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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, 2003

                                  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 Identification No.)
          incorporation or organization)

               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:
                                      NONE



               TITLE OF EACH CLASS                     NAME OF EACH EXCHANGE ON WHICH REGISTERED
               -------------------                     -----------------------------------------
                                                
       Class A Common Stock, $.01 par value                     New York 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.  [X]

     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2)  Yes [X]     No [ ]

     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 $19.45 per share (the
closing price of the Class A Common Stock on June 30, 2003 on the American Stock
Exchange): $357,985,837.

     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 5, 2004
was 18,442,780 and 2,360,370, respectively.

                      DOCUMENTS INCORPORATED BY REFERENCE

     1.  Proxy Statement for the 2004 Annual Meeting of Stockholders (to be
filed with the Securities and Exchange Commission on or before April 29, 2004)
is incorporated by reference in Part III hereof.


                           SAGA COMMUNICATIONS, INC.
                          2003 FORM 10-K ANNUAL REPORT

                               TABLE OF CONTENTS



                                                                               PAGE
                                                                               ----
                                                                         
                                      PART I
Item 1.          Business....................................................     2
Item 2.          Properties..................................................    20
Item 3.          Legal Proceedings...........................................    20
Item 4.          Submission of Matters to a Vote of Security Holders.........    20

                                      PART II
Item 5.          Market for Registrant's Common Equity and Related
                 Stockholder Matters.........................................    21
Item 6.          Selected Financial Data.....................................    23
Item 7.          Management's Discussion and Analysis of Financial Condition
                 and Results of Operations...................................    25
Item 7A.         Quantitative and Qualitative Disclosures about Market
                 Risk........................................................    38
Item 8.          Financial Statements and Supplementary Data.................    38
Item 9.          Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure....................................    38
Item 9A.         Controls and Procedures.....................................    38

                                     PART III
Item 10.         Directors and Executive Officers of the Registrant..........    39
Item 11.         Executive Compensation......................................    39
Item 12.         Security Ownership of Certain Beneficial Owners and
                 Management and Related Stockholder Matters..................    39
Item 13.         Certain Relationships and Related Transactions..............    39
Item 14.         Principal Accountant Fees and Services......................    39

                                      PART IV
Item 15.         Exhibits, Financial Statement Schedules and Reports on Form
                 8-K.........................................................    40
Financial Statements.........................................................   F-1
Signatures...................................................................
Exhibit Index>...............................................................


                                        1


                                     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, 2003, we have entered into the following transactions
regarding acquisitions, dispositions, Time Brokerage Agreements ("TBAs"), and
Shared Services Agreements for stations serving the markets indicated. The
following are included in our results of operations for the year ended December
31, 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 that Surtsey has incurred in closing the
       acquisition of a construction permit for KFJX-TV station in Pittsburg,
       Kansas. The station, a new full power Fox affiliate, went on the air for
       the first time on October 18, 2003. Under the Federal Communications
       Commission's ("FCC's") ownership rules, we are prohibited from owning
       this station. In consideration for our guarantee, Surtsey has entered
       into various agreements with us relating to the station, including a
       Shared Services Agreement, Technical Services Agreement, Agreement for
       the Sale of Commercial Time and Broker Agreement. Surtsey is a
       multi-media company that is 100% owned by the daughter of Edward K.
       Christian, our President and CEO.

     - On March 11, 2003, we acquired an AM radio station (WOXL-AM) serving the
       Asheville, North Carolina market for approximately $350,000.

     - On March 28, 2003, we acquired an FM radio station (WODB-FM) serving the
       Columbus, Ohio market for approximately $10,432,000. We began operating
       this station under the terms of a TBA on January 1, 2003. In conjunction
       with this transaction we sold our AM radio station (WVKO-AM) serving the
       Columbus, Ohio market for approximately $941,000. The buyer began
       brokering time on WVKO under the terms of a TBA on January 1, 2003. We
       recognized a gain on the disposal of this station of approximately
       $425,000.

     - On April 1, 2003, we acquired an FM radio station (WINQ-FM) in the
       Winchendon, Massachusetts market for approximately $290,000 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 was owned by
       a company in which a member of our Board of Directors has a 26%
       beneficial ownership interest, which was disclosed to our Board prior to
       its approval of the transaction. The interested director did not
       participate in voting on this transaction when it came before the Board.
       The purchase price was determined on an arm's length basis. We began
       operating this station under the terms of a TBA on February 1, 2003.

     - On April 1, 2003, we sold an AM radio station (WLLM-AM) serving the
       Lincoln, Illinois market for approximately $275,000. We recognized a gain
       on the sale of the station of approximately $29,000.

     - On October 1, 2003, we acquired two FM radio stations (WJZA-FM Lancaster,
       Ohio and WJZK-FM Richwood, Ohio) serving the Columbus, Ohio market for
       approximately $13,242,000 including approximately $1,063,000 of our Class
       A common stock plus up to an additional $2,000,000 if we obtain approval
       from the FCC for a city of license change.

     - On November 17, 2003, we acquired an AM radio station (WIDE-AM) serving
       the Portland, Maine market for approximately $386,000. We began operating
       this station under the terms of a TBA on August 1, 2003.

                                        2


     - On December 1, 2003, we acquired an FM and AM radio station (WQEL-FM and
       WBCO-AM) serving the Bucyrus, Ohio market for approximately $2,375,000.
       We began operating these stations under the terms of a TBA on October 1,
       2003.

     In addition, the following transactions were either pending at December 31,
2003 or were entered into subsequent to that date:

     - On December 22, 2003, we entered into an agreement to acquire three FM
       radio stations (WRSI-FM, WPVQ-AM and WRSY-FM) serving the Springfield,
       Massachusetts, Greenfield, Massachusetts and Brattleboro, Vermont
       markets, respectively, for approximately $7,000,000. This transaction,
       which is subject to the approval of the FCC, is expected to close during
       the second quarter 2004.

     - On January 21, 2004, we entered into agreements to acquire one FM radio
       station (WOXL-FM) and one AM radio station (WISE-AM), both serving the
       Asheville, North Carolina market, for approximately $10,000,000. We are
       currently providing programming to WISE-AM under a TBA and to WOXL-FM
       under a Sub-TBA. These transactions are subject to the approval of the
       FCC and have been contested; however we expect to get approval and close
       on the acquisitions during the fourth quarter 2004.

     - On January 23, 2004, we entered into an agreement to acquire the
       Minnesota News Network and the Minnesota Farm Network for approximately
       $3,250,000. We acquired these networks on March 1, 2004.

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

BUSINESS

     As of February 29, 2004 we owned and/or operated five television stations
and three low-power television stations serving three markets, three state radio
networks, and forty-nine FM and twenty-seven AM radio stations serving
twenty-one markets, including Columbus, Ohio; Norfolk, Virginia; Manchester, New
Hampshire and Milwaukee, Wisconsin.

     The following table sets forth information about our radio stations and the
markets they serve as of February 29, 2004:



                                                2003        2003                                  FALL 2003
                                               MARKET      MARKET                                  TARGET
                                              RANKING      RANKING                              DEMOGRAPHICS
                                              BY RADIO    BY RADIO                               RANKING (BY       TARGET
STATION                     MARKET(A)        REVENUE(B)   MARKET(B)       STATION FORMAT        LISTENERS)(C)   DEMOGRAPHICS
-------                     ---------        ----------   ---------       --------------        -------------   ------------
                                                                                              
FM:
WSNY.................  Columbus, OH              30           35      Adult Contemporary               2        Women 25-54
WODB.................  Columbus, OH              30           35      Oldies                           7        Adults 45-64
WJZA.................  Columbus, OH              30           35      Smooth Jazz                     11(d)     Adults 35-54
WJZK.................  Columbus, OH              30           35      Smooth Jazz                     11(d)     Adults 35-54
WKLH.................  Milwaukee, WI             34           33      Classic Hits                     1        Men 35-49
WLZR.................  Milwaukee, WI             34           33      Active Rock                      1        Men 18-34
WJMR-FM..............  Milwaukee, WI             34           33      Urban Adult                      2(e)     Women 25-49
                                                                      Contemporary
WFMR.................  Milwaukee, WI             34           33      Classical                        8        Adults 45+
WNOR.................  Norfolk, VA               41           40      Active Rock                      1        Men 18-34
WAFX.................  Norfolk, VA               41           40      Classic Hits                     1        Men 35-49
KSTZ.................  Des Moines, IA            76           91      Hot Adult Contemporary           1        Women 25-44
KIOA.................  Des Moines, IA            76           91      Oldies                           2        Adults 45-64
KAZR.................  Des Moines, IA            76           91      Active Rock                      1        Men 18-34


                                        3




                                                2003        2003                                  FALL 2003
                                               MARKET      MARKET                                  TARGET
                                              RANKING      RANKING                              DEMOGRAPHICS
                                              BY RADIO    BY RADIO                               RANKING (BY       TARGET
STATION                     MARKET(A)        REVENUE(B)   MARKET(B)       STATION FORMAT        LISTENERS)(C)   DEMOGRAPHICS
-------                     ---------        ----------   ---------       --------------        -------------   ------------
                                                                                              
KLTI.................  Des Moines, IA            76           91      Soft Adult Contemporary          2        Women 35-54
WZID.................  Manchester, NH           103          186      Adult Contemporary               1        Adults 25-54
WQLL.................  Manchester, NH           103          186      Oldies                           2        Adults 45-64
WAQY.................  Springfield, MA          102           81      Classic Rock                     1        Men 25-49
WLZX.................  Springfield, MA          102           81      Active Rock                      2(e)     Men 18-34
WHAI.................  Greenfield, MA           N/A          N/A      Adult Contemporary               1        Women 18+
WMGX.................  Portland, ME             116          165      Adult Contemporary               1        Women 25-54
WYNZ.................  Portland, ME             116          165      Oldies                           1        Adults 45-64
WPOR.................  Portland, ME             116          165      Country                          1        Adults 35+
WLRW.................  Champaign, IL            154          216      Hot Adult Contemporary           2        Women 18-44
WIXY.................  Champaign, IL            154          216      Country                          1        Adults 25-54
WKIO.................  Champaign, IL            154          216      Oldies                           4        Adults 45-64
WYMG.................  Springfield, IL          161          206      Classic Hits                   N/R        Men 25-54
WQQL.................  Springfield, IL          161          206      Oldies                         N/R        Adults 45-64
WDBR.................  Springfield, IL          161          206      Contemporary Hits              N/R        Women 18-34
WMHX.................  Springfield, IL          161          206      Adult Contemporary             N/R        Women 25-54
WOXL.................  Asheville, NC            176          160      Oldies                           2        Adults 35-64
WNAX.................  Yankton, SD              209          261      Country                        N/S        Adults 35+
KDEZ.................  Jonesboro, AR            249          280      Classic Rock                     1        Men 25-54
KDXY.................  Jonesboro, AR            249          280      Country                          1        Adults 25-54
KJBX.................  Jonesboro, AR            249          280      Adult Contemporary               2        Women 25-54
WCVQ.................  Clarksville-             259          204      Hot Adult Contemporary           2(e)     Women 25-54
                       Hopkinsville, TN-KY
WVVR.................  Clarksville-             259          204      Country                          3(e)     Adults 25-54
                       Hopkinsville, TN-KY
WZZP.................  Clarksville-             259          204      Active Rock                      2        Men 18-34
                       Hopkinsville, TN-KY
WJOI.................  Springfield, TN          N/A          N/A      Contemporary Christian         N/R        Adults 18+
KISM.................  Bellingham, WA           N/A          N/A      Classic Rock                   N/R        Men 25-49
KAFE.................  Bellingham, WA           N/A          N/A      Adult Contemporary             N/R        Women 25-54
KICD.................  Spencer, IA              N/A          N/A      Country                        N/R        Adults 35+
KLLT.................  Spencer, IA              N/A          N/A      Adult Contemporary             N/R        Women 25-54
KMIT.................  Mitchell, SD             N/A          N/A      Country                        N/R        Adults 35+
KUQL.................  Mitchell, SD             N/A          N/A      Oldies                         N/R        Adults 45-64
WKVT.................  Brattleboro, VT          N/A          N/A      Classic Rock                   N/R        Men 25-49
WKNE.................  Keene, NH                N/A          N/A      Hot Adult Contemporary         N/R        Women 25-54
WOQL.................  Keene, NH                N/A          N/A      Oldies                         N/R        Adults 45-64
WINQ.................  Keene, NH                N/A          N/A      Country                        N/R        Adults 35+
WQEL.................  Bucyrus, OH              N/A          N/A      Classic Hits                   N/R        Men 25-54


(footnotes on next page)

                                        4




                                                2003        2003                                  FALL 2003
                                               MARKET      MARKET                                  TARGET
                                              RANKING      RANKING                              DEMOGRAPHICS
                                              BY RADIO    BY RADIO                               RANKING (BY       TARGET
STATION                     MARKET(A)        REVENUE(B)   MARKET(B)       STATION FORMAT        LISTENERS)(C)   DEMOGRAPHICS
-------                     ---------        ----------   ---------       --------------        -------------   ------------
                                                                                              
AM:
WJYI.................  Milwaukee, WI             34           33      Contemporary Christian         N/A        Adults 18+
WJOI.................  Norfolk, VA               41           40      Nostalgia                      N/A        Adults 45+
KRNT.................  Des Moines, IA            76           91      Nostalgia/Sports                 5        Adults 45+
KPSZ.................  Des Moines, IA            76           91      Contemporary Christian         N/A        Adults 18+
WFEA.................  Manchester, NH           103          186      Adult Standards                  2        Adults 45+
WHNP.................  Springfield, MA          102           81      News/Talk                       14(e)(d)  Adults 35+
WHMP.................  Northampton, MA          102           81      News/Talk                       14(e)(d)  Adults 35+
WHMQ.................  Greenfield, MA           N/A          N/A      News/Talk                       14(e)(d)  Adults 35+
WGAN.................  Portland, ME             116          165      News/Talk                        3        Adults 35+
WZAN.................  Portland, ME             116          165      News/Talk                        8(e)     Men 35-54
WBAE.................  Portland, ME             116          165      Nostalgia                      N/A        Adults 45+
WVAE.................  Portland, ME             116          165      Nostalgia/Sports               N/A        Adults 35+
WTAX.................  Springfield, IL          161          206      News/Talk                      N/S        Adults 35+
WISE.................  Asheville, NC            176          160      News/Talk                        7(e)     Adults 35+
WOXL-AM..............  Asheville, NC            176          160      Oldies                           2(d)     Adults 35-64
WNAX.................  Yankton, SD              209          261      News/Talk                      N/S        Adults 35+
WJQI.................  Clarksville-             259          204      Contemporary Christian         N/A        Adults 18+
                       Hopkinsville, TN-KY
WKFN.................  Clarksville-             259          204      Sports                         N/A        Men 18+
                       Hopkinsville, TN-KY
WJQY.................  Springfield, TN          N/A          N/A      Contemporary Christian         N/R        Adults 18+
KGMI.................  Bellingham, WA           N/A          N/A      News/Talk                      N/R        Adults 35+
KPUG.................  Bellingham, WA           N/A          N/A      Sports/Talk                    N/R        Men 18+
KBAI.................  Bellingham, WA           N/A          N/A      Adult Standards                N/R        Adults 45+
KICD.................  Spencer, IA              N/A          N/A      News/Talk                      N/R        Adults 35+
WKVT.................  Brattleboro, VT          N/A          N/A      News/Talk                      N/R        Adults 35+
WKBK.................  Keene, NH                N/A          N/A      News/Talk                      N/R        Adults 35+
WZBK.................  Keene, NH                N/A          N/A      News/Talk                      N/R        Men 35-54
WBCO.................  Bucyrus, OH              N/A          N/A      Full Service/Oldies            N/R        Adults 45+


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


  
(a)  Actual city of license may differ from metropolitan market
     actually served.
(b)  Derived from Investing in Radio 2003 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.


                                        5


     The following table sets forth information about our television stations
and the markets they serve as of February 29, 2004:



                                          2003 MARKET                           FALL 2003
                                          RANKING BY                         STATION RANKING
                                         NUMBER OF TV         STATION         (BY NUMBER OF
STATION             MARKET(A)            HOUSEHOLDS(B)       AFFILIATE         VIEWERS)(B)
-------             ---------            -------------   -----------------   ---------------
                                                                 
KOAM.....  Joplin, MO -- Pittsburg, KS        145        CBS                     1
KFJX(d)... Joplin, MO -- Pittsburg, KS        145        FOX                    N/A
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               5
KXTS-LP... Victoria, TX                       204        NBC                     4


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


  
(a)  Actual city of license may differ from metropolitan market
     actually served.
(b)  Derived from Investing in Television Market Report 2003,
     based on A.C. Nielson ratings and data.
(c)  Station operated under the terms of a TBA.
(d)  Station operated under the terms of a Shared Services
     Agreement.
N/A  Information is currently unavailable.


STRATEGY

     Our strategy is to operate top billing radio and television stations in
mid-sized markets. We seek 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 February
29, 2004, we believe 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, 15 of our 32 FM 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 or viewer 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, two Fox affiliates, 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 each
of our television markets.

     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

                                        6


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
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

     Our primary source of revenue is 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
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 $109,666,000 or 81% of our gross revenue for the year ended
December 31, 2003 (approximately $102,849,000 or 80% in fiscal 2002 and
approximately $93,021,000 or 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 2003 was
approximately $25,470,000 or 19% of our

                                        7


gross revenue (approximately $25,111,000 or 20% in fiscal 2002 and approximately
$21,678,000 or 19% 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 and satellite 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.

SEASONALITY

     Our revenue varies throughout the year. Advertising expenditures, our
primary source of revenue, is generally lowest is the first quarter.

EMPLOYEES

     As of December 31, 2003, we had approximately 830 full-time employees and
359 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.

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, or
furnish it to, the Securities and Exchange Commission (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

                                        8


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 by third parties for the FCC 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.

     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:



                                                  POWER          EXPIRATION DATE OF
STATION                 MARKET(1)               (WATTS)(2)       FCC AUTHORIZATION
-------                 ---------               ----------       ------------------
                                                        
FM:
WSNY.......  Columbus, OH                          50,000        October 1, 2004
WODB.......  Columbus, OH                           6,000        October 1, 2004
WJZA.......  Columbus, OH                           6,000        October 1, 2004
WJZK.......  Columbus, OH                           6,000        October 1, 2004
WQEL.......  Bucyrus, OH                            3,000        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, 2011
WAFX.......  Norfolk, VA                          100,000        October 1, 2011
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




(footnotes follow tables)

                                        9




                                                  POWER          EXPIRATION DATE OF
STATION                 MARKET(1)               (WATTS)(2)       FCC AUTHORIZATION
-------                 ---------               ----------       ------------------
                                                        
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.......  Springfield, 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.......  Clarksville,TN/Hopkinsville, KY      100,000        August 1, 2004
WZZP.......  Clarksville,TN/Hopkinsville, KY        6,000        August 1, 2004
WVVR.......  Clarksville,TN/Hopkinsville, KY      100,000        August 1, 2004
KMIT.......  Mitchell, SD                         100,000        April 1, 2005
KUQL.......  Mitchell, SD                         100,000        April 1, 2005
WHAI.......  Greenfield, MA                         3,000        April 1, 2006
WKNE.......  Keene, NH                             50,000        April 1, 2006
WRSI(6)....  Northampton, MA                        3,000        April 1, 2006
WRSY(6)....  Brattleboro, VT                        3,000        April 1, 2006
WPVQ(6)....  Greenfield, MA                         3,000        April 1, 2006
WKVT.......  Brattleboro, VT                        6,000        April 1, 2006
WOQL.......  Keene, NH                              6,000        April 1, 2006
WOXL(6)(7)(8)... Asheville, NC                     25,000        N/A(8)
WINQ(9)....  Keene, NH                              3,000        April 1, 2006
WEGI(10)...  Springfield/Clarksville, 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




                                                  POWER          EXPIRATION DATE OF
STATION                 MARKET(1)               (WATTS)(2)       FCC AUTHORIZATION
-------                 ---------               ----------       ------------------
                                                        
AM:
WJYI.......  Milwaukee, WI                          1,000        December 1, 2004
WJOI.......  Norfolk, VA                            1,000        October 1, 2011
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
WVAE.......  Portland, ME                           1,000        April 1, 2006
WHNP.......  Springfield, MA                        2,500(5)     April 1, 2006




(footnotes follow tables)

                                        10




                                                  POWER          EXPIRATION DATE OF
STATION                 MARKET(1)               (WATTS)(2)       FCC AUTHORIZATION
-------                 ---------               ----------       ------------------
                                                        
WHMP.......  Northampton, MA                        1,000        April 1, 2006
WFEA.......  Manchester, NH                         5,000        April 1, 2006
WTAX.......  Springfield, IL                        1,000        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
WKFN.......  Fort Campbell, KY                      1,000(5)     August 1, 2004
WDXN.......  Clarksville, TN                        1,000(5)     August 1, 2004
WHMQ.......  Greenfield, MA                         1,000        April 1, 2006
WKBK.......  Keene, NH                              5,000        April 1, 2006
WZBK.......  Keene, NH                              1,000(5)     April 1, 2006
WKVT.......  Brattleboro, VT                        1,000        April 1, 2006
WISE(6)(7)... Asheville, NC                         5,000(5)     December 1, 2011
WOXL
  (AM).....  Asheville, NC                          5,000(5)     December 1, 2011
WJQY.......  Springfield, TN                        1,000(5)     August 1, 2004
WBCO.......  Bucyrus, OH                              500(5)     October 1, 2004
TV/CHANNEL:
KOAM (Ch
  7).......  Joplin, MO/Pittsburg, KS             316,000(vis),  June 1, 2006
                                                   61,600(aur)
KAVU (Ch
  25)......  Victoria, TX                       2,140,000(vis),  August 1, 2006
                                                  214,000(aur)
KVCT(3) (Ch
  19)......  Victoria, TX                         155,000(vis),  August 1, 2006
                                                   15,500(aur)
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),  June 1, 2005
                                                  549,000(aur)


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

 (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, KPSZ (AM), KPUG (AM), KGMI (AM), KBAI (AM), WZBK
     (AM) and WBCO (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.
                                        11


 (6) Pending acquisition.

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

 (8) WOXL-FM operates on program test authority under a construction permit. An
     application is pending for a new license.

 (9) Holds a construction permit for 6,000 watts.

(10) An application is pending to relocate WEGI (formerly known as WJOI) to the
     Clarksville, TN, market (Oak Grove, KY).

     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 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 the FCC announces
the required termination date when it conducts its review of the rules in 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).

                                        12


     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. As a result, on July 2, 2003, the FCC
released a "Report and Order and Notice of Proposed Rulemaking" in MB Docket No.
02-277 that significantly modified the FCC's multiple ownership rules. The new
multiple ownership rules expand the opportunities for newspaper-broadcast
combinations, as follows:

          - In markets with three or fewer TV stations, no cross-ownership is
            permitted among TV, radio and newspapers. A company may obtain a
            waiver of that ban if it can show that the television station does
            not serve the area served by the cross-owned property (i.e. the
            radio station or the newspaper).

          - In markets with between 4 and 8 TV stations, combinations are
            limited to one of the following:

             (A) A daily newspaper; one TV station; and up to half of the radio
        station limit for that market (i.e. if the radio limit in the market is
        6, the company can only own 3) OR

             (B) A daily newspaper; and up to the radio station limit for that
        market; (i.e. no TV stations) OR

             (C) Two TV stations (if permissible under local TV ownership rule);
        up to the radio station limit for that market (i.e. no daily
        newspapers).

          - In markets with nine or more TV stations, the FCC eliminated the
            newspaper-broadcast cross-ownership ban and the television-radio
            cross-ownership ban.

Numerous parties, including the Company, have sought reconsideration of the new
rules. In Prometheus Radio v. FCC, Case No. 03-3388, on September 3, 2003, the
U.S. Court of Appeals for the Third Circuit granted a stay of the effective date
of the FCC's new rules. If the new rules take effect, they could restrict the
Company's ability to acquire additional radio and television stations in some
markets and could require the Company to terminate its arrangements with Surtsey
Productions, Inc. The Court and FCC proceedings are ongoing and we cannot
predict what action, if any, the Court may take or what action the FCC may take
to modify its rules. The statements herein are based solely on the FCC's
multiple ownership rules in effect as of the date hereof and do not include any
forward-looking statements concerning compliance with any future multiple
ownership 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).


                                        13


     The FCC has eliminated its previous scrutiny of some proposed acquisitions
and mergers on antitrust grounds and that was manifest in 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. Notwithstanding this
action, 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 April 2003, the FCC issued a Report and Order resolving a proceeding in
which 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 adopted a proposal to
allow applicants for NCE stations to submit applications for non-reserved
spectrum in a filing window, subject to being returned as unacceptable for
filing if there is any mutually exclusive application for a commercial station,
and to allow applicants for AM stations and secondary services a prior
opportunity to resolve their mutually exclusive applications through
settlements. Applicants for NCE stations in the full-power FM and TV services
also have an opportunity to reserve channels at the allocation stage of the
licensing process we use for those channels; however, this opportunity is not
available to commercial applicants such as the Company.

     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.

     In 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.

     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
                                        14


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 quarterly a report with the FCC on these programs and related
matters. Television stations are required 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.  In March 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 part outreach program: 1.) widely
disseminate information concerning each full-time (30 hours or more) job
vacancy, except for vacancies filled in exigent circumstances; 2.) provide
notice of each full-time job vacancy to recruitment organizations that have
requested such notice; and 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 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.

                                        15


     Historically, 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
entered 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. In the order adopting the new multiple
ownership rules, the FCC stated that it would issue a future Notice of Proposed
Rulemaking to seek comment on whether or not to attribute television joint sales
agreements ("JSA") for purposes of the FCC's multiple ownership rules. If the
FCC decides to attribute JSA's, we would be required to terminate the Agreement
for the Sale of Commercial Time.

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, the 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
                                        16


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. A DTV station must provide
a DTV signal at least 50% of the time it transmits an analog signal; beginning
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, all of which serve the Victoria, Texas market. None of the stations
qualifies under the FCC's established criteria for Class A Status.

     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,

                                        17


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. In February 2004, the FCC
submitted a report to the U.S. Congress recommending the elimination of minimum
distance separation requirements for LPFM stations operating on third-adjacent
channels to full power and other FM broadcast stations. 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. The satellite radio
systems provide multiple channels of audio programming in exchange for the
payment of a subscription fee. Because the DARS service is a new factor, 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.  In October 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 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.
                                        18


     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.

     In January 1999, the FCC 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. In February 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.......................  59    President, Chief Executive Officer and
                                                  Chairman; Director
Steven J. Goldstein.......................  47    Executive Vice President and Group Program
                                                  Director
Warren Lada...............................  49    Senior Vice President, Operations
Samuel D. Bush............................  46    Senior Vice President, Chief Financial
                                                  Officer and Treasurer
Marcia K. Lobaito.........................  55    Vice President, Corporate Secretary, and
                                                  Director of Business Affairs
Catherine A. Bobinski.....................  44    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.

     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.

                                        19


     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, 2003 the studios and offices of 21 of our 28 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 4 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 substantially
all of our assets and those of our subsidiaries.

ITEM 3.  LEGAL PROCEEDINGS

     We currently and from time to time are involved in litigation incidental to
the conduct of our business. We are not a party to any lawsuit or proceeding
which, in the opinion of management, is likely to have a material adverse effect
on our financial position, cash flows or results of operations.

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

     Not applicable.

                                        20


                                    PART II

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

     Until January 20, 2004, our Class A Common Stock traded on the American
Stock Exchange. Thereafter our Class A Common Stock began trading on the New
York 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 (all
amounts are reflective of stock splits):



YEAR                                                           HIGH     LOW
----                                                          ------   ------
                                                                 
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
2003:
  First Quarter.............................................  $19.68   $16.20
  Second Quarter............................................  $21.84   $17.11
  Third Quarter.............................................  $20.60   $17.10
  Fourth Quarter............................................  $19.79   $17.20


     As of February 29, 2004, there were approximately 145 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 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 and note 4 of the
Notes to Consolidated Financial Statements.

                                        21


SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN INFORMATION

     The following table sets forth as of December 31, 2003, 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:



                                       (A)                    (B)                      (C)
                               --------------------   --------------------   -----------------------
                                                                              NUMBER OF SECURITIES
                               NUMBER OF SHARES TO                           REMAINING AVAILABLE FOR
                                  BE ISSUED UPON        WEIGHTED-AVERAGE         FUTURE ISSUANCE
                                   EXERCISE OF         EXERCISE PRICE OF          UNDER EQUITY
                               OUTSTANDING OPTIONS    OUTSTANDING OPTIONS,     COMPENSATION PLANS
PLAN CATEGORY                  WARRANTS AND RIGHTS    WARRANTS AND RIGHTS    (EXCLUDING COLUMN (A))
-------------                  --------------------   --------------------   -----------------------
                                                                    
Equity Compensation Plans
  Approved by Stockholders:
  Employee Stock Purchase
     Plan....................              --               $    --                 1,482,875
  1992 Stock Option Plan.....       1,728,645               $12.540                        --
  2003 Stock Option Plan.....       1,006,016               $19.220                   993,894
  1997 Non-Employee Director
     Stock Option Plan.......          17,234               $  .008                   172,944
Equity Compensation Plans Not
  Approved by Stockholders:
  None
                                    ---------                                       ---------
Total........................       2,751,895                                       2,649,803
                                    =========                                       =========


RECENT SALES OF UNREGISTERED SECURITIES

     On October 1, 2003 we issued a total of 55,740 shares of our Class A Common
Stock to Skyway Broadcasting Company, Inc., EXL Management, Ltd., and Scantland
Broadcasting, Ltd., in connection with our acquisition of two FM radio stations
(WJZA-FM Lancaster, Ohio and WJZK-FM Richwood, Ohio) serving the Columbus, Ohio
market for total aggregate cash and stock consideration of approximately
$13,242,000, plus up to an additional $2,000,000 upon the occurrence of certain
events.

     On November 1, 2002, we issued a total of 108,894 shares of our Class A
Common Stock to two individuals associated with Pressly Partnership Productions,
Inc. in connection with our acquisition of three FM radio stations (KDEZ-FM,
KDXY-FM and KJBX-FM) serving the Jonesboro, Arkansas market for total aggregate
cash and stock consideration of approximately $12,745,000.

     On February 1, 2001, we issued a total of 63,872 shares of our Class A
Common Stock to five individuals associated with WRUS, Inc. in connection with
our acquisition of an FM radio station (WVVR-FM) serving the Clarksville,
Tennessee/Hopkinskville, Kentucky market for total aggregate cash and stock
consideration of approximately $7,000,000.

     We relied upon Section 4(2) of the Securities Act of 1933 in connection
with the issuance of these securities.

                                        22


ITEM 6.  SELECTED FINANCIAL DATA



                                                            YEARS ENDED DECEMBER 31,
                                  -----------------------------------------------------------------------------
                                  2003(1)(2)(3)   2002(1)(2)(4)   2001(1)(2)(5)   2000(1)(2)(6)   1999(1)(2)(7)
                                  -------------   -------------   -------------   -------------   -------------
                                                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                                                   
OPERATING DATA:
Net Operating Revenue...........    $121,297        $114,782        $103,956        $101,746         $90,020
Station Operating Expense
  (excluding depreciation,
  amortization, corporate
  general and administrative)...      79,280          73,350          66,640          62,487          56,552
Depreciation and Amortization...       7,002           6,533          10,110           9,019           8,022
Corporate General and
  Administrative................       6,450           6,022           5,421           5,101           5,095
                                    --------        --------        --------        --------         -------
Operating Income................      28,565          28,877          21,785          25,139          20,351
Interest Expense................       4,779           5,487           7,037           6,793           5,988
Net Income......................    $ 13,884        $ 13,955        $  8,565        $  8,650         $ 8,552
Basic Earnings Per Share........    $    .67        $    .68        $    .42        $    .42         $   .42
Cash Dividends Declared Per
  Common Share..................          --              --              --              --              --
Weighted Average Common Shares..      20,817          20,631          20,473          20,543          20,394
Diluted Earnings Per Share......    $    .65        $    .66        $    .41        $    .41         $   .41
Weighted Average Common Shares
  and Common Equivalents........      21,301          21,209          20,888          20,990          20,831




                                                                     DECEMBER 31,
                                         --------------------------------------------------------------------
                                         2003(1)(2)(3)   2002(1)(2)(4)   2001(1)(5)   2000(1)(6)   1999(1)(7)
                                         -------------   -------------   ----------   ----------   ----------
                                                                    (IN THOUSANDS)
                                                                                    
BALANCE SHEET DATA:
  Working Capital......................    $ 25,353        $  5,517       $ 24,083     $ 20,793     $ 22,756
  Net Property and Equipment...........      62,369          60,161         55,169       47,672       44,455
  Net Intangible and Other Assets......     161,112         134,713        112,033      100,390       84,901
  Total Assets.........................     262,343         226,322        202,721      179,424      162,496
  Long-term Debt Including Current
    Portion............................     121,205         105,228        105,501       94,641       85,774
  Stockholders' Equity.................     107,244          93,059         75,062       65,618       59,102


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

(1) All periods presented include the weighted average shares and common
    equivalents related to certain stock options. In each of June 2002 and
    December 1999 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 adoption of SFAS No. 142 "Accounting for Goodwill and Other
    Intangible Assets" on January 1, 2002, which resulted in our goodwill and
    broadcast licenses no longer being amortized for the years ended December
    31, 2003 and 2002. Proforma net income, basic and diluted earnings per share
    for the years ended December 31, 2001, 2000, and 1999 for the adoption of
    SFAS 142, was $10,580, $10,326 and $10,030; $.52, $.50 and $.49; $.51, $.49
    and $.48; respectively.

(3) Reflects the results of WOXL-AM, acquired in March 2003; WODB, acquired in
    March 2003 and the results of a time brokerage agreement ("TBA") for WODB
    which began in January 2003; the disposition of WVKO in May 2003 and the
    results of the buyer brokering time on WVKO under a TBA which began in
    January 2003; WINQ acquired in April 2003, and the results of a TBA for
    WINQ, which began in February 2003; the disposition of WLLM in April 2003;
    WJZA and WJZK acquired in October 2003; the results of a Shared Services
    Agreement, Technical Services Agreement, Agreement for the Sale of
    Commercial Time, Option Agreement and Broker Agreement for KFJX, which began
    in October 2003; WIDE acquired in November 2003 and the results of a TBA for
    WIDE which began in August 2003; and WQEL and WBCO acquired in December 2003
    and the results of a TBA for WQEL and WBCO which began in October 2003.

                                        23


(4) 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-FM and WISE,
    which began in November 2002.

(5) 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.

(6) 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.

(7) 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.

                                        24


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 1.
Business, Item 6. Selected Financial Data and the financial statements and notes
thereto of Saga Communications, Inc. and its subsidiaries contained elsewhere
herein.

GENERAL

     We are a broadcast company primarily engaged in acquiring, developing and
operating radio and television stations. We actively seek and explore
opportunities for expansion through the acquisition of additional broadcast
properties. We review acquisition opportunities on an ongoing basis.

     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 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 and ratings. 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.

     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.

     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 market's sales staff. In 2003, approximately 79% of our gross
broadcast 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 markets.

     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.

     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.

     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 involves the cost of
acquiring certain syndicated programming.

                                        25


     Historically, our Columbus, Ohio, Manchester, New Hampshire, Milwaukee,
Wisconsin, and Norfolk, Virginia markets have each represented 15% or more of
our operating income. During the years ended December 31, 2003, 2002 and 2001,
these markets when combined represented approximately 81%, 81% and 93%,
respectively, of our operating income. While radio revenues in each of the
Columbus, Manchester, Milwaukee and Norfolk markets have remained relatively
stable historically, an adverse change in any of these radio markets or our
relative market position in those markets could have a significant impact on our
operating results as a whole. The following tables describe the percentage of
our operating income represented by each of these markets.



                                                                    PERCENTAGE OF
                                                            CONSOLIDATED OPERATING INCOME
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                          ----------------------------------
MARKET:                                                    2003          2002          2001
-------                                                   ------        ------        ------
                                                                             
Columbus, Ohio..........................................    17%           19%           23%
Manchester, New Hampshire...............................    15%           16%           17%
Milwaukee, Wisconsin....................................    32%           30%           36%
Norfolk, Virginia.......................................    17%           16%           16%


     We utilize certain financial measures that are not calculated in accordance
with generally accepted accounting principles (GAAP) to assess our financial
performance. For example, we evaluate the performance of our markets based on
"station operating income" (operating income plus corporate general and
administrative, depreciation and amortization). Station operating income is
generally recognized by the broadcasting industry as a measure of performance,
is used by analysts who report on the performance of broadcasting groups to
provide a meaningful comparison of operating performance between companies in
the broadcasting industry and it serves as an indicator of the market value of a
group of stations. In addition, we use it to evaluate individual stations,
market-level performance, overall operations and as a primary measure for
incentive based compensation of executives and other members of management.
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 GAAP, and should be viewed as a
supplement to and not a substitute for the results of operations presented on a
GAAP basis.

     During the years ended December 31, 2003, 2002 and 2001, the Columbus,
Ohio, Manchester, New Hampshire, Milwaukee, Wisconsin, and Norfolk, Virginia
markets when combined represented approximately 58%, 59% and 60%, respectively,
of our station operating income (operating income plus corporate general and
administrative, depreciation and amortization). The following tables describe
the percentage of our station operating income represented by each of these
markets.



                                                                    PERCENTAGE OF
                                                             STATION OPERATING INCOME(*)
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                          ----------------------------------
MARKET:                                                    2003          2002          2001
-------                                                   ------        ------        ------
                                                                             
Columbus, Ohio..........................................    12%           14%           15%
Manchester, New Hampshire...............................    11%           11%           11%
Milwaukee, Wisconsin....................................    23%           22%           23%
Norfolk, Virginia.......................................    12%           12%           11%


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

(* -- Operating income plus corporate general and administrative, depreciation
      and amortization)

                                        26


RESULTS OF OPERATIONS

     The following tables summarize our results of operations for the three
years ended December 31, 2003.

     Consolidated Results of Operations



                                                                        2003 VS. 2002             2002 VS. 2001
                                     YEARS ENDED DECEMBER 31,      -----------------------   -----------------------
                                  ------------------------------   $ INCREASE   % INCREASE   $ INCREASE   % INCREASE
                                    2003       2002       2001     (DECREASE)   (DECREASE)   (DECREASE)   (DECREASE)
                                  --------   --------   --------   ----------   ----------   ----------   ----------
                                          (IN THOUSANDS)
                                                                                     
Net operating revenue...........  $121,297   $114,782   $103,956     $6,515         5.68%     $10,826        10.41%
Station operating expense*......    79,280     73,350     66,640      5,930         8.08%       6,710        10.07%
Corporate G&A...................     6,450      6,022      5,421        428         7.11%         601        11.09%
Depreciation....................     6,544      6,034      5,763        510         8.45%         271         4.70%
Amortization....................       458        499      4,347        (41)       (8.22)%     (3,848)      (88.52)%
                                  --------   --------   --------     ------       ------      -------       ------
Operating income................    28,565     28,877     21,785       (312)       (1.08)%      7,092        32.55%
Interest expense................     4,779      5,487      7,037       (708)      (12.90)%     (1,550)      (22.03)%
Other (income) expense..........     1,131        159        (17)       972       611.32%         176          N/M
Income taxes....................     8,771      9,276      6,200       (505)       (5.44)%      3,076        49.61%
                                  --------   --------   --------     ------       ------      -------       ------
Net income......................  $ 13,884   $ 13,955   $  8,565     $  (71)        (.51)%    $ 5,390        62.93%
                                  ========   ========   ========     ======       ======      =======       ======
Earnings per share:
Basic...........................  $    .67   $    .68   $    .42     $ (.01)       (1.75)%    $   .26        61.68%
                                  ========   ========   ========     ======                   =======
Diluted.........................  $    .65   $    .66   $    .41     $ (.01)       (1.24)%    $   .25        60.46%
                                  ========   ========   ========     ======                   =======


     Radio Broadcasting Segment



                                                                        2003 VS. 2002             2002 VS. 2001
                                     YEARS ENDED DECEMBER 31,      -----------------------   -----------------------
                                   -----------------------------   $ INCREASE   % INCREASE   $ INCREASE   % INCREASE
                                     2003       2002      2001     (DECREASE)   (DECREASE)   (DECREASE)   (DECREASE)
                                   --------   --------   -------   ----------   ----------   ----------   ----------
                                          (IN THOUSANDS)
                                                                                     
Net operating revenue............  $109,065   $102,372   $93,094     $6,693       6.54%        $9,278         9.97%
Station operating expense*.......    69,685     64,134    58,317      5,551       8.66%         5,817         9.97%
Corporate G&A....................        --         --        --         --         N/A            --          N/A
Depreciation.....................     4,785      4,401     3,961        384       8.73%           440        11.11%
Amortization.....................       444        475     3,580        (31)      (6.53)%      (3,105)      (86.73)%
                                   --------   --------   -------     ------       -----        ------       ------
Operating income.................  $ 34,151   $ 33,362   $27,236     $  789       2.36%        $6,126        22.49%
                                   ========   ========   =======     ======       =====        ======       ======


     Television Broadcasting Segment



                                                                        2003 VS. 2002             2002 VS. 2001
                                      YEARS ENDED DECEMBER 31,     -----------------------   -----------------------
                                     ---------------------------   $ INCREASE   % INCREASE   $ INCREASE   % INCREASE
                                      2003      2002      2001     (DECREASE)   (DECREASE)   (DECREASE)   (DECREASE)
                                     -------   -------   -------   ----------   ----------   ----------   ----------
                                           (IN THOUSANDS)
                                                                                     
Net operating revenue..............  $12,232   $12,410   $10,862     $(178)        (1.43)%     $1,548        14.25%
Station operating expense*.........    9,595     9,216     8,323       379          4.11%         893        10.73%
Corporate G&A......................       --        --        --        --           N/A           --          N/A
Depreciation.......................    1,560     1,432     1,630       128          8.94%        (198)      (12.15)%
Amortization.......................       14        24       391       (10)       (41.67)%       (367)      (93.86)%
                                     -------   -------   -------     -----        ------       ------       ------
Operating income...................  $ 1,063   $ 1,738   $   518     $(675)       (38.84)%     $1,220       235.52%
                                     =======   =======   =======     =====        ======       ======       ======


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

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

 N/A Not applicable

N/M Not meaningful

                                        27


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     For the year ended December 31, 2003 net operating revenue was $121,297,000
compared with $114,782,000 for the year ended December 31, 2002, an increase of
$6,515,000 or 6%. Approximately $6,493,000 of the increase was attributable to
revenue generated by stations which we did not own or operate for the entire
comparable period in 2002. Net operating revenue generated by stations that we
owned and operated for the entire comparable period ("same station") remained
relatively consistent (increased by approximately $22,000).

     Station operating expense (i.e., programming, technical, selling, and
station general and administrative expenses) increased by $5,930,000 or 8% to
$79,280,000 for the year ended December 31, 2003, compared with $73,350,000 for
the year ended December 31, 2002. Of the total increase, approximately
$5,897,000 or 99% 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 2002.
Station operating expense increased by approximately $33,000 or .1% on a same
station basis.

     Operating income for the year ended December 31, 2003 was $28,565,000
compared to $28,877,000 for the year ended December 31, 2002, a decrease of
$312,000 or 1%. The decrease was the result of the increase in net operating
revenue, offset by the increase in station operating expense, and a $41,000 or
8% decrease in amortization expense offset by a $510,000 or 8% increase in
depreciation expense, and a $428,000 or 7% increase in corporate general and
administrative charges. The increase in depreciation expense was principally the
result of recent acquisitions. The increase in corporate general and
administrative charges was primarily attributable to increases in legal,
accounting, consulting and employee benefit related expenses. Of the total
increase in corporate general and administrative expense, approximately $275,000
or 64% was attributable to additional legal and tax consulting fees related to a
conversion of a number of our subsidiaries from C-Corporations to Limited
Liability Company's ("LLC's") as part of a state tax saving strategy. The
remainder of the increase in corporate general and administrative expenses were
a primarily a result of Sarbanes-Oxley related consulting fees and represents a
2% increase.

     We generated net income of approximately $13,884,000 ($0.65 per share on a
fully diluted basis) during the year ended December 31, 2003 compared with
$13,955,000 ($0.66 per share on a fully diluted basis) for the year ended
December 31, 2002, a decrease of approximately $71,000 or 1%. The decrease was
the result of the decrease in operating income discussed above, and a $708,000
decrease in interest expense, offset by a $972,000 increase in other expense,
and a $505,000 decrease in income tax expense. The decrease in interest expense
was the result of lower interest rates over the prior year, and the expiration
of our swap agreements in September 2003. The increase in other expense was
primarily attributable to a $1,206,000 charge incurred for the write-off of
unamortized debt issuance costs in conjunction with our previous credit
agreement offset by gains recognized on the sale of two of our AM radio stations
in the Columbus, Ohio and Springfield, Illinois markets. See Notes 4 and 10 of
the Notes to the Consolidated Financial Statements.

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 the entire comparable period, representing a 5% increase
in same station net operating revenue. The overall increase same station 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 same station 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
                                        28


$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 same
station 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 of 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 due to recent acquisitions, as well as approximately $200,000 in legal fees
incurred in connection with an acquisition, which was not consummated.

     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.

LIQUIDITY AND CAPITAL RESOURCES

  DEBT ARRANGEMENTS AND DEBT SERVICE REQUIREMENTS

     As of December 31, 2003, we had $121,205,000 of long-term debt (including
the current portion of $45,000) outstanding and approximately $79,900,000 of
unused borrowing capacity under our Credit Agreement at December 31, 2003.

     On July 29, 2003, we entered into a new credit agreement (the "Credit
Agreement") to refinance our outstanding debt under the Old Credit Agreement.
Our current financing facility (the "Facility") is a $200,000,000 reducing
revolving line of credit (the "Reducing Revolver"). The Facility matures July
29, 2010. Our indebtedness under the Facility 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.

     The Reducing Revolver may be used for general corporate purposes, including
working capital, capital expenditures, permitted acquisition and related
transaction expenses and permitted stock buybacks. On March 31, 2006, the
Revolving Commitments (as defined in the Credit Agreement) will be permanently
reduced quarterly in amounts ranging from 3.125% to 12.5% of the total Revolving
Commitments in effect on March 31, 2006. Any outstanding balance under the
Reducing Revolver will be due on the maturity date of July 29, 2010. In
addition, the Revolving Commitments shall be further reduced by specified
percentages of Excess Cash Flow (as defined in the New Credit Agreement) based
on leverage ratios.

     Interest rates under the Facility are payable, at our option, at
alternatives equal to LIBOR plus 1.375% to 2.0% or the Agent bank's base rate
plus 0.125% to 0.75%. 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 unused portion of the Facility.

     The Credit Agreement contains a number of financial covenants (all of which
we were in compliance with at December 31, 2003) 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.
                                        29


     Periodically we enter into interest rate swap agreements to reduce our risk
of rising interest rates. Our swap agreements, which expired in September 2003,
were used to convert the variable Eurodollar interest rate of a portion of our
bank borrowings to a fixed interest rate. At December 31, 2003 we had no
interest rate swap agreements in place.

     Net receipts or payments under the agreements are recognized as an
adjustment to interest expense. Approximately $756,000 in additional interest
expense was recognized as a result of these interest rate swap agreements for
the year ended December 31, 2003. An aggregate increase in interest expense of
approximately $1,736,000 had been recognized since the inception of the
agreements.

     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. At December 31, 2003 there was $1,060,000
outstanding under this agreement. We do not have any recourse provision in
connection with our guarantee that would enable us to recover any amounts paid
under the guarantee. Under FIN 45, all guarantees should be recorded at fair
value. As a result, at December 31, 2003 we have recorded $1,060,000 in debt and
$1,060,000 in intangible assets, primarily broadcast licenses. The station, a
new full power Fox affiliate, went on the air for the first time on October 18,
2003. In consideration for our guarantee, Surtsey has entered 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.

  SOURCES AND USES OF CASH

     During the years ended December 31, 2003, 2002 and 2001, we had net cash
flows from operating activities of $27,382,000, $25,482,000 and $21,258,000,
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.

     In addition, the following transactions were either pending at December 31,
2003 or were entered into subsequent to that date which we expect to finance
through funds generated from operations and additional borrowings under our
Credit Agreement:

     - On December 22, 2003, we entered into an agreement to acquire three FM
       radio stations (WRSI-FM, WPVQ-FM and WRSY-FM), serving the Springfield,
       Massachusetts, Greenfield, Massachusetts and Brattleboro, Vermont
       markets, respectively, for approximately $7,000,000. This transaction,
       which is subject to the approval of the FCC, is expected to close during
       the second quarter 2004.

     - On January 21, 2004, we entered into agreements to acquire one FM radio
       station (WOXL-FM) and one AM radio station (WISE-AM), both serving the
       Asheville, North Carolina market, for approximately $10,000,000. We are
       currently providing programming to WISE-AM under a Time Brokerage
       Agreement ("TBA") and to WOXL-FM under a Sub-Time Brokerage Agreement.
       These transactions are subject to the approval of the FCC and have been
       contested, however we expect to get approval and close on the
       acquisitions during the fourth quarter 2004.

     - On January 23, 2004, we entered into an agreement to acquire the
       Minnesota News Network and the Minnesota Farm Network for approximately
       $3,250,000. We acquired these networks on March 1, 2004.

                                        30


     The following acquisitions in 2003 were financed through funds generated
from operations, $8,500,000 of additional borrowings under the Credit agreement
and the re-issuance of approximately $1,063,000 of our Class A Common Stock from
treasury:

     - March 11, 2003: an AM radio station (WOXL-AM) serving the Asheville,
       North Carolina market for approximately $350,000.

     - March 28, 2003: an FM radio station (WODB-FM) serving the Columbus, Ohio
       market for approximately $10,432,000. In conjunction with this
       transaction we sold our AM radio station (WVKO-AM) serving the Columbus,
       Ohio market for approximately $941,000. We recognized a gain on the
       disposal of this station of approximately $425,000.

     - April 1, 2003: an FM radio station (WINQ-FM) serving the Winchendon,
       Massachusetts market for approximately $290,000. If within five years of
       closing we obtain approval from the FCC for a city of license change, we
       have an agreement with the seller to pay them an additional $500,000.

     - October 1, 2003: two FM radio stations (WJZA-FM Lancaster, Ohio and
       WJZK-FM Richwood, Ohio) serving the Columbus, Ohio market for
       approximately $13,242,000, including approximately $1,063,000 of our
       Class A common stock, plus an additional $2,000,000 if we obtain approval
       from the FCC for a city of license change.

     - November 17, 2003: an AM radio station (WIDE-AM Biddeford, Maine) serving
       the Portland, Maine market for approximately $386,000.

     - December 1, 2003: an AM and FM radio station (WBCO-AM and WQEL-FM)
       serving the Bucyrus, Ohio market for approximately $2,375,000.

     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.

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

     In December 2003, we modified our Stock Buy-Back Program so that we are
authorized to purchase up to $15,000,000 of our Class A Common Stock. From the
inception of the Stock Buy-Back program in 1998 through December 31, 2003 we
have repurchased 564,664 shares of our Class A Common Stock for approximately
$7,683,000.

     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.

     Our capital expenditures, exclusive of acquisitions, for the year ended
December 31, 2003 were approximately $8,118,000 ($7,559,000 in 2002). We
anticipate capital expenditures in 2004 to be

                                        31


approximately $8,500,000, which we expect to finance through funds generated
from operations or additional borrowings under the Credit Agreement.

SUMMARY DISCLOSURES ABOUT CONTRACTUAL OBLIGATIONS

     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, 2003:



                                                            PAYMENTS DUE BY PERIOD
                                        --------------------------------------------------------------
                                                   LESS THAN                                 MORE THAN
     CONTRACTUAL OBLIGATIONS(1):         TOTAL      1 YEAR     1 TO 3 YEARS   3 TO 5 YEARS    5 YEARS
     ---------------------------        --------   ---------   ------------   ------------   ---------
                                                                (IN THOUSANDS)
                                                                              
Long-Term Debt Obligations(2).........  $121,205    $    45      $ 1,060        $10,100      $110,000
Operating Leases......................     7,463      1,368        1,744          1,092         3,259
Purchase Obligations(3)...............    44,875     31,187       10,082          3,265           341
Other Long-Term Liabilities...........        --         --           --             --            --
                                        --------    -------      -------        -------      --------
Total Contractual Cash Obligations....  $175,543    $32,600      $12,886        $14,457      $113,600
                                        ========    =======      =======        =======      ========


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

(1) The above amounts do not include interest, which is primarily variable in
    amount.

(2) Under our Credit Agreement, the maturity on outstanding debt of $120,100,000
    could be accelerated if we do not maintain certain covenants. Includes the
    guarantee of debt of a related party of $1,060,000 (see note 11 of our
    consolidated financial statements).

(3) (a) Includes $20,250,000 of commitments to acquire radio stations WRSI,
    WPVQ, WRSY, WOXL-FM, WISE, the Minnesota News Network and the Minnesota Farm
    Network.

     (b) Includes $17,017,000 in obligations under employment agreements and
     contracts with on-air personalities, other employees, and our president,
     CEO, and chairman, Edward K. Christian.

     (c) Includes $7,608,000 in purchase obligations under general operating
     agreements and contracts including but not limited to syndicated
     programming contracts; sports programming rights; software rights; ratings
     services; and television advertising; and other operating expenses.

     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. Agency
commissions, when applicable are based on a stated percentage applied to gross
billing.

     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

                                        32


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. Our historical estimates have been a reliable method
to estimate future allowances and our average reserves have been approximately
4% of our outstanding receivables. The effect of an increase in our allowance of
1% of our outstanding receivables as of December 31, 2003, from 4% to 5% or from
$979,000 to $1,218,000 would result in a decrease in net income of $146,000, net
of taxes for the year ended December 31, 2003.

     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 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, 2003
represents 59% of our total assets. We determine the recoverability of the cost
of our intangible assets, based on a market approach of the related market.

     We conduct annual impairment tests for our goodwill and broadcast licenses
as required by SFAS 142 "Goodwill and Other Intangible Assets". In accordance
with SFAS 142 we tested our goodwill and broadcast licenses for impairment as of
October 1, 2003 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 fair value. The market approach takes into consideration
information available on recent transactions of radio and television stations
similar to those owned by us, within the broadcast industry. The determination
of the fair value requires the use of estimates in our assumptions. Changes in
these estimates could result in an impairment of intangible assets in the
future.

     Derivatives:  Periodically we enter into derivative financial instruments,
including interest rate swap agreements to hedge the risk of rising interest
rates associated with our long-term debt. In the past these derivatives
qualified 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.

     At December 31, 2003 we did not have any interest rate swap agreements in
place, however we may enter into them in the future. We do not believe we would
be exposed to more than a nominal amount of credit risk in that our interest
rate hedges historically have been with counter-parties that 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.

                                        33


     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 2003 than they did during 2003, our
interest expense, after considering the effect of our interest rate swap
agreements, would increase and income before taxes would decrease by $862,000
($645,000 in 2002). 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 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 29, 2004, for the
quarter ending March 31, 2004 we anticipate a 2% to 4% increase in net revenue
and a 3% to 5% increase in station operating income.

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
2004 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.
                                        34


  WE HAVE SUBSTANTIAL INDEBTEDNESS AND DEBT SERVICE REQUIREMENTS

     At December 31, 2003 our long-term debt (including the current portion
thereof and our guarantee of debt of Surtsey Productions) was approximately
$121,205,000. 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, on March
31, 2006, the Revolving Commitments (as defined in the Credit Agreement) will be
permanently reduced quarterly, in amounts ranging from 3.125% to 12.5% of the
total Revolving Commitments in effect on March 31, 2006. 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.

  OUR DEBT COVENANTS RESTRICT OUR FINANCIAL AND OPERATIONAL FLEXIBILITY

     Our 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 investment, additional indebtedness,
dividends, distributions, guarantees, liens and encumbrances. Our ability to
meet these financial ratios can be affected by operating performance or other
events beyond our control, and we cannot assure you that we will meet those
ratios. Certain events of default under our Credit Agreement could allow the
lenders to declare all amounts outstanding to be immediately due and payable
and, therefore, could have a material adverse effect on our business. Our
indebtedness under the Facility 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. If the amounts
outstanding under the Credit Agreement were accelerated, the lenders could
proceed against such available collateral.

  WE DEPEND 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.

  WE DEPEND ON KEY STATIONS

     For the years ended December 31, 2003, 2002 and 2001 our Milwaukee,
Wisconsin radio stations accounted for an aggregate of 17%, 17% and 18%,
respectively, our Columbus, Ohio radio stations accounted for an aggregate of
10%, 10% and 11%, respectively, our Norfolk, Virginia radio stations accounted
for 9%, 9% and 9%, respectively, and our Manchester, New Hampshire radio
stations accounted for 7%, 8%, and 8%, respectively, of our net operating
revenue. While radio revenues in each of the Milwaukee, Columbus, Norfolk and
Manchester markets have remained relatively stable historically, an adverse
change in any of the above radio market's or location's relative market position
could have a significant adverse impact on our operating results as a whole.

  LOCAL AND NATIONAL ECONOMIC CONDITIONS MAY AFFECT OUR ADVERTISING REVENUE

     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. Generally, advertising declines
during periods of economic recession or downturns in the economy. As a result,
our revenue is likely to be adversely affected during such periods, whether they
occur on a national level or in the geographic markets

                                        35


in which we operate. During such periods we may also be required to reduce our
advertising rates in order to attract available advertisers. Such a decline in
advertising rates could also have a material adverse effect on our revenue,
results of operations and financial condition.

  OUR STATIONS MUST COMPETE FOR ADVERTISING REVENUES IN THEIR RESPECTIVE MARKETS

     Both radio and television broadcasting are highly competitive businesses.
Our stations compete for listeners/viewers and advertising revenues within their
respective markets directly with other radio and/or television stations, as well
as with other media, such as broadcast television and/or radio (as applicable),
cable television, newspapers, magazines, direct mail, the internet, coupons and
billboard advertising. Audience ratings and market shares are subject to change,
and any change in a particular market could have a material adverse effect on
the revenue of our stations located in that market. While we already compete in
some of our markets with other stations with similar programming formats, if
another radio station in a market were to convert its programming format to a
format similar to one of our stations, if a new station were to adopt a
comparable format or if an existing competitor were to strengthen its
operations, our stations could experience a reduction in ratings and/or
advertising revenue and could incur increased promotional and other expenses.
Other radio or television broadcasting companies may enter into the markets in
which we operate or may operate in the future. These companies may be larger and
have more financial resources than we have. We cannot assure you that any of our
stations will be able to maintain or increase their current audience ratings and
advertising revenues.

  OUR SUCCESS DEPENDS ON OUR ABILITY TO IDENTIFY, CONSUMMATE AND INTEGRATE
  ACQUIRED STATIONS

     As part of our strategy, we have pursued and intend to continue to pursue
acquisitions of additional radio and television stations. Broadcasting is a
rapidly consolidating industry, with many companies seeking to consummate
acquisitions and increase their market share. In this environment, we compete
and will continue to compete with many other buyers for the acquisition of radio
and television stations. Some of those competitors may be able to outbid us for
acquisitions because they have greater financial resources. As a result of these
and other factors, our ability to identify and consummate future acquisitions is
uncertain.

     Our consummation of all future acquisitions is subject to various
conditions, including FCC and other regulatory approvals. The FCC must approve
any transfer of control or assignment of broadcast licenses. In addition,
acquisitions may encounter intense scrutiny under federal and state antitrust
laws. Our future acquisitions may be subject to notification under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and to a waiting period and
possible review by the Department of Justice and the Federal Trade Commission.
Any delays, injunctions, conditions or modifications by any of these federal
agencies could have a negative effect on us and result in the abandonment of all
or part of attractive acquisition opportunities. We cannot predict whether we
will be successful in identifying future acquisition opportunities or what the
consequences will be of any acquisitions.

     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.

  OUR BUSINESS IS SUBJECT TO EXTENSIVE FEDERAL REGULATION

     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. For a detail description of the material regulations applicable to
our business, see "Federal Regulation of Radio and Television Broadcasting" and
"Other FCC Requirements" in Item 1 of this Form 10-K. Failure to comply with
these regulations could, under certain circumstances and among other things,
result in the denial or revocation of FCC licenses, shortened license renewal
terms, monetary

                                        36


fines or other 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 has and 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 have and will continue
to 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.

  THE COMPANY IS CONTROLLED BY OUR PRESIDENT, CHIEF EXECUTIVE OFFICER AND
  CHAIRMAN

     As of February 29, 2004, Edward K. Christian, our President, Chief
Executive Officer and Chairman, holds approximately 56% of the combined voting
power of our Common Stock. As a result, Mr. Christian generally is able to
control the vote on most matters submitted to the vote of stockholders and,
therefore, is able to direct our management and policies, except with respect to
(i) the election of the two Class A directors, (ii) those matters where the
shares of our Class B Common Stock are only entitled to one vote per share, and
(iii) and other matters requiring a class vote under the provisions of our
certificate of incorporation, bylaws or applicable law. For a description of the
voting rights of our Common Stock, see note 12 of the Notes to Consolidated
Financial Statements included with this Form 10-K. Without the approval of Mr.
Christian, we will be unable to consummate transactions involving an actual or
potential change of control, including transactions in which stockholders might
otherwise receive a premium for your shares over then-current market prices.

RECENT ACCOUNTING PRONOUNCEMENTS

     On January 1, 2003, we adopted SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 applies to legal obligations associated with the
retirement of long-lived assets that result from acquisition, construction,
development, and/or the normal operation of a long lived asset. The adoption of
SFAS 143 did not materially impact our financial position or results of
operations.

     On January 1, 2003 we adopted SFAS 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." The adoption of SFAS 146 did not
materially impact our financial position or results of operations.

     On January 1, 2003 we adopted the initial recognition provisions of
Financial Accounting Standards Board ("FASB") Interpretation No. 45 ("FIN 45"),
entitled "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." We adopted the
disclosure requirements of FIN 45 in 2002. 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. The adoption of

                                        37


Interpretation No. 45 did not 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 Financial Accounting Standards Board ("FASB") issued
FIN 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. In December
2003, the FASB issued a revision of FIN 46 which deferred the effective date of
the interpretation's provisions for certain variable interests. As a result, we
will be required to apply the consolidation requirements of FIN 46 in our March
31, 2004 interim financial statements. We have not yet determined what the
effect, if any, this interpretation will have on our financial position, cash
flows or results of operations.

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.

ITEM 9A.  CONTROLS AND PROCEDURES

     As of the end of the period covered by this report, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act
of 1934. Based upon that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective to cause the material information required to be
disclosed by the Company in the reports that it files or submits under the
Securities Exchange Act of 1934 to be recorded, processed, summarized and
reported within the time periods specified in the Commission's rules and forms.
There were no changes in the Company's internal controls over financial
reporting during the quarter ended December 31, 2003 that have materially
affected, or are reasonably likely to materially affect, the Company's internal
controls over financial reporting.

                                        38


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     "Election of Directors," "Corporate Governance-Board Committees-Finance and
Audit Committee," "Section 16(a) Beneficial Ownership Reporting Compliance" and
"Corporate Governance-Code of Business Conduct and Ethics" in our Proxy
Statement for the 2004 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 29, 2004 are incorporated
by reference herein. See also Item 1. Business -- Executive Officers.

ITEM 11.  EXECUTIVE COMPENSATION

     "Executive Compensation," "Corporate Governance-The Board of
Directors-Board Compensation," "Compensation Committee Report" and "Common Stock
Performance" in our Proxy Statement for the 2004 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission on or before April 29,
2004 is 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.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     "Security Ownership of Certain Beneficial Owners and Management" in our
Proxy Statement for the 2004 Annual Meeting of Stockholders to be filed with the
Securities and Exchange Commission on or before April 29, 2004 is incorporated
by reference herein. In addition, the information contained in the "Securities
Authorized for Issuance Under Equity Compensation Plan Information" subheading
under Item 5 of this report is incorporated by reference herein.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     "Certain Business Relationships and Transactions with Directors and
Management" in our Proxy Statement for the 2004 Annual Meeting of Stockholders
to be filed with the Securities and Exchange Commission on or before April 29,
2004 is incorporated by reference herein.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

     "Independent Auditors" in our Proxy Statement for the 2004 Annual Meeting
of Stockholders to be filed with the Securities and Exchange Commission on or
before April 29, 2004 is hereby incorporated by reference.

                                        39


                                    PART IV

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

     (a)1. FINANCIAL STATEMENTS

     The following consolidated financial statements attached hereto are filed
as part of this annual report:

     - Report of Independent Auditors

     - Consolidated Financial Statements:

      -- Consolidated Balance Sheets as of December 31, 2003 and 2002

      -- Consolidated Statements of Income for the years ended December 31,
         2003, 2002 and 2001

      -- Consolidated Statements of Stockholders' Equity for the years ended
         December 31, 2003, 2002 and 2001

      -- Consolidated Statements of Cash Flows for the years ended December 31,
         2003, 2002 and 2001

     - Notes to Consolidated Financial Statements

     2. FINANCIAL STATEMENT SCHEDULES

     Schedule II Valuation and qualifying accounts is disclosed in note 1 to the
consolidated financial statements attached hereto and 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

     The Exhibits filed in response to Item 601 of Regulation S-K are listed in
the Exhibit Index, which is incorporated herein by reference.

     (b) REPORTS ON FORM 8-K



DATE                             ITEMS REPORTED                          FINANCIAL STATEMENTS FILED
----                             --------------                          --------------------------
                                                                   
11/06/03   Item 7 -- Financial Statements and Exhibits                              None
           Item 12 -- Results of Operations and Financial Condition


                                        40


                         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. as of December 31, 2003 and 2002, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 2003. 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, 2003 and 2002, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2003, 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.

                                          /s/ ERNST & YOUNG LLP

Detroit, Michigan
February 27, 2004

                                       F-1


                           SAGA COMMUNICATIONS, INC.

                          CONSOLIDATED BALANCE SHEETS



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2003       2002
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
                                     ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 11,766   $  5,874
  Accounts receivable, less allowance of $979 ($932 in
    2002)...................................................    22,733     21,355
  Prepaid expenses and other current assets.................     2,214      2,102
  Barter transactions.......................................     1,459      1,415
  Deferred taxes............................................       690        702
                                                              --------   --------
Total current assets........................................    38,862     31,448
Net property and equipment..................................    62,369     60,161
Other assets:
  Broadcast licenses, net of accumulated amortization of
    $8,187..................................................   123,657    102,699
  Goodwill, net of accumulated amortization of $13,091
    ($13,393 in 2002).......................................    30,839     26,892
  Other intangibles, deferred costs and investments, net of
    accumulated amortization of $9,053 ($12,054 in 2002)....     6,616      5,122
                                                              --------   --------
Total other assets..........................................   161,112    134,713
                                                              --------   --------
                                                              $262,343   $226,322
                                                              ========   ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  1,817   $  1,265
  Accrued expenses:
    Payroll and payroll taxes...............................     6,459      5,753
    Other...................................................     3,699      3,920
  Barter transactions.......................................     1,489      1,685
  Current portion of long-term debt.........................        45     13,308
                                                              --------   --------
Total current liabilities...................................    13,509     25,931
Deferred income taxes.......................................    18,414     14,064
Long-term debt..............................................   121,160     91,920
Broadcast program rights....................................       581        306
Other.......................................................     1,435      1,042
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, 18,592 issued and outstanding (18,499 in
      2002).................................................       186        185
    Class B common stock, $.01 par value, 3,500 shares
      authorized, 2,360 issued and outstanding..............        24         24
  Additional paid-in capital................................    47,207     45,649
  Retained earnings.........................................    62,277     48,393
  Accumulated other comprehensive income (loss).............        29       (464)
  Treasury stock (134 shares in 2003 and 55 in 2002, at
    cost)...................................................    (2,479)      (728)
                                                              --------   --------
Total stockholders' equity..................................   107,244     93,059
                                                              --------   --------
                                                              $262,343   $226,322
                                                              ========   ========


                            See accompanying notes.
                                       F-2


                           SAGA COMMUNICATIONS, INC.

                       CONSOLIDATED STATEMENTS OF INCOME



                                                                     YEARS ENDED DECEMBER 31,
                                                              ---------------------------------------
                                                                 2003          2002          2001
                                                              -----------   -----------   -----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                 
Net operating revenue.......................................   $121,297      $114,782      $103,956
Operating expenses:
  Programming and technical.................................     29,069        26,732        24,459
  Selling...................................................     30,160        28,446        26,424
  Station general and administrative........................     20,051        18,172        15,757
  Corporate general and administrative......................      6,450         6,022         5,421
  Depreciation..............................................      6,544         6,034         5,763
  Amortization..............................................        458           499         4,347
                                                               --------      --------      --------
                                                                 92,732        85,905        82,171
                                                               --------      --------      --------
Operating income............................................     28,565        28,877        21,785
Other (income) expenses:
  Interest expense..........................................      4,779         5,487         7,037
  Other.....................................................      1,131           159           (17)
                                                               --------      --------      --------
Income before income tax....................................     22,655        23,231        14,765
Income tax provision:
  Current...................................................      5,177         5,506         3,858
  Deferred..................................................      3,594         3,770         2,342
                                                               --------      --------      --------
                                                                  8,771         9,276         6,200
                                                               --------      --------      --------
Net income..................................................   $ 13,884      $ 13,955      $  8,565
                                                               ========      ========      ========
Basic earnings per share....................................   $    .67      $    .68      $    .42
                                                               ========      ========      ========
Weighted average common shares..............................     20,817        20,631        20,473
Diluted earnings per share..................................   $    .65      $    .66      $    .41
                                                               ========      ========      ========
Weighted average common and common equivalent shares........     21,301        21,209        20,888
                                                               ========      ========      ========


                            See accompanying notes.
                                       F-3


                           SAGA COMMUNICATIONS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001


                                                                         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, 2001.........   $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)
  Comprehensive income:
    Net income.....................                                                  13,884
    Change in fair value of
      derivatives, net of tax......                                                                  464
    Change in market value of
      securities, net of tax.......                                                                   29
      Total comprehensive income...
  Net proceeds from exercised
    options........................      1                  1,220                                                 (844)
  Station acquisitions.............                           234                                                  829
  Purchase of shares held in
    treasury.......................                                                                             (2,007)
  Employee stock purchase plan.....                           104                                                  271
                                      ----       ---      -------        -----      -------        -----       -------
BALANCE AT DECEMBER 31, 2003.......   $186       $24      $47,207        $  --      $62,277        $  29       $(2,479)
                                      ====       ===      =======        =====      =======        =====       =======



                                                        TOTAL
                                       DEFERRED     STOCKHOLDERS'
                                     COMPENSATION      EQUITY
                                     ------------   -------------
                                            (IN THOUSANDS)
                                              
BALANCE AT JANUARY 1, 2001.........     $(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
  Comprehensive income:
    Net income.....................                     13,884
    Change in fair value of
      derivatives, net of tax......                        464
    Change in market value of
      securities, net of tax.......                         29
                                                      --------
      Total comprehensive income...                     14,377
  Net proceeds from exercised
    options........................                        377
  Station acquisitions.............                      1,063
  Purchase of shares held in
    treasury.......................                     (2,007)
  Employee stock purchase plan.....                        375
                                        -----         --------
BALANCE AT DECEMBER 31, 2003.......     $  --         $107,244
                                        =====         ========


                            See accompanying notes.

                                       F-4


                           SAGA COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2003        2002       2001
                                                              ---------   --------   --------
                                                                      (IN THOUSANDS)
                                                                            
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................  $  13,884   $ 13,955   $  8,565
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Depreciation and amortization..........................      7,002      6,533     10,110
     Barter revenue, net of barter expenses.................       (367)       (49)      (288)
     Broadcast program rights amortization..................        366        277        261
     Deferred taxes.........................................      3,594      3,770      2,342
     Loss (gain) on sale of assets..........................        (75)       159        (17)
     Deferred and other compensation........................        175         --         --
     Note forgiveness.......................................         --        173        174
     Amortization of deferred costs.........................      1,444        366         85
     Changes in assets and liabilities:
       Increase in receivables and prepaids.................       (890)      (720)      (388)
       Payments for broadcast program rights................       (356)      (277)      (261)
       Increase in accounts payable, accrued expenses, and
          other liabilities.................................      2,605      1,295        675
                                                              ---------   --------   --------
     Total adjustments......................................     13,498     11,527     12,693
                                                              ---------   --------   --------
Net cash provided by operating activities...................     27,382     25,482     21,258
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment.....................     (8,118)    (7,559)    (8,479)
  Increase in other intangibles and other assets............       (543)    (1,448)    (1,795)
  Acquisition of stations...................................    (24,424)   (24,144)   (18,358)
  Proceeds from sale of assets..............................        465        714         41
                                                              ---------   --------   --------
Net cash used in investing activities.......................    (32,620)   (32,437)   (28,591)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from long-term debt..............................    128,600         --     11,250
  Payments on long-term debt................................   (113,683)      (273)      (390)
  Payments for debt issuance costs..........................     (1,899)        --         --
  Purchase of shares held in treasury.......................     (2,007)        --       (987)
  Net proceeds from exercise of stock options...............        119      1,262        633
  Fractional shares -- five for four stock split............         --         (3)        --
                                                              ---------   --------   --------
Net cash provided by financing activities...................     11,130        986     10,506
                                                              ---------   --------   --------
Net increase (decrease) in cash and cash equivalents........      5,892     (5,969)     3,173
Cash and cash equivalents, beginning of year................      5,874     11,843      8,670
                                                              ---------   --------   --------
Cash and cash equivalents, end of year......................  $  11,766   $  5,874   $ 11,843
                                                              =========   ========   ========


                            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, 2003 we owned or operated seventy-six radio stations, five
television stations, three low power television stations, two state radio
networks and 1 farm radio network, serving twenty-four markets throughout the
United States including Columbus, Ohio; Milwaukee, Wisconsin; Norfolk, Virginia;
and Manchester, New Hampshire.

  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.

  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 2002 and 2001 financial
statements have been reclassified to conform to the 2003 presentation.

  CONCENTRATION OF RISK

     For the years ended December 31, 2003, 2002, and 2001 our Milwaukee,
Wisconsin radio stations accounted for an aggregate of 17%, 17% and 18%,
respectively, our Columbus, Ohio radio stations accounted for an aggregate of
10%, 10% and 11%, respectively, our Norfolk, Virginia radio stations accounted
for 9%, 9% and 9%, respectively, and our Manchester, New Hampshire radio
stations accounted for 7%, 8% and 8% 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

     We account for derivatives and hedging activities in accordance with SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities," 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.
                                       F-6

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. See note 5.

     We account for marketable securities in accordance with SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", which
requires that certain debt and equity securities be classified into one of three
categories: held-to-maturity, available-for-sale, or trading securities, and
depending upon the classification, value the security at fair market value. At
December 31, 2003, marketable securities having a fair market value of
approximately $157,000 have been classified as available-for-sale and are
included in prepaid expenses and other current assets at fair value, based on
the quoted market price. Unrealized gains and losses are reported as a component
of accumulated other comprehensive income of stockholders' equity.

     Our financial instruments are comprised of cash and cash equivalents,
accounts receivable, accounts payable, long-term debt and marketable securities.
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 rate, prime rate or have been
reset at the prevailing market rate at December 31, 2003. The fair value of
marketable securities is based on the quoted market price for the security at
December 31, 2003.

  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, 2003, 2002 and 2001 was as follows:



                                                                       WRITE OFF
                                           BALANCE AT   CHARGED TO   UNCOLLECTIBLE   BALANCE AT
                                           BEGINNING    COSTS AND    ACCOUNTS, NET     END OF
YEAR ENDED                                 OF PERIOD     EXPENSES    OF RECOVERIES     PERIOD
----------                                 ----------   ----------   -------------   ----------
                                                              (IN THOUSANDS)
                                                                         
December 31, 2003........................     $932         $776          $729           $979
December 31, 2002........................      778          608           454            932
December 31, 2001........................      730          633           585            778


  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 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.

                                       F-7

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  PROPERTY AND EQUIPMENT

     Property and equipment are carried at cost. Expenditures for maintenance
and repairs are expensed as incurred. When property and equipment is sold or
otherwise disposed of, the related cost and accumulated depreciation is removed
from the respective accounts and the gain or loss realized on disposition is
reflected in earnings. Depreciation is provided using the straight-line method
based on the estimated useful life of the assets.

     Property and equipment consisted of the following:



                                                                       DECEMBER 31,
                                                       ESTIMATED    -------------------
                                                      USEFUL LIFE     2003       2002
                                                      -----------   --------   --------
                                                                      (IN THOUSANDS)
                                                                      
  Land and land improvements........................          --    $ 10,516   $ 10,279
  Buildings.........................................  31.5 years      21,025     20,575
  Towers and antennae...............................  7-15 years      21,467     20,855
  Equipment.........................................  3-15 years      63,855     59,650
  Furniture, fixtures and leasehold improvements....  7-20 years       7,038      6,988
  Vehicles..........................................     5 years       2,657      2,627
                                                                    --------   --------
                                                                     126,558    120,974
  Accumulated depreciation..........................                 (64,189)   (60,813)
                                                                    --------   --------
Net property and equipment..........................                $ 62,369   $ 60,161
                                                                    ========   ========


     Depreciation expense for the years ended December 31, 2003, 2002 and 2001
was $6,544,000, $6,034,000 and $5,763,000, respectively.

  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, 2003, 2002 and 2001, we recognized interest expense related to the
amortization of debt issuance costs of $238,000, $303,000 and $334,000,
respectively. During 2003 we wrote-off unamortized debt issuance costs of
$1,206,000 resulting from the refinancing of our bank debt (see note 4).

  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

                                       F-8

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

  TREASURY STOCK

     In December 2003, we modified our Stock Buy-Back Program (the "Buy-Back
Program") to allow us to purchase up to $15,000,000 of our Class A Common Stock.
From its inception in 1998 through December 31, 2003 we have repurchased 564,664
shares of our Class A common stock for approximately $7,683,000. Repurchases of
shares of our Common Stock are recorded as Treasury Stock and result in a
reduction of Stockholders' Equity. During 2003, 2002 and 2001 we acquired
155,600 shares at an average price of $18.32, 781 shares at an average price of
$23.08 per share and 75,375 shares at an average price of $13.09 per share,
respectively. During 2003, we issued 75,871 shares of Treasury Stock in
connection with our acquisition of radio stations and our employee stock
purchase plan. 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.

  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. Agency commissions, when applicable are based on
a stated percentage applied to gross billing.

  TIME BROKERAGE AGREEMENTS

     We have entered into Time Brokerage Agreements ("TBA's") 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 TBA's are
included in the accompanying Consolidated Statements of Income. Under certain
circumstances, we may be subject to the provisions of FIN 46 beginning in the
first quarter of 2004, which is described further under Recent Accounting
Pronouncements.

  ADVERTISING AND PROMOTION COSTS

     Advertising and promotion costs are expensed as incurred. Such costs
amounted to approximately $7,108,000, $6,663,000 and $6,120,000 for the years
ended December 31, 2003, 2002 and 2001, respectively.

  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

                                       F-9

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

     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 requires 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.

     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 2003, 2002, and 2001: risk-free
interest rates of 3.4%, 4.3% and 4.9%; a dividend yield of 0%; expected
volatility of 32.2%, 32.7% and 30.9%; and a weighted average expected life of
the options of 7 years, respectively. Under these assumptions, the weighted
average fair value of an option to purchase one share granted in 2003, 2002 and
2001 was approximately $7.88, $9.05 and $7.73, 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.

     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:



                                                           2003      2002      2001
                                                          -------   -------   -------
                                                             (IN THOUSANDS, EXCEPT
                                                                PER SHARE DATA)
                                                                     
Net income, as reported.................................  $13,884   $13,955   $ 8,565
Add back: stock based compensation cost, net of tax.....       48        41        53
Less: pro forma stock based compensation cost determined
  under fair value method, net of tax...................   (2,028)   (1,566)   (1,272)
                                                          -------   -------   -------
Pro forma net income....................................  $11,904   $12,430   $ 7,346
                                                          =======   =======   =======
Pro forma earnings per share:
  Basic.................................................  $   .57   $   .60   $   .36
                                                          =======   =======   =======
  Diluted...............................................  $   .56   $   .59   $   .35
                                                          =======   =======   =======


                                       F-10

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  EARNINGS PER SHARE

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



                                                           YEARS ENDED DECEMBER 31,
                                                          ---------------------------
                                                           2003      2002      2001
                                                          -------   -------   -------
                                                             (IN THOUSANDS, EXCEPT
                                                                PER SHARE DATA)
                                                                     
Numerator:
  Net income available to common stockholders...........  $13,884   $13,955   $ 8,565
                                                          =======   =======   =======
Denominator:
  Denominator for basic earnings per
     share -- weighted-average shares...................   20,817    20,631    20,473
  Effect of dilutive securities:
     Stock options......................................      484       578       415
                                                          -------   -------   -------
  Denominator for diluted earnings per share -- adjusted
     weighted-average shares and assumed conversions....   21,301    21,209    20,888
                                                          =======   =======   =======
Basic earnings per share................................  $   .67   $   .68   $   .42
                                                          =======   =======   =======
Diluted earnings per share..............................  $   .65   $   .66   $   .41
                                                          =======   =======   =======


  RECENT ACCOUNTING PRONOUNCEMENTS

     On January 1, 2003, we adopted SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 applies to legal obligations associated with the
retirement of long-lived assets that result from acquisition, construction,
development, and/or the normal operation of a long lived asset. The adoption of
SFAS 143 did not materially impact our financial position or results of
operations.

     On January 1, 2003 we adopted SFAS 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." The adoption of SFAS 146 did not
materially impact our financial position or results of operations.

     On January 1, 2003 we adopted the initial recognition provisions of
Financial Accounting Standards Board ("FASB") Interpretation No. 45 ("FIN 45"),
entitled "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." We adopted the
disclosure requirements of FIN 45 in 2002. 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. The adoption of Interpretation No. 45 did not 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 Financial Accounting Standards Board ("FASB") issued
FIN 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

                                       F-11

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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. In December 2003, the FASB issued a revision of FIN 46 which
deferred the effective date of the interpretation's provisions for certain
variable interests. As a result, we will be required to apply the consolidation
requirements of FIN 46 in our March 31, 2004 interim financial statements. We
have not yet determined what the effect, if any, this interpretation will have
on our financial position, cash flows or results of operations.

2.  INTANGIBLE ASSETS AND GOODWILL

     On January 1, 2002 we adopted SFAS No. 142 ("SFAS 142"), "Goodwill and
Other 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 were effective upon adoption.

     The following table summarizes the effect of then adoption of SFAS 142 as
of January 1, 2001 on reported income and earnings per share adjusted to exclude
broadcast license and goodwill amortization:



                                                           YEARS ENDED DECEMBER 31,
                                                          ---------------------------
ADJUSTED NET INCOME FOR ADOPTION OF STATEMENT 142          2003      2002      2001
-------------------------------------------------         -------   -------   -------
                                                             (IN THOUSANDS, EXCEPT
                                                                PER SHARE DATA)
                                                                     
Reported net income.....................................  $13,884   $13,955   $ 8,565
  Add back: amortization of goodwill, net of tax of
     $510...............................................       --        --       687
  Add back: amortization of broadcast licenses, net of
     tax of $980........................................       --        --     1,328
                                                          -------   -------   -------
Adjusted net income.....................................  $13,884   $13,955   $10,580
                                                          =======   =======   =======
Basic earnings per share:
Reported net income per share -- basic..................  $   .67   $   .68   $   .42
  Add back: amortization of goodwill, net of taxes......       --        --       .03
  Add back: amortization of broadcast licenses, net of
     taxes..............................................       --        --       .07
                                                          -------   -------   -------
Adjusted net income per share -- basic..................  $   .67   $   .68   $   .52
                                                          =======   =======   =======
Diluted earnings per share:
Reported net income per share -- diluted................  $   .65   $   .66   $   .41
  Add back: amortization of goodwill, net of taxes......       --        --       .03
  Add back: amortization of broadcast licenses, net of
     taxes..............................................       --        --       .07
                                                          -------   -------   -------
Adjusted net income per share -- diluted................  $   .65   $   .66   $   .51
                                                          =======   =======   =======


     In accordance with SFAS 142 we tested our goodwill and broadcast licenses
(which we have deemed as indefinite lived since the licenses are expected to
generate cash flows indefinitely) for impairment as of January 1, 2002, October
1, 2002 and October 1, 2003 by comparing their estimated 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

                                       F-12

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

     We have recorded amortizable intangible assets at December 31, 2003 as
follows:



                                                             GROSS CARRYING   ACCUMULATED
                                                                 AMOUNT       AMORTIZATION
                                                             --------------   ------------
                                                                    (IN THOUSANDS)
                                                                        
Non-competition agreements.................................     $ 4,565          $4,320
Favorable lease agreements.................................       5,719           4,639
                                                                -------          ------
Total amortizable intangible assets........................     $10,284          $8,959
                                                                =======          ======


     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
                                                                 ======          ======


     Aggregate amortization expense for these amortizable intangible assets for
the years ended December 31, 2003 and 2002, was $458,000 and $499,000,
respectively. The estimated annual amortization expense for the years ending
December 31, 2004, 2005, 2006, 2007 and 2008, is approximately $239,000,
$234,000, $192,000, $188,000, and $93,000, respectively.

3.  TOTAL COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     Total Comprehensive Income Consists of:



                                                            YEARS ENDED DECEMBER 31,
                                                           --------------------------
                                                            2003      2002      2001
                                                           -------   -------   ------
                                                                 (IN THOUSANDS)
                                                                      
Net income...............................................  $13,884   $13,955   $8,565
Accumulated other comprehensive income (loss):
  Change in fair value of derivative instruments net of
     taxes of $250, $80 and $170, respectively...........      464      (124)    (340)
  Change in market value of securities net of taxes of
     $15.................................................       29        --       --
                                                           -------   -------   ------
Total comprehensive income...............................  $14,377   $13,831   $8,225
                                                           =======   =======   ======


                                       F-13

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Accumulated Comprehensive Income (Loss) Consists of:



                                                              MARKETABLE
                                                              SECURITIES   DERIVATIVES
                                                              ----------   -----------
                                                                   (IN THOUSANDS)
                                                                     
Balance at January 1, 2002..................................    $  --         $(340)
Change in fair value of derivatives, net of $80 taxes.......       --          (124)
                                                                -----         -----
Balance at December 31, 2002................................       --          (464)
Change in fair value of derivatives, net of $250 taxes......       --           464
Change in market value of securities, net of $15 taxes......       29            --
                                                                -----         -----
Balance at December 31, 2003................................    $  29         $  --
                                                                =====         =====


4.  LONG-TERM DEBT

     Long-term debt consisted of the following:



                                                                 DECEMBER 31,
                                                              -------------------
                                                                2003       2002
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
Credit Agreement:
  Reducing revolver facility................................  $120,100   $     --
  Senior secured term loan facility.........................        --    105,000
Subordinated promissory note. Payments are due monthly,
  including interest at 10%. The note matures in 2004.......        45        148
Other, primarily secured debt of affiliates and covenants
  not to compete............................................     1,060         80
                                                              --------   --------
                                                               121,205    105,228
Amounts due within one year.................................        45     13,308
                                                              --------   --------
                                                              $121,160   $ 91,920
                                                              ========   ========


     Future maturities of long-term debt are as follows:



YEAR ENDING
DECEMBER 31,
------------                                                  (IN THOUSANDS)
                                                           
2004........................................................     $     45
2005........................................................           --
2006........................................................        1,060
2007........................................................           --
2008........................................................       10,100
Thereafter..................................................      110,000
                                                                 --------
                                                                 $121,205
                                                                 ========


     On July 29, 2003, we entered into a new credit agreement (the "Credit
Agreement") with a group of banks, to refinance our outstanding debt under our
old credit agreement. Our current financing facility (the "Facility") under the
Credit Agreement is a $200,000,000 reducing revolving line of credit (the
"Reducing Revolver"). The Reducing Revolver matures July 29, 2010. Our
indebtedness under the Facility 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. We have
approximately $79,900,000 of unused borrowing capacity under the Facility at
December 31, 2003.

                                       F-14

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     We wrote-off unamortized debt issuance costs relating to the Old Credit
Agreement of approximately $1,206,000, pre-tax, due to this refinancing during
the year ended December 31, 2003.

     The Reducing Revolver was used to refinance our Old Credit Agreement and
pay transactional fees. The unused portion of the Reducing Revolver may be used
for general corporate purposes, including working capital, capital expenditures,
permitted acquisitions and related transaction expenses and permitted stock
buybacks. On March 31, 2006, the Revolving Commitments (as defined in the Credit
Agreement) will be permanently reduced quarterly in amounts ranging from 3.125%
to 12.5% of the total Revolving Commitments in effect on March 31, 2006. Any
outstanding balance under the Reducing Revolver will be due on the maturity date
of July 29, 2010. In addition, the Revolving Commitments shall be further
reduced by specified percentages of Excess Cash Flow (as defined in the Credit
Agreement) based on leverage ratios.

     Interest rates under the Facility are payable, at our option, at
alternatives equal to LIBOR at the rate reset date (ranging from 1.125% to
1.875% at December 31, 2003) plus 1.375% to 2.0% or the Agent bank's base rate
plus 0.125% to 0.75%. 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 unused portion of the Facility.

     The Credit Agreement contains a number of financial covenants (all of which
we were in compliance with at December 31, 2003) 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 financial covenants become more constrictive
over the life of the Credit Agreement. The Credit Agreement prohibits the
payment of dividends without the banks' prior consent.

     Our Old Credit Agreement had 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 Acquisition Facility was used for permitted acquisitions and to pay
related transaction expenses. The Revolving Facility was available 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 converted to a five and a half year term loan.

     Interest rates under the Facilities were 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 varies from time to time, depending upon our financial leverage. All
interest was due quarterly. We also paid quarterly commitment fees of 0.375% to
0.625% per annum on the aggregate unused portion of the Acquisition and
Revolving Facilities.

5.  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     Periodically we enter into derivative financial instruments, including
interest rate swap agreements to reduce our risk of rising interest rates. Our
swap agreements, which expired in March 2003 and September 2003, were used to
convert the variable Eurodollar interest rate of a portion of our bank
borrowings to a fixed interest rate. At December 31, 2003 we had no interest
rate swap agreements in place.

                                       F-15

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     We account for derivatives and hedging activities in accordance with SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended, which requires companies to recognize all of their derivative
instruments as either assets or liabilities at fair value in the statement of
financial position. The accounting for changes in the fair value (i.e., gains or
losses) of a derivative instrument depends on whether it has been designated and
qualifies as part of a hedging relationship, and further, on the type of hedging
relationship. For those derivative instruments that are designated and qualify
as hedging instruments, a company must designate the hedging instrument, based
upon the exposure being hedged, as either a fair value hedge or a cash flow
hedge.

     For derivative instruments that are designated and qualify as a fair value
hedge (i.e., hedging the exposure to changes in the fair value of an asset or a
liability or an identified portion thereof that is attributable to a particular
risk), the gain or loss on the derivative instrument as well as the offsetting
loss or gain on the hedged item attributable to the hedged risk are recognized
in current earnings during the period of the change in fair values. For
derivative instruments that are designated and qualify as a cash flow
hedge(i.e., hedging the exposure to variability in expected future cash flows
that is attributable to a particular risk), the effective portion of the gain or
loss on the derivative instrument is reported as a component of accumulated
other comprehensive income and reclassified into earnings in the same period or
periods during which the hedged transaction affects earnings. For derivative
instruments not designated as hedging instruments, the gain or loss is
recognized in current earnings during the period of change. All of the Company's
derivative instruments are accounted for as cash flow hedges.

     Market risks arise from movements in foreign exchange rates. In order to
reduce these risks, the Company uses derivative financial instruments. The
Company hedges a portion of its forecasted finished goods sales from the United
Kingdom to Holland with derivative financial instruments. These financial
instruments include forward contracts and forward contract options to sell Euros
for British Pounds for varying maturities through April 2004. For the years
ended December 31, 2002 and 2001, the Company did not recognize any net gains or
losses related to the ineffective portion of the hedging instrument excluded
from the assessment of hedge effectiveness. The Company does not use any
derivative financial instruments for trading purposes. In addition, the Company
did not recognize any net gains or losses during the year ended December 31,
2002 for cash flow hedges that were discontinued because the forecasted
transaction did not occur.

     At December 31, 2002, we had the following interest rate swap agreements in
place:

     - Two interest rate swap agreements with a total notional amount of
       $26,250,000. We paid 4.11% calculated on the notional amount; we received
       LIBOR (1.4% at December 31, 2002) calculated on the notional amount of
       $26,250,000. These agreements expired in March, 2003.

     - Two interest rate swap agreements with a total notional amount of
       $13,750,000. We paid 3.67% calculated on the notional amount; we received
       LIBOR (1.4% at December 31, 2002) calculated on the notional amount of
       $13,750,000. In March 2003 the total notional amount of these swap
       agreements increased to $40,000,000 with all other terms remaining the
       same. These agreements expired in September, 2003.

     Net receipts or payments under the agreements were recognized as an
adjustment to interest expense. All of the above interest rate swap agreements
were assessed as effective. Therefore, changes in their fair value were
recognized in other comprehensive income.

     At December 31, 2002, we recorded a liability of approximately $714,000
within "Other Accrued Expenses" in the accompanying consolidated balance sheets,
to record the fair value of the swap agreement.

                                       F-16

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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,
                                                             ------------------------
                                                              2003     2002     2001
                                                             ------   ------   ------
                                                                  (IN THOUSANDS)
                                                                      
Cash paid during the period for:
Interest...................................................  $4,077   $5,167   $7,275
Income taxes...............................................   4,670    3,295    5,342
Non-cash transactions:
Barter revenue.............................................  $3,702   $3,013   $3,037
Barter expense.............................................   3,335    2,964    2,749
Acquisition of property and equipment......................      94       69       69


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



                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2003       2002       2001
                                                       --------   --------   --------
                                                               (IN THOUSANDS)
                                                                    
Fair value of assets acquired........................  $ 27,074   $ 27,001   $ 20,063
Cash paid............................................   (24,424)   (24,144)   (18,358)
Issuance of restricted stock.........................    (1,063)    (2,245)      (990)
                                                       --------   --------   --------
Debt and liabilities assumed.........................  $  1,587   $    612   $    715
                                                       ========   ========   ========


                                       F-17

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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,
                                                              -----------------
                                                               2003      2002
                                                              -------   -------
                                                               (IN THOUSANDS)
                                                                  
Deferred tax liabilities:
  Property and equipment....................................  $ 8,764   $ 7,633
  Intangible assets.........................................   10,685     7,635
                                                              -------   -------
Total deferred tax liabilities..............................   19,449    15,268
Deferred tax assets:
  Allowance for doubtful accounts...........................      367       350
  Compensation..............................................    1,044       837
  Fair value of derivatives.................................       --       250
  Loss carry forwards.......................................      892     1,411
                                                              -------   -------
                                                                2,303     2,848
Less: valuation allowance...................................      578       942
                                                              -------   -------
Total net deferred tax assets...............................    1,725     1,906
                                                              -------   -------
Net deferred tax liabilities................................  $17,724   $13,362
                                                              =======   =======


     At December 31, 2003, we have a federal tax loss carry forward of
approximately $64,000, which expires in 2016, state tax loss carry forwards of
approximately $7,851,000, which will expire from 2004 to 2017 and a capital loss
carry forward of approximately $1,161,000, which will expire in 2005. During
2003, we utilized $1,070,000 of the capital loss carry forward; accordingly, the
valuation allowance decreased by $364,000. The valuation allowance for net
deferred tax assets relates to a capital loss incurred during 2000 and state
loss carry forwards. 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.

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



                                                             YEARS ENDED DECEMBER 31,
                                                             ------------------------
                                                              2003     2002     2001
                                                             ------   ------   ------
                                                                  (IN THOUSANDS)
                                                                      
Current:
  Federal..................................................  $3,811   $4,220   $2,751
  State....................................................   1,366    1,286    1,107
                                                             ------   ------   ------
Total current..............................................   5,177    5,506    3,858
Total deferred.............................................   3,594    3,770    2,342
                                                             ------   ------   ------
                                                             $8,771   $9,276   $6,200
                                                             ======   ======   ======


     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 $257,000, $438,000 and $212,000 for the
years ended December 31, 2003, 2002 and 2001, respectively.
                                       F-18

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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



                                                             YEARS ENDED DECEMBER 31,
                                                             ------------------------
                                                              2003     2002     2001
                                                             ------   ------   ------
                                                                  (IN THOUSANDS)
                                                                      
Tax at U.S. statutory rates................................  $7,703   $7,898   $5,020
State taxes, net of federal benefit........................   1,419    1,462      934
Amortization of goodwill...................................      --       --      201
Other, net.................................................      13       84       45
Reduction of valuation allowance on loss carry forwards....    (364)    (168)      --
                                                             ------   ------   ------
                                                             $8,771   $9,276   $6,200
                                                             ======   ======   ======


8.  STOCK OPTION PLANS

     Our 1992 Stock Option Plan (the "1992 Plan") expired in December 2002. In
2003, we adopted the 2003 Stock Option Plan (the "2003 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 number of shares of Common Stock that may be issued upon exercise of
options granted under the 2003 Plan may not exceed 1,500,000 shares of Class A
Common Stock, 500,000 shares of Class B Common Stock and 500,000 shares of Class
A Common Stock issuable upon conversion of the Class B Common Stock. Options
granted under the 2003 Plan may be either incentive stock options (within the
meaning of Section 422A of the Internal Revenue Code of 1986) or non-qualified
options. Options for Class A Common Stock may be granted to any employee of the
Corporation. Options for Class B Common Stock may only be granted to Edward K.
Christian, President, Chief Executive Officer, Chairman of the Board of
Directors, and the holder of 100% of the outstanding Class B Common Stock of the
Corporation. Incentive stock options granted under the 2003 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 2003 Plan shall be determined by the Compensation
Committee of the Board of Directors of the Company.

     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 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, 2003, approximately 173,000 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, 2004 a total of 4,277 shares were issued under the Directors Plan in
lieu of their directors' retainer for the year ended December 31, 2003.

                                       F-19

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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,
2003, 2002 and 2001, was approximately $0, $6,000 and $24,000, respectively.
Total Directors fees recognized in the income statement for stock based
compensation awards for the years ended December 31, 2003, 2002 and 2001, was
approximately $79,000, $63,000 and $67,000, respectively.

     The following summarizes the 1992 Plan and the 2003 Plan stock option
transactions for the three years ended December 31, 2003:



                                                                                WEIGHTED
                                                                                 AVERAGE
                                                 NUMBER OF    EXERCISE PRICE    PRICE PER
                                                  OPTIONS       PER SHARE         SHARE
                                                 ---------   ----------------   ---------
                                                                       
Options outstanding at January 1, 2001.........  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
  Granted......................................  1,006,016              19.22     19.22
  Exercised....................................    (92,828)    2.716 to 10.56     10.38
  Forfeited....................................     (3,401)    14.24 to 20.80     19.59
                                                 ---------   ----------------    ------
Options outstanding at December 31, 2003.......  2,734,661    $1.39 to $20.80    $14.99
                                                 =========   ================    ======


     The following summarizes the Directors Plan stock option transactions for
the three years ended December 31, 2003:



                                                                                 WEIGHTED
                                                                                  AVERAGE
                                                    NUMBER OF   EXERCISE PRICE   PRICE PER
                                                     OPTIONS      PER SHARE        SHARE
                                                    ---------   --------------   ---------
                                                                        
Options outstanding at January 1, 2001............   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
  Granted.........................................    2,997               .010      .010
  Exercised.......................................       --                           --
  Forfeited.......................................       --                           --
                                                     ------     --------------     -----
Options outstanding at December 31, 2003..........   17,234     $.005 to $.010     $.008
                                                     ======     ==============     =====


                                       F-20

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following summarizes stock options exercisable and available for the
three years ended December 31, 2003:



                                                                          THE DIRECTORS
                                                              THE PLAN        PLAN
                                                              ---------   -------------
                                                                    
Options exercisable at December 31:
  2003......................................................  1,311,326       17,234
  2002......................................................  1,068,140       14,237
  2001......................................................    915,984       15,319
Available for grant at December 31:
  2003......................................................    993,984      172,944
  2002......................................................         --      175,941
  2001......................................................    646,493      179,994


     Stock options outstanding in the 1992 and 2003 Plans at December 31, 2003
are summarized as follows:



                                                WEIGHTED AVERAGE
                      OPTIONS       OPTIONS        REMAINING
   EXERCISE PRICE   OUTSTANDING   EXERCISABLE   CONTRACTUAL LIFE
  ----------------  -----------   -----------   ----------------
                                       
       $1.39            21,868        21,868          1.4
       $2.72            57,677        57,677          2.5
       $4.00            25,702        25,702           .5
       $5.83            13,668        13,668          2.5
       $7.42            27,339        27,339          3.6
       $10.56          721,628       721,628          4.6
       $12.72          224,255       179,404          5.5
       $14.24          258,267       100,273          7.4
       $16.00           31,511        18,907          6.7
       $16.80          189,921       113,499          6.4
       $19.22        1,006,016             0          9.4
       $20.80          156,809        31,361          8.4
                    ----------    ----------          ---
                     2,734,661     1,311,326          6.9
                    ==========    ==========          ===
  Weighted Average
   Exercise Price   $    14.99    $    11.26
                    ==========    ==========


                                       F-21

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Stock options outstanding in the Directors Plan at December 31, 2003 are
summarized as follows:



                                                WEIGHTED AVERAGE
                      OPTIONS       OPTIONS        REMAINING
   EXERCISE PRICE   OUTSTANDING   EXERCISABLE   CONTRACTUAL LIFE
  ----------------  -----------   -----------   ----------------
                                       
       $0.005           2,662         2,662           4.1
       $0.006           2,620         2,620           5.1
       $0.008           8,955         8,955           7.1
       $0.010           2,997         2,997           9.1
                      -------       -------           ---
                       17,234        17,234           6.7
                      =======       =======           ===
  Weighted Average
   Exercise Price     $ 0.008       $ 0.008
                      =======       =======


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 $312,000, $321,000 and $303,000 in 2003, 2002 and 2001,
respectively, of which approximately $245,000, $222,000 and $200,000 represents
our discretionary contributions in 2003, 2002 and 2001, respectively.

  EMPLOYEE STOCK PURCHASE PLAN

     In 1999 our stockholders approved the Employee Stock Purchase Plan ("ESPP")
under which a total of 1,562,500 shares of our Class A Common Stock is eligible
for sale to our employees. At December 31, 2003 approximately 1,483,000 shares
are reserved for issuance under the ESPP. 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 20,131, 15,870 and 18,476 shares
issued under the ESPP in 2003, 2002 and 2001, respectively. Compensation expense
recognized related to the ESPP for the years ended December 31, 2003, 2002 and
2001 was approximately $56,000, $47,000 and $43,000, 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, 2003, 2002 and 2001 was approximately $296,000, $268,000 and
$291,000, 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

                                       F-22

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

     On December 22, 2003, we entered into agreements to acquire three FM radio
stations (WRSI-FM, WPVQ-FM and WRSY-FM), serving the Springfield, Massachusetts,
Greenfield, Massachusetts and Brattleboro, Vermont markets, respectively, for
approximately $7,000,000. This transaction, which is subject to the approval of
the FCC, is expected to close during the second quarter 2004.

     On January 21, 2004, we entered into an agreement to acquire one FM radio
station (WOXL-FM) and one AM radio station (WISE-AM), both serving the
Asheville, North Carolina market, for approximately $10,000,000. We are
currently providing programming to WISE-AM under a Time Brokerage Agreement
("TBA") and to WOXL-FM under a Sub-Time Brokerage Agreement. These transactions
are subject to the approval of the FCC and have been contested, however we
expect to get approval and close on the acquisitions during the fourth quarter
2004.

     On January 23, 2004, we entered into an agreement to acquire the Minnesota
News Network and the Minnesota Farm Network for approximately $3,250,000. We
acquired these networks on March 1, 2004.

  2003 ACQUISITIONS, TIME BROKERAGE AGREEMENTS, SHARED SERVICES AGREEMENTS AND
  DISPOSITIONS

     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 has incurred in closing on the acquisition
of a construction permit for KFJX-TV station in Pittsburg, Kansas. At December
31, 2003 there was $1,060,000 outstanding under this agreement. The station, a
new full power Fox affiliate, went on the air for the first time on October 18,
2003. Under the FCC's ownership rules, we are prohibited from owning this
station. In consideration for our guarantee, Surtsey has entered into various
agreements with us relating to the station, including a Shared Services
Agreement, Technical Services Agreement, Agreement for the Sale of Commercial
Time and Broker Agreement. Surtsey is a multi-media company that is 100% owned
by the daughter of Edward K. Christian, our principal stockholder, President and
CEO.

     On March 11, 2003, we acquired an AM radio station (WOXL-AM) serving the
Asheville, North Carolina market for approximately $350,000.

     On March 28, 2003, we acquired an FM radio station (WODB-FM) serving the
Columbus, Ohio market for approximately $10,432,000. We began operating this
station under the terms of a TBA on January 1, 2003. In conjunction with this
transaction we sold our AM radio station (WVKO-AM) serving the Columbus, Ohio
market for approximately $941,000. The buyer began brokering time on WVKO under
the terms of a TBA on January 1, 2003. We recognized a gain on the disposal of
this station of approximately $425,000.

     On April 1, 2003, we acquired an FM radio station (WINQ-FM) in the
Winchendon, Massachusetts market for approximately $290,000 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 was owned by a company in which a
member of our Board of Directors has a 26% beneficial ownership interest, which
was disclosed to our Board prior to its approval of the transaction. The
interested director did not participate in voting on this transaction when it
came before the Board. The purchase price was determined on an arm's length
basis. We began operating this station under the terms of a TBA on February 1,
2003.

                                       F-23

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On April 1, 2003, we sold an AM radio station (WLLM-AM) serving the
Lincoln, Illinois market for approximately $275,000. We recognized a gain on the
sale of the station of approximately $29,000.

     On October 1, 2003, we acquired two FM radio stations (WJZA-FM Lancaster,
Ohio and WJZK-FM Richwood, Ohio) serving the Columbus, Ohio market for
approximately $13,242,000 including approximately $1,063,000 of our Class A
common stock, plus up to an additional $2,000,000 if we obtain approval from the
FCC for a city of license change.

     On November 17, 2003, we acquired an AM radio station (WIDE-AM) serving the
Portland, Maine market for approximately $386,000. We began operating this
station under the terms of a TBA on August 1, 2003.

     On December 1, 2003, we acquired an FM and AM radio station (WQEL-FM and
WBCO-AM) serving the Bucyrus, Ohio market for approximately $2,375,000. We began
operating these stations under the terms of a TBA on October 1, 2003.

  2002 ACQUISITIONS AND TIME BROKERAGE AGREEMENTS

     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.

     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 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.

  2001 ACQUISITIONS

     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.

     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 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.

                                       F-24

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CONDENSED CONSOLIDATED BALANCE SHEET OF 2003 ACQUISITIONS

     The following condensed balance sheets represent the estimated fair value
assigned to the related assets and liabilities of the 2003 and 2002 acquisitions
at their respective acquisition dates. In connection with the 2003 acquisitions
we issued restricted stock of approximately $1,063,000 and $2,245,000,
respectively.

                           SAGA COMMUNICATIONS, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                         OF 2003 AND 2002 ACQUISITIONS



                                                               ACQUISITIONS IN
                                                              -----------------
                                                               2003      2002
                                                              -------   -------
                                                               (IN THOUSANDS)
                                                                  
ASSETS ACQUIRED:
Current assets..............................................  $   590   $   901
Property and equipment......................................    1,357     4,113
Other assets:
  Broadcast licenses -- Radio segment.......................   19,958    15,864
  Broadcast licenses -- TV segment..........................    1,000        --
  Goodwill -- Radio segment.................................    3,494     6,123
  Goodwill -- Television segment............................       27        --
  Other intangibles, deferred costs and investments.........      648        --
                                                              -------   -------
Total other assets..........................................   25,127    21,987
                                                              -------   -------
Total assets acquired.......................................   27,074    27,001
                                                              -------   -------
LIABILITIES ASSUMED:
Current liabilities.........................................      298       612
Long-term syndicated programming............................      229        --
Long-term debt..............................................    1,060        --
                                                              -------   -------
Total liabilities assumed...................................    1,587       612
                                                              -------   -------
Net assets acquired.........................................  $25,487   $26,389
                                                              =======   =======


PRO FORMA RESULTS OF OPERATIONS FOR ACQUISITIONS AND DISPOSITIONS (UNAUDITED)

     The following unaudited pro forma results of our operations for the years
ended December 31, 2003 and 2002 assume the acquisitions and dispositions in
2003 and 2002 occurred as of January 1, 2002. The pro forma results give effect
to certain adjustments, including depreciation, amortization of certain
intangible assets, 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

                                       F-25

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of operations, which would actually have occurred had the combinations been in
effect on the dates indicated, or which may occur in the future.



                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2003        2002
                                                              ---------   ---------
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
                                                                    
CONSOLIDATED RESULTS OF OPERATIONS:
  Net operating revenue.....................................  $123,111    $121,896
  Station operating expense.................................    80,649      79,045
  Corporate general and administrative......................     6,450       6,218
  Depreciation..............................................     6,632       6,382
  Amortization..............................................       510         581
                                                              --------    --------
  Operating income..........................................    28,870      29,670
  Interest expense..........................................     4,996       6,250
  Other.....................................................     1,131         159
  Income taxes..............................................     8,809       9,304
                                                              --------    --------
  Net income................................................  $ 13,934    $ 13,957
                                                              ========    ========
  Basic earnings per share..................................  $    .67    $    .68
                                                              ========    ========
  Diluted earnings per share................................  $    .65    $    .66
                                                              ========    ========




                                                                2003       2002
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                   
RADIO BROADCASTING SEGMENT
  Net operating revenue.....................................  $110,879   $109,387
  Station operating expense.................................    71,054     69,535
  Corporate general and administrative......................        --         --
  Depreciation..............................................     4,873      4,705
  Amortization..............................................       496        557
                                                              --------   --------
  Operating income..........................................  $ 34,456   $ 34,590
                                                              ========   ========




                                                               2003      2002
                                                              -------   -------
                                                               (IN THOUSANDS)
                                                                  
TELEVISION BROADCASTING SEGMENT
  Net operating revenue.....................................  $12,232   $12,509
  Station operating expense.................................    9,595     9,510
  Corporate general and administrative......................       --        --
  Depreciation..............................................    1,560     1,476
  Amortization..............................................       14        24
                                                              -------   -------
  Operating income..........................................  $ 1,063   $ 1,499
                                                              =======   =======


                                       F-26

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  RELATED PARTY TRANSACTIONS

  ACQUISITION OF STATIONS FROM AFFILIATES OF DIRECTORS

     On April 1, 2003 we acquired an FM radio station (WINQ-FM) in the
Winchendon, Massachusetts market for approximately $290,000 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 was owned by a company in which Robert
Maccini, a member of our Board of Directors, has a 26% beneficial ownership
interest and is an officer and director of, which was disclosed to our Board
prior to its approval of the transaction. Mr. Maccini did not participate in
voting on this transaction when it came before the Board. The purchase price was
determined on an arm's length basis. 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 March 1, 2004, in connection with our acquisition of the Minnesota News
and Farm Networks for approximately $3,250,000, a company controlled by Gary
Stevens, a member of our Board of Directors, received a brokerage commission of
approximately $122,000 from the seller.

     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 was $450,000
per year effective April 1, 2002, $500,000 per year effective January 1, 2003
and $512,500 per year effective January 1, 2004. 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, 2003 his
average annual compensation, as defined by the employment agreement, was
approximately $867,000.

                                       F-27

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  NOTE RECEIVABLE FROM PRINCIPAL STOCKHOLDER

     Through March 31, 2002, we had a loan due from Edward K. Christian. The
loan 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, 2002. We recorded compensation expense of approximately $74,000 in 2002 and
$287,000 in 2001, relative to the debt forgiveness.

  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, plus reimbursement of expenses actually incurred in operating the
station. 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, 2003, 2002 and 2001 we paid Surtsey
$0, $45,000 and $112,000, respectively for such services which were 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, 2003,
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. At December 31, 2003 there was $1,060,000
outstanding under this agreement. We do not have any recourse provision in
connection with our guarantee that would enable us to recover any amounts paid
under the guarantee. Under FIN 45, all guarantees should be recorded at fair
value. As a result, at December 31, 2003 we have recorded $1,060,000 in debt and
$1,060,000 in intangible assets, primarily broadcast licenses. The station, a
new full power Fox affiliate, went on the air for the first time on October 18,
2003. In consideration for our guarantee, Surtsey has entered 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. We pay fees under the agreements of
$4,000 per month plus reimbursement of expenses actually incurred in operating
the station. Under the FCC's ownership rules we are prohibited from owning or
having an attributable or cognizable interest in this station.

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,
                                       F-28

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

     In the election of directors, the holders of Class A Common Stock, voting
as a separate class, are entitled to elect twenty-five percent, or 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,
2003. 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 or an
affiliate of 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 accordance with the number of shares held 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, 2003 was
$1,564,000 ($1,476,000 and $1,462,000 for the years ended December 31, 2002 and
2001, respectively). Minimum annual rental commitments under noncancellable
operating leases consisted of the following at December 31, 2003 (in thousands):


                                                           
2004........................................................  $1,368
2005........................................................     954
2006........................................................     790
2007........................................................     615
2008........................................................     477
Thereafter..................................................   3,259
                                                              ------
                                                              $7,463
                                                              ======


                                       F-29

                           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, 2003
(in thousands):


                                                           
2004........................................................  $  448
2005........................................................     350
2006........................................................     188
2007........................................................      32
2008........................................................      11
Thereafter..................................................      --
                                                              ------
                                                               1,029
Amounts due within one year (included in accounts
  payable)..................................................     448
                                                              ------
                                                              $  581
                                                              ======


  ACQUISITIONS

     On December 22, 2003, we entered into an agreement to acquire three FM
radio stations (WRSI-FM, WPVQ-FM and WRSY-FM), serving the Springfield,
Massachusetts, Greenfield, Massachusetts and Brattleboro, Vermont markets,
respectively, for approximately $7,000,000. This transaction, which is subject
to the approval of the FCC, is expected to close during the second quarter 2004.

  CONTINGENCIES

     In 2003 in connection with our acquisition of an FM radio station (WINQ-FM)
in the Winchendon, Massachusetts market for approximately $290,000 we entered
into an agreement whereby we would pay the seller an additional $500,000 if
within five years of closing we obtain approval from the FCC for a city of
license change.

     In 2003 in connection with our acquisition of two FM radio stations
(WJZA-FM Lancaster, Ohio and WJZK-FM Richwood, Ohio) serving the Columbus, Ohio
market for approximately $13,242,000 including approximately $1,063,000 of our
Class A common stock, we entered into an agreement whereby we would pay the
seller up to an additional $2,000,000 if we obtain approval from the FCC for a
city of license change.

14.  SEGMENT INFORMATION

     We evaluate the operating performance of our markets 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 twenty-one markets, which includes all
seventy-six of our radio stations and three radio information networks. The
Television segment includes three markets and consists of five television
stations and three low power television ("LPTV") stations. The Radio and
Television segments

                                       F-30

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.



                                                                     CORPORATE
YEAR ENDED DECEMBER 31, 2003:                 RADIO     TELEVISION   AND OTHER   CONSOLIDATED
-----------------------------                --------   ----------   ---------   ------------
                                                                     
Net operating revenue......................  $109,065    $12,232      $    --      $121,297
Station operating expense..................    69,685      9,595           --        79,280
Corporate general and administrative.......        --         --        6,450         6,450
Depreciation...............................     4,785      1,560          199         6,544
Amortization...............................       444         14           --           458
                                             --------    -------      -------      --------
Operating income (loss)....................  $ 34,151    $ 1,063      $(6,649)     $ 28,565
                                             ========    =======      =======      ========
Total assets at December 31, 2003..........  $215,135    $29,906      $17,302      $262,343
                                             ========    =======      =======      ========
Capital additions..........................  $  4,403    $ 3,583      $   132      $  8,118
                                             ========    =======      =======      ========




                                                                     CORPORATE
YEAR ENDED DECEMBER 31, 2002:                 RADIO     TELEVISION   AND OTHER   CONSOLIDATED
-----------------------------                --------   ----------   ---------   ------------
                                                                     
Net operating revenue......................  $102,372    $12,410      $    --      $114,782
Station operating expense..................    64,134      9,216           --        73,350
Corporate general and administrative.......        --         --        6,022         6,022
Depreciation...............................     4,401      1,432          201         6,034
Amortization...............................       475         24           --           499
                                             --------    -------      -------      --------
Operating income (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
                                             ========    =======      =======      ========




                                                                     CORPORATE
YEAR ENDED DECEMBER 31, 2001:                 RADIO     TELEVISION   AND OTHER   CONSOLIDATED
-----------------------------                --------   ----------   ---------   ------------
                                                                     
Net operating revenue......................  $ 93,094    $10,862      $    --      $103,956
Station operating expense..................    58,317      8,323           --        66,640
Corporate general and administrative.......        --         --        5,421         5,421
Depreciation...............................     3,961      1,630          172         5,763
Amortization...............................     3,580        391          376         4,347
                                             --------    -------      -------      --------
Operating income (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
                                             ========    =======      =======      ========


15.  SUBSEQUENT EVENTS

     On January 20, 2004 our Class A Common Stock began trading on the New York
Stock Exchange ("NYSE") under the ticker symbol "SGA". Previously, our Class A
Common Stock was traded on the American Stock Exchange ("AMEX") under the ticker
symbol "SGA".

     On January 21, 2004 we entered into an agreement to acquire one FM radio
station (WOXL-FM) and one AM radio station (WISE-AM), both serving the
Asheville, North Carolina market, for

                                       F-31

                           SAGA COMMUNICATIONS, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

approximately $10,000,000. We are currently providing programming to WISE-AM
under a Time Brokerage Agreement ("TBA") and to WOXL-FM under a Sub-Time
Brokerage Agreement. This transaction is subject to the approval of the FCC,
which has been contested; however, we expect to get approval and close on the
acquisition during the fourth quarter 2004.

     On March 1, 2004, we acquired the Minnesota News Network and Minnesota Farm
Network for approximately $3,250,000.

16.  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)



                                    MARCH 31,           JUNE 30,          SEPTEMBER 30,       DECEMBER 31,
                                -----------------   -----------------   -----------------   -----------------
                                 2003      2002      2003      2002      2003      2002      2003      2002
                                -------   -------   -------   -------   -------   -------   -------   -------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                              
Net operating revenue.........  $26,141   $23,928   $31,790   $29,763   $30,433   $29,783   $32,933   $31,308
Operating expenses:
  Programming and technical...    7,174     6,401     7,029     6,363     7,276     6,753     7,590     7,215
  Selling.....................    6,452     5,872     8,349     8,008     6,901     6,620     8,458     7,946
  Station general and
    administrative............    5,187     4,360     5,119     4,493     4,661     4,495     5,084     4,824
  Corporate general and
    administrative............    1,245     1,292     1,896     1,542     1,794     1,511     1,515     1,677
  Depreciation................    1,719     1,441     1,671     1,534     1,562     1,523     1,592     1,536
  Amortization................       90       125       120       125       120       125       128       124
                                -------   -------   -------   -------   -------   -------   -------   -------
Operating income..............    4,274     4,437     7,606     7,698     8,119     8,756     8,566     7,986
Other expenses:
  Interest expense............    1,535     1,341     1,157     1,367     1,081     1,344     1,006     1,435
  Other.......................       (8)       (7)     (357)       10     1,215      (150)      281       306
                                -------   -------   -------   -------   -------   -------   -------   -------
Income before income tax......    2,747     3,103     6,806     6,321     5,823     7,562     7,279     6,245
  Income tax provision........    1,098     1,303     2,577     2,656     2,356     3,176     2,740     2,141
                                -------   -------   -------   -------   -------   -------   -------   -------
Net income....................  $ 1,649   $ 1,800   $ 4,229   $ 3,665   $ 3,467   $ 4,386   $ 4,539   $ 4,104
                                =======   =======   =======   =======   =======   =======   =======   =======
Basic earnings per share......  $   .08   $   .09   $   .20   $   .18   $   .17   $   .21   $   .22   $   .20
                                =======   =======   =======   =======   =======   =======   =======   =======
Weighted average common
  shares......................   20,805    20,516    20,815    20,585    20,810    20,667    20,839    20,753
                                =======   =======   =======   =======   =======   =======   =======   =======
Diluted earnings per share....  $   .08   $   .09   $   .20   $   .17   $   .16   $   .21   $   .21   $   .19
                                =======   =======   =======   =======   =======   =======   =======   =======
Weighted average common and
  common equivalent shares....   21,264    21,044    21,354    21,250    21,292    21,016    21,293    21,270
                                =======   =======   =======   =======   =======   =======   =======   =======


                                       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 15, 2004.

                                                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 15, 2004.



                    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



                                 EXHIBIT INDEX



EXHIBIT NO.                                 DESCRIPTION
-----------                                 -----------
              
   3(a)        10   Second Restated Certificate of Incorporation, restated as of
                    December 12, 2003.
   3(b)         *   Bylaws, as amended March 12, 2004.
   4(a)         1   Plan of Reorganization.
   4(b)         6   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(c)         9   Credit Agreement dated as of July 29, 2003 between the
                    Company and Union Bank of California, as Syndication Agent,
                    Fleet National Bank as Documentation Agent and The Bank of
                    New York as Administrative Agent.
  10(a)         7   Employment Agreement of Edward K. Christian dated as of
                    April 1, 2002. +
  10(b)         3   Saga Communications, Inc. 1992 Stock Option Plan, as
                    amended. +
  10(c)         1   Summary of Executive Insured Medical Reimbursement Plan. +
  10(d)         2   Saga Communications, Inc. 1997 Non-Employee Director Stock
                    Option Plan. +
  10(e)(1)      1   Promissory Note of Edward K. Christian dated December 10,
                    1992.
  10(e)(2)      4   Amendment to Promissory Note of Edward K. Christian dated
                    December 8, 1998.
  10(e)(3)      5   Loan Agreement and Promissory Note of Edward K. Christian
                    dated May 5, 1999.
  10(f)         8   Saga Communications, Inc. 2003 Employee Stock Option Plan. +
  21            *   Subsidiaries.
  23.1          *   Consent of Ernst & Young LLP.
  31(a)         *   Certification of Chief Executive Officer Pursuant to Rule
                    13a-14(a) of the Securities Exchange Act of 1934, as Adopted
                    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31(b)         *   Certification of Chief Financial Officer Pursuant to Rule
                    13a-14(a) of the Securities Exchange Act of 1934, as Adopted
                    Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  32            *   Certification of Chief Executive Officer and Chief Financial
                    Officer Pursuant to 18 U.S.C. Section 1350 and Rule 13-14(b)
                    of the Securities Exchange Act of 1934, as Adopted Pursuant
                    to Section 906 of the Sarbanes-Oxley Act of 2002.


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

 + Denotes executive compensation plan or arrangement.

 * Filed herewith.

 1 Exhibit filed with the Company's Registration Statement on Form S-1 (File No.
   33-47238) incorporated by reference herein.

 2 Exhibit filed with the Company's Form 10-Q for the quarter ended June 30,
   1997 incorporated by reference herein.

 3 Exhibit filed with the Company's Form 10-K for the year ended December 31,
   1997 incorporated by reference herein.

 4 Exhibit filed with the Company's Form 10-K for the year ended December 31,
   1998 incorporated by reference herein.

 5 Exhibit filed with the Company's Form 10-K for the year ended December 31,
   1999 incorporated by reference herein.

 6 Exhibit filed with the Company's Form 10-K for the year ended December 31,
   2000 incorporated by reference herein.

 7 Exhibit filed with the Company's Form 10-K for the year ended December 31,
   2001 incorporated by reference herein.

 8 Exhibit filed with the Company's Registration Statement on Form S-8 (File No.
   333-107686) incorporated by reference herein.


 9 Exhibit filed with the Company's Form 10-Q for the quarter ended June 30,
   2003 incorporated by reference herein.

10 Exhibit filed with the Company's Registration Statement on Form 8-A (File No.
   001-11588) incorporated by reference herein.