recorded net income of approximately $1.3 million in fiscal
1996; however, after excluding the gain on the sale of the Johnstown Tribune
Publishing Company, the write-off of fees and other costs associated with the
newly issued term loan and revolving credit facility and the SAN MATEO COUNTY
TIMES start-up costs, Garden State would have recorded an adjusted loss of $5.6
million compared to a fiscal 1995 adjusted loss of $3.1 million after adjusting
the loss to exclude the fiscal 1995 gain on sale of the BRISTOL PRESS of $4.2
million.  The increase in the adjusted net loss is primarily attributable to a
$1.9 million decrease in operating profit associated with an increase in
newsprint prices and depreciation and amortization expenses and a $1.6 million
increase in interest expense primarily associated with current year
acquisitions. The change in operating profit



                                          19

<PAGE>

and interest expense was offset by a $1.6 million increase in tax benefits, the
majority of which is associated with the sale of the Johnstown Tribune
Publishing Company.


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 its 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, 1997 COMPARED TO JUNE 30, 1996

    Net cash flows from operating activities were approximately $31.4 million
and $8.7 million for fiscal years ended June 30, 1997 and 1996, respectively.
The $22.7 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 ended June 30, 1996, which was partially offset by a $4.5
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 NON-PAREIL 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 acquistions and the
prepayment of its 10.89% Senior Notes compared to financing fees and expenses of
$1.1 million paid in fiscal 1996.

JUNE 30, 1996 COMPARED TO JUNE 30, 1995

    Net cash flows from operating activities were approximately $8.7 million
and $22.9 million for fiscal years 1996 and 1995, respectively.  The decrease in
cash flow from operating activities was primarily the result of negative
year-over-year change in the operating assets and liabilities of $11.7 million
and increased interest and debt expenses of $2.7 million. The majority of the
change was associated with an increase in accounts payable and accrued expenses
in 1995 largely caused by a one time $6.1 million increase in accrued interest,
combined with an increase in accounts receivable, net of the impact of the
acquisition and disposition transactions. A $1.3 million increase in operating
profit (excluding depreciation and amortization) partially offset the decline in
operating cash flow.


                                          20

<PAGE>

    Net cash flows from investing activities were $6.9 million and $1.3 million
for the fiscal years 1996 and 1995, respectively.  The $5.6 million increase was
a result of the Company receiving a net $5.5 million in proceeds from
acquisition and disposition transactions in fiscal 1995 as compared to a net of
$15.0 million related to the acquisition of the New England Newspapers and San
Mateo and the sale of the Johnstown Tribune Publishing Company in fiscal 1996.
The Company also increased capital spending in fiscal 1996 by $3.8 million,
primarily associated with the Alameda Newspaper Group press project and press
modifications associated with web width reductions.

    Net cash flows from financing activities were $(28.2) million and $(15.7)
million for fiscal years 1996 and 1995, respectively.  The decrease of $12.5
million was primarily attributable to the Company prepaying $47.0 million of
debt out of proceeds from the sale of the Johnstown Tribune Publishing Company
as well as approximately $13.0 million of paydowns in the normal course in
fiscal 1996 as compared to paydowns of approximately $14.0 million associated
with dispositions in fiscal 1995. Paydowns were offset partially by borrowings
of $37.3 million, the majority of which was borrowed in conjunction with the
previously discussed New England Newspapers and San Mateo acquisitions in fiscal
1996.

CAPITAL EXPENDITURES

    The Company has a capital expenditure plan (not including business
acquisitions) which includes normal maintenance capital expenditures of
approximately $1.5 million for fiscal 1998. In addition, the plan also
anticipates expenditures during fiscal 1998 of $2.7 million associated with
computer system upgrades and mailroom upgrades at several of the Company's
newspapers, all of which are expected to improve efficiencies and/or the quality
of the newspaper.  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 credit facility.

LIQUIDITY

    As of June, 1997, Garden State had approximately $22.0 million available
for borrowings under the RCB of the Garden State credit facility, excluding
approximately $5.0 million in letters of credit outstanding. Commitments under
the Garden State credit facility will also continue to reduce in accordance with
the terms disclosed in the June 30, 1997, Consolidated Financial Statements and
notes thereto appearing elsewhere herein. The Garden State instruments contain
covenants which, among other things, limit capital expenditures, require the
maintenance of certain financial ratios and place limitations on the payment of
dividends and other distributions.

    Effective with the completion of the Offering (as described below), the
Garden State credit facility will be amended. Such amendment will decrease the
interest rate on borrowings under the Garden State credit facility and provide
the Company with greater flexibility and liquidity. Terms of the proposed
amendment are described in the notes to the Consolidated Financial Statements.



                                          21
<PAGE>

PROPOSED OFFERING

    In September 1997, the Company anticipates issuing $200.0 million of Senior
Subordinated Notes due in 2009 (the "Offering"). The issuance of the Senior
Subordinated Notes will provide the Company with additional liquidity and
flexibility, as well as fixed rate long-term debt, at rates which the Company
currently believes are attractive.

    The following table sets forth, based on balances outstanding at June 30,
1997, after giving effect to borrowings associated with the Lowell
Acquisition and the Offering, the approximate expected scheduled maturities of
long-term debt of the Company for the periods presented. (In thousands)

              Fiscal                               In Thousands
              ------                               ------------

              1998 . . . . . . . . . . . . . . .      $   2,247
              1999 . . . . . . . . . . . . . . .          4,410
              2000 . . . . . . . . . . . . . . .          4,604
              2001 . . . . . . . . . . . . . . .          6,670
              2002 . . . . . . . . . . . . . . .         38,979
              Thereafter . . . . . . . . . . . .        351,442
                                                      ---------
                                                      $ 408,352
                                                      ---------
                                                      ---------

    The following table sets forth the annual commitment reductions for RCA,
RCB and RCC, as well as annual payments under Term A Loan, giving effect to the
amended Bank Credit Agreement. (Dollars in thousands)

<TABLE>
<CAPTION>
 
                                                                             TERM A
                                        RCA          RCB           RCC        LOAN
                                      -------      -------       -------    --------
         <S>                         <C>         <C>          <C>           <C>
         1998. . . . . . . . . . .   $  10,000   $      --     $  4,000     $     --
         1999. . . . . . . . . . .      31,000          --        7,500           --
         2000. . . . . . . . . . .      31,000          --        7,500           --
         2001. . . . . . . . . . .      31,000          --       12,000           --
         2002. . . . . . . . . . .      31,000          --       12,000        3,750
         Thereafter. . . . . . . .      33,000      27,000       33,000       11,250
                                     ---------   ---------    ---------    ---------
                                     $ 167,000   $  27,000    $  76,000    $  15,000
                                     ---------   ---------    ---------    ---------
                                     ---------   ---------    ---------    ---------
 
</TABLE>

    The net proceeds of the Offering, estimated to be approximately $195.0
million after deducting fees and expenses of the Offering, will be used to pay
off the outstanding balance of approximately $17.0 million and retire the bank
credit facility of NJNI, a subsidiary of the Company. Pending repayment of the
NJNI bank credit facility, which is required to occur within 90 days from the
date of issuance, such proceeds related thereto will be invested in cash
equivalents. The remainder will be used to prepay outstanding borrowings under
the Garden State credit facility. Subject to compliance with certain tests
contained in the Garden State credit facility, and after giving effect to the
Offering, there would be approximately $199.0 million available for borrowings,
of which $101.0 million would be available only for acquisitions.


                                          22

<PAGE>

NEAR TERM OUTLOOK

    The steady increase in newsprint prices came to a halt in the second
quarter of calendar 1996 and, beginning in May, 1996, newsprint suppliers began
lowering prices.  From May, 1996 to December, 1996, the discounts offered by
newsprint suppliers continued to accelerate as newsprint supply outpaced demand.
Believing that newsprint demand was beginning to strengthen, several newsprint
suppliers announced a $75 per metric ton increase in newsprint effective March
1, 1997, which was only partially successful as it has taken the newsprint
suppliers several months to obtain the full $75 per ton increase and not all
publishers, including the Company, are currently paying the full increase.
However, because of an industry wide year-over-year increase in newsprint
consumption, combined with a strike at Fletcher Challenge, several suppliers
have announced a $35 to $40 per ton increase as of October 1, 1997, which would
bring average transaction prices to approximately $600 per metric ton on the
East Coast and $610 per metric ton on the West Coast. If the price increase is
successful, the increase is not expected to have a significant impact on the
Company's future cash flows from operations, as the Company expects to purchase
approximately two-thirds of its fiscal 1998 newsprint requirements under fixed
price contracts at a weighted average price of approximately $532 per metric
ton. MNG has entered into fixed price contracts expiring over the next two and
one-half to three years on behalf of the Company and its affiliates. Such
contracts cover the purchase of approximately 86,000 metric tons per year, of
which 60,000 metric tons is expected to be allocated to the Company each year.
While there is no assurance that the Company will receive its full allocation
each year, based on current circumstances management does not expect the
Company's final allocation of such newsprint to be materially different from
that discussed above.

    Based upon current operations and after consideration of future newsprint
price reductions, management believes that the Company will have sufficient cash
flows from operations which, combined with the Garden State credit facility and
other resources available to the Company, will be adequate to fund scheduled
payment of principal and interest and to meet anticipated capital expenditure
and working capital requirements for at least the next twelve months.

    The Company and its subsidiaries may, from time to time, consider the
acquisition of daily and weekly newspapers, as favorable investment
opportunities are identified.  In the event an investment 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.


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 28).


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

    None.


                                          23

<PAGE>

                                       PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   Set forth below are the names, ages and titles as of June 30, 1997, and a
brief account of the business experience of each person who is a director,
executive officer or other significant employee of the Company.

         NAME                   AGE              TITLE
         ----                   ---              -----
Richard B. Scudder. . . . . .    84    Chairman of the Board and Director
William Dean Singleton. . . .    45    Vice Chairman, President, Chief
                                         Executive Officer and Director
Joseph J. Lodovic, IV . . . .    36    Executive Vice President and Chief
                                         Financial Officer
Anthony F. Tierno . . . . . .    52    Executive Vice President and Chief
                                         Operating Officer
E. Michael Fluker . . . . . .    60    Senior Vice President, Administration
Nicholas L. Lebra . . . . . .    49    Vice President and Director of Human
                                         Resources
Ronald A. Mayo. . . . . . . .    35    Vice President Finance and Controller
James L. McDougald. . . . . .    43    Treasurer
Howell E. Begle, Jr.. . . . .    53    Director, Assistant Secretary and
                                         General Counsel
Peter M. Miller . . . . . . .    48    Director

    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 Garden State 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 Garden State are
appointed by and serve at the pleasure of the Board of Directors.

BUSINESS EXPERIENCE

    RICHARD B. SCUDDER has served as Chairman of the Board and a Director of
Garden State since 1985.

    WILLIAM DEAN SINGLETON has served as Vice Chairman, President, Chief
Executive Officer and a Director of Garden State since 1985.

    JOSEPH J. LODOVIC, IV, 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 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 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 November,
1993.

    NICHOLAS L. LEBRA, JR. has served as Vice President and Director of Human
Resources of Garden State since 1985.

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


                                          24

<PAGE>

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

    HOWELL E. BEGLE, JR. was elected Director, General Counsel and Assistant
Secretary of Garden State in November 1996. Mr. Begle is Of Counsel to Verner,
Liipfert, Bernhard, McPherson and Hand, Chartered, which law firm is counsel to
the Company.

    PETER M. MILLER has served as a Director of Garden State since 1985.  From
1991 through 1994, Mr. Miller served as Senior Vice President of Marketing of
Environmental Technologies Corporation, a subsidiary of Envirotech Systems, Inc.
Mr. Miller is a son-in-law of Mr. Scudder.

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 direct or
allocated cash compensation exceeded $100,000 for services rendered to the
Company in fiscal 1997.

<TABLE>
<CAPTION>

NAME AND                               FISCAL    ANNUAL COMPENSATION     ALL OTHER
PRINCIPAL POSITION                      YEAR        SALARY    BONUS     COMPENSATION
------------------                      ----        ------    -----     ------------
<S>                                     <C>      <C>        <C>         <C>
William Dean Singleton(a)               1997     $ 250,000  $ 100,000     $  3,610
Vice Chairman, President                1996       100,000     80,000          --
 and Chief Executive Officer. . . .     1995       100,000    100,000          --

Joseph J. Lodovic, IV(b),(c)
Executive Vice President,               1997     $ 165,000  $  94,700         3,390
 Chief Financial Officer. . . . . .     1996       125,550         --        31,900

Anthony F. Tierno                       1997     $ 200,005  $   7,500     $  10,396
Executive Vice President                1996       192,503      2,500         9,620
 and Chief Operating Officer. . . .     1995       120,979     12,500         5,117
</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.
  (b)    A portion of Mr. Lodovic's compensation is allocated by MNG to other
         affiliated companies which it manages. In fiscal year 1995, total
         compensation allocated to Garden State was less than $100,000.
  (c)    All Other Compensation in 1996 includes a relocation bonus.

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 $550,000 (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.  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).


                                          25
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

    Decisions regarding annual compensation of executives in excess of $175,000
are made by the Board of Directors of Garden State.  In addition, the Board of
Directors of Garden State 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 Garden State consists of 1,000 shares of
common stock, all of which are held by Affiliated Newspapers Investments, Inc.
The Singleton Shareholder Group and the Scudder Shareholder Group, as sole
holders of the ANI common stock (other than Class B common stock representing
7.5% of the capital stock of the Company), are each in effect entitled to elect
one-half of all of the members of the Board of Directors of ANI and Garden
State, and to otherwise control both ANI and Garden State, including as to
mergers, liquidations and asset acquisitions and dispositions.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

MEDIANEWS GROUP, INC.

    Garden State has 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.  All 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 will be allocated based on revenue of the newspapers for which such
services are provided. As of June 30, 1997, the Company had not been charged any
fees associated with MNT; however, beginning in fiscal year 1998, MNT will
charge a portion of its operating expenses to the Company. MNT charges to the
Company for fiscal year 1998 are expected to be approximately $1.5 million. The
Company will record electronic media advertising revenues 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
1997 the Company paid approximately $2.2 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.


                                          26

<PAGE>

    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.  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 Auditors is filed as a part of this Report (see page
         28).

    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 Auditors is filed as part of the
         Report (see page 28).

    3.   Exhibits

         The Exhibits listed in the accompanying index to exhibits are filed as
         a part of this annual report. (See page 71).

   (b)   Reports on Form 8-K

         The Company filed a Form 8-K on March 6, 1997, and a Form 8-K/A on May
         14, 1997, regarding the purchase of the SENTINEL & ENTERPRISE, LEBANON
         DAILY NEWS and THE DAILY NONPAREIL.



                                          27

<PAGE>

                            GARDEN STATE NEWSPAPERS, INC.
                              ITEMS 8, 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:

GARDEN STATE NEWSPAPERS, INC.
                                                                          PAGE
                                                                          ----

Report of Independent Auditors. . . . . . . . . . . . . . . . . . . .      29
Consolidated Balance Sheets as of June 30, 1997
  and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      30
Consolidated Statements of Operations for the
 Years Ended June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . .      32
Consolidated Statements of Changes in Shareholder's Equity (Deficit) 
 for the Years Ended June 30, 1997, 1996 and 1995 . . . . . . . . . .      33
Consolidated Statements of Cash Flows for the Years Ended
 June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . .      34
Notes to Consolidated Financial Statements. . . . . . . . . . . . . .      35


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

Schedule II   Valuation and Qualifying Accounts. . . . . . . . . . . .     49

    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.


GARDEN STATE INVESTMENTS, INC.
                                                                          PAGE
                                                                          ----

Report of Independent Auditors. . . . . . . . . . . . . . . . . . . .      50
Consolidated Balance Sheets as of June 30, 1997
  and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      51
Consolidated Statements of Operations for the
 Years Ended June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . .      53
Consolidated Statements of Changes in Shareholder's Deficit for the
 Years Ended June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . .      54
Consolidated Statements of Cash Flows for the Years Ended
 June 30, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . .      55
Notes to Consolidated Financial Statements. . . . . . . . . . . . . .      56




                                          28

<PAGE>

                            REPORT OF INDEPENDENT AUDITORS


The Board of Directors
Garden State Newspapers, Inc.


    We have audited the accompanying consolidated balance sheets of Garden
State Newspapers, Inc. and subsidiaries (the "Company") as of June 30, 1997 and
1996, and the related consolidated statements of operations, changes in
shareholder's deficit, and cash flows for each of the three years in the period
ended June 30, 1997.  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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Garden State Newspapers, Inc. and subsidiaries at June 30, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended June 30, 1997, 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 22, 1997



                                          29

<PAGE>

                    GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
 
                                                                                  June 30,
                                                                          -------------------------
                                                                             1997           1996
                                                                          ---------      ----------
                                                                               (In thousands)
              ASSETS
<S>                                                                       <C>            <C>
CURRENT ASSETS
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .       $  8,944       $  4,415
  Trade accounts receivable, less allowance for doubtful accounts of
   $4,252 and $2,426 at June 30, 1997 and 1996, respectively. . . . .         32,849         24,888
  Receivable from affiliates. . . . . . . . . . . . . . . . . . . . .          1,968          1,523
  Other receivables . . . . . . . . . . . . . . . . . . . . . . . . .          1,353          1,201
  Inventories of newsprint and supplies . . . . . . . . . . . . . . .          6,170          3,966
  Prepaid expenses and other assets . . . . . . . . . . . . . . . . .          3,295          2,780
                                                                            --------       --------
     TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . .         54,579         38,773

PROPERTY, PLANT AND EQUIPMENT
  Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          8,307          5,168
  Buildings and improvements. . . . . . . . . . . . . . . . . . . . .         43,462         32,687
  Machinery and equipment . . . . . . . . . . . . . . . . . . . . . .        126,450         87,522
                                                                            --------       --------
       Total Property, Plant and Equipment. . . . . . . . . . . . . .        178,219        125,377
  Less accumulated depreciation and amortization. . . . . . . . . . .         57,670         50,027
                                                                            --------       --------
       NET PROPERTY, PLANT AND EQUIPMENT. . . . . . . . . . . . . . .        120,549         75,350

OTHER ASSETS
  Investment in partnership . . . . . . . . . . . . . . . . . . . . .          6,365          6,369
  Subscriber accounts, less accumulated amortization of
    $45,808 and $48,594 at June 30, 1997 and 1996, respectively . . .         69,960         44,220
  Excess of cost over fair value of net assets acquired, less
    accumulated amortization of $12,718 and $13,267 at
    June 30, 1997 and 1996, respectively  . . . . . . . . . . . . . .        154,294         65,715
  Covenants not to compete and other identifiable intangible
    assets, less accumulated amortization of $15,861 and
    $19,673 at June 30, 1997 and 1996, respectively . . . . . . . . .          6,684          8,461
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,000          1,871
                                                                            --------       --------
     TOTAL OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . .        239,303        126,636
                                                                            --------       --------

TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .       $414,431       $240,759
                                                                            --------       --------
                                                                            --------       --------
 
</TABLE>

                   SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                          30

<PAGE>

<TABLE>
<CAPTION>
 
                                                                       June 30,
                                                                -------------------------
                                                                    1997          1996
                                                                ----------     ----------
                                                                  (In thousands, except
                                                                        share data)

         LIABILITIES AND SHAREHOLDER'S DEFICIT
<S>                                                              <C>            <C>
CURRENT LIABILITIES
  Trade accounts payable. . . . . . . . . . . . . . . . . .      $  6,286       $  5,884
  Accrued employee compensation . . . . . . . . . . . . . .         7,208          4,498
  Accrued interest. . . . . . . . . . . . . . . . . . . . .         7,830          8,114
  Other accrued liabilities . . . . . . . . . . . . . . . .         8,676          5,562
  Unearned income . . . . . . . . . . . . . . . . . . . . .        10,746          7,048
  Income taxes. . . . . . . . . . . . . . . . . . . . . . .         1,308            373
  Current portion of long-term debt . . . . . . . . . . . .         6,247         11,190
                                                                 --------       --------
     TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . .        48,301         42,669

OBLIGATIONS UNDER CAPITAL LEASES. . . . . . . . . . . . . .         7,477          7,520

LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . .       337,098        191,879

OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . .         5,092          7,728

DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . .        12,516         11,755

SHAREHOLDER'S EQUITY (DEFICIT)
 Common stock, par value $1.00 per share; authorized 1,000
  shares; 1,000 shares issued and outstanding . . . . . . .             1              1
 Additional paid-in-capital . . . . . . . . . . . . . . . .        78,570         78,570
 Deficit. . . . . . . . . . . . . . . . . . . . . . . . . .       (74,624)       (99,363)
                                                                 --------       --------
     TOTAL SHAREHOLDER'S EQUITY (DEFICIT) . . . . . . . . .         3,947        (20,792)
                                                                 --------       --------





TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY
(DEFICIT) . . . . . . . . . . . . . . . . . . . . . . . . .      $414,431       $240,759
                                                                 --------       --------
                                                                 --------       --------
 
</TABLE>
                    SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




                                          31

<PAGE>

                    GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS

                                            Fiscal Years Ended June 30,
                                       ------------------------------------
                                         1997          1996          1995
                                       --------      --------      --------

                                                  (In thousands)

REVENUES
 Advertising. . . . . . . . . . . .    $242,914      $197,954       $179,268
 Circulation. . . . . . . . . . . .      48,451        39,930         30,517
 Other. . . . . . . . . . . . . . .      11,537         7,546          3,260
                                       ---------     --------       --------
   TOTAL REVENUES . . . . . . . . .     302,902       245,430        213,045

COSTS AND EXPENSES
 Cost of sales. . . . . . . . . . .     106,476        98,469         79,098
 Selling, general and administrative    125,632       100,230         88,847
 Management fees. . . . . . . . . .       2,205         2,008          1,666
 Depreciation and amortization. . .      24,689        21,841         18,710
 Interest expense . . . . . . . . .      31,903        27,414         25,806
 Other. . . . . . . . . . . . . . .       7,995         4,511          2,387
                                       ---------     --------       --------
   TOTAL COSTS AND EXPENSES . . . .     298,900       254,473        216,514

GAIN ON SALE OF NEWSPAPER PROPERTY.      30,575         8,291          4,153
                                       ---------     --------       --------

INCOME (LOSS) BEFORE INCOME TAXES
 AND EXTRAORDINARY LOSS . . . . . .      34,577          (752)           684
INCOME TAX BENEFIT (EXPENSE). . . .      (1,066)        2,012            364
                                       ---------     --------       --------

INCOME BEFORE EXTRAORDINARY . . . .
 LOSS . . . . . . . . . . . . . . .      33,511         1,260          1,048

EXTRAORDINARY LOSS (net of taxes
 of $689) . . . . . . . . . . . . .       8,772            --             --
                                       ---------     --------       --------

NET INCOME. . . . . . . . . . . . .    $ 24,739      $  1,260       $  1,048
                                       ---------     --------       --------
                                       ---------     --------       --------


                   SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.




                                          32

<PAGE>

                    GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY (DEFICIT)

                                      ADDITIONAL                TOTAL
                             COMMON    PAID-IN-             SHAREHOLDER'S
                              STOCK    CAPITAL    DEFICIT  EQUITY (DEFICIT)
                              -----    -------    -------  ---------------

                                           (In thousands)

BALANCE AT JUNE 30, 1994. . .   $1     $ 78,570  $(101,671)      $(23,100)
  Net income. . . . . . . . .    --          --      1,048          1,048
                                ----   --------  ---------       --------
BALANCE AT JUNE 30, 1995. . .    1       78,570   (100,623)       (22,052)
  Net income. . . . . . . . .    --          --      1,260          1,260
                                ----   --------  ---------       --------
BALANCE AT JUNE 30, 1996. . .    1       78,570    (99,363)       (20,792)
  Net income. . . . . . . . .    --          --     24,739         24,739
                                ----   --------  ---------       --------
BALANCE AT JUNE 30, 1997. . .   $1      $78,570  $ (74,624)      $  3,947
                                ----   --------  ---------       --------
                                ----   --------  ---------       --------


                   SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.




                                          33



<PAGE>

                    GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended June 30,
                                                                        ---------------------------------------
                                                                           1997          1996            1995
                                                                        ----------    -----------     ---------
                                                                                     (In thousands)
<S>                                                                    <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income. . . . . . . . . . . . . . . . . . . . . . . . .        $ 24,739       $  1,260        $ 1,048
    Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation  . . . . . . . . . . . . . . . . . . . . . .          10,707          9,762          7,216
      Amortization. . . . . . . . . . . . . . . . . . . . . . .          12,775         11,499         10,804
      Gain on sale of newspaper assets. . . . . . . . . . . . .         (30,579)        (8,621)        (4,137)
      Provision for losses on accounts receivable . . . . . . .           3,092          2,510          2,876
      Amortization of debt discount . . . . . . . . . . . . . .           2,060          1,696          1,577
      Debt issue cost and repurchase premiums . . . . . . . . .          13,969          1,092             --
      Distributions in excess of (less than)
        earnings from investments in partnership. . . . . . . .              23           (610)           (28)
      Deferred income tax benefit . . . . . . . . . . . . . . .          (3,226)        (2,529)          (793)
      Change in operating assets and liabilities:
        Increase in accounts receivable . . . . . . . . . . . .          (5,408)        (3,403)        (2,150)
        (Increase) decrease in inventories. . . . . . . . . . .          (1,163)         1,799         (2,469)
        (Increase) decrease in prepaid expenses and
           other assets . . . . . . . . . . . . . . . . . . . .            (455)          (558)           717
        Increase (decrease) in accounts payable and
          accrued liabilities . . . . . . . . . . . . . . . . .           5,139         (5,047)         4,880
        Increase in unearned income . . . . . . . . . . . . . .             746             22          1,504
        (Increase) decrease in affiliate account balances . . .            (445)           303            701
        Change in other assets and liabilities. . . . . . . . .            (366)          (517)         1,130
        Other . . . . . . . . . . . . . . . . . . . . . . . . .            (170)            --             --
                                                                       --------       --------      ---------
    NET CASH FLOWS FROM OPERATING ACTIVITIES. . . . . . . . . .          31,438          8,658         22,876

CASH FLOWS FROM INVESTING ACTIVITIES:
    Sale of newspaper property and other assets
    Business acquisitions . . . . . . . . . . . . . . . . . . .          47,776         50,647         14,864
    Purchase of machinery and equipment . . . . . . . . . . . .        (187,597)       (35,668)        (9,325)
    NET CASH FLOWS FROM INVESTING ACTIVITIES. . . . . . . . . .          (8,836)        (8,079)        (4,284)
                                                                       --------       --------      ---------
                                                                       (148,657)         6,900          1,255
CASH FLOW FROM FINANCING ACTIVITIES:
    Issuance of long-term debt, net
    Equity contribution . . . . . . . . . . . . . . . . . . . .         259,450         37,300             --
    Reduction of long-term debt . . . . . . . . . . . . . . . .              --             --             --
    Reduction of non-operating liabilities. . . . . . . . . . .        (120,773)       (60,240)       (14,007)
    Debt issuance cost and repurchase premiums. . . . . . . . .          (2,960)        (4,194)        (1,735)
    NET CASH FLOWS FROM FINANCING ACTIVITIES. . . . . . . . . .         (13,969)        (1,092)            --
                                                                       --------       --------      ---------
                                                                        121,748        (28,226)       (15,742)
                                                                       --------       --------      ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT. . . . . . . . . . . . . . . . . .           4,529        (12,668)         8,389
   BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS AT END OF YEAR. . . . . . . . . . . .           4,415         17,083          8,694
                                                                       --------       --------      ---------

                                                                       $  8,944       $  4,415      $  17,083
                                                                       --------       --------      ---------
                                                                       --------       --------      ---------
</TABLE>
 


                   See notes to consolidated financial statements.


                                          34
<PAGE>

                         GARDEN STATE NEWSPAPERS, 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 Garden State
Newspapers, Inc. (the "Company" or "Garden State"), Garden State Investments,
Inc. ("GSI"), a wholly owned subsidiary of Garden State, and its subsidiaries.
All intercompany accounts have been eliminated.  The Company is a wholly owned
subsidiary of Affiliated Newspapers Investments, Inc. ("ANI").

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 consolidated 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.



                                          35
<PAGE>

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

LONG-LIVED ASSETS

    The carrying value of long-lived assets is reviewed annually; if at any
time the facts or circumstances at any of the Company's individual newspaper
operations indicate impairment of long-lived asset values, as a result of a
continual decline 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).

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 files a consolidated tax return with its parent, ANI; however,
the Company accounts for income taxes on a separate return basis 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 GSI,
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 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 consolidated 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 $6.4 million at each of the fiscal years ended June
30, 1997 and 1996. The Agency made cash distributions to YNI in the amount of
$7.2 million, $4.9 million and $4.8 million in fiscal years 1997, 1996 and 1995.


                                          36
<PAGE>

NOTE 2:  INVESTMENT IN PARTNERSHIP (CONTINUED)

    In September, 1996, YNI 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

    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.

    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.

    On August 31, 1995, the Company acquired 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.


                                          37
<PAGE>

NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

    On November 18, 1994, a subsidiary of the Company purchased substantially
all the assets used in the publication of the GLOUCESTER COUNTY TIMES and
TODAY'S SUNBEAM, daily newspapers distributed in Woodbury and Salem, New Jersey,
respectively, from an affiliate of the Company.  The assets were purchased for
$9.0 million in cash plus the assumption of a $1.9 million discounted note
payable to certain of ANI's shareholders. The purchase price was based on the
fair market value of the assets acquired, as determined by an independent
appraisal of the assets.

    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 1997 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

    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.

    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:

Newspaper Location            Daily Publication       Weekly Publication
-------------------------     ---------------------   -----------------------

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        
                                                      SPORTLIGHT(a)
Akron, Colorado              None                     AKRON NEWS REPORTER(b)
Brush, Colorado              None                     BRUSH NEWS-TRIBUNE(b) 
Julesburg, Colorado          None                     JULESBURG ADVOCATE(b) 

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

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


                                          38
<PAGE>

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.

    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.

    On August 1, 1994, the Company sold substantially all the assets used in
the publication of the BRISTOL PRESS and three weekly newspapers located in
Bristol, Connecticut, and a covenant not to compete in Bristol, Connecticut, for
a total of $14.5 million in cash.  The sale resulted in a pre-tax gain of
approximately $4.2 million.

UNAUDITED PRO FORMA OPERATING RESULTS

    The following table sets forth the unaudited pro forma operating results
had the October 31, 1996 acquisition, the February 13, 1997, disposition, and
the February 28, 1997, acquisition (described above) occurred as of July 1, 1996
and 1995 (in thousands):

                                                 June 30, 1997  June 30, 1996
                                                 -------------  -------------

     Revenues. . . . . . . . . . . . . . . .       $  333,885     $  325,990
                                                   ----------     ----------
                                                   ----------     ----------
     Net Income Before Extraordinary Items .       $   35,491     $    3,701
                                                   ----------     ----------
                                                   ----------     ----------
     Net Income. . . . . . . . . . . . . . .       $   26,719     $    3,701
                                                   ----------     ----------
                                                   ----------     ----------

NOTE 4:  LONG-TERM DEBT

DEBT RESTRUCTURING

    As a result of certain refinancings and debt prepayments on October 31,
1996, associated with acquisitions, the Company 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. The Company charged the $4.4 million of the debt issuance cost to
fiscal year 1997 expense and, as such, the cost has been included in other
expense in the accompanying Consolidated Statements of Operations.



                                          39
<PAGE>

NOTE 4: LONG-TERM DEBT (CONTINUED)

LONG-TERM DEBT

Long-term debt consisted of the following at each year end:
<TABLE>
<CAPTION>

                                                                      June 30,
                                                             ------------------------
                                                                1997           1996
                                                             ---------      ---------
                                                                   (In thousands)
<S>                                                 <C>     <C>            <C>
Bank Credit Agreement . . . . . . . . . . . . . .   (I)     $ 211,000      $   7,500
10.89% Senior Secured Notes . . . . . . . . . . .   (II)           --         76,880
NJNI bank credit facility . . . . . . . . . . . .   (III)      16,750             --
Various Notes, payable through December 2002. . .   (IV)       12,966         16,361
12.00% Senior Subordinated Secured Notes, due
  July 1, 2004. . . . . . . . . . . . . . . . . .   (V)       100,000        100,000
Notes payable to certain shareholders of ANI. . .   (VI)        2,629          2,328
                                                             --------       --------
                                                              343,345        203,069
Less current portion of long-term debt. . . . . .               6,247         11,190
                                                             --------       --------
                                                             $337,098       $191,879
                                                             --------       --------
                                                             --------       --------
</TABLE>
 
I.  In conjunction with the October 31, 1996, acquisition previously discussed,
    the Company entered into a $240.0 million amended and restated bank credit
    facility (the "Bank Credit Agreement") which was subsequently increased to
    $285.0 million on January 22, 1997. The Bank Credit Agreement is comprised
    of the following components at June 30, 1997:

    a.   A $167.0 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: $10.0 million
         reduction on December 31, 1997; $15.0 million reduction on June 30,
         1998; $28.0 million reduction on June 30, 1999 through 2002, and a
         final maturity on June 30, 2003. A portion of the proceeds from RCA
         were used to purchase the newspaper assets acquired on October 31,
         1996. As of June 30, 1997, $47.0 million was available under RCA for
         business acquisitions; however, the entire $47.0 million was borrowed
         in conjunction with the acquisition of The Sun discussed in Note 10.
         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, 1997,
         approximately $22.0 million was available under RCB. RCB is secured by
         a first priority lien on the common stock 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.


                                          40
<PAGE>

NOTE 4: LONG-TERM DEBT (CONTINUED)

    d.   A $76.0 million Senior Secured Term Loan ("Term B Loan") with a final
         maturity of March 31, 2004. Term B Loan requires quarterly principal
         payments commencing on September 30, 1997, with annual reductions of
         $4.0 million in fiscal year 1998, $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 Term B Loan were used
         to prepay the Company's 10.89% Senior Secured Notes on October 31,
         1996, as further described below. Term B Loan is secured by a first
         priority lien on the common stock and substantially all of the assets
         of GSI.

    All borrowings under the Bank Credit Agreement, except loans under the
    swingline facility, bear interest at rates based upon, at the Company's
    option, Eurodollar or prime, plus a spread based on the Company's leverage.
    Borrowings under the swingline facility bear interest at prime plus a
    spread based on the Company's leverage. Interest on prime borrowings under
    the Bank Credit Agreement is payable quarterly. Interest on Eurodollar
    borrwoings is due at the end of the applicable interest rate period or
    quarterly if the interest rate period exceeds three months. In addition,
    the Company 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%.

    The Company has requested an amendment of its Bank Credit Agreement which
    would, among other things, change Term B Loan into a revolving credit
    facility ("RCC"), reduce the Company's borrowing spreads (in most cases by
    .375%), and change the amortization of the RCA commitment. This amendment
    is being requested in conjunction with a proposed bond offering (the
    "Offering") and would be effective upon successful completion of the
    Offering (see Note 10 for discussion).

II. In May, 1994, the Company issued 10.89% Senior Secured Notes. As previously
    discussed, these notes were prepaid in full on October 31, 1996.

III.NJNI entered into a bank credit facility in May, 1994.  The bank credit
    facility is secured by the stock of NJNI and its subsidiaries and is
    non-recourse to Garden State.  The bank credit agreement, as subsequently
    amended, provides for maximum borrowings of approximately $23.5 million as
    of June 30, 1997.  Borrowings bear interest at rates based upon, at the
    Company's option, LIBOR or prime plus a spread based on NJNI's leverage.

    Commitments under the NJNI bank credit facility are permanently reduced
    each quarter, based on the following annual amounts shown below. Mandatory
    principal payments are required to the extent the principal balance is in
    excess of the remaining commitment at such time of any commitment
    reduction.


         Fiscal Year              Commitment Reduction
         -----------              --------------------

         1998                         $  6,000,000
         1999                           17,500,000


                                          41
<PAGE>

NOTE 4: LONG-TERM DEBT (CONTINUED)

    The NJNI bank credit facility contains certain restrictive covenants which
    restrict the incurrence of additional debt and capital expenditures.  In
    addition, the agreement requires NJNI to meet certain financial ratios
    based on leverage, debt service coverage, and cash flow, each as defined in
    the NJNI bank credit facility. Proceeds from the Offering (see Note 10)
    will be used to pay off and terminate the NJNI bank credit facility.

IV. In connection with various acquisitions, the Company 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 9.0%.  Obligations bearing interest
    at below market rates were discounted at rates ranging from 7.8% to 12.0%.

V.  In May, 1994, the Company issued $100.0 million of 12.0% Senior
    Subordinated Secured Notes due July 1, 2004.  Interest accruing on the
    Senior Subordinated Secured Notes is payable semi-annually, in arrears, on
    January 1 and July 1.  The indebtedness evidenced by the Senior
    Subordinated Secured Notes is subordinated and junior in right of payment
    to obligations 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 Senior
    Subordinated Secured Notes are secured by a second lien on the stock of
    GSI, a subsidiary of the Company and holding company for each of the
    operating subsidiaries except the newspapers acquired on October 31, 1996,
    and July 31, 1997.

VI. In connection with the acquisition of the GLOUCESTER COUNTY TIMES and
    TODAY'S SUNBEAM, the Company 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 the Company's senior indebtedness, and the Company is
    prohibited from paying principal or interest on the notes until all senior
    debt has been repaid in full.

   The Bank Credit Agreement contains certain restrictive covenants which relate
to the incurrence of additional debt, capital expenditures and distributions.
Additionally, the agreement requires the maintenance of certain financial ratios
based on leverage, debt service coverage, interest coverage and fixed charges
coverage.

   Maturities of the Company's long-term debt as of June 30, 1997, for the five
fiscal years ending June 30, 2002, are shown below. The proposed Bank Credit
Agreement amendment, the Offering and July 31, 1997, acquisition previously
discussed will affect the maturity schedule shown below (in thousands).

               1998. . . . . . . . . . . . . . . . .   $   6,247
               1999. . . . . . . . . . . . . . . . .      32,670
               2000. . . . . . . . . . . . . . . . .      38,013
               2001. . . . . . . . . . . . . . . . .      42,347
               2002. . . . . . . . . . . . . . . . .      45,392
               Thereafter. . . . . . . . . . . . . .     178,676
                                                        --------
                                                        $343,345
                                                        --------
                                                        --------


                                          42
<PAGE>

NOTE 4: LONG-TERM DEBT (CONTINUED)

  Interest paid during the fiscal years ended June 30, 1997, 1996 and 1995 was
approximately $30.8 million, $27.2 million and $19.4 million, respectively.

  Letters of credit have been issued in favor of an insurance company
providing workers compensation insurance coverage to the Company totalling
approximately $2.1 million as of June 30, 1997. In addition, the Company issued
approximately $2.8 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.

  The fair market value of the Senior Subordinated Secured Notes at June 30,
1997, was approximately $112.5 million. 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 its original issue price net of remaining
original issue discounts, if applicable.

INTEREST RATE SWAPS

  Effective April 1, 1997, the Company 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. The Company 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 and because of
requirements under the Bank Credit Agreement. The Company accounts for the
differences paid or received under this agreement as an adjustment to interest
expense. As of June 30, 1997, the interest rate swap had a market loss of $0.3
million. The Company 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. The Company does not
anticipate that the counterparty will fail to meet its obligation because of its
high credit rating.

NOTE 5:  LEASES

  A subsidiary of the Company 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:

                                                         June 30,
                                                     1997        1996
                                                    ------      ------
                                                      (In thousands)

       Building. . . . . . . . . . . . . . . . .    $ 6,934   $ 6,934
       Accumulated amortization. . . . . . . . .      1,811     1,579
                                                    -------   -------
         Assets under capital leases, net. . . .    $ 5,123   $ 5,355
                                                    -------   -------
                                                    -------   -------


                                          43
<PAGE>

NOTE 5: LEASES (CONTINUED)

    The Company's subsidiaries also lease certain facilities and equipment
under operating leases, some of which contain renewal or escalation clauses.
Rent expense was approximately $2.0 million, $2.1 million and $1.9 million for
the fiscal years ended June 30, 1997, 1996 and 1995, respectively.  Contingent
rentals are not significant.  Future minimum payments on capital and operating
leases are as follows:


                                                       Capital    Operating
Fiscal Years Ending                                    Leases      Leases
                                                      --------    ---------
                                                         (In thousands)

     1998. . . . . . . . . . . . . . . . . . . .        $  821    $ 2,323
     1999. . . . . . . . . . . . . . . . . . . .           821      2,171
     2000. . . . . . . . . . . . . . . . . . . .           867      1,924
     2001. . . . . . . . . . . . . . . . . . . .           931      1,628
     2002. . . . . . . . . . . . . . . . . . . .           931      1,501
     Thereafter. . . . . . . . . . . . . . . . .        15,904      2,955
                                                        ------    -------
      Total minimum lease payments . . . . . . .        20,275    $12,502
                                                                  -------
     Less amount representing interest . . . . .        12,798    -------
                                                        ------
      Present value of net future lease payments        $7,477
                                                        ------
                                                        ------


NOTE 6:  RETIREMENT PLANS

  The Company 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 the Company's full-time employees are covered by these plans.  Total expense
for these plans for the fiscal years ended June 30, 1997, 1996 and 1995, was
approximately $2.1 million, $1.4 million, and $1.6 million, respectively.

  In general, the Company contributes 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.  The Company, 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.
The Company's contribution may be suspended  annually at management's
discretion.

  A non-contributory defined benefit pension plan was assumed in connection
with the August 31, 1995, acquisition. On September 23, 1995, the Company
elected to freeze the plan.  Accordingly, all current service cost under the
plan was terminated as of September 23, 1995. As of June 30, 1997 and 1996, the
net present value of accumulated benefit obligations exceeded the fair market
value of plan assets by approximately $2.0 and $3.9 million, respectively.


                                          44
<PAGE>


NOTE 7:  INCOME TAXES

  The income tax provision (benefit) for each of the three years ended
June 30, 1997, 1996 and 1995, consists of the following:

                                              1997         1996         1995
                                             ------        ------      ------
                                                      (In thousands)

Current:
  State . . . . . . . . . . . . . . . .     $  3,429     $   441     $    285
  Federal . . . . . . . . . . . . . . .          863          76          144
Deferred:
  State . . . . . . . . . . . . . . . .         (213)       (695)         (18)
  Federal . . . . . . . . . . . . . . .       (3,013)     (1,834)        (775)
                                            --------     -------     --------
Net provision (benefit) . . . . . . . .     $  1,066     $(2,012)    $   (364)
                                            --------     -------     --------
                                            --------     -------     --------


    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, 1997, 1996 and 1995 is as follows:

                                                          1997    1996   1995
                                                         ------   ------  -----

Statutory Federal income tax rate . . . . . . . . . . .     35%   (35%)    35%
  Effect of:
   State income tax net of federal benefit. . . . . . .      7     22      50
   Utilization of net operating losses. . . . . . . . .    (24)   (55)     66
   Book/tax basis difference associated with
    acquisitions and non-deductible acquisition costs .      1   (200)   (238)
   Alternative minimum tax. . . . . . . . . . . . . . .     --     --      21
   Sales of assets. . . . . . . . . . . . . . . . . . .    (17)    --      --
   Extraordinary loss . . . . . . . . . . . . . . . . .      3     --      --
   Other, net . . . . . . . . . . . . . . . . . . . . .     (1)    --      13
                                                           ------  ------ ------
Financial statement effective tax rate. . . . . . . . .      4%  (268%)   (53%)
                                                           ------  ------ ------
                                                           ------  ------ ------


                                          45
<PAGE>


NOTE 7: INCOME TAXES (CONTINUED)

Components of the long-term deferred tax assets and liabilities are as follows:

                                                                June 30,
                                                         ---------------------
                                                           1997        1996
                                                         --------     --------
                                                             (In thousands)
Deferred tax assets:
   Net operating losses and other credits. . . . .       $ 14,566    $ 23,593
   Other . . . . . . . . . . . . . . . . . . . . .          8,604       7,421
                                                         --------    --------
                                                           23,170      31,014
   Valuation allowance . . . . . . . . . . . . . .        (14,904)    (20,363)
                                                         --------    --------
   Deferred tax assets . . . . . . . . . . . . . .          8,266      10,651

Deferred tax liabilities:
   Fixed assets. . . . . . . . . . . . . . . . . .          8,679       8,129
   Intangibles . . . . . . . . . . . . . . . . . .          8,391      12,990
   Other . . . . . . . . . . . . . . . . . . . . .          3,712       1,287
                                                         --------    --------
   Deferred tax liabilities. . . . . . . . . . . .         20,782      22,406

                                                         --------    --------
Net deferred tax liabilities . . . . . . . . . . .       $ 12,516    $ 11,755
                                                         --------    --------
                                                         --------    --------

  In fiscal years 1997 and 1996, the Company generated federal taxable income
which was offset by operating loss carryforwards.  However, since not all the
federal taxable income could be offset with operating loss carryforwards, the
Company did incur alternative minimum tax which can be carried forward as a
credit to future taxes payable. The Company's current year utilization of
operating loss carryforwards also reduced the Company's valuation allowance by
$5.5 million, which was recorded as a benefit in current year income tax
expense.

  At June 30, 1997, the Company has approximately $37.0 million of net
operating loss carryforwards for tax reporting purposes available to offset its
future taxable income which expire in 2005 through 2011 and $1.3 million of
alternative minimum tax credit carryforwards.

  The Company made state and federal income tax payments of approximately $3.0
million, $0.6 million and $0.8 million during fiscal years 1997, 1996 and 1995,
respectively.


NOTE 8:  RELATED PARTY TRANSACTIONS

  MediaNews Group, Inc. ("MNG"), an affiliate of the Company's shareholder,
provides management services to the Company and its subsidiaries.  Related
management fees are shown on the accompanying Consolidated Statements of
Operations.


                                          46
<PAGE>


NOTE 9:  COMMITMENTS AND 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.

  Under the terms of a newsprint contract, the Company, through MNG, has
agreed to purchase 1,000 tons per month of newsprint at a fixed price for the
period September 1, 1997 through 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 the Company would be responsible
for damages, if any, incurred by the seller.


NOTE 10:  SUBSEQUENT EVENT

ACQUISITION

  On July 31, 1997, the Company acquired substantially all the assets used in
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. The newspaper has daily and Sunday circulation of approximately 52,000
and 56,000, respectively.

  The acquisition will be accounted for as a purchase; accordingly, the
consolidated financial statements will include the operations of the acquired
newspaper from August 1, 1997.

PROPOSED BOND OFFERING

  In September 1997, the Company anticipates issuing $200.0 million of Senior
Subordinated Notes due in 2009 (the "Offering"). The issuance of the Senior
Subordinated Notes will provide the Company with additional liquidity and
flexibility, as well as fixed rate long-term debt, at rates which the Company
currently believes are attractive. If completed, the Company will use the net
proceeds to reduce existing bank debt at Garden State and pay off and terminate
the NJNI bank credit facility.

  The following unaudited table sets forth, after giving effect to borrowings
associated with the July 31, 1997, acquisition of The Sun, the Offering and the
paydown of debt associated with the Offering, the approximate expected scheduled
maturities of long-term debt of the Company for the periods indicated.

             Fiscal                                     In Thousands
             ------                                     ------------

             1998. . . . . . . . . . . . . . . . . . .   $    2,247
             1999. . . . . . . . . . . . . . . . . . .        4,410
             2000. . . . . . . . . . . . . . . . . . .        4,604
             2001. . . . . . . . . . . . . . . . . . .        6,670
             2002. . . . . . . . . . . . . . . . . . .       38,979
             Thereafter. . . . . . . . . . . . . . . .      351,442
                                                         ----------
                                                         $  408,352
                                                         ----------
                                                         ----------


                                          47
<PAGE>


NOTE 10: SUBSEQUENT EVENT (CONTINUED)

  The following unaudited table sets forth the annual commitment reductions
for RCA, RCB and RCC, as well as annual payments under Term A Loan, giving
effect to the amended Bank Credit Agreement. (Dollars in thousands)

                                                                      TERM A
                                     RCA        RCB        RCC         LOAN
                                  --------- ---------   ---------   ----------

    1998 . . . . . . . . . .     $  10,000  $      --  $   4,000   $       --
    1999 . . . . . . . . . .        31,000         --      7,500           --
    2000 . . . . . . . . . .        31,000         --      7,500           --
    2001 . . . . . . . . . .        31,000         --     12,000           --
    2002 . . . . . . . . . .        31,000         --     12,000        3,750
    Thereafter . . . . . . .        33,000     27,000     33,000       11,250
                                 ---------  ---------  ---------   ----------
                                 $ 167,000  $  27,000  $  76,000   $   15,000
                                 ---------  ---------  ---------   ----------
                                 ---------  ---------  ---------   ----------

   Giving effect to the Offering and the related paydown of debt, the Company
will have $101.0 million available under RCA for future acquisitions, $76.0
million under RCC for future acquisitions and general corporate purposes and
$22.0 million available under RCB, net of approximately $5.0 million in letters
of credit outstanding.


                                          48
<PAGE>

                    GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES

                   SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                   FISCAL YEARS ENDED JUNE 30, 1997, 1996 AND 1995
                                    (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, 1997
  Reserves and allowances deducted
    from asset accounts:

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

YEAR ENDED JUNE 30, 1995
  Reserves and allowances deducted
    from asset accounts:

  Allowance for uncollectible
   accounts. . . . . . . . . . . . . . . .       $2,321         $2,876         $3,343           $ 77         $1,931
</TABLE>
 

                                          49
<PAGE>

                            REPORT OF INDEPENDENT AUDITORS



The Board of Directors
Garden State Investments, Inc.

    We have audited the accompanying consolidated balance sheets of Garden
State Investments, Inc. and subsidiaries (the "Company") as of June 30, 1997 and
1996, and the related consolidated statements of operations, changes in
shareholder's deficit, and cash flows for each of the three years in the period
ended June 30, 1997. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Garden State Investments, Inc. and subsidiaries at June 30, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended June 30, 1997, 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 22, 1997


                                          50
<PAGE>

                   GARDEN STATE INVESTMENTS, INC. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>


                                                                                     June 30,
                                                                            -------------------------
                                                                               1997            1996
                                                                            ----------      ---------
                                                                                (In thousands)
                                     ASSETS
<S>                                                                        <C>             <C>
CURRENT ASSETS
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .    $   7,736       $  4,415
  Trade accounts receivable, less allowance for doubtful accounts of
   $2,696 and $2,426 at June 30, 1997 and 1996, respectively. . . . . .       27,280         24,888
  Receivable from affiliates and parent . . . . . . . . . . . . . . . .        3,888          1,523
  Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . .        1,150          1,201
  Inventories of newsprint and supplies . . . . . . . . . . . . . . . .        5,315          3,966
  Prepaid expenses and other assets . . . . . . . . . . . . . . . . . .        3,011          2,780
                                                                            --------       --------
     TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . . . . .       48,380         38,773

PROPERTY, PLANT AND EQUIPMENT
  Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        4,954          5,168
  Buildings and improvements. . . . . . . . . . . . . . . . . . . . . .       37,138         32,687
  Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . .       96,851         87,522
                                                                            --------       --------
       Total Property, Plant and Equipment. . . . . . . . . . . . . . .      138,943        125,377
  Less accumulated depreciation and amortization. . . . . . . . . . . .       56,233         50,027
                                                                            --------       --------
       NET PROPERTY, PLANT AND EQUIPMENT. . . . . . . . . . . . . . . .       82,710         75,350

OTHER ASSETS
  Investment in partnership . . . . . . . . . . . . . . . . . . . . . .        6,365          6,369
  Subscriber accounts, less accumulated amortization of
    $44,466 and $48,594 at June 30, 1997 and 1996, respectively . . . .       50,924         44,220
  Excess of cost over fair value of net assets acquired, less
    accumulated amortization of $11,468 and $13,267 at
    June 30, 1997 and 1996, respectively. . . . . . . . . . . . . . . .       84,401         65,715
  Covenants not to compete and other identifiable intangible
    assets, less accumulated amortization of $15,861 and
    $19,673 at June 30, 1997 and 1996, respectively . . . . . . . . . .        6,685          8,461
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        1,985          1,871
                                                                            --------       --------
     TOTAL OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . .      150,360        126,636
                                                                            --------       --------

TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $281,450       $240,759
                                                                            --------       --------
                                                                            --------       --------
</TABLE>

                   See notes to consolidated financial statements.


                                          51
<PAGE>

 <TABLE>
<CAPTION>

                                                                            June 30,
                                                                    ------------------------
                                                                      1997           1996
                                                                    ---------      ---------
                                                                      (In thousands, except
                                                                           share data)

                    LIABILITIES AND SHAREHOLDER'S DEFICIT
<S>                                                                <C>            <C>
CURRENT LIABILITIES
   Trade accounts payable. . . . . . . . . . . . . . . . . .       $   5,712      $   5,884
   Accrued employee compensation . . . . . . . . . . . . . .           5,134          4,498
   Accrued interest. . . . . . . . . . . . . . . . . . . . .           7,671          8,114
   Other accrued liabilities . . . . . . . . . . . . . . . .           6,913          5,562
   Unearned income . . . . . . . . . . . . . . . . . . . . .           8,378          7,048
   Income taxes. . . . . . . . . . . . . . . . . . . . . . .           1,256            373
   Current portion of long-term debt . . . . . . . . . . . .           6,247         11,190
                                                                   ---------      ---------
             TOTAL CURRENT LIABILITIES . . . . . . . . . . .          41,311         42,669

OBLIGATIONS UNDER CAPITAL LEASES . . . . . . . . . . . . . .           7,477          7,520

LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . .         230,586        210,652

OTHER LIABILITIES. . . . . . . . . . . . . . . . . . . . . .           5,092          7,728

DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . .          12,215         11,755

SHAREHOLDER'S DEFICIT
  Common stock, par value $1.00 per share; authorized 1,000
    shares; 1,000 shares issued and outstanding. . . . . . .               1              1
  Additional paid-in-capital . . . . . . . . . . . . . . . .          34,734         34,734
  Deficit. . . . . . . . . . . . . . . . . . . . . . . . . .         (49,966)       (74,300)
                                                                   ---------      ---------
             TOTAL SHAREHOLDER'S DEFICIT . . . . . . . . . .         (15,231)       (39,565)
                                                                   ---------      ---------





TOTAL LIABILITIES AND SHAREHOLDER'S DEFICIT. . . . . . . . .        $281,450       $240,759
                                                                   ---------      ---------
                                                                   ---------      ---------
</TABLE>
                     See notes to consolidated financial statements


                                          52
<PAGE>


                   GARDEN STATE INVESTMENTS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                      Fiscal Years Ended June 30,
                                               ---------------------------------------
                                                  1997           1996           1995
                                               ----------    ------------    ---------
                                                          (In thousands)
<S>                                           <C>            <C>            <C>
REVENUES
  Advertising . . . . . . . . . . . . .       $209,541       $197,954       $179,268
  Circulation . . . . . . . . . . . . .         38,707         39,930         30,517
  Other . . . . . . . . . . . . . . . .          8,734          7,546          3,260
                                              --------       --------       --------
      TOTAL REVENUES. . . . . . . . . .        256,982        245,430        213,045

COSTS AND EXPENSES
  Cost of sales . . . . . . . . . . . .         91,811         98,469         79,098
  Selling, general and administrative .        107,746        100,230         88,847
  Management fees . . . . . . . . . . .          1,550          2,008          1,666
  Depreciation and amortization . . . .         20,688         21,841         18,710
  Interest expense. . . . . . . . . . .         27,079         29,345         27,462
  Other . . . . . . . . . . . . . . . .          5,151          4,511          2,387
                                              --------       --------       --------
      TOTAL COSTS AND EXPENSES. . . . .        254,025        256,404        218,170

GAIN ON SALE OF NEWSPAPER PROPERTY. . .         30,575          8,291          4,153
                                              --------       --------       --------

INCOME (LOSS) BEFORE INCOME TAXES
  AND EXTRAORDINARY LOSS. . . . . . . .         33,532         (2,683)          (972)
INCOME TAX BENEFIT (EXPENSE). . . . . .           (426)         2,012            364
                                              --------       --------       --------

INCOME (LOSS) BEFORE EXTRAORDINARY
  LOSS. . . . . . . . . . . . . . . . .         33,106           (671)          (608)

EXTRAORDINARY LOSS (net of taxes of $689)        8,772             --             --
                                              --------       --------       --------

NET INCOME (LOSS) . . . . . . . . . . .      $  24,334       $   (671)      $   (608)
                                             ---------      ---------      ---------
                                             ---------      ---------      ---------
</TABLE>
 
                   See notes to consolidated financial statements.



                                          53
<PAGE>


                   GARDEN STATE INVESTMENTS, INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S DEFICIT


                                        ADDITIONAL                  TOTAL
                                COMMON   PAID-IN-                SHAREHOLDER'S
                                STOCK     CAPITAL     DEFICIT       DEFICIT
                                ------  ----------   ----------  -------------

                                               (In thousands)

BALANCE AT JUNE 30, 1994. . .      $1    $ 34,734     $ (73,021)    $ (38,286)
  Net loss. . . . . . . . . .      --          --          (608)         (608)
                                   ---    --------    ----------   ----------
BALANCE AT JUNE 30, 1995. . .       1      34,734       (73,629)      (38,894)
  Net loss. . . . . . . . . .      --          --          (671)         (671)
                                   ---    --------    ----------   ----------
BALANCE AT JUNE 30, 1996. . .       1      34,734       (74,300)      (39,565)
  Net income. . . . . . . . .      --          --        24,334        24,334
                                   ---    --------    ----------   ----------
BALANCE AT JUNE 30, 1997. . .      $1    $ 34,734     $ (49,966)    $ (15,231)
                                   ---    --------    ----------   ----------
                                   ---    --------    ----------   ----------


                   See notes to consolidated financial statements.










                                          54
<PAGE>

                   GARDEN STATE INVESTMENTS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended June 30,
                                                              ---------------------------------
                                                                 1997        1996         1995
                                                              ---------    --------     -------
                                                                        (In thousands)
<S>                                                          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss). . . . . . . . . . . . . . . . . .       $  24,334    $   (671)    $   (608)
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
    Depreciation . . . . . . . . . . . . . . . . . . .           9,269       9,762        7,216
    Amortization . . . . . . . . . . . . . . . . . . .          10,211      11,499       10,804
    Gain on sale of newspaper assets . . . . . . . . .         (30,579)     (8,621)      (4,137)
    Provision for losses on accounts receivable. . . .           2,538       2,510        2,876
    Amortization of debt discount. . . . . . . . . . .           2,060       1,696        1,577
    Debt issue cost and repurchase premiums. . . . . .          11,327       1,092           --
    Distributions in excess of (less than)
     earnings from investment in partnership . . . . .              23        (610)         (28)
    Deferred income tax benefit. . . . . . . . . . . .          (3,527)     (2,529)        (793)
    Deferred interest. . . . . . . . . . . . . . . . .           2,100       1,931        1,656
    Change in operating assets and liabilities:
      Increase in accounts receivable. . . . . . . . .          (4,278)     (3,403)      (2,150)
      (Increase) decrease in inventories . . . . . . .          (1,146)      1,799       (2,469)
      (Increase) decrease in prepaid expenses and
        other assets . . . . . . . . . . . . . . . . .            (308)       (558)         717
      Increase (decrease) in accounts payable and
        accrued liabilities. . . . . . . . . . . . . .           2,539      (5,047)       4,880
      Increase in unearned income. . . . . . . . . . .             703          22        1,504
      (Increase) decrease in affiliate account balances         (2,365)        303          701
      Change in other assets and liabilities . . . . .            (350)       (517)       1,130
      Other. . . . . . . . . . . . . . . . . . . . . .            (170)         --           --
                                                             ---------   ---------    ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES . . . . . . .          22,381       8,658       22,876

CASH FLOWS FROM INVESTING ACTIVITIES:
    Sale of newspaper property and other assets. . . .          47,776      50,647       14,864
    Business acquisitions. . . . . . . . . . . . . . .         (55,573)    (35,668)      (9,325)
    Purchase of machinery and equipment. . . . . . . .          (8,267)     (8,079)      (4,284)
                                                             ---------   ---------    ---------
    NET CASH FLOWS FROM INVESTING ACTIVITIES . . . . .         (16,064)      6,900        1,255
CASH FLOW FROM FINANCING ACTIVITIES:
    Issuance of long-term debt, net. . . . . . . . . .         132,064      37,300           --
    Reduction of long-term debt. . . . . . . . . . . .        (120,773)    (60,240)     (14,007)
    Reduction of non-operating liabilities . . . . . .          (2,960)     (4,194)      (1,735)
    Debt issuance cost and repurchase premiums . . . .         (11,327)     (1,092)          --
                                                             ---------   ---------    ---------
    NET CASH FLOWS FROM FINANCING ACTIVITIES . . . . .          (2,996)    (28,226)     (15,742)
                                                             ---------   ---------    ---------
INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS . . . . . . . . . . . . . . . . . .           3,321     (12,668)       8,389

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR. . . . . . . . . . . . . . . . . .           4,415      17,083        8,694
                                                             ---------   ---------    ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . .      $    7,736   $   4,415    $  17,083
                                                             ---------   ---------    ---------
                                                             ---------   ---------    ---------
</TABLE>
                    See notes to consolidated financial statements.



                                          55
<PAGE>

                            GARDEN STATE 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 Garden State
Investments, Inc. (the "Company" or "GSI"). All intercompany accounts have been
eliminated.  The Company is a wholly owned subsidiary of Garden State
Newspapers, Inc. ("Garden State").

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 consolidated 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. 


                                          56
<PAGE>


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

LONG-LIVED ASSETS

    The carrying value of long-lived assets is reviewed annually; if at any
time the facts or circumstances at any of the Company's individual newspaper
operations indicate impairment of long-lived asset values, as a result of a
continual decline 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).  

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 files a consolidated tax return with Affiliated Newspapers
Investments, Inc. ("ANI"), the parent of Garden State. However, the Company
accounts for income taxes on a separate return basis 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 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
consolidated 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 $6.4 million at each of
the fiscal years ended June 30, 1997 and 1996. The Agency made cash
distributions to YNI in the amount of $7.2 million, $4.9 million and $4.8
million in fiscal years 1997, 1996 and 1995.


                                          57
<PAGE>


NOTE 2:  INVESTMENT IN PARTNERSHIP (CONTINUED)

    In September, 1996, YNI 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

    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. 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.

    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.

    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. 

    On August 31, 1995, the Company acquired 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 
approximately $2.7 million for a covenant not to compete payable to the prior
owners. 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.


                                          58
<PAGE>


NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

    On November 18, 1994, a subsidiary of the Company purchased substantially
all the assets used in the publication of the GLOUCESTER COUNTY TIMES and
TODAY'S SUNBEAM, daily newspapers distributed in Woodbury and Salem, New Jersey,
respectively, from an affiliate of the Company.  The assets were purchased for
$9.0 million in cash plus the assumption of a $1.9 million discounted note
payable to certain of ANI's shareholders. The purchase price was based on the
fair market value of the assets acquired, determined by an independent appraisal
of the assets.

    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 1997 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

    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. 

    On May 1, 1996, the Company 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


                                          59
<PAGE>


NOTE 3:  ACQUISITIONS AND DISPOSITIONS (CONTINUED)

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

    Immediately after the purchase of the above described newspapers, the
Company 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.

    On August 1, 1994, the Company sold substantially all the assets used in
the publication of the BRISTOL PRESS and three weekly newspapers located in
Bristol, Connecticut, and a covenant not to compete in Bristol, Connecticut, for
a total of $14.5 million in cash.  The sale resulted in a pre-tax gain of
approximately $4.2 million.

UNAUDITED PRO FORMA OPERATING RESULTS

    The following table sets forth the unaudited pro forma operating results
had the February 13, 1997 disposition and the February 28, 1997 acquisition
(described above) occurred as of July 1, 1996 and 1995 (in thousands):

<TABLE>
<CAPTION>
                                                       June 30, 1997        June 30, 1996
                                                      -------------        --------------
         <S>                                          <C>                  <C>
         Revenues..................................... $  264,740            $  257,078
                                                       ----------            ----------
                                                       ----------            ----------
         Net Income Before Extraordinary Items........ $   34,441            $    2,531   
                                                       ----------            ----------
                                                       ----------            ----------
         Net Income................................... $   25,669            $    2,531   
                                                       ----------            ----------
                                                       ----------            ----------

</TABLE>


NOTE 4:  LONG-TERM DEBT

    For purposes of these financial statements, certain long-term
debt obligations of Garden State have been allocated to the Company in
conjunction with purchase accounting. Below is a description and the
terms of the long-term debt allocated to the Company as well as
obligations of the Company's subsidiaries.


                                     60
<PAGE>


NOTE 4: LONG-TERM DEBT (CONTINUED)

DEBT RESTRUCTURING

    As a result of certain refinancings and debt prepayments on
October 31, 1996, Garden State allocated to the Company debt issuance
costs of approximately $1.9 million. In addition, the Company 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.  The Company charged the $1.9 million of the debt
issuance cost to fiscal year 1997 expense and as such, the cost has
been included in other expense in the accompanying Consolidated
Statements of Operations.

LONG-TERM DEBT

<TABLE>
<CAPTION>
 

Allocated long-term debt consisted of the following at each year end:
                                                                                           June 30,
                                                                                 --------------------------
                                                                                    1997            1996
                                                                                 ---------       ---------
                                                                                       (In thousands)
<S>                                                                     <C>      <C>              <C>
Bank Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . .   (I)      $ 83,614         $  7,500
10.89% Senior Secured Notes . . . . . . . . . . . . . . . . . . . . .   (II)           --           76,880
NJNI bank credit facility . . . . . . . . . . . . . . . . . . . . . .   (III)      16,750               --
Various Notes, payable through December 2002. . . . . . . . . . . . .   (IV)       12,966           16,361
12.00% Senior Subordinated Secured Notes, due
  July 1, 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . .   (V)       100,000          100,000
Notes payable to certain shareholders of ANI. . . . . . . . . . . . .   (VI)        2,629            2,328
Subordinated Term Note to Parent. . . . . . . . . . . . . . . . . . .   (VII)      20,874           18,773
                                                                                 --------         --------
                                                                                  236,833          221,842
Less current portion of long-term debt. . . . . . . . . . . . . . . .               6,247           11,190
                                                                                 --------         --------
                                                                                 $230,586         $210,652
                                                                                 --------         --------
                                                                                 --------         --------
</TABLE>

 

I.  In conjunction with the October 31, 1996, refinancing previously
    discussed, Garden State entered into an amended and restated bank
    credit facility (the "Bank Credit Agreement"). The following
    components of the Bank Credit Agreement are secured by certain
    assets of the Company at June 30, 1997: 

    a.   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, 1997,
         approximately $22.0 million was available under RCB. RCB is
         secured by a first priority lien on the common stock and
         substantially all of the assets of GSI. 


                                     61
<PAGE>


NOTE 4: LONG-TERM DEBT (CONTINUED)

          b.   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. 

          c.   A $76.0 million Senior Secured Term Loan ("Term B Loan")
               with a final maturity of March 31, 2004. Term B Loan
               requires quarterly principal payments commencing on
               September 30, 1997, with annual reductions of $4.0 million
               in fiscal year 1998, $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
               Term B Loan were used to prepay the Company's 10.89% senior
               secured notes on October 31, 1996, as further described
               below. Term B Loan is secured by a first priority lien on
               the common stock and substantially all of the assets of GSI.

          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's 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, the Company and/or Garden State pay an
          annual commitment fee of 0.50% on the unused commitment under
          RCB. If the ratio of Garden State's total debt to operating cash
          flow is less than 4.00 to 1.00, the commitment fee is reduced to
          0.375%.

          Garden State has requested an amendment of its Bank Credit
          Agreement which would, among other things, change Term B Loan
          into a revolving credit facility ("RCC"), reduce the Company's
          borrowing spreads (in most cases by .375%). This amendment is
          being requested in conjunction with a proposed bond offering (the
          "Offering") and would be effective upon successful completion of
          the Offering (see Note 10 for discussion).

II. In May, 1994, Garden State issued 10.89% Senior Secured Notes. As 
    previously discussed, these Notes were prepaid in full on October 31, 1996.

III.NJNI entered into a bank credit facility in May, 1994.  The bank credit 
    facility is secured by the stock of NJNI and its subsidiaries and is 
    non-recourse to the Company. The bank credit agreement, as subsequently 
    amended, provides for maximum borrowings of approximately $23.5 million 
    as of June 30, 1997. Borrowings bear interest at rates based upon, at the 
    Company's option, LIBOR or prime plus a spread based on NJNI's leverage.


                                     62
<PAGE>


NOTE 4: LONG-TERM DEBT (CONTINUED)

    Commitments under the NJNI bank credit facility are permanently
    reduced each quarter, based on the following annual amounts.
    Annual reductions are cumulative. Mandatory principal payments
    are required to the extent the principal balance is in excess of
    the remaining commitment at such time of any commitment
    reduction.

              Fiscal Year                        Commitment Reduction
              -----------                        --------------------
              1998  .......................         $  6,000,000  
              1999  .......................           17,500,000

    The NJNI bank credit facility contains certain restrictive
    covenants which restrict the incurrence of additional debt and
    capital expenditures.  In addition, the agreement requires NJNI
    to meet certain financial ratios based on leverage, debt service
    coverage, and cash flow, each as defined in the NJNI bank credit
    facility. Proceeds from the Offering (see Note 10) will be used
    to pay off and terminate the NJNI bank credit facility.

IV. In connection with various acquisitions, Garden State and/or the
    Company have 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 9.0%.  Obligations bearing interest at below
    market rates were discounted at rates ranging from 7.8% to 12.0%. 

V.  In May 1994, Garden State issued $100.0 million of 12.0% Senior
    Subordinated Secured Notes due July 1, 2004. Interest accruing on
    the Senior Subordinated Secured Notes is payable semi-annually,
    in arrears, on January 1 and July 1. The indebtedness evidenced
    by the Senior Subordinated Secured Notes is subordinated and
    junior in right of payment to obligations 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 Senior
    Subordinated Secured Notes are secured by a second lien on the
    stock of the Company.

VI. In connection with the acquisition of the GLOUCESTER COUNTY TIMES
    and TODAY'S SUNBEAM, the Company 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 the
    Company's senior indebtedness, and the Company is prohibited from
    paying principal or interest on the notes until all senior debt
    has been repaid in full.

VII.In May 1994, North Jersey Newspapers Company ("NJNCO"), a
    subsidiary of NJNI, issued a $15.0 million subordinated term note
    to Garden State. The subordinated term note bears interest at
    10.89% compounded semi-annually.  As of June 30, 1997 and 1996,
    no interest payments have been made on this note and,
    accordingly, $5.9 million and $3.8 million, respectively, of
    accrued and unpaid interest has been included in the balance. The
    subordinated term note is subordinate to the NJNI bank credit
    facility.


                                     63
<PAGE>


NOTE 4: LONG-TERM DEBT (CONTINUED)

    The Bank Credit Agreement contains certain restrictive covenants
which relate to the incurrence of additional debt, capital
expenditures and distributions.  Additionally, the agreement requires
the maintenance of certain financial ratios based on leverage, debt
service coverage, interest coverage and fixed charges coverage. 

    Maturities of long-term debt as of June 30, 1997, for the five
fiscal years ending June 30, 2002, are shown below. The proposed Bank
Credit Agreement amendment and the Offering previously discussed will
affect the maturity schedule shown below. (In thousands)

              1998 . . . . . . . . . . . . . . . . .     $   6,247
              1999 . . . . . . . . . . . . . . . . .        26,670
              2000 . . . . . . . . . . . . . . . . .        10,013
              2001 . . . . . . . . . . . . . . . . .        14,347
              2002 . . . . . . . . . . . . . . . . .        17,392
              Thereafter . . . . . . . . . . . . . .       162,164
                                                         ---------
                                                         $ 236,833
                                                         ---------
                                                         ---------

    Interest paid during the fiscal years ended June 30, 1997, 1996
and 1995 was approximately $24.0 million, $27.2 million and $19.4
million, respectively.  

    Letters of credit have been issued in favor of an insurance
company providing workers compensation insurance coverage to the
Company totalling approximately $2.1 million as of June 30, 1997. In
addition, the Company issued approximately $2.8 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.


NOTE 5:  LEASES 
 
    A subsidiary of the Company 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: 

                                                            June 30,
                                                        1997        1996 
                                                       ------      ------
                                                         (In thousands)

         Building . . . . . . . . . . . . . . . .     $ 6,934     $ 6,934 
         Accumulated amortization . . . . . . . .       1,811       1,579 
                                                      -------     -------
            Assets under capital leases, net. . .     $ 5,123     $ 5,355 
                                                      -------     -------
                                                      -------     -------

                                     64
<PAGE>


NOTE 5: LEASES (CONTINUED)

    The Company's subsidiaries also lease certain facilities and
equipment under operating leases, some of which contain renewal or
escalation clauses.  Rent expense was approximately $1.9 million, $2.1
million and $1.9 million for the fiscal years ended June 30, 1997,
1996 and 1995, respectively.  Contingent rentals are not significant. 
Future minimum payments on capital and operating leases are as
follows:

<TABLE>
<CAPTION>
 

          Fiscal Years Ending                                            Capital      Operating
          -------------------                                             Leases        Leases
                                                                         -------      ---------
                                                                               (In thousands)
         <S>                                                             <C>          <C>
         1998. . . . . . . . . . . . . . . . . . . . . . . . . .         $  821       $  2,116
         1999. . . . . . . . . . . . . . . . . . . . . . . . . .            821          1,981
         2000. . . . . . . . . . . . . . . . . . . . . . . . . .            867          1,776
         2001. . . . . . . . . . . . . . . . . . . . . . . . . .            931          1,481
         2002. . . . . . . . . . . . . . . . . . . . . . . . . .            931          1,379
         Thereafter. . . . . . . . . . . . . . . . . . . . . . .         15,904          2,617
                                                                         ------        --------
           Total minimum lease payments. . . . . . . . . . . . .         20,275        $11,350
                                                                                       --------
                                                                                       --------
         Less amount representing interest . . . . . . . . . . .         12,798
                                                                         ------
           Present value of net future lease payments. . . . . .         $7,477
                                                                         ------
                                                                         ------

         
</TABLE>
 

NOTE 6:  RETIREMENT PLANS
 
    The Company 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 the Company's full-time
employees are covered by these plans.  Total expense for these plans
for the fiscal years ended June 30, 1997, 1996 and 1995, was
approximately $1.9 million, $1.4 million, and $1.6 million,
respectively.  

    In general, the Company contributes 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.  The
Company, 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.  The
Company's contribution may be suspended  annually at management's
discretion.

    A non-contributory defined benefit pension plan was assumed in
connection with the August 31, 1995, acquisition. On September 23,
1995, the Company elected to freeze the plan.  Accordingly, all
current service cost under the plan was terminated as of September 23,
1995. As of June 30, 1997 and 1996, the net present value of
accumulated benefit obligations exceeded the fair market value of plan
assets by approximately $2.0 and $3.9 million, respectively.


                                     65
<PAGE>


NOTE 7:  INCOME TAXES

    The income tax provision (benefit) for each of the three years
ended June 30, 1997, 1996 and 1995, consists of the following:  

<TABLE>
<CAPTION>
 

                                                      1997           1996         1995 
                                                   ----------     ----------   ----------
                                                                 (In thousands)
<S>                                                <C>             <C>            <C> 
Current: 
  State. . . . . . . . . . . . . . . .             $  3,221        $   441        $   285
  Federal. . . . . . . . . . . . . . .                  773             76            144
Deferred:
  State. . . . . . . . . . . . . . . .                 (769)          (695)           (18)
  Federal  . . . . . . . . . . . . . .               (2,799)        (1,834)          (775)
                                                   ---------       --------       --------
Net (benefit) expense. . . . . . . . .             $    426        $(2,012)       $  (364)
                                                   ---------       --------       --------
                                                   ---------       --------       --------

</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, 1997, 1996 and
1995 is as follows:

<TABLE>
<CAPTION>
                                                                  1997            1996          1995
                                                                --------        --------       ------
<S>                                                             <C>             <C>            <C>
Statutory Federal income tax rate. . . . . . . . . . . . .         35%           (35%)           35%
  Effect of:
     State income tax net of federal benefit . . . . . . .          5             22             50
     Utilization of net operating losses . . . . . . . . .        (25)           (55)            66
     Book/tax basis difference associated with
        acquisitions and non-deductible acquisition costs.          1           (200)          (238)
     Alternative minimum tax . . . . . . . . . . . . . . .         --             --             21
     Sales of assets . . . . . . . . . . . . . . . . . . .        (18)            --             --
     Extraordinary loss. . . . . . . . . . . . . . . . . .          3             --             --
     Other, net. . . . . . . . . . . . . . . . . . . . . .          1             --             13
                                                                  -----         ------         -----
Financial statement effective tax rate . . . . . . . . . .          2%          (268%)          (53%)
                                                                  -----         ------         -----
                                                                  -----         ------         -----

</TABLE>




                                     66
<PAGE>


NOTE 7: INCOME TAXES (CONTINUED)

Components of the long-term deferred tax assets and liabilities are as
follows:

<TABLE>
<CAPTION>
                                                                          June 30,
                                                                 --------------------------
                                                                     1997           1996
                                                                 ----------      ----------
                                                                       (In thousands)
<S>                                                              <C>             <C>
Deferred tax assets:
   Net operating losses and other credits . . . . . . . . .       $ 14,258       $ 23,593
   Other. . . . . . . . . . . . . . . . . . . . . . . . . .          7,648          7,421
                                                                  --------       --------
                                                                    21,906         31,014
   Valuation allowance. . . . . . . . . . . . . . . . . . .        (14,947)       (20,363)
                                                                  --------       --------
   Deferred tax assets. . . . . . . . . . . . . . . . . . .          6,959         10,651
       
Deferred tax liabilities:
   Fixed assets . . . . . . . . . . . . . . . . . . . . . .          7,583          8,129
   Intangibles. . . . . . . . . . . . . . . . . . . . . . .          8,241         12,990
   Other. . . . . . . . . . . . . . . . . . . . . . . . . .          3,350          1,287
                                                                  --------       --------
   Deferred tax liabilities . . . . . . . . . . . . . . . .         19,174         22,406

                                                                  --------       --------
Net deferred tax liabilities. . . . . . . . . . . . . . . .       $ 12,215       $ 11,755
                                                                  --------       --------
                                                                  --------       --------
  

</TABLE>
 

    In fiscal years 1997 and 1996, the Company generated federal
taxable income which was offset by operating loss carryforwards. 
However, since not all the federal taxable income could be offset with
operating loss carryforwards, the Company did incur alternative
minimum tax which can be carried forward as a credit to future taxes
payable. The Company's current year utilization of operating loss
carryforwards also reduced the Company's valuation allowance by $5.4
million, which was recorded as a benefit in current year income tax
expense.

    At June 30, 1997, Garden State has approximately $37.0 million of
net operating loss carryforwards for tax reporting purposes available
to offset its future taxable income which expire in 2005 through 2011
and $1.3 million of alternative minimum tax credit carryforwards. 

    The Company and Garden State made state and federal income tax
payments of approximately $3.0 million, $0.6 million and $0.8 million
during fiscal years 1997, 1996 and 1995, respectively.  


NOTE 8:  RELATED PARTY TRANSACTIONS
  
    MediaNEWS Group, Inc., an affiliate of ANI, provides management
services to Garden State and the Company. Management fees charged to
Garden State by MediaNEWS Group are allocated to the individual
newspaper operations based on the revenues of the newspaper
operations.  Related management fees are shown on the accompanying
consolidated statements of operations.


                                     67
<PAGE>


NOTE 9: COMMITMENTS AND 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.

    Under the terms of a newsprint contract, the Company and Garden
State, through MNG, has agreed to purchase 1,000 tons per month of
newsprint at a fixed price for the period September 1, 1997 through
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, Garden State and/or the Company would be
responsible for damages, if any, incurred by the seller.

NOTE 10: SUBSEQUENT EVENT

    In September 1997, the Company anticipates issuing $200.0 million
of Senior Subordinated Notes due in 2009 (the "Offering"). The
issuance of the Senior Subordinated Notes will provide the Company
with additional liquidity and flexibility, as well as fixed rate
long-term debt, at rates which the Company currently believes are
attractive. If completed, Garden State will use the net proceeds to
reduce existing bank debt and pay off and terminate the NJNI bank
credit facility.

    The following unaudited table sets forth, after giving effect to
the Offering at Garden State, the amended Bank Credit Agreement and
the paydown of debt, allocated to the Company, associated with the
Offering, the approximate expected scheduled maturities of long-term
debt, allocated to the Company, for the periods indicated.

              Fiscal                        In thousands
              ------                        ------------

              1998....................      $    2,247
              1999....................           2,420
              2000....................           2,513
              2001....................           2,347
              2002....................           5,392
              Thereafter..............         221,914
                                            ----------
                                            $  236,833
                                            ----------
                                            ----------

    The following table sets forth the annual commitment reductions
for RCB and RCC, as well as annual payments under Term A Loan, giving
effect to the amended Bank Credit Agreement previously discussed.

                                                         TERM A
                                      RCB       RCC       LOAN
                                    -------  --------    -------
              1998..........        $   --   $  4,000    $    --
              1999..........            --      7,500         --
              2000..........            --      7,500         --
              2001..........            --     12,000         --
              2002..........            --     12,000      3,750
              Thereafter....        27,000     33,000     11,250
                                   --------  --------    -------
                                   $27,000   $ 76,000    $15,000
                                   --------  --------    -------
                                   --------  --------    -------


                                     68
<PAGE>


NOTE 10: SUBSEQUENT EVENT (CONTINUED)

    Giving effect to the Offering and the related paydown of debt,
the Company's parent, Garden State, will have available $76.0 million
under RCC for future acquisitions and general corporate purposes and
$22.0 million available under RCB, net of approximately $5.0 million
in letters of credit outstanding.
























                                     69
<PAGE>




             GARDEN STATE INVESTMENTS, INC. AND SUBSIDIARIES

             SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
             FISCAL YEARS ENDED JUNE 30, 1997, 1996 AND 1995
                              (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, 1997
  Reserves and allowances deducted
    from asset accounts:

  Allowance for uncollectible
   accounts........................        $2,426         $2,923         $3,003         $  350           $2,696

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

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

YEAR ENDED JUNE 30, 1995                                                                                     
  Reserves and allowances deducted                                                                           
    from asset accounts:                                                                                     
                                                                               
  Allowance for uncollectible                                                                                
   accounts........................        $2,321         $2,876         $3,343           $ 77           $1,931


</TABLE>
















                                     70
<PAGE>


INDEX TO EXHIBITS

EXHIBIT 
  NO.     DESCRIPTION
-------   -------------


 3.1*    -Second Amended and Restated Certificate of Incorporation.
 3.2*    -Form of Fourth Amended and Restated Certificate of Incorporation.
 3.5*    -Form of Certificate of Incorporation of Garden State Investments, Inc.
 4.1*    -Form of Indenture.
 4.2*    -Form of Second Pledge Agreement between Garden State Investments,
           Inc., Bank of New York, Wilmington Trust Company and William J. Wade.
10.1*    -Form of 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 Garden State Credit Facility Agreement.
10.3*    -Form of 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, Delaware banking corporation,
           and William J. Wade.


                                     71
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

EXHIBIT
  NO.     DESCRIPTION
-------   -----------

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.
10.19**  -Asset purchase agreement and assumed debt agreements related to THE
           GLOUCESTER COUNTY TIMES and TODAY'S SUNBEAM asset acquisition.
10.20**  -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 Nw England Newspapers, Inc.,
           Brattleboro Publishing Company, Connecticut Newspapers, Inc. and 
           Pittsfield Publications, Inc., as Purchasers.
10.21**  -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.
10.22**  -Asset Purchase Agreement dated August 24, 1995, by and among
           Connecticut Newspapers, Inc., as Seller, and Middletown Acquisition
           Corp., as Purchaser.
10.23**  -$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.
10.24**  -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.
10.25**  -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.
10.26**  -Asset Purchase Agreement by and among Thomson Newspapers, Inc., 
           Seller, and Garden State Newspapers, Inc., Purchaser, relating to the
           PASADENA STAR-NEWS, WHITTIER DAILY NEWS, SAN GABRIEL VALLEY TRIBUNE
           and Various Related Publications Collectively Referred to by Seller
           as The Thomson L.A. News Group Published in Pasadena, Whittier and
           West Covina, California; The TIMES-STANDARD and Various Related
           Publications Published in Eureka, California; and THE EVENING SUN and
           Various Related Publications Published in Hanover, Pennsylvania,
           dated October 30, 1996.
10.27**  -$240,000,000 Credit Agreement Dated as of August 31, 1995, as Amended
           and Restated as of October 31, 1996, among Garden State Newspapers,
           Inc., the Banks listed in the signature pages hereof (including
           Bankers Trust Company, as Documentation Agent) and The Bank of New
           York (including in its capacity as Administrative and Syndication
           Agent), as Agent.
10.28**  -Asset Purchase Agreement dated as of February 13, 1997, by and among
           Mid-States Newspapers, Inc., as Seller, and Newspaper Holdings, Inc.,
           as Buyer.
10.29**  -Asset Purchase Agreement by and among Thomson Newspapers, Inc.,
           Seller, and Garden State Newspapers, Inc., Purchaser, relating to the
           SENTINEL & ENTEPRISE and various related publications published in
           Fitchburg, Massachusetts; THE DAILY NEWS and various related
           publications published in Lebanon, Pennsylvania; and THE DAILY
           NONPAREIL and various related publications published in Council
           Bluffs, Iowa, dated February 27, 1997.
12.1*    -Computation of Ratio of Earnings to Fixed Charges.
27       -Financial Data Schedule


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

*Previously Filed as exhibits to registration statement on Form S-1
(No. 33-75156) and amendments thereto.
**Previously Filed.


                                     72
<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. 
                                      
                                      
                                      
                                  GARDEN STATE NEWSPAPERS, INC.

 
Date:  September 17, 1997         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 15, 1997  
     ----------------------------------       Chief Executive Officer and Director
          (William Dean Singleton)                  (Chief Executive Officer)      
                                              

          /s/ Joseph J. Lodovic, IV            Executive Vice President and Chief         September 15, 1997  
     ----------------------------------        Financial Officer (Chief Financial
          (Joseph J. Lodovic, IV)                          Officer)              
                                              

          /s/ Richard B. Scudder                           Director                       September 15, 1997  
     ----------------------------------
          (Richard B. Scudder)          
         
          /s/ Peter M. Miller                              Director                       September 15, 1997  
     ----------------------------------
          (Peter M. Miller)        
         
          /S/ Ronald A. Mayo                       Vice President Finance and             September 15, 1997  
     ----------------------------------         Controller (Principal Accounting
          (Ronald A. Mayo)                                  Officer)              
                                                  


</TABLE>
 















                                     73