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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   FORM 10-K


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



             FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002



                                   OR




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



             FOR THE TRANSITION PERIOD FOR           TO


                         COMMISSION FILE NUMBER 1-11588
                             ---------------------

                           SAGA COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)


                                              
                    DELAWARE                                        38-3042953
        (State or other jurisdiction of                          (I.R.S. Employer
         incorporation or organization)                        Identification No.)

              73 KERCHEVAL AVENUE                                     48236
         GROSSE POINTE FARMS, MICHIGAN                              (Zip Code)
    (Address of principal executive offices)


              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (313) 886-7070

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:



              TITLE OF EACH CLASS                    NAME OF EACH EXCHANGE ON WHICH REGISTERED
              -------------------                    -----------------------------------------
                                               
      Class A Common Stock, $.01 par value                    American Stock Exchange


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

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Rule
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 amendments to
this Form 10-K.  [ ]

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).  [X]

     Aggregate market value of the Class A Common Stock and the Class B Common
Stock (assuming conversion thereof into Class A Common Stock) held by
nonaffiliates of the registrant, computed on the basis of $22.50 per share (the
closing price of the Class A Common Stock on June 28, 2002 on the American Stock
Exchange): $409,451,434.

     The number of shares of the registrant's Class A Common Stock, $.01 par
value, and Class B Common Stock, $.01 par value, outstanding as of March 11,
2003 was 18,498,822 and 2,360,370, respectively.

                      DOCUMENTS INCORPORATED BY REFERENCE

     1. Proxy Statement for the 2003 Annual Meeting of Stockholders (to be filed
with the Securities and Exchange Commission on or before April 30, 2003) is
incorporated by reference in Part III hereof.
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                                     PART I

ITEM 1.  BUSINESS

     We are a broadcast company primarily engaged in acquiring, developing and
operating radio and television stations.

RECENT DEVELOPMENTS

     Since January 1, 2002, we have entered into the following transactions
regarding acquisitions and Time Brokerage Agreements ("TBAs") for stations
serving the markets indicated. The following are included in our results of
operations for the year ended December 31, 2002:

     - On November 1, 2002, we acquired three FM radio stations (KDEZ-FM,
       KDXY-FM and KJBX-FM) serving the Jonesboro, Arkansas market for
       approximately $12,745,000, including approximately $2,245,000 of our
       Class A common stock.

     - On November 1, 2002, we entered into a time brokerage agreement and a
       sub-time brokerage agreement for WISE-AM and WOXL-FM, respectively,
       serving the Asheville, North Carolina market.

     - On November 1, 2002, we acquired an AM and FM radio station (WJQY-AM and
       WJOI-FM) serving the Springfield, Tennessee market for approximately
       $1,525,000.

     - On July 1, 2002, we acquired an FM and AM radio station (WOQL-FM and
       WZBK-AM) serving the Keene, New Hampshire market, for approximately
       $2,740,000.

     - On May 1, 2002, we acquired two FM and two AM radio stations (WKBK-AM,
       WKNE-FM and WKVT-AM/FM) serving the Keene, New Hampshire and Brattleboro,
       Vermont markets, respectively, for approximately $9,400,000.

     In addition, the following transactions were either pending at December 31,
2002 or were entered into subsequent to that date:

     - In November 2002 we entered into an agreement to acquire an FM radio
       station (WODB-FM) serving the Columbus, Ohio market for approximately
       $9,000,000 and the exchange of one of our AM radio stations (WVKO-AM)
       serving the Columbus, Ohio market. The transaction, which is subject to
       the approval of the Federal Communications Commission ("FCC"), is
       expected to close during the first half of 2003. We began operating this
       station under the terms of a TBA on January 1, 2003. We are also
       contemplating an agreement whereby we would forgo the exchange of WVKO-AM
       and would instead pay the seller an additional $1,000,000 for WODB-FM.

     - On January 8, 2003 we entered into an agreement to acquire an FM radio
       station (WINQ-FM) in the Winchendon, Massachusetts market for
       approximately $400,000 plus an additional $500,000 if within five years
       of closing we obtain approval from the FCC for a city of license change.
       The radio station is owned by a company in which a member of our Board of
       Directors has a 26% beneficial ownership interest. The purchase price was
       determined on an arm's length basis. The transaction, which is subject to
       FCC approval, is expected to close during the second quarter 2003. We
       began operating this station under the terms of a TBA on February 1,
       2003.

     - On February 3, 2003 we entered into an agreement to sell an AM radio
       station (WLLM-AM) serving the Lincoln, Illinois market for approximately
       $275,000. The transaction, which is subject to FCC approval, is expected
       to close during the second quarter 2003.

     - On March 7, 2003 we entered into an agreement of understanding with
       Surtsey Productions, Inc. ("Surtsey"), whereby we have guaranteed up to
       $1,250,000 of the debt incurred by Surtsey in closing on the acquisition
       of a construction permit for KFJX-TV station in Pittsburg, Kansas. In
       consideration for our guarantee, Surtsey has agreed to enter into various
       agreements with us relating to the station, including a Shared Services
       Agreement, Technical Services Agreement, Agreement

                                        2


for the Sale of Commercial Time, Option Agreement and Broker Agreement. It is
contemplated that such agreements will be executed on or before September 1,
2003. Under the FCC's ownership rules, we are prohibited from owning or having
      an attributable or cognizable interest in this station. Surtsey is a
      company that is 100% owned by the daughter of Edward K. Christian.

     - On March 11, 2003 we acquired an AM radio station (WWIT-AM) serving the
       Asheville, North Carolina market for approximately $311,000. Since we
       closed on this transaction after obtaining the initial grant for the
       license from the FCC, the grant is still subject to the FCC issuing its
       final order.

     For additional information with respect to these acquisitions, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.

BUSINESS

     As of March 11, 2003 we owned and/or operated four television stations and
three low-power television stations serving three markets; three state radio
networks; and forty-five FM and twenty-six AM radio stations serving twenty
markets, including Columbus, Ohio; Norfolk, Virginia; and Milwaukee, Wisconsin.

     The following table sets forth information about our television stations
and the markets they serve as of March 11, 2003:



                                                      2002 MARKET
                                                       RANKING BY                      FALL 2002
                                                      NUMBER OF TV     STATION      STATION RANKING
STATION                         MARKET(A)            HOUSEHOLDS(B)    AFFILIATE   (BY # OF VIEWERS)(B)
-------                ---------------------------   --------------   ---------   --------------------
                                                                      
KOAM.................  Joplin, MO -- Pittsburg, KS        145            CBS                1
WXVT.................  Greenwood -- Greenville, MS        182            CBS                2
KAVU.................  Victoria, TX                       204            ABC                1
KVCT (c).............  Victoria, TX                       204            FOX                2
KUNU-LP..............  Victoria, TX                       204         Univision             3
KVTX-LP..............  Victoria, TX                       204         Telemundo           N/A
KXTS-LP..............  Victoria, TX                       204            NBC                4(d)


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

(a)   Actual city of license may differ from metro market actually served.

(b)   Derived from Investing in Television Market Report 2002, based on A.C.
      Nielson ratings and data.

(c)   Station operated under the terms of a TBA.

(d)   Tied for position.

N/A  Information is currently unavailable.

     The following table sets forth information about our radio stations and the
markets they serve as of March 11, 2003:



                                                 2002                                    FALL 2002
                                                MARKET                                    TARGET
                                                RANKING                                DEMOGRAPHICS
                                               BY RADIO                                 RANKING (BY       TARGET
       STATION              MARKET(A)         REVENUE(B)         STATION FORMAT        LISTENERS)(C)   DEMOGRAPHICS
       -------         --------------------   -----------   ------------------------   -------------   ------------
                                                                                        
FM:
WSNY.................  Columbus, OH                29       Adult Contemporary                1        Women 25-54
WODB.................  Columbus, OH                29       Oldies                            4(e)     Adults 45-64
WKLH.................  Milwaukee, WI               35       Classic Hits                      1        Men 35-49
WLZR.................  Milwaukee, WI               35       Album Oriented Rock               1        Men 18-34
WJMR-FM..............  Milwaukee, WI               35       Urban Adult Contemporary          5        Women 25-49


                                        3




                                                 2002                                    FALL 2002
                                                MARKET                                    TARGET
                                                RANKING                                DEMOGRAPHICS
                                               BY RADIO                                 RANKING (BY       TARGET
       STATION              MARKET(A)         REVENUE(B)         STATION FORMAT        LISTENERS)(C)   DEMOGRAPHICS
       -------         --------------------   -----------   ------------------------   -------------   ------------
                                                                                        
WFMR.................  Milwaukee, WI               35       Classical                         7        Adults 45+
WNOR.................  Norfolk, VA                 41       Album Oriented Rock               1        Men 18-34
WAFX.................  Norfolk, VA                 41       Classic Hits                      3        Men 35-49
KSTZ.................  Des Moines, IA              75       Hot Adult Contemporary            1        Women 25-44
KIOA.................  Des Moines, IA              75       Oldies                            2        Adults 45-64
KAZR.................  Des Moines, IA              75       Album Oriented Rock               1        Men 18-34
KLTI.................  Des Moines, IA              75       Soft Adult Contemporary           2        Women 35-54
WZID.................  Manchester, NH             104       Adult Contemporary                1        Adults 25-54
WQLL.................  Manchester, NH             104       Oldies                            2        Adults 45-64
WAQY.................  Springfield, MA            109       Classic Rock                      1        Men 25-49
WLZX.................  Springfield, MA            109       Active Rock                       4        Men 18-34
WHAI.................  Greenfield, MA             N/A       Adult Contemporary                1        Women 18+
WMGX.................  Portland, ME               124       Adult Contemporary                1(e)     Women 25-54
WYNZ.................  Portland, ME               124       Oldies                            1        Adults 45-64
WPOR.................  Portland, ME               124       Country                           2        Adults 35+
WLRW.................  Champaign, IL              148       Hot Adult Contemporary            1        Women 18-34
WIXY.................  Champaign, IL              148       Country                           1(e)     Adults 25-54
WKIO.................  Champaign, IL              148       Oldies                            1(e)     Adults 45-64
WYMG.................  Springfield, IL            165       Classic Hits                    N/S        Men 25-54
WQQL.................  Springfield, IL            165       Oldies                          N/S        Adults 45-64
WDBR.................  Springfield, IL            165       Contemporary Hits               N/S        Women 18-34
WMHX.................  Springfield, IL            165       Adult Contemporary              N/S        Adults 25-54
WOXL.................  Asheville, NC              167       Oldies                            2        Adults 35-64
WNAX.................  Sioux City, IA             204       Country                         N/S        Adults 35+
KDEZ.................  Jonesboro, AR              243       Album Oriented Rock               3        Men 25-54
KDXY.................  Jonesboro, AR              243       Country                           2        Adults 25-54
KJBX.................  Jonesboro, AR              243       Adult Contemporary                4(e)     Women 25-54
WCVQ.................  Clarksville-               263       Hot Adult Contemporary            1        Women 25-54
                       Hopkinsville, TN-KY
WVVR.................  Clarksville-               263       Country                           2(e)     Adults 25-54
                       Hopkinsville, TN-KY
WZZP.................  Clarksville-               263       Active Rock                       1        Men 18-34
                       Hopkinsville, TN-KY
WJOI.................  Springfield, TN            N/A       Contemporary Christian          N/R        Adults 18+
KISM.................  Bellingham, WA             N/A       Rock                            N/R        Men 25-49
KAFE.................  Bellingham, WA             N/A       Adult Contemporary              N/R        Women 25-54
KICD.................  Spencer, IA                N/A       Country                         N/R        Adults 35+
KLLT.................  Spencer, IA                N/A       Adult Contemporary              N/R        Adults 25-54
KMIT.................  Mitchell, SD               N/A       Country                         N/R        Adults 35+
KUQL.................  Mitchell, SD               N/A       Oldies                          N/R        Adults 45-64
WKVT.................  Brattleboro, VT            N/A       Classic Rock                    N/R        Men 25-49
WKNE.................  Keene, NH                  N/A       Hot Adult Contemporary          N/R        Women 25-54
WOQL.................  Keene, NH                  N/A       Oldies                          N/R        Adults 45-64


                                        4




                                                 2002                                    FALL 2002
                                                MARKET                                    TARGET
                                                RANKING                                DEMOGRAPHICS
                                               BY RADIO                                 RANKING (BY       TARGET
       STATION              MARKET(A)         REVENUE(B)         STATION FORMAT        LISTENERS)(C)   DEMOGRAPHICS
       -------         --------------------   -----------   ------------------------   -------------   ------------
                                                                                        
AM:
WVKO.................  Columbus, OH                29       Gospel                          N/A        Adults 35+
WJYI.................  Milwaukee, WI               35       Contemporary Christian          N/A        Adults 18+
WJOI.................  Norfolk, VA                 41       Nostalgia                       N/A        Adults 45+
KRNT.................  Des Moines, IA              75       Nostalgia/Sports                  4(e)     Adults 45+
KPSZ.................  Des Moines, IA              75       Contemporary Christian          N/A        Adults 18+
WFEA.................  Manchester, NH             104       Nostalgia                         3        Adults 45+
WHMP.................  Springfield, MA            109       News/Talk                        11(d)     Adults 35+
WHNP.................  Springfield, MA            109       News/Talk                        11(d)     Adults 35+
WHMQ.................  Greenfield, MA             N/A       News/Talk                        11(d)     Adults 35+
WGAN.................  Portland, ME               124       News/Talk                         1        Adults 35+
WZAN.................  Portland, ME               124       News/Talk                         2        Men 35-54
WBAE.................  Portland, ME               124       Nostalgia                       N/A        Adults 35+
WTAX.................  Springfield, IL            165       News/Talk                       N/S        Adults 35+
WLLM.................  Springfield, IL            165       Adult Standards                 N/S        Adults 45+
WISE.................  Asheville, NC              167       News/Talk                         8(e)     Adults 35+
WNAX.................  Yankton, SD                204       News/Talk                       N/S        Adults 35+
WDXN.................  Clarksville-               263       Contemporary Christian          N/A        Adults 18+
                       Hopkinsville, TN-KY
WJMR-AM..............  Clarksville-               263       Urban Adult Contemporary          8(e)     Women 35-54
                       Hopkinsville, TN-KY
WJQY.................  Springfield, TN            N/A       Contemporary Christian          N/R        Adults 18+
KGMI.................  Bellingham, WA             N/A       News/Talk                       N/R        Adults 35+
KPUG.................  Bellingham, WA             N/A       Sports/Talk                     N/R        Men 18+
KBAI.................  Bellingham, WA             N/A       Adult Standards                 N/R        Adults 45+
KICD.................  Spencer, IA                N/A       News/Talk                       N/R        Adults 35+
WKVT.................  Brattleboro, VT            N/A       News/Talk                       N/R        Adults 35+
WKBK.................  Keene, NH                  N/A       News/Talk                       N/R        Adults 35+
WZBK.................  Keene, NH                  N/A       News/Talk                       N/R        Men 35-54


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

(a)   Actual city of license may differ from metro market actually served.

(b)   Derived from Investing in Radio 2002 Market Report.

(c)   Information derived from most recent available Arbitron Radio Market
      Report.

(d)   Since stations are simulcast, ranking information pertains to the combined
      stations.

(e)   Tied for position.

N/A  Information is currently not available.

N/R  Station does not appear in Arbitron Radio Market Report.

N/S  Station is a non-subscriber to the Arbitron Radio Market Report.

STRATEGY

     Our strategy is to operate top billing radio and television stations in
mid-sized markets. We prefer to operate in mid-sized markets, which we define as
markets ranked from 20 to 200 out of the markets summarized by Investing in
Radio Market Report and Investing in Television Market Report. As of

                                        5


March 11, 2003, we owned and/or operated at least one of the top three billing
stations in each of our radio and television markets for which independent data
exists.

     Based on the most recent information available, 16 of our 31 FM radio and 1
of our 15 AM radio stations that subscribe to independent ratings services were
ranked number one (by number of listeners), and 2 of our 7 television stations
were ranked number one (by number of viewers), in their target demographic
markets. Programming and marketing are key components in our strategy to achieve
top ratings in both our radio and television operations. In many of our markets,
the three or four most highly rated stations (radio and/or television) receive a
disproportionately high share of the market's advertising revenues. As a result,
a station's revenue is dependent upon its ability to maximize its number of
listeners/viewers within an advertiser's given demographic parameters. In
certain cases we use attributes other than specific market listener data for
sales activities. In those markets where sufficient alternative data is
available, we do not subscribe to an independent listener rating service.

     Our radio stations employ a variety of programming formats, including
Classic Hits, Adult Contemporary, Album Oriented Rock, News/Talk, Country and
Classical. We regularly perform extensive market research, including music
evaluations, focus groups and strategic vulnerability studies. Our stations also
employ audience promotions to further develop and secure a loyal following.

     Our television stations are comprised of two CBS affiliates, one ABC
affiliate, one Fox affiliate, one Univision affiliate, one NBC affiliate and one
Telemundo affiliate. In addition to securing network programming, we also
carefully select available syndicated programming to maximize viewership. We
also develop local programming, including a strong local news franchise.

     In operating our stations, we concentrate on the development of strong
decentralized local management, which is responsible for the day-to-day
operations of the station. We compensate local management based on the station's
financial performance, as well as other performance factors that are deemed to
effect the long-term ability of the stations to achieve financial performance
objectives. Corporate management is responsible for long-range planning,
establishing policies and procedures, resource allocation and monitoring the
activities of the stations.

     We actively seek and explore opportunities for expansion through the
acquisition of additional broadcast properties. Under the Telecommunications Act
of 1996 (the "Telecommunications Act"), a company is now permitted to own as
many as 8 radio stations in a single market. See "Federal Regulation of Radio
and Television Broadcasting". The Telecommunications Act also eliminated the
limitations on the total number of radio stations one organization can own. We
seek to acquire reasonably priced broadcast properties with significant growth
potential that are located in markets with well-established and relatively
stable economies. We often focus on local economies supported by a strong
presence of state or federal government or one or more major universities.
Future acquisitions will be subject to the availability of financing and
compliance with the Communications Act of 1934 (the "Communications Act") and
Federal Communications Commission ("FCC") rules. Although we review acquisition
opportunities on an ongoing basis, we have no other present understandings,
agreements or arrangements to acquire or sell any radio or television stations,
other than those discussed.

ADVERTISING SALES

     Virtually all of our revenue is generated from the sale of advertising for
broadcast on our stations. Depending on the format of a particular radio
station, there are a predetermined number of advertisements broadcast each hour.
The number of advertisements broadcast on our television stations may be limited
by certain network affiliation and syndication agreements and, with respect to
children's programs, federal regulation. We determine the number of
advertisements broadcast hourly that can maximize a station's available revenue
dollars without jeopardizing listening/viewing levels. While there may be shifts
from time to time in the number of advertisements broadcast during a particular
time of the day, the total number of advertisements broadcast on a particular
station generally does not vary significantly from year to year. Any change in
our revenue, with the exception of those instances where stations are acquired
or

                                        6


sold, is generally the result of pricing adjustments which are made to ensure
that the station efficiently utilizes available inventory.

     Advertising rates charged by radio and television stations are based
primarily on a station's ability to attract audiences in the demographic groups
targeted by advertisers; the number of stations in the market competing for the
same demographic group; the supply of and demand for radio and television
advertising time; and other qualitative factors, including rates charged by
competing radio and television stations within a given market. Radio rates are
generally highest during morning and afternoon drive-time hours, while
television advertising rates are generally higher during prime time evening
viewing periods. Most advertising contracts are short-term, generally running
for only a few weeks. This allows broadcasters the ability to modify advertising
rates as dictated by changes in station ownership within a market, changes in
listener/viewer ratings and changes in the business climate within a particular
market.

     Approximately 80% of our gross revenue in fiscal 2002 (81% in fiscal 2001)
was generated from the sale of local advertising. Additional revenue is
generated from the sale of national advertising, network compensation payments,
barter and other miscellaneous transactions. In all our markets, we attempt to
maintain a local sales force that is generally larger than our competitors. The
principal goal in our sales efforts is to develop long-standing customer
relationships through frequent direct contacts, which we believe represents a
competitive advantage. We also typically provide incentives to our sales staff
to seek out new opportunities resulting in the establishment of new client
relationships, as well as new sources of revenue, not directly associated with
the sale of broadcast time.

     Each of our stations also engage national independent sales representatives
to assist us in obtaining national advertising revenues. These representatives
obtain advertising through national advertising agencies and receive a
commission from us based on our net revenue from the advertising obtained. Total
gross revenue resulting from national advertising in fiscal 2002 was
approximately $25,111,000 or 19.6% of our gross revenue (approximately
$21,678,000 or 18.7% in fiscal 2001).

COMPETITION

     Both radio and television broadcasting are highly competitive businesses.
Our stations compete for listeners/viewers and advertising revenues directly
with other radio and/or television stations, as well as other media, within
their markets. Our radio and television stations compete for listeners/viewers
primarily on the basis of program content and by employing on-air talent which
appeals to a particular demographic group. By building a strong listener/viewer
base comprised of a specific demographic group in each of its markets, we are
able to attract advertisers seeking to reach these listeners/viewers.

     Other media, including broadcast television and/or radio (as applicable),
cable television, newspapers, magazines, direct mail, the internet, coupons and
billboard advertising, also compete with us for advertising revenues.

     The radio and television broadcasting industries are also subject to
competition from new media technologies that may be developed or introduced,
such as the delivery of audio programming by cable television systems, direct
reception from satellites, and streaming of audio on the internet. We cannot
predict what effect, if any, any of these new technologies may have on us or the
broadcasting industry.

EMPLOYEES

     As of December 31, 2002, we had approximately 789 full-time employees and
337 part-time employees, none of whom are represented by unions. We believe that
our relations with our employees are good.

     We employ several high-profile personalities with large loyal audiences in
their respective markets. We have entered into employment and non-competition
agreements with our President and with most of our on-air personalities, as well
as non-competition agreements with our commissioned sales representatives.

                                        7


AVAILABLE INFORMATION

     You can find more information about us at our Internet website located at
www.sagacommunications.com. Our Annual Report on Form 10-K, our Quarterly
Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to
those reports are available free of charge on our Internet website as soon as
reasonably practicable after we electronically file such material with the SEC.

FEDERAL REGULATION OF RADIO AND TELEVISION BROADCASTING

     Introduction.  The ownership, operation and sale of radio and television
stations, including those licensed to us, are subject to the jurisdiction of the
FCC, which acts under authority granted by the Communications Act. Among other
things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and operating power of stations; issues,
renews, revokes and modifies station licenses; determines whether to approve
changes in ownership or control of station licenses; regulates equipment used by
stations; adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of stations;
and has the power to impose penalties for violations of its rules or the
Communications Act. For additional information on the impact of FCC regulations
and the introduction of new technologies on our operations, see "Forward Looking
Statements; Risk Factors" below.

     The following is a brief summary of certain provisions of the
Communications Act and of specific FCC regulations and policies. Reference
should be made to the Communications Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of broadcast stations.

     License Renewal.  Radio and television broadcasting licenses are granted
for maximum terms of eight years, and are subject to renewal upon application to
the FCC. Under its "two-step" renewal process, the FCC must grant a renewal
application if it finds that during the preceding term the licensee has served
the public interest, convenience and necessity, and there have been no serious
violations of the Communications Act or the FCC's rules which, taken together,
would constitute a pattern of abuse. If a renewal applicant fails to meet these
standards, the FCC may either deny its application or grant the application on
such terms and conditions as are appropriate, including renewal for less than
the full 8-year term. In making the determination of whether to renew the
license, the FCC may not consider whether the public interest would be served by
the grant of a license to a person other than the renewal applicant. If the FCC,
after notice and opportunity for a hearing, finds that the licensee has failed
to meet the requirements for renewal and no mitigating factors justify the
imposition of lesser sanctions, the FCC may issue an order denying the renewal
application, and only thereafter may the FCC accept applications for a
construction permit specifying the broadcasting facilities of the former
licensee. Petitions may be filed to deny the renewal applications of our
stations, but any such petitions must raise issues that would cause the FCC to
deny a renewal application under the standards adopted in the "two-step" renewal
process. Under the Communications Act, if a broadcast station fails to transmit
signals for any consecutive 12-month period, the FCC license expires at the end
of that period.

                                        8


     The following table sets forth the market and broadcast power of each of
our broadcast stations (or pending acquisitions) and the date on which each such
station's FCC license expires:



                                                                                      EXPIRATION DATE OF
       STATION                   MARKET(1)                   POWER (WATTS)(2)         FCC AUTHORIZATION
       -------          ----------------------------   ----------------------------   ------------------
                                                                             
FM:
WSNY..................  Columbus, OH                              50,000              October 1, 2004
WODB(10)..............  Columbus, OH                               6,000              October 1, 2004
WKLH..................  Milwaukee, WI                             50,000              December 1, 2004
WLZR..................  Milwaukee, WI                             50,000              December 1, 2004
WFMR..................  Milwaukee, WI                              6,000              December 1, 2004
WJMR..................  Milwaukee, WI                              6,000              December 1, 2004
WNOR..................  Norfolk, VA                               50,000              October 1, 2003
WAFX..................  Norfolk, VA                              100,000              October 1, 2003
KSTZ..................  Des Moines, IA                           100,000              February 1, 2005
KIOA..................  Des Moines, IA                           100,000              February 1, 2005
KAZR..................  Des Moines, IA                           100,000              February 1, 2005
KLTI..................  Des Moines, IA                           100,000              February 1, 2005
WMGX..................  Portland, ME                              50,000              April 1, 2006
WYNZ..................  Portland, ME                              25,000              April 1, 2006
WPOR..................  Portland, ME                              50,000              April 1, 2006
WLZX..................  Northampton, MA                            6,000              April 1, 2006
WAQY..................  Springfield, MA                           50,000              April 1, 2006
WZID..................  Manchester, NH                            50,000              April 1, 2006
WQLL..................  Manchester, NH                             6,000              April 1, 2006
WYMG..................  Springfield, IL                           50,000              December 1, 2004
WQQL..................  Springfield, IL                           50,000              December 1, 2004
WDBR..................  Springfield, IL                           50,000              December 1, 2004
WMHX..................  Lincoln, IL                               25,000              December 1, 2004
WLRW..................  Champaign, IL                             50,000              December 1, 2004
WIXY..................  Champaign, IL                             25,000              December 1, 2004
WKIO..................  Urbana, IL                                25,000              December 1, 2004
WNAX..................  Yankton, SD                              100,000              April 1, 2005
KISM..................  Bellingham, WA                           100,000              February 1, 2006
KAFE..................  Bellingham, WA                           100,000              February 1, 2006
KICD..................  Spencer, IA                              100,000              February 1, 2005
KLLT..................  Spencer, IA                               25,000              February 1, 2005
WCVQ..................  Fort Campbell, KY                        100,000              August 1, 2004
WZZP..................  Hopkinsville, KY                           6,000              August 1, 2004
WVVR..................  Hopkinsville, KY                         100,000              August 1, 2004
KMIT..................  Mitchell, SD                             100,000              April 1, 2005
KUQL..................  Wessington Springs, SD                   100,000              April 1, 2005
WHAI..................  Greenfield, MA                             6,000              April 1, 2006
WKNE..................  Keene, NH                                 50,000              April 1, 2006
WKVT..................  Brattleboro, VT                            6,000              April 1, 2006
WOXL(8)...............  Asheville, NC                             25,000              December 1, 2003


                                        9




                                                                                      EXPIRATION DATE OF
       STATION                   MARKET(1)                   POWER (WATTS)(2)         FCC AUTHORIZATION
       -------          ----------------------------   ----------------------------   ------------------
                                                                             
WINQ(6)(9)............  Winchendon, MA                             3,000              April 1, 2006
WOQL..................  Winchester, NH                             6,000              April 1, 2006
WJOI..................  Springfield, TN                            6,000              August 1, 2004
KDEZ..................  Jonesboro, AR                             50,000              June 1, 2004
KDXY..................  Jonesboro, AR                             25,000              June 1, 2004
KJBX..................  Jonesboro, AR                              6,000              June 1, 2004
AM:
WVKO(7)(11)...........  Columbus, OH                               1,000              October 1, 2004
WJYI..................  Milwaukee, WI                              1,000              December 1, 2004
WJOI..................  Norfolk, VA                                1,000              October 1, 2003
KRNT..................  Des Moines, IA                             5,000              February 1, 2005
KPSZ..................  Des Moines, IA                            10,000              February 1, 2005
WGAN..................  Portland, ME                               5,000              April 1, 2006
WZAN..................  Portland, ME                               5,000              April 1, 2006
WBAE..................  Portland, ME                               1,000              April 1, 2006
WHNP..................  Springfield, MA                           2,500(5)            April 1, 2006
WHMP..................  Northampton, MA                            1,000              April 1, 2006
WFEA..................  Manchester, NH                             5,000              April 1, 2006
WTAX..................  Springfield, IL                            1,000              December 1, 2004
WLLM(7)...............  Lincoln, IL                               1,000(5)            December 1, 2004
WNAX..................  Yankton, SD                                5,000              April 1, 2005
KGMI..................  Bellingham, WA                             5,000              February 1, 2006
KPUG..................  Bellingham, WA                            10,000              February 1, 2006
KBAI..................  Bellingham, WA                            1,000(5)            February 1, 2006
KICD..................  Spencer, IA                                1,000              February 1, 2005
WJMR(AM)..............  Fort Campbell, KY                         1,000(5)            August 1, 2004
WDXN..................  Clarksville, TN                           1,000(5)            August 1, 2004
WHMQ..................  Greenfield, MA                             3,000              April 1, 2006
WKBK..................  Keene, NH                                  5,000              April 1, 2006
WKVT..................  Brattleboro, VT                            1,000              April 1, 2006
WISE(8)...............  Asheville, NC                             5,000(5)            December 1, 2003
WOXL(AM)(8)...........  Asheville, NC                             5,000(5)            December 1, 2003
WJQY..................  Springfield, TN                           1,000(5)            August 1, 2004
WZBK..................  Keene, NH                                 1,000(5)            April 1, 2006
TV/CHANNEL:
KOAM (Ch 7)...........  Joplin, MO/Pittsburg, KS        316,000(vis), 61,600(aur)     June 1, 2006
KAVU (Ch 25)..........  Victoria, TX                   2,140,000(vis), 214,000(aur)   August 1, 2006
KVCT(3) (Ch 19).......  Victoria, TX                    155,000(vis), 15,500(aur)     August 1, 2006
KUNU-LP(4) (Ch 21)....  Victoria, TX                            1,000(vis)            August 1, 2006
KVTX-LP(4) (Ch 45)....  Victoria, TX                            1,000(vis)            August 1, 2006
KXTS-LP(4) (Ch 41)....  Victoria, TX                            1,000(vis)            August 1, 2006
WXVT (Ch 15)..........  Greenville, MS                 2,746,000(vis), 549,000(aur)   June 1, 2005


                                        10


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

 (1) Some stations are licensed to a different community located within the
     market that they serve.

 (2) Some stations are licensed to operate with a combination of effective
     radiated power ("ERP") and antenna height, which may be different from, but
     provide equivalent coverage to, the power shown. The ERP of television
     stations is expressed in terms of visual ("vis") and aural ("aur")
     components. WOXL, WISE, WVKO (AM), KPSZ (AM), KPUG (AM), KGMI (AM), and
     KBAI (AM) operate with lower power at night than the power shown.

 (3) We program this station pursuant to a TBA with the licensee of KVCT,
     Surtsey Productions, Inc. See note 11 of the Consolidated Financial
     Statements for additional information on our relationship with Surtsey
     Productions, Inc.

 (4) KUNU-LP, KXTS-LP and KVTX-LP are "low power" television stations that
     operate as "secondary" stations (i.e., if they conflict with the operations
     of a "full power" television station, the low power stations must change
     their facilities or terminate operations).

 (5) Operates daytime only or with greatly reduced power at night.

 (6) Pending Acquisition.

 (7) Pending Divestiture.

 (8) We program this station pursuant to a TBA with Ashville Radio Partners,
     LLC.

 (9) We program this station pursuant to a TBA with Ashville Radio Partners,
     LLC.

(10) We program this station pursuant to a TBA with Aritaur Communications, Inc.

(11) We program this station pursuant to a TBA with Associated Radio, Inc.

(12) This station is being programmed pursuant to a TBA with Associated Radio,
     Inc.

     Ownership Matters.  The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast licensee without the
prior approval of the FCC. In determining whether to grant or renew a broadcast
license, the FCC considers a number of factors pertaining to the licensee,
including compliance with the Communications Act's limitations on alien
ownership; compliance with various rules limiting common ownership of broadcast,
cable and newspaper properties; and the "character" and other qualifications of
the licensee and those persons holding "attributable or cognizable" interests
therein.

     Under the Communications Act, broadcast licenses may not be granted to any
corporation having more than one-fifth of its issued and outstanding capital
stock owned or voted by aliens (including non-U.S. corporations), foreign
governments or their representatives (collectively, "Aliens"). The
Communications Act also prohibits a corporation, without FCC waiver, from
holding a broadcast license if that corporation is controlled, directly or
indirectly, by another corporation in which more than 25% of the issued and
outstanding capital stock is owned or voted by Aliens. The FCC has issued
interpretations of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships. Since we
serve as a holding company for our various radio station subsidiaries, we cannot
have more than 25% of our stock owned or voted by Aliens.

     The Communications Act and FCC rules also generally prohibit or restrict
the common ownership, operation or control of a radio broadcast station and a
television broadcast station serving the same geographic market. The FCC's rules
permit the ownership of up to two television stations by the same entity if (a)
at least eight independently owned and operated full-power commercial and
noncommercial TV stations would remain in the Designated Market Area ("DMA") in
which the communities of license of the TV stations in question are located, and
(b) the two merging stations are not both among the top four-ranked stations in
the market as measured by audience share. The FCC established criteria for
obtaining a waiver of the rules to permit the ownership of two television
stations in the same DMA that would not otherwise comply with the FCC's rules.
Under certain circumstances, a television station may merge with a "failed" or
"failing" station or an "unbuilt" station if strict criteria are satisfied.
Additionally, the FCC now permits a party to own up to two television stations
(if permitted under the modified TV duopoly rule) and up to six radio stations
(if permitted under the local radio ownership rules), or one

                                        11


television station and up to seven radio stations, in any market where at least
20 independently owned media voices remain in the market after the combination
is effected ("Qualifying Market"). The FCC will permit the common ownership of
up to two television stations and four radio stations in any market where at
least 10 independently owned media voices remain after the combination is
effected. The FCC will permit the common ownership of up to two television
stations and one radio station notwithstanding the number of voices in the
market. The FCC also adopted rules that make television time brokerage
agreements or TBA's count as if the brokered station were owned by the brokering
station in making a determination of compliance with the FCC's multiple
ownership rules. TBA's entered into before November 5, 1996, are grandfathered
until 2004. As a result of the FCC's rules, we would not be permitted to acquire
a television broadcast station (other than low power television) in a
non-Qualifying Market in which we now own any television properties. The FCC
revised its rules to permit a television station to affiliate with two or more
major networks of television broadcast stations under certain conditions. (Major
existing networks are still subject to the FCC's dual network ban).

     We are permitted to own an unlimited number of radio stations on a
nationwide basis (subject to the local ownership restrictions described below).
We are permitted to own an unlimited number of television stations on a
nationwide basis so long as the ownership of the stations would not result in an
aggregate national audience reach (i.e., the total number of television
households in the Arbitron Area of Dominant Influence ("ADI") markets in which
the relevant stations are located divided by the total national television
households as measured by ADI data at the time of a grant, transfer or
assignment of a license) of 35%. This so-called "national television station
ownership rule" was appealed to the court, and on February 21, 2002, the United
States Court of Appeals for the District of Columbia Circuit remanded the rule
to the FCC for further consideration and vacated outright a related rule that
prohibited a cable television system from carrying the signal of any television
station it owned in the same local market. On September 23, 2002, the FCC
released a "notice of proposed rule making" that initiated a comprehensive
review of the FCC's multiple ownership rules for both television and radio. The
proceeding is ongoing and we cannot predict what action, if any, the FCC may
take to modify its rules.

     Under the Communications Act, we are permitted to own radio stations
(without regard to the audience shares of the stations) based upon the number of
radio stations in the relevant radio market as follows:



         NUMBER OF
          STATIONS
          IN RADIO
           MARKET                            NUMBER OF STATIONS WE CAN OWN
         ---------            ------------------------------------------------------------
                           
14 or Fewer.................  Total of 5 stations, not more than 3 in the same service
                              (AM or FM) except the Company cannot own more than 50% of
                              the stations in the market.
15-29.......................  Total of 6 stations, not more than 4 in the same service
                              (AM or FM).
30-44.......................  Total of 7 stations, not more than 4 in the same service
                              (AM or FM).
45 or More..................  Total of 8 stations, not more than 5 in the same service
                              (AM or FM).


     The FCC has increased its scrutiny of some proposed acquisitions and
mergers on antitrust grounds and has initiated a policy of placing a "flag"
soliciting public comment on concentration of control issues based on
advertising revenue shares or other criteria, on the public notice announcing
the acceptance of assignment and transfer applications. The FCC has flagged
proposed transactions that would result in one entity controlling 50% or more of
the advertising revenues in the relevant Arbitron radio market or two entities
controlling 70% or more of the advertising revenues in the radio market. The FCC
uses revenue data supplied by BIA Research, Inc. ("BIA"). While the FCC reviews
is multiple ownership rules as noted above, the FCC will continue to "flag"
applications that in its view raise competitive concerns. In making its
competitive analysis of flagged applications, the FCC will examine (1) product
market

                                        12


definition, (2) geographic definition, (3) market participants, (4) market
shares and concentration, (5) barriers to entry, (6) potential adverse
competitive effects, and (7) efficiencies and other public interest benefits. As
a result of these new policies, we may not be permitted to acquire additional
radio stations in markets where we own stations that earn 50% or more of the
revenues in that market as reported by BIA or where we and another broadcast
company garner 70% or more of the revenues in the market. We cannot predict
whether the FCC will adopt rules that would restrict our ability to acquire
additional stations.

     New rules to be promulgated under the Communications Act may permit us to
own, operate, control or have a cognizable interest in additional radio
broadcast stations if the FCC determines that such ownership, operation, control
or cognizable interest will result in an increase in the number of radio
stations in operation. No firm date has been established for initiation of this
rule-making proceeding.

     In February 2002, the FCC issued a Second Further Notice of Proposed Rule
Making wherein it sought comment on the procedures it should use to license
"non-reserved" broadcast channels (i.e., those FM channels not specifically
reserved for noncommercial use) in which both commercial and noncommercial
educational ("NCE") entities have an interest. The FCC suggested several options
for treating the exempt entities. The first option would be simply to hold NCE
entities ineligible for licenses for non-reserved channels. The second option
would be to permit NCE entities the opportunity to acquire licenses for
non-reserved channels when there is no conflict with commercial entities. The
third option would be to provide NCE entities the opportunity to reserve
additional channels in the Table of Allotments through reservation criteria that
are more relaxed than the current criteria. If the FCC were to adopt the third
option, our ability to apply for new radio authorizations could be limited where
an NCE entity expressed interest in the use of the new channel. The FCC has not
yet released a decision in this proceeding.

     The FCC generally applies its ownership limits to "attributable" interests
held by an individual, corporation, partnership or other association. In the
case of corporations holding broadcast licenses, the interests of officers,
directors and those who, directly or indirectly, have the right to vote 5% or
more of the corporation's stock (or 20% or more of such stock in the case of
certain passive investors that are holding stock for investment purposes only)
are generally attributable, as are positions of an officer or director of a
corporate parent of a broadcast licensee. Currently, three of our officers and
directors have an attributable interest or interests in companies applying for
or licensed to operate broadcast stations other than us.

     On January 19, 2001, the FCC revised its ownership attribution rules to (a)
apply to limited liability companies and registered limited liability
partnerships the same attribution rules that the FCC applies to limited
partnerships; and (b) create a new equity/debt plus ("EDP") rule that attributes
the other media interests of an otherwise passive investor if the investor is
(1) a "major-market program supplier" that supplies over 15% of a station's
total weekly broadcast programming hours, or (2) a same-market media entity
subject to the FCC's multiple ownership rules (including broadcasters, cable
operators and newspapers) so that its interest in a licensee or other media
entity in that market will be attributed if that interest, aggregating both debt
and equity holdings, exceeds 33% of the total asset value (equity plus debt) of
the licensee or media entity. We could be prohibited from acquiring a financial
interest in stations in markets where application of the EDP rule would result
in us having an attributable interest in the stations. In reconsidering its
rules, the FCC also eliminated the "single majority shareholder exemption" which
provides that minority voting shares in a corporation where one shareholder
controls a majority of the voting stock are not attributable; however, in
December 2001 the FCC "suspended" the elimination of this exemption until the
FCC resolved issues concerning cable television ownership.

     In addition to the FCC's multiple ownership rules, the Antitrust Division
of the United States Department of Justice and the Federal Trade Commission have
the authority to examine proposed transactions for compliance with antitrust
statutes and guidelines. The Antitrust Division has become more active recently
in reviewing proposed acquisitions. It has issued "civil investigative demands"
and obtained consent decrees requiring the divestiture of stations in a
particular market based on antitrust concerns.

                                        13


     Programming and Operation.  The Communications Act requires broadcasters to
serve the "public interest". Licensees are required to present programming that
is responsive to community problems, needs and interests and to maintain certain
records demonstrating such responsiveness. Complaints from listeners concerning
a station's programming often will be considered by the FCC when it evaluates
renewal applications of a licensee, although such complaints may be filed at any
time and generally may be considered by the FCC at any time. Stations also must
follow various rules promulgated under the Communications Act that regulate,
among other things, political advertising, sponsorship identification, the
advertisement of contests and lotteries, obscene and indecent broadcasts, and
technical operations, including limits on radio frequency radiation. The FCC now
requires the owners of antenna supporting structures (towers) to register them
with the FCC. As an owner of such towers, we are subject to the registration
requirements. The Children's Television Act of 1990 and the FCC's rules
promulgated thereunder require television broadcasters to limit the amount of
commercial matter which may be aired in children's programming to 10.5 minutes
per hour on weekends and 12 minutes per hour on weekdays. The Children's
Television Act and the FCC's rules also require each television licensee to
serve, over the term of its license, the educational and informational needs of
children through the licensee's programming (and to present at least three hours
per week of "core" educational programming specifically designed to serve such
needs). Licensees are required to publicize the availability of this programming
and to file annually a report with the FCC on these programs and related
matters. On January 1, 1998, a new FCC rule became effective which requires
television stations to provide closed captioning for certain video programming
according to a schedule that gradually increases the amount of video programming
that must be provided with captions.

     Equal Employment Opportunity Rules.  On March 10, 2003, new equal
employment opportunity (EEO) rules and policies for broadcasters went into
effect. The rules prohibit discrimination by broadcasters and multichannel video
programming distributors. They also require broadcasters to provide notice of
job vacancies and to undertake additional outreach measures, such as job fairs
and scholarship programs. The rules mandate a "three prong" outreach program;
i.e., Prong 1: widely disseminate information concerning each full-time (30
hours or more) job vacancy, except for vacancies filled in exigent
circumstances; Prong 2: provide notice of each full-time job vacancy to
recruitment organizations that have requested such notice; and Prong 3: complete
two (for broadcast employment units with five to ten full-time employees or that
are located in smaller markets) or four (for employment units with more than ten
full-time employees located in larger markets) longer-term recruitment
initiatives within a two-year period. These include, for example, job fairs,
scholarship and internship programs, and other community events designed to
inform the public as to employment opportunities in broadcasting. The rules
mandate extensive record keeping and reporting requirements. The EEO rules will
be enforced through review at renewal time, at mid-term for larger broadcasters,
and through random audits and targeted investigations resulting from information
received as to possible violations. The FCC has not yet decided on whether and
how to apply the EEO rule to part-time positions.

     Failure to observe these or other rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
"short" (less than the full eight-year) renewal terms or, for particularly
egregious violations, the denial of a license renewal application or the
revocation of a license.

     Time Brokerage Agreements.  As is common in the industry, we have entered
into what have commonly been referred to as Time Brokerage Agreements, or
"TBA's". While these agreements may take varying forms, under a typical TBA,
separately owned and licensed radio or television stations agree to enter into
cooperative arrangements of varying sorts, subject to compliance with the
requirements of antitrust laws and with the FCC's rules and policies. Under
these types of arrangements, separately-owned stations agree to function
cooperatively in terms of programming, advertising sales, and other matters,
subject to the licensee of each station maintaining independent control over the
programming and station operations of its own station. One typical type of TBA
is a programming agreement between two separately-owned radio or television
stations serving a common service area, whereby the licensee of one station
purchases substantial portions of the broadcast day on the other licensee's
station, subject to ultimate editorial and other controls being exercised by the
latter licensee, and sells advertising time during

                                        14


such program segments. Such arrangements are an extension of the concept of time
brokerage agreements, under which a licensee of a station sells blocks of time
on its station to an entity or entities which purchase the blocks of time and
which sell their own commercial advertising announcements during the time
periods in question.

     In the past, the FCC has determined that issues of joint advertising sales
should be left to antitrust enforcement. Furthermore, the staff of the FCC's
Mass Media Bureau has held that such agreements are not contrary to the
Communications Act provided that the licensee of the station from which time is
being purchased by another entity maintains complete responsibility for and
control over operations of its station and assures compliance with applicable
FCC rules and policies. The FCC adopted rules that permit, under certain
circumstances, the ownership of two or more television stations in a Qualifying
Market and requires the termination of certain non-complying existing television
TBA's. We currently have a television TBA in the Victoria, Texas market with
Surtsey. Even though the Victoria market is not a Qualifying Market such that
the duopoly would otherwise be permissible, we believe that the TBA is
"grandfathered" under the FCC's rules and need not be terminated earlier than
2004. See "Ownership Matters" above.

     The FCC's rules provide that a station purchasing (brokering) time on
another station serving the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's multiple ownership rules. As a result, under the rules, a broadcast
station will not be permitted to enter into a time brokerage agreement giving it
the right to purchase more than 15% of the broadcast time, on a weekly basis, of
another local station that it could not own under the local ownership rules of
the FCC's multiple ownership rules. The FCC's rules also prohibit a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) whether it owns the
stations or through a TBA arrangement, where the brokered and brokering stations
serve substantially the same geographic area.

     On March 7, 2003 we entered into an agreement of understanding with
Surtsey, whereby we have guaranteed up to $1,250,000 of the debt incurred by
Surtsey in closing on the acquisition of a construction permit for KFJX-TV
station in Pittsburg, Kansas. In consideration for our guarantee, Surtsey has
agreed to enter into various agreements with us relating to the station,
including a Shared Services Agreement, Technical Services Agreement, Agreement
for the Sale of Commercial Time, Option Agreement and Broker Agreement. It is
contemplated that such agreements will be executed on or before September 1,
2003. Under the FCC's ownership rules, we are prohibited from owning or having
an attributable or cognizable interest in this station.

OTHER FCC REQUIREMENTS

     The "V-Chip."  The FCC adopted methodology that will be used to send
program ratings information to consumer TV receivers (implementation of "V-Chip"
legislation contained in the Communications Act). The FCC also adopted the TV
Parental Guidelines, developed by the Industry Ratings Implementation Group,
which apply to all broadcast television programming except for news and sports.
As a part of the legislation, television station licensees are required to
attach as an exhibit to their applications for license renewal a summary of
written comments and suggestions received from the public and maintained by the
licensee that comment on the licensee's programming characterized as violent.

     Digital Television.  The FCC's rules provide for the conversion by all U.S.
television broadcasters to digital television ("DTV"), including build-out
construction schedules, NTSC (current analog system) and DTV channel
simulcasting, and the return of NTSC channels to the government by 2006. The FCC
has attempted to provide DTV coverage areas that are comparable to the NTSC
service areas. DTV licensees may use their DTV channels for a multiplicity of
services such as high-definition television broadcasts, multiple standard
definition television broadcasts, data, audio, and other services so long as the
licensee provides at least one free video channel equal in quality to the
current NTSC technical standard. Our television stations have begun providing
low power DTV service on channels separate from their NTSC channels. Our
television stations are required to cease broadcasting on the NTSC channels by
December 31, 2006, and return the NTSC channels to the government. On November
15, 2001, and the

                                        15


FCC released a Memorandum Opinion and Order on Reconsideration, and on January
27, 2003, the FCC released notice of proposed rule making that temporarily
deferred its earlier requirement that commercial broadcasters replicate their
entire current grade B NTSC analog service area with their DTV signal by
December 31, 2004, or lose interference protection to the unreplicated areas. As
a result of these decisions licensees can now construct and operate facilities
that offer DTV services to serve at least their communities of license while
retaining interference protection to their allotted service areas. The FCC
temporarily deferred its requirement that stations granted construction permits
for maximized facilities construct such facilities by May 1, 2002, in order to
retain interference protection. On January 27, 2003, the FCC released a notice
of proposed rule making that proposes to establish May 1, 2005, as the date by
which commercial stations with both NTSC and DTV channel assignments elect which
channel they will use for their post-transition DTV channel and proposed July 1,
2006 (or the date by which 85% of the television households in a licensee's
market are capable of receiving DTV signals, whichever is later) for replication
and maximization. Starting on April 1, 2003, a DTV station must provide a DTV
signal at least 50% of the time it transmits an analog signal; on April 1, 2004,
75%; and on April 1, 2005, 100%. Commercial DTV stations must meet increased
city-grade signal strength requirements by December 31, 2004.

     Under the Balanced Budget Act, the FCC is authorized to extend the December
31, 2006, deadline if (1) one or more television stations affiliated with ABC,
CBS, NBC, or Fox in a market are not broadcasting in DTV and the FCC determines
that such stations have "exercised due diligence" in attempting to convert to
DTV; or (2) less than 85% of the television households in the station's market
subscribe to a multichannel video service that carries at least one DTV channel
from each of the local stations in that market and less than 85% of the
television households in the market can receive DTV signals off the air using
either set-top converters for NTSC broadcasts or a new DTV set. At present
KOAM-TV is providing NTSC service on Channel 7 and DTV service on Channel 13.
KAVU-TV is providing NTSC service on Channel 25 and DTV service on Channel 15.
WXVT is providing NTSC operations on Channel 15 and DTV service on Channel 17.
Brokered Station KVCT is providing NTSC service on Channel 19 and DTV service on
Channel 11. By the date the FCC finally establishes (now proposed for January 1,
2005), our stations will elect one of their channels for permanent DTV operation
and by the FCC's final deadline will cease broadcasting on the NTSC channel. On
January 22, 2001, the FCC adopted rules on how the law requiring the carriage of
television signals on local cable television systems should apply to DTV
signals. The FCC decided that a DTV-only station could immediately assert its
right to carriage on a local cable television system; however, the FCC decided
that a television station may not assert a right to carriage of both its NTSC
and DTV channels. On January 10, 2003, in a Further Notice of Proposed Rule
Making, the FCC sought comment on proposed rules for "plug and play" cable
compatibility that will allow consumers to plug their cable directly into their
digital TV set without the need for a set-top box. The notice seeks comment on a
Memorandum of Understanding ("MOU") filed with the FCC by the cable and consumer
electronics industries detailing an agreement on a cable compatibility standard
for an integrated, one-way digital cable television receiver, as well as other
unidirectional digital cable products. On November 19, 1998 the FCC decided to
charge television licensees a fee of 5% of gross revenue derived from the
offering of ancillary or supplementary services on DTV spectrum for which a
subscription fee is charged.

     Low Power and Class A Television Stations.  In the Community Broadcasters
Protection Act of 1999, Congress authorized the FCC to create a new class of
commercial television station. Currently, the service areas of low power
television ("LPTV") stations are not protected. LPTV stations can be required to
terminate their operations if they cause interference to full power stations.
LPTV stations meeting certain criteria were permitted to certify to the FCC
their eligibility to be reclassified as "Class A Television Stations" whose
signal contours would be protected against interference from other stations.
Stations deemed "Class A Stations" by the FCC would thus be protected from
interference. We own three operating LPTV stations, KUNU-LP, KVTX-LP, and
KXTS-LP, Victoria, Texas. None of the stations qualifies under the FCC's
established criteria for Class A Status.

                                        16


     The Cable Television Consumer Protection and Competition Act of 1992, among
other matters, requires cable television system operators to carry the signals
of local commercial and non-commercial television stations and certain low power
television stations. Cable television operators and other multi-channel video
programming distributors may not carry broadcast signals without, in certain
circumstances, obtaining the transmitting station's consent. A local television
broadcaster must make a choice every three years whether to proceed under the
"must-carry" rules or waive the right to mandatory-uncompensated coverage and
negotiate a grant of retransmission consent in exchange for consideration from
the cable system operator. As noted above, such must-carry rights will extend to
the new DTV signal to be broadcast by our stations, but will not extend
simultaneously to the analog signal.

     Low Power FM Radio.  The FCC has created a new "low power radio service"
("LPFM"). The FCC will authorize the construction and operation of two new
classes of noncommercial educational FM stations, LP100 (up to 100 watts
effective radiated power ("ERP") with antenna height above average terrain
("HAAT") at up to 30 meters (100 feet) which is calculated to produce a service
area radius of approximately 3.5 miles, and LP10 (up to 10 watts ERP and up to
30 meters HAAT) with a service area radius of approximately 1 to 2 miles. The
FCC will not permit any broadcaster or other media entity subject to the FCC's
ownership rules to control or hold an attributable interest in an LPFM station
or enter into related operating agreements with an LPFM licensee. Thus, absent a
waiver, we could not own or program an LPFM station. LPFM stations will be
allocated throughout the FM broadcast band, i.e., 88 to 108 MHz, although they
must operate with a noncommercial format. The FCC has established allocation
rules that require FM stations to be separated by specified distances to other
stations on the same frequency, and stations on frequencies on the first, second
and third channels adjacent to the center frequency. The FCC has begun granting
construction permits for LPFM stations. We cannot predict what, if any, adverse
effect future LPFM stations may have on our FM stations.

     Digital Audio Radio Satellite Service.  The FCC has adopted rules for the
Digital Audio Radio Satellite Service ("DARS") in the 2310-2360 MHz frequency
band. In adopting the rules, the FCC stated, "although healthy satellite DARS
systems are likely to have some adverse impact on terrestrial radio audience
size, revenues and profits, the record does not demonstrate that licensing
satellite DARS would have such a strong adverse impact that it threatens the
provision of local service." The FCC has granted two nationwide licenses, one to
XM Satellite Radio, which began broadcasting in May 2001, and a second to Sirius
Satellite Radio, which began broadcasting in February 2002 in three markets, and
has now expanded nationwide. The satellite radio systems provide multiple
channels of audio programming in exchange for the payment of a subscription fee.
Because the DARS service is in its infant stage, we cannot predict whether, or
the extent to which, it will have an adverse impact on our business.

     Satellite Carriage of Local TV Stations.  The Satellite Home Viewer
Improvement Act ("SHVIA"), a copyright law, prevents direct-to-home satellite
television carriers from retransmitting broadcast network television signals to
consumers unless those consumers (1) are "unserved" by the over-the-air signals
of their local network affiliate stations, and (2) have not received cable
service in the last 90 days. According to the SHVIA, "unserved" means that a
consumer cannot receive, using a conventional outdoor rooftop antenna, a
television signal that is strong enough to provide an adequate television
picture. In December 2001 the U.S. Court of Appeals for the District of Columbia
upheld the FCC's rules for satellite carriage of local television stations which
require satellite carriers to carry upon request all local TV broadcast stations
in local markets in which the satellite carriers carry at least one TV broadcast
station, also known as the "carry one, carry all" rule.

     In-Band On-Channel "High Definition" Radio.  On October 11, 2002, the FCC
selected in-band, on-channel (IBOC) as the technology that will allow AM
(daytime operations only) and FM stations on a voluntary basis to begin interim
digital transmissions immediately using the IBOC systems developed by iBiquity
Digital Corporation. This technology has become commonly known as "high
definition" or HD radio. During the interim IBOC operations, stations will
broadcast the same main channel program material in both analog and digital
modes. IBOC technology permits "hybrid" operations, the simultaneous
transmission of analog and digital signals with a single AM and FM channel. It
is believed that IBOC technology will provide near CD-quality sound on FM
channels and FM quality on AM channels. Hybrid

                                        17


IBOC operations will have minimal impact on the present broadcast service. At
the present time, we have no immediate plans to begin broadcasting in HD radio.

     Proposed Changes.  The FCC has under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that could, directly or indirectly, affect us and the operation and
ownership of our broadcast properties. New application processing rules adopted
by the FCC might require us to apply for facilities modifications to our
standard broadcast stations in future "window" periods for filing applications
or result in the stations being "locked in" with their present facilities. The
Balanced Budget Act of 1997 authorizes the FCC to use auctions for the
allocation of radio broadcast spectrum frequencies for commercial use. The
implementation of this law could require us to bid for the use of certain
frequencies. Proposals are pending in Congress to repeal the FCC's ban
restricting broadcasters from owning newspapers in the same market. On September
13, 2001, the FCC initiated a proceeding to review its rule barring common
ownership of a broadcast station and daily newspaper in the same market, and to
consider whether or to what extent the rule should be revised.

     The FCC on January 13, 1999 released a study and conducted a forum on the
impact of advertising practices on minority-owned and minority-formatted
broadcast stations. The study provided evidence that advertisers often exclude
radio stations serving minority audiences from ad placements and pay them less
than other stations when they are included. On February 22, 1999, a "summit" was
held at the FCC's headquarters to continue this initiative where participants
considered the advertising study's recommendations to adopt a Code of Conduct to
oppose unfair ad placement and payment, to encourage diversity in hiring and
training and to enforce laws against unfair business practices. We cannot
predict at this time whether the FCC will adopt new rules that would require the
placement of part of an advertiser's budget on minority-owned and
minority-formatted broadcast stations, and if so, whether such rules would have
an adverse impact on us.

     Congress, the courts and the FCC have recently taken actions that may lead
to the provision of video services by telephone companies. The 1996
Telecommunications Act has lifted previous restrictions on a local telephone
company providing video programming directly to customers within the telephone
company's service areas. The law now permits a telephone company to distribute
video services either under the rules applicable to cable television systems or
as operators of so-called "wireless cable" systems as common carriers or under
new FCC rules regulating "open video systems" subject to common carrier
regulations. We cannot predict what effect these services may have on us.
Likewise, we cannot predict what other changes might be considered in the
future, nor can we judge in advance what impact, if any, such changes might have
on our business.

EXECUTIVE OFFICERS

     Our current executive officers are:



NAME                             AGE                         POSITION
----                             ---   ----------------------------------------------------
                                 
Edward K. Christian............  58    President, Chief Executive Officer and Chairman;
                                       Director
Steven J. Goldstein............  46    Executive Vice President and Group Program Director
Warren Lada....................  48    Senior Vice President, Operations
Samuel D. Bush.................  45    Senior Vice President, Chief Financial Officer and
                                       Treasurer
Marcia K. Lobaito..............  54    Vice President, Corporate Secretary, and Director of
                                       Business Affairs
Catherine A. Bobinski..........  43    Vice President, Chief Accounting Officer and
                                       Corporate Controller


     Officers are elected annually by our Board of Directors and serve at the
discretion of the Board. Set forth below is information with respect to our
executive officers.

     Mr. Christian has been President, Chief Executive Officer and Chairman
since our inception in 1986.

                                        18


     Mr. Goldstein has been Executive Vice President and Group Program Director
since 1988. Mr. Goldstein has been employed by us since our inception in 1986.

     Mr. Lada has been Senior Vice President, Operations since 2000. He was Vice
President, Operations from 1997 to 2000. From 1992 to 1997 he was Regional Vice
President of our subsidiary, Saga Communications of New England, Inc.

     Mr. Bush has been Senior Vice President since 2002, Chief Financial Officer
and Treasurer since September 1997. He was Vice President from 1997 to 2002.
From 1988 to 1997 he held various positions with the Media Finance Group at AT&T
Capital Corporation, most recently as Senior Vice President.

     Ms. Lobaito has been Vice President since 1996, and Director of Business
Affairs and Corporate Secretary since our inception in 1986.

     Ms. Bobinski has been Vice President since March 1999 and Chief Accounting
Officer and Corporate Controller since September 1991. Ms. Bobinski is a
certified public accountant.

ITEM 2.  PROPERTIES

     Our corporate headquarters is located in Grosse Pointe Farms, Michigan. The
types of properties required to support each of our stations include offices,
studios, transmitter sites and antenna sites. A station's studios are generally
housed with its offices in downtown or business districts. The transmitter sites
and antenna sites are generally located so as to provide maximum market
coverage.

     As of December 31, 2002 the studios and offices of 21 of our 26 operating
locations, as well as our corporate headquarters in Michigan, are located in
facilities we own. The remaining studios and offices are located in leased
facilities with lease terms that expire in one to 6 years. We own or lease our
transmitter and antenna sites, with lease terms that expire in one to 86 years.
We do not anticipate any difficulties in renewing those leases that expire
within the next five years or in leasing other space, if required.

     No one property is material to our overall operations. We believe that our
properties are in good condition and suitable for our operations.

     We own substantially all of the equipment used in our broadcasting
business.

     Our bank indebtedness is secured by a first priority lien on all of our
assets and those of our subsidiaries.

ITEM 3.  LEGAL PROCEEDINGS

     There are no material legal proceedings pending against us.

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

     Not applicable.

                                        19


                                    PART II

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

     Our Class A Common Stock trades on the American Stock Exchange. There is no
public trading market for our Class B Common Stock. The following table sets
forth the high and low sales prices of the Class A Common Stock as reported by
Tradeline for the calendar quarters indicated:



YEAR                                                           HIGH     LOW
----                                                          ------   ------
                                                                 
2001:
  First Quarter.............................................  $16.28   $11.00
  Second Quarter............................................  $18.99   $12.00
  Third Quarter.............................................  $18.99   $12.72
  Fourth Quarter............................................  $17.56   $12.64
2002:
  First Quarter.............................................  $20.28   $15.68
  Second Quarter............................................  $23.98   $19.68
  Third Quarter.............................................  $23.69   $16.55
  Fourth Quarter............................................  $22.15   $15.95


     As of March 11, 2003, there were approximately 141 holders of record of our
Class A Common Stock, and one holder of our Class B Common Stock.

     We have not paid any cash dividends on our Common Stock during the three
most recent fiscal years. We intend to retain future earnings for use in our
business and do not anticipate paying any dividends on our Common Stock in the
foreseeable future. We are prohibited by the terms of our bank loan agreement
from paying dividends on our Common Stock without the banks' prior consent. See
Item 7. Management's Discussion and Analysis of Financial Position and Results
of Operations -- Liquidity and Capital Resources.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     The following table sets forth as of December 31, 2002, the number of
securities outstanding under our equity compensation plans, the weighted average
exercise price of such securities and the number of securities available for
grant under these plans:



                                                                                      (C)
                                             (A)                 (B)               NUMBER OF
                                       NUMBER OF SHARES       WEIGHTED-           SECURITIES
                                         TO BE ISSUED     AVERAGE EXERCISE    REMAINING AVAILABLE
                                       UPON EXERCISE OF       PRICE OF        FOR FUTURE ISSUANCE
                                         OUTSTANDING         OUTSTANDING         UNDER EQUITY
                                           OPTIONS            OPTIONS,        COMPENSATION PLANS
                                        WARRANTS, AND       WARRANTS AND          (EXCLUDING
PLAN CATEGORY                               RIGHTS             RIGHTS             COLUMN (A))
-------------                          ----------------   -----------------   -------------------
                                                                     
Equity Compensation Plans Approved by
  Shareholders:
  Employee Stock Purchase Plan.......            --            $    --             1,562,500
  1992 Stock Option Plan.............     1,824,874            $12.440                    --
  1997 Non-Employee Director Stock
     Option Plan.....................        14,237            $  .007               175,941
Equity Compensation Plans Not
  Approved by Shareholders:
  None...............................            --                                       --
                                          ---------                                ---------
Total................................     1,839,111                                1,738,441
                                          =========                                =========


                                        20


ITEM 6.  SELECTED FINANCIAL DATA



                                                         YEARS ENDED DECEMBER 31,
                                     -----------------------------------------------------------------
                                     2002(1)(2)(3)   2001(1)(4)   2000(1)(5)   1999(1)(6)   1998(1)(7)
                                     -------------   ----------   ----------   ----------   ----------
                                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                                                             
OPERATING DATA:
Net Operating Revenue..............    $114,782       $103,956     $101,746     $90,020      $75,871
Station Operating Expense
  (excluding depreciation,
  amortization, corporate general
  and administrative)..............      73,350         66,640       62,487      56,552       48,544
                                       --------       --------     --------     -------      -------
Station Operating Income (excluding
  depreciation, amortization,
  corporate general and
  administrative)..................      41,432         37,316       39,259      33,468       27,327
Depreciation and Amortization......       6,533         10,110        9,019       8,022        6,420
Corporate General and
  Administrative...................       6,022          5,421        5,101       5,095        4,497
                                       --------       --------     --------     -------      -------
Operating Profit...................      28,877         21,785       25,139      20,351       16,410
Interest Expense...................       5,487          7,037        6,793       5,988        4,609
Net Income.........................    $ 13,955       $  8,565     $  8,650     $ 8,552      $ 6,351
Basic Earnings Per Share...........    $    .68       $    .42     $    .42     $   .42      $   .32
Cash Dividends Declared Per Common
  Share............................          --             --           --          --           --
Weighted Average Common Shares.....      20,631         20,473       20,543      20,394       19,870
Diluted Earnings Per Share.........    $    .66       $    .41     $    .41     $   .41      $   .31
Weighted Average Common Shares and
  Common Equivalents...............      21,209         20,888       20,990      20,831       20,298
BALANCE SHEET DATA:
  Working Capital..................    $  5,517       $ 24,083     $ 20,793     $22,756      $15,255
  Net Property and Equipment.......      60,161         55,169       47,672      44,455       35,564
  Net Intangible and Other
     Assets........................     134,713        112,033      100,390      84,901       70,505
  Total Assets.....................     226,322        202,721      179,424     162,496      130,013
  Long-term Debt Including Current
     Portion.......................     105,228        105,501       94,641      85,774       70,906
  Stockholders' Equity.............      93,059         75,062       65,618      59,102       44,723


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

(1) All periods presented include the weighted average shares and common
    equivalents related to certain stock options. In each of June 2002, December
    1999 and June 1998 we consummated five-for-four splits of our Class A and
    Class B Common Stock. All share and per share information has been restated
    to reflect the retroactive equivalent changes in the weighted average
    shares.

(2) Reflects the results of WKNE, WKBK and WKVT AM/FM, acquired in May 2002;
    WOQL and WZBK, acquired in July 2002; KDEZ, KDXY, KJBX, WJOI and WJQY,
    acquired in November 2002 and the results of a TBA for WOXL and WISE, which
    began in November 2002.

(3) Reflects the adoption of SFAS No. 142 "Accounting for Goodwill and Other
    Intangible Assets," which resulted in our goodwill and broadcast licenses no
    longer being amortized.

(4) Reflects the results of WCVQ, WVVR, WZZP, WDXN and WJMR, acquired in
    February 2001; WHAI and WHMQ, acquired in April 2001; and KMIT and KUQL,
    acquired in July 2001.

(5) Reflects the results of KICD AM/FM and KLLT, acquired in January 2000; WKIO,
    acquired in July 2000; and WHMP and WLZX, acquired in August 2000.

                                        21


(6) Reflects the results of KAFE and KPUG, acquired in January 1999; Michigan
    Farm Radio Network, acquired in January 1999; KAVU and KUNU, acquired in
    April 1999 and the results of a TBA for KVCT which began in April 1999;
    KBAI, acquired in May 1999; WXVT, acquired in July 1999.

(7) Reflects the results of Michigan Radio Network, acquired in March 1998; and
    KGMI and KISM, acquired in December 1998.

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

RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with Item 6.
Selected Financial Data and the financial statements and notes thereto of Saga
Communications, Inc. and its subsidiaries contained elsewhere herein.

GENERAL

     Our financial results are dependent on a number of factors, the most
significant of which is our ability to generate advertising revenue through
rates charged to advertisers. The rates a station is able to charge are, in
large part, based on a station's ability to attract audiences in the demographic
groups targeted by its advertisers. Various factors affect the rate a station
can charge, including the general strength of the local and national economies,
population growth, ability to provide popular programming, local market
competition, relative efficiency of radio and/or broadcasting compared to other
advertising media, signal strength and government regulation and policies. For
additional information about advertising rates, see Item 1.
Business -- Advertising Sales. The primary operating expenses involved in owning
and operating radio stations are employee salaries, depreciation and
amortization, programming expenses, solicitation of advertising, and promotion
expenses. In addition to these expenses, owning and operating television
stations involve the cost of acquiring certain syndicated programming.

     We evaluate performance of our operating entities based on station
operating income before corporate general and administrative, depreciation and
amortization ("station operating income"). We believe that station operating
income is useful because it provides a meaningful comparison of operating
performance between companies in the broadcasting industry and serves as an
indicator of the market value of a group of stations. Station operating income
is generally recognized by the broadcasting industry as a measure of performance
and is used by analysts who report on the performance of broadcasting groups.
Station operating income is not necessarily indicative of amounts that may be
available to us for debt service requirements, other commitments, reinvestment
or other discretionary uses. Station operating income is not a measure of
liquidity or of performance in accordance with generally accepted accounting
principles, and should be viewed as a supplement to and not a substitute for the
results of operations presented on the basis of accounting principles generally
accepted in the United States.

     During the years ended December 31, 2002, 2001 and 2000, none of our
operating locations represented more than 15% of our station operating income
(i.e., net operating revenue less station operating expense), other than our two
radio stations in Columbus, Ohio and our five radio stations in Milwaukee,
Wisconsin. For the years ended December 31, 2002, 2001 and 2000, The Columbus
stations accounted for an aggregate of 14%, 15% and 16%, respectively, and the
Milwaukee stations accounted for an aggregate of 22%, 23%, and 22%,
respectively, of our station operating income. While radio revenues in each of
the Columbus and Milwaukee markets have remained relatively stable historically,
an adverse change in either radio market or either location's relative market
position could have a significant impact on our operating results as a whole.

     Because audience ratings in the local market are crucial to a station's
financial success, we endeavor to develop strong listener/viewer loyalty. We
believe that the diversification of formats on our radio stations helps insulate
us from the effects of changes in musical tastes of the public on any particular
format.

                                        22


     The number of advertisements that can be broadcast without jeopardizing
listening/viewing levels (and the resulting ratings) is limited in part by the
format of a particular radio station and, in the case of television stations, by
restrictions imposed by the terms of certain network affiliation and syndication
agreements and, with respect to children's programs, federal regulation. Our
stations strive to maximize revenue by constantly managing the number of
commercials available for sale and adjusting prices based upon local market
conditions. While there may be shifts from time to time in the number of
advertisements broadcast during a particular time of the day, the total number
of advertisements broadcast on a particular station generally does not vary
significantly from year to year. Any change in our revenue, with the exception
of those instances where stations are acquired or sold, is generally the result
of pricing adjustments, which are made to ensure that the station efficiently
utilizes available inventory.

     In the broadcasting industry, stations often utilize trade (or barter)
agreements to generate advertising time sales in exchange for goods or services
used or useful in the operation of the stations, instead of for cash. We
minimize our use of trade agreements and historically have sold over 95% of our
advertising time for cash.

     Most advertising contracts are short-term and generally run only for a few
weeks. Most of our revenue is generated from local advertising, which is sold
primarily by each station's sales staff. In 2002, approximately 80% of our gross
revenue was from local advertising. To generate national advertising sales, we
engage an independent advertising sales representative that specializes in
national sales for each of our stations.

     Our revenue varies throughout the year. Advertising expenditures, our
primary source of revenue, generally have been lowest during the winter months
comprising the first quarter.

     The following tables summarize our results of operations for the three
years ended December 31, 2002. The as-reported amounts reflect our historical
financial results and include the results of operations for stations that we did
not own for the entire comparable period. The same station amounts reflect the
results of operations for stations that we owned for the entire comparable
period.

                                        23


CONSOLIDATED RESULTS OF OPERATIONS



                                                                      2002 VS. 2001             2001 VS. 2000
                                                                 -----------------------   -----------------------
                                                                    AS-          SAME         AS-          SAME
                              YEARS ENDED DECEMBER 31,            REPORTED    STATION %     REPORTED    STATION %
                       ---------------------------------------   % INCREASE    INCREASE    % INCREASE    INCREASE
                          2002          2001          2000       (DECREASE)   (DECREASE)   (DECREASE)   (DECREASE)
                       -----------   -----------   -----------   ----------   ----------   ----------   ----------
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                   
Net operating
  revenue............   $114,782      $103,956      $101,746        10.41%        5.33%        2.17%      (3.22%)
Station operating
  expense*...........     73,350        66,640        62,487        10.07%        3.98%        6.65%      (1.57%)
                        --------      --------      --------
Station operating
  income.............     41,432        37,316        39,259        11.03%        7.62%       (4.95%)     (5.79%)
Corporate G&A........      6,022         5,421         5,101        11.09%         N/A         6.27%        N/A
Depreciation.........      6,034         5,763         5,343         4.70%       (2.78%)       7.86%      (2.99%)
Amortization.........        499         4,347         3,676       (88.52%)     (88.62%)      18.25%        .77%
                        --------      --------      --------
Operating profit.....     28,877        21,785        25,139        32.55%       26.30%      (13.34%)     (9.72%)
Interest expense.....      5,487         7,037         6,793       (22.03%)                    3.59%
Other (income)
  expense............        159           (17)        2,104          N/A                       N/A
Income taxes.........      9,276         6,200         7,592        49.61%                   (18.34%)
                        --------      --------      --------
Net income...........   $ 13,955      $  8,565      $  8,650        62.93%                     (.98%)
Earnings per share:
Basic................   $    .68      $    .42      $    .42        61.68%                       --
                        ========      ========      ========
Diluted..............   $    .66      $    .41      $    .41        60.46%                       --
                        ========      ========      ========


RADIO BROADCASTING SEGMENT



                                                           2002 VS. 2001             2001 VS. 2000
                                                      -----------------------   -----------------------
                                                         AS-          SAME         AS-          SAME
                         YEARS ENDED DECEMBER 31,      REPORTED    STATION %     REPORTED    STATION %
                       ----------------------------   % INCREASE    INCREASE    % INCREASE    INCREASE
                         2002      2001      2000     (DECREASE)   (DECREASE)   (DECREASE)   (DECREASE)
                       --------   -------   -------   ----------   ----------   ----------   ----------
                              (IN THOUSANDS)
                                                                        
Net operating
  revenue............  $102,372   $93,094   $89,127       9.97%        4.25%       4.45%       (1.67%)
Station operating
  expense*...........    64,134    58,317    53,886       9.97%        2.95%       8.22%       (1.30%)
                       --------   -------   -------
Station operating
  income.............    38,238    34,777    35,241       9.95%        6.29%      (1.32%)      (2.23%)
Corporate G&A........        --        --        --        N/A          N/A         N/A          N/A
Depreciation.........     4,401     3,961     3,665      11.11%         .60%       8.08%       (7.85%)
Amortization.........       475     3,580     3,015     (86.73%)     (86.65%)     18.74%       (2.77%)
                       --------   -------   -------
Operating profit.....  $ 33,362   $27,236   $28,561      22.49%       17.71%      (4.64%)      (1.48%)
                       ========   =======   =======


                                        24


TELEVISION BROADCASTING SEGMENT



                                                            2002 VS. 2001             2001 VS. 2000
                                                       -----------------------   -----------------------
                                                          AS-          SAME         AS-          SAME
                         YEARS ENDED DECEMBER 31,       REPORTED    STATION %     REPORTED    STATION %
                       -----------------------------   % INCREASE    INCREASE    % INCREASE    INCREASE
                         2002       2001      2000     (DECREASE)   (DECREASE)   (DECREASE)   (DECREASE)
                       --------   --------   -------   ----------   ----------   ----------   ----------
                              (IN THOUSANDS)
                                                                         
Net operating
  revenue............  $ 12,410   $ 10,862   $12,619      14.25%       14.25%      (13.92%)     (13.92%)
Station operating
  expense*...........     9,216      8,323     8,601      10.73%       10.73%       (3.23%)      (3.23%)
                       --------   --------   -------
Station operating
  income.............     3,194      2,539     4,018      25.80%       25.80%      (36.81%)     (36.81%)
Corporate G&A........        --         --        --        N/A          N/A          N/A          N/A
Depreciation.........     1,432      1,630     1,572     (12.15%)     (12.15%)       3.69%        3.69%
Amortization.........        24        391       391     (93.86%)     (93.86%)         --           --
                       --------   --------   -------
Operating profit.....  $  1,738   $    518   $ 2,055     235.52%      235.52%      (74.79%)     (74.79%)
                       ========   ========   =======


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

* Programming, technical, selling and station general and administrative
  expenses

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

     For the year ended December 31, 2002 net operating revenue was $114,782,000
compared with $103,956,000 for the year ended December 31, 2001, an increase of
$10,826,000 or 10%. Approximately $5,489,000 or 51% of the increase was
attributable to revenue generated by stations which we did not own or operate
for the entire comparable period in 2001. The balance of the increase in net
operating revenue of approximately $5,337,000 was attributable to stations we
owned and operated for at least two years, representing a 5% increase in
comparable station/comparable period net operating revenue. The overall increase
in comparable station/comparable period revenue was primarily the result of
increased advertising rates and an increase in political revenue at a majority
of our stations. Improvements were noted in most of our markets on a comparable
station/comparable period basis.

     Station operating expense (i.e., programming, technical, selling, and
station general and administrative expenses) increased by $6,710,000 or 10% to
$73,350,000 for the year ended December 31, 2002, compared with $66,640,000 for
the year ended December 31, 2001. Of the total increase, approximately
$4,210,000 or 63% was the result of the impact of the operation of stations
which were not owned or operated by us for the entire comparable period in 2001.
The remaining balance of the increase in station operating expense of $2,500,000
represents a total increase in station operating expense of 4% for the year
ended December 31, 2002 compared to the year ended December 31, 2001 on a
comparable station/ comparable period basis.

     Operating profit for the year ended December 31, 2002 was $28,877,000
compared to $21,785,000 for the year ended December 31, 2001, an increase of
$7,092,000 or 33%. The improvement was the result of the $10,826,000 increase in
net operating revenue, offset by the $6,710,000 increase in station operating
expense, and a $3,848,000 or 89% decrease in amortization expense offset by a
$271,000 or 5% increase in depreciation expense, and a $601,000 increase in
corporate general and administrative charges. The decrease in amortization
expense was principally the result to the non-amortization provisions of the
adoption of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets". See note 2 of the Notes to Consolidated Financial
Statements. The increase in depreciation expense was principally the result of
recent acquisitions. The increase in corporate general and administrative
charges was primarily attributable to the increase in the number of stations we
own because of recent acquisitions, as well as approximately $200,000 in legal
fees incurred in an attempted acquisition.

                                        25


     We generated net income in the amount of approximately $13,955,000 ($0.66
per share on a fully diluted basis) during the year ended December 31, 2002
compared with $8,565,000 ($0.41 per share on a fully diluted basis) for the year
ended December 31, 2001, an increase of approximately $5,390,000 or 63%. The
increase was the result of the $7,092,000 improvement in operating profit, and a
$1,550,000 decrease in interest expense, offset by a $176,000 increase in other
expense, and a $3,076,000 increase in income tax expense. The decrease in
interest expense was principally the result of lower interest rates over the
prior period. The increase in income tax expense was due to higher income
levels.

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

     For the year ended December 31, 2001, net operating revenue was
$103,956,000 compared with $101,746,000 for the year ended December 31, 2000, an
increase of $2,210,000 or 2%. Stations that we did not own or operate for the
entire comparable period in 2000 generated an increase in our revenue of
approximately $5,436,000. Net operating revenue generated by stations that we
owned and operated for the entire comparable period ("same station") decreased
by approximately 3% ($3,226,000). The decrease in same station revenue was
primarily the result of a combination of a general slowdown in the advertising
sector coupled with the effects of the tragic events of September 11, 2001,
which not only curtailed radio and television advertising for the days following
the terrorist attacks, but also had a significant negative effect on the fourth
quarter 2001 advertising sales.

     Station operating expense (i.e., programming, technical, selling, and
station general and administrative expenses) increased by $4,153,000 or 7% to
$66,640,000 for the year ended December 31, 2001, compared with $62,487,000 for
the year ended December 31, 2000. Stations that we did not own or operate for
the entire comparable period in 2000 generated an increase in station operating
expense of approximately $5,117,000. Station operating expense decreased by
approximately $964,000 or 2% on a same station basis, primarily due to the
decline in revenue.

     Operating profit decreased by $3,354,000 or 13% to $21,785,000 for the year
ended December 31, 2001 compared to $25,139,000 for the year ended December 31,
2000. The decrease was primarily the result of the $1,943,000 decrease in
station operating income, a $1,091,000 or 12% increase in depreciation and
amortization expense and a $320,000 increase in corporate general and
administrative charges. The increase in depreciation and amortization charges
was principally the result of recent acquisitions.

     We generated net income in the amount of approximately $8,565,000 ($0.41
per share on a fully diluted basis) during the year ended December 31, 2001
compared with $8,650,000 ($0.42 per share on a fully diluted basis) for the year
ended December 31, 2000, a decrease of approximately $85,000 or 1%. The decrease
was the result of the $3,354,000 decrease in operating profit and a $244,000
increase in interest expense, offset by a $2,121,000 decrease in other expense
and a $1,392,000 decrease in income tax expense. The increase in interest
expense was principally the result of additional borrowings to finance
acquisitions. Other expense in 2000 included non-recurring charges consisting of
$1,300,000 loss resulting from the sale of our equity in an investment in a
group of radio stations in Reykjavik, Iceland, a $600,000 loss related to our
equity in the operating results of that investment and a $125,000 loss on the
sale of a building in one of our markets. The decrease in income tax expense and
the effective tax rate was the result of lower pre-tax income in 2001, the
nondeductible capital loss realized in 2000 on the sale of the equity
investment, and the related equity in the operations of that investment during
the first six months of 2000.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2002, we had $105,228,000 of long-term debt (including
the current portion thereof) outstanding and approximately $95,000,000 of unused
borrowing capacity under our Credit Agreement at December 31, 2002.

     Our Credit Agreement has three financing facilities (the "Facilities"): a
$105,000,000 senior secured term loan (the "Term Loan"), a $75,000,000 senior
secured acquisition loan facility (the "Acquisition Facility"), and a
$20,000,000 senior secured revolving credit facility (the "Revolving Facility").
The

                                        26


Facilities mature September 30, 2008. Our indebtedness under the Facilities is
secured by a first priority lien on substantially all of our assets and of our
subsidiaries, by a pledge of our subsidiaries' stock and by a guarantee of our
subsidiaries.

     As of December 31, 2002 we had $105,000,000 outstanding under the Term
Loan. The Acquisition Facility may be used for permitted acquisitions and to pay
related transaction expenses. The Revolving Facility may be used for general
corporate purposes, including working capital, capital expenditures, permitted
acquisitions (to the extent that the Acquisition Facility has been fully
utilized and limited to $10,000,000) and permitted stock buybacks. On March 28,
2003, the Acquisition Facility will convert to a five and a half year term loan.
We are in the process of negotiating an amendment to the current Credit
Agreement or entering into a new credit facility, which we anticipate will be
completed during the second quarter of 2003. The Term Loan is required to be
reduced quarterly in amounts ranging from 3.125% to 7.5% of the initial
commitment commencing on June 30, 2003. The outstanding amount of the
Acquisition Facility is required to be reduced quarterly in amounts ranging from
3.125% to 7.5% commencing on June 30, 2003. Any outstanding amount under the
Revolving Facility will be due on the maturity date of September 30, 2008. In
addition, the Facilities may be further reduced by specified percentages of
Excess Cash Flow (as defined in the Credit Agreement) based on leverage ratios.

     In January 2003, we borrowed $8,500,000 under the Acquisition Facility, in
anticipation of closing on the acquisition of WODB-FM in Columbus.

     Interest rates under the Facilities are payable, at our option, at
alternatives equal to LIBOR (1.40% at December 31, 2002) plus 1.25% to 2.0% or
the Agent bank's base rate plus .25% to 1.0%. The spread over LIBOR and the base
rate vary from time to time, depending upon our financial leverage. We also pay
quarterly commitment fees of 0.375% to 0.625% per annum on the aggregate unused
portion of the Acquisition and Revolving Facilities.

     The Credit Agreement contains a number of financial covenants which, among
other things, require us to maintain specified financial ratios and impose
certain limitations on us with respect to investments, additional indebtedness,
dividends, distributions, guarantees, liens and encumbrances.

     We use interest rate swap agreements to reduce our risk of rising interest
rates. Our swap agreements are used to convert the variable Eurodollar interest
rate of a portion of our bank borrowings to a fixed interest rate.

     At December 31, 2002, we had four interest rate swap agreements with the
following terms:

     - Notional amount of $13,125,000. We pay 4.11% calculated on the notional
       amount. We receive LIBOR (1.40% at December 31, 2002) calculated on the
       notional amount of $13,125,000. This agreement expires in March 2003.

     - Notional amount of $13,125,000. We pay 4.11% calculated on the notional
       amount. We receive LIBOR (1.40% at December 31, 2002) calculated on the
       notional amount of $13,125,000. This agreement expires in March 2003.

     - Notional amount of $6,875,000 through March 2003, then notional amount
       increases to $20,000,000. We pay 3.67% calculated on the notional amount.
       We receive LIBOR (1.40% at December 31, 2002) calculated on the notional
       amount of $6,875,000 ($20,000,000 after March 2003). This agreement
       expires in September 2003.

     - Notional amount of $6,875,000 through March 2003, then notional amount
       increases to $20,000,000. We pay 3.67% calculated on the notional amount.
       We receive LIBOR (1.40% at December 31, 2002) calculated on the notional
       amount of $6,875,000 ($20,000,000 after March 2003). This agreement
       expires in September 2003.

     Net receipts or payments under the agreements are recognized as an
adjustment to interest expense. Approximately $835,000 in additional interest
expense was recognized as a result of these interest rate swap agreements for
the year ended December 31, 2002. An aggregate increase in interest expense of

                                        27


approximately $980,000 has been recognized since the inception of the
agreements. The fair value of these swap agreements at December 31, 2002 was
approximately ($714,000), which has been recorded as a liability in our balance
sheet.

     During the years ended December 31, 2002, 2001 and 2000, we had net cash
flows from operating activities of $25,482,000, $21,258,000 and $21,074,000,
respectively. We believe that cash flow from operations will be sufficient to
meet quarterly debt service requirements for interest and scheduled payments of
principal under the Credit Agreement. However, if such cash flow is not
sufficient we may be required to sell additional equity securities, refinance
our obligations or dispose of one or more of our properties in order to make
such scheduled payments. There can be no assurance that we would be able to
effect any such transactions on favorable terms, if at all.

     The following acquisitions in 2002 were financed through funds generated
from operations and the re-issuance of approximately $2,245,000 of our Class A
Common Stock from treasury:

     - May 1, 2002: an AM and FM radio station (WKBK-AM, WKNE-FM) serving the
       Keene, New Hampshire market, and an AM and FM radio station (WKVT AM/FM)
       serving the Brattleboro, Vermont market, for approximately $9,400,000.

     - July 1, 2002: an AM and FM radio station (WZBK-AM and WOQL-FM) serving
       the Keene, New Hampshire market for approximately $2,740,000.

     - November 1, 2002: three FM radio stations (KDEZ-FM, KDXY-FM and KJBX-FM)
       serving the Jonesboro, Arkansas market for approximately $12,745,000
       including approximately $2,245,000 of our Class A common stock.

     - November 1, 2002: an AM and FM radio station (WJQY-AM and WJOI-FM)
       serving the Springfield, Tennessee market for approximately $1,525,000.

     The following acquisitions in 2001 were financed through funds generated
from operations, $11,250,000 of additional borrowings under the Credit agreement
and the re-issuance of approximately $1,000,000 of our Class A Common Stock from
treasury:

     - February 1, 2001: two FM and two AM radio stations (WCVQ-FM, WZZP-FM,
       WDXN-AM, and WJMR-AM) serving the Clarksville, Tennessee/Hopkinsville,
       Kentucky market for approximately $6,700,000.

     - February 1, 2001: one FM radio station (WVVR-FM) serving the Clarksville,
       Tennessee/ Hopkinsville, Kentucky market for approximately $7,000,000,
       including approximately $1,000,000 of the Company's Class A common stock.

     - April 1, 2001: an AM and FM radio station (WHAI-FM and WHMQ-AM) serving
       the Greenfield, Massachusetts market for approximately $2,200,000.

     - July 1, 2001: two FM radio stations (KMIT-FM and KUQL-FM) serving the
       Mitchell, South Dakota market for approximately $4,050,000.

     We continue to actively seek and explore opportunities for expansion
through the acquisition of additional broadcast properties. See Item 1.
Business -- Strategy.

     In September 2002, we modified our Stock Buy-Back Program so that we are
authorized to purchase up to $10,000,000 of our Class A Common Stock. From the
inception of the Stock Buy-Back program in 1998 through December 31, 2002 we
have repurchased 409,065 shares of our Class A Common Stock for approximately
$4,832,000.

     We anticipate that any future acquisitions of radio and television stations
and purchases of Class A Common Stock under the Stock Buy-Back Program will be
financed through funds generated from operations, borrowings under the Credit
Agreement, additional debt or equity financing, or a combination thereof.
However, there can be no assurances that any such financing will be available on
acceptable terms, if at all.

                                        28


     Our capital expenditures, exclusive of acquisitions, for the year ended
December 31, 2002 were approximately $7,559,000 ($8,479,000 in 2001). We
anticipate capital expenditures in 2003 to be approximately $7,000,000, which we
expect to finance through funds generated from operations or additional
borrowings under the Credit Agreement.

SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

     We have future cash obligations under various types of contracts under the
terms of our Credit Agreement, operating leases, programming contracts,
employment agreements, and other operating contracts. The following tables
reflect a summary of our contractual cash obligations and other commercial
commitments as of December 31, 2002:



                                   APPLICABLE                 PAYMENTS DUE BY PERIOD
CONTRACTUAL CASH                   NOTE(S) TO   --------------------------------------------------
OBLIGATIONS AND OTHER              FINANCIAL               LESS THAN   1 TO 3    4 TO 5    AFTER 5
COMMERCIAL COMMITMENTS:            STATEMENTS    TOTAL      1 YEAR      YEARS     YEARS     YEARS
-----------------------            ----------   --------   ---------   -------   -------   -------
                                                                  (IN THOUSANDS)
                                                                         
Long Term Debt...................      4        $105,228    $13,308    $28,920   $39,375   $23,625
Operating Leases.................      13          6,488      1,406      1,722     1,055     2,305
Acquisition Commitments..........    13, 15        9,711      9,711         --        --        --
TV Syndicated Programming........      13            604        298        295        11        --
Employment Agreements............      11         21,278      6,136      7,347     4,689     3,106
Other Operating Contracts........      --          5,969      3,234      2,321       405         9
                                                --------    -------    -------   -------   -------
Total Contractual Cash
  Obligations....................               $149,278    $34,093    $40,605   $45,535   $29,045
                                                ========    =======    =======   =======   =======


     We anticipate that the above contractual cash obligations will be financed
through funds generated from operations or additional borrowings under the
Credit Agreement, or a combination thereof.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which require us
to make estimates, judgments and assumptions that affect the reported amounts of
certain assets, liabilities, revenues, expenses and related disclosures and
contingencies. We evaluate estimates used in preparation of our financial
statements on a continual basis, including estimates related to the following:

     Revenue Recognition:  Revenue from the sale of commercial broadcast time to
advertisers (our principal source of revenue) is recognized when commercials are
broadcast. Revenue is reported net of advertising agency commissions.

     Carrying Value of Accounts Receivable and Related Allowance for Doubtful
Accounts:  We evaluate the collectibility of our accounts receivable based on a
combination of factors. In circumstances where we are aware of a specific
customer's inability to meet its financial obligations to us (e.g., bankruptcy
filings, credit history, etc.) we record a specific reserve for bad debts
against amounts due to reduce the net recognized receivable to the amount we
reasonably believe will be collected. For all other customers, we recognize
reserves for bad debts based on past loss history and the length of time the
receivables are past due, ranging from 50% for amounts 90 days outstanding to
100% for amounts over 120 days outstanding. If our evaluations of the
collectibility of our accounts receivable differ from actual results, additional
bad debt expense and allowances may be required.

     Purchase Accounting:  We account for our acquisitions under the purchase
method of accounting. The total cost of acquisitions is allocated to the
underlying net assets, based on their respective estimated fair values as of the
acquisition date. The excess of consideration paid over the estimated fair
values of the net assets acquired is recorded as goodwill. Determining the fair
values of the net assets acquired and liabilities assumed requires management's
judgment and often involves the use of significant estimates

                                        29


including assumptions with respect to future cash inflows and outflows, discount
rates, asset lives and market multiples, among other items.

     Broadcast Licenses and Goodwill:  We have a significant amount of broadcast
licenses and goodwill recorded in our balance sheets, which at December 31, 2002
represents 57% of our total assets. We determine the recoverability of the cost
of our intangible assets based on a review of projected undiscounted cash flows
of the related market or segment.

     We adopted SFAS 142, "Goodwill and Other Intangible Assets" on January 1,
2002. In accordance with SFAS 142 we tested our goodwill and broadcast licenses
for impairment as of January 1, 2002 and October 1, 2002 by comparing their fair
value to the related carrying value as of that date. The results of these tests
indicated that there was no impairment of the carrying value of goodwill or
broadcast licenses. We used a market approach to determine the fair value of our
broadcast licenses as well as the fair value of our reporting units. The market
approach used for valuing broadcast licenses and goodwill takes into
consideration information available on recent transactions of radio and
television stations similar to those owned by us, within the broadcast industry.
To determine the fair value of broadcast licenses and the reporting units
goodwill requires the use of estimates in our assumptions. Changes in these
estimates could result in an impairment of intangible assets in the future.

     Derivatives:  We hold derivative financial instruments to hedge the risk of
rising interest rates associated with our long-term debt. These derivatives
qualify for hedge accounting as discussed in detail in Notes 1 and 5 to our
consolidated financial statements. We do not participate in speculative
derivatives trading. Hedge accounting results when we designate and document the
hedging relationships involving these derivative instruments. While we intend to
continue to meet the conditions for hedge accounting, if hedges did not qualify
as highly effective, the changes in the fair value of the derivatives used as
hedges would be reflected in our earnings.

     We do not believe we are exposed to more than a nominal amount of credit
risk in our interest rate hedges as the counter-parties are established,
well-capitalized financial institutions. In addition, we generally enter into
master netting agreements to minimize those risks.

     Employee Healthcare Reserves:  We maintain a self-insured health insurance
program for major medical and hospitalization coverage for our full time
employees, certain directors and their dependents, which is partially funded by
payroll deductions. Payments for major medical and hospitalization to individual
participants below specified amounts (currently, $75,000 per individual per year
and $1,000,000 per individual for a lifetime maximum) are self-insured by us. We
base our estimate of ultimate liability on trends in claim payment history,
historical trends in incurred but not reported incidents and developments in
other cost components (such as rising medical costs, projected premium costs,
number of participants, etc.). Our liability with respect to employee healthcare
reserves is monitored on a regular basis and adjusted accordingly.

     Litigation and Contingencies:  We monitor ongoing litigation and other loss
contingencies on a case-by-case basis as they arise. Losses related to
litigation and other contingencies are recognized when the loss is considered
probable and the amount is estimable.

MARKET RISK AND RISK MANAGEMENT POLICIES

     Our earnings are affected by changes in short-term interest rates as a
result of our long-term debt arrangements. However, due to our purchase of
interest rate swap agreements, the effects of interest rate changes are limited.
If market interest rates averaged 1% more in 2002 than they did during 2002, our
interest expense, after considering the effect of our interest rate swap
agreements, would increase and income before taxes would decrease by $645,000
($1,346,000 in 2001). These amounts are determined by considering the impact of
the hypothetical interest rates on our borrowing cost, short-term investment
balances, and interest rate swap agreements. This analysis does not consider the
effects of the reduced level of overall economic activity that could exist in
such an environment. Further, in the event of a

                                        30


change of such magnitude, management would likely take actions to further
mitigate its exposure to the change. However, due to the uncertainty of the
specific actions that would be taken and their possible effects, the sensitivity
analysis assumes no changes in our financial structure.

INFLATION

     The impact of inflation on our operations has not been significant to date.
There can be no assurance that a high rate of inflation in the future would not
have an adverse effect on our operations.

OUTLOOK

     The following statements are forward-looking statements and should be read
in conjunction with "Forward-Looking Statements" below.

     Based on economic and market conditions as of February 26, 2003, for the
quarter ending March 31, 2003 we anticipate net revenue of approximately
$26,000,000 to $27,000,000; station operating income of approximately $7,500,000
to $8,000,000; and operating profit of $4,000,000 to $4,500,000.

     Based on economic and market conditions as of February 26, 2003, for the
year ending December 31, 2003 we anticipate a 3% to 5% increase in net revenue;
a 4% to 6% increase in station operating income; and a 4% to 6% increase in
operating profit.

FORWARD-LOOKING STATEMENTS; RISK FACTORS

     Statements contained in this Form 10-K that are not historical facts are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. In addition, words such
as "believes," "anticipates," "estimates," "plans", "expects," and similar
expressions are intended to identify forward-looking statements. These
statements are made as of the date of this report or as otherwise indicated,
based on current expectations. We undertake no obligation to update this
information. A number of important factors could cause our actual results for
2003 and beyond to differ materially from those expressed in any forward-looking
statements made by or on our behalf. Forward-looking statements are not
guarantees of future performance as they involve a number of risks,
uncertainties and assumptions that may prove to be incorrect and that may cause
our actual results and experiences to differ materially from the anticipated
results or other expectations expressed in such forward-looking statements. The
risks, uncertainties and assumptions that may affect our performance include our
financial leverage and debt service requirements, dependence on key personnel,
dependence on key stations, U.S. and local economic conditions, our ability to
successfully integrate acquired stations, regulatory requirements, new
technologies, natural disasters and terrorist attacks. We cannot be sure that we
will be able to anticipate or respond timely to changes in any of these factors,
which could adversely affect the operating results in one or more fiscal
quarters. Results of operations in any past period should not be considered, in
and of itself, indicative of the results to be expected for future periods.
Fluctuations in operating results may also result in fluctuations in the price
of our stock.

     The more prominent risks and uncertainties inherent in our business are
described in more detail below. However, these are not the only risks and
uncertainties we face. Our business may face additional risks and uncertainties
that are unknown to us at this time.

FINANCIAL LEVERAGE AND DEBT SERVICE REQUIREMENTS

     At December 31, 2002 our long-term debt (including the current portion
thereof) was approximately $105,228,000. We have borrowed and expect to continue
to borrow to finance acquisitions and for other corporate purposes. Because of
our substantial indebtedness, a significant portion of our cash flow from
operations is required for debt service. Our leverage could make us vulnerable
to an increase in interest rates or a downturn in our operating performance or a
decline in general economic conditions. Under the terms of our Credit Agreement,
the $105,000,000 commitment under the Term Loan and any indebtedness outstanding
under our $75,000,000 Acquisition Facility will be reduced on a quarterly basis
in amounts

                                        31


ranging from 3.125% to 7.5%, commencing on June 30, 2003. We believe that cash
flow from operations will be sufficient to meet our debt service requirements
for interest and scheduled quarterly payments of principal under the Credit
Agreement. However, if such cash flow is not sufficient, we may be required to
sell additional equity securities, refinance our obligations or dispose of one
or more of our properties in order to make such scheduled payments. We cannot be
sure that we would be able to effect any such transactions on favorable terms,
if at all.

     On March 28, 2003 the Acquisition Facility will convert to a five and a
half year term loan. We are in the process of negotiating an amendment to the
current Credit Agreement or entering into a new credit facility, which we
anticipate will be completed during the second quarter 2003. However, there can
be no assurances that any such financing will be available on acceptable terms,
if at all.

  DEPENDENCE ON KEY PERSONNEL

     Our business is partially dependent upon the performance of certain key
individuals, particularly Edward K. Christian, our President and the holder of
approximately 56% of the combined voting power of our Common Stock. Although we
have entered into long-term employment and non-competition agreements with Mr.
Christian and certain other key personnel, we cannot be sure that such key
personnel will remain with us. We do not maintain key man life insurance on Mr.
Christian's life.

  DEPENDENCE ON KEY STATIONS

     For the years ended December 31, 2002, 2001 and 2000 our two stations in
Columbus, Ohio accounted for an aggregate of 10%, 11% and 12%, respectively, and
our five stations in Milwaukee, Wisconsin accounted for an aggregate of 17%, 18%
and 18%, respectively, of our net operating revenue. For the years ended
December 31, 2002, 2001 and 2000 our Columbus, Ohio stations accounted for an
aggregate of 14%, 15% and 16%, respectively, and our Milwaukee, Wisconsin
stations accounted for an aggregate of 22%, 23% and 22%, respectively, of our
station operating income. While radio revenues in each of the Columbus and
Milwaukee markets have remained relatively stable historically, an adverse
change in either radio market or either location's relative market position
could have a significant adverse impact on our operating results as a whole.

  DEPENDENCE ON LOCAL AND NATIONAL ECONOMIC CONDITIONS

     Our financial results are dependent primarily on our ability to generate
advertising revenue through rates charged to advertisers. The advertising rates
a station is able to charge is affected by many factors, including the general
strength of the local and national economies. A decline in advertising rates
could have a material adverse effect on our revenue, results of operations and
financial condition.

  SUCCESS OF ACQUISITIONS DEPEND ON OUR ABILITY TO INTEGRATE ACQUIRED STATIONS

     As part of our strategy, we have pursued and intend to continue to pursue
acquisitions of additional radio and television stations. The success of any
completed acquisition will depend on our ability to effectively integrate the
acquired stations. The process of integrating acquired stations may involve
numerous risks, including difficulties in the assimilation of operations, the
diversion of management's attention from other business concerns, risk of
entering new markets, and the potential loss of key employees of the acquired
stations.

  REGULATORY MATTERS

     The broadcasting industry is subject to extensive federal regulation which,
among other things, requires approval by the FCC of transfers, assignments and
renewals of broadcasting licenses, limits the number of broadcasting properties
that may be acquired within a specific market, and regulates programming and
operations. Failure to comply with these regulations could, under certain
circumstances, result in the denial or revocation of FCC licenses, shortened
license renewal terms, monetary fines or other

                                        32


penalties which would adversely affect our profitability. Changes in ownership
requirements could limit our ability to own or acquire stations in certain
markets.

  NEW TECHNOLOGIES MAY AFFECT OUR BROADCASTING OPERATIONS

     The FCC is considering ways to introduce new technologies to the
broadcasting industry, including satellite and terrestrial delivery of digital
audio broadcasting and the standardization of available technologies which
significantly enhance the sound quality of AM broadcasters. We are unable to
predict the effect such technologies may have on our broadcasting operations.
The capital expenditures necessary to implement such technologies could be
substantial. We also face risks in implementing the conversion of our television
stations to digital television as required by the FCC. We will incur
considerable expense in the conversion to digital television and are unable to
predict the extent or timing of consumer demand for any such digital television
services. Moreover, the FCC may impose additional public service obligations on
television broadcasters in return for their use of the digital television
spectrum. This could add to our operational costs. One issue yet to be resolved
is the extent to which cable systems will be required to carry broadcasters' new
digital channels. Our television stations are highly dependent on their carriage
by cable systems in the areas they serve. FCC rules that impose no or limited
obligations on cable systems to carry the digital television signals of
television broadcast stations in their local markets could adversely affect our
television operations.

RECENT ACCOUNTING PRONOUNCEMENTS

     In April 2002 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment to FASB
Statement No. 13, and Technical Corrections", gains and losses from
extinguishment of debt can only be classified as extraordinary if they meet the
criteria in APB Opinion 30. Since there have been no gains or losses recognized
from the extinguishment of debt for the three years in the period ended December
31, 2002, there was no impact from the adoption of this standard.

     In June 2002 the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity". SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred whereas under Issue 94-3, a liability for an exit
cost was recognized at the date of an entity's commitment to an exit plan. A
fundamental conclusion reached by the FASB in SFAS 146 is that an entity's
commitment to a plan, by itself, does not create an obligation that meets the
definition of a liability. Therefore, SFAS 146 eliminates the definition and
requirements for recognition of exit costs in Issue 94-3 and establishes that
fair value is the objective for initial measurement of the liability. SFAS 146
is effective for exit or disposal activities that are initiated after December
31, 2002. We do not expect that the adoption of SFAS 146 will have a significant
impact.

     In December 2002, the Financial Accounting Standards Board issued SFAS No.
148 ("SFAS 148"), Accounting for Stock-Based Compensation -- Transition and
Disclosure which amends SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation", to provide alternative methods of transition to SFAS 123's fair
value method of accounting for stock-based employee compensation and to require
disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements. SFAS 148 does not require companies
to account for employee stock options using the fair value method; accordingly,
we have continued to elect to account for employee stock options under APB 25
and its related interpretations. The effect of adopting SFAS 148 had no material
effect except for the quarterly disclosure provisions, which will be made
beginning in our March 31, 2003 interim financial statements.

     In November 2002, the FASB issued Financial Accounting Series
Interpretation No. 45 entitled "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of

                                        33


Indebtedness of Others," which provides for an interpretation of Financial
Accounting Standards Board Statements No. 5, 57, and 107 and rescission of
Financial Accounting Standards Board Interpretation No. 34. This interpretation
elaborates on the disclosures to be made by a guarantor in its financial
statements about its obligations under certain guarantees that it has issued.
This interpretation also clarifies that a guarantor is required to recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. Adoption of this interpretation by the
Company will be effective on January 1, 2003 and will be applied prospectively
to all guarantees issued or modified after December 31, 2002. We do not believe
that the adoption of Interpretation No. 45 will materially impact out financial
position, cash flows or results of operations. See Note 11 to the Consolidated
Financial statements for a guarantee that we entered into on March 7, 2003.

     In January 2003, the FASB issued Financial Accounting Series Interpretation
No. 46 entitled "Consolidation of Variable Interest Entities." This
interpretation requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure used for business
purposes that either (a) does not have equity investors with voting rights or
(b) has equity investors that do not provide sufficient financial resources for
the entity to support its activities. The interpretation also requires
disclosures about variable interest entities that the company is not required to
consolidate but in which it has a significant variable interest. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003 and existing variable interest
entities in the first fiscal year or interim period beginning after June 15,
2003. We have not yet determined what the effect, if any, this interpretation
will have on our financial statements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Information appearing under the caption "Market Risk and Risk Management
Policies" in Item 7 is hereby incorporated by reference.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements attached hereto are filed as part of this annual
report.

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

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     "Election of Directors" and "Compensation of Directors and Officers
-Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy Statement
for the 2003 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission on or before April 30, 2003 are hereby incorporated by
reference herein. See Item 1. Business -- Executive Officers.

ITEM 11.  EXECUTIVE COMPENSATION

     "Compensation of Directors and Officers" in our Proxy Statement for the
2003 Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission on or before April 30, 2003 is hereby incorporated by reference
herein. Such incorporation by reference shall not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.

                                        34


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     "Security Ownership of Certain Beneficial Owners and Management" in our
Proxy Statement for the 2003 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 30, 2003 is hereby
incorporated by reference herein.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     "Certain Transactions" in our Proxy Statement for the 2003 Annual Meeting
of Stockholders to be filed with the Securities and Exchange Commission on or
before April 30, 2003 is hereby incorporated by reference herein. See
accompanying financial statements and related footnotes.

ITEM 14.  CONTROLS AND PROCEDURES

     Our principal executive and financial officers have concluded, based on
their evaluation as of a date within 90 days before the filing of this Form
10-K, that our disclosure controls and procedures under Rule 13a-14 of the
Securities Exchange Act of 1934 are effective to ensure that information we are
required to disclose in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and include controls and procedures designed to
ensure that information we are required to disclose in such reports is
accumulated and communicated to management, including our principal executive
and financial officers, as appropriate to allow timely decisions regarding
required disclosure.

     Subsequent to our evaluation, there were no significant changes in internal
controls or other factors that could significantly affect these internal
controls.

                                    PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

  (A) 1. FINANCIAL STATEMENTS

     The financial statements attached hereto pursuant to Item 8 hereof are
filed as part of this annual report.

  2. FINANCIAL STATEMENT SCHEDULES

     Schedule II Valuation and qualifying accounts is disclosed in Note 1 to the
consolidated financial statements attached hereto as filed as part of this
annual report. All other schedules for which provision are 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.

  3. EXHIBITS



EXHIBIT
  NO.       DESCRIPTION
-------     -----------
         
3(a)        Amended and Restated Certificate of Incorporation (3(a))*
3(b)        By-laws, as amended (3(b))**
4(a)        Plan of Reorganization (2)*
4(b)        Credit Agreement dated as of March 28, 2001 between the
            Company and Fleet National Bank, as Agent for the lenders
            and The Bank of New York, as syndication agent
            (4(b))********


                                        35




EXHIBIT
  NO.       DESCRIPTION
-------     -----------
         
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

            Employment Agreement of Edward K. Christian dated as of
10(a)       April 1, 2002*********
            Saga Communications, Inc. 1992 Stock Option, as amended
10(b)       (10(b))*****
            Summary of Executive Insured Medical Reimbursement Plan
10(c)       (10(2))*
            Saga Communications, Inc. 1997 Non-Employee Director Stock
10(d)       Option Plan (10)****

OTHER MATERIAL AGREEMENTS

            Promissory Note of Edward K. Christian dated December 10,
10(e)(1)    1992 (10(l)(a))*
            Amendment to Promissory Note of Edward K. Christian dated
10(e)(2)    December 8,
            1998 10(e)(2)******
            Loan Agreement and Promissory Note of Edward K. Christian
10(e)(3)    dated May 5, 1999 10(e)(3)*******
(21)        Subsidiaries
(23.1)      Consent of Ernst & Young LLP
(99.1)      Certification of Chief Executive Officer
(99.2)      Certification of Chief Financial Officer


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

*            Exhibit indicated in parenthesis of the Company's Registration
             Statement on Form S-1 (File No. 33-47238) incorporated by reference
             herein.

**           Exhibit indicated in parenthesis of the Company's Form 10-K for the
             year ended December 31, 1992 incorporated by reference herein.

***          Exhibit indicated in parenthesis of the Company's Form 10-Q for the
             quarter ended March 31, 1997 incorporated by reference herein.

****        Exhibit indicated in parenthesis of the Company's Form 10-Q for the
            quarter ended June 30, 1997 incorporated by reference herein.

*****       Exhibit indicated in parenthesis of the Company's Form 10-K for the
            year ended December 31, 1997 incorporated by reference herein.

******      Exhibit indicated in parenthesis of the Company's Form 10-K for the
            year ended December 31, 1998 incorporated by reference herein.

*******     Exhibit indicated in parenthesis of the Company's Form 10-K for the
            year ended December 31, 1999 incorporated by reference herein.

********   Exhibit indicated in parenthesis of the Company's Form 10-K for the
           year ended December 31, 2000 incorporated by reference herein.

*********  Exhibit indicated in parenthesis of the Company's Form 10-K for the
           year ended December 31, 2001 incorporated by reference herein.

  (B) REPORTS ON FORM 8-K

     None

                                        36


                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Saga Communications, Inc.

     We have audited the accompanying consolidated balance sheets of Saga
Communications, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2002. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Saga
Communications, Inc. at December 31, 2002 and 2001, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States.

     As discussed in Note 1 to the consolidated financial statements, the
Company adopted SFAS No. 142, "Accounting for Goodwill and Other Intangible
Assets" in 2002.

                                          ERNST & YOUNG LLP

Detroit, Michigan
March 11, 2003

                                       F-1


                           SAGA COMMUNICATIONS, INC.

                          CONSOLIDATED BALANCE SHEETS



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................  $  5,874   $ 11,843
  Accounts receivable, less allowance of $932 ($778 in
    2001)...................................................    21,355     19,185
  Prepaid expenses..........................................     2,102      2,811
  Barter transactions.......................................     1,415      1,192
  Deferred taxes............................................       702        488
                                                              --------   --------
Total current assets........................................    31,448     35,519
Net property and equipment..................................    60,161     55,169
Other assets:
  Broadcast licenses, net of accumulated amortization of
    $8,187..................................................   102,699     86,835
  Goodwill, net of accumulated amortization of $13,393......    26,892     20,929
  Other intangibles, deferred costs and investments, net of
    accumulated amortization of $12,054 ($11,251 in 2001)...     5,122      4,269
                                                              --------   --------
Total other assets..........................................   134,713    112,033
                                                              --------   --------
                                                              $226,322   $202,721
                                                              ========   ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  1,265   $    944
  Accrued expenses:
    Payroll and payroll taxes...............................     5,753      4,958
    Other...................................................     3,920      4,005
  Barter transactions.......................................     1,685      1,254
  Current portion of long-term debt.........................    13,308        275
                                                              --------   --------
Total current liabilities...................................    25,931     11,436
Deferred income taxes.......................................    14,064      9,990
Long-term debt..............................................    91,920    105,226
Broadcast program rights....................................       306        323
Other.......................................................     1,042        684
Commitments and contingencies...............................        --         --
Stockholders' equity:
  Preferred stock, 1,500 shares authorized, none issued and
    outstanding.............................................        --         --
  Common stock:
    Class A common stock, $.01 par value, 35,000 shares
     authorized, 18,499 issued and outstanding (18,321 in
     2001)..................................................       185        147
    Class B common stock, $.01 par value, 3,500 shares
     authorized, 2,360 issued and outstanding...............        24         19
  Additional paid-in capital................................    45,649     43,185
  Note receivable from principal stockholder................        --       (171)
  Retained earnings.........................................    48,393     34,483
  Accumulated other comprehensive income (loss).............      (464)      (340)
  Treasury stock (55 shares in 2002 and 179 in 2001, at
    cost)...................................................      (728)    (2,198)
  Unearned compensation on restricted stock.................        --        (63)
                                                              --------   --------
Total stockholders' equity..................................    93,059     75,062
                                                              --------   --------
                                                              $226,322   $202,721
                                                              ========   ========


                            See accompanying notes.
                                       F-2


                           SAGA COMMUNICATIONS, INC.

                       CONSOLIDATED STATEMENTS OF INCOME



                                                                       YEARS ENDED DECEMBER 31,
                                                                --------------------------------------
                                                                   2002          2001          2000
                                                                ----------    ----------    ----------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                   
Net operating revenue.......................................     $114,782      $103,956      $101,746
Operating expenses:
  Programming and technical.................................       26,732        24,459        22,670
  Selling...................................................       28,446        26,424        25,471
  Station general and administrative........................       18,172        15,757        14,346
  Corporate general and administrative......................        6,022         5,421         5,101
  Depreciation..............................................        6,034         5,763         5,343
  Amortization..............................................          499         4,347         3,676
                                                                 --------      --------      --------
                                                                   85,905        82,171        76,607
                                                                 --------      --------      --------
Operating profit............................................       28,877        21,785        25,139
Other (income) expenses:
  Interest expense..........................................        5,487         7,037         6,793
  Other.....................................................          159           (17)        2,104
                                                                 --------      --------      --------
Income before income tax....................................       23,231        14,765        16,242
Income tax provision:
  Current...................................................        5,506         3,858         5,850
  Deferred..................................................        3,770         2,342         1,742
                                                                 --------      --------      --------
                                                                    9,276         6,200         7,592
                                                                 --------      --------      --------
Net income..................................................     $ 13,955      $  8,565      $  8,650
                                                                 ========      ========      ========
Basic earnings per share....................................     $    .68      $    .42      $    .42
                                                                 ========      ========      ========
Weighted average common shares..............................       20,631        20,473        20,543
                                                                 ========      ========      ========
Diluted earnings per share..................................     $    .66      $    .41      $    .41
                                                                 ========      ========      ========
Weighted average common and common equivalent shares........       21,209        20,888        20,990
                                                                 ========      ========      ========


                            See accompanying notes.
                                       F-3


                           SAGA COMMUNICATIONS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000


                                                                          NOTE
                                                                       RECEIVABLE                ACCUMULATED
                                      CLASS A   CLASS B   ADDITIONAL      FROM                      OTHER
                                      COMMON    COMMON     PAID-IN      PRINCIPAL    RETAINED   COMPREHENSIVE   TREASURY
                                       STOCK     STOCK     CAPITAL     STOCKHOLDER   EARNINGS   INCOME (LOSS)    STOCK
                                      -------   -------   ----------   -----------   --------   -------------   --------
                                                                        (IN THOUSANDS)
                                                                                           
BALANCE AT JANUARY 1, 2000..........   $146       $19      $42,273        $(486)     $17,268        $  33       $  (151)
 Comprehensive income:
   Net income.......................                                                   8,650
   Foreign currency translation
     adjustment.....................                                                                  (33)
     Total comprehensive income.....
 Issuance of restricted stock.......                            30                                                  139
 Amortization of deferred
   compensation.....................
 Accrued interest...................                                        (23)
 Note forgiveness...................                                        174
 Employee stock purchase plan.......                            22                                                  279
 Purchase of shares held in
   treasury.........................                                                                             (2,574)
                                       ----       ---      -------        -----      -------        -----       -------
BALANCE AT DECEMBER 31, 2000........    146        19       42,325         (335)      25,918           --        (2,307)
 Comprehensive income:
   Net income.......................                                                   8,565
   Change in fair value of
     derivatives, net of tax........                                                                 (340)
     Total comprehensive income.....
 Net proceeds from exercised
   options..........................      1                    681
 Station acquisitions...............                           100                                                  890
 Amortization of deferred
   compensation.....................
 Accrued interest...................                                        (10)
 Note forgiveness...................                                        174
 Employee stock purchase plan.......                            79                                                  206
 Purchase of shares held in
   treasury.........................                                                                               (987)
                                       ----       ---      -------        -----      -------        -----       -------
BALANCE AT DECEMBER 31, 2001........    147        19       43,185         (171)      34,483         (340)       (2,198)
 Comprehensive income:
   Net income.......................                                                  13,955
   Change in fair value of
     derivatives, net of tax........                                                                 (124)
     Total comprehensive income.....
 Net proceeds from exercised
   options..........................      1                  1,392                                                  (18)
 Station acquisitions...............                           939                                                1,306
 Amortization of deferred
   compensation.....................
 Accrued interest...................                                         (2)
 Note forgiveness...................                                        173
 Employee stock purchase plan.......                           133                                                  182
 Stock split........................     37         5                                    (45)
                                       ----       ---      -------        -----      -------        -----       -------
BALANCE AT DECEMBER 31, 2002........   $185       $24      $45,649        $  --      $48,393        $(464)      $  (728)
                                       ====       ===      =======        =====      =======        =====       =======



                                                         TOTAL
                                        DEFERRED     STOCKHOLDERS'
                                      COMPENSATION      EQUITY
                                      ------------   -------------
                                             (IN THOUSANDS)
                                               
BALANCE AT JANUARY 1, 2000..........        --          $59,102
 Comprehensive income:
   Net income.......................                      8,650
   Foreign currency translation
     adjustment.....................                        (33)
                                                        -------
     Total comprehensive income.....                      8,617
 Issuance of restricted stock.......      (169)              --
 Amortization of deferred
   compensation.....................        21               21
 Accrued interest...................                        (23)
 Note forgiveness...................                        174
 Employee stock purchase plan.......                        301
 Purchase of shares held in
   treasury.........................                     (2,574)
                                         -----          -------
BALANCE AT DECEMBER 31, 2000........      (148)          65,618
 Comprehensive income:
   Net income.......................                      8,565
   Change in fair value of
     derivatives, net of tax........                       (340)
                                                        -------
     Total comprehensive income.....                      8,225
 Net proceeds from exercised
   options..........................                        682
 Station acquisitions...............                        990
 Amortization of deferred
   compensation.....................        85               85
 Accrued interest...................                        (10)
 Note forgiveness...................                        174
 Employee stock purchase plan.......                        285
 Purchase of shares held in
   treasury.........................                       (987)
                                         -----          -------
BALANCE AT DECEMBER 31, 2001........       (63)          75,062
 Comprehensive income:
   Net income.......................                     13,955
   Change in fair value of
     derivatives, net of tax........                       (124)
                                                        -------
     Total comprehensive income.....                     13,831
 Net proceeds from exercised
   options..........................                      1,375
 Station acquisitions...............                      2,245
 Amortization of deferred
   compensation.....................        63               63
 Accrued interest...................                         (2)
 Note forgiveness...................                        173
 Employee stock purchase plan.......                        315
 Stock split........................                         (3)
                                         -----          -------
BALANCE AT DECEMBER 31, 2002........     $  --          $93,059
                                         =====          =======


                            See accompanying notes.
                                       F-4


                           SAGA COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                    YEARS ENDED DECEMBER 31,
                                                                --------------------------------
                                                                  2002        2001        2000
                                                                --------    --------    --------
                                                                         (IN THOUSANDS)
                                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................    $ 13,955    $  8,565    $  8,650
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization..........................       6,533      10,110       9,019
     Barter revenue, net of barter expenses.................         (49)       (288)        (81)
     Broadcast program rights amortization..................         277         261         438
     Deferred taxes.........................................       3,770       2,342       1,742
     Loss (gain) on sale of assets..........................         159         (17)        238
     Equity in loss of unconsolidated affiliate.............          --          --         600
     Loss on sale of stock of unconsolidated affiliate......          --          --       1,266
     Note forgiveness.......................................         173         174         174
     Amortization of deferred costs.........................         366          85          21
     Changes in assets and liabilities:
       Increase in receivables and prepaids.................        (720)       (388)     (1,122)
       Payments for broadcast program rights................        (277)       (261)       (434)
       Increase in accounts payable, accrued expenses, and
          other liabilities.................................       1,295         675         563
                                                                --------    --------    --------
     Total adjustments......................................      11,527      12,693      12,424
                                                                --------    --------    --------
Net cash provided by operating activities...................      25,482      21,258      21,074
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment.....................      (7,559)     (8,479)     (5,401)
  Increase in other intangibles and other assets............      (1,448)     (1,795)     (1,770)
  Acquisition of stations...................................     (24,144)    (18,358)    (25,145)
  Proceeds from sale of assets..............................         714          41       2,277
                                                                --------    --------    --------
Net cash used in investing activities.......................     (32,437)    (28,591)    (30,039)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from long-term debt..............................          --      11,250      13,524
  Payments on long-term debt................................        (273)       (390)     (4,657)
  Purchase of shares held in treasury.......................          --        (987)     (2,574)
  Net proceeds from exercise of stock options...............       1,262         633          --
  Fractional shares -- five for four stock split............          (3)         --          --
                                                                --------    --------    --------
Net cash provided by financing activities...................         986      10,506       6,293
                                                                --------    --------    --------
Net increase (decrease) in cash and cash equivalents........      (5,969)      3,173      (2,672)
Cash and cash equivalents, beginning of year................      11,843       8,670      11,342
                                                                --------    --------    --------
Cash and cash equivalents, end of year......................    $  5,874    $ 11,843    $  8,670
                                                                ========    ========    ========


                            See accompanying notes.
                                       F-5


                           SAGA COMMUNICATIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

     Saga Communications, Inc. is a broadcasting company whose business is
devoted to acquiring, developing and operating broadcast properties. As of
December 31, 2002 we owned or operated seventy radio stations, four television
stations, three low power television stations, two state radio networks and 1
farm radio network, serving twenty-three markets throughout the United States
including Columbus, Ohio; Milwaukee, Wisconsin; and Norfolk, Virginia.

BASIS OF PRESENTATION

     On June 15, 2002 we consummated a five-for-four split of our Class A and
Class B Common Stock, resulting in additional shares being issued of
approximately 3,685,000 and 472,000, respectively, for holders of record on May
31, 2002. All share and per share information in the accompanying financial
statements have been restated retroactively to reflect the split.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Saga
Communications, Inc. and our wholly-owned subsidiaries. All significant
inter-company balances and transactions have been eliminated in consolidation.
We sold our equity investment in six FM radio stations in Iceland (the "Iceland
radio stations") in June 2000.

USE OF ESTIMATES

     The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires us to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RECLASSIFICATION

     Certain amounts previously reported in the 2001 and 2000 financial
statements have been reclassified to conform to the 2002 presentation.

CONCENTRATION OF RISK

     For the years ended December 31, 2002, 2001, and 2000 our Milwaukee,
Wisconsin market accounted for an aggregate of 17%, 18% and 18%, respectively,
and our Columbus, Ohio market accounted for an aggregate of 10%, 11% and 12%,
respectively, of our net operating revenue.

CONCENTRATION OF CREDIT RISK

     We sell advertising to local and national companies throughout the United
States. We perform ongoing credit evaluations of our customers and generally do
not require collateral. We maintain an allowance for doubtful accounts at a
level which we believe is sufficient to cover potential credit losses.

FINANCIAL INSTRUMENTS

     Our financial instruments are comprised of cash and cash equivalents,
accounts receivable, accounts payable, long-term debt and related derivatives.
The carrying value of cash and cash equivalents, accounts receivable and
accounts payable approximate fair value due to their short maturities. The
carrying value of long-term debt approximates fair value as it carries interest
rates that either fluctuate with the euro-dollar
                                       F-6

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

rate, prime rate or have been reset at the prevailing market rate at December
31, 2002. The carrying value of our derivatives represent the estimated fair
value based on the change in variable cash flows.

     We enter into interest rate swap agreements to reduce the risk of rising
interest rates. At December 31, 2002, we had four interest rate swap agreements
which are our only derivatives. See note 5.

     We adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," on January 1, 2001, which requires that all derivatives be
recognized on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or be recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings.

     We use interest rate swap agreements to reduce the risk of rising interest
rates. Each interest rate swap agreement is designated with all or a portion of
the principal balance and term of a specific debt obligation. These agreements
involve the exchange of amounts based on a fixed interest rate for amounts based
on variable interest rates over the life of the agreement without an exchange of
the notional amount upon which the payments are based. The differential to be
paid or received as interest rates change is accrued and recognized as an
adjustment of the interest expense related to the debt (the accrual accounting
method). The related amount payable to or receivable from counterparties is
included in other liabilities or assets. The fair value of the swap agreements
are recognized on the balance sheet at fair value. Gains and losses on
terminations of interest-rate swap agreements are deferred as an adjustment to
interest expense related to the debt over the remaining term of the original
contract life of the terminated swap agreement. In the event of the early
extinguishment of a designated debt obligation, any realized or unrealized gain
or loss from the swap would be recognized in income in connection with the
extinguishment. Any swap agreements that are not designated with outstanding
debt or notional amounts (or durations) of interest-rate swap agreements in
excess of the principal amounts (or maturities) of the underlying debt
obligations are recorded as an asset or liability at fair value, with changes in
fair value recorded in other income or expense (the fair value method).

ALLOWANCE FOR DOUBTFUL ACCOUNTS

     A provision for doubtful accounts is recorded based on our judgment of the
collectibility of receivables. Amounts are written off when determined to be
fully uncollectible. Delinquent accounts are based on contractual terms. The
activity in the allowance for doubtful accounts during the years ended December
31, 2002, 2001 and 2000 was as follows:



                                                                       WRITE OFF
                                                                     UNCOLLECTIBLE
                                           BALANCE AT   CHARGED TO     ACCOUNTS,     BALANCE AT
                                           BEGINNING    COSTS AND       NET OF         END OF
YEAR ENDED                                 OF PERIOD     EXPENSES     RECOVERIES       PERIOD
----------                                 ----------   ----------   -------------   ----------
                                                                         
December 31, 2002........................     $778         $608          $454           $932
December 31, 2001........................      730          633           585            778
December 31, 2000........................      573          623           466            730


BARTER TRANSACTIONS

     Our radio and television stations trade air time for goods and services
used principally for promotional, sales and other business activities. An asset
and a liability are recorded at the fair market value of goods or services
received. Barter revenue is recorded when commercials are broadcast, and barter
expense is

                                       F-7

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recorded when goods or services are received or used. Barter transactions are
recorded at the estimated fair value of the goods or services received.

LONG LIVED ASSETS

     We evaluate the recoverability of long-lived assets, which include property
and equipment, broadcast licenses, goodwill, other intangibles, deferred costs
and investments, in accordance with SFAS No. 142, "Goodwill and Other Intangible
Assets" and SFAS No. 144, "Accounting for the Impairment of Long-Lived Assets"
(see Note 2), as applicable.

PROPERTY AND EQUIPMENT

     Property and equipment are carried at cost. Depreciation is provided using
the straight-line method over five to thirty-one and one-half years.

     Property and equipment consisted of the following:



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
  Land and land improvements................................  $ 10,279   $  9,518
  Buildings.................................................    20,575     17,537
  Towers and antennae.......................................    20,855     18,370
  Equipment.................................................    59,650     55,811
  Furniture, fixtures and leasehold improvements............     6,988      6,608
  Vehicles..................................................     2,627      2,328
                                                              --------   --------
                                                               120,974    110,172
  Accumulated depreciation..................................   (60,813)   (55,003)
                                                              --------   --------
Net property and equipment..................................  $ 60,161   $ 55,169
                                                              ========   ========


INTANGIBLE ASSETS

     Under SFAS No. 142 ("SFAS 142") "Accounting for Goodwill and Other
Intangible Assets," goodwill and intangible assets deemed to have indefinite
lives are no longer amortized but are subject to annual (or more frequent if
impairment indicators arise) impairment tests. We consider broadcast licenses to
have indefinite lives. Separable intangible assets that have finite lives are
amortized over their useful lives using the straight-line method. Favorable
lease agreements are amortized over the lives of the leases. Other intangibles
are amortized over five to forty years. The amortization provisions of Statement
142 apply to goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to July 1, 2001, the
amortization provisions of Statement 142 were effective upon adoption on January
1, 2002 (see Note 2).

DEFERRED COSTS

     The costs related to the issuance of debt are capitalized and accounted for
as interest expense over the life of the debt. During the years ended December
31, 2002, 2001 and 2000 we recognized interest expense related to the
amortization of debt issuance costs of $303,000, $334,000 and $249,000,
respectively.

                                       F-8

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

BROADCAST PROGRAM RIGHTS

     We record the capitalized costs of broadcast program rights when the
license period begins and the programs are available for use. Amortization of
the program rights is recorded using the straight-line method over the license
period or based on the number of showings. Amortization of broadcast program
rights is included in station operating expense. Unamortized broadcast program
rights are classified as current or non-current based on estimated usage in
future years.

FOREIGN CURRENCY TRANSLATION

     The initial investment in the Iceland radio stations was translated into
U.S. dollars at the then-current exchange rate. Resulting translation
adjustments were reflected as a separate component of stockholders' equity.
Transaction gains and losses that arose from exchange rate fluctuations on
transactions denominated in a currency other than the functional currency were
included in the results of operations as incurred.

TREASURY STOCK

     In September 2002, we modified our Stock Buy-Back Program (the "Buy-Back
Program") to allow us to purchase up to $10,000,000 of our Class A Common Stock.
From its inception in 1998 through December 31, 2002 we have repurchased 409,065
shares of our Class A common stock for approximately $4,832,000. Repurchases of
shares of our Common Stock are recorded as Treasury Stock and result in a
reduction of Stockholders' Equity. During 2002, 2001 and 2000 we acquired 781
shares at an average price of $23.08 per share, 75,375 shares at an average
price of $13.09 per share, and 225,599 shares at an average price of $11.41 per
share, respectively. During 2002, we issued 124,764 shares of Treasury Stock in
connection with our acquisition of radio stations and our employee stock
purchase plan. During 2001, we issued 98,316 shares of Treasury Stock in
connection with our acquisition of radio stations and our employee stock
purchase plan. During 2000, we issued 33,736 shares of Treasury Stock in
connection with our employee stock purchase plan and restricted stock issued to
an employee.

REVENUE RECOGNITION

     Revenue from the sale of commercial broadcast time to advertisers is
recognized when commercials are broadcast. Revenue is reported net of
advertising agency commissions.

TIME BROKERAGE AGREEMENTS

     We have entered into Time Brokerage Agreements ("TBAs") in certain markets.
In a typical TBA, the Federal Communications Commission ("FCC") licensee of a
station makes available, for a fee, blocks of air time on its station to another
party that supplies programming to be broadcast during that air time and sells
their own commercial advertising announcements during the time periods
specified. We account for TBA's under SFAS 13, "Accounting for Leases" and
related interpretations. Revenue and expenses related to TBAs are included in
the accompanying Consolidated Statements of Income.

ADVERTISING AND PROMOTION COSTS

     Advertising and promotion costs are expensed as incurred. Such costs
amounted to approximately $6,663,000, $6,120,000 and $6,436,000 for the years
ended December 31, 2002, 2001 and 2000, respectively.

                                       F-9

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME TAXES

     We account for income taxes under SFAS No. 109, "Accounting for Income
Taxes." Deferred tax assets and liabilities are determined based on temporary
differences between the financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that are
expected to be in effect when the differences are expected to reverse.

STOCK OPTION PLANS

     We follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related interpretations, in accounting for
our employee and non-employee director stock options. Under APB 25, when the
exercise price of our employee stock options equals or exceeds the market price
of the underlying stock on the date of grant, no compensation expense is
recognized.

     In December 2002, the Financial Accounting Standards Board issued SFAS No.
148 ("SFAS 148"), "Accounting for Stock-Based Compensation -- Transition and
Disclosure" which amends SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," to provide alternative methods of transition to SFAS 123's fair
value method of accounting for stock-based employee compensation and to require
disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation on reported net income and earnings per share
in annual and interim financial statements. SFAS 148 does not require companies
to account for employee stock options using the fair value method. Accordingly,
we have continued to elect to account for employee stock options under APB 25
and its related interpretations. The effect of adopting SFAS 148 had no material
effect except for the quarterly disclosure provisions, which will be made
beginning in our March 31, 2003 interim financial statements.

     SFAS 123 defines a fair value based method of accounting for an employee
stock option or similar equity instrument. Pro forma information regarding net
income and earnings per share is required by SFAS 148, and has been determined
as if we had accounted for our employee stock options under the fair value
method of that Statement. The fair value of our stock options were estimated as
of the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 2002, 2001, and 2000, respectively:
risk-free interest rates of 4.3%, 4.9% and 5.3%; a dividend yield of 0%;
expected volatility of 32.7%, 30.9% and 28.6%; and a weighted average expected
life of the options of 7 years. Under these assumptions, the weighted average
fair value of an option to purchase one share granted in 2002, 2001 and 2000 was
approximately $9.05, $7.73 and $8.92, respectively.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because our employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
our opinion the existing models do not necessarily provide a reliable single
measure of the fair value of our employee stock options.

                                       F-10

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     For purposes of the pro forma disclosures required under SFAS 148, the
estimated fair value of the options is amortized to expense over the options'
vesting period. Our pro forma information is as follows:



                                                            2002          2001         2000
                                                         ----------    ----------    ---------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                            
Net income, as reported................................   $13,955       $ 8,565       $8,650
  Add back: stock based compensation cost, net of
     tax...............................................        41            53           61
  Less: pro forma stock based compensation cost
     determined under fair value method, net of tax....    (1,566)       (1,272)        (909)
                                                          -------       -------       ------
Pro forma net income...................................   $12,430       $ 7,346       $7,802
                                                          =======       =======       ======
Pro forma earnings per share:
  Basic................................................   $   .60       $   .36       $  .38
                                                          =======       =======       ======
  Diluted..............................................   $   .59       $   .35       $  .37
                                                          =======       =======       ======


EARNINGS PER SHARE

     The following table sets forth the computation of basic and diluted
earnings per share:



                                                               YEARS ENDED DECEMBER 31,
                                                        --------------------------------------
                                                           2002          2001          2000
                                                        ----------    ----------    ----------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                           
Numerator:
  Net income available to common stockholders.........   $13,955       $ 8,565       $ 8,650
                                                         =======       =======       =======
Denominator:
  Denominator for basic earnings per share -- weighted
     average shares...................................    20,631        20,473        20,543
  Effect of dilutive securities:
     Stock options....................................       578           415           447
                                                         -------       -------       -------
  Denominator for diluted earnings per
     share -- adjusted weighted-average shares and
     assumed conversions..............................    21,209        20,888        20,990
                                                         =======       =======       =======
Basic earnings per share..............................   $   .68       $   .42       $   .42
                                                         =======       =======       =======
Diluted earnings per share............................   $   .66       $   .41       $   .41
                                                         =======       =======       =======


RECENT ACCOUNTING PRONOUNCEMENTS

     In April 2002 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment to FASB
Statement No. 13, and Technical Corrections", which provides that gains and
losses from extinguishment of debt can only be classified as extraordinary if
they meet the criteria in APB Opinion 30. Since there have been no gains or
losses recognized from the extinguishment of debt for the three years in the
period ended December 31, 2002, there was no impact from the adoption of this
standard.

     In June 2002 the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity." SFAS 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred whereas under

                                       F-11

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Issue 94-3, a liability for an exit cost was recognized at the date of an
entity's commitment to an exit plan. A fundamental conclusion reached by the
FASB in SFAS 146 is that an entity's commitment to a plan, by itself, does not
create an obligation that meets the definition of a liability. Therefore, SFAS
146 eliminates the definition and requirements for recognition of exit costs in
Issue 94-3 and establishes that fair value is the objective for initial
measurement of the liability. SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002. We do not expect that the
adoption of SFAS 146 will have a significant impact.

     In November 2002, the FASB issued Financial Accounting Series
Interpretation No. 45 entitled "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others," which provides for an interpretation of Financial Accounting Standards
Board Statements No. 5, 57, and 107 and rescission of Financial Accounting
Standards Board Interpretation No. 34. This interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. This interpretation
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. Adoption of this interpretation will be effective on
January 1, 2003 and will be applied prospectively to all guarantees issued or
modified after December 31, 2002. We do not believe that the adoption of
Interpretation No. 45 will materially impact our financial position, cash flows
or results of operations. See Note 11 for a guarantee that we entered into on
March 7, 2003.

     In January 2003, the FASB issued Financial Accounting Series Interpretation
No. 46 entitled "Consolidation of Variable Interest Entities." This
interpretation requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. In general, a variable interest entity is a
corporation, partnership, trust, or any other legal structure used for business
purposes that either (a) does not have equity investors with voting rights or
(b) has equity investors that do not provide sufficient financial resources for
the entity to support its activities. The Interpretation also requires
disclosures about variable interest entities that the company is not required to
consolidate but in which it has a significant variable interest. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003 and existing variable interest
entities in the first fiscal year or interim period beginning after June 15,
2003. We have not yet determined what the effect, if any, this interpretation
will have on our financial statements.

2.  ADOPTION OF ACCOUNTING POLICIES

     In June 2001, the Financial Accounting Standards Board issued SFAS No. 141
("SFAS 141"), "Business Combinations", and SFAS No. 142 ("SFAS 142"), "Goodwill
and Other Intangible Assets". The requirements of SFAS 141 are effective for any
business combination after June 30, 2001. SFAS 141 eliminates the
pooling-of-interests method of accounting for business combinations and changes
the criteria to recognize intangible assets apart from goodwill. We have
historically used the purchase method to account for all business combinations.
Therefore, the adoption of SFAS 141 did not have a material impact on our
financial position, cash flows or results of operations. The adoption of SFAS
142 resulted in the reclassification of various intangible assets.

     Under SFAS 142, goodwill and intangible assets deemed to have indefinite
lives are no longer amortized and are subject to annual (or more frequent if
impairment indicators arise) impairment tests. Separable intangible assets that
have finite lives will continue to be amortized over their useful lives. The
amortization provisions of SFAS 142 apply to goodwill and intangible assets
acquired after June 30, 2001. With respect to goodwill and intangible assets
acquired prior to July 1, 2001, the amortization provisions of SFAS 142 are
effective upon adoption.

                                       F-12

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     We adopted SFAS 142 on January 1, 2002. Reported income and earnings per
share adjusted to exclude broadcast license and goodwill amortization are as
follows:

               ADJUSTED NET INCOME FOR ADOPTION OF STATEMENT 142



                                                               YEARS ENDED DECEMBER 31,
                                                         -------------------------------------
                                                            2002         2001          2000
                                                         ----------   -----------   ----------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                           
Reported net income....................................   $13,955      $  8,565      $ 8,650
  Add back: amortization of goodwill, net of tax
     provision of $510 and $488........................        --           687          661
  Add back: amortization of broadcast licenses, net of
     tax provision of $980 and $747....................        --         1,328        1,015
                                                          -------      --------      -------
Adjusted net income....................................   $13,955      $ 10,580      $10,326
                                                          =======      ========      =======
Basic earnings per share:
Reported net income per share -- basic.................   $   .68      $    .42      $   .42
  Add back: amortization of goodwill, net of taxes.....        --           .03          .03
  Add back: amortization of broadcast licenses, net of
     taxes.............................................        --           .07          .05
                                                          -------      --------      -------
Adjusted net income per share -- basic.................   $   .68      $    .52      $   .50
                                                          =======      ========      =======
Diluted earnings per share:
Reported net income per share -- diluted...............   $   .66      $    .41      $   .41
  Add back: amortization of goodwill, net of taxes.....        --           .03          .03
  Add back: amortization of broadcast licenses, net of
     taxes.............................................        --           .07          .05
                                                          -------      --------      -------
Adjusted net income per share -- diluted...............   $   .66      $    .51      $   .49
                                                          =======      ========      =======


     During the first quarter of 2002, we completed the required transitional
impairment test prescribed by Statement 142 for our broadcast licenses (which we
have deemed as indefinite lived since the licenses are expected to generate cash
flows indefinitely). The results of these tests indicate that there was no
impairment for these intangibles as of January 1, 2002.

     During the second quarter of 2002, we completed the required transitional
impairment test prescribed by Statement 142 for goodwill. The results of these
tests indicate that there was no impairment for goodwill as of January 1, 2002.

     During the fourth quarter of 2002, we completed the required annual
impairment test prescribed by Statement 142 for goodwill and other intangible
assets. The results of these tests indicate that there was no impairment for
broadcast licenses and goodwill as of October 1, 2002.

     We have recorded amortizable intangible assets at December 31, 2002 as
follows:



                                                             GROSS CARRYING   ACCUMULATED
                                                                 AMOUNT       AMORTIZATION
                                                             --------------   ------------
                                                                    (IN THOUSANDS)
                                                                        
Non-competition agreements.................................      $4,315          $4,090
Favorable lease agreements.................................       4,807           4,411
                                                                 ------          ------
Total amortizable intangible assets........................      $9,122          $8,501
                                                                 ======          ======


                                       F-13

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     We have recorded amortizable intangible assets at December 31, 2001 as
follows:



                                                             GROSS CARRYING   ACCUMULATED
                                                                 AMOUNT       AMORTIZATION
                                                             --------------   ------------
                                                                    (IN THOUSANDS)
                                                                        
Non-competition agreements.................................      $4,315          $3,750
Favorable lease agreements.................................       4,807           4,252
                                                                 ------          ------
Total amortizable intangible assets........................      $9,122          $8,002
                                                                 ======          ======


     Aggregate amortization expense for these amortizable intangible assets for
the years ended December 31, 2002 and 2001, was $499,000 each year.

     Effective January 1, 2002 we adopted Statement No. 144 ("Statement 144"),
"Accounting for the Impairment or Disposal of Long-Lived Assets". Statement 144
provides a consistent method to value long-lived assets to be disposed of and
broadens the presentation of discontinued operations to include more disposal
transactions. The adoption of Statement 144 did not have a material effect on
our financial position, cash flows or results of operations.

3.  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     Accumulated other comprehensive income (loss) is comprised solely of the
changes in the fair value of derivatives at December 31, 2002 and 2001.



                                                                DERIVATIVE
                                                                FINANCIAL
                                                               INSTRUMENTS
                                                                  GAINS
                                                                 (LOSSES)
                                                              --------------
                                                              (IN THOUSANDS)
                                                           
Balance at January 1, 2001..................................      $  --
Change in fair value of derivatives, net of $170 taxes......       (340)
                                                                  -----
Balance at December 31, 2001................................       (340)
Change in fair value of derivatives, net of $80 taxes.......       (124)
                                                                  -----
Balance at December 31, 2002................................      $(464)
                                                                  =====


4.  LONG-TERM DEBT

     Long-term debt consisted of the following:



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2002       2001
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
Credit Agreement:
  Senior secured term loan facility.........................  $105,000   $105,000
Subordinated promissory note. Payments are due monthly,
  including interest at 10%. The note matures in 2004.......       148        241
Other, primarily covenants not to compete...................        80        260
                                                              --------   --------
                                                               105,228    105,501
Amounts due within one year.................................    13,308        275
                                                              --------   --------
                                                              $ 91,920   $105,226
                                                              ========   ========


                                       F-14

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Future maturities of long-term debt are as follows:



                  YEAR ENDING DECEMBER 31,
                  ------------------------                     (IN THOUSANDS)
                                                            
       2003.................................................      $ 13,308
       2004.................................................        13,170
       2005.................................................        15,750
       2006.................................................        18,375
       2007.................................................        21,000
     Thereafter.............................................        23,625
                                                                  --------
                                                                  $105,228
                                                                  ========


     We have three financing facilities (the "Facilities") under the Credit
Agreement: a $105,000,000 senior secured term loan (the "Term Loan"), a
$75,000,000 senior secured acquisition loan facility (the "Acquisition
Facility"), and a $20,000,000 senior secured revolving credit facility (the
"Revolving Facility"). The Facilities mature September 30, 2008. Our
indebtedness under the Facilities is secured by a first priority lien on
substantially all of our assets and the assets of our subsidiaries, by a pledge
of our subsidiaries' stock and by a guarantee of our subsidiaries.

     The Acquisition Facility may be used for permitted acquisitions and to pay
related transaction expenses. The Revolving Facility may be used for general
corporate purposes, including working capital, capital expenditures, permitted
acquisitions (to the extent the Acquisition Facility has been fully utilized and
limited to $10,000,000) and permitted stock buybacks. On March 28, 2003, the
Acquisition Facility will convert to a five and a half year term loan. We are in
the process of negotiating an amendment to the current Credit Agreement or
entering into a new credit facility, which we anticipate will be completed
during the second quarter of 2003. The outstanding amount of the Term Loan is
required to be reduced quarterly in amounts ranging from 3.125% to 7.5% of the
initial commitment commencing on June 30, 2003. Any outstanding amount under the
Acquisition Facility is required to be reduced quarterly in amounts ranging from
3.125% to 7.5% commencing on June 30, 2003. Any outstanding amount under the
Revolving Facility will be due on the maturity date of September 30, 2008. In
addition, the Facilities may be further reduced by specified percentages of
Excess Cash Flow (as defined in the Credit Agreement) based on leverage ratios.

     Interest rates under the Facilities are payable, at our option, at
alternatives equal to LIBOR (1.40% at December 31, 2002) plus 1.25% to 2.0% or
the Agent bank's base rate plus .25% to 1.0%. The spread over LIBOR and the base
rate vary from time to time, depending upon our financial leverage. All interest
is due quarterly. We also pay quarterly commitment fees of 0.375% to 0.625% per
annum on the aggregate unused portion of the Acquisition and Revolving
Facilities.

     The Credit Agreement contains a number of financial covenants (all of which
we were in compliance with at December 31, 2002) that, among other things,
requires us to maintain specified financial ratios and impose certain
limitations on us with respect to (i) the incurrence of additional indebtedness;
(ii) acquisitions, except under specified conditions; (iii) the incurrence of
additional liens, except those relating to capital leases and purchase money
indebtedness; (iv) the disposition of assets; (v) the payment of cash dividends;
and (vi) mergers, changes in business and management, investments and
transactions with affiliates. The Credit Agreement prohibits the payment of
dividends without the banks' prior consent.

                                       F-15

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5.  DERIVATIVES

     We use interest rate swap agreements to reduce our risk of rising interest
rates. As previously indicated in Note 1, we adopted Statement 133 effective
January 1, 2001. The cumulative effect of adopting Statement 133 was immaterial
to our consolidated financial statements at January 1, 2001.

     In July 2001, we entered into two interest rate swap agreements with a
total notional amount of $26,250,000 with an effective date of September 2001.
In accordance with the terms of the swap agreements, we pay 4.11% calculated on
a $26,250,000 notional amount. We receive LIBOR (1.40% at December 31, 2002)
calculated on a notional amount of $26,250,000. These agreements expire in March
2003.

     In September 2001, we entered into two interest rate swap agreements with a
total notional amount of $13,750,000. In accordance with the terms of the swap
agreements, we pay 3.67% calculated on a $13,750,000 notional amount. We receive
LIBOR (1.40% at December 31, 2002) calculated on a notional amount of
$13,750,000. In March 2003 the total notional amount of these swap agreements
increases to $40,000,000 with all other terms remaining the same. These
agreements expire in September 2003.

     The swap agreements are used to convert the variable interest rate of a
portion of bank borrowings to a fixed interest rate. Net receipts or payments
under the agreements are recognized as an adjustment to interest expense.

     All of our current interest rate swap agreements are assessed as effective.
Therefore, changes in their fair value have been recognized in other
comprehensive income.

     We have recorded a liability of approximately $714,000 and $510,000 within
"Other Accrued Expenses" in the accompanying consolidated balance sheets, to
record the fair value of the swap agreements at December 31, 2002 and 2001,
respectively.

6.  SUPPLEMENTAL CASH FLOW INFORMATION

     For the purposes of the statements of cash flows, cash and cash equivalents
include temporary investments with maturities of three months or less.



                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                        2002        2001        2000
                                                       ------      ------      ------
                                                               (IN THOUSANDS)
                                                                      
Cash paid during the period for:
  Interest...........................................  $5,167      $7,275      $6,654
  Income taxes.......................................   3,295       5,342       6,004
Non-cash transactions:
  Barter revenue.....................................  $3,013      $3,037      $2,308
  Barter expense.....................................   2,964       2,749       2,227
  Acquisition of property and equipment..............      69          69          62


                                       F-16

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In conjunction with the acquisition of the net assets of broadcasting
companies, liabilities were assumed as follows:



                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2002       2001       2000
                                                       --------   --------   --------
                                                               (IN THOUSANDS)
                                                                    
Fair value of assets acquired........................  $ 27,001   $ 20,063   $ 25,496
Cash paid............................................   (24,144)   (18,358)   (25,145)
Issuance of restricted stock.........................    (2,245)      (990)        --
                                                       --------   --------   --------
Liabilities assumed..................................  $    612   $    715   $    351
                                                       ========   ========   ========


7.  INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:



                                                                DECEMBER 31,
                                                              ----------------
                                                               2002      2001
                                                              -------   ------
                                                               (IN THOUSANDS)
                                                                  
Deferred tax liabilities:
  Property and equipment....................................  $ 7,633   $6,162
  Intangible assets.........................................    7,635    4,997
                                                              -------   ------
Total deferred tax liabilities..............................   15,268   11,159
Deferred tax assets:
  Allowance for doubtful accounts...........................      350      265
  Compensation..............................................      837      765
  Fair value of derivatives.................................      250      170
  Loss carry forwards.......................................    1,228    1,384
                                                              -------   ------
                                                                2,665    2,584
Less: valuation allowance...................................      759      927
                                                              -------   ------
Total net deferred tax assets...............................    1,906    1,657
                                                              -------   ------
Net deferred tax liabilities................................  $13,362   $9,502
                                                              =======   ======


     At December 31, 2002, we have a federal tax loss carry forward of
approximately $264,000, which expires in 2016, state tax loss carry forwards of
approximately $6,043,000, which will expire from 2003 to 2016 and a capital loss
carry forward of approximately $2,232,000, which will expire in 2005. During
2002, we utilized $494,000 of the capital loss carry forward; accordingly, the
valuation allowance decreased by $168,000. The valuation allowance for net
deferred tax assets relates to a capital loss incurred during 2000. Statement of
Financial Accounting Standards No. 109 requires that deferred tax assets be
reduced by a valuation allowance if it is more likely than not that some portion
or all of the deferred tax asset will not be realized.

                                       F-17

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The significant components of the provision for income taxes are as
follows:



                                                             YEARS ENDED DECEMBER 31,
                                                             ------------------------
                                                              2002     2001     2000
                                                             ------   ------   ------
                                                                  (IN THOUSANDS)
                                                                      
Current:
  Federal..................................................  $4,220   $2,751   $4,664
  State....................................................   1,286    1,107    1,186
                                                             ------   ------   ------
Total current..............................................   5,506    3,858    5,850
Total deferred.............................................   3,770    2,342    1,742
                                                             ------   ------   ------
                                                             $9,276   $6,200   $7,592
                                                             ======   ======   ======


     In addition we realized tax benefits as a result of stock option exercises
for the difference between compensation expense for financial statement and
income tax purposes. These tax benefits were credited to additional paid-in
capital in the amounts of approximately $438,000, $212,000 and $0 for the years
ended December 31, 2002, 2001 and 2000, respectively.

     The reconciliation of income tax at the U. S. federal statutory tax rates
to income tax expense is as follows:



                                                             YEARS ENDED DECEMBER 31,
                                                             ------------------------
                                                              2002     2001     2000
                                                             ------   ------   ------
                                                                  (IN THOUSANDS)
                                                                      
Tax at U.S. statutory rates................................  $7,898   $5,020   $5,522
State taxes, net of federal benefit........................   1,462      934    1,329
Amortization of goodwill...................................      --      201      200
Other, net.................................................      84       45       77
Increase (reduction) of valuation allowance on loss carry
  forwards.................................................    (168)      --      464
                                                             ------   ------   ------
                                                             $9,276   $6,200   $7,592
                                                             ======   ======   ======


8.  STOCK OPTION PLANS

     In 1992, we adopted the 1992 Stock Option Plan (the "Plan") pursuant to
which our key employees, including directors who are employees, are eligible to
receive grants of options to purchase our Class A Common Stock or Class B Common
Stock. The Plan terminated on December 10, 2002. Options granted under the Plan
may be either incentive stock options (within the meaning of Section 422A of the
Internal Revenue Code of 1986) or non-qualified options. Incentive stock options
granted under the Plan may be for terms not exceeding ten years from the date of
grant, except in the case of incentive stock options granted to persons owning
more than 10% of the total combined voting power of all classes of our stock,
which may be granted for terms not exceeding five years. These options may not
be granted at a price which is less than 100% of the fair market value of shares
at the time of grant (110% in the case of persons owning more than 10% of the
combined voting power of all classes of our stock). The terms and price of
non-qualified stock options granted pursuant to the Plan shall be determined by
the Compensation Committee.

     On February 26, 2003 our board of directors approved a new Plan, which is
subject to stock-holder approval at our annual meeting on May 12, 2003.

     In 1997, we adopted the 1997 Non-Employee Director Stock Option Plan (the
"Directors Plan") pursuant to which our directors who are not our employees are
eligible to receive options. Under the terms

                                       F-18

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the Directors Plan, on the last business day of January of each year during
the term of the Directors Plan, in lieu of their directors' retainer for the
previous year, each eligible director shall automatically be granted an option
to purchase that number of our shares of Class A Common Stock equal to the
amount of the retainer divided by the fair market value of our Common Stock on
the last trading day of the December immediately preceding the date of grant
less $.01 per share. The option exercise price is $.01 per share. At December
31, 2002, approximately 176,000 shares of common stock are reserved for issuance
under the Directors Plan. Options granted under the Directors Plan are
non-qualified stock options and shall be immediately vested and exercisable on
the date of grant. The options may be exercised for a period of 10 years from
the date of grant of the option. On January 31, 2003 a total of 2,997 shares
were issued under the Directors Plan in lieu of their directors' retainer for
the year ended December 31, 2002.

     We follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and related interpretations, in accounting for
our employee and non-employee director stock options. Under APB 25, when the
exercise price of our employee stock options equals or exceeds the market price
of the underlying stock on the date of grant, no compensation expense is
recognized. Total compensation costs recognized in the income statement for
stock based compensation awards to employees for the years ended December 31,
2002, 2001 and 2000, was $6,000, $24,000 and $52,000, respectively. Total
Directors fees recognized in the income statement for stock based compensation
awards for the years ended December 31, 2002, 2001 and 2000, was $63,000,
$67,000 and $55,000, respectively.

     The following summarizes the Plan stock option transactions for the three
years ended December 31, 2002:



                                                                                    WEIGHTED
                                                                                     AVERAGE
                                                NUMBER OF      EXERCISE PRICE       PRICE PER
                                                 OPTIONS          PER SHARE           SHARE
                                                ---------   ---------------------   ---------
                                                                     
Options outstanding at January 1, 2000........  1,429,306   $ 1.39    To   $12.72    $ 9.10
Granted.......................................    232,194    16.00    To    16.80     16.63
Exercised.....................................         --                                --
Forfeited.....................................     (2,101)                  16.80     16.80
                                                ---------   ---------------------   ---------
Options outstanding at December 31, 2000......  1,659,399   $ 1.39    To   $16.80    $10.14
Granted.......................................    270,606                   14.24     14.24
Exercised.....................................    (83,093)    1.39    To    12.72      4.82
Forfeited.....................................     (6,621)   10.56    To    16.80     13.05
                                                ---------   ---------------------   ---------
Options outstanding at December 31, 2001......  1,840,291   $ 1.39    To   $16.80    $10.98
Granted.......................................    159,593                   20.80     20.80
Exercised.....................................   (172,885)    1.39    To    16.80      4.54
Forfeited.....................................     (2,125)                  14.24     14.24
                                                ---------   ---------------------   ---------
Options outstanding at December 31, 2002......  1,824,874   $ 1.39    To   $20.80    $12.44
                                                =========   =====================   =========


                                       F-19

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following summarizes the Directors Plan stock option transactions for
the three years ended December 31, 2002:



                                                                                    WEIGHTED
                                                                                     AVERAGE
                                                  NUMBER OF     EXERCISE PRICE      PRICE PER
                                                   OPTIONS         PER SHARE          SHARE
                                                  ---------   -------------------   ---------
                                                                     
Options outstanding at January 1, 2000..........    6,868     $.005    To   $.006     $.006
Granted.........................................    3,810                    .008      .008
Exercised.......................................       --                                --
Forfeited.......................................       --                                --
                                                   ------     -------------------   ---------
Options outstanding at December 31, 2000........   10,678     $.005    To   $.008     $.007
Granted.........................................    4,641                    .008      .008
Exercised.......................................       --                                --
Forfeited.......................................       --                                --
                                                   ------     -------------------   ---------
Options outstanding at December 31, 2001........   15,319     $.005    To   $.008     $.007
Granted.........................................    4,046                    .008      .008
Exercised.......................................   (5,128)     .005    To    .008      .007
Forfeited.......................................       --                                --
                                                   ------     -------------------   ---------
Options outstanding at December 31, 2002........   14,237     $.005    To   $.008     $.007
                                                   ======     ===================   =========


     The following summarizes stock options exercisable and available for the
three years ended December 31, 2002:



                                                                          THE DIRECTORS
                                                              THE PLAN        PLAN
                                                              ---------   -------------
                                                                    
Options exercisable at December 31:
  2002......................................................  1,068,140       14,237
  2001......................................................    915,984       15,319
  2000......................................................    721,144       10,678
Available for grant at December 31:
  2002......................................................         --      175,941
  2001......................................................    646,493      179,994
  2000......................................................    910,479      184,635


                                       F-20

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Stock options outstanding in the Plan at December 31, 2002 are summarized
as follows:



                                                                           WEIGHTED AVERAGE
EXERCISE                                         OPTIONS       OPTIONS        REMAINING
PRICE                                          OUTSTANDING   EXERCISABLE   CONTRACTUAL LIFE
--------                                       -----------   -----------   ----------------
                                                                  
$ 1.39.......................................      21,868        21,868          2.2
$ 2.72.......................................      60,177        60,177          2.1
$ 4.00.......................................      25,702        25,702          1.2
$ 5.83.......................................      13,668        13,668          3.2
$ 7.42.......................................      27,339        27,339          4.3
$10.56.......................................     811,956       649,208          5.2
$12.72.......................................     224,255       134,553          6.2
$14.24.......................................     258,892        47,733          8.2
$16.00.......................................      31,511        12,604          7.2
$16.80.......................................     189,921        75,288          7.2
$20.80.......................................     159,585             0          9.2
                                               ----------    ----------          ---
                                                1,824,874     1,068,140          6.1
                                               ==========    ==========          ===
Weighted Average Exercise Price..............  $    12.44    $    10.57
                                               ==========    ==========


     Stock options outstanding in the Directors Plan at December 31, 2002 are
summarized as follows:



                                                                             WEIGHTED AVERAGE
EXERCISE                                           OPTIONS       OPTIONS        REMAINING
PRICE                                            OUTSTANDING   EXERCISABLE   CONTRACTUAL LIFE
--------                                         -----------   -----------   ----------------
                                                                    
$0.005.........................................      2,662         2,662           5.1
$0.006.........................................      2,620         2,620           6.1
$0.008.........................................      8,955         8,955           8.1
                                                   -------       -------           ---
                                                    14,237        14,237           7.2
                                                   =======       =======           ===
Weighted Average Exercise Price................    $ 0.007       $ 0.007
                                                   =======       =======


9.  EMPLOYEE BENEFIT PLANS

401(K) PLAN

     We have a defined contribution pension plan ("401(k) Plan") that covers
substantially all employees. Employees can elect to have a portion of their
wages withheld and contributed to the plan. The 401(k) Plan also allows us to
make a discretionary contribution. Total expense under the 401(k) Plan was
approximately $321,000, $303,000 and $288,000 in 2002, 2001 and 2000,
respectively, of which approximately $222,000, $200,000 and $180,000 represents
our discretionary contributions in 2002, 2001 and 2000, respectively.

EMPLOYEE STOCK PURCHASE PLAN

     In 1999 our stockholders approved the Employee Stock Purchase Plan ("ESPP")
under which 1,562,500 shares of our Class A Common Stock is eligible for sale to
our employees. The ESPP was effective July 1, 1999. Each quarter, an eligible
employee may elect to withhold up to 10 percent of his or her compensation to
purchase shares of our stock at a price equal to 85 percent of the fair value of
the stock as of the last day of such quarter. The ESPP will terminate on the
earlier of the issuance of 1,562,500 shares pursuant to the ESPP or December 31,
2008. There were 15,870, 18,476 and 21,011

                                       F-21

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

shares issued under the ESPP in 2002, 2001 and 2000, respectively. Compensation
expense recognized related to the ESPP for the years ended December 31, 2002,
2001 and 2000 was approximately $47,000, $43,000 and $45,000, respectively.

DEFERRED COMPENSATION PLAN

     In 1999 we established a Nonqualified Deferred Compensation Plan which
allows officers and certain management employees to annually elect to defer a
portion of their compensation, on a pre-tax basis, until their retirement. The
retirement benefit to be provided is based on the amount of compensation
deferred and any earnings thereon. Deferred compensation expense for the years
ended December 31, 2002, 2001 and 2000 was approximately $268,000, $291,000 and
$300,000, respectively. We have invested in company-owned life insurance
policies to assist in funding these programs. The cash surrender values of these
policies are in a rabbi trust and are recorded as our assets.

10.  ACQUISITIONS AND DISPOSITIONS

     We actively seek and explore opportunities for expansion through the
acquisition of additional broadcast properties. The consolidated statements of
income include the operating results of the acquired stations from their
respective dates of acquisition. All acquisitions were accounted for as
purchases and, accordingly, the total costs were allocated to the acquired
assets and assumed liabilities based on their estimated fair values as of the
acquisition dates. The excess of the consideration paid over the estimated fair
value of net assets acquired have been recorded as goodwill, which is deductible
for tax purposes.

PENDING ACQUISITIONS, SHARED SERVICES AGREEMENTS AND DIVESTITURES

     On November 13, 2002 we entered into an agreement to acquire an FM radio
station (WODB-FM) Delaware, Ohio, serving the Columbus, Ohio market for
approximately $9,000,000 and the exchange of one of our AM radio stations
(WVKO-AM) serving the Columbus, Ohio market. The transaction, which is subject
to the approval of the FCC, is expected to close during the first half of 2003.
We began operating this station under the terms of a TBA on January 1, 2003. We
are also contemplating an agreement whereby we would forgo the exchange of
WVKO-AM and would pay the seller an additional $1,000,000 for WODB-FM.

     On January 8, 2003 we entered into an agreement to acquire an FM radio
station (WINQ-FM) in the Winchendon, Massachusetts market for approximately
$400,000 plus an additional $500,000 if within five years of closing we obtain
approval from the FCC for a city of license change. The radio station is owned
by a company in which a member of our Board of Directors has a 26% beneficial
ownership interest. The purchase price was determined on an arm's length basis.
The transaction, which is subject to the approval of the FCC, is expected to
close during the second quarter 2003. We began operating this station under the
terms of a TBA on February 1, 2003.

     On February 3, 2003 we entered into an agreement to sell an AM radio
station (WLLM-AM) serving the Lincoln, Illinois market for approximately
$275,000. The transaction, which is subject to the approval of the FCC, is
expected to close during the second quarter 2003.

     On March 11, 2003 we acquired an AM radio station (WWIT-AM) serving the
Asheville, North Carolina market for approximately $311,000. Since we closed on
this transaction after obtaining the initial grant for the license from the FCC,
the grant is still subject to the FCC issuing its final order.

     On March 7, 2003 we entered into an agreement of understanding with Surtsey
Productions, Inc. ("Surtsey"), whereby we have guaranteed up to $1,250,000 of
the debt that Surtsey will incur in closing on the acquisition of a construction
permit for KFJX-TV station in Pittsburg, Kansas. In consideration for our
guarantee, Surtsey has agreed to enter into various agreements with us relating
to the station, including
                                       F-22

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a Shared Services Agreement, Technical Services Agreement, Agreement for the
Sale of Commercial Time, Option Agreement and Broker Agreement. It is
contemplated that such agreements will be executed on or before September 1,
2003. Under the FCC's ownership rules, we are prohibited from owning this
station. Surtsey is a company that is 100% owned by the daughter of Edward K.
Christian, our principal stockholder, President and CEO. See Note 11.

2002 ACQUISITIONS AND TIME BROKERAGE AGREEMENTS

     On November 1, 2002, we acquired three FM radio stations (KDEZ-FM, KDXY-FM
and KJBX-FM) serving the Jonesboro, Arkansas market for approximately
$12,745,000, including approximately $2,245,000 of our Class A common stock.

     On November 1, 2002, we entered into a time brokerage agreement and a
sub-time brokerage agreement for WISE-AM and WOXL-FM, respectively, serving the
Asheville, North Carolina market.

     On November 1, 2002, we acquired an AM and FM radio station (WJQY-AM and
WJOI-FM) serving the Springfield, Tennessee market for approximately $1,525,000.

     On July 1, 2002, we acquired an FM and AM radio station (WOQL-FM and
WZBK-AM) serving the Keene, New Hampshire market, for approximately $2,740,000.

     On May 1, 2002, we acquired two FM and two AM radio stations (WKBK-AM,
WKNE-FM and WKVT-AM/FM) serving the Keene, New Hampshire and Brattleboro,
Vermont markets, respectively, for approximately $9,400,000.

2001 ACQUISITIONS

     On July 1, 2001, we acquired two FM radio stations (KMIT-FM and KUQL-FM)
serving the Mitchell, South Dakota market for approximately $4,050,000. This
transaction has been accounted for in accordance with Statement 141 as
summarized in Note 2.

     On April 1, 2001, we acquired an AM and FM radio station (WHAI-FM and
WHMQ-AM) serving the Greenfield, Massachusetts market for approximately
$2,200,000.

     On February 1, 2001, we acquired an FM radio station (WVVR-FM) serving the
Clarksville, Tennessee/Hopkinsville, Kentucky market for approximately
$7,000,000, including approximately $1,000,000 of our Class A Common Stock. The
radio station was owned by a company in which a member of our Board of Directors
had a 35% beneficial ownership interest. The purchase price was determined on an
arm's length basis. We also obtained an opinion from an independent appraiser
that the purchase price was fair from a financial point of view.

     On February 1, 2001, we acquired two FM and two AM radio stations (WCVQ-FM,
WZZP-FM, WDXN-AM, and WJMR-AM) serving the Clarksville, Tennessee /
Hopkinsville, Kentucky market for approximately for $6,700,000.

2000 ACQUISITIONS

     On August 30, 2000, we acquired an AM and FM radio station (WHMP-AM and
WLZX-FM) serving the Northampton, Massachusetts market for approximately
$12,000,000.

     On July 17, 2000, we acquired an FM radio station (WKIO-FM) serving the
Champaign-Urbana, Illinois market for approximately $6,800,000.

     On January 1, 2000, we acquired two FM and one AM radio station (KICD-AM/FM
and KLLT-FM) serving the Spencer, Iowa market for approximately $6,400,000.

                                       F-23

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATED BALANCE SHEET OF 2002 ACQUISITIONS

     The following condensed balance sheets represent the estimated fair value
assigned to the related assets and liabilities of the 2002 and 2001 acquisitions
at their respective acquisition dates. In connection with the 2002 acquisitions
we issued restricted stock of approximately $2,245,000.

                           SAGA COMMUNICATIONS, INC.
      CONDENSED CONSOLIDATED BALANCE SHEETS OF 2002 AND 2001 ACQUISITIONS



                                                               ACQUISITIONS IN
                                                               2002      2001
                                                              -------   -------
                                                               (IN THOUSANDS)
                                                                  
ASSETS ACQUIRED:
Current assets..............................................  $   902   $   684
Property and equipment......................................    4,113     4,737
Other assets:
  Broadcast licenses -- Radio segment.......................   15,864    14,941
  Goodwill -- Radio segment.................................    6,123       113
  Other intangibles, deferred costs and investments.........       --       227
                                                              -------   -------
Total other assets..........................................   21,987    15,281
                                                              -------   -------
Total assets acquired.......................................   27,001    20,702
                                                              -------   -------
LIABILITIES ASSUMED:
Current liabilities.........................................      612       471
Deferred income taxes.......................................       --       245
                                                              -------   -------
Total liabilities assumed...................................      612       716
                                                              -------   -------
Net assets acquired.........................................  $26,389   $19,986
                                                              =======   =======


PRO FORMA RESULTS OF OPERATIONS FOR ACQUISITIONS (UNAUDITED)

     The following unaudited pro forma results of our operations for the years
ended December 31, 2002 and 2001 assume the acquisitions occurred as of January
1, 2001. The pro forma results give effect to certain adjustments, including
depreciation, amortization of intangible assets based on amortization rules in
place at time of acquisition, increased interest expense on acquisition debt and
related income tax effects. The pro forma results have been prepared for
comparative purposes only and do not purport to indicate the results of
operations, which would actually have occurred had the combinations been in
effect on the dates indicated, or which may occur in the future.

                                       F-24

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

          PRO FORMA RESULTS OF OPERATIONS FOR ACQUISITIONS (UNAUDITED)



                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2002        2001
                                                              ---------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
                                                                    
CONSOLIDATED RESULTS OF OPERATIONS:
  Net operating revenue.....................................  $118,697    $110,301
  Station operating expense.................................    76,236      71,307
  Depreciation..............................................     6,229       6,171
  Amortization..............................................       499       4,391
  Corporate general and administrative......................     6,218       5,421
                                                              --------    --------
  Operating profit..........................................    29,515      23,011
  Interest expense..........................................     5,679       7,091
  Other.....................................................       159         (17)
  Income taxes..............................................     9,466       6,699
                                                              --------    --------
  Net income................................................  $ 14,211    $  9,238
                                                              ========    ========
  Basic earnings per share..................................  $    .69    $    .45
                                                              ========    ========
  Diluted earnings per share................................  $    .67    $    .44
                                                              ========    ========



                                                                   
RADIO BROADCASTING SEGMENT
  Net operating revenue.....................................  $106,287   $ 99,439
  Station operating expense.................................    67,020     62,984
  Depreciation..............................................     4,596      4,369
  Amortization..............................................       475      3,624
  Corporate general and administrative......................        --         --
                                                              --------   --------
  Operating profit..........................................  $ 34,196   $ 28,462
                                                              ========   ========



                                                                   
TELEVISION BROADCASTING SEGMENT
  Net operating revenue.....................................  $ 12,410   $ 10,862
  Station operating expense.................................     9,216      8,323
  Depreciation..............................................     1,432      1,630
  Amortization..............................................        24        391
  Corporate general and administrative......................        --         --
                                                              --------   --------
  Operating profit..........................................  $  1,738   $    518
                                                              ========   ========


                                       F-25

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  RELATED PARTY TRANSACTIONS

ACQUISITION OF STATIONS FROM AFFILIATES OF DIRECTORS

     On January 8, 2003 we entered into an agreement to acquire an FM radio
station (WINQ-FM) in the Winchendon, Massachusetts market for approximately
$400,000 plus an additional $500,000 if within five years of closing we obtain
approval from the FCC for a city of license change. The radio station is owned
by a company in which Robert Maccini, a member of our Board of Directors, has a
26% beneficial ownership interest. The purchase price was determined on an arm's
length basis. The transaction, which is subject to FCC approval, is expected to
close during the second quarter 2003. We began operating this station under the
terms of a TBA on February 1, 2003.

     On February 1, 2001, we acquired an FM radio station (WVVR-FM) serving the
Clarksville, Tennessee/Hopkinsville, Kentucky market for approximately
$7,000,000, including approximately $1,000,000 of our Class A Common Stock. The
radio station was owned by a company in which Donald Alt, a member of our Board
of Directors, had a 35% beneficial ownership interest. The purchase price was
determined on an arm's length basis. We also obtained an opinion from an
independent appraiser that the purchase price was fair from a financial point of
view.

COMMISSIONS PAID TO AFFILIATES OF DIRECTORS

     On May 1, 2002, in connection with our acquisition of two AM and two FM
radio stations (WKBK-AM, WKNE-FM and WKVT-AM/FM) serving the Keene, New
Hampshire and Brattleboro, Vermont markets, respectively, for approximately
$9,400,000 we paid a company that is affiliated with Robert Maccini, a member of
our board of directors, a brokerage commission of $200,000.

     On November 1, 2002, in connection with our acquisition of an AM and FM
radio station (WJQY-AM and WJOI-FM) serving the Springfield, Tennessee market
for approximately $1,525,000, a company controlled by Gary Stevens, a member of
our board of directors received a brokerage commission of approximately $70,000
from the seller.

PRINCIPAL STOCKHOLDER EMPLOYMENT AGREEMENT

     In March 2002, we entered into an employment agreement with Edward K.
Christian, our principal stockholder, President and CEO. This agreement was
effective April 1, 2002 and expires March 31, 2009. The agreement provides for
certain compensation, death, disability and termination benefits, as well as the
use of an automobile. The annual base salary under the agreement is $450,000 per
year effective April 1, 2002, increasing to $500,000 per year effective January
1, 2003. The agreement also provides that he is eligible for stock options to be
awarded at the discretion of our Board of Directors, and annual bonuses in such
amounts as shall be determined pursuant to the terms of the Chief Executive
Officer Annual Incentive Plan. The agreement also provides that, upon the
consummation of our sale or transfer of control, his employment will be
terminated and we will pay him an amount equal to five times the average of his
total annual compensation for the preceding three years, plus an additional
amount as is necessary for applicable income taxes related to the payment. For
the three years ended December 31, 2002 his average annual compensation, as
defined by the employment agreement, was approximately $828,000.

NOTE RECEIVABLE FROM PRINCIPAL STOCKHOLDER

     The loan from us to Edward K. Christian bore interest at a rate per annum
equal to the lowest rate necessary to avoid the imputation of income for federal
income tax purposes. As part of a five year employment agreement with the
principal stockholder, we forgave 20% of the note balance ratably over five
years, and paid him an amount in cash equal to such amount as was necessary to
enable the principal stockholder to pay all related federal and state income tax
liabilities. This agreement expired March 31,
                                       F-26

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2002. We recorded compensation expense of approximately $74,000, $287,000 and
$331,000 in 2002, 2001 and 2000, respectively, relative to the agreement.

LOAN TO PRINCIPAL STOCKHOLDER AND TRANSACTIONS WITH AFFILIATE

     In May 1999 we lent $125,000 to Edward K. Christian. The loan bore interest
at 7% per annum. Principal and interest on the loan was repaid in two equal
installments on May 5, 2000 and 2001. Mr. Christian loaned the proceeds of his
loan to Surtsey, to finance the purchase of the assets of television station
KVCT, Victoria, Texas. Under the FCC's ownership rules we are prohibited from
owning or having an attributable or cognizable interest in this station. We
operate KVCT under the terms of a TBA with Surtsey. Under the 16 year TBA, we
paid Surtsey two lump sum payments of approximately $118,000 and $122,000 in
2001 and 2000, respectively. Additionally, we pay fees under the TBA of $2,000
per month. During 2002 we prepaid $50,000 for future payments due under the TBA.
In January 2003 we prepaid $25,000 for future payments due under the TBA. These
amounts were repaid in full in March, 2003.

OTHER RELATED PARTY TRANSACTIONS

     A number of our radio and television stations have utilized the graphic
design services of Surtsey, a multi-media company owned by Mr. Christian's
daughter. For the years ended December 31, 2002 and 2001 the total fees paid to
Surtsey for such services was approximately $45,000 and $112,000, respectively
which was primarily comprised of on-air graphics for news broadcasts for some of
our television stations. Surtsey leases office space in a building owned by us,
and paid us rent of approximately $33,000 during each of the years ended
December 31, 2002 and 2001.

     On March 7, 2003 we entered into an agreement of understanding with
Surtsey, whereby we have guaranteed up to $1,250,000 of the debt incurred by
Surtsey in closing on the acquisition of a construction permit for KFJX-TV
station in Pittsburg, Kansas. In consideration for our guarantee, Surtsey has
agreed to enter into various agreements with us relating to the station,
including a Shared Services Agreement, Technical Services Agreement, Agreement
for the Sale of Commercial Time, Option Agreement and Broker Agreement. Under
the FCC's ownership rules we are prohibited from owning or having an
attributable or cognizable interest in this station. It is contemplated that
such agreements will be executed on or before September 1, 2003.

12.  COMMON STOCK

     Dividends.  Stockholders are entitled to receive such dividends as may be
declared by our Board of Directors out of funds legally available for such
purpose. However, no dividend may be declared or paid in cash or property on any
share of any class of Common Stock unless simultaneously the same dividend is
declared or paid on each share of the other class of common stock. In the case
of any stock dividend, holders of Class A Common Stock are entitled to receive
the same percentage dividend (payable in shares of Class A Common Stock) as the
holders of Class B Common Stock receive (payable in shares of Class B Common
Stock). The payment of dividends is prohibited by the terms of our bank loan
agreement, without the banks' prior consent.

     Voting Rights.  Holders of shares of Common Stock vote as a single class on
all matters submitted to a vote of the stockholders, with each share of Class A
Common Stock entitled to one vote and each share of Class B Common Stock
entitled to ten votes, except (i) in the election for directors, (ii) with
respect to any "going private" transaction between the Company and the principal
stockholder, and (iii) as otherwise provided by law.

                                       F-27

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In the election of directors, the holders of Class A Common Stock, voting
as a separate class, are entitled to elect two of our directors. The holders of
the Common Stock, voting as a single class with each share of Class A Common
Stock entitled to one vote and each share of Class B Common Stock entitled to
ten votes, are entitled to elect the remaining directors. The Board of Directors
consisted of seven members at December 31, 2002. Holders of Common Stock are not
entitled to cumulative votes in the election of directors.

     The holders of the Common Stock vote as a single class with respect to any
proposed "going private" transaction with the principal stockholder, with each
share of each class of Common Stock entitled to one vote per share.

     Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of any class of common stock is required to approve,
among other things, a change in the designations, preferences and limitations of
the shares of such class of common stock.

     Liquidation Rights.  Upon our liquidation, dissolution, or winding-up, the
holders of Class A Common Stock are entitled to share ratably with the holders
of Class B Common Stock in all assets available for distribution after payment
in full of creditors.

     Other Provisions.  Each share of Class B Common Stock is convertible, at
the option of its holder, into one share of Class A Common Stock at any time.
One share of Class B Common Stock converts automatically into one share of Class
A Common Stock upon its sale or other transfer to a party unaffiliated with the
principal stockholder or, in the event of a transfer to an affiliated party,
upon the death of the transferor.

13.  COMMITMENTS AND CONTINGENCIES

LEASES

     We lease certain land, buildings and equipment under noncancellable
operating leases. Rent expense for the year ended December 31, 2002 was
$1,476,000 ($1,462,000 and $1,356,000 for the years ended December 31, 2001 and
2000, respectively). Minimum annual rental commitments under noncancellable
operating leases consisted of the following at December 31, 2002 (in thousands):


                                                           
2003........................................................  $1,406
2004........................................................     991
2005........................................................     731
2006........................................................     598
2007........................................................     457
Thereafter..................................................   2,305
                                                              ------
                                                              $6,488
                                                              ======


                                       F-28

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

BROADCAST PROGRAM RIGHTS

     We have entered into contracts for broadcast program rights that expire at
various dates during the next five years. The aggregate minimum payments
relating to these commitments consisted of the following at December 31, 2002
(in thousands):


                                                           
2003........................................................  $298
2004........................................................   196
2005........................................................    99
2006........................................................    11
2007........................................................    --
Thereafter..................................................    --
                                                              ----
                                                              $604
                                                              ====
Amounts due within one year (included in accounts
  payable)..................................................   298
                                                              ----
                                                              $306
                                                              ====


ACQUISITIONS

     On November 13, 2002 we entered into an agreement to acquire an FM radio
station (WODB-FM) Delaware, Ohio, serving the Columbus, Ohio market for
approximately $9,000,000 and the exchange of one of our AM radio stations
(WVKO-AM) serving the Columbus, Ohio market. The transaction, which is subject
to FCC approval, is expected to close during the first or second quarter 2003.
We began operating this station under the terms of a TBA on January 1, 2003. We
are also contemplating an agreement whereby we would forgo the exchange of
WVKO-AM and would pay the seller an additional $1,000,000 for WODB-FM.

     On December 31, 2002 we entered into an agreement to acquire an AM radio
station (WWIT-AM) serving the Asheville, North Carolina market for approximately
$311,000. We acquired this station on March 11, 2003. We closed on this
transaction after obtaining the initial grant for the license from the FCC. The
grant is still subject to the FCC issuing its final order.

14.  SEGMENT INFORMATION

     We evaluate the operating performance of our stations individually. For
purposes of business segment reporting, we have aligned operations with similar
characteristics into two business segments: Radio and Television.

     The Radio segment includes all seventy of our radio stations and three
radio information networks. The Television segment consists of four television
stations and three low power television ("LPTV") stations. The Radio and
Television segments derive their revenue from the sale of commercial broadcast
inventory. The category "Corporate and Other" represents the income and expense
not allocated to reportable segments.

     We evaluate performance of our operating entities based on station
operating income before corporate general and administrative, depreciation and
amortization ("station operating income"). We believe that station operating
income is useful because it provides a meaningful comparison of operating
performance between companies in the broadcasting industry and serves as an
indicator of the market value of a group of stations. Station operating income
is generally recognized by the broadcasting industry as a measure of performance
and is used by analysts who report on the performance of broadcasting groups.
Station operating income is not necessarily indicative of amounts that may be
available to us for debt service

                                       F-29

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

requirements, other commitments, reinvestment or other discretionary uses.
Station operating income is not a measure of liquidity or of performance in
accordance with generally accepted accounting principles, and should be viewed
as a supplement to and not a substitute for the results of operations presented
on the basis of accounting principles generally accepted in the United States.



                                                                     CORPORATE
                                              RADIO     TELEVISION   AND OTHER   CONSOLIDATED
                                             --------   ----------   ---------   ------------
                                                                     
YEAR ENDED DECEMBER 31, 2002:
Net operating revenue......................  $102,372    $12,410      $    --      $114,782
Station operating expense..................    64,134      9,216           --        73,350
                                             --------    -------      -------      --------
Station operating income...................    38,238      3,194           --        41,432
Corporate general and administrative.......        --         --        6,022         6,022
Depreciation...............................     4,401      1,432          201         6,034
Amortization...............................       475         24           --           499
                                             --------    -------      -------      --------
Operating profit (loss)....................  $ 33,362    $ 1,738      $(6,223)     $ 28,877
                                             ========    =======      =======      ========
Total assets at December 31, 2002..........  $188,940    $26,167      $11,215      $226,322
                                             ========    =======      =======      ========
Capital additions..........................  $  6,114    $ 1,331      $   114      $  7,559
                                             ========    =======      =======      ========
YEAR ENDED DECEMBER 31, 2001:
Net operating revenue......................  $ 93,094    $10,862      $    --      $103,956
Station operating expense..................    58,317      8,323           --        66,640
                                             --------    -------      -------      --------
Station operating income...................    34,777      2,539           --        37,316
Corporate general and administrative.......        --         --        5,421         5,421
Depreciation...............................     3,961      1,630          172         5,763
Amortization...............................     3,580        391          376         4,347
                                             --------    -------      -------      --------
Operating profit (loss)....................  $ 27,236    $   518      $(5,969)     $ 21,785
                                             ========    =======      =======      ========
Total assets at December 31, 2001..........  $159,694    $26,234      $16,793      $202,721
                                             ========    =======      =======      ========
Capital additions..........................  $  6,521    $ 1,476      $   482      $  8,479
                                             ========    =======      =======      ========
YEAR ENDED DECEMBER 31, 2000:
Net operating revenue......................  $ 89,127    $12,619      $    --      $101,746
Station operating expense..................    53,886      8,601           --        62,487
                                             --------    -------      -------      --------
Station operating income...................    35,241      4,018           --        39,259
Corporate general and administrative.......        --         --        5,101         5,101
Depreciation...............................     3,665      1,572          106         5,343
Amortization...............................     3,015        391          270         3,676
                                             --------    -------      -------      --------
Operating profit (loss)....................  $ 28,561    $ 2,055      $(5,477)     $ 25,139
                                             ========    =======      =======      ========
Total assets at December 31, 2000..........  $140,080    $26,716      $12,628      $179,424
                                             ========    =======      =======      ========
Capital additions..........................  $  3,506    $ 1,403      $   492      $  5,401
                                             ========    =======      =======      ========


                                       F-30

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15.  SUBSEQUENT EVENTS

     On January 8, 2003 we entered into an agreement to acquire an FM radio
station (WINQ-FM) in the Winchendon, Massachusetts market for approximately
$400,000 plus an additional $500,000 if within five years of closing we obtain
approval from the FCC for a city of license change. The radio station is owned
by a company in which a member of our Board of Directors has a 26% beneficial
ownership interest. The purchase price was determined on an arm's length basis.
The transaction, which is subject to the FCC's approval is expected to close
during the second quarter 2003. We began operating this station under the terms
of a TBA on February 1, 2003.

     On February 3, 2003 we entered into an agreement to sell an AM radio
station (WLLM-AM) serving the Lincoln, Illinois market for approximately
$275,000. The transaction, which is subject to the FCC's approval, is expected
to close during the second quarter 2003.

     On March 7, 2003 we entered into an agreement of understanding with Surtsey
whereby we have guaranteed up to $1,250,000 of the debt incurred by Surtsey in
closing on the acquisition of a construction permit for KFJX-TV station in
Pittsburg, Kansas. In consideration for our guarantee, Surtsey has agreed to
enter into various agreements with us relating to the station, including but not
limited to a Shared Services Agreement, Technical Services Agreement, Agreement
for the Sale of Commercial Time, Option Agreement and Broker Agreement. It is
contemplated that such agreements shall be executed on or before September 1,
2003. Under the FCC's ownership rules we are prohibited from owning or having an
attributable or cognizable interest in this station. It is contemplated that
such agreements will be executed on or before September 1, 2003. Surtsey is a
company owned by Edward K. Christian's daughter. See Note 11.

     On March 11, 2003 we acquired an AM radio station (WWIT-AM) serving the
Asheville, North Carolina market for approximately $311,000. We closed on this
transaction after obtaining the initial grant for the license from the FCC. The
grant is still subject to the FCC issuing its final order.

                                       F-31

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)



                              MARCH 31,           JUNE 30,          SEPTEMBER 30,       DECEMBER 31,
                          -----------------   -----------------   -----------------   -----------------
                           2002      2001      2002      2001      2002      2001      2002      2001
                          -------   -------   -------   -------   -------   -------   -------   -------
                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                        
Net operating revenue...  $23,928   $22,793   $29,763   $28,014   $29,783   $26,251   $31,308   $26,898
Station operating
  expense:
  Programming and
     technical..........    6,401     6,060     6,363     6,075     6,753     6,230     7,215     6,094
  Selling...............    5,872     5,902     8,008     7,361     6,620     6,037     7,946     7,124
  Station general and
     administrative.....    4,360     3,976     4,493     3,743     4,495     4,021     4,824     4,017
                          -------   -------   -------   -------   -------   -------   -------   -------
     Total station
       operating
       expense..........   16,633    15,938    18,864    17,179    17,868    16,288    19,985    17,235
                          -------   -------   -------   -------   -------   -------   -------   -------
Station operating income
  before corporate
  general and
  administrative,
  depreciation and
  amortization..........    7,295     6,855    10,899    10,835    11,915     9,963    11,323     9,663
  Corporate general and
     administrative.....    1,292     1,356     1,542     1,539     1,511     1,191     1,677     1,335
  Depreciation..........    1,441     1,383     1,534     1,422     1,523     1,450     1,536     1,508
  Amortization(1).......      125       993       125     1,064       125     1,156       124     1,134
                          -------   -------   -------   -------   -------   -------   -------   -------
Operating profit........    4,437     3,123     7,698     6,810     8,756     6,166     7,986     5,686
Other expenses:
  Interest expense......    1,341     1,803     1,367     1,942     1,344     1,896     1,435     1,396
  Other.................       (7)      358        10       (48)     (150)     (315)      306       (12)
                          -------   -------   -------   -------   -------   -------   -------   -------
Income before income
  tax...................    3,103       962     6,321     4,916     7,562     4,585     6,245     4,302
  Income tax
     provision..........    1,303       428     2,656     2,066     3,176     1,870     2,141     1,836
                          -------   -------   -------   -------   -------   -------   -------   -------
Net income..............  $ 1,800   $   534   $ 3,665   $ 2,850   $ 4,386   $ 2,715   $ 4,104   $ 2,466
                          =======   =======   =======   =======   =======   =======   =======   =======
Basic earnings per
  share.................  $   .09   $   .03   $   .18   $   .14   $   .21   $   .13   $   .20   $   .12
                          =======   =======   =======   =======   =======   =======   =======   =======
Weighted average common
  shares................   20,516    20,443    20,585    20,483    20,667    20,475    20,753    20,488
                          =======   =======   =======   =======   =======   =======   =======   =======
Diluted earnings per
  share.................  $   .09   $   .03   $   .17   $   .14   $   .21   $   .13   $   .19   $   .12
                          =======   =======   =======   =======   =======   =======   =======   =======
Weighted average common
  and common equivalent
  shares................   21,044    20,819    21,250    20,885    21,016    20,910    21,270    20,941
                          =======   =======   =======   =======   =======   =======   =======   =======


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

(1) Effective January 1, 2002 we adopted SFAS No. 142, "Goodwill and Other
    Intangible Assets", which resulted in our goodwill and broadcast licenses no
    longer being amortized.

                                       F-32


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 20, 2003.

                                          SAGA COMMUNICATIONS, INC.

                                          By:    /s/ EDWARD K. CHRISTIAN
                                            ------------------------------------
                                                    Edward K. Christian
                                                         President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 20, 2003.



                 SIGNATURES
                 ----------
                                             




           /s/ EDWARD K. CHRISTIAN                 President, Chief Executive Officer, and
---------------------------------------------               Chairman of the Board
             Edward K. Christian




             /s/ SAMUEL D. BUSH                  Vice President, Chief Financial Officer and
---------------------------------------------                     Treasurer
               Samuel D. Bush




          /s/ CATHERINE A. BOBINSKI               Vice President, Corporate Controller and
---------------------------------------------             Chief Accounting Officer
            Catherine A. Bobinski




            /s/ KRISTIN M. ALLEN                                  Director
---------------------------------------------
              Kristin M. Allen




              /s/ DONALD J. ALT                                   Director
---------------------------------------------
                Donald J. Alt




             /s/ BRIAN W. BRADY                                   Director
---------------------------------------------
               Brian W. Brady




           /s/ JONATHAN FIRESTONE                                 Director
---------------------------------------------
             Jonathan Firestone




            /s/ ROBERT J. MACCINI                                 Director
---------------------------------------------
              Robert J. Maccini




              /s/ GARY STEVENS                                    Director
---------------------------------------------
                Gary Stevens



                                 CERTIFICATIONS

     I, Edward K. Christian, Chief Executive Officer of Saga Communications,
Inc., certify that:

        1.   I have reviewed this annual report on Form 10-K of Saga
             Communications, Inc.;

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

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

        4.   The registrant's other certifying officers and I are responsible
             for establishing and maintaining disclosure controls and procedures
             (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
             registrant and we have:

           a)  designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

           b)  evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

           c)  presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

        5.   The registrant's other certifying officers and I have disclosed,
             based on our most recent evaluation, to the registrant's auditors
             and the audit committee of registrant's board of directors (or
             persons performing the equivalent function):

           a)  all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

           b)  any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

        6.   The registrant's other certifying officers and I have indicated in
             this annual report whether or not there were significant changes in
             internal controls or in other factors that could significantly
             affect internal controls subsequent to the date of our most recent
             evaluation, including any corrective actions with regard to
             significant deficiencies and material weaknesses.

Date: March 20, 2003

                                                /s/ EDWARD K. CHRISTIAN
                                          --------------------------------------
                                                 Chief Executive Officer


                                 CERTIFICATIONS

     I, Samuel D. Bush, Chief Financial Officer of Saga Communications, Inc.,
certify that:

        1.   I have reviewed this annual report on Form 10-K of Saga
             Communications, Inc.;

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

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

        4.   The registrant's other certifying officers and I are responsible
             for establishing and maintaining disclosure controls and procedures
             (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
             registrant and we have:

           a)  designed such disclosure controls and procedures to ensure that
               material information relating to the registrant, including its
               consolidated subsidiaries, is made known to us by others within
               those entities, particularly during the period in which this
               annual report is being prepared;

           b)  evaluated the effectiveness of the registrant's disclosure
               controls and procedures as of a date within 90 days prior to the
               filing date of this annual report (the "Evaluation Date"); and

           c)  presented in this annual report our conclusions about the
               effectiveness of the disclosure controls and procedures based on
               our evaluation as of the Evaluation Date;

        5.   The registrant's other certifying officers and I have disclosed,
             based on our most recent evaluation, to the registrant's auditors
             and the audit committee of registrant's board of directors (or
             persons performing the equivalent function):

           a)  all significant deficiencies in the design or operation of
               internal controls which could adversely affect the registrant's
               ability to record, process, summarize and report financial data
               and have identified for the registrant's auditors any material
               weaknesses in internal controls; and

           b)  any fraud, whether or not material, that involves management or
               other employees who have a significant role in the registrant's
               internal controls; and

        6.   The registrant's other certifying officers and I have indicated in
             this annual report whether or not there were significant changes in
             internal controls or in other factors that could significantly
             affect internal controls subsequent to the date of our most recent
             evaluation, including any corrective actions with regard to
             significant deficiencies and material weaknesses.

Date: March 20, 2003

                                                  /s/ SAMUEL D. BUSH
                                          --------------------------------------
                                                 Chief Financial Officer