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                         SECURITIES AND EXCHANGE COMMISSION
                               WASHINGTON, D.C. 20549

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

                                     FORM 10-K

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

                       For the Fiscal Year Ended June 30, 1998
                                         OR

            [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
                          SECURITIES EXCHANGE ACT OF 1934
                                          
                      Commission File Number  _______________
                                          
                           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 29 market dominant daily and 83
non-daily newspapers in nine states (including suburban markets in close
proximity to the San Francisco Bay area, Los Angeles, Philadelphia, Omaha and
Boston). The Company's principal sources of revenue are print advertising and
circulation sales. Other sources of revenue include commercial printing and
electronic advertising. The newspapers published by the Company had a combined
daily and Sunday paid circulation of approximately 1,145,000 and 1,144,000,
respectively, as of March 31, 1998, including the August 22, 1998 acquisition of
the CHARLESTON DAILY MAIL, published in Charleston, West Virginia. The Company
had revenue and EBITDA of $414.3 million and $98.4 million, respectively, for
fiscal 1998.

     Garden State has grown significantly through internal growth and by making
strategic acquisitions in markets which the Company believes have above average
growth potential. The Company's 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 that no longer fit a cluster strategy and when, in
management's opinion, the value of such newspaper properties has been maximized.
This strategy has enabled the Company to reinvest sale proceeds in newspaper
properties that can be clustered, allowing the Company to achieve greater
internal revenue and EBITDA growth in the future while reducing its leverage
ratio (as defined in the Company's Bank Credit Agreement).

     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 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 that only it can
provide, making it attractive for both consumers and advertisers.  

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


                                       2

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INDUSTRY BACKGROUND

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

     The number of adult readers of daily and Sunday newspapers is reported to
have increased from 106.0 million and 106.7 million in 1980 to 112.2 million and
127.6 million in 1997, respectively, representing compounded annual growth rates
of 0.33% and 1.06%, respectively. Readers of daily and Sunday newspapers tend to
be more highly educated and have higher incomes than non-newspaper readers. For
instance, 67% of college graduates and 69% of households with income greater
than $75,000 are reported to read a daily newspaper, compared to 59% of high
school graduates and 53% of households with 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 45.4 million and 60.5 million in 1997,
respectively, representing compounded annual growth rates of 2.6% and 0.6%,
respectively. Total reported daily circulation, including evening editions,
however, declined nationally from 62.2 million in 1980 to 56.7 million in 1997,
or 0.5% annually. This decrease can be directly attributable to the national
decline in circulation of evening newspapers which is reported to have decreased
from 32.8 million in 1980 to 11.3 million in 1997, or 6.1% annually, as a result
of an inability to compete with existing morning newspapers, in the same city,
which in most cases caused the evening newspaper to shut down, or as a result of
evening newspapers converting to morning.  Circulation statistics for suburban
daily newspapers are not published separately from circulation statistics for
daily newspapers as a whole. Reliable circulation statistics for weekly
newspapers are not available.

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

RECENT ACQUISITIONS & DISPOSITIONS

     Acquisitions:

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

     FISCAL 1998

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


                                       3

<PAGE>

RECENT ACQUISITIONS & DISPOSITIONS (CONTINUED)

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

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

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

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

     FISCAL 1997

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

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

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

     FISCAL 1996

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

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


                                       4

<PAGE>

RECENT ACQUISITIONS & DISPOSITIONS (CONTINUED)

     Dispositions:

     FISCAL 1998

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

     FISCAL 1997

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

     FISCAL 1996

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

OPERATING STRATEGY

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

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

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

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


                                       5

<PAGE>

OPERATING STRATEGY (CONTINUED)

     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).

     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) as the 
     seventh largest newspaper group in the United States in terms of 
     circulation as of September 30, 1997.  The Company's newspapers buy 
     newsprint from several suppliers, under arrangements covering MNG 
     affiliates, resulting in what management believes are some of the most 
     favorable newsprint prices in the industry.  Through MNG, the Company 
     has available to it fixed price newsprint contracts with certain 
     suppliers expiring over the next twelve months to two years, as well as 
     newsprint purchasing arrangements with certain of its other suppliers 
     which delay the adverse effect of newsprint price increases.  Based on 
     expected newsprint utilization at Garden State, excluding fiscal 1999 
     acquisitions, approximately 41% of the Company's annual newsprint 
     consumption for fiscal 1999 will be covered by fixed price contracts, at 
     prices which are currently well below market.

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

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


                                       6

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<TABLE>
<CAPTION>
                                         CLUSTERS

<S>                                                  <C>
          SOUTH EASTERN PENNSYLVANIA NEWSPAPER GROUP
          ------------------------------------------
          The York Dispatch (York, PA)                 NEW ENGLAND NEWSPAPER GROUP
          York Sunday News (York, PA)                  --------------------------- 
                                                       Bennington Banner (Bennington, VT)
          The Evening Sun (Hanover, PA)                Brattleboro Reformer (Brattleboro, VT)
          Lebanon Daily News (Lebanon, PA)             North Adams Transcript (North Adams, MA)
                                                       The Berkshire Eagle (Pittsfield, MA)

     The Daily Nonpareil (Council Bluffs, IA)              NORTH EASTERN MASSACHUSETTS
     The Valley News Today (Shenandoah, IA)                --------------------------- 
                                                           NEWSPAPER GROUP
                                                           --------------------------- 
                                                           The Sun (Lowell, MA)
                                                           Sentinel & Enterprise (Fitchburg, MA)

Times Standard (Eureka, CA)           [MAP]


  ALAMEDA NEWSPAPER GROUP                                      The Express Times (Easton, PA)
  -----------------------                                      North Jersey Newspaper Co
The Oakland Tribune (Oakland, CA)                              
The Daily Review (Hayward, CA)                             The Daily Mail (Charleston, WV)

Tri-Valley Herald (Pleasanton, CA)
Alameda Times-Star (Alameda, CA)

The Argus (Fremont-Newark, CA)
San Mateo County Times (San Mateo, CA)

     LOS ANGELES NEWSPAPER GROUP                       SOUTH JERSEY NEWSPAPER GROUP
     ---------------------------                       ---------------------------- 
     San Gabriel Valley Tribune (West Covina, CA)     
     Pasadena Star-News (Pasadena, CA)                 Gloucester County Times, (Woodbury, NJ)
     Whittier Daily News (Whittier, CA)                Today's Sunbeam (Salem, NJ)
                                                       Bridgeton News (Bridgeton, NJ)
     LA Daily News (Los Angeles, CA)                        
     Long Beach Press-Telegram (Long Beach, CA)

               Las Cruces News (Las Cruces, NM)                  Graham Newspapers (Graham, TX)
</TABLE>

<PAGE>

OPERATING STRATEGY (CONTINUED)

     Management believes that successful implementation of the operating 
strategy described above will position the Company to continue to achieve 
internal growth. The Company may, from time to time, seek strategic or 
targeted newspaper acquisitions and dispositions such as the acquisitions 
previously discussed. The Company continually reviews newspaper acquisition 
candidates that it believes are underperforming in terms of operating cash 
flows but 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.

MEDIANEWS GROUP, INC.'S MANAGEMENT OF NEWSPAPER OPERATIONS

     MNG provides certain corporate services to Garden State.  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.

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

     MNG's commitment to editorial quality is an integral part of its overall 
management strategy.  While MNG does not maintain any centralized editorial 
control over the newspapers it manages, MNG does maintain high standards for 
local news coverage by utilizing its extensive contacts, trade reputation and 
opportunities for career advancement throughout the Company and its 
affiliates to attract and retain talented editorial personnel.

     MNG is currently constructing a website to post press releases, annual 
and quarterly financial data, as well additional information on MNG and its 
affiliates.  This website is located at WWW.MEDIANEWSGROUP.COM.


                                       8

<PAGE>

NEWSPAPER PROPERTIES

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

     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 affluent suburban markets located immediately south, southeast
and southwest of Oakland in Alameda County and San Mateo County.  The Alameda
Newspaper Group also publishes THE ALAMEDA ACCENT, SAN BRUNO HERALD, DALY CITY
RECORD/BRISBANE BEE, TIMES WEEKEND, MILLBRAE RECORDER-PROGRESS and THE COASTSIDE
CHRONICLE on Saturday. The Alameda Newspaper Group had total daily and Sunday
paid circulation of approximately 214,000 and 171,000 as of March 31, 1998. 

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

     LOWELL. THE SUN is located in Lowell, Massachusetts, approximately 30 
miles north of Boston, and publishes an evening newspaper five days a week 
and morning editions on Saturday and Sunday. THE SUN had daily and Sunday 
paid circulation of approximately 52,000 and 56,000, respectively, as of 
March 31, 1998.
 
     EASTON.  THE EXPRESS-TIMES is located in Easton, Pennsylvania,
approximately 60 miles north of Philadelphia, Pennsylvania, and publishes a
morning newspaper seven days a week. THE EXPRESS-TIMES also publishes five
weekly newspapers: THE BETHLEHEM STAR, TWO RIVERS SHOPPING TIMES, BANGOR
HOMETOWN NEWS, THE NAZARETE US and the HUNTERDON MARKETPLACE, which are
distributed in the area surrounding Easton, Pennsylvania.  THE EXPRESS-TIMES had
total daily and Sunday paid circulation of approximately 50,000 and 48,000,
respectively, as of March 31, 1998.

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

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

                                       9
<PAGE>

NEWSPAPER PROPERTIES (CONTINUED)

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

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

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

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

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

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

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

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

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


                                      10

<PAGE>

NEWSPAPER PROPERTIES (CONTINUED)

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

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

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

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

RECENT ACQUISITION

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

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 1998, 1997, and 1996 were as follows:

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


                                      11

<PAGE>

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

NEWSPRINT
 
     Newsprint represents one of the largest costs of producing a newspaper. 
The Company's newspapers buy newsprint from several suppliers under arrangements
covering MNG affiliates, resulting in what management believes are some of the
most favorable newsprint prices in the industry.  In fiscal years 1998, 1997 and
1996, the Company consumed approximately 99,900, 76,000, and 62,400 tons of
newsprint, respectively, and, during the same periods, incurred newsprint
expense of approximately $54.4 million, $41.1 million, and $42.5 million,
respectively.  Newsprint expense as a percentage of revenue for fiscal year
1998, 1997 and 1996 was 13.1%, 13.6%, and 18.5%, respectively.  Newsprint
expense varies between years because of fluctuations in prices and consumption.
Newsprint expense as a percentage of revenue showed no significant change in
fiscal 1998 over fiscal 1997.  Newsprint expense as a percentage of revenue
decreased in fiscal 1997 over 1996, primarily because of a decrease of
approximately 25.0% in the average cost per ton of newsprint consumed and a
reduction in consumption from the implementation of the 50 inch web width. See
"Near Term Outlook" on page 23 for additional discussion of newsprint pricing.

EMPLOYEE RELATIONS
 
     The Company employs approximately 4,000 full-time and 1,700 part-time
employees, of which approximately 900 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 suburban small city 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.  The Company may from
time to time compete with other companies, which have greater financial
resources than the Company.


                                      12

<PAGE>

ELECTRONIC MEDIA

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

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

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

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, Long Beach, Woodland
Hills, Valencia and Eureka, California; Council Bluffs, Denison and Shenandoah
Iowa; Bridgeton and Woodbury, New Jersey; Easton, York, Hanover and Lebanon,
Pennsylvania; Pittsfield, North Adams, Lowell and Fitchburg, Massachusetts; Las
Cruces, New Mexico; Bennington and Brattleboro, Vermont; and Graham, Texas. 
Facilities located in Oakland, Pasadena and Pleasanton, California, are operated
under long-term leases. 
 
     The 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.


                                      13

<PAGE>

REGULATION AND ENVIRONMENTAL MATTERS (CONTINUED)

     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.  

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.











                                      14

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

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

Cost of Sales                              145,412       106,939       98,469       79,098       68,531   
Selling, General and Administrative        168,022       125,169      100,230       88,847       79,217   
Management Fees                              2,757         2,205        2,008        1,666        1,552   
Depreciation and Amortization               38,857        24,689       21,841       18,710       19,900   
Interest Expense                            45,311        31,903       27,414       25,806       24,623   
Gain on Sale of Newspaper Property          31,829        30,575        8,291        4,153        6,536   
Income (Loss) Before Income Taxes  
  and Extraordinary Items                   34,392        34,577         (752)         684      (15,253)  
Net Income                                  29,600        24,739        1,260        1,048       18,716   

OTHER FINANCIAL DATA:
Capital Expenditures                         9,683         8,836        8,079        4,284        3,380   
Cash Flow from:
  Operating Activities                      55,350        31,438        8,658       22,876        7,039   
  Investing Activities                    (207,026)     (148,657)       6,900        1,255       (9,840)  
  Financing Activities                     143,731       121,748      (28,226)     (15,742)       3,105   
EBITDA(b)                                   98,115        68,589       44,723       43,434       37,343   

BALANCE SHEET DATA:
Total Assets                               639,643       414,431      240,759      250,500      252,561   
Long-Term Debt and
  Capital Leases                           517,330       350,822      210,589      223,847      235,147   
Other Long-Term Liabilities and
  Obligations                                6,963         5,488        8,101        5,042        3,852   
Total Shareholder's Equity (Deficit)        33,547         3,947      (20,792)     (22,052)     (23,100)  
</TABLE>

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


                                      15

<PAGE>

(FOOTNOTES FROM PROCEEDING PAGE)

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

     (I)       On May 31, 1994, the Company purchased the assets of THE EXPRESS
               TIMES, which contributed $1.5 million to fiscal 1994 revenues of
               the Company.
     
     (II)      On June 27, 1994, the Company closed the YPSILANTI PRESS, a daily
               newspaper published in Ypsilanti, Michigan, and sold its
               circulation list for $9.0 million.  The sale resulted in a 
               pre-tax gain of approximately $6.5 million. This newspaper
               contributed approximately $4.3 million in fiscal 1993 and $4.1
               million of revenues in fiscal 1994 prior to its disposition.

     (III)     On August 1, 1994, 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.

     (IV)      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.

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

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

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

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

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

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

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

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


                                      16

<PAGE>


(footnotes from proceeding page)

     (XIII)    On December 16, 1997, the Company acquired substantially all the
               assets used in the publication of the PRESS-TELEGRAM, a daily
               newspaper published in Long Beach, California, for approximately
               $38.2 million in cash.  Proceeds from the sale of the NORTH
               JERSEY HERALD & NEWS were used to fund the acquisition.  This
               newspaper contributed approximately $22.7 million of revenue in
               fiscal year 1998.
     
     (XIV)     On January 29, 1998, the Company acquired substantially all the
               assets used in the publication of the DAILY NEWS, a daily
               newspaper published in the San Fernando Valley of Los Angeles,
               California, for approximately $130.0 million.  This newspaper
               contributed approximately $36.9 million of revenue to the Company
               in fiscal year 1998.
     
     (XV)      On May 1, 1998, the Company acquired substantially all the assets
               used in the publication of the VALLEY NEWS TODAY, a morning
               newspaper published five times a week in Shenandoah Iowa, and
               seven weekly publications distributed primarily in Shenandoah and
               Dennison, Iowa. These assets were purchased for approximately
               $5.1 million in cash, plus covenants not to compete with a
               discounted value of $0.6 million.  These newspapers contributed
               approximately $0.3 million of revenue to the Company in fiscal
               year 1998.

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

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

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

INTRODUCTION
 
     The following analysis of the financial condition and results of 
operations of the Company should be read in conjunction with the Selected 
Financial Data and the 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.  However, since fiscal 
year 1994 the Company has reduced the accumulated deficit by approximately 
$75.4 million.

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

     FISCAL 1998 TRANSACTIONS

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

                                       17
<PAGE>

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

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

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

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

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

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

     FISCAL 1997 TRANSACTIONS

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

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

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

     FISCAL 1996 TRANSACTIONS

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

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

                                       18
<PAGE>

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

     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). 

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

<TABLE>
<CAPTION>
                                                    SUMMARY HISTORICAL FINANCIAL DATA
                                                         (DOLLARS IN THOUSANDS)        
                                        Fiscal Years Ended June 30,     Fiscal Years Ended June 30,
                                      ------------------------------   ----------------------------
                                        1998        1997      1996     1998 vs. 1997  1997 vs. 1996
                                      --------   --------   --------   -------------  -------------
<S>                                   <C>        <C>        <C>        <C>            <C>
 Total Revenues                       $414,306   $302,902   $245,430       36.8%          23.4%
                                                                                                   
 Cost of Sales                         145,412    106,939     98,469       36.0            8.6
 Selling, General and                                                                 
    Administrative                     168,022    125,169    100,230       34.2           24.9
 Management Fees                         2,757      2,205      2,008       25.0            9.8
 Depreciation and                                                                     
    Amortization                        38,857     24,689     21,841       57.4           13.0
 Interest Expense                       45,311     31,903     27,414       42.0           16.4
 Other                                  11,384      7,995      4,511       42.4           77.2
                                      --------   --------   --------       ----           ----
    Total Costs and Expenses           411,743    298,900    254,473       37.8           17.5

 Net Income                           $ 29,600   $ 24,739   $  1,260       19.6%           (a)
</TABLE>

(a) not meaningful

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1998 AND 1997

REVENUES

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

                                       19
<PAGE>

COST OF SALES

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

SELLING, GENERAL AND ADMINISTRATIVE

     Selling, general and administrative ("SG&A") expenses increased $42.9 
million or 34.9 in fiscal year 1998 as compared to fiscal year 1997.  The 
aforementioned acquisitions resulted in SG&A expense increases of $54.5 
million; however, this was in part offset by a $14.6 million reduction in 
SG&A expense associated with the sale the POTOMAC NEWS and the NORTH JERSEY 
HERALD & NEWS. On a same newspaper basis, SG&A expense increased $3.0 million 
or 3.8%.  The increase in SG&A expense is associated with increases in 
advertising and circulation expenditures, which were primarily related to 
ongoing efforts to increase advertising lineage and paid circulation. 

OTHER EXPENSE

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

DEPRECIATION AND AMORTIZATION

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

INTEREST EXPENSE

     Interest expense increased $13.4 million in fiscal year 1998 as compared 
to the same period of fiscal year 1997.  Interest expense increased primarily 
as a result of a $147.3 million increase in average debt outstanding, all of 
which is associated with acquisitions.  This increase was partially offset by 
a 36 basis point decrease in the average interest rate, mainly associated 
with the refinancing of the Company's 10.89% Notes on October 31, 1996 and a 
reduction in the borrowing spread on bank debt, which was offset in part by 
an increase associated with the replacement of $300.0 million of bank debt 
with the 8.75% Senior Subordinated Notes issued on October 1, 1997 and 
February 12, 1998.

NET INCOME

     Garden State recorded adjusted net income of approximately $5.1 million 
in fiscal year 1998; after excluding the pretax gain on the sale of the 
NORTH JERSEY HERALD & NEWS of $31.8 million and $7.3 million of debt issuance 
cost, compared to adjusted net income of $7.3 million in fiscal year 1997, 
after excluding the $30.6 million pre-tax gain on the sale of the POTOMAC 
NEWS, $4.4 million of debt issuance cost and an $8.8 million extraordinary 
loss.  The $2.2 million decrease in adjusted net income was caused by a $13.4 
million increase in interest expense, primarily as a result of acquisitions, 
and a $3.7 million increase in tax expense resulting from the sale of the 
NORTH JERSEY HERALD & NEWS, which completely offset the $15.4 million 
increase in operating profit.

                                       20
<PAGE>

COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1997 AND 1996

REVENUES

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

COST OF SALES

     Cost of sales increased $8.5 million or 8.6% in fiscal year 1997 
compared to fiscal 1996.  The aforementioned acquisitions caused cost of 
sales to increase approximately $25.8 million in fiscal year 1997. However, 
this increase was offset in part by a $7.0 million decrease in cost of sales 
resulting from the sale of the Johnstown Tribune Publishing Company and the 
POTOMAC NEWS.  On a same newspaper basis, cost of sales decreased 
approximately $10.3 million or 12.8%.  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 $24.9 
million or 24.9% in fiscal year 1997 as compared to fiscal year 1996.  The 
aforementioned acquisitions resulted in SG&A expense increases of $29.3 
million; however, this was in part offset by a $6.1 million reduction in SG&A 
expense associated with the sale of the Johnstown Tribune Publishing Company 
and the POTOMAC NEWS.  On a same newspaper basis, SG&A expense increased $1.7 
million or 2.1%.  The increase in SG&A expense is associated with increases 
in advertising and circulation expenditures, which were primarily related to 
ongoing efforts to increase advertising lineage and paid circulation. 

OTHER EXPENSE

     Other expense, 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 Bank Credit Agreement entered into on October 31, 1996. The 
increase was partially offset by $1.1 million of financing costs recorded in 
the same period of fiscal year 1996 associated with the New England 
Newspapers acquisition. 

                                       21
<PAGE>

NET INCOME

     Garden State recorded adjusted net income of approximately $7.3 million 
in fiscal year 1997, after excluding the pretax gain on the sale of the 
POTOMAC NEWS of $30.6 million, the effect of the $4.4 million charge 
described above, and the $8.8 million extraordinary loss from the prepayment 
of the Company's senior notes, as compared to an adjusted net loss of $5.6 
million in fiscal year 1996, after excluding the gain on sale of the 
Johnstown Tribune Publishing Company, the write-off of fees and other costs 
associated with a Garden State credit facility and start up costs associated 
with the acquisition and integration of the SAN MATEO COUNTY TIMES. The 
increase in adjusted net income is primarily attributable to a $21.0 million 
increase in operating profit offset by a $4.5 million increase in interest 
expense and a $3.1 million reduction in tax benefits.

LIQUIDITY AND CAPITAL RESOURCES

     The principal sources of liquidity for the Company and its subsidiaries 
are existing cash and other working capital, cash flow provided from their 
operating activities and the borrowing capacity under 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, 1998 COMPARED TO JUNE 30, 1997

     Net cash flows from operating activities were approximately $55.3 
million and $31.4 million for fiscal years ended June 30, 1998 and 1997, 
respectively. The $23.9 million increase in cash flow from operating 
activities was primarily the result of a $29.5 million increase in operating 
profit, excluding depreciation and amortization expense, for the fiscal year 
1998, compared to the fiscal year 1997, combined with a $9.0 million increase 
in the change in operating assets and liabilities, which were offset by a 
$12.5 million increase in cash interest expense. 

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

     Net cash flows from financing activities were $143.7 million and $121.7 
million for fiscal years ended June 30, 1998 and 1997, respectively.  The 
change of approximately $22.0 million was primarily attributable to the 
Company borrowing a net $141.0 million in fiscal year 1998, compared to the 
net borrowing of $135.7 million in fiscal year 1997, the majority of which 
was issued in conjunction with the previously discussed acquisitions in each 
fiscal year.  A $6.7 million reduction in debt issuance and repurchase 
premium also contributed to the increase.

JUNE 30, 1997 COMPARED TO JUNE 30, 1996

     Net cash flows from operating activities were approximately $31.4 
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 
1997, compared to the fiscal year 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.

                                      22
<PAGE>

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

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

CAPITAL EXPENDITURES

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

LIQUIDITY

     Giving effect to the issuance of $300.0 million of 8.75% Senior 
Subordinated Notes and the corresponding paydown of bank debt, Garden State 
had a combined $242.4 million available for future borrowings under its Bank 
Credit Agreement, net of approximately $4.6 million in outstanding letters of 
credit at June 30, 1998.  Approximately $141.0 million of the availability 
under the Bank Credit Agreement is available solely for future business 
acquisitions. Commitments under the Garden State credit facility will also 
continue to reduce in accordance with the terms disclosed in the June 30, 
1998, Consolidated Financial Statements and notes thereto appearing elsewhere 
herein.

     Subsequent to year end Garden State repurchased $36.0 million of its 
12.0% Senior Subordinated Secured Notes.  Beginning July 1, 1999, the Company 
can call its remaining outstanding 12.0% Senior Subordinated Secured Notes at 
107.5%. The Company is currently expect to call the Senior Subordinated 
Secured Notes at the first call date, as a result of an anticipated annual 
interest savings in excess of $5.0 million.  Current and future repurchases 
of the Senior Subordinated Secured Notes will be financed by borrowing under 
the existing Garden State Bank Credit Agreement and cash flows from 
operations.

NEAR TERM OUTLOOK

     The majority of the large newsprint suppliers have announced a $40 per 
metric ton price increase on standard 30 pound newsprint, beginning on 
September 1, 1998.  If the price increase takes hold, newsprint transaction 
prices will increase to approximately $615 per metric ton for large buyers.  
Upward pressure in newsprint pricing is being fueled by the Abitibi 
Consolidated (the largest newsprint vendor in North America) strike at seven 
newsprint mills which began on June 15, 1998.  If the September 1, 1998, 
price increase is successful, the increase is not expected to have a 
significant impact on the Company's cash flows from operations as the Company 
expects to purchase approximately 41% of its fiscal 1999 newsprint 
requirements under fixed price contracts, entered into by MediaNews Group, 
expiring over the next 18 months to 26 months.   The weighted average rate 
for contracted newsprint which the Company anticipates receiving in fiscal 
year 1999 will be approximately $526 per metric ton.  In addition, the 
Company has a contract that allows it to purchase 36,000 metric ton per year 
at a price equal to the lowest price which newsprint is sold to large North 
America newsprint purchasers, subject to quarterly adjustment. While there is 
no assurance that the Company will receive newsprint allocation as described 
above, based on current operations, management does not anticipate material 
changes in the allocation during fiscal year 1999.

                                       23
<PAGE>

NEAR TERM OUTLOOK (CONTINUED)

     Based upon current and expected operations, management believes that the 
Company will have sufficient cash flows from operations 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.  In 
addition to cash flows from operations, the Company has approximately $6.0 
million available under a working capital facility as of the date of this 
report which should be more than sufficient to fund unanticipated needs.

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

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

IMPACT OF YEAR 2000

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

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

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

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

                                       24
<PAGE>

MARKET RISK

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

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

   Fixed Rate                                    --     --      --     --      --     400,287   400,287  416,500
   Average Interest Rate                       9.56%  9.56%   9.56%  9.56%   9.56%       9.56%           
                                                                                                         
   Variable Rate                                 --     --      --  3,750   7,500      22,750    34,000   34,000
   Average Interest Rate                       6.93%  6.93%   6.93%  6.93%   6.93%       6.93%           

 INTEREST RATE DERIVATIVE FINANCIAL                                                                      
   INSTRUMENT RELATED TO DEBT
 INTEREST RATE SWAPS                                                                                     
   Pay variable/Receive Fixed                 50,000    --      --     --      --          --    50,000     (0.4)
   Average Pay Rate                            6.45%    --      --     --      --          --           
   Average Rate Received                       5.70%    --      --     --      --          --           
</TABLE>
                                       
                           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 29).

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

    None.

                                       25

<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, 1998, and a 
brief account of the business experience of each person who is a director, 
executive officer or other significant employee of the Company.

<TABLE>
<CAPTION>
        NAME              AGE                     TITLE
        ----              ---                     -----
<S>                       <C>  <C>
 Richard B. Scudder        85  Chairman of the Board and Director
 William Dean Singleton    46  Vice Chairman, President, Chief Executive Officer
                                  and Director
 Joseph J. Lodovic, IV     37  Executive Vice President and Chief Financial Officer
 Anthony F. Tierno         53  Executive Vice President and Chief Operating Officer
 E. Michael Fluker         61  Senior Vice President, Administration
 Ronald A. Mayo            36  Vice President Finance and Controller
 Michael C. Bush           43  Vice President Operations
 James L. McDougald        44  Treasurer
 Jean Scudder              46  Director
</TABLE>

     Each director is elected annually and serves until the next annual 
meeting of shareholders or until his successor is duly elected and qualified. 
The directors of 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. 

     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.

     MICHAEL C. BUSH has served as Vice President Operations since October 
1997. Prior thereto, he served as Director of Marketing of Morris Newspaper 
Corp., and Regional Director and Assistant Administrator of Park Newspapers 
from 1986 to 1996.

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

     JEAN SCUDDER has served as a Director of Garden State since July 1998.  
Ms. Scudder is the daughter of Richard B. Scudder.

                                       26
<PAGE>

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 1998.

<TABLE>
<CAPTION>
 Name and                           Fiscal           Annual Compensation            All Other
 Principal Position                  Year           Salary           Bonus         Compensation
 ------------------                 ------        ---------       ---------        ------------
<S>                                 <C>           <C>             <C>              <C>
 William Dean Singleton(a)           1998         $ 360,000       $ 250,000           $ 7,394
 Vice Chairman, President            1997           250,000         100,000             3,610
 And Chief Executive Officer         1996           100,000          80,000                --

 Joseph J. Lodovic IV(b)             1998         $ 181,500       $ 140,000           $ 3,078
 Executive Vice President,           1997           165,000          94,700             3,390
 Chief Financial Officer             1996           125,550              --            31,900

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

 E. Michael Fluker(c)                                                                   
 Senior Vice President,              1998         $ 101,400       $   3,250           $ 5,265
 Administration                                                                         

 Michael C. Bush(d)                  1998         $ 133,050       $  35,000           $ 7,049
 Vice President Operations         
</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)  Other Compensation in 1996 includes a relocation bonus.
(c)  In fiscal 1996 and 1997 allocated compensation did not exceed $100,000.
(d)  Mr. Bush was not an officer of the Company in fiscal year 1997.

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 $360,000 (of which Garden 
State is obligated to pay a portion), subject to annual review and adjustment 
by the Board of Directors of Garden State. In addition, Mr. Singleton is 
entitled to receive a bonus of up to $100,000 for each fiscal year based on a 
comparison of actual profits of Garden State to budgeted profits during such 
fiscal year.  Other discretionary bonuses may be paid which are not part of 
the employment agreements.  The Employment Agreement expires by its terms on 
June 30, 2001, but will be automatically renewed for successive one-year 
terms unless Garden State or Mr. Singleton gives notice terminating the 
Employment Agreement at least 120 days prior to the expiration of the 
existing term.  The Employment Agreement contains a five-year non-compete 
covenant for all counties and geographical areas in which newspapers are 
owned or circulated by Garden State or its subsidiaries (currently or in the 
future).  

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     Decisions regarding annual compensation 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." 

                                       27
<PAGE>

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

     MNT, a division of MNG, provides electronic media services including 
website development and maintenance, internet access, and online publishing 
capabilities for all the newspapers managed by MNG. The cost of providing 
these services is allocated based on revenue of the newspapers for which such 
services are provided. For fiscal 1998 the Company paid approximately $1.0 
million to MNT. The Company records electronic media advertising revenues 
earned by the Company's newspapers, in its consolidated statement of 
operations.

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

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





                                       28
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)

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 29).

          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 29).

          3.   Exhibits

                    The Exhibits listed in the accompanying index to exhibits
are filed as a part of this annual report. (See page 70).

     (b)       Reports on Form 8-K

                    The Company filed a Form 8-K/A on April 9, 1998, 
regarding the purchase of the DAILY NEWS, of Los Angeles.

                                       29
<PAGE>

                        GARDEN STATE NEWSPAPERS, INC.
                        ITEMS 8, AND 14(a) (1) AND (2)
                                          
           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES 
                   COVERED BY REPORTS OF INDEPENDENT AUDITORS

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

<TABLE>
<CAPTION>
GARDEN STATE NEWSPAPERS, INC.
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
Report of Independent Auditors                                              31
Consolidated Balance Sheets as of June 30, 1998 
  and 1997                                                                  32
Consolidated Statements of Operations for the
 Fiscal Years Ended June 30, 1998, 1997 and 1996                            34
Consolidated Statements of Changes in Shareholder's Equity 
 (Deficit) for the Fiscal Years Ended June 30, 1998, 1997 and 1996          35
Consolidated Statements of Cash Flows for the Fiscal Years Ended
 June 30, 1998, 1997 and 1996                                               36
Notes to Consolidated Financial Statements                                  37
</TABLE>

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

<TABLE>
<S>                                                                        <C>
Schedule II         Valuation and Qualifying Accounts                       51
</TABLE>

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

<TABLE>
<CAPTION>
GARDEN STATE INVESTMENTS, INC.
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
Report of Independent Auditors                                              52
Consolidated Balance Sheets as of June 30, 1998 
  and 1997                                                                  53
Consolidated Statements of Operations for the Fiscal
 Years Ended June 30, 1998, 1997 and 1996                                   55
Consolidated Statements of Changes in Shareholder's Deficit for the
 Fiscal Years Ended June 30, 1998, 1997 and 1996                            56
Consolidated Statements of Cash Flows for the Fiscal Years Ended
 June 30, 1998, 1997 and 1996                                               57
Notes to Consolidated Financial Statements                                  58


Schedule II        Valuation and Qualifying Accounts                        69
</TABLE>

                                       30
<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, 1998 
and 1997, and the related consolidated statements of operations, changes in 
shareholder's equity, and cash flows for each of the three years in the 
period ended June 30, 1998.  Our audits also included the financial statement 
schedule II.  These financial statements and schedule are the responsibility 
of the Company's management.  Our responsibility is to express an opinion on 
these financial statements and schedule based on our audits.

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

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




                                            ERNST & YOUNG LLP

Denver, Colorado
September 4, 1998



                                       31
<PAGE>
                                       
                 GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                          June 30,
                                                                                 --------------------------
                                                                                   1998              1997  
                                                                                 --------          --------
                                                                                       (In thousands)
<S>                                                                              <C>               <C>
 ASSETS
 CURRENT ASSETS                                                                            
   Cash and cash equivalents                                                     $    999          $  8,944
   Trade accounts receivable, less allowance for doubtful accounts of                      
       $6,239 and $4,252 at June 30, 1998 and 1997, respectively                   48,241            32,849
   Receivable from affiliates                                                         956             1,968
   Other receivables                                                                2,534             1,353
   Inventories of newsprint and supplies                                            7,286             6,170
   Prepaid expenses and other assets                                                3,475             3,295
   Income taxes receivable                                                          1,687                --
                                                                                 --------          --------
      TOTAL CURRENT ASSETS                                                         65,178            54,579

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

 OTHER ASSETS                                                                              
   Investment in partnership                                                        7,479             6,365
   Subscriber accounts, less accumulated amortization of                                   
     $53,446 and $45,808 at June 30, 1998 and 1997, respectively                   98,712            69,960
   Excess of cost over fair value of net assets acquired, less                             
     accumulated amortization of $18,492 and $12,718 at                                    
     June 30, 1998 and 1997, respectively                                         251,196           154,294
   Covenants not to compete and other identifiable intangible                              
     assets, less accumulated amortization of $19,846 and                                  
     $15,861 at June 30, 1998 and 1997, respectively                               15,810             6,684
   Other                                                                            7,468             2,000
                                                                                 --------          --------
      TOTAL OTHER ASSETS                                                          380,665           239,303
                                                                                 --------          --------

 TOTAL ASSETS                                                                    $639,643          $414,431
                                                                                 --------          --------
                                                                                 --------          --------
</TABLE>

                   SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       32
<PAGE>
                                       
<TABLE>
<CAPTION>
                                                                                                      June 30
                      LIABILITIES AND SHAREHOLDER'S EQUITY                                 ------------------------------
                                                                                             1998                  1997 
                                                                                           --------              --------
                                                                                         (In thousands, except  share data)
<S>                                                                                      <C>                     <C>
 CURRENT LIABILITIES                                                                                  
    Trade accounts payable                                                                 $  5,684              $  6,286
    Accrued employee compensation                                                            13,938                 7,208
    Accrued interest                                                                         14,465                 7,830
    Other accrued liabilities                                                                20,876                 8,676
    Unearned income                                                                          14,829                10,746
    Income taxes                                                                                 --                 1,308
    Current portion of long-term debt and obligations under capital leases                    5,644                 6,247
                                                                                           --------              --------
           TOTAL CURRENT LIABILITIES                                                         75,436                48,301
                                                                                                                         
 OBLIGATIONS UNDER CAPITAL LEASES                                                             7,484                 7,477
                                                                                                                          
 LONG-TERM DEBT                                                                             504,202               337,098
                                                                                                                           
 OTHER LIABILITIES                                                                            6,479                 5,092

 DEFERRED INCOME TAXES                                                                       12,495                12,516

 SHAREHOLDER'S EQUITY                                                                                 
   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                                                                                  (45,024)              (74,624)
                                                                                           --------              --------
           TOTAL SHAREHOLDER'S EQUITY                                                        33,547                 3,947
                                                                                           --------              --------




 TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY                                                $639,643              $414,431
                                                                                           --------              --------
                                                                                           --------              --------
</TABLE>

                  SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       33

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

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

 COSTS AND EXPENSES                                                                 
   Cost of sales                                            145,412       106,939         98,469
   Selling, general and administrative                      168,022       125,169        100,230
   Management fees                                            2,757         2,205          2,008
   Depreciation and amortization                             38,857        24,689         21,841
   Interest expense                                          45,311        31,903         27,414
   Other                                                     11,384         7,995          4,511
                                                           --------      --------       --------
       TOTAL COSTS AND EXPENSES                             411,743       298,900        254,473

 GAIN ON SALE OF NEWSPAPER PROPERTY                          31,829        30,575          8,291
                                                           --------      --------       --------

 INCOME (LOSS) BEFORE INCOME TAXES                                                  
   AND EXTRAORDINARY LOSS                                    34,392        34,577           (752)
 INCOME TAX BENEFIT (EXPENSE)                                (4,792)       (1,066)         2,012
                                                           --------      --------       --------

 INCOME BEFORE EXTRAORDINARY LOSS                            29,600        33,511          1,260

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

 NET INCOME                                               $  29,600     $  24,739       $  1,260
                                                           --------      --------       --------
                                                           --------      --------       --------
</TABLE>
                                       
                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       34
<PAGE>

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

<TABLE>
<CAPTION>
                                                    ADDITIONAL                            TOTAL
                                       COMMON        PAID-IN-                         SHAREHOLDER'S
                                       STOCK         CAPITAL         DEFICIT         EQUITY (DEFICIT)
                                       ------       ----------       -------         ----------------
<S>                                    <C>          <C>             <C>              <C>
                                                            (In thousands)

 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
   Net income                            --                --          29,600              29,600
                                        ---           -------       ---------            --------
 BALANCE AT JUNE 30, 1998                $1           $78,570       $ (45,024)           $ 33,547
                                        ---           -------       ---------            --------
                                        ---           -------       ---------            --------
</TABLE>

                                       
               SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

















                                       35
<PAGE>

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

<TABLE>
<CAPTION>
                                                                             Fiscal Year Ended June 30,
                                                               ------------------------------------------------------
                                                                  1998                    1997                 1996  
                                                               ---------                ---------            --------
                                                                                     (In thousands)
<S>                                                           <C>                       <C>                  <C>
 CASH FLOWS FROM OPERATING ACTIVITIES:                                                              
     Net income                                               $   29,600                $  24,739            $  1,260
     Adjustments to reconcile net income to net
           cash provided by operating activities:
       Depreciation                                               16,038                   10,707               9,762
       Amortization                                               22,194                   12,775              11,499 
       Gain on sale of newspaper assets                          (31,539)                 (30,579)             (8,621)
       Provision for losses on accounts receivable                 4,596                    3,092               2,510
       Amortization of debt discount                               2,937                    2,060               1,696
       Debt issue cost and repurchase premiums                     7,287                   13,969               1,092
       Distributions in excess of (less than)                                                    
           earnings from investment in partnership                (1,114)                      23                (610)
       Deferred income tax (benefit)                              (1,520)                  (3,226)             (2,529)
       Change in operating assets and liabilities:                                               
           Accounts receivable                                     1,211                   (5,408)             (3,403)
           Inventories                                             3,538                   (1,163)              1,799
           Prepaid expenses and other assets                       1,898                     (455)               (558)
           Accounts payable and accrued liabilities               (5,550)                   5,139              (5,047)
           Unearned income                                          (541)                     746                  22
           Affiliate account balances                              1,012                     (445)                303
           Change in other assets and liabilities                  5,303                     (366)               (517)
           Other                                                      --                     (170)                 --
                                                               ---------                ---------            --------
 NET CASH FLOWS FROM OPERATING ACTIVITIES                         55,350                   31,438               8,658

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

 CASH FLOW FROM FINANCING ACTIVITIES:                                                               
     Issuance of long-term debt                                  490,988                  259,450              37,300
     Reduction of long-term debt                                (337,779)                (120,773)            (60,240)
     Reduction of non-operating liabilities                       (2,191)                  (2,960)             (4,194)
     Debt issuance cost and repurchase premiums                   (7,287)                 (13,969)             (1,092)
                                                               ---------                ---------            --------
 NET CASH FLOWS FROM FINANCING ACTIVITIES                        143,731                  121,748             (28,226)
                                                               ---------                ---------            --------

 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 (7,945)                   4,529             (12,668)

 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                    8,944                    4,415              17,083
                                                               ---------                ---------            --------

 CASH AND CASH EQUIVALENTS AT END OF YEAR                      $     999                $   8,944            $  4,415
                                                               ---------                ---------            --------
                                                               ---------                ---------            --------
</TABLE>

                                       
                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       36
<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. 

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.  

                                       37
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 $7.5 million and 
$6.4 million at each of the fiscal years ended June 30, 1998 and 1997, 
respectively. The Agency made cash distributions to YNI in the amount of $7.3 
million, $7.2 million and $4.9 million in fiscal years 1998, 1997 and 1996.

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

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

NOTE 3: ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

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

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

                                       38
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

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

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

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

  FISCAL 1997

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

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

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

  FISCAL 1996

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

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

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

                                       39
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

DISPOSITIONS

  FISCAL 1998

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

  FISCAL 1997

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

  FISCAL 1996

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

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

  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.

                                       40
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: ACQUISITIONS AND DISPOSITIONS (CONTINUED)

UNAUDITED PRO FORMA OPERATING RESULTS

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

<TABLE>
<CAPTION>
                                                 June 30, 1998      June 30, 1997
                                                 -------------      -------------
<S>                                              <C>                <C>
 Revenues                                          $ 470,593          $ 427,947
                                                   ---------          ---------
                                                   ---------          ---------
 Net Income Before Extraordinary Items             $  27,708          $  27,027
                                                   ---------          ---------
                                                   ---------          ---------
 Net Income                                        $  27,708          $  18,255
                                                   ---------          ---------
                                                   ---------          ---------
</TABLE>

NOTE 4:  LONG-TERM DEBT

DEBT RESTRUCTURING

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

  As a result of certain refinancing and debt prepayments on October 31, 
1996, associated with acquisitions, 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 elected to charge the $4.4 
million of the debt issuance cost to fiscal year 1997 expense and, 
accordingly, the cost has been included in other expense in the accompanying 
Consolidated Statements of Operations.

LONG-TERM DEBT

LONG-TERM DEBT CONSISTED OF THE FOLLOWING AT EACH YEAR-END:

<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                               ----------------------------
                                                                                 1998                1997
                                                                               --------            --------
                                                                                      (IN THOUSANDS)
<S>                                                                            <C>                 <C>
 Bank Credit Agreement . . . . . . . . . . . . . . . . . . . . . .      (I)    $ 34,000            $211,000
 NJNI bank credit facility . . . . . . . . . . . . . . . . . . . .     (II)         --               16,750
 Various Notes, payable through December, 2002 . . . . . . . . . .    (III)      24,988              12,966
 12.00% Senior Subordinated Secured Notes due July 1, 2004 . . . .     (IV)     100,000             100,000
 8.75% Senior Subordinated Notes, due 2009 . . . . . . . . . . . .      (V)     300,287                  --
 9.00% Subordinated Promissory Note  . . . . . . . . . . . . . . .     (VI)      47,600                  --
 Notes payable to certain shareholders of ANI  . . . . . . . . . .    (VII)       2,971               2,629
                                                                               --------            --------
                                                                                509,846             343,345
 Less current portion of long-term debt  . . . . . . . . . . . . .                5,644               6,247
                                                                               --------            --------
                                                                               $504,202            $337,098
                                                                               --------            --------
                                                                               --------            --------
</TABLE>

                                       41
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

     d.   A $72.0 million Senior Secured Revolving Credit Facility ("RCC") with
          a final maturity of March 31, 2004. The commitment under RCC requires
          quarterly principal payments beginning on September 30, 1997, with
          total annual payments of $7.5 million in fiscal years 1999 and 2000,
          $12.0 million in fiscal years 2001 and 2002, $14.0 million in 2003 and
          $19.0 million in 2004.  RCC is secured by a first priority lien on the
          common stock and substantially all 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
     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 pays an annual commitment fee of 0.50% on the unused commitment
     under RCA and RCB. If the ratio of total debt to operating cash flow is
     less than 4.00 to 1.00, the commitment fee is reduced to 0.375%.

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

III. In connection with various acquisitions, 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%.

IV.  In May, 1994, the Company issued $100.0 million of 12.0% Senior
     Subordinated Secured Notes due July 1, 2004.  Interest accruing on the 12%
     Senior Subordinated Secured Notes is payable semi-annually, in arrears, on
     January 1 and July 1.  The indebtedness evidenced by the 12% 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 12% Senior
     Subordinated Secured Notes are secured by a second lien on the stock of
     GSI, a subsidiary of Garden State and holding company for certain
     newspapers of Garden State.

                                       42
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4:  LONG-TERM DEBT (CONTINUED)

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

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

VII. 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, 1998, for the 
five fiscal years ending June 30, 2003 and thereafter, are shown below.

<TABLE>
<S>                                                                   <C>
        1999  . . . . . . . . . . . . . . . . . . . . . . . .         $  5,644 
        2000  . . . . . . . . . . . . . . . . . . . . . . . .            4,856 
        2001  . . . . . . . . . . . . . . . . . . . . . . . .            4,787 
        2002  . . . . . . . . . . . . . . . . . . . . . . . .            8,106 
        2003  . . . . . . . . . . . . . . . . . . . . . . . .           27,925 
        Thereafter  . . . . . . . . . . . . . . . . . . . . .          458,528 
                                                                      --------
                                                                      $509,846 
                                                                      --------
                                                                      --------
</TABLE>

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

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

                                      43
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4:  LONG-TERM DEBT (CONTINUED)

  The fair market value of the 12.0% Senior Subordinated Secured Notes and 
the 8.75% Senior Subordinated Notes at June 30, 1998 was approximately $112.0 
million and $304.5 million, respectively. 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. The 
Company accounts for the differences paid or received under this agreement as 
an adjustment to interest expense. As of June 30, 1998, the interest rate 
swap had a market loss of $0.4 million. Upon termination or sale of the 
interest rate swap agreement any gain or loss associated with the termination 
or sale will be immediately recognized. 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:

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

  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 $2.3 million, $2.0 million and $2.1 million 
for the fiscal years ended June 30, 1998, 1997 and 1996, respectively.  
Contingent rentals are not significant.  Future minimum payments on capital 
and operating leases are as follows:

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

                                       44
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6:   EMPLOYEE BENEFIT PLANS

PENSION PLANS

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

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

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

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

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

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


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


                                       45
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6:   EMPLOYEE BENEFIT PLANS (CONTINUED)

OTHER RETIREMENT PLANS

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

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

NOTE 7:  INCOME TAXES
 
     The income tax provision (benefit) for each of the three years ended 
June 30, 1998, 1997 and 1996, consists of the following: 

<TABLE>
<CAPTION>
                                                       1998         1997          1996  
                                                     --------     --------     --------
                                                               (In thousands)
<S>                                                  <C>          <C>          <C>
 Current: 
   State . . . . . . . . . . . . . . . . . . . . .   $  2,592     $  3,429      $   441 
   Federal . . . . . . . . . . . . . . . . . . . .      3,720          863           76 
 Deferred:
   State . . . . . . . . . . . . . . . . . . . . .      1,062         (213)        (695)
   Federal   . . . . . . . . . . . . . . . . . . .     (2,582)      (3,013)      (1,834)
                                                     --------     --------     --------
 Net provision (benefit) . . . . . . . . . . . . .   $  4,792     $  1,066     $ (2,012)
                                                     --------     --------     --------
                                                     --------     --------     --------
</TABLE>


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

<TABLE>
<CAPTION>
                                                               1998      1997      1996  
                                                               ----      ----      ----
<S>                                                            <C>       <C>       <C>
 Statutory Federal income tax rate                              35%       35%      (35%)
   Effect of:
    State income tax net of federal benefit                      7         7        22
    Utilization of net operating losses                        (22)      (24)      (55)
    Book/tax basis difference associated with
     acquisitions and non-deductible acquisition costs           1         1      (200)
     Sales of assets                                            (6)      (17)       --  
     Other, net                                                 (1)        2        --  
                                                               ----      ----     -----
 Financial statement effective tax rate                         14%        4%     (268%)
                                                               ----      ----     -----
                                                               ----      ----     -----
</TABLE>

                                       46
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7:  INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                          June 30,
                                                                  -------------------------
                                                                    1998             1997
                                                                  -------          --------
                                                                      (In thousands)
<S>                                                               <C>              <C>
         Deferred tax assets:
            Net operating losses and other credits                $14,826          $ 14,566
            Other                                                  13,665             8,604
                                                                  -------          --------
                                                                   28,491            23,170
            Valuation allowance                                    (9,273)          (14,904)
                                                                  -------          --------
            Deferred tax assets                                    19,218             8,266

         Deferred tax liabilities:
            Fixed assets                                           16,624             8,679
            Intangibles                                            14,254             8,391
            Other                                                     835             3,712
                                                                  -------          --------
            Deferred tax liabilities                               31,713            20,782

         Net deferred tax liabilities                             $12,495           $12,516
                                                                  -------          --------
                                                                  -------          --------
</TABLE>


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

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

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

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

                                       47
<PAGE>
                                       
                        GARDEN STATE NEWSPAPERS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9: COMMITMENTS AND CONTINGENCIES (CONTINUED)

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

NOTE 10:  SUBSEQUENT EVENTS

ACQUISITION

     On August 22, 1998 the Company acquired a 50% interest in Charleston 
Newspapers, a joint venture, which publishes the CHARLESTON GAZETTE 
(morning), and CHARLESTON DAILY MAIL (evening), six days a week and the 
SUNDAY GAZETTE-MAIL, under the terms of a JOA.  Charleston Newspapers has 
daily and Sunday circulation of approximately 93,000 and 102,000, 
respectively, as of March 31, 1998.  The acquisition included rights to the 
masthead of the CHARLESTON DAILY MAIL; thus the Company is responsible for 
the editorial content of the CHARLESTON DAILY MAIL.  The acquisition price of 
approximately $47.0 million was funded with borrowings under the RCC of the 
Company's Bank Credit Agreement.
 
     The Company has agreed to acquire substantially all the assets used in 
the publication of a morning newspaper in New Mexico. The assets will be 
purchased for $5.0 million in cash, a note with a discounted value of $7.7 
million, plus a covenant not to compete with the prior owners with a 
discounted value of approximately $3.2 million. The cash portion of the 
acquisition will be funded with borrowings under the Company's Bank Credit 
Agreement.  The newspaper has daily and Sunday circulation of approximately 
17,000 and 18,000, respectively as of March 31, 1998.  Closing is expected 
to occur on September 30, 1998.

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

LONG-TERM DEBT

     In the first quarter of fiscal year 1999, the Company repurchased $36.0 
million of its 12% Senior Subordinated Secured Notes at a premium of 
approximately $3.6 million.  The premium will be recognized as an 
extraordinary loss in the first quarter of fiscal year 1999.  Proceeds from 
borrowings under RCC and RCB of the Company's Bank Credit Agreement were used 
to repurchase the 12.0% Senior Subordinated Secured Notes.

                                       48
<PAGE>

                 GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES

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

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

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

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

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

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

   Allowance for doubtful
    accounts                                     $1,931           $2,510             $2,474           $  459            $2,426
</TABLE>

                                       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, 1998 
and 1997, and the related consolidated statements of operations, changes in 
shareholder's equity (deficit), and cash flows for each of the three years in 
the period ended June 30, 1998. Our audits also included the financial 
statement schedule II. These financial statements and schedule are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements and schedule based on our audits.

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




                                           ERNST & YOUNG LLP

Denver, Colorado
September 4, 1998




                                       50
<PAGE>

                                       
               GARDEN STATE INVESTMENTS, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                  June 30,
                                                                                         --------------------------
                                 ASSETS                                                    1998              1997
                                                                                         --------          --------
                                                                                                  (In thousands)
<S>                                                                                      <C>               <C>
CURRENT ASSETS
  Cash and cash equivalents....................................................          $    996          $  7,736
  Trade accounts receivable, less allowance for doubtful accounts of
   $3,226 and $2,696 at June 30, 1998 and 1997, respectively...................            29,367            27,280
  Receivable from affiliates and parent........................................            29,191             3,888
  Other receivables ...........................................................             1,504             1,150
  Inventories of newsprint and supplies........................................             4,261             5,315
  Prepaid expenses and other assets...........................................              2,712             3,011
  Income tax receivable........................................................               694                --
                                                                                         --------          --------
     TOTAL CURRENT ASSETS......................................................            68,725            48,380

PROPERTY, PLANT AND EQUIPMENT
  Land.........................................................................             5,485             4,954
  Buildings and improvements...................................................            39,467            37,138
  Machinery and equipment......................................................            98,622            96,851
                                                                                         --------          --------
       TOTAL PROPERTY, PLANT AND EQUIPMENT.....................................           143,574           138,943
  Less accumulated depreciation and amortization...............................            57,752            56,233
                                                                                         --------          --------
       NET PROPERTY, PLANT AND EQUIPMENT.......................................            85,822            82,710

OTHER ASSETS
  Investment in partnership....................................................             7,479             6,365
  Subscriber accounts, less accumulated amortization of
    $48,260 and $44,466 at June 30, 1998 and 1997, respectively................            52,919            50,924
  Excess of cost over fair value of net assets acquired, less
    accumulated amortization of $14,330 and $11,468 at
    June 30, 1998 and 1997, respectively ......................................           107,934            84,401
  Covenants not to compete and other identifiable intangible
    assets, less accumulated amortization of $17,669 and
    $15,861 at June 30, 1998 and 1997, respectively............................             5,686             6,685
  Other........................................................................             1,351             1,985
                                                                                         --------          --------
     TOTAL OTHER ASSETS........................................................           175,369           150,360
                                                                                         --------          --------


TOTAL ASSETS...................................................................          $329,916          $281,450
                                                                                         --------          --------
                                                                                         --------          --------
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       51
<PAGE>

<TABLE>
<CAPTION>
                                                                                                  June 30,
                                                                                         --------------------------
                                                                                           1998              1997
                                                                                         --------          --------
                                                                                     (In thousands, except  share data)
<S>                                                                                      <C>               <C>
               LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)                                           
CURRENT LIABILITIES
   Trade accounts payable...................................................             $  4,962          $  5,712
   Accrued employee compensation............................................                7,714             5,134
   Accrued interest.........................................................                8,135             7,671
   Other accrued liabilities................................................               13,765             6,913
   Unearned income..........................................................                9,627             8,378
   Income taxes............................................................                    --             1,256
   Current portion of long-term debt and obligations under capital leases...                2,520             6,247
                                                                                         --------          --------
                  TOTAL CURRENT LIABILITIES.................................               46,723            41,311

OBLIGATIONS UNDER CAPITAL LEASES............................................                7,484             7,477

LONG-TERM DEBT..............................................................              240,307           230,586

OTHER LIABILITIES...........................................................                3,379             5,092

DEFERRED INCOME TAXES.......................................................               13,081            12,215

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................................................               34,734            34,734
  Deficit...................................................................              (15,793)          (49,966)
                                                                                         --------          --------
                  TOTAL SHAREHOLDER'S EQUITY (DEFICIT)......................               18,942           (15,231)
                                                                                         --------          --------



TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)........................             $329,916          $281,450
                                                                                         --------          --------
                                                                                         --------          --------
</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,    
                                                   ---------------------------------- 
                                                     1998        1997          1996   
                                                   --------     --------     -------- 
                                                            (In thousands)
<S>                                                <C>          <C>          <C>
REVENUES
  Advertising....................................  $230,175     $209,541     $197,954
  Circulation....................................    42,957       38,707       39,930
  Other..........................................    10,104        8,734        7,546
                                                   --------     --------     -------- 
      TOTAL REVENUES.............................   283,236      256,982      245,430

COSTS AND EXPENSES
  Cost of sales..................................   100,824       92,274       98,469
  Selling, general and administrative............   114,894      107,283      100,230
  Management fees................................       682        1,550        2,008
  Depreciation and amortization..................    25,497       20,688       21,841
  Interest expense...............................    27,641       27,079       29,345
  Other..........................................     5,334        5,151        4,511
                                                   --------     --------     -------- 
      TOTAL COSTS AND EXPENSES...................   274,872      254,025      256,404

GAIN ON SALE OF NEWSPAPER PROPERTY...............    31,829       30,575        8,291
                                                   --------     --------     -------- 

INCOME (LOSS) BEFORE INCOME TAXES
  AND EXTRAORDINARY LOSS.........................    40,193       33,532       (2,683)
INCOME TAX BENEFIT (EXPENSE).....................    (6,020)        (426)       2,012
                                                   --------     --------     -------- 

INCOME (LOSS) BEFORE EXTRAORDINARY  LOSS.........    34,173       33,106         (671)

EXTRAORDINARY LOSS (net of taxes of $689)........        --        8,772           --
                                                   --------     --------     -------- 
NET INCOME (LOSS)................................  $ 34,173     $ 24,334     $   (671)
                                                   --------     --------     -------- 
                                                   --------     --------     -------- 
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      53

<PAGE>

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

<TABLE>
<CAPTION>
                                                      ADDITIONAL                   TOTAL        
                                              COMMON   PAID-IN-                 SHAREHOLDER'S   
                                              STOCK    CAPITAL     DEFICIT     EQUITY (DEFICIT) 
                                              -----   ----------   -------     ---------------- 
                                                                (In thousands)
<S>                                           <C>      <C>         <C>         <C>
BALANCE AT JUNE 30, 1995 ...................   $1      $34,734     $(73,629)      $(38,894)  
  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)  
  Net income ...............................   --           --       34,173         34,173   
                                               --      -------     --------       --------   
BALANCE AT JUNE 30, 1998 ...................   $1      $34,734     $(15,793)      $ 18,942   
                                               --      -------     --------       --------   
                                               --      -------     --------       --------   
</TABLE>

                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                      54
<PAGE>

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

<TABLE>
<CAPTION>
                                                       Fiscal Years Ended June 30,
                                                   -----------------------------------  
                                                      1998         1997        1996     
                                                      ----         ----        ----     
                                                              (In thousands)
<S>                                                <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) .............................. $  34,173    $  24,334    $   (671)  
  Adjustments to reconcile net income (loss) to 
    net cash provided by operating activities:
    Depreciation .................................    11,639        9,269       9,762   
    Amortization .................................    13,234       10,211      11,499   
    Gain on sale of newspaper assets .............   (31,820)     (30,579)     (8,621)  
    Provision for losses on accounts receivable ..     2,737        2,538       2,510   
    Amortization of debt discount ................     1,741        2,060       1,696   
    Debt issue cost and repurchase premiums ......     2,244       11,327       1,092   
    Distributions in excess of (less than)
      earnings from investment in partnership ....    (1,114)          23        (610)  
    Deferred income tax benefit ..................      (609)      (3,527)     (2,529)  
    Deferred interest ............................     2,335        2,100       1,931   
    Change in operating assets and liabilities:
      Accounts receivable ........................    (1,109)      (4,278)     (3,403)  
      Inventories ................................     2,235       (1,146)      1,799   
      Prepaid expense and other assets ...........       939         (308)       (558)  
      Accounts payable and accrued liabilities ...    (4,243)       2,539      (5,047)  
      Unearned income ............................      (458)         703          22   
      Affiliate account balances .................   (25,303)      (2,365)        303   
      Other assets and liabilities ...............     3,447         (350)       (517)  
      Other ......................................       (74)        (170)         --   
                                                   ---------    ---------    --------  
        NET CASH FLOWS FROM OPERATING ACTIVITIES..    10,142       22,381       8,658   

CASH FLOWS FROM INVESTING ACTIVITIES:
  Sale of newspaper property and other assets ....    43,030       47,776      50,647   
  Business acquisitions ..........................   (49,768)     (55,573)    (35,668)  
  Purchase of machinery and equipment ............    (7,206)      (8,267)     (8,079)  
                                                   ---------    ---------    --------  
        NET CASH FLOWS FROM INVESTING ACTIVITIES..   (13,944)     (16,064)      6,900   

CASH FLOW FROM FINANCING ACTIVITIES:
  Issuance of long-term debt .....................   103,914      132,064      37,300    
  Reduction of long-term debt ....................  (102,470)    (120,773)    (60,240)   
  Reduction of non-operating liabilities .........    (2,138)      (2,960)     (4,194)   
  Debt issuance cost and repurchase premiums......    (2,244)     (11,327)     (1,092)   
                                                   ---------    ---------    --------  
        NET CASH FLOWS FROM FINANCING ACTIVITIES..    (2,938)      (2,996)    (28,226)   
                                                   ---------    ---------    --------  

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..    (6,740)       3,321     (12,668)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR....     7,736        4,415      17,083
                                                   ---------    ---------    --------  
CASH AND CASH EQUIVALENTS AT END OF YEAR.......... $     996    $   7,736    $  4,415
                                                   ---------    ---------    --------  
                                                   ---------    ---------    --------  
</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.

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.


                                      56

<PAGE>

                         GARDEN STATE INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

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 basis 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 $7.5 million and $6.4 million in fiscal years
ended June 30, 1998 and 1997, respectively. The Agency made cash distributions
to YNI in the amount of $7.3 million, $7.2 million and $4.9 million in fiscal
years 1998, 1997 and 1996.

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

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

NOTE 3:  ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

     FISCAL 1998

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


                                      57

<PAGE>

                         GARDEN STATE INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:  ACQUISITIONS AND DISPOSITIONS (CONTINUED)

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

     FISCAL 1997

     On February 28, 1997, the Company acquired substantially all the assets
used in the publication of the SENTINEL & ENTERPRISE, LEBANON DAILY NEWS and THE
DAILY NONPAREIL, daily newspapers 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.

     FISCAL 1996

     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 completed the acquisition of substantially
all the assets used in the publication of THE BERKSHIRE EAGLE, the BRATTLEBORO
REFORMER and the BENNINGTON BANNER, daily newspapers published in Pittsfield,
Massachusetts; Brattleboro, Vermont; and Bennington, Vermont, respectively, and
the MANCHESTER JOURNAL, a weekly newspaper published in Manchester, Vermont
(collectively referred to as "New England Newspapers"). The purchase price
consisted of $1.1 million in cash, the assumption of $20.5 million of long-term
debt and 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.

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

DISPOSITIONS

     FISCAL 1998

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


                                      58

<PAGE>

                         GARDEN STATE INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3:  ACQUISITIONS AND DISPOSITIONS (CONTINUED)

     DISPOSITIONS (CONTINUED)

     FISCAL 1997

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

     FISCAL 1996

     On May 1, 1996, the Company sold the common stock of The Johnstown Tribune
Publishing Company, which publishes THE TRIBUNE-DEMOCRAT, 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

     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.

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. 


                                      59

<PAGE>

                         GARDEN STATE INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4:  LONG-TERM DEBT (CONTINUED)

DEBT RESTRUCTURING

     On October 1, 1997 and February 12, 1998, Garden State issued $250.0
million and $50.0 million, respectively, of 8.75% Senior Subordinated Notes due
2009. Proceeds from the sale of these notes of $300.3 million were used to
paydown balances then outstanding under the Garden State Bank Credit Agreement.
In conjunction with the issuance of the 8.75% Senior Subordinated Notes Garden
State paid approximately $7.3 million of fees and expenses of which $2.2 million
was allocated to the Company. The Company elected to charge the debt issuance
cost to fiscal year 1998 expense and, accordingly, the cost has been included in
other expense in the accompanying Consolidated Statement of Operations.

     As a result of certain refinancing and debt prepayments on October 31,
1996, 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 elected to charge the $1.9 million of debt
issuance cost to fiscal year 1997 expense and accordingly, the cost has been
included in other expense in the accompanying Consolidated Statements of
Operations.

LONG-TERM DEBT

     Allocated long-term debt consisted of the following at each year end:

<TABLE>
<CAPTION>
                                                                                June 30,
                                                                         ---------------------  
                                                                           1998         1997    
                                                                         --------     --------  
                                                                             (In thousands)
     <S>                                                          <C>    <C>          <C>
     Bank Credit Agreement.......................................   (I)  $ 12,600     $ 83,614  
     NJNI bank credit facility...................................  (II)        --       16,750  
     Various Notes, payable through December 2002................ (III)    11,565       12,966  
     12.00% Senior Subordinated Secured Notes, Due July 1, 2004..  (IV)   100,000      100,000  
     8.75% Senior Subordinated Notes, due 2009...................   (V)    92,482           --  
     Notes payable to certain shareholders of ANI................  (VI)     2,971        2,629  
     Subordinated Term Note to Parent............................ (VII)    23,209       20,874  
                                                                         --------     --------  
                                                                          242,827      236,833  
     Less current portion of long-term debt......................           2,520        6,247  
                                                                         --------     --------  
                                                                         $240,307     $230,586  
                                                                         --------     --------  
                                                                         --------     --------  
</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, 1998:

          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, 1998, 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.


                                      60

<PAGE>

                         GARDEN STATE INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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 $72.0 million Senior Secured Revolving Credit Facility ("RCC")
              with a final maturity of March 31, 2004. The commitment under RCC
              requires quarterly principal payments beginning on September 30,
              1997, with total annual payments of $7.5 million in fiscal years
              1999 and 2000, $12.0 million in fiscal years 2001 and 2002, $14.0
              million in 2003 and $19.0 million in 2004. RCC is secured by a
              first priority lien on the common stock and substantially all 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 Garden State pay an annual
              commitment fee of 0.50% on the unused commitment under RCB. If
              the ratio of Garden State total debt to operating cash flow is
              less than 4.00 to 1.00, the commitment fee is reduced to 0.375%.

II.  In fiscal year 1998, the Company paid off and terminated the NJNI Bank
     Credit Facility, in conjunction with the previously discussed sale of the
     NORTH JERSEY HERALD & NEWS.

III. In connection with various acquisitions, Garden State and 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%.

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

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


                                      61

<PAGE>

                         GARDEN STATE INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4: LONG-TERM DEBT (CONTINUED)

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, 1998 and 1997, no interest payments have been made on this
     note and, accordingly, $8.2 million and $5.9 million, respectively, of
     accrued and unpaid interest has been included in the balance.

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, 1998, for the five fiscal years
ending June 30, 2003 and thereafter, are as follows (in thousands):

<TABLE>
<CAPTION>
               <S>                            <C>
               1999........................   $  2,520
               2000........................      2,727
               2001........................      2,422
               2002........................      5,475
               2003........................      7,348
               Thereafter..................    222,335
                                              --------  
                                              $242,827
                                              --------  
                                              --------  
</TABLE>


     Interest paid during the fiscal years ended June 30, 1998, 1997 and 1996
was approximately $21.5 million, $24.0 million and $27.2 million, respectively.

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

     The fair market value of the 12.0% Senior Subordinated Secured Notes and
the 8.75% Senior Subordinated Notes at June 30, 1998 was approximately $112.0
million and $93.9 million, respectively. 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 of 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, Garden State entered into a two-year interest rate
swap agreement with a notional principal amount of $50.0 million and a fixed
annual interest rate of 6.455%, plus the applicable spread. Garden State uses
interest rate swaps to manage its floating rate debt to minimize, in part,
Garden State's exposure to the uncertainty of floating interest rates. Garden
State accounts for the differences paid or received under this agreement as an
adjustment to interest expense. As of June 30, 1998, the interest rate swap had
a market loss of $0.4 million. Upon termination of the hedge or sale of the
interest rate swap agreement, any


                                      62

<PAGE>

                         GARDEN STATE INVESTMENTS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


INTEREST RATE SWAPS (CONTINUED)

gain or loss associated with the termination or sale will be immediately
recognized. Garden State is exposed to credit loss related to the interest rate
swap to the extent such interest rate swap has a market gain and the
counterparty to the agreement fails to perform under the agreement. Garden State
does not anticipate that the counterparty will fail to meet its obligation
because of its high credit rating.

NOTE 5:  LEASES

     A subsidiary of 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:

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


     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 $1.8 million, $1.9 million and $2.1 million for
the fiscal years ended June 30, 1998, 1997 and 1996, respectively. Contingent
rentals are not significant. Future minimum payments on capital and operating
leases are as follows:

<TABLE>
<CAPTION>
     Fiscal Years Ending                                 Capital     Operating   
     -------------------                                 Leases       Leases
                                                         -------     ---------   
                                                           (In thousands)
     <S>                                                 <C>         <C>
     1999..............................................  $   821     $  1,563   
     2000..............................................      867        1,561   
     2001..............................................      931        1,285   
     2002..............................................      931          751   
     2003..............................................      931          309   
     Thereafter........................................   14,972           --   
                                                         -------     --------   
        Total minimum lease payments...................   19,453     $  5,469   
                                                                     --------   
                                                                     --------   
      Less amount representing interest................   11,990     
                                                         -------     
        Present value of net future lease payments.....  $ 7,463
                                                         -------
                                                         -------
</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 one of these plans. Total
expense for these plans for the fiscal years ended June 30, 1998, 1997 and 1996,
was approximately $1.8 million, $1.9 million, and $1.4 million, respectively.

     In general, the Company contributes one or two percent of an employee's
salary to the plan for each employee who works at least 1,000 hours annually and
is not covered by a collective bargaining agreement. 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.


                                      63
<PAGE>
                                       
                        GARDEN STATE INVESTMENTS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7:  INCOME TAXES

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

<TABLE>
<CAPTION>
                                 1998            1997            1996
                                ------          ------          ------
                                           (IN THOUSANDS)
<S>                            <C>             <C>             <C>
Current:
  State ...............        $ 2,367         $ 3,221         $   441
  Federal .............          4,261             773              76
Deferred:
  State ...............            112            (769)           (695)
  Federal .............           (721)         (2,799)         (1,834)
                               -------         -------         -------
Net (benefit) provision        $ 6,019         $   426         $(2,012)
                               -------         -------         -------
                               -------         -------         -------
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 1998         1997          1996
                                                                 ----         ----         -----
<S>                                                              <C>          <C>          <C>
Statutory Federal income tax rate .......................         35%          35%          (35%)
  Effect of:
     State income tax net of federal benefit ............          4            5            22
     Utilization of net operating losses ................        (16)         (25)          (55)
     Book/tax basis difference associated with
        acquisitions and non-deductible acquisition costs          1            1          (200)
     Sales of assets ....................................         (5)         (18)           --
     Extraordinary loss .................................         --            3            --
     Other, net .........................................         (4)           1            --
                                                                 ----         ----         -----

Financial statement effective tax rate ..................         15%           2%         (268%)
                                                                 ----         ----         -----
                                                                 ----         ----         -----
</TABLE>

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

<TABLE>
<CAPTION>
                                                                                    June 30,
                                                                             1998              1997
                                                                            -------          --------
                                                                                 (In thousands)
<S>                                                                         <C>              <C>
Deferred tax assets:
   Net operating losses and other credits..........................         $10,673          $ 14,258
   Other...........................................................           9,435             7,648
                                                                            -------          --------
                                                                             20,108            21,906
   Valuation allowance.............................................          (9,109)          (14,947)
                                                                            -------          --------
   Deferred tax assets.............................................          10,999             6,959

Deferred tax liabilities:
   Fixed assets....................................................          11,085             7,583
   Intangibles.....................................................          12,178             8,241
   Other...........................................................             817             3,350
                                                                            -------          --------
   Deferred tax liabilities........................................          24,080            19,174

                                                                            -------          --------
Net deferred tax liabilities.......................................         $13,081          $ 12,215
                                                                            -------          --------
                                                                            -------          --------
</TABLE>

                                       64
<PAGE>
                                       
                        GARDEN STATE INVESTMENTS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7: INCOME TAXES (CONTINUED)

     In fiscal years 1998 and 1997, the Company generated federal taxable 
income which was offset by operating loss carryforwards. However, since the 
federal tax laws do not allow the Company to completely offset taxable income 
with loss carryforwards, the Company did incur alternative minimum tax which 
can be carried forward as a credit to future taxes payable. Other deferred 
tax assets are the result of timing differences associated with bad debt 
allowances, capital leases and acquisition related items. The Company's 
current year utilization of operating loss carryforwards also reduced the 
Company's valuation allowance by $16.0 million, which was recorded as a 
benefit in current year income tax expense.

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

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

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 approximately 4,300 tons per month of 
newsprint at a fixed price under contracts expiring December 31, 1999 and 
August 31, 2000. Management does not expect that it will purchase less than 
the required amount; however, if it should default on the purchase 
obligation, MNG, Garden State and/or the Company would be responsible for 
damages, if any, incurred by the seller.

NOTE 10: SUBSEQUENT EVENTS

     On August 22, 1998 the Company acquired a 50% interest in Charleston 
Newspapers, a joint venture, which publishes the CHARLESTON GAZETTE 
(morning), and CHARLESTON DAILY MAIL (evening) newspapers, six days a week 
and the SUNDAY GAZETTE-MAIL, under the terms of a JOA. The acquisition 
included rights to the masthead of the CHARLESTON DAILY MAIL; thus, the 
Company is responsible for the editorial content of the CHARLESTON DAILY 
MAIL. Charleston Newspapers had daily and Sunday circulation of approximately 
93,000 and 102,000, respectively, as of March 31, 1998. The acquisition price 
of approximately $47.0 million was funded with borrowings under the Company's 
Bank Credit Agreement.

                                       65
<PAGE>
                                       
                        GARDEN STATE INVESTMENTS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10: SUBSEQUENT EVENTS (CONTINUED)

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

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

LONG-TERM DEBT

     In the first quarter of fiscal year 1999, Garden State repurchased $36.0 
million of its 12% Senior Subordinated Secured Notes at a premium of 
approximately $3.6 million. The premium will be recognized as an 
extraordinary loss in the first quarter of fiscal year 1999. Proceeds from 
borrowings under RCC and RCB of Garden State's Bank Credit Agreement were 
used to repurchase the 12.0% Senior Subordinated Secured Notes.


















                                       66
<PAGE>

               GARDEN STATE INVESTMENTS, INC. AND SUBSIDIARIES


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

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

  Allowance for doubtful
   Accounts.....................          $2,696         $2,737         $2,514        $  307        $3,226

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

  Allowance for doubtful
   Accounts.....................          $2,426         $2,923         $3,003        $ 350         $2,696

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

  Allowance for doubtful
   Accounts.....................          $1,931         $2,510         $2,474        $ 459         $2,426
</TABLE>









                                       67
<PAGE>


INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
  NO.     DESCRIPTION
-------   -----------
<S>       <C>
3.1*      -Second Amended and Restated Certificate of Incorporation.
3.2*      -Form of Fourth Amended and Restated Certificate of Incorporation.
3.5*      -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 rust Company, a
           New York banking corporation, Wilmington Trust Company, a Delaware
           banking corporation, and William J. Wade.
</TABLE>

                                       68

<PAGE>



INDEX TO EXHIBITS (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
  NO.     DESCRIPTION
-------   -----------
<S>       <C>
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 New 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 & ENTERPRISE 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.
10.30*    -Asset Purchase Agreement by and among Lowell Sun Publishing Company
           and Lowell Sun Realty Company (Sellers), Garden State Newspapers, Inc.
           (Purchaser), and John H. Costello, Jr., Alexander S. Costello, Thomas
           F. Costello, Andrew G. Costello, Charlotte E. LaPierre and Dana Biadi
           (Guarantors), Relating to the Acquisition of THE SUN and THE SUNDAY
           SUN dated July 31, 1997
10.31*    -Asset Purchase and Sale Agreement by and between Tower Media, Inc.,
           as Seller; Jack Kent Cooke Incorporated as Guarantor; and Garden State
           Newspapers, Inc., as Purchaser, dated as of December 1, 1997
10.32*    -Indenture dated as of October 1, 1997, between Garden State
           Newspapers, Inc., and The Bank of New York, as Trustee, for the
           issuance of up to $300,000,000 of Series A & B 8-3/4% Senior
           Subordinated Notes due 2009
10.33*    -Subordinated Note Purchase Agreement between Garden State Newspapers, 
           Inc., and Greenco, Inc., dated as of January 30, 1998 
</TABLE>

                                       69
<PAGE>

INDEX TO EXHIBITS (CONTINUED)

<TABLE>
<CAPTION>
EXHIBIT
  NO.     DESCRIPTION
-------   -----------
<S>       <C>
10.34*    - Note Purchase Agreement dated February 6, 1998, by and among Garden
           State Newspapers, Inc., and the Purchasers of $50,000,000 of 8-3/4%
           Notes due 2009
12.1*     -Computation of Ratio of Earnings to Fixed Charges.
21.1      -Subsidiaries of Registrant
27        -Financial Data Schedule
</TABLE>

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

*Previously Filed



















                                       70
<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 18, 1997              By:
                                          -------------------------------------
                                           Joseph J. Lodovic, IV
                                           Executive Vice President and
                                           Chief Financial Officer


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

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


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


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


          /S/ Peter M. Miller                                  Director                          September 18, 1998
------------------------------------------        
         (Peter M. Miller)


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



                                       71