SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                    FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
                                               OR
[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
         OF 1934 (NO FEE REQUIRED)
For the transition period from ___________ to _____________.

                         Commission file number 0-26102

                       AMERICAN RADIO SYSTEMS CORPORATION
             (Exact name of registrant as specified in its charter)
               Delaware                               04-3196245
   (State or other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)               Identification No.)

                              116 Huntington Avenue
                           Boston, Massachusetts 02116
              (Address of principal executive offices and Zip Code)

                                 (617) 375-7500
              (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12 (b) of the Act:
         Title of each class               Name of 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:

                                (Title of Class)
                                      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 Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of  registrant's  knowledge in definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ].

   The aggregate market value of the voting stock held by  non-affiliates of the
registrant as of March 3, 1997 was approximately $471,872,971.  As of March 1,
1997,  15,176,397  shares of Class A Common Stock,  4,604,862  shares of Class B
Common  Stock and  1,295,518  shares of Class C Common  Stock  were  issued  and
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual  shareholders  meeting to be held
May 29, 1997 are incorporated by reference into Part III.
<PAGE>



                       AMERICAN RADIO SYSTEMS CORPORATION

                                TABLE OF CONTENTS

Part I                                                                      Page
ITEM 1.   Business                                                            1
ITEM 2.   Properties                                                         18
ITEM 3.   Legal Proceedings                                                  18
ITEM 4.   Submission of Matters to a Vote of Security Holders                18

Part II
ITEM 5.   Market for the Registrant's Common Equity and Related Stockholder
            Matters                                                          19
ITEM 6.   Selected Financial Data                                            20
ITEM 7.   Management's Discussion and Analysis of Financial Condition and
            Results of Operations                                            25
ITEM 8.   Financial Statements and Supplementary Data                        33
ITEM 9.   Changes In and Disagreements With Accountants On Accounting and
            Financial Disclosure                                             33

PART III
ITEM 10.  Directors and Executive Officers of the Registrant                 34
ITEM 11.  Executive Compensation                                             34
ITEM 12.  Security Ownership of Certain Beneficial Owners and Management     34
ITEM 13.  Certain Relationships and Related Transactions                     34

PART IV.

ITEM 14.  Exhibits, Financial Statement Schedule, and Reports on Form 8-K    35

              Signatures                                                     36




<PAGE>

INTRODUCTION

     American  desires to take advantage of the new "safe harbor"  provisions of
the Private Securities  Litigation Reform Act of 1995.  American's Annual Report
on  Form  10-K  contains   "forward-looking   statements"  including  statements
concerning  projections,  plans,  objectives,  future events or performance  and
underlying  assumptions and other  statements which are other than statements of
historical fact. For a description of the important factors,  among others, that
may have affected and could in the future affect  American's  actual results and
could  cause  American's  actual  results  for  subsequent   periods  to  differ
materially from those expressed in any  forward-looking  statement made by or on
behalf of  American,  see  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations".


                                     PART I
ITEM 1.  BUSINESS

General


     American  Radio Systems  Corporation  (the  "Company" or  "American")  is a
national  radio  broadcasting  company  committed to acquiring,  developing  and
operating  radio  stations in markets where it can be a leading  radio  operator
(i.e., one of the top two radio operators in terms of local market revenues). In
July 1995,  the  Company  organized  American  Tower  Systems,  Inc.  (the Tower
Subsidiary  or Tower) for the purpose of  acquiring,  developing,  and operating
communications  towers throughout the United States, for use by American's radio
stations, other radio operators and other communications related businesses.  As
of December 31, 1996, the Company (which ranks among the four largest U.S. radio
broadcasting companies in terms of 1996 net revenues),  owned and/or operated 71
stations  (48  FM and 23 AM) in 14  markets  consisting  of  Boston,  Baltimore,
Hartford,  Buffalo,  Austin,  West Palm Beach,  Fresno,  Rochester,  Dayton, Las
Vegas, Omaha, Portland,  Sacramento and San Jose and owned and operated over 200
stand-alone  towers and rooftop towers.  The Company is also a party to a merger
agreement  (the EZ Merger) with EZ  Communications,  Inc. (EZ) pursuant to which
the Company will acquire  over twenty  additional  stations in seven new markets
consisting of Charlotte,  Kansas City,  Philadelphia,  Pittsburgh,  New Orleans,
Seattle and St. Louis and additional stations in Sacramento. The Company expects
to  consummate  the EZ  Merger  in the  second  quarter  of  1997.  See  Pending
Transactions.


     See the  table  set forth on page 2 for  additional  information  about the
Company's radio stations.


                                       1

<PAGE>


   The following  table sets forth certain key  information  about the Company's
radio stations owned and operated as of December 31, 1996:
<TABLE>
<CAPTION>

                              Market         Year Acquired                                       Market         Year Acquired
     Market (1) &            Revenue           or began                  Market (1) &            Revenue           or began
       Station               Rank(3)            LMA(2)                     Station               Rank(3)             LMA(2)
     ------------            -------         -------------               ------------            -------         ------------
   <S>                        <C>            <C>                      <C>                        <C>               <C>

      Austin, TX                37                                      Las Vegas, NV              42
      KKMJ-FM(2)                                 1995                      KMZQ-FM                                   1996
      KAMX-FM(2)                                 1995                      KXTE-FM                                   1996
      KJCE-AM(2)                                 1995                      KMXB-FM                                   1996
                                                                           KXNT-AM                                   1996
    Baltimore, MD               19                                         KXNO-AM                                   1996
       WQSR-FM                                   1994                      KLUC-FM                                   1996
       WBMD-AM                                   1994
       WBGR-AM                                   1996                     Omaha, NE                57
      WWMX-FM(2)                                 1996                      KGOR-FM                                   1996
      WOCT-FM(2)                                 1996                      KFAB-AM                                   1996

      Boston, MA                9                                        Portland, OR              23
       WBMX-FM                                   1988                      KUFO-FM                                   1996
       WRKO-AM                                   1988                      KUPL-AM                                   1996
       WEEI-AM                                   1992                      KUPL-FM                                   1996
       WEGQ-FM                                   1994                      KKJZ-FM                                   1996
      WAAF-FM(2)                                 1996                      KBBT-FM                                   1996
      WWTM-AM(2)                                 1996
                                                                        Rochester, NY              54
     Buffalo, NY                41                                         WCMF-FM                                   1983
       WYRK-FM                                   1980                      WRMM-FM                                   1988
       WJYE-FM                                   1994                      WCMF-AM                                   1988
       WECK-AM                                   1994
      WBLK-FM(2)                                 1996                   Sacramento, CA             25
       WSJZ-FM                                   1996                      KSTE-AM                                  1996
                                                                          KSFM-FM(2)                                 1996
      Dayton, OH                55                                        KMJI-AM(2)                                 1996
       WMMX-FM                                   1985                      KYMX-FM                                   1996
       WTUE-FM                                   1993                      KCTC-AM                                   1996
       WONE-AM                                   1993                      KSSJ-FM                                   1996
      WXEG-FM(2)                                 1996                     KXOA-FM(2)                                 1996
      WLQT-FM(2)                                 1996                     KXOA-AM(2)                                 1996
      WBTT-FM(2)                                 1996                     KQPT-FM(2)                                 1996


      Fresno, CA                62                                       San Jose, CA              43
        KSKS-FM                                  1996                      KSJO-FM                                   1996
       KKDJ-FM                                   1996                      KUFX-FM                                   1996
        KMJ-AM                                   1996                     KBAY-FM(2)                                 1996
      KOQO-AM(2)                                 1996                     KKSJ-AM(2)                                 1996
      KOQO-FM(2)                                 1996
       KNAX-FM                                   1996                West Palm Beach, FL           48
       KVSR-FM                                   1996                      WIRK-FM                                   1994
                                                                           WKGR-FM                                   1995
     Hartford, CT               34                                         WBZT-AM                                   1994
       WZMX-FM                                   1988                     WEAT-FM(2)                                 1996
       WRCH-FM                                   1994                     WEAT-AM(2)                                 1996
       WTIC-AM                                   1996                     WOLL-FM(2)                                 1996
       WTIC-FM                                   1996

<FN>
(1)  Actual community of license may differ from the metropolitan market served.
(2)  Programmed and marketed under Local Marketing Agreement (LMA).
(3)  Ranking of the principal radio market served by the station among all radio
     markets in the United States by 1995 market revenue according to the Duncan
     Guide. James H. Duncan, publisher of the Duncan Guide, is a director of the
     Company.
</FN>
</TABLE>

                                       2
<PAGE>

    History

     On November 1, 1993 the Company commenced  operations  following the merger
of four radio broadcasting entities: Stoner Broadcasting Systems, Inc., Atlantic
Radio, L.P., Multi Market Communications,  Inc. and Boston AM Radio Corporation.
As a result,  American  owned and  operated  eleven FM and seven AM  stations in
eight markets consisting of Boston, Hartford,  Buffalo,  Rochester,  Dayton, Des
Moines, Binghamton and Louisville. Between November 1, 1993 and January 1, 1996,
American entered three new markets,  Baltimore,  Austin and West Palm Beach, and
disposed of all of its stations in Des Moines, Binghamton and Louisville. During
such period,  American  also agreed to purchase or acquired  options to purchase
additional  stations  in  several  existing  and new  markets.  See Notes to the
Consolidated Financial Statements of American.

Recent Transactions

1996  Station Acquisitions:

     Baltimore:  In October  1996,  American  acquired the assets of WBGR-AM for
approximately $2.8 million.

     Buffalo:  In August  1996,  the Company  acquired the assets of WSJZ-FM for
approximately $12.5 million.  The Company had been programming and marketing the
station pursuant to an LMA beginning in April 1996.

     Fresno:  In December 1996,  the Company  acquired the assets of KNAX-FM and
KVSR-FM (formerly  KRBT-FM) for approximately  $11.0 million.  American had been
programming  and marketing  the stations  pursuant to an LMA beginning in August
1996.

     Fresno,  Omaha,  Portland and  Sacramento:  In July 1996, the  transactions
contemplated  by a  merger  agreement  by and  between  the  Company  and  Henry
Broadcasting  Company  (HBC) were  consummated.  Pursuant  thereto,  the Company
acquired KUFO-FM and KUPL-AM (formerly KBBT-AM) in Portland, Oregon, KYMX-FM and
KCTC-AM in Sacramento,  California,  KGOR-FM and KFAB-AM in Omaha, Nebraska (See
pending  transactions  for  information  with  respect  to the sale of the Omaha
stations),  and  KSKS-FM,  KKDJ-FM,  and  KMJ-AM in Fresno,  California,  for an
aggregate  purchase price of approximately  $110.4 million.  The acquisition was
financed through a $5.0 million escrow deposit, the issuance of 1,879,034 shares
of Class A Common Stock valued at  approximately  $64.0  million,  approximately
$4.1 million in available  cash,  together with the assumption of  approximately
$37.3  million in long term debt,  which was paid by the Company at closing.  As
part of a related transaction with the principal stockholder of HBC, the Company
acquired certain real estate used in the business of HBC for approximately  $2.0
million in cash and obtained a five-year  option to acquire  certain  other real
estate for a purchase price of approximately $1.0 million.

     Hartford:  In May 1996, the Company consummated the acquisitions of WTIC-AM
and  WTIC-FM.  In  August  1995,  the  Company  had  entered  into a  series  of
transactions with the owner of those stations and certain  affiliates,  pursuant
to which,  among other things,  the Company agreed to purchase the assets of the
stations for approximately $39.0 million,  including  approximately $1.1 million
of working capital.  The Company also paid $1.0 million for a two-year option to
purchase  for $1.00 the New England  Weather  Service  (which  provides  weather
information to subscribers). In August 1995, the Company was prevented under the
then current Federal Communications  Commission (FCC) regulations from acquiring
these stations,  and therefore loaned an aggregate of $35.5 million to the owner
of such stations and an affiliate thereof . Upon receipt of FCC approval in May,
1996,  the  escrow  deposit  of $2.0  million,  the  loans and $1.1  million  of
available cash were used to finance the acquisition.  The Company also paid $3.5
million to purchase the tower of one of the stations in October 1995.


                                       3
<PAGE>

     Las Vegas:  In October  1996,  the  Company  acquired  KMZQ-FM  and KXTE-FM
(formerly   KFBI-FM)  for  approximately   $28.0  million.   American  had  been
programming and marketing the stations pursuant to an LMA beginning in May 1996.
As part of such transaction, American paid an additional $0.2 million to acquire
the seller's right (and obligation) to purchase KXNT-AM  (formerly  KVEG-AM) for
approximately  $1.9 million which purchase,  as noted below,  was consummated in
September 1996.

     In  September,  1996,  the  Company  acquired  the  assets of  KXNT-AM  for
approximately  $1.9 million.  The Company had been programming and marketing the
station pursuant to an LMA beginning in May 1996.

     In July 1996, the Company acquired the assets of KMXB-FM (formerly KJMZ-FM)
for approximately  $8.0 million.  The Company had been programming and marketing
the station pursuant to an LMA beginning in May 1996.

     In July 1996,  the Company  acquired  the assets of KLUC-FM and KXNO-AM for
approximately $11.0 million.

     Philadelphia  and  Detroit:  In  May  1996,  the  Company  consummated  the
transactions  contemplated by a merger agreement with Marlin Broadcasting,  Inc.
(Marlin).  American acquired WFLN-FM in Philadelphia,  Pennsylvania,  WQRS-FM in
Detroit,  Michigan and WTMI-FM in Miami, Florida for an aggregate purchase price
of  approximately  $58.5 million,  together with the assumption of approximately
$9.0 million of long-term debt which was paid in full at closing.  The principal
stockholder of Marlin immediately  thereafter  acquired WTMI-FM from the Company
for approximately  $18.0 million in cash. Proceeds from the sale of WTMI-FM were
held in an escrow account  pursuant to a like-kind  exchange  agreement and were
utilized to  partially  fund the  Portland  and San Jose  transaction  discussed
below. The Company retained  certain  Philadelphia  real estate and tower assets
valued at approximately $1.5 million.  In June 1996, the Company entered into an
agreement  with an  unaffiliated  party  pursuant to which it will  exchange the
assets of the  Philadelphia  station for two stations in Sacramento and sell the
Detroit  station  for  approximately  $20.0  million in cash.  This party  began
programming the Philadelphia and Detroit stations under an LMA beginning in June
1996. The net assets and  liabilities of the Detroit and  Philadelphia  stations
included in this  exchange  agreement  are carried on the  consolidated  balance
sheet  as  net  assets  held  under  exchange   agreement.   See  1997  Station
Acquisitions - Sacramento.

     Portland:  In July  1996,  the  Company  acquired  the  assets  of  KBBT-FM
(formerly KDBX-FM) for approximately $14.0 million. The Company also granted the
seller the right to exercise American's option to acquire the assets of WBNW-AM.

     Portland and San Jose: In August 1996,  the Company  acquired the assets of
KUPL-FM  and KKJZ- FM in  Portland,  Oregon and KSJO-FM and KUFX-FM in San Jose,
California for approximately $103.0 million. The acquisition was partly financed
through  $18.0  million  in  restricted  cash.  (See  Philadelphia  and  Detroit
transaction discussed above).

     Sacramento:  In September 1996, the Company  acquired the assets of KSSJ-FM
for approximately $14.0 million.  The Company had been programming and marketing
the station pursuant to an LMA beginning in July 1996. (See Pending Transactions
- EZ Merger -  Sacramento  for  information  with respect to the exchange of the
station).

     In July 1996,  the Company  acquired the assets of KSTE-AM  serving  Rancho
Cordova,  California  for  approximately  $7.25  million.  The  Company had been
programming  and  marketing  the station  pursuant to an LMA  beginning in April
1996. (See Pending  Transactions - West Palm Beach for information  with respect
to the exchange of the station).

1996 Station Dispositions

     In December 1996, the Company sold WNEZ-AM serving New Britain, Connecticut
for approximately  $710,000,  and a loss of approximately  $140,000 was recorded
upon disposition.

                                       4

<PAGE>

1996 Tower Acquisitions:

      In November 1996, the Tower Subsidiary acquired a 32.5 percent interest in
a partnership for  approximately  $325,000.  The partnership owns and operates a
tower site in Los Angeles,  California and was formed by the minority partner in
the Needham venture discussed below.

      In October 1996, the Tower  Subsidiary  acquired the assets of tower sites
located in Hampton, Virginia and North Stonington, Connecticut for approximately
$1.4 million and 1.0 million, respectively.

     In July  1996,  the Tower  Subsidiary  entered  into an  agreement  with an
unaffiliated  party  to  operate  a tower  site in  Needham,  Massachusetts.  In
connection therewith,  the Tower Subsidiary advanced  approximately $3.8 million
to  the  corporation.   The  Tower  Subsidiary  has  a  50.1%  interest  in  the
corporation.  The accounts of the corporation  are included in the  consolidated
financial  statements,  with the other  shareholder's  investment  reflected  as
minority interest in subsidiary on the consolidated balance sheet.

      In April 1996, the Tower Subsidiary acquired BDS Communications,  Inc. and
BRIDAN Communications Corporation for approximately $9.1 million which consisted
of 257,495 shares of the Company's Class A Common Stock valued at  approximately
$7.4 million and the assumption of approximately $1.7 million of long-term debt,
of which approximately $1.5 million was paid at closing. BDS Communications owns
three towers in Pennsylvania and BRIDAN  Communications  manages or has sublease
agreements with respect to  approximately  forty tower sites located  throughout
the Mid-Atlantic region.

      In February 1996, the Tower Subsidiary acquired Skyline Communications and
Skyline  Antenna  Management for  approximately  $3.3 million which consisted of
26,989 shares of the Company's Class A Common Stock valued at approximately $0.8
million,  $2.2 million in cash and the assumption of approximately  $0.3 million
of long-term debt, which was paid at closing. Skyline Antenna Management manages
or has sublease agreements on approximately 200 antenna sites,  primarily in the
northeast region of the United States.

Equity and Debt Financings

     February  Public  Offerings:  In February  1996,  American  consummated  an
offering of 5,514,707 shares of Class A Common Stock at an offering price of $27
per share, including 4,501,337 shares sold by American and 1,013,370 shares sold
by the selling stockholders. Proceeds to American, net of underwriters' discount
and associated costs,  were  approximately  $114.5 million.  Concurrent with the
stock  offering,  American sold  $175,000,000  principal  amount of the American
Notes at a discount of $1,419,250 to yield 9.125%. Proceeds of the debt offering
to American,  net of the  underwriters'  discount  and  associated  costs,  were
approximately $167.5 million.

     June  Private  Offering:  In June 1996,  American  consummated  an offering
exempt  from  registration  under the  Securities  Act of  137,500  shares of 7%
Convertible  Exchangeable  Preferred Stock, $1,000 liquidation  preference.  Net
proceeds to American from the offering were  approximately  $132.8 million.  The
Convertible  Preferred Stock is convertible  into shares of Class A Common Stock
at a conversion  price of $42.50,  subject to  adjustment  for certain  dilutive
stock issuances,  and exchangeable at American's  option after June 30, 1997 for
the Convertible  Exchange  Debentures  which are convertible into Class A Common
Stock on the same terms as the Convertible Preferred Stock.

     January 1997 Private  Offering:  In January 1997,  American  consummated an
offering exempt from  registration  under the Securities Act of 2,000,000 shares
of 11 3/8%  Exchangeable  Preferred  Stock.  Net  proceeds to American  from the
offering were approximately $192.4 million. The Exchangeable  Preferred Stock is
exchangeable at American's option for the Exchange Debentures.  American has the
option,  on or prior to January 15, 2002, to pay  dividends on the  Exchangeable
Preferred  Stock  (and/or  interest on the Exchange  Debentures)  in the form of
additional shares of Exchangeable Preferred Stock (or Exchange Debentures).  The
Exchangeable  Preferred Stock and Exchange Debentures are redeemable for cash at
any time after  January  15,  2002 at the option of  American,  and  American is
required  to redeem  all of the  Exchangeable  Preferred  Stock  outstanding  on
January 15, 2009.

                                       5

<PAGE>

     Credit  Agreements:  In  January  1997,  American  entered  into two credit
agreements (the American Credit Agreement) pursuant to which American may borrow
a maximum combined  principal amount of $900.0 million,  of which $150.0 million
is available  only to finance the  repurchase of certain note  obligations of EZ
which will be  assumed  by the  Company  in  connection  with the EZ Merger.  In
November 1996, the Tower  Subsidiary  entered into a credit agreement (the Tower
Credit Agreement)  pursuant to which Tower may borrow a maximum principal amount
of $90.0  million,  pursuant to which the initial  funding  occurred in December
1996.

1997  Station Acquisitions:

     Baltimore: In February 1997, the Company acquired the assets of WWMX-FM and
WOCT-FM for  approximately  $60.0 million and $30.0 million,  respectively.  The
Company had been  programming  and  marketing  the  stations  pursuant to an LMA
beginning in November 1996.

     Boston,  Worcester:  In January  1997,  the Company  acquired the assets of
WAAF-FM and WWTM-AM in Worcester, Massachusetts for approximately $24.8 million.
The Company had been  programming and marketing the stations  pursuant to an LMA
beginning in August 1996.

     Dayton:  In February 1997,  the Company  acquired the assets of WXEG-FM for
approximately $3.6 million. The Company had previously loaned approximately $3.6
million to the owner of the station.  In December 1995, the Company entered into
an  agreement  with Steven B. Dodge,  Chairman of the Board and Chief  Executive
Officer of the Company, relating to this station pursuant to which Mr. Dodge had
agreed to provide  financing to a newly  organized  company  which  acquired the
station in December 1995.  Pursuant to the agreement,  the Company  acquired Mr.
Dodge's  approximately  $2.2 million loan (including accrued interest) which had
been assumed by the new owner, along with his right to acquire the station.  The
Company also loaned an additional approximately $1.4 million to the new owner to
finance the  acquisition  of the station.  The  acquisition  was  financed  with
proceeds  from the loans.  The Company had been  programming  and  marketing the
station pursuant to an LMA beginning in April 1996.

     In  February  1997,  Company  acquired  the assets of WLQT-FM  and  WBTT-FM
(formerly WDOL-FM) for approximately  $12.0 million.  The Company had previously
loaned approximately $12.0 million to the owner of the stations. The acquisition
was financed with proceeds from the loan. The Company had been  programming  and
marketing the stations pursuant to an LMA beginning in April 1996.

     Rochester:  In February  1997,  the Company  consummated  the  transactions
contemplated  by a series of agreements  pursuant to which the Company  acquired
the assets of WVOR-FM,  WPXY-FM,  WHAM-AM and  WHTK-AM for  approximately  $31.5
million,   including   working  capital.   The  Company  had  previously  loaned
approximately  $28.5 million to the owner of the stations.  The  acquisition was
financed  with  proceeds  from the  loan,  a $2.0  million  escrow  deposit  and
available  cash.  In  accordance  with a October  1996  consent  decree with the
Antitrust Division of the U.S. Department of Justice and the Attorney General of
the State of New York,  the Company is required to divest  WHAM-AM and WVOR- FM,
within a certain  period of time.  See  Pending  Transactions  -  Rochester  and
Cincinnati.

     Sacramento:  In February  1997,  the Company  consummated  an  agreement to
exchange  the  Philadelphia  station  which it  acquired  as part of the  Marlin
Transaction for KSFM-FM and KMJI-AM serving Sacramento,  California. The Company
also sold the Detroit station acquired as part of the Marlin  transaction to the
owner of the Sacramento  stations for  approximately  $20.0 million.  See Recent
Transactions -Philadelphia and Detroit and Pending Transactions - Sacramento.

     In March 1997, the Company acquired the assets of KXOA-AM/FM and KQPT-FM in
Sacramento,  California  for  approximately  $50.0  million.  The Company  began
programming  and marketing  the stations  pursuant to an LMA beginning in August
1996. See Pending Transactions - Sacramento.

                                       6

<PAGE>


     San Jose: In February 1997, the Company  acquired the assets of KBAY-FM and
KKSJ-AM for  approximately  $31.0 million.  The Company had been programming and
marketing the stations pursuant to an LMA beginning in August 1996.

     West Palm Beach:  In March 1997,  the Company  consummated  an agreement to
exchange  the assets of KSTE-AM in  Sacramento,  California  plus  approximately
$33.0  million in cash for the assets of WEAT-FM,  WEAT-AM  and WOLL-FM in West
Palm Beach,  Florida.  The party to the exchange agreement began programming and
marketing  KSTE-AM  pursuant to an LMA and the  Company  began  programming  and
marketing  the West Palm  stations  pursuant to an LMA beginning in August 1996.
Under current FCC regulations,  the Company is permitted to own five FM stations
in West Palm Beach;  accordingly,  it will be required to dispose of one station
in West Palm Beach.

Pending Transactions

     Charlotte, Kansas City, Philadelphia,  Pittsburgh, New Orleans, Sacramento,
Seattle, and St. Louis:

     In August 1996, the Company entered into a merger  agreement (as amended in
September  1996) with EZ pursuant to which EZ will be merged  directly  with and
into the Company . Pursuant  to the merger  agreement,  each holder of EZ Common
Stock will receive (i) $11.75 in cash and (ii) 0.9 shares of the Company's Class
A Common Stock.  Based on the number of shares of EZ Common Stock outstanding at
December 31, 1996, the Company will pay approximately $107.4 million in cash and
issue  approximately  8,228,400  shares of the  Company's  Class A Common  Stock
(excluding  options to purchase an aggregate of 514,400  shares of the Company's
Class A Common  Stock  which  will be assumed  pursuant  to the EZ  Merger).  EZ
currently  owns and/or  operates  twenty-six  radio stations in eight markets as
follows: WSOC- FM and WSSS-FM in Charlotte, North Carolina; KFKF-FM, KBEQ-FM and
KOWW-AM  in  Kansas  City,  Missouri;   WIOQ-FM  and  WUSL-FM  in  Philadelphia,
Pennsylvania; WBZZ-FM and WZPT-FM in Pittsburgh,  Pennsylvania; WRNO-FM, WEZB-FM
and  WBYU-AM  in New  Orleans,  Louisiana;  KNCI- FM,  KRAK-FM  and  KHTK-AM  in
Sacramento,  California;  KZOK-FM,  KMPS-AM/FM,  KBKS-FM, KRPM-AM and KYCW-FM in
Seattle,  Washington and KYKY-FM,  KEZK-FM, KFNS-AM and KSD- AM/FM in St. Louis,
Missouri.  As a result of existing FCC regulations  and the Sacramento  stations
either  owned by the  Company  or under  agreement  to  purchase  or sell by the
Company,  upon  consummation  of the EZ Merger,  the Company will be required to
sell one radio  station in  Sacramento,  KSSJ-FM,  (in  addition  to KXOA-FM and
KSTE-AM).  See  West  Palm  Beach  and  Sacramento  below.  Termination  of  the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976 (HSR Act) waiting period
with  respect  to the EZ Merger  has  occurred.  Subject  to the  receipt of FCC
approval,  the Company expects to consummate the EZ Merger in the second quarter
of 1997.

     EZ is a party to several  pending  transactions  which are  expected  to be
consummated subsequent to the EZ Merger and the applicable regulatory approvals.
EZ is a party to an asset exchange agreement, pursuant to which EZ will exchange
the New Orleans stations for KBKS-FM and KRPM-AM in Seattle and $7.5 million. In
December  1996, EZ entered into an agreement  pursuant to which it will exchange
its Philadelphia stations for stations in Charlotte,  North Carolina,  (WRFX-FM,
WPEG-FM,  WBAV-AM/FM  and WFNZ-AM) and purchase  WNKS-FM in Charlotte  for $10.0
million.  Pursuant  to FCC and HSR Act  requirements,  EZ then  entered  into an
exchange  agreement pursuant to which it will exchange WRFX-FM for WDSY-AM/FM in
Pittsburgh and $20.0 million.  In December 1996, EZ entered into an agreement to
sell KMPS-AM in Seattle for  approximately  $2.0 million.  In November 1996, the
Company  entered into an agreement to sell the assets of KSD-AM in St. Louis for
approximately  $10.0 million and the buyer began  programming  and marketing the
station pursuant to an LMA in January 1997. All of such transactions are subject
to receipt of FCC approval  and, in certain  cases,  the  expiration  or earlier
termination  of the HSR Act waiting period and will be consummated in the second
or third quarter of 1997.

     Austin:  In February 1997,  the Company  executed its option to acquire the
assets of KKMJ-FM,  KAMX-FM  (formerly  KPTY-FM)  and KJCE-AM for  approximately
$28.7 million.  In August 1995, the Company paid a deposit of $3.0 million for a
two-year  option to acquire the assets of these  stations which will be credited
toward the purchase  price.  The Company has been  programming and marketing the
stations  pursuant to an LMA  beginning in September  1995.  The HSR Act waiting
period was  terminated  early and  subject to the receipt of FCC  approval,  the
acquisition is expected to be consummated in the first half of 1997.

                                       7
<PAGE>

     Buffalo:  In August 1995, the Company  entered into an agreement to acquire
the assets of WBLK-FM  for  approximately  $8.0  million and then  assigned  its
purchase  right and agreed to make loans to finance the  purchase to PBRB.  PBRB
consummated the acquisition in March 1996 utilizing the proceeds of the loan and
the Company  began  programming  and  marketing  the station  pursuant to an LMA
beginning in March 1996.  The Company  intends to exercise its option to acquire
WBLK-FM (which acquisition may take the form of a merger with PBRB).  Subject to
the receipt of FCC approval,  and the  expiration or earlier  termination of the
HSR Act waiting period,  the acquisition or merger is expected to be consummated
in the second or third quarter of 1997.

     Cincinnati : In January 1997,  the Company  entered into and  consummated a
merger agreement  pursuant to which it became a party to an agreement to acquire
the assets of  WGRR-FM  for  approximately  $30.0  million.  The  Company  began
programming  and  marketing  the station  pursuant to an LMA beginning in March
1997.  American  issued  approximately  18,300  shares  of Class A Common  Stock
pursuant to such merger. The HSR Act waiting period was terminated early and FCC
approval has been received. The acquisition is expected to be consummated in the
second quarter of 1997.

     Fresno: In July 1996, the Company entered into an agreement to purchase the
assets  of KOQO-AM/FM  for  approximately  $6.0  million.  The  Company  began
programming  and marketing  the stations  pursuant to an LMA beginning in August
1996. A petition to deny the  assignment  of the FCC licenses of these  stations
was filed with the FCC in  September  1996.  American  and the seller have filed
oppositions  to the  petition to deny and believe  that it is without  merit and
will not further  affect or  substantially  delay  consummation.  Subject to the
receipt of FCC approvals,  the Company expects to consummate this acquisition in
the second quarter of 1997.

      Omaha: In October 1996, the Company entered into an agreement, as amended,
to sell KGOR-FM and KFAB-AM and Business Music Service for  approximately  $38.0
million.  The  carrying  values  of these  assets  have been  adjusted  from the
original  purchase price allocation to reflect the anticipated net proceeds from
the sale and accordingly, no gain or loss will be recognized on the transaction.
Omaha net  revenues  of  $3,504,000  and  operating  expenses  of  approximately
$2,486,000 are included in the accompanying statement of operations for the year
ended  December 31, 1996. FCC approval has been received and the HSR Act waiting
period was terminated  early.  The Company expects to consummate the sale in the
first half of 1997.

     Rochester:  In February 1997, the Company entered into an agreement to sell
WCMF-AM for approximately $650,000. Net revenues and operating expenses included
in the  accompanying  statement of operations  for the years ended  December 31,
1994,  1995 and 1996 were not material.  Subject to the receipt of FCC approval,
the Company expects to consummate the sale in the second quarter of 1997.

     In October 1995,  American  entered into a joint sales  agreement  with the
owner of an FM station in Rochester  under which the Company,  in exchange for a
fixed payment,  had the right to sell  advertising for the station and to retain
all such  advertising  revenue.  American also acquired an assignable  option to
purchase the station for  approximately  $5.0 million.  In  connection  with the
consent decree described in Rochester and Cincinnati  below,  American  assigned
this  purchase  option to the third  party  described  below and the joint sales
agreement was canceled in February 1997. See Rochester and Cincinnati below.

       In February  1997,  the Company  entered into an agreement to acquire the
assets of WAQB-FM, a newly licensed Class A FM radio station,  for approximately
$3.5  million.  FCC  approval  has been  received  and the  Company  expects  to
consummate the acquisition in the first half of 1997.

      Rochester and  Cincinnati:  In December 1996, the Company  entered into an
agreement to exchange the assets of WHAM-AM, WVOR-FM and WHTK-AM,  together with
$16.0 million for the assets of WKRQ-FM in Cincinnati,  Ohio.  (See 1997 Station
Acquisitions  -Rochester).  In connection therewith, the party to this agreement
began  programming  and  marketing  the  Rochester  stations  pursuant to an LMA
beginning in February 1997. The Company began  programming and marketing WKRQ-FM
pursuant to an LMA  beginning in March 1997.  FCC approval has been received and
pursuant to certain consent decrees entered into by both parties,  the Antitrust
Division of the U.S.  Department of Justice has approved this  transaction.  The
Company expects to consummate the exchange in the first half of 1997.

                                        8
<PAGE>

      Sacramento: In October 1996, the Company entered into an agreement to sell
KXOA-FM for  approximately  $27.5 million in cash. The Company began programming
and  marketing the stations  pursuant to an LMA beginning in August 1996,  which
was terminated in January 1997 when the party to the agreement began programming
and  marketing  the station  pursuant to an LMA. The HSR Act waiting  period was
terminated early and subject to the receipt of FCC approval, the Company expects
to consummate the sale in the first half of 1997.

      In December  1996,  the Company  entered into an agreement to sell KMJI-AM
for approximately  $1.5 million.  FCC approval has been received and the Company
expects to consummate the sale in the first half of 1997.

     San Jose:  In March  1997,  the  Company  entered  into a merger  agreement
pursuant  to which the  Company  will  acquire the assets of KEZR-FM and KLUE-FM
serving  Monterey,  California in exchange for  approximately  723,000 shares of
Class A Common Stock valued at  approximately  $20.0 million and $4.0 million in
cash.  Subject to the  receipt of FCC  approval  and the  expiration  or earlier
termination of the HSR Act waiting period, the Company expects to consummate the
merger in the first half of 1997.

     In March 1997,  the Company  entered  into an agreement to sell KKSJ-AM for
approximately $3.2 million.  Subject to the receipt of FCC approval, the Company
expects to consummate the sale in the second quarter of 1997.

     West Palm Beach:  In March 1996,  the Company  loaned PBRB $7.2  million to
finance the acquisition of WMBX-FM (formerly  WHLG-FM) and WSTU-AM.  The Company
has an option to  acquire,  and a right of first  refusal  with  respect to, the
stations.  In November  1996,  PBRB sold WSTU-AM to a third  party.  The Company
intends  to  exercise  its  option  to  acquire   WMBX-FM  and  WPBZ-FM   (which
acquisitions may take the form of a merger of PBRB into the Company). Subject to
the receipt of FCC approval and the expiration or earlier termination of the HSR
Act  waiting  periods,  such  acquisitions  are  expected  to occur in the third
quarter of 1997  utilizing  proceeds  from the WMBX-FM and WPBZ-FM  loans in the
aggregate  principal amount of approximately  $17.3 million and $2.75 million in
cash.

      In December  1996, the Company  acquired an option to purchase  another FM
station for approximately  $11.0 million.  The Company also agreed to loan up to
$150,000 to the party to this option agreement.  Subject to certain  conditions,
including  the  receipt of FCC  approval,  the Company  expects to exercise  its
option and consummate the acquisition in the third quarter of 1997.

      Tower  Subsidiary:  In February  1997, the Tower  Subsidiary  entered into
agreements  with three entities which are affiliated with one another to acquire
tower sites and a tower site  management  business in  Southern  California  for
approximately $32.1 million.  Consummation of the transaction is conditioned on,
among other things, the expiration or earlier termination of the HSR Act waiting
period. Subject to such expiration or termination, the acquisitions are expected
to be consummated in the second quarter of 1997.

     In December 1996, the Tower  Subsidiary  entered into a letter of intent to
acquire  certain  tower  sites and tower  site  management  agreements,  located
primarily in Northern  California,  for approximately  $42.0 million.  The Tower
Subsidiary  also  agreed  to  loan  the  sellers  approximately  $1.35  million.
Consummation   of  the  transaction  is  conditioned  on,  among  other  things,
negotiation  and execution of definitive  purchase and sale  agreements  and the
expiration or earlier termination of the HSR Act waiting period. Subject to such
expiration or termination,  the acquisition is expected to be consummated in the
second quarter of 1997.

     The Company is also  pursuing  the  acquisitions  of tower  properties  and
additional  radio  stations  in new and  existing  markets,  none of which  have
definitive purchase agreements.

                                       9

<PAGE>

Operating Philosophy

   American's  objective is to operate  leading radio station  groups in each of
its  markets as measured by  audience  ratings  and  revenue  share.  Management
believes  that  station  groups  create the  opportunity  to develop  leadership
positions within American's markets,  which significantly  improve its stations'
appeal to advertisers and their revenue and profit potential.  American believes
that group,  rather than  individual,  station results present a more meaningful
measure of performance  because a significant  percentage of revenues in most of
its markets is earned by companies  owning  multiple  stations.  Consistent with
such belief,  American  seeks to enhance the overall  performance  of its groups
through  means such as  complementary  programming  and joint  marketing  of its
individual stations.

   To  maintain  or improve  its  position  in each  market,  American  combines
extensive  research with an assessment of its  competitors'  vulnerabilities  in
order to identify specific audience  opportunities within each market.  American
then  tailors  the  programming,  marketing  and  promotion  of each  station to
maximize  its  appeal  to its  target  audience.  Management  seeks to  create a
distinct and marketable personality for each of its stations in order to enhance
audience share and listener  loyalty,  and to protect against  vulnerability  to
other format competition.  To help achieve this objective,  American employs and
promotes distinctive, high-profile on-air personalities in many of its stations.

     American's radio stations employ a number of programming  formats,  each of
which is designed to appeal to a specific  target audience in each local market.
American's  portfolio  of stations  is  diversified  in terms of format,  target
audience and geographic location. Management believes this diversification helps
to insulate its performance from potential local economic downturns, competitive
attacks and changes in listening preferences.  American's station groups are, in
many  instances,  composed  of  stations  in  different  phases of  development.
Management  believes  this  configuration  enables  it to  maximize  the  growth
potential of those station  groups,  while  reducing the risks  associated  with
launching new formats and undertaking other means of improving  under-performing
properties.

     Management  employs an  operating  philosophy  designed  to achieve  market
leadership which includes: (i) owning multiple stations and establishing program
formats within its individual markets that target specific diverse demographics,
(ii) developing and maintaining  popular programming to attract a large share of
the target  audience,  (iii) promoting its radio stations  frequently to develop
high  awareness  among its  target  listeners,  (iv)  leveraging  the  skills of
experienced  general  managers  with  strong  local  market  knowledge,  and (v)
developing well trained client-oriented local sales professionals.

     Strategic   Programming  of  Station   Groups:   American   customizes  the
programming of its groups to maximize their combined  audience share and revenue
potential.   American  does  not  utilize  a  predetermined  formula  to  target
demographic niches;  instead,  American believes that each market has individual
characteristics and should be evaluated independently.

     In certain cases,  American  utilizes stations to serve a demographic group
by  operating  stations  with  formats  that  target  similar  or  complementary
audiences.   For  example,  in  Boston,  American  owns  two  AM  stations  with
complementary  formats (Talk and Sports/Talk) and overlapping  demographics (Men
35- 54).  Management  believes that if two of its stations  which target similar
audiences  can achieve a large enough  percentage of that  audience,  it will be
able to secure a higher percentage of the advertising  directed to that audience
than its comparative market share of that audience.

     Popular  Programming:  American  tailors  the  programming,  marketing  and
promotion  of each  station  to  maximize  its appeal to that  station's  target
audience and to create a distinct and marketable  personality  for each station.
An  important  element of this  approach is  American's  strong  preference  for
employing  and  promoting  high  profile and  marketable  on-air  personalities,
especially in the morning drive day part,  which is 6-10 a.m. In order to adjust
to developing trends and identify new opportunities,  American conducts frequent
market research to provide its stations with the information necessary to refine
and improve their programming and assess the vulnerabilities of competitors.


                                       10

<PAGE>


     Aggressive  Station  Promotion:  American's  stations  typically  engage in
significant  local  promotional   activities,   including   extensive  community
involvement.  American's  stations also typically advertise on local television,
utilize  billboards  and print media,  participate in  telemarketing  and direct
mailings and sponsor local  contests,  concerts and events.  In Boston,  WBMX-FM
sponsors  events  such as "MIX  Fest",  WRKO-AM  sponsors  "Taste of Boston" and
WEEI-AM sponsors "The Hot Dog Safari".  In Hartford,  WZMX-FM sponsors an annual
"penny pitch" charity event designed to raise funds for the Hartford  Children's
Hospital.  See  Community  Involvement.  American has also  invested in database
marketing  programs with the objective of developing more personal  contact with
listeners.

     Strong Local Management and Sales Effort: In each of its markets,  American
employs  a  highly  experienced  general  manager  who is  responsible  for  the
performance  of the  stations  in his or her  market.  The  general  managers of
American's  stations have an average of six years experience as general managers
and an average of more than twenty years  experience  in the radio  industry.  A
portion of each general  manager's  compensation  is dependent on the  financial
results of the stations in his or her markets, aligning the manager's goals with
those of American.  As incentive  compensation,  American's general managers and
executive  officers have been granted options to purchase shares of common stock
which are  subject  to  vesting  provisions  over a  five-year  period.  Since a
significant portion of American's revenues are generated from local advertising,
American also focuses on developing a high quality,  client-oriented local sales
force at each radio station. Such a sales force allows American to establish and
maintain  direct   relationships   with  advertisers  and  capture   significant
advertising dollars.

Acquisition Strategy

     American  intends to continue to pursue the acquisition of additional radio
stations in new and existing  markets in order to achieve,  among other  things,
increased  size and  greater  geographic  diversification.  American  expects to
concentrate  these efforts in markets  ranked in the top 60 (with an emphasis on
markets  ranked 10  through  50) in terms of radio  advertising  revenues  where
management  believes  it  can  achieve  a  substantial  market  position.   When
evaluating acquisition  opportunities in new markets, American also assesses the
potential to achieve a leading position in audience share and to generate strong
cash flow growth through improved  programming,  marketing,  sales and operating
efficiencies.  While  American  intends  to  continue  to  focus  its  principal
acquisition efforts on radio stations, it also intends to continue to expand its
ownership and operation of communications  towers and to explore the syndication
of radio programming.  American intends to pursue acquisitions opportunistically
and to evaluate both market and station characteristics.

     Market Selection  Considerations:  American intends to make acquisitions in
markets that  provide the  opportunity  to obtain a leadership  position in both
audience  share and revenue  share.  In assessing  its potential to achieve this
leadership,  American evaluates the existence of under-served  audience segments
and competitors with perceived vulnerabilities.  In addition, American considers
the  potential  to  acquire  two or more FM  stations  in the  market.  American
believes  the  potential  to acquire two or more FM stations is essential to its
ability to achieve leading audience shares,  broad acceptance with  advertisers,
and  sustainable  growth  in  profitability.  American  will also  consider  the
acquisition  of AM stations  which it believes  have profit  potential and whose
ownership will enhance American's overall appeal to advertisers.

     American seeks to acquire  stations in markets that have already  witnessed
or are poised for significant group activity. American also closely examines the
state of the economy in its potential markets, specifically the size, historical
growth rates and projected future growth rates of the market's radio advertising
revenue, population and retail sales.

                                       11

<PAGE>

     Station  Selection   Considerations:   Within  markets  meeting  the  above
criteria, American intends to acquire stations in varying stages of development,
based primarily on management's  evaluation of the target station's  facilities,
including the relative strength and market coverage of its signal,  and its past
and  current  operating  performance.  When  entering  a  new  market,  American
generally   plans   to   employ  a  "core   station"   strategy,   acquiring   a
well-established and profitable station, thereby reducing the risk of entering a
new market.  Having established its presence in a new market,  American may then
continue its selective acquisition of under-performing  stations which generally
represent  greater  growth  potential  than   well-established   and  profitable
stations.  By  applying  its  turnaround  expertise,  and  leveraging  the  core
station's management and market presence, American believes that it will be able
to promote the  development  of  under-performing  stations and thereby  enhance
asset value.

     Purchase Price  Considerations:  American has never applied a fixed formula
to determine the purchase price of radio  stations.  In determining the purchase
price for an acquisition,  management  places emphasis on multiples of projected
station  broadcast cash flow rather than  historical  measures.  This is because
American   frequently   considers   acquisitions  of  radio  stations  requiring
significant  reconfiguration  which have nominal or negative  historical station
broadcast cash flow.

     American believes that its acquisition  strategy,  if properly implemented,
could have a number of benefits, including the following: (i) diversification of
revenues  and  broadcast  cash flow  across a greater  number  of  stations  and
markets,  (ii) more efficient  utilization of its senior  management team, (iii)
enhanced appeal to top industry  management  talent,  and (iv) increased overall
scale  which  should  broaden  the range of and  facilitate  American's  capital
raising activities.

Advertising Sales

     Virtually  all of the  Company's  revenues are  generated  from the sale of
local and national  advertising for broadcast on its radio stations.  In each of
1994,  1995 and 1996,  approximately  77% and 23% of the  Company's net revenues
were generated from local and national  advertising,  respectively.  The Company
believes that radio is one of the most  efficient and cost  effective  means for
advertisers to reach specific  demographic groups.  Advertising rates charged by
radio stations are based  primarily on (i) a station's  share of the audience in
the demographic  groups targeted by advertisers,  (ii) the number of stations in
the market competing for the same demographic groups and (iii) the supply of and
demand for radio  advertising  time. Rates are generally  highest during morning
and afternoon commuting hours.

     Depending on the format of a particular station,  there are a predetermined
number of  advertisements  that are broadcast each hour. The Company  determines
the  number of  advertisements  broadcast  hourly  that can  maximize  available
revenue dollars without  jeopardizing  listening levels.  The Company's revenues
vary  throughout the year. The Company's  first  calendar  quarter  historically
produces  the lowest  revenues  for the year,  while each of the other  quarters
produces  roughly  equivalent  revenues.  Although the number of  advertisements
broadcast   during  a  given  time  period  may  vary,   the  total   number  of
advertisements  broadcast  on a  particular  station  generally  does  not  vary
significantly  from  year to  year.  As is  typical  of the  radio  broadcasting
industry,  American's  stations  respond to  changing  demands  for  advertising
inventory by varying  prices rather than by varying the target  inventory  level
for a particular  station.  Most changes in revenues are therefore the result of
pricing changes rather than changes in the available inventory.

     Local and most  regional  advertising  sales are made by a station's  sales
staff. To achieve greater control over advertising  dollars, the Company's sales
force  focuses on  establishing  direct  relationships  with local  advertisers.
National sales are made by firms  specializing in such sales and are compensated
on a commission-only basis. The majority of advertising contracts run for only a
few weeks.


                                       12
<PAGE>

     Advertising   sales  in  connection  with  its  sports  network   generated
approximately  8% of the Company's  revenues  during 1996. The Company  believes
that sports broadcasting,  absent unusual  circumstances,  is a stable source of
advertising revenues.  There is less competition for the sports listener,  since
only one radio  station can offer a particular  game.  In  addition,  due to the
higher  degree  of  audience  predictability,  sports  advertisers  tend to sign
contracts  which are  generally  longer term and more stable than the  Company's
other advertisers.  American's sports network also benefits from a dedicated and
experienced sales force that has specialized expertise in sports advertising.

     The  Company  believes  its  strong  multi-station   combinations  give  it
significant  advantages in the competition for advertising dollars. A duopoly in
a market  better  positions  American to access a  significant  share of a given
demographic segment,  making its stations more attractive to advertisers seeking
to reach that segment.  In addition,  management believes the larger size of the
American organization attracts a higher quality sales force, a key asset for the
profitability of a radio station.

Competition

     The financial success of each of the Company's radio stations is dependent,
to a significant  degree, upon its audience ratings and its share of the overall
radio advertising revenue within its geographic market and the popularity of its
programming  within that market and, to a lesser extent,  on the economic health
of the geographic  market in which it operates.  Radio  broadcasting is a highly
competitive business.  Each of the Company's radio stations compete for audience
share and  advertising  revenue  directly with other media,  such as billboards,
newspapers, television, magazines, direct mail, compact discs and music videos.
With the  elimination of  restrictions on the number of radio stations which may
be  owned  nationally  by a  single  operator  and the  liberalization  of local
ownership restriction effected by the Telecommunications Act, the radio industry
is experiencing a concentration of ownership, as a result of which,  competition
may intensify as a limited  number of larger  companies  with greater  resources
emerge.

     The radio  broadcasting  industry is also subject to  competition  from new
media technologies that are being developed or introduced,  such as the delivery
of  audio  programming  by  cable  television   systems  and  by  digital  audio
broadcasting  (DAB).  DAB may provide a medium for the  delivery by satellite or
terrestrial  means of  multiple  new  audio  programming  formats  to local  and
national audiences.  The radio broadcasting  industry  historically has grown in
terms of total revenues  despite the  introduction of new  technologies  for the
delivery of  entertainment  and  information,  such as television  broadcasting,
cable television,  audio tapes and compact discs. Another possible competitor to
traditional radio is In Band On Channel (IBOC) digital radio. IBOC could provide
multi-channel,  multi-format  digital  radio  services  in  the  same  bandwidth
currently  occupied by traditional FM radio services.  See Federal Regulation of
Radio Broadcasting below.

     In addition to management experience, factors that may materially influence
a station's  competitiveness  include  the  station's  rank in its  market,  its
authorized   transmission  power,   general  radio  signal  strength,   audience
characteristics,  local program  acceptance and the number of characteristics of
other  stations  in the  market  area.  The  Company  attempts  to  improve  its
competitive  position  in each  market by  devoting  extensive  research  to its
stations'   programming,   implementing   advertising  campaigns  aimed  at  the
demographic groups for which its stations program and managing its sales efforts
to attract a larger share of advertising dollars.

Employees

     As of December 31, 1996, American employed 1,931 employees (1,237 full time
and 694 part time  persons).  American  has three  agreements  with the American
Federation  of Television  and Radio Artists  (AFTRA)  covering  various  on-air
personnel at four of its Boston  stations  and at two of its Hartford  stations.
American also has agreements  with the  International  Brotherhood of Electrical
Workers,  AFL- CIO  (IBEW) in Boston  expiring  on April 30,  1997 and in Fresno
which  expired on March 1,  1997,  and is  currently  in  negotiation.  American
considers its relations with its employees, AFTRA, and IBEW to be satisfactory.


                                       13
<PAGE>


Community Involvement

     American  considers  its  community   involvement  to  be  of  considerable
importance,  and,  to  that  end,  each  of its  stations  participates  in many
community  programs,  fund raisers and activities that benefit a wide variety of
organizations.  Charitable  organizations  that have been the  beneficiaries  of
American's telethons,  marathons,  walkathons,  swimathons, parades, food banks,
fairs and festivals include, among others, the American Cancer Society, American
Heart Association,  Big Brothers,  Big Sisters, Red Cross, United Way, Salvation
Army,  Jimmy Fund (Dana Farber Cancer  Institute),  St. Jude's Hospital and many
other organizations.

Federal Regulation of Radio Broadcasting

     The radio  broadcasting  industry  is subject  to  extensive  and  changing
regulatory  oversight,  governing,  among other  things,  technical  operations,
ownership and business and  employment  practices,  and certain types of program
content (including indecent and obscene program material).

     The ownership,  operation and sale of radio broadcast  stations  (including
those  licensed to American) are subject to the  jurisdiction  of the FCC, which
acts under authority granted by the  Communications  Act. The Communications Act
prohibits the  assignment of an FCC license or any transfer of control of an FCC
licensee without the prior written  approval of the FCC. In determining  whether
to  grant  requests  for  consents  to such  assignments  or  transfers,  and in
determining  whether  to  grant  or  renew a radio  broadcast  license,  the FCC
considers a number of factors pertaining to the licensee (and proposed licensee)
including  compliance with alien ownership  restrictions and rules governing the
multiple ownership and  cross-ownership of broadcast and other media properties,
the  "character"  of  the  applicant  and  those  persons  or  entities  holding
"attributable"  interests in the  applicant  and  compliance  with the Anti-Drug
Abuse Act of 1988. Among other things, the FCC assigns frequency bands for radio
broadcast stations; issues, renews, revokes and modifies radio broadcast station
licenses; regulates transmitting equipment used by radio broadcast stations; and
adopts and  implements  regulations  and policies  that  directly or  indirectly
affect the  ownership,  operation,  program  content and employment and business
practices  of radio  broadcast  stations.  The FCC also has the  power to impose
penalties for violations of its rules and the Communications Act.

     On February 8, 1996, the President signed the  Telecommunications Act which
substantially amended the Communications Act. The Telecommunications  Act, among
other things,  eliminated the national radio broadcast ownership restrictions in
the FCC's broadcast  ownership  regulations and raised the ceiling on the number
of radio  broadcast  stations  that a  single  entity  may own in a local  radio
market.  The  precise  number  of  stations  that  may be  commonly  owned  in a
particular  local market  depends upon the number of commercial  radio  stations
serving the local market.

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

     License  Renewal-Under  present FCC rules,  radio  broadcast  licenses  are
granted for maximum terms of seven years and upon application may be renewed for
additional terms. The  Telecommunications Act now permits the FCC to grant radio
broadcast  licenses for terms up to eight years. The FCC has begun a rule making
proceeding  in which it has  proposed  to  extend  the  license  term for  radio
broadcast   stations   to  the  full   eight   year   term   permitted   by  the
Telecommunications Act. Broadcast licenses may be renewed through an application
to  the  FCC  and   licensees   are  entitled  to  renewal   expectancies.   The
Communications  Act authorizes the filing of petitions to deny a license renewal
application  during  specified  periods after the renewal  application  has been
filed.  Interested parties,  including members of the public, may file petitions
as a means to raise issues  concerning the renewal  applicant's  qualifications.
The FCC may not consider  applications for the channel by other parties until it
first has decided to deny renewal to the incumbent. Before denying renewal to an
incumbent,  the FCC must allow the licensee a hearing on the licensee's  alleged
failure to satisfy the statutory standard.  The Communications Act now prohibits
the FCC from  considering  whether another licensee would be preferable until it
first has  determined  that the incumbent  does not qualify for renewal.  In the
vast majority of cases the FCC has renewed incumbent operators'


                                       14
<PAGE>

station  licenses.  Also,  during certain periods when a renewal  application is
pending,  the  transferability  of the  applicant's  license may be  restricted.
Certain of EZ's  stations  have license  renewal  applications  pending and this
could affect the timing of the  consummation  of the EZ Merger.  American is not
aware of any facts or circumstances that would prevent it from obtaining renewal
of the  radio  broadcast  licenses  that it holds.  There  can be no  assurance,
however, that each of American's licenses will necessarily be renewed.

     Ownership  Matters.  The FCC's broadcast  multiple ownership rules restrict
the number of radio broadcast  stations one person or entity may own, operate or
control in a local market. The  Telecommunications  Act raised the limitation on
the number of radio  broadcast  stations that a single entity may own in a given
local market, as follows:

     (i)  In radio  markets  with 14 or fewer  commercial  radio  stations,  one
          person or entity may hold  attributable  interests in up to five radio
          stations, no more than three of which may be in any one service (i.e.,
          AM or FM), as long as the commonly  owned  stations  amount to no more
          than 50% of the commercial radio stations in that market;

     (ii) In radio markets with between 15 and 29 commercial radio stations, one
          person or entity may hold  attributable  interests  in up to six radio
          stations, no more than four of which may be in any one service;

     (iii)In radio  markets with between 30 and 44  commercial  radio  stations,
          one person or entity  may hold  attributable  interest  in up to seven
          radio stations,  no more than four of which may be in any one service;
          and

     (iv) In radio markets with 45 or more commercial radio stations, one person
          or  entity  may  hold  attributable  interests  in up to  eight  radio
          stations, no more than five of which may be in any one service.

     The FCC rules also generally  restrict the common  ownership,  operation or
control of (i) a radio  broadcast  station and a  television  broadcast  station
serving the same local market,  and (ii) a radio  broadcast  station and a daily
newspaper serving the same local market.  Under these  "cross-ownership"  rules,
American,  absent  waivers,  would not be permitted  to acquire an  attributable
interest in any daily  newspaper or television  broadcast  station (other than a
low-power  television  station) in a local  market where it then owned any radio
broadcast station. American is not aware of any reason why these cross-ownership
rules  would  require  any  change  in  American's  current  ownership  of radio
broadcast stations.

     Programming and Operation:  The Communications Act requires broadcasters to
serve the  "public  interest".  A  broadcast  licensee  is  required  to present
programming  in  response  to  community  problems,  needs and  interest  and to
maintain  certain  records  demonstrating  its  responsiveness.   The  FCC  will
generally consider  complaints from listeners  concerning a broadcast  station's
programming  when it evaluates  the  licensee's  renewal  application,  but such
complaints  may be filed and  considered at any time.  Stations also must follow
various FCC rules that regulate, among other things, political advertising,  the
broadcast of obscene or indecent programming,  sponsorship  identification,  the
broadcast of contests and lotteries and technical operation (including limits on
human exposure to radio frequency energy).  From time to time, complaints may be
filed against American's stations alleging violations of these or other rules.

     A complaint  is pending  against a station  licensed  to American  alleging
violation of the political broadcasting rules by discriminatory  political sales
practices.  American  believes that these complaints will not, either separately
or in the aggregate,  result in either monetary forfeitures of a material nature
or any other regulatory  action which might have a materially  adverse effect on
American's stations or FCC licenses.


                                       15
<PAGE>


     In addition,  licensees  must develop and  implement  programs  designed to
promote equal  employment  opportunities  and must submit  reports to the FCC on
these  matters   annually  and  in  connection   with  the  licensee's   renewal
application.  The FCC has begun a rule  making  proceeding  to revise  its equal
employment  opportunity  rules. At this time,  however,  American cannot predict
what changes, if any, the FCC will implement,  or the effect of those changes on
American's current equal employment opportunity programs.

     Local  Marketing  Agreements:  In recent years, a number of radio stations,
including certain of American's stations, have entered into what are referred to
as "local marketing  agreements" (LMAs),  "time brokerage  agreements" (TBAs) or
joint  sales and  service  agreements.  These  agreements  take  various  forms.
Separately owned and licensed stations may agree to function  cooperatively with
respect to certain other matters,  subject to compliance with the antitrust laws
and the FCC's rules and policies, including the requirement that the licensee of
each  station  maintain  independent  control  over the  programming  and  other
operations of its own station.  A radio  broadcast  station that brokers time on
another  radio  broadcast  station  or  engages  in a TBA  or LMA  with a  radio
broadcast  station in the same market will be considered to have an attributable
ownership  interest in the  brokered  radio  station  for  purposes of the FCC's
multiple  ownership  rules,  if the  arrangement  covers  more  than  15% of the
brokered station's weekly broadcast hours.

     Failure to observe  these or other FCC rules and policies may result in the
imposition of various  sanctions,  including  admonishment,  fines, the grant of
"short"  (less  than the full)  renewal  terms or,  for  particularly  egregious
violations,  the denial of a license renewal application,  the revocation of FCC
licenses  or  the  denial  of  FCC  consent  to  acquire  additional   broadcast
properties.

     Digital Audio  Broadcasting:  The FCC recently has allocated  spectrum to a
new technology,  digital audio  broadcasting  (DAB), to deliver  satellite-based
audio  programming  to a  national  or  regional  audience  and  is  considering
regulations  for a DAB  service.  DAB may  provide a medium for the  delivery by
satellite or terrestrial  means of multiple new audio  programming  formats with
compact disc quality sound to local and national audiences. Another form of DAB,
known as In-Band On Channel (IBOC) DAB could provide DAB in the present FM radio
band. Thus far, the FCC has not granted the pending requests for  authorizations
to offer  satellite  radio,  nor has it  adopted  regulations  for the  proposed
satellite radio service.  A rule making  proceeding is pending before the FCC to
adopt DAB regulations,  however.  There are currently  several pending satellite
DAB  applications,  and the FCC has begun  rulemaking to establish  services and
operational  standards  for  satellite  DAB.  The FCC has  granted  at least one
applicant a waiver to begin  satellite  construction.  Implementation  of DAB or
IBOC would provide an additional  audio  programming  service that could compete
with  American's  radio  stations for  listeners,  but the effect upon  American
cannot be predicted.

     Future Changes: The Congress and the FCC have 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:  (i) affect the
operation,  ownership and profitability of American and its radio stations; (ii)
result in the loss of audience share and advertising revenue of American's radio
stations;  and (iii) affect the ability of American to acquire  additional radio
stations or finance such acquisitions. Such matters include, but are not limited
to, for example,  changes to the license  renewal  process;  proposals to impose
spectrum use or other  governmentally-imposed fees upon licensees;  proposals to
repeal  or modify  some or all of the  FCC's  multiple  ownership  rules  and/or
policies;  proposals to restrict or prohibit the  advertising of beer,  wine and
other alcoholic  beverages on radio and television;  changes in the FCC's cross-
interest,  multiple  ownership,  alien ownership and  cross-ownership  rules and
policies;  changes to broadcast technical  requirements;  proposals to limit the
tax  deductibility  of  advertising  expenses by  advertisers;  and proposals to
auction the right to use the broadcast  spectrum to the highest bidder,  instead
of granting broadcast licenses and subsequent license renewals free of charge.

     American cannot predict what other matters may be considered in the future,
nor can it judge in advance what impact,  if any, the  implementation  of any of
these proposals or changes might have on its business.


                                       16

<PAGE>

Executive Officers of the Registrant

     Steven  B.  Dodge  has been  Chairman  of the  Board,  President  and Chief
Executive  Officer since the founding of the Company.  Mr. Dodge was the founder
in 1988 of Atlantic Radio,  L.P. Prior to forming Atlantic Radio L.P., Mr. Dodge
served  as  Chairman  and  Chief  Executive  Officer  of  American  Cablesystems
Corporation,  a cable  television  company he founded in 1978 and  operated as a
privately-held  company until 1986 when it completed a public  offering in which
its stock was priced at $14.50 per share.  American Cablesystems was merged into
Continental Cablevision,  Inc. in 1988 in a transaction valued at more than $750
million,  or $46.50 per share. Mr. Dodge serves as a director of American Media,
Inc.  Mr. Dodge is 51 years old.

     Joseph  L.  Winn has been the  Treasurer,  Chief  Financial  Officer  and a
director  since the  founding  of the  Company.  In addition to serving as Chief
Financial  Officer of the  Company,  Mr.  Winn was  Co-Chief  Operating  Officer
responsible  for  Boston  operations  until  May  1994  when Mr.  Gehron  joined
American.  Mr.  Winn  served as Chief  Financial  Officer  and a director of the
general partner of Atlantic Radio L.P. since its organization. He also served as
Executive Vice President of the general  partner of Atlantic Radio L.P. from its
organization  until June  1992,  and as its  President  from June 1992 until the
organization of American. Prior to joining Atlantic Radio, L.P., Mr. Winn served
as Senior Vice President and Corporate Controller of American Cablesystems since
joining that company in 1983.  Mr. Winn is 45 years old.

     John R.  Gehron  joined  American  in May 1994 as a director  and  Co-Chief
Operating  Officer and served as a director  from then until  February 16, 1995.
With more than twenty years of radio experience,  Mr. Gehron began his career as
a  program  director  in  Philadelphia,  New York and  Chicago  before he joined
Capital  Cities/ABC  in 1983 as Vice  President-General  Manager of WLS-AM/FM in
Chicago. In 1987, Mr. Gehron joined CBS and launched WODS-FM in Boston, bringing
the station rank from fifteen to first within  three years.  Mr.  Gehron  joined
Pyramid  Broadcasting in 1989 as Vice  President-General  Manager for WNUA-FM in
Chicago which, under his aegis,  established a national standard for the "smooth
jazz" format and became a major factor in the Chicago  market.  Mr. Gehron is 50
years old.

     David  Pearlman has been Co-Chief  Operating  Officer since the founding of
the Company,  and served as a director  from then until  February 16, 1995.  Mr.
Pearlman organized Multi Market  Communications,  Inc. in 1990. Mr. Pearlman has
over 24 years of radio experience that includes 14 years at Westinghouse  where,
in a capacity of vice president/general  manager, he launched an all news format
on  WMAQ-AM in Chicago  and  negotiated  the  country's  first FM sports  rights
agreement in Houston at KODA-FM,  which station became one of Westinghouse's top
performing radio stations under his management. Mr. Pearlman was the first three
time winner of  Westinghouse's  Winner's  Circle  Award,  signifying  management
excellence.  In addition,  Mr.  Pearlman was the president  and chief  executive
officer of First City Broadcasting, a privately owned radio operating group that
experienced  significant  performance gains in key markets under his leadership.
Mr. Pearlman is 46 years old.

     Don Bouloukos joined American in August 1996 and became Co-Chief  Operating
Officer in September 1996.  Prior to joining  American,  Mr. Bouloukos served as
president of Capital  Cities/ABC  owned radio  stations for more than ten years,
having previously been Vice  President-Operations  for ABC owned radio stations.
Mr. Bouloukos,  as Vice  President-Operations  for ABC, had been responsible for
the daily operations for the station group,  which consisted of twelve stations.
In  1980,  Mr.  Bouloukos  served  as Vice  President  and  General  Manager  of
WLS-AM/FM,  the ABC owned  station  in Chicago  and headed the AM station  there
since 1970. With 24 years of radio experience, Mr. Bouloukos began his career at
WFYR in Chicago before joining WLS-AM/FM.  Mr. Bouloukos is 48 years old.

     Upon consummation the the EZ Merger,  Alan Box is expected to be elected to
the  office  of  Executive  Vice  President.  Alan Box  joined EZ in 1974 as the
General Manager of EZ's Washington, D.C. area radio station. He became Executive
Vice president and General Manager and a director of EZ in 1979, President of EZ
in 1985 and Chief  Executive  Officer of EZ in 1995.  He serves as a director of
the George  Mason  Bankshares  and the George  Mason Bank.  Previously,  Mr. Box
served as the Chairman of the NAB Digital  Audio  Broadcast  Task Force and as a
director of the NAB.  Currently,  Mr. Box is the  Chairman of the NAB's  Futures
Committee.  Mr. Box is 45 years old.

                                       17
<PAGE>


ITEM 2.   PROPERTIES.

     American's  corporate  headquarters are located in leased facilities at 116
Huntington Avenue, Boston, Massachusetts.

     The  properties  used by American's  radio  stations and owned by the Tower
Subsidiary  consist  of office  and  studio  facilities,  towers,  and tower and
transmitter  sites.  Station studio and sales offices are generally located in a
downtown or business district.  Antennas are located on either an American-owned
or leased tower.  Transmitter  and tower sites are generally  located to provide
maximum market coverage. American believes that owning its tower and transmitter
sites is an important goal for the Company inasmuch as such ownership provides a
station with the stabilizing  benefits of predictable  cash flow and lower fixed
operating costs.

     American owns many of its towers,  transmitter sites and studio facilities.
Certain office and studio facilities, towers and tower and transmitter sites are
also leased by American under leases that expire in three to twenty-five  years,
most of which are renewable.  American does not anticipate any  difficulties  in
renewing  its  leases,  where  required,  or in  leasing  additional  space,  if
required, and it believes that its properties are adequate for its operations.

     American owns  substantially  all of the  equipment it uses,  including its
transmitting  antennas,  transmitters,   studio  equipment  and  general  office
equipment.

     American  believes that its  properties  are in good condition and suitable
for its operations;  however,  American  continually  reviews  opportunities  to
upgrade its properties.  Substantially  all of the property and assets currently
owned and leased by the Tower subsidiary are pledged as security for the lenders
under the Tower Credit Agreement. See Notes to Consolidated Financial Statements
of American for additional information regarding the Company's credit agreements
and the minimum annual rental commitments of American.

ITEM 3.   LEGAL PROCEEDINGS.

     From time to time, American becomes involved in various claims and lawsuits
that are  incidental to its business.  In the opinion of American's  management,
there are no legal or regulatory  proceedings  pending  against  American  which
could have a material impact on financial position, the results of operations or
liquidity.

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

     A Special Meeting of Stockholders was held on December 17, 1996 to consider
and act upon the following  matters.  The results of the stockholder voting were
as follows:

     1.   To  approve  and  adopt  the  Agreement  and  Plan of  Merger  with EZ
          Communications,  Inc.  dated as of  August 5,  1996,  as  amended  and
          restated as of September 27, 1996.

             Votes Cast For    Votes Cast Against   Votes Withheld     Non-Vote
               56,404,280           45,830              12,341          117,081


     2.   To approve an  amendment  to the  Company's  Restated  Certificate  of
          Incorporation, as amended, to increase the authorized number of shares
          of Preferred  Stock and Common Stock,  to permit,  among other things,
          the consummation of the above merger.

             Votes Cast For    Votes Cast Against   Votes Withheld     Non-Vote
                55,255,805          1,320,252            3,475            0


                                       18

<PAGE>


                                    PART II.

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

     Shares of the Company's Class A Common Stock, par value $.01 per share (the
"Class A Shares" ) were quoted on the Nasdaq  National  Market  System under the
symbol "AMRD" from the  consummation of the Common Stock initial public offering
in June 1995 through  February 4, 1997.  On February 5, 1997,  the Company began
trading on the New York Stock  Exchange  under the symbol  "AFM".  The following
table sets forth, for the calendar  quarters  indicated,  the high and low sales
prices of the Class A Shares while quoted on the Nasdaq  National Market System,
as reported in published  financial  sources.  There is no public trading market
for the Company's  Class B Common Stock,  par value $.01 per share (the "Class B
Shares"),  or the Company's Class C Common Stock,  par value $.01 per share (the
"Class C Shares").

1996:                                               High              Low
First Quarter ...................................$   34 1/2        $   25
Second Quarter ..................................    43 1/2            30 1/4
Third Quarter ...................................    43                33
Fourth Quarter ..................................    37 3/4            23 7/8

1995:                                               High              Low

Second Quarter (commencing June 9, 1995).........$   26            $   18 1/4
Third Quarter ...................................    29 3/4            23
Fourth Quarter ..................................    28 1/2            19 1/2

     As of March 1, 1997,  there were 380 holders of record  (which  number does
not  include  the number of  stockholders  whose  shares are held of record by a
broker or clearing agency but does include each such brokerage house or clearing
agency as one record holder) of the Class A Shares;  62 holders of record of the
Class B shares and one holder of record of the Class C shares.

     The Company has not paid  dividends  on its shares of Common  Stock and the
payment of dividends on Common Stock is  restricted by the terms of the American
Credit Agreement and the Indenture under which the 9% Senior  Subordinated Notes
were issued in February 1996. It is not  anticipated  that any dividends will be
paid on any shares of any class of the Company's Common Stock in the foreseeable
future.




                                       19
<PAGE>


ITEM 6.   SELECTED COMBINED FINANCIAL DATA OF AMERICAN AND THE
          PREDECESSOR ENTITIES

     The following  Selected Combined  Financial Data have been derived from the
consolidated  financial statements of American and the Predecessor Entities. The
following  financial data present the combined  operating  results and financial
position of the  Predecessor  Entities for the periods  prior to the date of the
Combination  (November  1, 1993) for 1992 and the ten months  ended  October 31,
1993 as if such  entities had combined  effective  January 1, 1992 or, if later,
the commencement of operations of certain Predecessor Entities.  The information
as of December 31,  1994,  1995 and 1996 and for each of the years then ended is
based  on  the  historical  American  consolidated  financial  statements.  This
selected  financial  data  should  be read in  connection  with  such  financial
statements  and notes  thereto  and  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations"  appearing elsewhere in this Form
10-K.
<TABLE>
<CAPTION>
                                     SELECTED COMBINED FINANCIAL DATA
                                    American Radio Systems Corporation
                                  (In thousands, except per share data)

                     Combined Predecessor Entities (1)    American (1)    Combined (1)                   American
                     ---------------------------------   ------------    ------------                  ---------

                                                              Two
                                           Ten Months        Months           Year
                          Year Ended         Ended            Ended           Ended
   Statement of          December 31,      October 31,     December 31,    December 31,         Years Ended December 31,
   Operations Data:        1992 (2)           1993            1993          1993 (2)        1994 (2)     1995 (2)      1996 (2)
                           --------           ----            ----          --------        --------     --------      --------
<S>                        <C>            <C>             <C>             <C>            <C>            <C>           <C>
Net revenues                $ 46,306       $ 45,010         $  8,943       $ 53,953       $ 68,034       $ 97,772       $178,019
Station operating
   expenses                   36,698         37,058            6,493         43,551         50,129         66,448        120,004
Net local marketing
   agreement expense                                                                                          600          8,128
Depreciation and
   amortization                4,465          5,900            1,415          7,315          9,920         12,364         17,810
Operating income (loss)        1,486           (845)              91           (754)         5,756         14,452         27,031
Interest expense- net          4,370          5,517              801          6,318          7,051         10,062         16,762
Gains (losses) on sale of
   assets, net                  (964)         3,133                           3,133          2,278         11,544           (308)
Income (loss) before
   extraordinary losses       (4,233)        (4,877)            (447)        (5,324)           (73)         9,105          5,135
Extraordinary losses                                                                        (1,160)          (817)
Net income (loss)             (4,233)        (4,877)            (447)        (5,324)        (1,233)         8,288            162
Income (loss) before
   extraordinary losses
   per common share                                         $   (.08)                     $   (.21)      $    .65       $    .01
                                                            ========                      ========       ========       ========

Balance Sheet Data:
Working capital             $    354       $  1,331         $  8,496                      $ 16,342       $ 22,045       $ 34,986
Total assets                  56,872         64,236           63,424                       158,121        248,796        796,303
Long-term debt,
   including current
   portion and deferred
   interest                   51,491         59,610           57,355                       130,590        152,504        330,672

<FN>
(1)  The  information for the Combined  Predecessor  Entities  includes the results of operations of the following  entities for the
     following periods: Stoner and Atlantic - the year ended December 31, 1992 and ten months ended October 31, 1993; Multi Market -
     the fiscal year ended August 31, 1992  (included in calendar  year 1992) and the sum of (a)  eight-twelfths  of the fiscal year
     ended August 31, 1993,  and (b) the  historical  results for the two months ended October 31, 1993  (included in the ten months
     ended  October 31,  1993);  and Boston AM - the one- month period ended  December 31, 1992 (in calendar  year 1992) and the ten
     months ended October 31, 1993 (in that period). In addition,  the 1993 financial  information combines the Predecessor Entities
     for the ten months ended October 31, 1993 and historical American financial  statements for the two month period ended December
     31, 1993.

(2)  Year-to-year  comparisons are  significantly  affected by the timing of acquisitions and dispositions of radio stations,  which
     have been numerous during the periods shown.  See "Business" for a description of the  acquisitions  and  dispositions  made in
     1996.
</FN>
</TABLE>
                                       20
<PAGE>

                             SELECTED FINANCIAL DATA
                             OF PREDECESSOR ENTITIES

The following Selected Financial Data for each of Stoner, Atlantic, Multi Market
and Boston AM  presented  below is  derived  from  those  respective  companies'
financial statements which have been audited by independent accountants.

<TABLE>
<CAPTION>
                                SBS Holding, Inc. and Subsidiary (Stoner)
                                              (In thousands)


                                                                                Ten Months
                                                              Year Ended          Ended
                                                             December 27        October 31,
                                                               1992 (a)          1993 (a)
                                                             ------------       ----------
<S>                                                           <C>              <C>
Statement of Operations Data :
Net revenues                                                    $ 21,072         $ 20,797
Operating expenses                                                15,488           14,874
Depreciation and amortization                                      1,208            1,711
Corporate general and administrative expenses                      2,355            1,883
                                                                --------         --------
Operating income                                                   2,021            2,329
Interest expense, net                                                863            1,500
Gain (loss) on sale of assets, net                                  (504)           3,133
Provision for income taxes                                           382            1,690
Cumulative effect of change in accounting principles (b)             155
                                                                --------         --------

Net income                                                      $    272         $  2,117
                                                                ========         ========

Balance Sheet Data :
Working capital                                                 $  2,333         $  3,868
Total assets                                                      16,083           30,692
Long-term debt, including current portion                         17,300           27,000

<FN>

(a)      Year-to-year  comparisons are  significantly  affected by the timing of
         acquisitions  and  dispositions  of radio stations and, with respect to
         the ten months ended October 31, 1993, seasonality.
(b)      Includes   cumulative   effect  of  adopting   Statement  of  Financial
         Accounting Standards (FAS) No. 109, Accounting for Income Taxes, ($155)
         in 1993.
</FN>
</TABLE>
                                       21
<PAGE>

<TABLE>
<CAPTION>
                                  Atlantic Radio, L.P. and Subsidiaries
                                              (In thousands)


                                                                                Ten Months
                                                              Year Ended          Ended
                                                             December 27        October 31,
                                                               1992 (a)          1993 (a)
                                                             ------------       ----------
<S>                                                           <C>              <C>

Statement of Operations Data :
Net revenues                                                   $ 22,416         $ 18,643
Operating expenses                                               19,103           16,252
Depreciation and amortization                                     2,591            3,414
Corporate general and administrative expenses                       638              835
                                                               --------         --------
Operating income  (loss)                                             84           (1,858)
Interest expense, net                                             3,086            2,972
Loss on sale of assets, net                                        (460) (b)
                                                               --------         --------

Net loss                                                       $ (3,462)        $ (4,830)
                                                               ========         ========

Balance Sheet Data :
Working capital (deficiency)                                   $   (269)        $  1,174
Total assets                                                     27,253           21,767
Long-term debt, including current portion                        25,456           23,779

<FN>
(a)      Year-to-year  comparisons are  significantly  affected by the timing of
         acquisitions  and  dispositions  of radio stations and, with respect to
         the ten months ended October 31, 1993, seasonality.
(b)      Relates to sale of two radio stations in Rochester, New York to Stoner.
</FN>
</TABLE>

                                       22

<PAGE>
<TABLE>
<CAPTION>
                                    Multi Market Communications, Inc.
                                              (In thousands)

                                                                                           Two Months
                                                             Year Ended     Year Ended       Ended
                                                             August 31,     August 31,     October 31,
                                                                 1992          1993         1993 (a)
                                                             ----------     -----------    -----------
<S>                                                          <C>             <C>           <C>
Statement of Operations Data :
Net revenues                                                   $ 2,565        $ 3,355        $   510
Operating expenses                                               1,891          2,880            452
Depreciation and amortization                                      649            652             54
Corporate general and administrative expenses                      664            146             82
                                                               -------        -------        -------
Operating loss                                                    (639)          (323)           (78)
Interest expense, net                                              349            326             44
Other non-operating income (expense)                                (3)            52              7
Extraordinary gain                                                                359 (b)
                                                               -------        -------        -------

Net loss                                                       $  (991)       $  (238)       $  (115)
                                                               =======        =======        =======

Balance Sheet Data :
Working capital (deficiency)                                   $(2,631)       $(3,664)       $(3,727)
Total assets                                                     6,888          6,532          6,423
Long-term debt, including current portion                        4,332          4,250          4,200

<FN>
(a)      Comparison  of the fiscal  years ended August 31 on a pro rata basis to
         the two months ended October 31, 1993 is significantly  affected due to
         seasonality.
(b)      Represents gain on the forgiveness of debt.
</FN>
</TABLE>


                                       23

<PAGE>

                           Boston AM Radio Corporation
                                 (In thousands)


                                       Period December 1,         Ten Months
                                             1992                  Ended
                                      to December 31, 1992   October 31, 1993(a)
                                      --------------------   ------------------

Statement of Operations Data :
Net revenues                                  $    253              $ 2,823
Operating expenses                                 216                3,560
Depreciation and amortization                       17                  286
                                               -------              -------
Operating income (loss)                             20               (1,023)
Interest expense, net                               72                  784
                                               -------              -------

Net loss                                       $   (52)             $(1,807)
                                               =======              =======

Balance Sheet Data :
Working capital                                $   921              $    16
Total assets                                     6,648                5,354
Long-term debt, including current portion
and deferred interest                            4,403                4,631

(a)  Comparison of the fiscal year ended  December 31 on a pro rata basis to the
     ten  months  ended  October  31,  1993  is  significantly  affected  due to
     seasonality.


                                       24
<PAGE>

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

     The Company  desires to take advantage of the new "safe harbor"  provisions
of the Private Securities Litigation Reform Act of 1995. The Company's Report on
Form 10-K contains "forward-looking  statements" including statements concerning
projections,  plans,  objectives,  future events or  performance  and underlying
assumptions and other  statements  which are other than statements of historical
fact.  The  Company  wishes to  caution  readers  that the  following  important
factors,  among  others,  may have  affected and could in the future  affect the
Company's  actual  results  and could  cause the  Company's  actual  results for
subsequent   periods  to  differ   materially   from  those   expressed  in  any
forward-looking statement made by or on behalf of the Company: (a) the Company's
ability to meet debt service requirements;  (b) the Company's ability to compete
successfully  with other  radio  broadcasters;  (c) the  possibility  of adverse
governmental  action or regulatory  restrictions  from those  administering  the
Antitrust laws, the FCC or other governmental authorities;  (d) the availability
of funds under its credit  agreements to fund  acquisitions  for the foreseeable
future,  or, if such funds are inadequate,  the ability of the Company to obtain
new or additional debt or equity financing and the potential  dilutive effect of
any such equity financing and (e) the Company's ability to successfully  operate
existing and any subsequently  acquired  stations and towers,  particularly with
the increasing number and geographic diversity of its operations.

General

     The  Company's  financial  results  are  dependent  on a number of factors,
including the general strength of the local and national  economies,  population
growth,  ability to  provide  popular  programming,  local  market  competition,
relative  efficiency of radio broadcasting  compared to other advertising media,
signal strength and government  regulation and policies.  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.

     During the years ended  December 31, 1995 and 1994,  none of the  Company's
markets  represented  more than 15% of the Company's  station  operating  income
(i.e., net operating revenue less station operating expenses before depreciation
and  amortization),  other than the Boston market.  For the years ended December
31, 1994 and 1995 the Boston market  accounted for an aggregate of approximately
27% of the Company's  station operating income. As a consequence of the numerous
acquisitions consummated by the Company in 1996, the Boston markets significance
in relation to the  Company's  consolidated  financial  results has declined and
other markets,  particularly  the Hartford  market,  have emerged as significant
contributors to station operating income.  For the year ended December 31, 1996,
both the Boston and Hartford market  individually  accounted for an aggregate of
approximately 20% of the Company's station operating income. While historically,
radio  revenues in the Boston and  Hartford  markets  have  remained  relatively
stable,  an adverse change in the radio market or the station's  relative market
position could have a significant impact on the Company's operating results as a
whole. The relative  significance of the Boston and Hartford markets is expected
to decline in 1997 and  thereafter,  as the  Company  reports the full impact of
operating results of 1996 and subsequent station acquisitions.

     The Company's  revenues are affected primarily by the advertising rates the
Company's stations are able to charge.  These rates are in large part based on a
station's ability to attract audiences in the demographic groups targeted by its
advertisers,  as  measured  principally  by  quarterly  reports  by  independent
national  rating  services.  Because  audience  ratings in the local  market are
crucial to a  station's  financial  success,  the Company  endeavors  to develop
strong  listener  loyalty.  The Company  believes  that the  diversification  of
formats on its radio  stations  helps the  Company to  insulate  itself from the
effects of changes in musical tastes of the public on any particular format.


                                       25
<PAGE>

General - (continued)

     The number of  advertisements  that can be broadcast  without  jeopardizing
listening levels (and the resulting ratings) is limited in part by the format of
a particular radio station. The Company's stations strive to maximize revenue by
constantly  managing the number of commercials  available for sale and adjusting
prices  based  upon  local  market  conditions.  In the  broadcasting  industry,
stations often utilize trade or barter  agreements to generate  advertising time
sales in exchange for goods or services  used in the  operation of the stations,
instead  of  cash.  The  Company  minimizes  its  use of  trade  agreements  and
historically has sold over 93% of its advertising time for cash.

     Most advertising  contracts are short-term and generally run only for a few
weeks.  In each of  1994,  1995 and  1996,  approximately  77% of the  Company's
revenue was generated  from local  advertising,  which is sold primarily by each
station's  sales staff.  To generate  national  advertising  sales,  the Company
engages an independent  advertising  sales  representative  that  specializes in
national sales for each of its stations.

     The  Company's  first  calendar  quarter  historically  produces the lowest
revenues  for the  year,  while  each of the  other  quarters  produces  roughly
equivalent revenues.

     The 1995  major  league  baseball  labor  dispute  adversely  impacted  the
Company's  1995 and 1994  financial  performance.  The Company  has  contractual
commitments to pay fees in connection with the exclusive rights to broadcast the
games of the  Boston  Red Sox (1996 and 1997  seasons)  and the  Boston  Celtics
(through  the  1998-99  seasons).  The fees  payable  by  American  under  these
arrangements  currently  aggregate more than $6.0 million annually through 1997;
$2.4  million  in 1998 and $2.0  million  in 1999 and are  payable on a pro rata
basis for games played.  During 1994,  the major league  baseball  labor dispute
caused the Company to lose more than $1.5 million of booked advertising business
(plus,  the  Company  believes,  an  indeterminate  amount  of  other  potential
advertising revenue) with a corresponding reduction in expenses of approximately
$1.0 million,  representing mostly rights fees. Historically,  the majority of a
total season's advertising is placed during the six months prior to the start of
the regular season.  With respect to the 1995 Boston Red Sox season, the Company
continued to place advertising in anticipation of a resolution of the dispute in
time for the start of the regular season. However, in light of the uncertainties
as to the timing  and  nature of such  resolution,  and  despite  an  aggressive
effort,  placed  advertising  in 1995 was  approximately  $3.0 million less than
placed 1994 advertising (not giving effect to a $1.5 million loss in 1994 caused
by the labor dispute).  The Company, over a period of several months,  discussed
with the Boston Red Sox a reduction in the approximately  $4.0 million of rights
fees payable for the full 1995 season  (which would have been $3.5 million based
on the  shortened  season).  Those  discussions  resulted in an amendment to the
agreement  providing  for a  reduction  in the 1995 fees to  approximately  $2.9
million,  an extension of the  agreement for one year to include the 1997 season
and a prepayment  by American for such  extension  and of such  season's fees of
$0.7 million.  Due to the absence of a collective  bargaining  agreement between
the  owners and the  players,  there can be no  assurance  that there may not be
future labor  disputes  that could  adversely  affect the  Company's  subsequent
financial performance.

                                       26

<PAGE>


Results of Operations

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

   As of December 31, 1996, the Company owned and/or operated forty-eight FM and
twenty-three  AM stations.  As of December 31,  1995,  the Company  owned and/or
operated fifteen FM and nine AM stations. The Company also entered into LMA's as
follows:  September 1995 - KKMJ-FM, KAMX-FM and KJCE- FM in Austin; March 1996 -
WBLK-FM in  Buffalo;  April  1996 - WSJZ-FM in  Buffalo,  WLQT-FM,  WBTT-FM  and
WXEG-FM  in Dayton  and  KSTE-AM in  Sacramento;  May 1996 - KSFM-FM  KMJI-FM in
Sacramento,  KMXB-FM,  KMZQ-FM, KXTE-FM, KXNT-FM in Las Vegas; July - KSSJ-FM in
Sacramento;  August 1996 - KNAX-FM,  KVSR-FM,  KOQO-AM/FM in Fresno, KBAY-FM and
KKSJ- AM in San Jose, KXOA-AM/FM and KQPT-FM in Sacramento,  WEAT-AM/FM, WOLL-FM
in West Palm Beach and WAAF-FM and WWTM-AM in the Boston area; and November 1996
- WWMX-FM  and  WOCT-FM in  Baltimore.  The Company  sold  KGGO-FM,  KHKI-FM and
KDMI-AM in Des Moines in January 1995,  WHWK-FM and WNBF-AM in  Binghamton,  New
York in March 1995, and WNEZ-AM in Hartford in December  1996.  During 1996, the
Tower  Subsidiary  also  continued  to  increase  the number of tower  sites and
management  agreements  with  several  acquisitions.   These  transactions  have
significantly  affected  operations  for the year  ended  December  31,  1996 as
compared to the year ended December 31, 1995. See the Notes to the  Consolidated
Financial   Statements   for  a  description   of  the  1996  and  1995  station
acquisitions.

     Net  revenues  were  $178.0  million for the year ended  December  31, 1996
compared to $97.8 million in 1995,  an increase of $80.2 million or 82.0%.  This
increase was attributable to revenue growth in certain of the Company's existing
markets and more importantly the impact of the 1996 station acquisitions.

     Operating  expenses  excluding  net  local  marketing  agreement  expenses,
depreciation and amortization and corporate general and administrative  expenses
were $120.0  million  for the year ended  December  31,  1996  compared to $66.4
million in 1995, an increase of $53.6 million or 80.7%. This increase was due to
the impact of increased costs associated with the Company's revenue growth.

     Net local  marketing  agreement (LMA) expense was $8.1 million for the year
ended  December 31, 1996  compared to $0.6 million in 1995,  an increase of $7.5
million.  The increase is related to the impact of 1996 station  acquisitions as
the Company enters into LMA agreements  prior to the consummation of many of its
acquisitions and  dispositions.  Net LMA expenses consist of fees paid or earned
by the Company  under  agreements  which  permit an entity to program and market
stations prior to their acquisition.  Local marketing agreement expenses for the
year ended December 31, 1996 are presented net of approximately  $2.3 million of
revenues earned under such agreements.

     Depreciation  and  amortization was $17.8 million and $12.4 million for the
years ended December 31, 1996 and December 31, 1995,  respectively,  an increase
of $5.4 million or 43.5%. This increase was primarily attributable to the impact
of  increased   expenses   associated  with  the  increase  in  depreciable  and
amortizable assets resulting from 1996 station acquisitions.


                                       27

<PAGE>

Results of Operations - (continued):

     Corporate general and administrative  expense increased to $5.0 million for
the year ended  December 31, 1996 from $3.9 million for the year ended  December
31, 1995,  an increase of $1.1  million or 28.2%.  This  increase was  primarily
attributable  to the higher  personnel  costs  associated  with  supporting  the
Company's greater number of stations.

     Interest  expense was $22.3  million for the year ended  December  31, 1996
compared to $12.5  million for the 1995  period,  an increase of $9.8 million or
78.4%. The increase is related to higher borrowing levels during 1996, including
the Senior  Subordinated  Notes  issued in early  1996,  and to a lesser  extent
borrowings under the 1995 Credit Agreement.

     Interest  income was $5.5  million  for the year ended  December  31,  1996
compared to $2.4 million for the year ended  December  31, 1995,  an increase of
$3.1 million.  The increase is attributable to interest income earned on certain
station investment notes and higher investable cash balances in 1996.

     Gain  (loss) on the sales of assets  and other,  net in 1996 was  primarily
attributable to the loss of the sale of WNEZ-FM and to a lesser extent losses on
the  sales  of  assets  associated  with  the  integration  of  certain  station
facilities.  The gain on sale of assets for 1995 represents gains on the sale of
radio  broadcasting  properties in  Binghamton,  New York ($3.9 million) and Des
Moines, Iowa ($7.7 million).

     Provision  for income  taxes for the year ended  December 31, 1996 was $4.8
million compared to $6.8 million for year ended December 31, 1995. The effective
tax rate for the year ended December 31, 1996 was  approximately  48.4% compared
to 42.9% in 1995.  The  higher  rate in 1996 is due to the  effect of  permanent
differences, principally amortization of non-deductible goodwill on acquisitions
consummated through mergers.

     Redeemable common and preferred stock dividends for the year ended December
31,  1996 were $5.0  million  as  compared  to $0.8  million  for the year ended
December  31, 1995.  The 1996  dividends  are  attributable  to the  Convertible
Preferred  Stock issued in late June 1996. The 1995 dividends were  attributable
to the Series C Common Stock which was retired in June 1995 with  proceeds  from
the Company's initial public offering.

     Net income applicable to common  stockholders was $0.2 million for the year
ended December 31, 1996 compared to $7.5 million for the year ended December 31,
1995, a decrease of $7.3 million as a result of the factors discussed above.

   Broadcast  cash  flow  (i.e.,  operating  income  before  net  LMA  expenses,
depreciation and amortization and corporate general and administrative  expense)
was $58.0 million for the year ended December 31, 1996 compared to $31.3 million
for the year ended  December  31,  1995,  a $26.7  million  or 85.3 %  increase.
Broadcast cash flow margins were 32.6% in 1996 compared to 32.0% in 1995.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

     As of December 31, 1995, the Company owned and/or  operated  fifteen FM and
nine AM stations.  The Company  acquired WRCH-FM and WNEZ-AM in Hartford in June
1994;  WJYE-FM and WECK-AM in Buffalo  and WQSR-FM and WBMD-AM in  Baltimore  in
September 1994;  WIRK-FM and WBZT-AM in West Palm Beach in October 1994, WEGQ-FM
in Boston in January  1995,  and  WKGR-FM  in West Palm Beach in July 1995.  The
Company also entered into LMA's with  KKMJ-FM,  KAMX-FM and KJCE-FM in September
1995. The Company sold  WDJX-AM/FM in Louisville in May 1994;  KGGO- FM, KHKI-FM
and KDMI-AM in Des Moines in January 1995 and WHWK-FM and WNBF-AM in Binghamton,
New  York  in  March  1995.  These  transactions  have  significantly   affected
operations  for the year ended  December  31, 1995 as compared to the year ended
December 31, 1994.

                                       28

<PAGE>

Results of Operations - (continued):

     Net  Revenues  for the year ended  December  31,  1995 were  $97.8  million
compared  to $68.0  million in 1994,  a $29.8  million or 43.8%  increase.  This
increase was principally attributable to acquisitions and also to revenue growth
at substantially all of the Company's radio stations,  but was partially reduced
by a loss in revenue of one of American's Boston radio stations  attributable to
a labor dispute in major league baseball. See ---General above.

     Operating expenses excluding net LMA expense, depreciation and amortization
and  corporate  general and  administrative  expenses were $66.5 million for the
year ended December 31, 1995 and $50.1 million in 1994, a $16.4 million or 32.7%
increase.  This  increase was due to station  acquisitions  as well as increased
sales commissions resulting from the Company's revenue growth.

     Depreciation  and  amortization was $12.4 million and $9.9 million for 1995
and 1994,  respectively,  a $2.5 million or 25.3%  increase.  This  increase was
primarily attributable to intangible assets related to 1994 station acquisitions
which occurred primarily in the third and fourth quarters of 1994.

     Corporate  general and  administrative  expenses  increased $1.7 million to
$3.9 million for 1995 from $2.2  million in 1994 or 77.3%.  The increase was due
primarily to the higher costs associated with supporting the Company's increased
number of stations.

     Interest  expense was $12.5  million for 1995  compared to $7.3 million for
1994, a $5.2 million or 71.2%  increase.  This  increase is related to increased
borrowings used to fund station acquisitions.

     Interest  income was $2.4  million  for the year ended  December  31,  1995
compared to $0.2 million for the year ended  December  31, 1994,  an increase of
$2.2 million.  The increase is attributable to interest income earned on certain
station investment notes and higher investable cash balances in 1995.

     Gain on sale of assets for 1995 was $11.5 million  compared to $2.3 million
for 1994,  an increase of $ 9.2 million.  The 1995 gain  represents  two station
sales:  Binghamton  ($4.0  million)  and Des  Moines  ($7.6  million);  only one
station, Louisville, was sold in 1994.

     Income tax provision for 1995 was $6.8 million compared to $0.6 million for
1994,  a $6.2  million  or  1,033.3  %  increase.  The  increase  is a result of
significantly improved profitability in 1995. The effective tax rate in 1994 was
approximately  115.1% as compared to 42.9% in 1995. The higher effective rate in
1994 is due to the  non-deductibility  of  amortization  of  certain  intangible
assets in 1994 as a percentage of income before taxes compared to 1995.

     Extraordinary  loss for 1994 was $1.2  million,  net of a $0.6  million tax
benefit  compared to $0.8  million,  net of a $0.6 million tax benefit for 1995.
Both  extraordinary  losses were the result of certain deferred  financing costs
being written off pursuant to the  extinguishment  of debt outstanding under the
1993 and 1994 Credit Agreements.

     Redeemable  common and preferred stock dividends for 1995 were $0.8 million
as compared to $1.9 million for 1994, a 57.9% decrease.  The primary reasons for
this decrease were the exchange of Preferred  Stock to Common Stock in September
1994 and the retirement of Series C Common Stock in June 1995 which  accompanied
the initial  public  offering of the Company's  Class A Common  Stock.  (See the
Notes to the Consolidated Financial Statements).

     Net income  applicable  to common  stockholders  was $7.5  million for 1995
compared to a net loss  applicable  to common  stockholders  of $3.1 million for
1994, an increase of $10.6 million as a result of the factors discussed above.

     Broadcast  cash  flow  (i.e.,  operating  income  before  net LMA  expense,
depreciation and amortization and corporate general and administrative  expense)
was $31.3  million for 1995  compared to $17.9 million for 1994, a $13.4 million
or 74.9 % increase.  Broadcast cash flow margins were 32.0 % in 1995 compared to
26.3% in 1994.

                                       29

<PAGE>


Liquidity and Capital Resources

     The   Company's   liquidity   needs  arise  from  its   acquisition-related
activities,  debt service,  working capital,  capital  expenditures and dividend
payments. Historically, the Company has met its operational liquidity needs with
internally   generated   funds  and  has  financed  the   acquisition  of  radio
broadcasting  properties and tower related properties with a combination of bank
borrowings  and  proceeds  from  the  sale  of the  Company's  equity  and  debt
securities.  For the year  ended  December  31,  1996  cash  flows  provided  by
operating activities was $15.7 million, as compared to $9.7 million for the year
ended  December 31, 1995 and $2.0 million for the year ended  December 31, 1994.
The change is primarily  attributable to working capital  investments related to
station acquisition and growth.

     Cash flows used for investing  activities  were $421.9 million for the year
ended December 31, 1996 as compared to $81.2 million for the year ended December
31, 1995 and $92.9 million for the year ended  December 31, 1994. The variations
from year to year related to varying station acquisition activity.

     Cash provided by financing activities was $412.8 million for the year ended
December 31, 1996 as compared to $72.2  million for the year ended  December 31,
1995 and $ 89.6 for the year ended  December 31, 1994.  The increase in 1996 was
due to the equity and debt  offerings  described  below  offset by  repayment of
borrowings under the 1995 Credit Agreement.

     Offerings:  In January 1997, the Company  consummated a private offering of
2,000,000  shares  of 11 3/8%  Cumulative  Exchangeable  Preferred  Stock,  $100
liquidation preference per share (Exchangeable Preferred Stock). Net proceeds to
the Company from the offering were approximately $192.4 million. Proceeds of the
offering  were used  initially  to repay  indebtedness  and  thereafter  to fund
acquisitions. Dividends on the Exchangeable Preferred Stock are cumulative at an
annual  rate of 11 3/8%  (equivalent  to  $11.375  per  share)  and are  payable
quarterly in cash, at the Company's election, or on or prior to January 15, 2002
with the  issuance  of  additional  shares.  The  Exchangeable  Preferred  Stock
possesses mandatory  redemption  features and will be classified  accordingly in
the financial statements. See the Notes to the Consolidated Financial Statements
for a description of the Exchangeable Preferred Stock.

     In June 1996,  the Company  consummated  a private  offering  of  2,750,000
Depositary  Shares,  each representing a one-twentieth of a share of Convertible
Exchangeable  Preferred  Stock,  $1,000  liquidation   preference   (Convertible
Preferred   Stock).   Net  proceeds  to  the  Company  from  the  offering  were
approximately  $132.8 million and were used to fund  acquisitions.  Dividends on
the  Convertible  Preferred  Stock  are  cumulative  at  an  annual  rate  of 7%
(equivalent  to $3.50 per depositary  share) and are payable  quarterly in cash.
Approximately $5.0 million of accrued dividends had been paid as of December 31,
1996. See the Notes to the Consolidated  Financial  Statements for a description
of the Convertible Preferred Stock.

     In February  1996,  the Company  completed  an equity  offering  and a debt
offering.  Pursuant to the equity offering,  which consisted of 5,514,707 shares
of its Class A Common  Stock at a price of $27 per  share,  including  4,000,000
shares sold by the Company,  1,013,370 shares sold by selling shareholders,  and
an additional 501,337 shares sold by the Company pursuant to the exercise of the
underwriters'   over-allotment   option.   Proceeds  to  the  Company,   net  of
underwriters'  discount and associated costs, were approximately  $114.5 million
and were utilized to repay existing debt and fund acquisitions.

     Pursuant to the debt offering, the Company sold $175.0 million of 9% Senior
Subordinated  Notes at a discount of approximately $1.4 million yielding 9.125%.
Interest on the Senior Subordinated Notes is payable semi-annually on February 1
and August 1 and the Notes mature on February 1, 2006.  The Company,  may at its
option,  redeem,  in whole or in part, the Senior  Subordinated  Notes beginning
February 1, 2001,  initially at 104.5% of principal amount declining annually to
100.0% in 2004 and thereafter. The Company is also required to redeem the Senior
Subordinated   Notes  upon  the  occurrence  of  certain   events.   The  Senior
Subordinated  Notes are  subordinate in right of payment to the prior payment in
full of  indebtedness  outstanding  under the 1997 Credit  Agreement and contain
certain covenants including, but not limited to, limitations on sales of assets,
dividend  payments,  future  indebtedness  and issuance of preferred  stock, and
changes  in  control  (as  defined)  require  an offer to  purchase  the  Senior
Subordinated  Notes.  The  Senior  Subordinated  Notes  are  guaranteed  by  all
Restricted Subsidiaries (as defined). Proceeds


                                       30

<PAGE>

Liquidity and Capital Resources - (continued):


to  the  Company,  net of  underwriters'  discount  and  associated  costs  were
approximately  $167.5 million, and were utilized to repay existing debt and fund
acquisitions.

     Credit  Agreements:  As of December 31, 1996, the Company had approximately
$330.7 million of total long-term debt  (including the current portion  thereof)
outstanding.   This  included   approximately   $151.5   million  of  borrowings
outstanding  under the 1995  Credit  Agreement.  In January  1997,  the  Company
entered  into new credit  agreements  with a syndicate of banks (the 1997 Credit
Agreement)  which  replaced the $300.0 million 1995 Credit  Agreement.  The 1997
Credit  Agreement  consists of two separate  lending  agreements,  providing for
facilities  consisting of a $550.0 million reducing revolver credit facility,  a
$200.0 million  revolving credit converting to a term loan facility and a $150.0
million term loan facility,  available only to repurchase, if required,  certain
note  obligations of EZ  Communications,  Inc. (EZ) which will be assumed by the
Company in  connection  with the merger of EZ into the Company (EZ Merger).  The
terms  of  the  1997  Credit  Agreement  are  described  in  the  Notes  to  the
Consolidated Financial Statements. In connection with the 1997 Credit Agreement,
in January 1997, the Company  recorded an  extraordinary  loss of  approximately
$2.6 million,  which will be recorded net of the applicable  income tax benefit,
representing  the  write-off  of deferred  financing  fees  associated  with the
previous agreement.

     In November  1996,  the Tower  Subsidiary  entered into a credit  agreement
(Tower Credit Agreement) that provides the Tower Subsidiary with a $70.0 million
loan  commitment and an incremental  $20.0 million loan,  contingent  upon Tower
obtaining  additional  equity.  The  terms of the  Tower  Credit  Agreement  are
described in the Notes to the Consolidated Financial Statements.

     In  order  to  finance  acquisitions  of  radio  stations,   tower  related
properties  and for general  corporate  purposes,  the Company has  borrowed and
expects to continue  to borrow  under its credit  agreements.  As part of the EZ
Merger,  the Company will assume EZ's obligations with respect to $150.0 million
principal  amount of the EZ Senior  Subordinated  Notes and repay all borrowings
under the EZ credit facility with borrowings from the 1997 Credit Agreement. The
Company will be required to offer to purchase the EZ Senior  Subordinated  Notes
at 101% of their  principal  amount and will borrow any funds  required to do so
under the 1997 Credit  Agreement.  A substantial  portion of the Company's  cash
flow from  operations  is required for debt service.  The Company  believes that
cash flow from operations  will be sufficient to meet debt service  requirements
for interest and scheduled payments of principal under the credit agreements and
the Senior Subordinated Notes and the EZ Senior Subordinated Notes. However, the
Company's  leverage  could make it  vulnerable  to a downturn  in the  operating
performance of its radio  stations,  tower  properties or a downturn in economic
conditions.

     The Company believes that its cash flows from operations will be sufficient
to meet any  quarterly  dividend,  debt  service  requirements  for interest and
scheduled  payments of principal  under the 1997 Credit  Agreement and its other
debt obligations.  If such cash flow is not sufficient to meet such debt service
requirements,  the Company may be required to sell equity securities,  refinance
its  obligations  or dispose of one or more of its  properties  in order to make
such  scheduled  payments.  There can be no assurance  that the Company would be
able to effect any of such transactions on favorable terms.

     The Company's  working capital needs  fluctuate  throughout the year due to
industry-wide  seasonality  and its  broadcast  of sporting  events at different
times during the year. The Company historically has had sufficient cash from its
operations to meet its working capital needs and believes that it has sufficient
financial  resources  available  to it,  including  borrowing  under the  credit
agreements, to finance operations for the foreseeable future.

     The Company has entered into  numerous  station and tower  acquisition  and
related agreements (see the Notes to the Consolidated Financial Statements). The
consummation of each of these agreements is subject to, among other things,  FCC
approval and in some cases  expiration or earlier  termination of the Hart-Scott
Rodino Act waiting period and the negotiation of definitive  agreements.  Unless
otherwise  noted,  the Company intends to effect all of the transactions as soon
as the  necessary  approvals are  obtained.  The Company  intends to finance the
acquisitions  with available cash,  borrowings under the 1997 Credit  Agreement,
and, in certain cases, issuance of equity securities.


                                       31
<PAGE>

Liquidity and Capital Resources - (continued):

     The Company expects capital  expenditures in 1997 to be approximately $20.0
million, consisting principally of tower construction, office consolidations and
ongoing  technical  improvements.  To  the  extent  that  funds  generated  from
operations, or available cash, are insufficient to finance non-recurring capital
expenditures,  the Company  would seek to borrow the  necessary  funds under the
1997 Credit Agreement.

Inflation

     The  impact  of  inflation  on  the  Company's   operations  has  not  been
significant  to date.  However,  there can be no  assurance  that a high rate of
inflation  in the  future  would not have an  adverse  effect  on the  Company's
operating results.

Recent Accounting Pronouncement

     In March 1997, the Financial  Accounting Standards Board released Statement
of Financial  Accounting Standards No. 128 "Earnings Per Share" (FAS 128), which
will be effective  for fiscal 1997.  FAS 128 will require the Company to restate
amounts   previously   reported  as  earnings  per  share  to  comply  with  the
requirements  of the new  standard;  while  the  Company  is in the  process  of
evaluating  the impact of FAS 128, it does not expect that  adoption will have a
dilutive effect on previously reported earnings per share.


                                       32

<PAGE>

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The  following   financial   statements   of  American   Radio  Systems
Corporation are filed herein.

         American Radio Systems Corporation and Subsidiaries

         Independent Auditors' Report
         Consolidated Balance Sheets as of December 31, 1995 and 1996
         Consolidated Statements of Operations for each of the three years in
              the period ended December 31, 1996
         Consolidated Statements of Stockholders'  Equity  (Deficiency) for each
              of the three years in the period ended December 31, 1996
         Consolidated  Statements  of Cash Flows for each of the three  years in
              the period ended December 31, 1996
         Notes to Consolidated Financial Statements


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

         The information called for by this Item is not applicable.








                                       33

<PAGE>

                                    PART III.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         "Election of Directors" and  "Additional  Information" in the Company's
Proxy Statement for the 1996 Annual Meeting of Stockholders to be filed with the
Securities  and  Exchange  Commission  on or before  April 30,  1997 are  hereby
incorporated by reference herein.

ITEM 11.  EXECUTIVE COMPENSATION

         "Election of Directors" and "Executive  Compensation"  in the Company's
Proxy Statement for the 1996 Annual Meeting of Stockholders to be filed with the
Securities  and  Exchange  Commission  on or before  April 30,  1997 are  hereby
incorporated by reference herein.  Such  incorporation by reference shall not be
deemed to specifically  incorporate by reference the information  referred to in
Item 402(a)(8) of Regulation S-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

         "Principal  Stockholders" in the Company's Proxy Statement for the 1996
Annual  Meeting of  Stockholders  to be filed with the  Securities  and Exchange
Commission  on or before  April 30,  1997 is hereby  incorporated  by  reference
herein.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         "Other  Transactions"  in the  Company's  Proxy  Statement for the 1996
Annual  Meeting of  Stockholders  to be filed with the  Securities  and Exchange
Commission  on or before  April 30,  1997 is hereby  incorporated  by  reference
herein.




                                       34

<PAGE>




                                     PART IV

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

(a)  Documents filed as part of this report
         (1) Financial Statements


    The  consolidated  financial  statements of the Company are filed as part of
this Form 10-K and are set forth on pages F-1 to F-49 as detailed in Item 8.



(b)  Reports on Form 8-K filed in the fourth quarter of 1996.

         Form 8-K/A (Amendment 2) on October 2, 1996:
         Item  7  -  Financial   Statements  and  Pro  Forma  Financial
         Information for the Company and The Ten Eighty Corporation.



(c)  Exhibits - See Exhibit Index beginning on page (i).



(d)  Consolidated financial statement schedule

         Schedule II - Valuation and Qualifying Accounts - see page S-1.

         All other schedules have been omitted because the required  information
         either  is not  applicable  or is  shown  in or  determinable  from the
         financial statements or notes thereto.


                                       35

<PAGE>



                                   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 the 28th day of
March, 1997.

                                    AMERICAN RADIO SYSTEMS CORPORATION


                                    By: /s/ STEVEN B. DODGE
                                       Steven B. Dodge
                                       Chief Executive Officer, Director,
                                       President and Chairman of the Board

       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 and on the dates indicated.


/s/  STEVEN B. DODGE              Chairman of  the Board, Chief Executive
                                   Officer, President and Director

/s/ JOSEPH L. WINN                Chief Financial Officer and Director


/s/ JUSTIN D. BENINCASA           Vice President and Corporate Controller


/S/ THOMAS H. STONER              Director


/S/ ARNOLD L. CHAVKIN             Director


/S/ JAMES H. DUNCAN, JR.          Director


/S/ CHARLES D. PEEBLER, JR.       Director


/S/ DONALD B. HEBB, JR.           Director


/S/ CHARLTON H. BUCKLEY           Director


                                       36



<PAGE>
INDEPENDENT AUDITORS' REPORT

Stockholders and Board of Directors of
  American Radio Systems Corporation:

We have audited the accompanying  conso1idated  balance sheets of American Radio
Systems  Corporation and  subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity (deficiency)
and cash flows for each of the three  years in the  period  ended  December  31,
1996. Our audits also included the financial  statement  schedule  listed in the
index at Item 14.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and financial statement schedule based on our audits.

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

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of American  Radio Systems  Corporation  and
subsidiaries  as of  December  31,  1995  and  1996,  and the  results  of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted  accounting  principles.
Also, in our opinion,  such financial  statement  schedule,  when  considered in
relation  to the  basic  consolidated  financial  statements  taken  as a whole,
presents fairly in all material respects the information set forth therein.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 25, 1997


                                      F-1
<PAGE>



               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)


                                                                 December 31,
                                                           --------------------
                                                             1995         1996
                                                            ------       ------
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                              $  3,889   $ 10,447
     Accounts receivable (less allowance for doubtful
       accounts of $2,532 and $4,560 in 1995 and 1996,
       respectively)                                          24,389     51,897
     Employee and other related-party receivables                151        249
     Prepaid expenses and other assets                         2,130      3,354
     Note receivable--other                                    1,108
     Deferred income taxes                                     1,162      3,370
                                                            --------   --------
               Total current assets                           32,829     69,317
                                                            --------   --------
PROPERTY AND EQUIPMENT--Net                                   31,786     90,247
                                                            --------   --------
OTHER ASSETS:
     Station investment note receivable--related party
        (less valuation allowance of $500 in 1995 and
            1996)                                                500        743
     Station investment notes receivable                      48,597     69,177
     Intangible assets--net:
          Goodwill                                            66,464    232,149
          FCC licenses                                        45,023    233,558
          Other intangible assets                             15,864     27,553
     Deposits and other long-term assets                       7,733     26,064
     Net assets held under exchange agreement                            47,495
                                                            --------   --------
               Total other assets                            184,181    636,739
                                                            --------   --------
TOTAL                                                       $248,796   $796,303
                                                            ========   ========




                 See notes to consolidated financial statements.


                                      F-2

<PAGE>
<TABLE>
<CAPTION>
                           AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

                                       CONSOLIDATED BALANCE SHEETS
                                    (In thousands, except share data)

                                                                                   December 31,
                                                                             -----------------------
                                                                                 1995          1996
                                                                               --------      -------
<S>                                                                          <C>          <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Current maturities of long-term debt                                     $     355    $     561
     Accounts payable                                                             3,004        7,085
     Accrued compensation                                                         1,318        3,027
     Accrued expenses                                                             5,593       16,355
     Accrued interest                                                               514        7,303
                                                                              ---------    ---------
          Total current liabilities                                              10,784       34,331
                                                                              ---------    ---------
DEFERRED INCOME TAXES                                                             7,899       33,205
                                                                              ---------    ---------
OTHER LONG-TERM LIABILITIES                                                       1,929        2,149
                                                                              ---------    ---------
LONG-TERM DEBT                                                                  152,149      330,111
                                                                              ---------    ---------
MINORITY INTEREST                                                                                344
                                                                              ---------    ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
     Preferred Stock; $0.01 par value; 10,000,000 shares authorized;
       Convertible Exchangeable Preferred Stock; 137,500 shares issued
       and outstanding (represented by 2,750,000 depositary shares);
       liquidation preference $1,000 per share                                                     1
     Class A Common Stock; $.01 par value; 100,000,000 shares authorized;
        6,645,862 and 15,101,022 shares issued and outstanding,
        respectively                                                                 66          151
     Class B Common Stock; $.01 par value; 15,000,000 shares authorized,
        5,919,601 and 4,658,096 shares issued and  outstanding,
        respectively                                                                 59           47
     Class C Common Stock; $.01 par value; 6,000,000 shares authorized;
        1,795,518 and 1,295,518 shares issued and outstanding,
        respectively                                                                 18           13
     Additional paid-in capital                                                  70,928      390,731
     Unearned compensation                                                         (391)        (297)
     Retained earnings                                                            5,793        5,955
                                                                              ---------    ---------
          Total                                                                  76,473      396,601
     Less:
          Treasury stock, at cost, 18,449 shares at December 31, 1995
              and 1996                                                             (438)        (438)
                                                                              ---------    ---------
          Total stockholders' equity                                             76,035      396,163
                                                                              ---------    ---------
TOTAL                                                                         $ 248,796    $ 796,303
                                                                              =========    =========

</TABLE>

                 See notes to consolidated financial statements.


                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                           AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (In thousands, except per share data)


                                                                                            Years Ended
                                                                                             December 31,
                                                                                  ---------------------------------
                                                                                     1994        1995        1996
                                                                                   --------    --------   ---------
<S>                                                                               <C>         <C>         <C>
NET REVENUES                                                                       $ 68,034    $ 97,772    $178,019
                                                                                   --------    --------    --------
OPERATING EXPENSES:
     Operating expenses excluding depreciation and
        amortization, net local marketing agreement and
        corporate general and administrative expenses                                50,129      66,448     120,004
     Net local marketing agreement expenses                                                         600       8,128
     Depreciation and amortization                                                    9,920      12,364      17,810
     Corporate general and administrative                                             2,229       3,908       5,046
                                                                                   --------    --------    --------
          Total expenses                                                             62,278      83,320     150,988
                                                                                   --------    --------    --------
OPERATING INCOME                                                                      5,756      14,452      27,031
                                                                                   --------    --------    --------
OTHER INCOME (EXPENSE):
     Interest expense                                                                (7,276)    (12,497)    (22,287)
     Interest income and other, net                                                     225       2,435       5,525
     Gains (losses) on sale of assets and other, net                                  2,278      11,544        (308)
     Provision for loss on station investment note
        receivable                                                                     (500)
                                                                                   --------    --------    --------
          Total other income (expense)                                               (5,273)      1,482     (17,070)
                                                                                   --------    --------    --------
INCOME FROM OPERATIONS BEFORE
EXTRAORDINARY ITEMS AND INCOME TAXES                                                    483      15,934       9,961
INCOME TAX PROVISION                                                                   (556)     (6,829)     (4,826)
                                                                                   --------    --------    --------
INCOME (LOSS) BEFORE EXTRAORDINARY
   LOSSES                                                                               (73)      9,105       5,135
EXTRAORDINARY LOSSES ON EXTINGUISHMENT
   OF DEBT, NET OF INCOME TAX BENEFIT OF
   $597 IN 1994 AND $614 IN 1995                                                     (1,160)       (817)
                                                                                   --------    --------    --------
NET INCOME (LOSS)                                                                    (1,233)      8,288       5,135
REDEEMABLE COMMON AND PREFERRED
   STOCK DIVIDENDS                                                                   (1,887)       (815)     (4,973)
                                                                                   --------    --------    --------
NET INCOME (LOSS) APPLICABLE TO COMMON
   STOCKHOLDERS                                                                    $ (3,120)    $ 7,473     $   162
                                                                                    ========    =======     =======
PRIMARY AND FULLY DILUTED PER COMMON
   SHARE AMOUNTS:
   Income (loss) before extraordinary losses                                       $   (.21)        .65      $   .01
   Extraordinary losses                                                                (.12)       (.06)
                                                                                   --------     -------      -------
   Net income (loss)                                                               $   (.33)        .59      $   .01
                                                                                   ========     =======      =======
WEIGHTED AVERAGE NUMBER OF COMMON
   SHARES OUTSTANDING                                                                 9,338      12,646       20,510
                                                                                   ========     =======      =======


                             See notes to consolidated financial statements.

</TABLE>
                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                         AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                                                           (In thousands)
                             Convertible
                             Exchangeable         Series A          Series B         Series D          Class A           Class B
                            Preferred Stock     Common Stock      Common Stock     Common Stock      Common Stock      Common Stock
                            ---------------  ----------------  ----------------  ---------------   ----------------  ---------------
                            Shares            Shares            Shares            Shares            Shares            Shares
                             Out-              Out-              Out-              Out-              Out-              Out-
                          standing  Amount   standing  Amount  standing  Amount  standing  Amount  standing  Amount  standing Amount
                          --------  ------  ---------  ------  --------  ------  --------- ------  --------- ------  -------- ------
<S>                       <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>
BALANCE, January 1, 1994                        2,992 $   30        152 $    2
 Issuance of Common Stock,
  net of issuance costs
  of $129................                         473      4        222      2          317  $ 3
 Conversion of long-term
  debt to Series A Common
  Stock..................                          75      1
 Issuance of stock in
  exchange for note
  receivable.............                          28
 Conversion of preferred
  stock to Series A
  Common Stock...........                          63      1
 Dividends payable.......
 Distributions on
  redeemable stock.......
 Distributions paid......
 Acquisition of treasury
  stock................
 Issuance of warrants....
 Accretion of Series A
  redeemable stock to
  fair value.............
 Net loss................
                                            --------- ------  --------- ------  --------- ------
BALANCE,
 DECEMBER 31, 1994.......                       3,631     36        374      4        317      3

 Repayment of note
  receivable.............
 Stock options granted
  below fair market
  value..................
 Reclassification of
  Series A, B and C
  redeemable stock.......
 Two-for-one stock
  exchange...............                       3,631     36        374      4        317      3
 Distributions on
  redeemable stock.......
 Reversal of dividends
  payable................
 Conversion to Class A
   Common Stock..........                      (1,275)   (13)                        (539)    (5)     1,813 $   18
 Conversion to Class B
   Common Stock..........                      (5,637)   (56)                         (95)    (1)                       5,731 $  57
 Conversion to Class C
   Common Stock..........                        (298)    (3)      (748)    (8)
 Shares allocated to
  treasury...............                         (52)
 Issuance of Class A
  Common Stock, net of
  issuance costs of
  $8,303.................                                                                             4,770     47
 Exercise of Common Stock
  Option and Warrant.....                                                                                 1
 Conversion of Senior
  Series C Common Stock
  to Class B and Class
  C Common Stock.........                                                                                                 268     3
 Acquisition of
  treasury stock.........                                                                                                 (18)
 Amortization of unearned
   compensation..........
 Conversion of Class B
  Common Stock to Class A
  Common Stock...........                                                                                61      1        (61)   (1)
 Retirement of treasury
  stock..................

 Net income..............
 Reclassification of
  capital deficiency
  account................
                                            --------- ------  --------- ------  --------- ------  --------- ------  --------- ------
BALANCE,
   DECEMBER 31, 1995.....                           0      0          0      0          0      0      6,645     66      5,920    59

 Dividends payable.......
 Distributions paid......
 Issuance of Class A
  Common Stock, net of
  issuance cost of
  $7,034.................                                                                             4,501     45
 Shareholder conversion
  in conjunction with
  issuance of Class A
  Common Stock...........                                                                               838      8       (338)   (3)
 Issuance of Preferred
  Stock, net of issuance
   cost of $4,725........       138 $    1
 Issuance of  Class A
  Common Stock for
  Skyline, Bridan Tower,
  and Henry Mergers......                                                                             2,165     22
 Conversion of Class B
  Common Stock to Class
  A Common Stock.........                                                                               952     10       (952)  (10)
 Exercise of common
  stock options..........                                                                                                  28     1
 Amortization of
  unearned compensation..
 Net income..............
                          --------- ------  --------- ------  --------- ------  --------- ------  --------- ------  --------- ------
BALANCE,
 DECEMBER 31, 1996.......       138 $    1          0 $    0          0 $    0          0 $    0     15,101 $  151      4,658 $  47
                          ========= ======  ========= ======  ========= ======  ========= ======  ========= ======  ========= ======

<FN>
                                           See notes to consolidated financial statements.
</FN>

                                                               F-5
<PAGE>
     Class C
  Common Stock         Note     Treasury Stock                             Capital
------------------  Receivable  --------------               Additional  Deficiency   Retained  Redeemable
  Shares               from                       Unearned     Paid-in      Upon      Earnings     Stock   Dividends
Outstanding Amount  Stockholder  Shares Amount  Compensation   Capital   Combination  (Deficit)  Dividends  Payable       Total
----------- ------  -----------  ------ ------  ------------  ---------  -----------  ---------  ---------  -------   -------------
<S>         <C>     <C>          <C>    <C>     <C>           <C>        <C>          <C>        <C>        <C>       <C>
                                                                         $   (21,709) $    (447) $    (255)           $     (22,379)

                                                              $  18,046                                                      18,055

                                                                  1,349                                 25                    1,375

                    $      (500)                                    500

                                                                  1,138                                                       1,139
                                                                   (265)                                    $   265
                                                                 (1,536)                               230                   (1,306)
                                                                   (351)                                                       (351)
                                    (26)$ (340)                     340
                                                                    523                                                         523

                                                                 (1,387)                                                     (1,387)
                                                                                         (1,233)                             (1,233)
                    -----------  ------ ------                ---------  -----------  ---------  ---------  -------   -------------

                           (500)    (26)  (340)                  18,357      (21,709)    (1,680) $       0      265          (5,564)
                                                                                                 =========

                            500                                                                                                 500
                                                $       (473)       473

                                                                  3,121                                                       3,121
                                    (26)                            (43)
                                                                                           (815)                               (815)
                                                                    265                                        (265)




      1,046 $   11


                                                                 70,355                                                      70,402

         79      1                                                   11                                                          12


        671      6                                                                                                                9
                                    (18)  (438)                     438

                                                          82                                                                     82



                                     52    340                     (340)
                                                                                          8,288                               8,288

                                                                (21,709)      21,709
----------- ------  -----------  ------ ------  ------------  ---------  -----------  ---------             -------   -------------

      1,796     18            0     (18)  (438)         (391)    70,928  $         0      5,793                   0          76,035
                                                                         ===========

                                                                                         (4,973)              4,973
                                                                                                             (4,973)         (4,973)

                                                                114,457                                                     114,502


       (500)    (5)

                                                                132,774                                                     132,775


                                                                 72,131                                                      72,153



                                                                    441                                                         442

                                                          94                                                                     94
                                                                                          5,135                               5,135
----------- ------  -----------  ------ ------  ------------  ---------               ---------             -------   -------------

      1,296 $   13  $         0  $  (18)$ (438) $       (297) $ 390,731               $   5,955             $     0   $     396,163
=========== ======  ===========  ====== ======  ============  =========               =========             =======   =============

                 See notes to consolidated financial statements.

</TABLE>
                                       F-6
<PAGE>
<TABLE>
<CAPTION>
                           AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (in thousands)
                                                                                  Years Ended
                                                                                  December 31,
                                                                      -----------------------------------
                                                                          1994        1995         1996
                                                                      ----------   ---------    ---------
<S>                                                                  <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                  $  (1,233)   $   8,288    $   5,135
   Adjustments  to  reconcile  net income  (loss) to cash
     provided by operating activities:
     Barter revenues                                                     (4,369)      (4,678)      (7,989)
     Barter expenses                                                      4,011        4,626        6,973
     Depreciation and amortization                                        9,920       12,364       17,810
     Amortization of deferred financing costs                               265          278          868
     Amortization of debt discount                                                                     84
     Provision for losses on accounts receivable                            721        1,387        2,977
     Provision for loss on station investment note receivable               500
     Extraordinary losses, net                                            1,160          817
     Deferred taxes                                                         388        3,490          940
     Accretion of note discount                                             (34)         (53)         (42)
     (Gain) loss on sale of station and other, net                       (2,278)     (11,544)         248
     Unearned compensation                                                                82           94
     Change in assets and liabilities, net of effects
      of mergers and acquisitions:
        Accounts receivable                                              (8,142)      (6,030)     (27,872)
        Prepaid expenses and other assets                                  (399)        (919)      (1,202)
        Accounts payable and accrued expenses                             1,989        2,609       10,846
        Accrued interest                                                   (333)        (993)       6,789
                                                                      ---------    ---------    ---------
          Cash provided by operating activities                           2,166        9,724       15,659
                                                                      ---------    ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Payments for purchase of property and equipment and
     intangible assets                                                   (5,754)      (5,926)     (25,109)
   Proceeds from asset and radio station sales                            5,620       15,302        1,087
   Proceeds from repayment of station investment notes receivable                      3,000        1,350
   Payments for purchase of tower properties                                          (7,300)      (9,797)
   Payments for purchase of radio stations                              (87,291)     (31,013)    (312,591)
   Payments for station investment notes receivable and related
     intangible assets                                                   (5,000)     (48,597)     (56,522)
   Deposits and other long-term assets                                     (484)      (6,649)     (20,303)
                                                                      ---------    ---------    ---------
          Cash used for investing activities                            (92,909)     (81,183)    (421,885)
                                                                      ---------    ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings under the Credit Agreements                                83,500      225,000      154,000
   Repayment under the Credit Agreements                                 (7,000)    (202,500)    (151,500)
   Repayment of other obligations                                        (2,448)      (1,288)        (454)
   Net proceeds from debt offering - net of discount                                              173,581
   Additions to deferred financing costs                                 (1,742)      (3,896)      (5,344)
   Redemption of Series C Senior Common Stock                                        (14,580)
   Dividends paid                                                          (351)                   (4,973)
   Purchase of treasury stock                                                           (438)
   Net proceeds from stock offerings and exercise of
    options                                                              17,560       69,882      247,474
                                                                      ---------    ---------    ---------
          Cash provided by financing activities                          89,519       72,180      412,784
                                                                      ---------    ---------    ---------
INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                                           (1,224)         721        6,558
CASH AND CASH EQUIVALENTS, BEGINNING OF
   YEAR                                                                   4,392        3,168        3,889
                                                                      ---------    ---------    ---------
CASH AND CASH EQUIVALENTS, END OF YEAR                                $   3,168    $   3,889    $  10,447
                                                                      =========    =========    =========
</TABLE>
                 See notes to consolidated financial statements.

                                      F-7
<PAGE>
               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Business and Summary of Significant Accounting Policies

     American Radio Systems Corporation and subsidiaries (collectively, American
or the Company) is a national  broadcasting  company  formed in 1993 to acquire,
develop and operate radio  stations and  communications  towers  throughout  the
United States. In July 1995, the Company organized American Tower Systems,  Inc.
(the Tower  Subsidiary or Tower) for the purpose of acquiring,  developing,  and
operating  communications  towers  throughout  the  United  States,  for  use by
American's radio stations, other radio operators and other communication related
businesses.  As of  December  31,  1996 the  Company  owned  and/or  operated 71
stations in 14 markets (23 AM and 48 FM) and owned and operated  over 200 towers
and rooftop towers.

     The  Company  commenced  operations  on  November  1, 1993,  following  the
tax-free  combination  of four parties (the  Combination);  Stoner  Broadcasting
System Holding,  Inc. (Stoner),  Atlantic Radio, L.P.  (Atlantic),  Multi Market
Communications,  Inc. (Multi Market) and Boston AM Radio Corporation (Boston AM)
(collectively, the Predecessor Entities). The Combination was accounted for as a
purchase, and the Company has recorded the net assets of each of the Predecessor
Entities at their historical carrying values.

     In order to simplify its corporate  structure,  in December 1995,  American
merged American Radio Systems,  Inc.  (ARSI),  its wholly owned subsidiary which
had owned all of the radio  stations,  with and into  American.  American  Radio
Systems  License  Corp.  (ARSLC) is a wholly owned  subsidiary  of the Company
which holds  substantially  all of the FCC  licenses  utilized by the  Company's
broadcasting  properties.  Pursuant to a management  agreement between ARSLC and
American,  American  pays a  management  fee to  ARSLC  equal  to its  operating
expenses (primarily amortization and taxes).

     Concurrent  with  the  initial  public  offering  discussed  in Note 8, the
Company amended its Articles of  Incorporation,  which provided for, among other
things, a two-for-one  exchange of each share Series A, B and D Common Stock for
two  shares of Class A, B, or C Common  Stock (the 1995  Recapitalization).  The
accompanying  financial  statements give  retroactive  effect to the two-for-one
stock exchange.

     Principles  of  Consolidation--The   accompanying   consolidated  financial
statements  include  the  accounts  of the  Company  and its  subsidiaries.  All
significant   intercompany  accounts  and  transactions  have  been  eliminated.
Investments  in  affiliates,  owned more than 20 percent but not in excess of 50
percent, are accounted for using the equity method, when less than a controlling
interest  is held.  The  Company  also  consolidates  its  50.1%  interest  in a
communications tower partnership,  with the other partner's investment reflected
as  minority  interest in the  accompanying  balance  sheet.  Equity in earnings
(loss) of  affiliates  not  consolidated  and the minority  interest in earnings
(loss) of  consolidated  affiliates is reported as a component of gains on sales
of assets and other, net in the accompanying statement of operations. There were
no such amounts for the years ended December 31, 1994 and 1995, and such amounts
were not material in 1996.

     Revenue   Recognition--Revenues  are  recognized  when  advertisements  are
broadcast  and  transmitting  services are  provided.  Revenues  under lease and
management  contracts are recognized  when earned.  The Company's  revenues vary
throughout the year. The Company's first calendar quarter historically  produces
the lowest  revenues  for the year,  while each of the other  quarters  produces
roughly equivalent revenues.

     Corporate  General  and  Administrative   Expense--Corporate   general  and
administrative  expense  consists of corporate  overhead costs not  specifically
allocable to any of the Company's individual business properties.

                                      F-8
<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


1.   Business and Summary of Significant Accounting Policies--(Continued)

     Barter  Transactions--Revenue  from the stations'  exchange of  advertising
time for goods and services is recorded as the  advertising  is broadcast at the
fair market value of goods or services received or to be received.  The value of
the goods and services is charged to expense when used.  Net barter  receivables
are included in accounts receivable.

     Barter  transactions  were  approximately  as follows  for the years  ended
December 31 (in thousands):

                                    1994         1995         1996
                                    ----         ----         ----
Barter revenues                   $4,369       $4,678       $7,989
Barter expenses                    4,011        4,626        6,973
Net barter receivables               327          248          811
Barter fixed asset additions          89          131           22
Net barter liability assumed in
       acquisitions                                            431


     Net Local Marketing Agreement Expense--Net local marketing agreement (LMA)
expenses  consist of fees paid by or earned by American under  agreements  which
permit an entity to program and market stations prior to their acquisition.  The
Company enters into such  agreements  prior to the  consummation  of many of its
acquisitions or dispositions.  LMA expenses for the year ended December 31, 1996
are  presented  net of  approximately  $2,333,000  of revenue  earned under such
agreements with third parties.

     Concentration of Credit Risk--The Company extends credit to customers on an
unsecured  basis in the normal  course of business.  No  individual  industry or
industry segment is significant to the Company's  customer base. The Company has
policies  governing the  extension of credit and  collection of amounts due from
customers.

     Derivative  Financial  Instruments--The  Company uses derivative  financial
instruments as a means of managing  interest-rate  risk  associated with current
debt or  anticipated  debt  transactions  that have a high  probability of being
executed.  Derivative  financial  instruments  used include  interest  rate swap
agreements and interest rate cap agreements.  These instruments are matched with
either  fixed or  variable  rate debt  and,  when  matched,  are  recorded  on a
settlement basis as an adjustment to interest expense. Premiums paid to purchase
interest rate cap agreements are amortized as an adjustment of interest  expense
over the life of the  contract.  Gains and losses on  terminated  contracts  are
deferred and recognized over the shorter of the remaining term of the terminated
contract or the term of the related liability.  Derivative financial instruments
are not held for trading purposes. (See Notes 3 and 13).

     Impairment of Long-Lived  Assets--During  1996, the Company adopted FAS No.
121  "Accounting  for the  Impairment  of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed Of" (FAS 121),  which  addresses  the  accounting  for the
impairment of long-lived assets, certain identifiable  intangibles and goodwill.
Management reviews long-lived assets and the related intangibles whenever events
or changes in  circumstances  indicate that the carrying  amount of an asset may
not be recoverable.  Long-lived assets to be held and used are recorded at cost.
Recoverability  of these  assets  is  determined  by  comparing  the  forecasted
undiscounted net cash flows of the operations to which the assets relate, to the
carrying amount including associated intangible assets of such operations. If it
is determined  that the Company will be unable to recover the carrying amount of
such assets,  then  intangible  assets are written  down first,  followed by the
other  long-lived  assets,  to fair  value.  Fair value is  determined  based on
appraised  values or  discounted  cash flows,  depending  upon the nature of the
assets.  The  impact of the  adoption  of FAS 121 on the  Company's  results  of
operations, liquidity and financial position was not material.


                                      F-9
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


1.   Business and Summary of Significant Accounting Policies--(Continued)

     Stock-Based  Compensation--During  1996, the Company adopted the disclosure
only provisions of FAS No. 123 "Accounting  for Stock-Based  Compensation"  (FAS
123).  FAS 123 addresses the financial  accounting  and reporting  standards for
stock-based  employee  compensation plans. FAS 123 gives an entity the choice of
recognizing related  compensation  expense by either applying the new fair value
method or the intrinsic value approach described in Accounting  Principles Board
(APB) Opinion No. 25, the former standard.  The Company has continued to use the
measurement  prescribed  by APB No.  25,  and,  accordingly,  the  impact of the
adoption  had no effect on the  Company's  results of  operations,  liquidity or
financial  position.  The Company has provided  supplemental  disclosure  of the
impact of applying the fair value method. (See Note 8).

     Property and Equipment and  Intangible  Assets--Property  and equipment are
recorded at cost and  depreciation  is provided using the  straight-line  method
over  estimated  useful  lives  ranging  from  three to  thirty-two  years.  The
consolidated  financial statements reflect the preliminary allocation of certain
purchase  prices as the  appraisals for certain  acquisitions  have not yet been
finalized.

     Non-competition   and   consulting   agreements,   Federal   Communications
Commission (FCC) licenses,  favorable transmitter sites,  goodwill,  and various
other intangibles, acquired in connection with the Company's acquisitions of the
various radio stations,  are being amortized over their estimated  useful lives,
ranging  from  one  to  forty  years,  using  the  straight-line  method.  Other
intangible  assets consist  principally of deferred  financing costs,  broadcast
affiliation  agreements,  favorable  studio  and office  space  leases and costs
incurred  on  pending   acquisitions.   Accumulated   amortization  of  goodwill
aggregated  approximately  $2,176,000  and  $6,369,000  at December 31, 1995 and
1996,   respectively.   Accumulated  amortization  of  FCC  licenses  aggregated
approximately   $2,390,000  and  $7,628,000  at  December  31,  1995  and  1996,
respectively.  Accumulated  amortization of other intangible  assets  aggregated
approximately  $14,696,000  and  $14,112,000  at  December  31,  1995 and  1996,
respectively,

     Property  and  equipment  and  intangible   assets  include   approximately
$61,123,000 of assets related to radio stations held for sale as of December 31,
1996, excluding the net assets held under exchange agreement.  (See Notes 10, 11
and 14).

      Note  Receivable--Other--In  connection  with the sale of a Syracuse,  New
York radio  station,  the Company  held a note  receivable.  The note had a face
amount of  $1,000,000  and was  collected in full along with interest in October
1996.

     Station Investment Note  Receivable--Related  Party-- At December 31, 1994,
the Company held a $5,000,000 note (the Acquisition  Note) from a related party,
Back Bay Broadcasters,  Inc. (Back Bay),  pursuant to transactions  discussed in
Notes 8 and 12. The  Acquisition  Note had a stated interest rate of 10% but was
discounted  to  reflect  a  market  interest  rate of 16%  and was due in  2001.
Further,  during 1994, the Company  provided a $500,000  valuation  allowance to
reflect management's  estimate of the value of the underlying collateral for the
Acquisition Note.

     In May 1995, American sold the Acquisition Note, and its related rights and
privileges (the Back Bay Note Sale) for (a) $3,000,000 in cash, (b) 4.99% of the
common stock of Back Bay, and (c) a 10%  Convertible  Subordinated  Debenture of
Back Bay in the principal  amount of $1,000,000 which is convertible into 20% of
the common  stock of Back Bay.  This note  matures in 2002 and is carried at its
expected  net  realizable  value of $500,000.  There is no readily  determinable
market value for the common stock of Back Bay; therefore,  the Company is unable
to assign any value to this asset or its related rights


                                      F-10
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


1.   Business and Summary of Significant Accounting Policies--(Continued)

and  privileges.  As  part  of the  agreement,  the  Company  also  obtained  an
assignable  right of first  refusal  with respect to the sale of assets or stock
(or other equity securities) of Back Bay and an assignable  option,  exercisable
at any time after August 31, 1998, to purchase all of the assets of Back Bay. As
of December 31, 1996, Back Bay owned three radio stations: WBNW-AM, Boston (sale
pending),  and  certain  other  Rhode  Island  stations.  As part of  American's
arrangement to purchase  KBBT-FM in Portland,  Oregon,  the Company  granted the
seller of such  station the right to  exercise  its  purchase  option to acquire
WBNW- AM. In December 1996, such seller and Back Bay entered into a purchase and
sale agreement  with respect to WBNW-AM.  In August 1996,  American  advanced an
additional  $243,000 to Back Bay in exchange for a note bearing  interest at 10%
per annum and maturing in 2002. (See Note 14).

     Station   Investment   Notes   Receivable--In   connection   with   certain
transactions  discussed  in Notes 10, 11 and 12, the Company has loaned funds at
varying  rates of  interest to certain  entities  which own radio  stations  the
Company is obligated, or has options, to purchase. These notes, as amended, have
varying  interest  rates  ranging  from  6% to 12%  and  are  collateralized  by
substantially all of the assets of the related radio stations.

     Significant   Estimates--In  the  process  of  preparing  its  consolidated
financial  statements,  the Company estimates the appropriate  carrying value of
certain  assets  and  liabilities  which are not  readily  apparent  from  other
sources.  The primary estimates  underlying the Company's  financial  statements
include allowances for potential bad debts on accounts and notes receivable, the
useful  lives of its assets such as  property  and  intangibles,  fair values of
financial  instruments,  the realizable value of its tax assets and accruals for
health  insurance and other matters.  Management  bases its estimates on certain
assumptions,  which they believe are reasonable in the circumstances,  and while
actual results could differ from those  estimates,  management  does not believe
that any  change in those  assumptions  in the near term  would  have a material
effect on its financial position, results of operations or liquidity.

     Income  Taxes--Deferred taxes are provided to reflect temporary differences
in bases between book and tax assets and  liabilities,  and net  operating  loss
carryforwards.  Deferred tax assets and liabilities are measured using currently
enacted tax rates.

     Cash Flow  Information--For  purposes of the statements of cash flows,  the
Company  considers all highly  liquid,  short-term  investments  with  remaining
maturities of three months or less when purchased to be cash equivalents.

     Cash payments for interest  expense  aggregated  approximately  $7,018,000,
$9,890,000  and  $14,329,000  for the years ended  December 31, 1994,  1995, and
1996, respectively.

     Cash  payments  for  income  taxes  aggregated  approximately   $1,600,000,
$1,808,000 and $3,086,000 for the years ended December 31, 1994, 1995, and 1996,
respectively.

     Significant  noncash investing and financing  transactions,  apart from the
barter transactions discussed above, are as follows:

          For the year ended December 31, 1994:

          o    Capital lease obligations of approximately $550,000 were incurred
               when the Company entered into leases for new office furniture and
               equipment.

          o    The  Company  issued  warrants  to acquire  approximately  79,000
               shares  of  common  stock  with a cost  aggregating  $523,000  in
               exchange for the acquisition of certain intangible  assets.  (See
               Notes 8 and 12).


                                      F-11
<PAGE>



               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1.   Business and Summary of Significant Accounting Policies--(Continued)

          o    Additional  Series A Common Stock was issued upon the  conversion
               of $1,350,000 of long-term  debt,  $1,138,000 of Preferred  Stock
               (of which $138,000 represented Deferred Yield Distributions), and
               receipt of a $500,000 note receivable. (See Notes 7, 8 and 12).

          o    Leasehold   improvements  totaling  approximately  $937,000  were
               provided to the Company in connection with certain building lease
               incentives.

     For the years ended December 31, 1994 and 1995:

          o    Accrued and unpaid Common  Deferred  Yield  Distributions  on the
               Series  C  Common  Stock  aggregated   $1,536,000  and  $815,000,
               respectively. (See Note 7).

   For the year ended December 31, 1995:

          o    In  connection  with the WEGQ-FM  acquisition  (see Note 10), the
               Company issued a $500,000 note to the previous owner.

          o    Capital lease obligations of approximately $201,000 were incurred
               for office furniture and equipment.

          o    In connection  with the Company's  initial public offering of its
               Class A Common Stock (the Initial Public  Offering),  the Company
               exchanged  approximately  939,000  shares of Senior Series Common
               Stock for  approximately  268,000  shares of Class B Common Stock
               and  approximately  671,000 shares of Class C Common Stock.  (See
               Note 7).

          o    The  Company's   obligation  to  repurchase  the  shares  of  the
               beneficiaries of a Predecessor  Entity's Employee Stock Ownership
               Plan was canceled as a result of the Initial Public  Offering and
               pursuant to a vote by the Board of Directors  effective September
               30, 1995. (See Note 7).

For the year ended December 31, 1996:

          o    In  connection  with radio  station and tower  acquisitions,  the
               Company  assumed  approximately  $4,437,000  in  liabilities  and
               issued  shares of Class A Common  Stock with an agreed upon value
               of approximately $72,153,000. (See Note 10).

          o    Capital lease obligations of approximately $390,000 were incurred
               for office furniture and equipment. (See Note 3).

                                      F-12


<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


1.   Business and Summary of Significant Accounting Policies--(Continued)

     Retirement Plans--The Company has a 401(k) plan covering  substantially all
employees, subject to certain minimum age and length-of-employment requirements.
Under the plan, the Company matches 30% of participants'  contributions up to 5%
of compensation.  The Company contributed  approximately $164,000,  $225,000 and
$299,000 to the plan for the years ended  December  31,  1994,  1995,  and 1996,
respectively.

     Income (Loss) Per Common Share--For the periods prior to the initial public
offering,  income  (loss) per  common  share was based on the  weighted  average
number of common  shares  outstanding  during  each  period  adjusted  for stock
options and warrants  issued at prices below the initial public  offering price,
without regard to the  anti-dilutive  effect of such options and warrants.  Such
stock  options and  warrants  have been  included in the  calculation  of income
(loss) per common share as if they were  outstanding for the entire period prior
to the offering (using the treasury stock method and the initial public offering
price).  For the years ended December 31, 1995 and 1996, income per common share
is based on the number of common  shares  outstanding  as adjusted  for dilutive
stock options and warrants.  Fully diluted earnings (loss) per share amounts are
not reported separately as the effects are not dilutive.

     Reclassifications--Certain  reclassifications  have  been made to the prior
year financial statements to conform with the 1996 presentation.


2.   Property and Equipment

     Property and  equipment  consisted  of the  following as of December 31 (in
thousands):

                                                         1995           1996
                                                       -------        -------
Land and improvements                                  $ 4,731        $14,835
Buildings and improvements                              12,036         28,733
Broadcast equipment                                     11,452         37,256
Office equipment, furniture, fixtures and other
   equipment                                             2,974          8,635
Assets under capital lease obligations                     849          1,259
Construction in progress                                 1,982          8,903
                                                       -------        -------
Total                                                   34,024         99,621
Less accumulated depreciation and amortization           2,238          9,374
                                                       -------        -------
Property and equipment--net                            $31,786        $90,247
                                                       =======        =======


     Accumulated  amortization  for the assets under capital  leases  aggregated
approximately $511,000 and $659,000 at December 31, 1995 and 1996, respectively.


                                      F-13

<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3.   Long-Term Debt

     Outstanding   amounts  under  the  Company's  long-term  debt  arrangements
consisted of the following as of December 31 (in thousands):

                                          1995             1996
                                        --------         --------
      Credit Agreements                 $151,500         $151,500
      Tower Credit Agreement                                2,500
      Senior Subordinated Notes                           173,665
      Tower Note Payable-Other                              1,558
      Other obligations                    1,004            1,449
                                        --------         --------
      Total                              152,504          330,672
      Less current maturities                355              561
                                        --------         --------
      Long-term debt                    $152,149         $330,111
                                        ========         ========


     Credit Agreements--In January 1997, the Company entered into two new credit
agreements with a syndicate of banks (the 1997 Credit Agreement), which replaced
the previously  existing credit  agreement.  All amounts  outstanding  under the
previous agreement were repaid with proceeds from the 1997 Credit Agreement; the
following  discussion,  with the  exception of  information  regarding  interest
rates,  is based upon the terms and  conditions  of the 1997  Credit  Agreement.
Collectively,  the previous credit  agreement and the 1997 Credit  Agreement are
referred to as the Credit Agreements.

     The 1997 Credit  Agreement  consists of two  separate  lending  agreements,
providing for facilities consisting of a $550.0 million reducing revolver credit
facility  which is  available  through  December  31,  2004,  a  $200.0  million
revolving credit  converting to a term loan facility maturing December 31, 2004,
and a $150.0 million term loan facility,  maturing December 31, 2004,  available
only to repurchase, if required,  certain note obligations of EZ Communications,
Inc.  which  will be  assumed  by the  Company  in  connection  with the  merger
discussed in Note 11.

     Amounts  outstanding under the Credit Agreements bear interest based upon a
variable  base rate  adjusted for a margin which is  determined  by reference to
certain financial ratios of the Company,  generally  related to leverage.  Until
such time as the  Company  requests  that  rates be fixed or  capped,  rates are
determined,  at the option of the Company, by reference to either the Eurodollar
rate plus  certain  percentages,  or an alternate  base rate (as  defined)  plus
certain  percentages.  The  weighted  average  interest  rates  under the Credit
Agreements  were  approximately  9.4 % and 8.0% for the years ended December 31,
1995 and 1996, respectively.

     In connection with the Credit  Agreements,  the Company is obligated to pay
commitment  fees based on a percentage  of the unused  portion of the  available
commitments  (the fee varies  depending  upon which facility is affected and the
Company's leverage ratio). Commitment fees paid related to the Credit Agreements
were approximately $24,500 and $1,113,000 in 1995 and 1996, respectively.

     The 1997  Credit  Agreement  contains  certain  financial  and  operational
covenants and other restrictions with which the Company must comply,  including,
among others,  limitations  on certain  acquisitions,  additional  indebtedness,
capital  expenditures,  and payment of cash dividends and stock repurchases.  In
addition,  restrictions  are placed  upon the use of  borrowings  under the 1997
Credit  Agreement  and the  Company  must  maintain  certain  financial  ratios,
principally related to leverage.  Borrowings under the 1997 Credit Agreement are
collateralized  by a  first  security  interest  in  the  capital  stock  of the
Company's Restricted Subsidiaries (as defined in the 1997 Credit Agreement), and
all financial  instruments  (including the station  investment note receivables)
and material agreements.  The Company's Restricted  Subsidiaries have guaranteed
the obligations of the Company under the 1997 Credit Agreement.

                                      F-14

<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3.   Long-Term Debt--(Continued)

     Extraordinary  Losses--In  1994,  the Company  replaced  its then  existing
credit  facility and, in  connection  with  repayment of  borrowings  under that
facility,  recognized an extraordinary loss of $1,160,000,  net of a tax benefit
of $597,000,  representing the write-off of deferred  financing fees for the old
facility. In 1995, the Company again replaced its then existing credit facility,
and, in connection with repayment of borrowings under that facility,  recognized
an  extraordinary  loss  of  $817,000,   net  of  a  tax  benefit  of  $614,000,
representing  the  write-off of deferred  financing  fees for the old  facility.
Following  closing of the 1997 Credit Agreement in January 1997 and repayment of
amounts  outstanding  under the previous  agreement,  the Company  recognized an
extraordinary loss of approximately $2.6 million,  which will be recorded net of
the applicable  tax benefit,  representing  the write-off of deferred  financing
fees associated with the previous agreement.

   1996 Tower  Credit  Agreement--During  November  1996,  the Tower  Subsidiary
entered into a credit agreement (the 1996 Tower Credit Agreement), that provides
the  Tower  Subsidiary  with a $70.0  million  loan  commitment  based  on Tower
maintaining  certain  financial  ratios and an  incremental  $20.0 million loan,
contingent  on Tower  obtaining  additional  equity from the Company.  There was
$67.5 million  available  under the 1996 Tower Credit  Agreement at December 31,
1996.  The  facility  may be  borrowed,  repaid  (up to a minimum  $2.5  million
balance)  and  re-borrowed  until  April  15,  2000;  thereafter,   availability
decreases  in an amount  equal to 50% of the Excess Cash Flow (as defined in the
1996 Tower  Credit  Agreement)  for the fiscal year  immediately  preceding  the
calculation date. In addition,  the 1996 Tower Credit Agreement requires certain
commitment  reductions  in the event of sale of the Tower  Subsidiary's  capital
stock or debt  instruments,  and/or permitted asset sales as defined in the 1996
Tower Credit Agreement.

   Outstanding  amounts under the 1996 Tower Credit Agreement bear interest at a
variable base rate plus a variable margin based on certain of Tower's  financial
ratios. Interest rates under the 1996 Tower Credit Agreement are determined,  at
the option of Tower,  at either the LIBOR Rate plus certain  percentages  or the
Base  Rate  (as  defined  in the  1996  Tower  Credit  Agreement)  plus  certain
percentages.  The spread  over the LIBOR Rate and the Base Rate varies from time
to time, depending upon Tower's financial leverage.  For the year ended December
31, 1996, the weighted  average interest rate of the 1996 Tower Credit Agreement
was 8.75%.

     The Tower Subsidiary pays quarterly  commitment fees which vary,  depending
on the  Tower  Subsidiary's  financial  leverage,  and on the  aggregate  unused
portion of the total commitment.  Commitment fees paid for the 1996 Tower Credit
Agreement aggregated approximately $24,000 during 1996.

     The 1996 Tower Credit Agreement  contains certain financial and operational
covenants and other  restrictions  with which the Tower  Subsidiary must comply,
whether or not any  borrowings  are  outstanding  thereunder,  including,  among
others,  limitations on certain acquisitions,  additional indebtedness,  capital
expenditures, and cash distributions, unless certain financial tests are met, as
well as  restrictions  on the use of  borrowings  and  requirements  to maintain
certain financial ratios. The obligations of the Tower Subsidiary under the 1996
Tower Credit Agreement are  collateralized by a first priority security interest
in substantially all the assets of the Tower Subsidiary.

                                      F-15

<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

3.   Long-Term Debt--(Continued)

     Senior Subordinated  Notes--In February 1996, the Company sold $175,000,000
of 9% Senior  Subordinated Notes due 2006 (the Subordinated Notes) at a discount
of $1,419,000 to yield 9.125% (the Debt Offering).  Proceeds to the Company, net
of  underwriters'  discount and  associated  costs,  were  approximately  $167.5
million.   As  of  December  31,  1996,  the   Subordinated   Notes   aggregated
approximately  $173,665,000  net of an  unamortized  discount  of  approximately
$1,335,000.  Interest is payable  semi-annually  on February 1 and August 1 with
the  face  amount  of the  Subordinated  Notes  due on  February  1,  2006.  The
Subordinated  Notes are redeemable at the option of the Company,  in whole or in
part at any time on or after  February  1,  2001 and prior to  maturity,  at the
following  redemption prices (expressed as percentages of principal amount) plus
accrued and unpaid  interest,  if any, to but excluding the redemption  date, if
redeemed during the 12 month period beginning February 1 of the years indicated:
2001 - 104.5%;  2002 -  103.0%;  2003 - 101.5%;  2004 and  thereafter  - 100.0%.
Notwithstanding  the  foregoing,  at any time prior to  February  1,  1999,  the
Company  may redeem up to $58.3  million  principal  amount of the  Subordinated
Notes from the net  proceeds  of a public  equity  offering  (as  defined in the
Subordinated  Notes  indenture)  at a  redemption  price  equal to 109.0% of the
principal  amount  thereof  plus  accrued  and unpaid  interest,  if any, to the
Redemption Date,  provided that at least $116.7 million  principal amount of the
Subordinated  Notes remain  outstanding  immediately after the occurrence of any
such redemption.  The Subordinated  Notes are subordinate in right of payment to
the prior payment in full of all  obligations  under the 1997 Credit  Agreement.
The Subordinated Notes contain certain covenants including,  but not limited to,
limitations  on sales of assets,  dividend  payments,  future  indebtedness  and
issuance of preferred  stock, and require an offer to purchase in the event of a
Change of Control (as  defined).  Proceeds from the Debt Offering and the equity
offering  discussed in Note 8, were used to repay  outstanding  borrowings under
the Credit Agreements.

     Tower Note Payable-Other--A  corporation which is under majority control of
the Tower Subsidiary has a note secured by the minority  shareholder's  interest
in the corporation. Interest rates under this note are determined, at the option
of the corporation,  at either the greater of a floating rate (as defined in the
note  agreement),  the Federal Home Loan Bank of Boston rate plus 2.35%,  or the
Treasury  Fixed Rate plus 3%. As of December 31, 1996,  the  effective  interest
rate on  borrowings  under this note was  8.02%.  The note is payable in monthly
principal and interest payments through 2008.

     Other  obligations--In  connection with various  transactions,  the Company
assumed or incurred certain other  obligations.  These  obligations,  as well as
lease obligations, bear interest at rates ranging from 8% to 13% and are payable
in various monthly or annual installments through 2007.

     Future  principal  payments  required  under the Company's  long-term  debt
arrangements at December 31, 1996 are as follows (in thousands):

        Year Ending December 31,
        1997 .................................. $    561
        1998 ..................................      442
        1999 ..................................      248
        2000 ..................................      247
        2001 ..................... ............   36,659
        Thereafter through 2008 ...............  292,515
                                                 -------
        Total ................................. $330,672
                                                ========





                                      F-16
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1    Long-Term Debt--(Continued)

     Derivative Positions--Under the terms of the Credit Agreements, the Company
is required,  under certain  conditions,  to enter into interest rate protection
agreements.  At December  31,  1995,  the  Company  had  entered  into nine swap
agreements  under which the interest  rate was fixed with respect to $75 million
of  notional  principal  amount  at  rates  between  4.5%  and 8.1% and five cap
agreements  pursuant to which it had capped  another  $41.0  million of notional
principal amount at rates between 5% and 10%. These swap and cap agreements were
to expire at varying  dates between  March 1996 and May 2000.  During 1996,  the
Company  amended and or canceled  certain of these  agreements.  At December 31,
1996, the Company  maintains two swap  agreements,  expiring in September  2000,
under which the interest rate is fixed with respect to $35.5 million of notional
principal  amount at approximately 7% and 10%. The Company intends to enter into
new agreements, at least to the extent necessary to comply with the requirements
of the 1997 Credit Agreement (50% of the total  indebtedness of the Company must
bear fixed interest).  The Company's  exposure under these agreements is limited
to the impact of variable interest rate fluctuations and the periodic settlement
of amounts due under these agreements if the other parties fail to perform. (See
Note 13).

4.   Commitments and Contingencies

     Broadcast  Rights--At  December 31, 1996,  the Company was committed to the
purchase of broadcast rights for various sports events,  and other  programming,
including on-air talent, aggregating approximately $8,775,000.  This programming
is not yet available for broadcast.  As of December 31, 1996, aggregate payments
related to these  commitments  during the next five years and  thereafter are as
follows (in thousands):

     Year Ending December 31
     1997...........................................................$ 2,829
     1998...........................................................  2,736
     1999...........................................................  2,287
     2000...........................................................    423
     2001...........................................................    405
     Thereafter through 2004........................................     95
                                                                    -------
     Total..........................................................$ 8,775
                                                                    =======


     Leases--The  Company leases  various  offices,  studios,  and broadcast and
other  equipment  under  operating  leases that expire over various terms.  Most
leases contain renewal options with specified increases in lease payments in the
event of renewal by the Company.

     Future minimum rental  payments  required  under  non-cancelable  operating
leases  in  effect  at  December  31,  1996 are  approximately  as  follows  (in
thousands):

     Year Ending December 31
     1997...........................................................$ 4,762
     1998...........................................................  4,267
     1999...........................................................  3,843
     2000...........................................................  3,425
     2001...........................................................  3,521
     Thereafter through 2019........................................  9,412
                                                                    -------
     Total..........................................................$29,230
                                                                    =======

     Aggregate rent expense under operating  leases for the years ended December
31, 1994,  1995 and 1996  approximated  $1,314,000,  $1,769,000 and  $4,374,000,
respectively.

                                      F-17

<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4.   Commitments and Contingencies--(Continued)

     The Company  and the Tower  Subsidiary  obtain a portion of their  revenues
from leasing tower and transmitting  facilities and sub-carrier  rights to other
broadcasters and  communications  companies under various operating leases.  The
Tower  Subsidiary  sub-leases  rented  space  on  communications  towers  to its
customers,  under  substantially  the  same  terms  and  conditions,   including
cancellation  rights,  as those  found in its own lease  contracts.  Most leases
allow cancellation at will or under certain technical circumstances.  The leases
expire over various terms and provide for renewal options and increases in lease
payments in the event such leases are renewed.

     Future minimum lease revenues for non-cancelable operating leases in effect
at December 31, 1996 are approximately as follows (in thousands):

     Year Ending December 31
     1997...........................................................$  2,027
     1998...........................................................   1,574
     1999...........................................................   1,235
     2000...........................................................     960
     2001...........................................................     564
     Thereafter through 2006........................................   4,670
                                                                    --------
     Total..........................................................$ 11,030
                                                                    ========



     Total rental revenues under these leases  approximated  $199,000,  $448,000
and $676,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
Total rental revenues under the Company's sub-leases  approximated  $468,000 for
the year ended December 31, 1996.

     Audience Rating and Other Service and Employment Contracts--The Company has
entered  into  various  non-cancelable  audience  rating and other  service  and
employment  contracts  that  expire  over the  next  five  years.  Most of these
audience rating and other service  agreements are subject to escalation  clauses
and may be renewed  for  successive  periods  ranging  from one to five years on
terms similar to current agreements, except for specified increases in payments.
Management believes that, in the normal course of business, these contracts will
be renewed or replaced by similar contracts.

     Future minimum payments required under these contracts at December 31, 1996
are as follows (in thousands):

     Year Ending December 31
     1997...........................................................$  3,579
     1998...........................................................   3,365
     1999...........................................................     865
     2000...........................................................     308
     2001...........................................................      66
                                                                    --------
     Total..........................................................$  8,183
                                                                    ========


     Total expense under these  contracts for the years ended December 31, 1994,
1995 and 1996 approximated $1,577,000, $2,426,000 and $ 4,117,000, respectively.

     See Notes 11 and 12 for information with respect to station acquisition and
Tower Subsidiary acquisition commitments.


                                      F-18
<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4.   Commitments and Contingencies--(Continued)

     Litigation--In  the normal  course of  business,  the Company is subject to
certain  suits  and  other  matters.   Management  believes  that  the  eventual
resolution of any pending matters, either individually or in the aggregate, will
not have a  material  effect on the  Company's  financial  position,  results of
operations or liquidity.

5.   Related-Party Transactions

     An  individual,  who is a  stockholder  of the  Company  and was a  limited
partner and creditor of two of the Predecessor  Entities,  is a partner in a law
firm which represents the Company,  and certain associates of this firm serve as
assistant secretaries to the Company. Legal fees and other expenses incurred for
services rendered by this firm to the Company  approximated  $473,000,  $772,000
and  $2,038,000  for  the  years  ended  December  31,  1994,   1995  and  1996,
respectively.

     An  affiliate  of Chase  Equity  Associates  (CEA),  a  stockholder  of the
Company, is a co-syndication agent and an approximate 14%, 9% and 9% participant
under prior credit  agreements in 1994, 1995 and 1996,  respectively.  A company
director  is also a general  partner of CEA.  For the years ended  December  31,
1994, 1995 and 1996, the stockholder affiliate's share of interest and fees paid
by  the  Company  pursuant  to the  provisions  of the  Credit  Agreements  were
$1,200,000, $1,688,500 and $553,000, respectively.

     See Notes 8 and 12 for other related-party transactions.

6.   Income Taxes

     The income tax provision was comprised of the following for the years ended
     December 31 (in thousands):

                                        1994        1995        1996
                                        ----        ----        ----
        Current:
             Federal                               $1,851      $2,910
             State                                    612         854
        Deferred:
             Federal                   $  169       4,023         905
             State                        387         343         157
                                       ------      ------      ------
        Income tax provision           $  556      $6,829      $4,826
                                       ======      ======      ======



     The income tax  provision  for the year ended  December  31, 1996  includes
approximately  $244,000  relating to the  exercise of certain  options,  the tax
benefit of which was recorded as a component of additional paid-in capital.


                                      F-19
<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6.   Income Taxes --(Continued)

     A reconciliation  between the U.S. statutory rate and the effective rate is
as follows for the years ended December 31:

                                        1994       1995     1996
                                        ----       ----     ----


Statutory tax rate                       34%       34%       34%
State taxes, net of federal benefit      35         6         6
Goodwill amortization                    17         1         6
Amortization of intangibles              13                   1
Meals and entertainment                  15         1         3
Other--net                                1         1        (2)
                                        ---        --        --
Effective tax rate                      115%       43%       48%
                                        ===        ==        ==


     Significant   components   of  the   Company's   deferred  tax  assets  and
liabilities,  computed  using  currently  enacted  tax rates,  are as follows at
December 31 (in thousands):
<TABLE>
<CAPTION>

                                                                                  1995        1996
                                                                                  ----        ----
<S>                                                                            <C>        <C>

Current Assets:
          Allowances and accruals made for financial reporting purposes
             which are currently nondeductible                                  $  1,162    $  3,370
                                                                                ========    ========
Long-term items:
     Assets:
          Allowances made for financial reporting purposes which are
             currently nondeductible                                            $    200    $    277
          Net operating loss carry-forwards                                        1,507       1,010
          Valuation allowance                                                     (1,267)     (1,010)

     Liabilities:
          Property and equipment and intangible assets-principally due to tax
             basis differences and the use of accelerated depreciation and
             amortization methods for tax purposes                                (8,339)    (33,482)
                                                                                --------    --------
     Net long-term deferred tax liabilities                                     $ (7,899)   $(33,205)
                                                                                ========    ========
</TABLE>


     At December  31, 1996 the Company  has net  operating  loss  carry-forwards
available to reduce future  taxable  income of $2,886,000  for federal and state
purposes.  These loss carry-forwards expire through 2009. Because of uncertainty
regarding eventual recovery of these assets, a valuation  allowance was provided
against the carrying  amount.  During 1996,  as a result of increases in taxable
income  and  certain  tax  planning  strategies,  certain of these  assets  were
realized and approximately $257,000 of the valuation allowance was removed.


                                      F-20
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7.   Redeemable Stock

     Activity  related to the  classes of  redeemable  stock for the years ended
December 31, 1994 and 1995 is as follows,  after giving  retroactive  adjustment
for the two-for-one stock exchange (in thousands):
<TABLE>
<CAPTION>

                                              Preferred                  Series C            Series A
                                          Shares      Amount       Shares    Amount     Shares     Amount
                                          ------      ------       ------    ------     ------     ------
<S>                                    <C>         <C>           <C>      <C>           <C>     <C>

Balance, January 1, 1994                      71    $  1,025       1,714   $ 12,230        434   $  2,532
     Distributions accrued in kind                       113                  1,886
     Conversion of preferred
        stock                                (71)     (1,138)
     Treasury share repurchases                                                            (52)      (340)
     Accretion to fair value                                                                        1,240
     Distributions paid                                                        (351)
                                        --------    --------      ------   --------      -----    -------
Balance, December 31, 1994              $      0           0       1,714     13,765        382      3,432
                                        ========    ========
     Reclassification against
           additional paid-in capital                                                     (382)    (3,432)
     Distributions accrued in kind                                              815
     Distributions paid                                                      (2,580)
     Conversion to Common Stock                                     (939)
     Share redemption                                               (775)   (12,000)
                                                                  ------    -------      -----    -------
Balance, December 31, 1995                                             0    $     0          0    $    0
                                                                  ======    =======      =====    =======
</TABLE>

     Preferred  Stock--  The  holder  of the  Preferred  Stock was  entitled  to
quarterly  cash  distributions  (the  Yield  Distributions)  equal to 10% of the
stock's initial "preferred distribution amount" compounded on a daily basis. All
of the outstanding Preferred Stock, including approximately $138,000 of deferred
yield that was not  distributed  to the holder,  was converted to  approximately
126,000 shares of Series A Common Stock in September 1994.

     Senior  Common  Stock--Holders  of the  Senior  Series C Common  Stock (the
Senior Common Stock) were entitled to quarterly cash  distributions  (the Common
Yield Distributions) equal to 10% of the stock's initial "preferred distribution
amount",  compounded  on a daily  basis.  The  Company  paid  out  distributions
aggregating approximately $351,000 in December 1994.

     Upon  consummation  of the Initial  Public  Offering,  the Company paid the
liquidation  preference  of the  Senior  Common  Stock of $7.00 per  share  plus
accrued and unpaid Common Yield Distributions  (approximately $14.6 million). As
part of such  transaction,  the  Company  exchanged  0.54789  shares of Series B
Common Stock for each outstanding share of Senior Common Stock.

     Series  A Common  Stock--Repurchase  Obligation  to ESOP  Stockholders--The
Company was  obligated to  repurchase  shares of Class A Common Stock held by an
employee stock  ownership plan (ESOP) of a Predecessor  Entity.  During 1994 and
1995,  the Company  repurchased  at fair market value  approximately  52,000 and
18,000 shares, respectively.

     As a result of the Initial Public  Offering,  the Board of Directors of the
Company  voted  effective  September 30, 1995 to amend the ESOP to eliminate the
right of beneficiaries to require the Company to purchase their shares. Pursuant
to this  amendment,  the  Company  reclassified  the  long-term  portion  of its
obligation of  approximately  $3.4 million to additional  paid-in  capital.  The
Board of Directors also voted effective December 31, 1995 to terminate the ESOP.
During 1996, the Company applied for a favorable  determination  letter from the
IRS with respect to termination of the plan, which was received in March 1997.

                                      F-21
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.   Stockholders' Equity (Deficiency)


     Authorized  Shares--In  December 1996, the American  stockholders  voted to
approve an  increase in the  authorized  share  amounts  for certain  classes of
capital  stock.  Such  amounts are  reflected on the  accompanying  consolidated
balance sheet.  The number of shares that were authorized prior to this increase
consisted of 1,000,000 shares of Preferred Stock,  25,000,000 shares of Class A
Common Stock,  10,000,000 shares of Class B Common Stock and 6,000,000 shares of
Class C Common Stock.

      Convertible   Exchangeable   Preferred  Stock  Offering--The   outstanding
Convertible  Exchangeable  Preferred Stock (Convertible  Preferred Stock) of the
Company at December 31, 1996 consisted of 137,500 shares  (2,750,000  Depositary
Shares,  each Depositary Share represents  ownership of one-twentieth of a share
of  Convertible  Preferred  Stock).  Proceeds to the Company of the sale in June
1996, net of underwriters'  discount and associated  costs,  were  approximately
$132.8  million.  Proceeds  from the  offering  were used to fund  acquisitions.
Shares of  Convertible  Preferred  Stock are  convertible  at the  option of the
holder at any time,  unless  previously  redeemed or  exchanged,  into shares of
Class A Common Stock,  par value $.01 per share,  of the Company at a conversion
price of $42.50 per share of Class A Common  Stock  (equivalent  to a conversion
rate of 1.1765 shares of Class A Common Stock per Depositary Share),  subject to
adjustment in certain events.

      The Convertible Preferred Stock is redeemable, in whole or in part, at the
option of the Company,  for cash at any time after July 15,  1999,  initially at
$1,049 per share ($52.45 per Depositary  Share),  declining ratably  immediately
after July 15 of each year thereafter to a redemption  price of $1,000 per share
($50 per  Depositary  Share) after July 15, 2006,  plus in each case accrued and
unpaid dividends. The Convertible Preferred Stock will be exchangeable,  subject
to certain  conditions,  at the option of the Company, in whole but not in part,
on any  dividend  payment  date  commencing  June 30, 1997 for the  Company's 7%
Convertible Subordinated Debentures due 2011 (the Exchange Debentures) at a rate
of $1,000 principal amount of Exchange  Debentures for each share of Convertible
Preferred Stock ($50 principal amount for each Depositary Share).

      Dividends on the  Convertible  Preferred Stock are cumulative at an annual
rate of 7% (equivalent to $3.50 per Depositary Share), accruing from the date of
original  issuance (June 25, 1996) and are payable quarterly in arrears on March
31, June 30, September 30, and December 31,  commencing  September 30, 1996. The
Company's  ability  to pay  dividends  is  restricted  under  the  terms  of the
Subordinated  Notes (see Note 3) and is  prohibited  during the  existence  of a
default under the Company's  Credit  Agreements or the  Subordinated  Notes. The
Company met all tests and  approximately  $5.0 million of accrued  dividends had
been paid through December 31, 1996.

     Common  Stock  Offerings--In  February  1996,  the Company  consummated  an
offering  of  approximately  5,515,000  shares  of  Class A  Common  Stock at an
offering price of $27 per share,  consisting of 4,000,000  shares initially sold
by the Company,  approximately 1,013,000 shares sold by selling shareholders and
approximately 501,000 shares sold by the Company pursuant to the exercise of the
underwriters'   over-allotment   option.   Proceeds  to  the  Company,   net  of
underwriters'  discount and associated costs, were approximately  $114.5 million
and were utilized to repay existing debt and fund acquisitions.


                                      F-22
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.   Stockholders' Equity (Deficiency) --(Continued)

     In June 1995,  the  Company  consummated  the  Initial  Public  Offering of
5,500,000  shares of the  Company's  Class A Common  Stock ($.01 par value) at a
price of $16.50 per share.  The total  shares  issued  pursuant  to the  Initial
Public  Offering  consisted of 4,270,000  shares  initially sold by the Company,
730,000 shares by selling  shareholders and an additional 500,000 shares sold by
the Company pursuant to the underwriters' over-allotment option. Proceeds to the
Company, net of underwriters'  discount and associated costs, were approximately
$70.4 million.  The Company used the proceeds to pay the liquidation  preference
of the Senior  Common Stock as discussed  in Note 7 ($14.6  million),  to reduce
indebtedness  under the then existing  credit  agreement  ($54.0 million) and to
repay certain stockholder notes ($1.0 million). The remaining proceeds were used
to fund  current  working  capital  needs.  Concurrent  with the Initial  Public
Offering, the Company effected the 1995 Recapitalization  pursuant to which each
share of Series  A, B, and D Common  Stock  outstanding  was  exchanged  for two
shares of Class A, Class B or Class C Common Stock. The Class A Common Stock and
Class B Common Stock entitle the holder to one and ten votes, respectively,  per
share.  The  Class C  Common  Stock is  nonvoting.  The  accompanying  financial
statements give retroactive effect to the two-for-one stock exchange.

     Capital Deficiency Upon Combination--In  connection with accounting for the
Combination, the Predecessor Entities' accumulated deficits or retained earnings
at  November  1, 1993 were  carried  forward  into the  Company in the form of a
capital  deficiency  account.  The Company has  reclassified  the balance of the
capital  deficiency upon combination  against  additional paid-in capital in the
accompanying financial statements.

     Stock Option  Plan--The  Company has a stock option plan which provides for
the granting of options to employees to acquire up to 2,000,000  shares of Class
A and B Common Stock. Exercise prices in the case of incentive stock options are
not less than the fair value of the underlying  Class A Common Stock on the date
of grant.  Exercise prices in the case of non-qualified stock options are set at
the  discretion  of the Board of  Directors.  Options  vest ratably over various
periods, generally five years, commencing one year from the date of grant.

The following  table  summarizes the option  activity for the periods  presented
after considering the effect of the two-for-one stock exchange:

                                                         Weighted Average
                                                         Exercise Prices
                                              Options       Per Share

Outstanding as of  December 31, 1993 ...       580,000     $    6.38
Granted ................................       322,000     $    7.79
Canceled ...............................        (8,000)    $    6.38
Exercised ..............................        (2,000)    $    6.38
                                             ---------     ---------
Outstanding as of  December 31, 1994 ...       892,000     $    6.88
Granted ................................       362,000     $   12.58
Canceled ...............................        (4,800)    $    6.38
Exercised ..............................        (1,200)    $    6.38
                                             ---------     ---------
Outstanding as of December 31, 1995 ....     1,248,000     $    8.54
Granted/issued(1) ......................       740,500     $   29.40
Canceled(1) ............................      (260,600)    $    7.11
Exercised ..............................       (28,800)    $    6.84
                                             ---------     ---------
Outstanding as of December 31, 1996 ....     1,699,100     $   14.56
                                             =========     =========

(1) Includes  253,000  options  which were canceled and reissued at the December
31, 1996 fair market value of $27.25.


                                      F-23

<PAGE>
               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.   Stockholders' Equity (Deficiency) --(Continued)

      Options exercisable:                                   Weighted Average
                                                             Exercise Prices
                                                                Per Share
          December 31, 1994............    114,000 shares          $6.38
          December 31, 1995............    271,200 shares          $6.61
          December 31, 1996............    520,800 shares          $7.58


     In February 1995, the Board granted options to employees to acquire 282,000
shares of Class B Common Stock with exercise  prices below the fair market value
at the date of grant ($11.50 per share).  In addition,  the Board, in June 1995,
granted  options to an employee to acquire 10,000 shares of Class B Common Stock
at an exercise price below fair market value. Fair market value at date of grant
was determined based on advice from the Company's  investment  banker.  Unearned
compensation  with  respect to these  options  aggregated  $473,000 and is being
amortized  over the period  that the  options  vest (five  years).  Amortization
aggregating  $82,000 and $94,000 was recorded  for the years ended  December 31,
1995 and 1996, respectively.

The following  table sets forth  information  regarding  options  outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
                                                                                         Weighted Average
                       Range of                       Weighted Average Weighted Average Exercise Price for
                    Exercise Price  Number Currently   Exercise Price      Remaining        Currently
Number of Options    Per Share        Exercisable       Per Share            Life          Exercisable
-----------------    -----------      ------------      -----------          ----          -----------
  <S>             <C>                 <C>              <C>                   <C>            <C>
     538,000            $6.38            322,800            $6.38              2              $ 6.38
     316,400        $6.38 - $9.90        126,560            $7.80              3              $ 7.80
     357,200        $9.88 - 23.75         71,440           $12.61              4              $12.61
     487,500       $25.00 - 39.13                          $29.40              5
  ----------       --------------       --------        ---------             --              ------
   1,699,100       $6.38 - $39.13        520,800           $14.56              4              $ 7.58
  ==========       ==============       ========        =========             ==              ======
</TABLE>

     Tower Stock Option Plan--The Tower Subsidiary has a stock option plan which
provides  for the  granting of options to  employees  to acquire up to 1,000,000
shares of the Tower Subsidiary's common stock. During 1996, 550,000 options were
granted at an exercise  price of $5.00 per share.  The vesting terms are similar
to the Company's plan, and options to acquire the Tower  Subsidiary's  stock are
not convertible to options or stock of the Company.  When  determining  earnings
per share (as  discussed  in Note 1),  the  potential  dilutive  impact of these
options on the Company's share of Tower's net income is taken into account.

     Pro  Forma  Disclosure--As  described  in  Note 1,  the  Company  uses  the
intrinsic value method to measure compensation expense associated with grants of
stock options or awards to employees. Had the Company used the fair value method
to measure  compensation  for grants made in 1995 and 1996,  reported net income
(loss)  applicable to common  stockholders and net income (loss) per share would
have been  $7,257,000  or $0.57 per share in 1995 and  $(858,000)  or $(0.04) in
1996.  The  impact  of the  Tower  options  were not  material  to the pro forma
disclosures.

For purposes of determining the above  disclosure  required by FAS 123, the fair
value of options on their grant date was measured using the Black/Scholes option
pricing model. Key assumptions used to apply this pricing model are as follows:

                                                          1995          1996
                                                          ----          ----
     Approximate risk-free interest rate                  6.0%          6.0%
     Expected life of option grants                     5 years       5 years
     Expected volatility of underlying stock             35.0%         35.0%


     The estimated weighted average fair value of option grants made during 1995
and 1996 was $5.47 and $11.88, respectively, per option.

                                      F-24
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.    Stockholders' Equity (Deficiency) --(Continued)

     Warrants--In  connection  with the  financing  necessary  to  complete  the
acquisition  of radio  station  WEEI-AM  discussed  in Note 12 by Back Bay,  the
Company  granted CEA, a  stockholder,  warrants to acquire  79,000 shares of the
Company's  Series B Common  Stock  (which  became the right to  acquire  Class C
Common Stock as part of the 1995 Recapitalization) at an exercise price of $0.05
per share in exchange for  providing the initial  financing  (the Back Bay Note)
and granting the Company  certain rights with respect to the agreements  between
Back Bay and CEA  (including  the right to purchase from CEA the Back Bay Note).
The warrants  represented  approximately 1% of the Company's Common Stock at the
time of  issuance.  The cost of the  warrants  was  measured  as the  difference
between  the fair  value of the Series B Common  Stock on the date the  warrants
were granted and the exercise price,  and was recorded as a cost associated with
acquiring  certain assets from Back Bay after Back Bay's  acquisition of WEEI-AM
(see Note 12). In connection  with the Initial  Public  Offering , CEA exercised
its warrants.

     Reserved  Shares--The Company has reserved 400,000 shares of Class A Common
Stock and  1,600,000  shares  of Class B Common  Stock  for  issuance  under the
Company's stock option plan (the Plan). In February 1997, the Board of Directors
adopted,  subject to stockholder approval at the Company's annual meeting on May
29,  1997,  an  amendment  to the Plan which will  increase the number of shares
available for future grant to 3,000,000,  the additional  1,000,000 shares being
shares of Class A Common Stock.




                                      F-25

<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.    Station Dispositions

     Dispositions--  In December  1996,  the Company  sold  WNEZ-AM  serving New
Britain,  Connecticut for  approximately  $710,000,  and a loss of approximately
$140,000 was recorded upon disposition.

     In January  1995,  the Company sold three  stations,  KGGO-FM,  KHKI-FM and
KDMI-AM, serving Des Moines, Iowa. In March 1995, the Company sold two stations,
WHWK-FM and WNBF-AM,  serving Binghamton,  New York. Gains of approximately $7.6
million and $4.0 million were realized  during the year ended  December 31, 1995
on the Des Moines and Binghamton dispositions, respectively.

     In May 1994,  the Company  sold two  stations,  WDJX-AM/FM  in  Louisville,
Kentucky.  Net proceeds  from the sale  approximated  $5,300,000,  and a gain of
approximately $2,300,000 was recorded upon disposition.

      Summarized  financial  data  related to these  dispositions  for the three
years ended December 31, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
                                                                       1994           1995        1996
                                                                       ----           ----        ----
<S>                                                                <C>             <C>          <C>
 Net revenues.....................................................  $ 7,143         $  665       $   58
 Operating expenses excluding depreciation and amortization and
    corporate general and administrative expenses.................    5,333          4,531          193
</TABLE>

10.    Acquisitions

     General:  The  following  acquisitions  have all been  accounted for by the
purchase method of accounting,  and  accordingly,  the operating  results of the
acquired entities,  to the extent that an LMA agreement did not exist, have been
included in consolidated  operating  results since the date of acquisition.  The
purchase price has been allocated to the assets acquired, principally intangible
assets, and the liabilities  assumed based on their estimated fair values at the
dates of acquisition. The excess of purchase price over the estimated fair value
of the net  assets  acquired  has  been  recorded  as  goodwill.  The  financial
statements reflect the preliminary  allocation of certain purchase prices as the
appraisals for certain acquisitions have not yet been finalized.

     1995 Station Acquisitions:

     Boston:  In  January  1995,  the  Company  acquired  the  assets of WEGQ-FM
(formerly  WCGY-FM) for approximately  $12.0 million and a $500,000 note payable
to the prior owner.  American had begun  programming  and  marketing the station
pursuant to an LMA beginning in September 1994.

     West Palm Beach : In July 1995, the Company  acquired the assets of WKGR-FM
for approximately  $19.0 million and also acquired the right to purchase WPBZ-FM
from the prior owner.  As part of that  transaction,  the Company  assigned this
purchase  right to Palm Beach Radio  Broadcasting,  Inc.  (PBRB) and loaned PBRB
approximately  $9.75 million to purchase  WPBZ-FM.  The loan, as amended,  bears
interest at approximately  7% and is payable over seven years.  (See Note 11 for
information with respect to the purchase of WPBZ-FM)

                                      F-26
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10.    Acquisitions --(Continued)

      1996  Station Acquisitions:

     Baltimore:  In October  1996,  American  acquired the assets of WBGR-AM for
approximately $2.8 million.

     Buffalo:  In August  1996,  the Company  acquired the assets of WSJZ-FM for
approximately $12.5 million.  The Company had been programming and marketing the
station pursuant to an LMA beginning in April 1996.

     Fresno:  In December 1996,  the Company  acquired the assets of KNAX-FM and
KVSR-FM (formerly  KRBT-FM) for approximately  $11.0 million.  American had been
programming  and marketing  the stations  pursuant to an LMA beginning in August
1996.

     Fresno,  Omaha,  Portland and  Sacramento:  In July 1996, the  transactions
contemplated  by a  merger  agreement  by and  between  the  Company  and  Henry
Broadcasting  Company (HBC) were consummated.  Pursuant  thereto,  the Company
acquired KUFO-FM and KUPL-AM (formerly KBBT-AM) in Portland, Oregon, KYMX-FM and
KCTC-AM in Sacramento,  California,  KGOR-FM and KFAB-AM in Omaha, Nebraska (See
Note 11 for  information  with respect to the sale of the Omaha  stations),  and
KSKS-FM,  KKDJ-FM, and KMJ-AM in Fresno,  California,  for an aggregate purchase
price of  approximately  $110.4 million.  The acquisition was financed through a
$5.0 million escrow deposit,  the issuance of 1,879,034 shares of Class A Common
Stock  valued at  approximately  $64.0  million,  approximately  $4.1 million in
available cash,  together with the assumption of approximately  $37.3 million in
long term debt,  which was paid by the Company at closing.  As part of a related
transaction with the principal  stockholder of HBC, the Company acquired certain
real estate used in the business of HBC for  approximately  $2.0 million in cash
and  obtained a  five-year  option to acquire  certain  other real  estate for a
purchase price of approximately $1.0 million.

     Hartford:  In May 1996, the Company consummated the acquisitions of WTIC-AM
and  WTIC-FM.  In  August  1995,  the  Company  had  entered  into a  series  of
transactions with the owner of those stations and certain  affiliates,  pursuant
to which,  among other things,  the Company agreed to purchase the assets of the
stations for approximately $39.0 million,  including  approximately $1.1 million
of working capital.  The Company also paid $1.0 million for a two-year option to
purchase  for $1.00 the New England  Weather  Service  (which  provides  weather
information to subscribers). In August 1995, the Company was prevented under the
then current Federal Communications  Commission (FCC) regulations from acquiring
these stations,  and therefore loaned an aggregate of $35.5 million to the owner
of such stations and an affiliate thereof . Upon receipt of FCC approval in May,
1996,  the  escrow  deposit  of $2.0  million,  the  loans and $1.1  million  of
available cash were used to finance the acquisition.  The Company also paid $3.5
million to purchase the tower of one of the stations in October 1995.

     Las Vegas:  In October  1996,  the  Company  acquired  KMZQ-FM  and KXTE-FM
(formerly   KFBI-FM)  for  approximately   $28.0  million.   American  had  been
programming and marketing the stations pursuant to an LMA beginning in May 1996.
As part of such transaction, American paid an additional $0.2 million to acquire
the seller's right (and obligation) to purchase KXNT-AM  (formerly  KVEG-AM) for
approximately  $1.9 million which purchase,  as noted below,  was consummated in
September 1996.

     In  September,  1996,  the  Company  acquired  the  assets of  KXNT-AM  for
approximately  $1.9 million.  The Company had been programming and marketing the
station pursuant to an LMA beginning in May 1996.


                                      F-27
<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10.    Acquisitions --(Continued)

     In July 1996, the Company acquired the assets of KMXB-FM (formerly KJMZ-FM)
for approximately  $8.0 million.  The Company had been programming and marketing
the station pursuant to an LMA beginning in May 1996.

     In July 1996,  the Company  acquired  the assets of KLUC-FM and KXNO-AM for
approximately $11.0 million.

     Philadelphia  and  Detroit:  In  May  1996,  the  Company  consummated  the
transactions  contemplated by a merger agreement with Marlin Broadcasting,  Inc.
(Marlin).  American acquired WFLN-FM in Philadelphia,  Pennsylvania,  WQRS-FM in
Detroit,  Michigan and WTMI-FM in Miami, Florida for an aggregate purchase price
of  approximately  $58.5 million,  together with the assumption of approximately
$9.0 million of long-term debt which was paid in full at closing.  The principal
stockholder of Marlin immediately  thereafter  acquired WTMI-FM from the Company
for approximately  $18.0 million in cash. Proceeds from the sale of WTMI-FM were
held in an escrow account  pursuant to a like-kind  exchange  agreement and were
utilized to partially fund the Portland and Jose  transaction  discussed  below.
The Company retained certain Philadelphia real estate and tower assets valued at
approximately $1.5 million.  In June 1996, the Company entered into an agreement
with an unaffiliated  party pursuant to which it will exchange the assets of the
Philadelphia station for two stations in Sacramento and sell the Detroit station
for  approximately  $20.0  million in cash.  This party  began  programming  the
Philadelphia and Detroit stations under an LMA beginning in June 1996. (See Note
14 - Sacramento). The net assets and liabilities of the Detroit and Philadelphia
stations  included in this exchange  agreement  are carried on the  consolidated
balance sheet as net assets held under exchange agreement.

     Portland:  In July  1996,  the  Company  acquired  the  assets  of  KBBT-FM
(formerly KDBX-FM) for approximately $14.0 million. The Company also granted the
seller the right to exercise American's option to acquire the assets of WBNW-AM.
(See Notes 1 and 14).

      Portland and San Jose: In August 1996, the Company  acquired the assets of
KUPL-FM  and KKJZ- FM in  Portland,  Oregon and KSJO-FM and KUFX-FM in San Jose,
California for approximately $103.0 million. The acquisition was partly financed
through  $18.0  million  in  restricted  cash (see  Philadelphia  and  Detroit
transaction discussed above).

     Sacramento:  In September 1996, the Company  acquired the assets of KSSJ-FM
for approximately $14.0 million.  The Company had been programming and marketing
the  station  pursuant  to an LMA  beginning  in  July  1996.  (See  Note 11 for
information with respect to the exchange of the station).

      In July 1996,  the Company  acquired the assets of KSTE-AM  serving Rancho
Cordova,   California  for  approximately  $7.25  million.   The  Company  began
programming  and  marketing  the station  pursuant to an LMA  beginning in April
1996.  (See  Note 14 - West Palm  Beach  for  information  with  respect  to the
exchange of the station).

      Tower Acquisitions:

      In November 1996, the Tower Subsidiary acquired a 32.5 percent interest in
a partnership for  approximately  $325,000.  The partnership owns and operates a
tower site in Los Angeles,  California and was formed by the minority partner in
the Needham venture discussed below.

      In October 1996, the Tower  Subsidiary  acquired the assets of tower sites
located in Hampton, Virginia and North Stonington, Connecticut for approximately
$1.4 million and 1.0 million, respectively.


                                      F-28
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10.    Acquisitions --(Continued)

     In July  1996,  the  Tower  Subsidiary  entered  into a  limited  liability
corporation  agreement  with an  unaffiliated  party to  operate a tower site in
Needham,  Massachusetts.  In connection therewith, the Tower Subsidiary advanced
approximately $3.8 million to the corporation.  The Tower Subsidiary has a 50.1%
interest in the corporation. The accounts of the corporation are included in the
consolidated  financial  statements,  with the  other  shareholder's  investment
reflected as minority interest in subsidiary on the consolidated balance sheet.

     In April 1996, the Tower Subsidiary acquired BDS  Communications,  Inc. and
BRIDAN Communications Corporation for approximately $9.1 million which consisted
of 257,495 shares of the Company's Class A Common Stock valued at  approximately
$7.4 million and the assumption of approximately $1.7 million of long-term debt,
of which approximately $1.5 million was paid at closing. BDS Communications owns
three towers in Pennsylvania and BRIDAN  Communications  manages or has sublease
agreements with respect to  approximately  forty tower sites located  throughout
the Mid-Atlantic region.

      In February 1996, the Tower Subsidiary acquired Skyline Communications and
Skyline  Antenna  Management for  approximately  $3.3 million which consisted of
26,989 shares of the Company's Class A Common Stock valued at approximately $0.8
million,  $2.2 million in cash and the assumption of approximately  $0.3 million
of long-term debt, which was paid at closing. Skyline Antenna Management manages
or has sublease agreements on approximately 200 antenna sites,  primarily in the
northeast region of the United States.

Pro Forma Information:

      The  following  unaudited  pro forma  summary  presents  the  consolidated
results of operations as if the  acquisitions had occurred as of January 1, 1995
and 1996 after giving effect to certain adjustments,  including depreciation and
amortization  of assets and  interest  expense on any debt  incurred to fund the
acquisitions.   These  unaudited  pro  forma  results  have  been  prepared  for
comparative purposes only and do not purport to be indicative of what would have
occurred  had the  acquisitions  been made as of  January 1, 1995 and 1996 or of
results which may occur in the future.

Years ended December 31;

 (In thousands, except per share data-unaudited):
                                                         1995        1996
                                                         ----        ----
Net revenues........................................  $ 168,663   $ 211,850
Income before extraordinary items...................      8,584       4,693
Net income..........................................      7,767       4,693
Net income (loss) applicable to common stockholders.      6,952        (281)
Net income (loss) per common share..................  $     .47   $    (.01)


Pending station acquisitions are discussed in Notes 11 and 12.




                                      F-29
<PAGE>



               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


11.      Pending Transactions

     Charlotte, Kansas City, Philadelphia,  Pittsburgh, New Orleans, Sacramento,
Seattle,  and St.  Louis:  In August  1996,  the Company  entered  into a merger
agreement  (as amended in  September  1996) with EZ  Communications,  Inc.  (EZ)
pursuant to which EZ will be merged  directly  with and into the Company (the EZ
Merger).  Pursuant to the merger agreement,  each holder of EZ Common Stock will
receive (i) $11.75 in cash and (ii) 0.9 shares of the  Company's  Class A Common
Stock.  Based on the number of shares of EZ Common Stock outstanding at December
31, 1996,  the Company will pay  approximately  $107.4 million in cash and issue
approximately  8,228,400 shares of the Company's Class A Common Stock (excluding
options to purchase an  aggregate  of 514,400  shares of the  Company's  Class A
Common Stock which will be assumed pursuant to the EZ Merger). EZ currently owns
and/or operates  twenty-six radio stations in eight markets as follows:  WSOC-FM
and  WSSS-FM in  Charlotte,  North  Carolina;  KFKF- FM,  KBEQ-FM and KOWW-AM in
Kansas  City,  Missouri;  WIOQ-FM  and  WUSL-FM in  Philadelphia,  Pennsylvania;
WBZZ-FM and WZPT-FM in Pittsburgh, Pennsylvania; WRNO-FM, WEZB-FM and WBYU-AM in
New Orleans, Louisiana; KNCI-FM, KRAK-FM and KHTK-AM in Sacramento,  California;
KZOK-FM,  KMPS-AM/FM,  KBKS-FM,  KRPM-AM and KYCW-FM in Seattle,  Washington and
KYKY-FM,  KEZK-FM,  KFNS-AM and KSD-AM/FM in St. Louis, Missouri. As a result of
existing FCC regulations and the Sacramento stations either owned by the Company
or under agreement to purchase or sell by the Company,  upon consummation of the
EZ Merger, the Company will be required to sell one radio station in Sacramento,
KSSJ-FM,  (in  addition  to  KXOA-FM  and  KSTE-AM).  See West  Palm  Beach  and
Sacramento below.  Termination of the Hart-Scott-Rodino  Antitrust  Improvements
Act of 1976 (HSR Act)  waiting  period  with  respect  to the EZ Merger has been
received.  Subject  to the  receipt  of FCC  approval,  the  Company  expects to
consummate the EZ Merger in the second quarter of 1997.

     EZ is a party to several  pending  transactions  which are  expected  to be
consummated subsequent to the EZ Merger and the applicable regulatory approvals.
EZ is a party to an asset exchange agreement, pursuant to which EZ will exchange
the New Orleans stations for KBKS-FM and KRPM-AM in Seattle and $7.5 million. In
December  1996, EZ entered into an agreement  pursuant to which it will exchange
its Philadelphia stations for stations in Charlotte,  North Carolina,  (WRFX-FM,
WPEG-FM,  WBAV-AM/FM  and WFNZ-AM) and purchase  WNKS-FM in Charlotte  for $10.0
million.  Pursuant  to FCC and HSR Act  requirements,  EZ then  entered  into an
exchange  agreement pursuant to which it will exchange WRFX-FM for WDSY-AM/FM in
Pittsburgh and $20.0 million.  In December 1996, EZ entered into an agreement to
sell KMPS-AM in Seattle for  approximately  $2.0 million.  In November 1996, the
Company  entered into an agreement to sell the assets of KSD-AM in St. Louis for
approximately  $10.0 million and the buyer began  programming  and marketing the
station pursuant to an LMA in January 1997. All of such transactions are subject
to  receipt  of FCC  approval  and in certain  cases the  expiration  or earlier
termination of the HSR Act waiting period, and will be consummated in the second
or third quarter of 1997.

     Austin:  In February 1997,  the Company  executed its option to acquire the
assets of KKMJ-FM,  KAMX-FM  (formerly  KPTY-FM)  and KJCE-AM for  approximately
$28.7 million.  In August 1995, the Company paid a deposit of $3.0 million for a
two-year  option to acquire the assets of these  stations which will be credited
toward the purchase  price.  The Company has been  programming and marketing the
stations  pursuant to an LMA  beginning in September  1995.  The HSR Act waiting
period was  terminated  early and  subject to the receipt of FCC  approval,  the
acquisition is expected to be consummated in the first half of 1997.

                                      F-30


<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11.  Pending Transactions --(Continued)

     Buffalo:  In August 1995, the Company  entered into an agreement to acquire
the assets of WBLK-FM  for  approximately  $8.0  million and then  assigned  its
purchase  right and agreed to make loans to finance the  purchase to PBRB.  PBRB
consummated the acquisition in March 1996 utilizing the proceeds of the loan and
the Company  began  programming  and  marketing  the station  pursuant to an LMA
beginning in March 1996.  The Company  intends to exercise its option to acquire
WBLK-FM (which acquisition may take the form of a merger with PBRB).  Subject to
the receipt of FCC approval,  and the  expiration or earlier  termination of the
HSR Act waiting period,  the acquisition or merger is expected to be consummated
in the second or third quarter of 1997.

     Cincinnati : In January 1997,  the Company  entered into and  consummated a
merger  agreement  to  pursuant  to which it become a party to an  agreement  to
acquire the assets of WGRR-FM for approximately $30.0 million. The Company began
programming  and  marketing  the station  pursuant to an LMA beginning in March
1997.  American  issued  approximately  18,300  shares  of Class A Common  Stock
pursuant to such merger.  The HSR Act waiting  period was  terminated  early and
subject to the  receipt of FCC  approval,  the  acquisition  is  expected  to be
consummated  in the  second  quarter  of 1997.

     Fresno: In July 1996, the Company entered into an agreement to purchase the
assets  of  KOQO-AM/FM  for  approximately  $6.0  million.   The  Company  began
programming  and marketing  the stations  pursuant to an LMA beginning in August
1996. A petition to deny the  assignment  of the FCC licenses of these  stations
was filed with the FCC in  September  1996.  American  and the seller have filed
oppositions  to the  petition to deny and believe  that it is without  merit and
will not further  affect or  substantially  delay  consummation.  Subject to the
receipt of FCC approvals,  the Company expects to consummate this acquisition in
the second quarter of 1997.

     Omaha: In October 1996, the Company entered into an agreement,  as amended,
to sell KGOR-FM and KFAB-AM and Business Music Service for  approximately  $38.0
million.  The  carrying  values  of these  assets  have been  adjusted  from the
original  purchase price allocation to reflect the anticipated net proceeds from
the sale and accordingly, no gain or loss will be recognized on the transaction.
Omaha net  revenues  of  $3,504,000  and  operating  expenses  of  approximately
$2,486,000 are included in the accompanying consolidated statement of operations
for the year ended December 31, 1996. FCC approval has been received and the HSR
Act waiting period was terminated  early.  The Company expects to consummate the
sale in the first half of 1997.

     Rochester:  In February 1997, the Company entered into an agreement to sell
WCMF-AM for approximately $650,000. Net revenues and operating expenses included
in the  accompanying  consolidated  statement of operations  for the years ended
December 31, 1994,  1995 and 1996 were not  material.  Subject to the receipt of
FCC approval,  the Company  expects to consummate the sale in the second quarter
of 1997.

     In October 1995,  American  entered into a joint sales  agreement  with the
owner of an FM station in Rochester  under which the Company,  in exchange for a
fixed payment,  had the right to sell  advertising for the station and to retain
all such advertising  revenues.  American also acquired an assignable  option to
purchase the station for  approximately  $5.0 million.  In  connection  with the
consent decree described in Note 12, American assigned this purchase option to a
third party and the joint sales agreement was canceled in February 1997.

     In February  1997,  the Company  entered  into an  agreement to acquire the
assets of WAQB-FM, a newly licensed Class A FM radio station,  for approximately
$3.5  million.  FCC  approval  has been  received  and the  Company  expects  to
consummate the acquisition in the first half of 1997.

                                      F-31
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11.  Pending Transactions --(Continued)

     Rochester and  Cincinnati:  In December 1996,  the Company  entered into an
agreement to exchange the assets of WHAM-AM, WVOR-FM and WHTK-AM,  together with
$16.0  million  for the assets of WKRQ-FM in  Cincinnati,  Ohio.  (See Note 12 -
Rochester).   In  connection  therewith,  the  party  to  this  agreement  began
programming and marketing the Rochester stations pursuant to an LMA beginning in
February 1997. The Company began  programming and marketing  WKRQ-FM pursuant to
an LMA  beginning in March 1997.  FCC approval has been received and pursuant to
certain consent decrees entered into by both parties,  the Antitrust Division of
the U.S.  Department  of Justice  has  approved  this  transaction.  The Company
expects to consummate the exchange in the first half of 1997.

     Sacramento:  In October 1996, the Company entered into an agreement to sell
KXOA-FM for  approximately  $27.5 million in cash. The Company began programming
and  marketing the stations  pursuant to an LMA beginning in August 1996,  which
was terminated in January 1997 when the party to the agreement began programming
and  marketing  the station  pursuant to an LMA. The HSR Act waiting  period was
terminated early and subject to the receipt of FCC approval, the Company expects
to consummate the sale in the first half of 1997. (See Note 14).

     In December 1996, the Company entered into an agreement to sell KMJI-AM for
approximately  $1.5  million.  FCC  approval  has been  received and the Company
expects to consummate the sale in the first half of 1997. (See Note 14).

     West Palm Beach:  In March 1996,  the Company  loaned PBRB $7.2  million to
finance the acquisition of WMBX-FM (formerly  WHLG-FM) and WSTU-AM.  The Company
has an option to  acquire,  and a right of first  refusal  with  respect to, the
stations.  In November  1996,  PBRB sold WSTU-AM to a third  party.  The Company
intends  to  exercise  its  option  to  acquire   WMBX-FM  and  WPBZ-FM   (which
acquisitions may take the form of a merger of PBRB into the Company). Subject to
the receipt of FCC approval and the expiration or earlier termination of the HSR
Act  waiting  periods,  such  acquisitions  are  expected  to occur in the third
quarter of 1997  utilizing  proceeds  from the WMBX-FM and WPBZ-FM  loans in the
aggregate  principal amount of approximately  $17.3 million and $2.75 million in
cash.

     In December  1996,  the Company  acquired an option to purchase  another FM
station for approximately  $11.0 million.  The Company also agreed to loan up to
$150,000 to the party to this option agreement.  Subject to certain  conditions,
including  the  receipt of FCC  approval,  the Company  expects to exercise  its
option and consummate the acquisition in the third quarter of 1997.

     Tower  Subsidiary:  In February  1997,  the Tower  Subsidiary  entered into
agreements  with three entities which are affiliated with one another to acquire
tower sites and a tower site  management  business in  Southern  California  for
approximately $32.1 million.  Consummation of the transaction is conditioned on,
among other things, the expiration or earlier termination of the HSR Act waiting
period. Subject to such expiration or termination, the acquisitions are expected
to be consummated in the second quarter of 1997.

     In December 1996, the Tower  Subsidiary  entered into a letter of intent to
acquire  certain  tower  sites and tower  site  management  agreements,  located
primarily in Northern  California,  for approximately  $42.0 million.  The Tower
Subsidiary  also  agreed to advance  the  sellers  amounts  not to exceed  $1.35
million.  The  advances  will be  unsecured  and due in full at the  earlier  of
thirty-six  months  from the  date at  which  the  Tower  subsidiary  terminates
acquisition  discussions or June 30, 2000.  Consummation  of the  transaction is
conditioned  on, among other  things,  negotiation  and  execution of definitive
purchase and sale  agreements and the  expiration or earlier  termination of the
HSR  Act  waiting  period.  Subject  to  such  expiration  or  termination,  the
acquisition is expected to be consummated in the second quarter of 1997.

                                      F-32
<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


12.      Other Transactions

     Cumulative  Exchangeable  Preferred  Stock: In January  1997,  the Company
consummated  a private  offering of 2,000,000  shares of its 11 3/8%  Cumulative
Exchangeable  Preferred  Stock  (Exchangeable  Preferred  Stock)  to a group  of
qualified institutional  investors. The Company utilized the net proceeds, which
approximated  $192.4 million, to repay amounts outstanding under the 1997 Credit
Agreement and to fund acquisitions.  Shares of Exchangeable  Preferred Stock are
exchangeable, at the Company's option, in whole but not in part, on any dividend
payment date commencing  April 15, 1997 into the Company's 11 3/8%  Subordinated
Exchange  Debentures due 2009 (Exchange  Debentures).  As discussed  below,  the
Exchangeable Preferred Stock possesses mandatory redemption features and will be
classified as such in the Company's consolidated financial statements.

     Dividends on the  Exchangeable  Preferred Stock are cumulative at an annual
rate of 11 3/8%  (equivalent  to $11.375 per share),  accruing  from the date of
original  issuance  (January 30,  1997) and are payable  quarterly in arrears on
April 15, July 15,  October 15, and January 15,  commencing  April 15, 1997. The
Company's  ability  to pay  dividends  is  restricted  under  the  terms  of the
Subordinated Notes and is prohibited during the existence of a default under the
Company's 1997 Credit Agreement or the Subordinated Note Indenture.  The Company
has the right,  on or prior to January 15, 2002,  to pay  dividends  through the
issuance of additional shares of Exchangeable Preferred Stock.

     The  Exchangeable  Preferred  Stock  is  redeemable  at the  option  of the
Company,  for cash at any time after January 15, 2002,  initially at 105.688% of
the liquidation  preference,  declining  ratably  immediately  after January 15,
2007,  plus  accrued  and unpaid  dividends  of the date of the  redemption.  In
addition, prior to January 15, 2000, the Company may, at its option, use the net
cash proceeds of an offering to redeem up to 35% of the outstanding Exchangeable
Preferred Stock at 111.375% of the liquidation preference,  plus accumulated and
unpaid dividends to the date of redemption;  provided that, any such redemption,
there must be at least $130.0 million  aggregate  liquidation  preference of the
Exchangeable  Preferred Stock outstanding.  The Company is required,  subject to
certain  conditions,  to redeem all Exchangeable  Preferred Stock outstanding on
January 15, 2009, at a redemption  price to 100% of the liquidation  preference,
plus  accumulated  and  unpaid  dividends  to the date of  redemption.  Upon the
occurrence of a change in control, the Company,  will be required to, subject to
certain  conditions,  offer to purchase all of the then outstanding  shares at a
price equal to 101% of the liquidation  preference,  plus accumulated and unpaid
dividends to the date of redemption.

     1997  Station Acquisitions:

     Baltimore: In February 1997, the Company acquired the assets of WWMX-FM and
WOCT-FM for  approximately  $60.0 million and $30.0 million,  respectively.  The
Company had been  programming  and  marketing  the  stations  pursuant to an LMA
beginning in November 1996.

     Boston,  Worcester:  In January  1997,  the Company  acquired the assets of
WAAF-FM  and  WWTM-  AM in  Worcester,  Massachusetts  for  approximately  $24.8
million. The Company had been programming and marketing the stations pursuant to
an LMA beginning in August 1996.


                                      F-33

<PAGE>



               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12.  Other Transactions --(Continued)

     Dayton:  In February 1997,  the Company  acquired the assets of WXEG-FM for
approximately $3.6 million. The Company had previously loaned approximately $3.6
million to the owner of the station.  In December 1995, the Company entered into
an  agreement  with Steven B. Dodge,  Chairman of the Board and Chief  Executive
Officer of the Company, relating to this station pursuant to which Mr. Dodge had
agreed to provide  financing to a newly  organized  company  which  acquired the
station in December 1995.  Pursuant to the agreement,  the Company  acquired Mr.
Dodge's  approximately  $2.2 million loan (including accrued interest) which had
been assumed by the new owner, along with his right to acquire the station.  The
Company also loaned an additional approximately $1.4 million to the new owner to
finance the  acquisition  of the station.  The  acquisition  was  financed  with
proceeds  from the loans.  The Company had been  programming  and  marketing the
station pursuant to an LMA beginning in April 1996.

     In February  1997,  the Company  acquired the assets of WLQT-FM and WBTT-FM
(formerly WDOL- FM) for approximately $12.0 million.  The Company had previously
loaned approximately $12.0 million to the owner of the stations. The acquisition
was financed with proceeds from the loan. The Company had been  programming  and
marketing the stations pursuant to an LMA beginning in April 1996.

     Rochester:  In February  1997,  the Company  consummated  the  transactions
contemplated  by a series of agreements  pursuant to which the Company  acquired
the assets of WVOR-FM,  WPXY-FM,  WHAM- AM and WHTK-AM for  approximately  $31.5
million,   including   working  capital.   The  Company  had  previously  loaned
approximately  $28.5 million to the owner of the stations.  The  acquisition was
financed  with  proceeds  from the  loan,  a $2.0  million  escrow  deposit  and
available  cash.  In  accordance  with a October  1996  consent  decree with the
Antitrust Division of the U.S. Department of Justice and the Attorney General of
the State of New York,  the Company is required to divest  WHAM-AM and WVOR- FM,
within a certain period of time. See Note 11 - Rochester and Cincinnati.

     San Jose: In February 1997, the Company  acquired the assets of KBAY-FM and
KKSJ-AM for  approximately  $31.0  million.  (See Note 14). The Company had been
programming  and marketing  the stations  pursuant to an LMA beginning in August
1996.

     Back Bay  Transactions:  During 1994, the Company  entered into a series of
agreements  (the Back Bay  Transaction)  with  Back Bay and CEA,  as a result of
which,  among  other  things,  (a) Back Bay  acquired  the  radio  station  then
operating  under the call  letters  WEEI-AM from Boston  Celtics  Communications
Limited  Partnership  (BCCLP),  (b) the Company acquired the rights to broadcast
all of the Boston Celtics  basketball games through the 1998-99 season,  and (c)
Back Bay assigned all of its sports and other programming agreements,  including
those relating to syndicated  personalities,  to the Company's  WHDH-AM station,
which  assumed  the  obligations  under  those  agreements  and changed its call
letters to WEEI-AM.

     Back Bay  purchased  WEEI-AM  on June 30,  1994,  financing  for  which was
provided by CEA in the form of a  $5,000,000  loan (see Note 1). CEA  received a
16%  Secured  Note  due  2001  (the  Acquisition   Note)  together  with  rights
representing  a 75%  share  in the  appreciation  in the  value of Back Bay (the
"Acquisition   Appreciation  Right").  The  Acquisition  Appreciation  Right  is
exercisable  upon  the  earliest  of  February  28,  1999,  or  certain  defined
circumstances.

     As part of those  arrangements,  the  Company  had the  right,  but not the
obligation,  to  purchase  from CEA the  Acquisition  Note  and the  Acquisition
Appreciation  Right for a purchase  price equal to the sum of (i)  principal and
accrued and unpaid interest on the  Acquisition  Note, and (ii) the value of the
Acquisition  Appreciation  Right,  except  that  during  the  first  year of its
existence,  the Acquisition  Appreciation Right was deemed to have no value. The
Company also issued to CEA the warrants described in Note 8.

                                      F-34

<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12. Other Transactions --(Continued)

     In September 1994, (a) the Company exercised its right to purchase from CEA
the Acquisition Note and the Acquisition  Appreciation Right for an aggregate of
$5,000,000 in cash; (b) the interest rate on the Acquisition Note was reduced by
the Company to 10% per annum;  (c) the Company and Back Bay entered into certain
collateral  arrangements  including a sublease of the Company's  office space, a
service agreement and certain arrangements with respect to broadcasts of certain
sporting  events;  and (d) Back Bay  purchased  55,556 shares of Series A Common
Stock in exchange  for a 10% Secured  Note due 2001 in the  principal  amount of
$500,000 (the New Back Bay Note) and rights  representing  an  additional  10%
participation  in any  increase in the value of Back Bay (the New  Appreciation
Right).

     For financial reporting purposes, the Company has determined that the costs
associated with acquiring the sports and other programming agreements as well as
the radio call  letters  "WEEI"  consists of the  warrants to CEA to provide the
initial financing to Back Bay and the present value of the reduction in the Back
Bay Note's annual  interest rate from 16% to 10%. Such costs have been allocated
to various  intangible assets based upon an independent  appraiser's  report and
are being amortized on a basis  consistent  with the Company's other  intangible
assets.

     The Company and the  stockholders  of Back Bay also entered into a put/call
agreement  (the Put/Call  Agreement')  pursuant to which the Company was granted
the  assignable  right to purchase at any time prior to January 1, 2005, and the
Back Bay stockholders  have the right to any time after March 15, 1997 and prior
to January 1, 2005 to require the  Company to  purchase  all , but not less than
all,  of the  capital  stock of Back Bay.  Exercise by either the Company or the
Back Bay  stockholders of their respective  rights under the Put/Call  Agreement
is,  however,  conditioned  upon the Company being legally  entitled to own Back
Bay's  radio  stations.  At  December  31, 1995 then  existing  FCC  regulations
prohibited  the Company from  purchasing  the  stations.  This  prohibition  was
eliminated  pursuant  to the passing of the  Telecommunications  Act in February
1996. The purchase  price for the stock of Back Bay under Put/Call  Agreement is
based on a formula  similar to that  relating  to the  Acquisition  Appreciation
Right.  (See Notes 1 and 14 for information  concerning the purchase by Back Bay
of the Acquisition Note and the New Back Bay Note).




                                      F-35

<PAGE>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


13.   Fair Value of Financial Instruments

     The estimated fair value of financial  instruments  has been  determined by
the  Company  using  available  market  information  and  appropriate  valuation
methodologies.  However,  considerable judgment is required in interpreting data
to develop the estimates of fair value.  Accordingly,  the  estimates  presented
herein are not  necessarily  indicative  of the amounts  that the Company  could
realize in a current market exchange.  The fair value estimates presented herein
are based on pertinent  information  available to  management as of December 31,
1995 and 1996.  Although  management  is not  aware of any  factors  that  would
significantly  affect the estimated  fair value  amounts,  such amounts have not
been  comprehensively  revalued for purposes of these financial statements since
that date, and current estimates of fair value may differ significantly from the
amounts presented herein. (See Note 1).

     The following  methods and assumptions were used to estimate the fair value
of each class of financial instruments:

          Cash, cash equivalents, accounts receivable, accounts payable, accrued
     expenses  and  other   short-term   obligations--These   carrying   amounts
     approximate fair value because of the short-term  nature of these financial
     instruments.

          Notes  receivable--The  fair value of notes  receivable  is  estimated
     based on  discounted  cash  flows  using  current  interest  rates at which
     similar loans to borrowers  with similar credit ratings would be made or if
     the loan is collateral  dependent,  management's estimate of the fair value
     of  the  collateral.   The  carrying  amount  of  these  notes   aggregated
     $50,205,000  and  $69,920,000 at December 31, 1995 and 1996,  respectively,
     and approximate their fair value.

          Deposits on station  purchases--The fair value is not practicable to
     estimate.

          Long-term  debt--The fair values of long-term debt are estimated based
     on current market rates and instruments  with the same risk and maturities.
     The  fair  value of  long-term  debt  approximated  the  carrying  value at
     December 31, 1995 and 1996.

          Interest  rate  protection   agreements--The   fair  values  of  these
     agreements  are obtained  from dealer  quotes.  These values  represent the
     estimated  amount  the  Company  would  receive  or  pay to  terminate  the
     agreements  taking into  consideration  the  current  interest  rates.  The
     Company  would  expect  to pay  the  fair  value  of  these  agreements  of
     approximately  $1.9  million and $1.5  million as of December  31, 1995 and
     1996, respectively. (See Note 3).

                                      F-36

<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

14.      Events Subsequent to Independent Auditors' Report (Unaudited)

         Subsequent to February 25, 1997,  the Company has agreed to acquire (or
is in the process of negotiating agreements to acquire) the following additional
radio properties:

         Sacramento:  In February 1997, the Company  consummated an agreement to
exchange  the  Philadelphia  station  which it  acquired  as part of the  Marlin
Transaction for KSFM-FM and KMJI-AM serving Sacramento,  California. The Company
also sold the Detroit station acquired as part of the Marlin  transaction to the
owner of the Sacramento stations for approximately $20.0 million.  (See Notes 10
and 11).

      In March 1997,  the Company  acquired the assets of KXOA-AM/FM and KQPT-FM
in Sacramento,  California for  approximately  $50.0 million.  The Company began
programming  and marketing  the stations  pursuant to an LMA beginning in August
1996. (See Note 11-Sacramento).

     San Jose:  In March  1997,  the  Company  entered  into a merger  agreement
pursuant  to which the  Company  will  acquire the assets of KEZR-FM and KLUE-FM
serving  Monterey,  California in exchange for  approximately  723,000 shares of
Class A Common Stock valued at  approximately  $20.0 million and $4.0 million in
cash.  Subject to the  receipt of FCC  approval  and the  expiration  or earlier
termination of the HSR Act waiting period, the Company expects to consummate the
merger in the first half of 1997.

      In March 1997,  the Company  entered into an agreement to sell KKSJ-AM for
approximately $3.2 million.  Subject to the receipt of FCC approval, the Company
expects to consummate the sale in the second quarter of 1997.

      West Palm Beach:  In March 1997,  the Company  consummated an agreement to
exchange  the assets of KSTE-AM in  Sacramento,  California  plus  approximately
$33.0  million in cash for the assets of  WEAT-FM,  WEAT-AM  and WOLL-FM in West
Palm Beach,  Florida.  The party to the exchange agreement began programming and
marketing  KSTE-AM  pursuant to an LMA and the  Company  began  programming  and
marketing  the West Palm  stations  pursuant to an LMA beginning in August 1996.
Under current FCC regulations,  the Company is permitted to own five FM stations
in West Palm Beach;  accordingly,  it will be required to dispose of one station
in West Palm Beach.

      Back Bay  Transactions:  In March 1997,  Back Bay  consummated the sale of
WBNW-AM and utilized a portion of the proceeds to repay the Company all amounts,
including  accrued  interest,  that were  outstanding  under the note agreements
described in Notes 1 and 12.

         The Company is also pursuing the  acquisitions of tower  properties and
additional  radio  stations  in new and  existing  markets,  none of which  have
definitive purchase agreements.

                                      F-37

<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

15.      Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
                                            First        Second           Third          Fourth
In thousands, except per share data:      Quarter        Quarter         Quarter         Quarter
<S>                                     <C>             <C>            <C>             <C>

1996
Net revenues (2)                         $ 23,315        $ 37,777       $ 52,490        $ 64,437
Operating income                            1,793           6,757          7,403          11,078
Net income (loss) before dividends           (456)          2,210            934           2,447
Income (loss) per share (1)              $   (.03)       $    .10       $   (.07)       $    .00

<CAPTION>
1995
<S>                                     <C>             <C>            <C>             <C>
Net revenues                             $ 19,842        $ 24,672       $ 25,109        $ 28,149
Operating income                              672           3,698          4,637           5,445
Income before extraordinary item            5,207             675          1,435           1,788
Net income before dividends                 5,207             675          1,435             971
Income per share before
   extraordinary item (1)                    $.50            $.03           $.09            $.11
<FN>
(1)      The  sum of the  quarter's  earnings  per  share  does  not  equal  the
         year-to-date  earnings  per  share  due to  changes  in  average  share
         calculations. (See Note 1).

(2)      1996  second  quarter  revenues  from LMA  agreements  aggregating  $.3
         million were subsequently  reclassified to net LMA expense in the third
         quarter.  The  reclassification had no effect on other reported amounts
         presented herein.
</FN>
</TABLE>

                                      F-38
<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees

     The Company's payment  obligations  under the Subordinated  Notes are fully
and unconditionally  guaranteed on a joint and several basis (collectively,  the
"Subsidiary  Guarantees"),  on a senior subordinated basis by all of its present
and any future Restricted Subsidiaries  (collectively  "Restricted Guarantors").
The Restricted Subsidiaries have also unconditionally guaranteed, and any future
Restricted  Subsidiaries  will be required to guarantee,  on a joint and several
basis (collectively, the "Senior Subsidiary Guarantees"), all obligations of the
Company under the Credit  Agreements.  The Tower  Subsidiary  has not guaranteed
obligations under the Credit Agreements or the Subordinated Notes. (See Note 1).

     The  Subordinated  Notes and the Subsidiary  Guarantees are subordinated to
all  Senior  Debt  of  the  Company  including  indebtedness  under  the  Credit
Agreements and the Senior  Subsidiary  Guarantees.  The indenture  governing the
Subordinated Notes contains limitations on the amount of indebtedness (including
Senior Debt) which the Company may incur.

     With the intent that the Subsidiary  Guarantees  not constitute  fraudulent
transfers or conveyances  under  applicable state or federal law, the obligation
of each guarantor under its Subsidiary  Guarantee is also limited to the maximum
amount as will,  after  giving  effect to any  rights  to  contribution  of such
guarantor  pursuant to any  agreement  providing  for an equitable  contribution
among such  guarantor  and other  affiliates  of the Company of payments made by
guarantees  by such  parties,  result in the  obligations  of such  guarantor in
respect of such maximum amount not constituting a fraudulent conveyance.

     The  following  condensed  consolidating  financial  data  illustrates  the
composition  of the combined  guarantors.  The Company  believes  that  separate
complete  financial  statements of the respective  guarantors  would not provide
additional material information which would be useful in assessing the financial
composition of the guarantors.  No single  guarantor has any  significant  legal
restrictions  on the ability of investors  or creditors to obtain  access to its
assets  in  event  of  default  on  the  Subsidiary  Guarantee  other  than  its
subordination to senior indebtedness described above.

     Investments in  subsidiaries  are accounted for by the parent on the equity
method for purposes of the  supplemental  consolidating  presentation.  Earnings
(losses) of  subsidiaries  are  therefore  reflected in the parent's  investment
accounts and earnings.  The principal  elimination entries eliminate investments
in subsidiaries and intercompany balances and transactions.

                                      F-39

<PAGE>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)
<TABLE>
<CAPTION>
                                  Condensed Consolidating Balance Sheet
                                            December 31, 1996
                                          (Dollars in thousands)

                                                   Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                       $    8,074                     $    2,373                        $   10,447
   Accounts receivable, net                            49,565    $   2,095               237                            51,897
   Prepaid expenses and other current assets            3,509           14                80                             3,603
   Deferred income taxes                                3,202          168                                               3,370
                                                   ----------    ---------        ----------       ----------       ----------
      Total current assets                             64,350        2,277             2,690                            69,317

PROPERTY AND EQUIPMENT, NET                            67,267        3,271            19,709                            90,247
OTHER ASSETS:

   Investment in and advances to subsidiaries         314,983                                      $ (314,983)               0
   Station investment notes receivable                 69,920                                                           69,920
   Goodwill - net                                     200,449       20,457            11,243                           232,149
   FCC licenses - net                                              233,558                                             233,558
   Other intangible assets - net                       24,178          327             3,048                            27,553
   Deposits and other long-term assets                 25,589           48               427                            26,064
   Net assets held under exchange agreement                         47,495                                              47,495
                                                   ----------    ---------        ----------       ----------       ----------
      Total other assets                              635,119      301,885            14,718         (314,983)         636,739
                                                   ----------    ---------        ----------       ----------       ----------
TOTAL ASSETS                                       $  766,736    $ 307,433        $   37,117       $ (314,983)      $  796,303
                                                   ==========    =========        ==========       ==========       ==========




                                      F-40


<PAGE>
<CAPTION>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                                  Condensed Consolidating Balance Sheet
                                            December 31, 1996
                                          (Dollars in thousands)

                                                  Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current maturities of long-term debt            $      444                      $     117                        $      561
   Accounts payable and accrued expenses               31,087          656             2,027                            33,770
                                                   ----------    ---------        ----------       ----------       ----------
   Total current liabilities                           31,531          656             2,144                            34,331

NON-CURRENT LIABILITIES

   Deferred income taxes                               11,405       21,521               279                            33,205
   Other long-term liabilities                          2,129                             20                             2,149
   Long-term debt                                     325,693                          4,418                           330,111
                                                   ----------    ---------         ---------       ----------       ----------
      Total non-current liabilities                   339,227       21,521             4,717                           365,465



MINORITY INTEREST IN SUBSIDIARY                          (185)                           529                               344

STOCKHOLDERS'  EQUITY

   Preferred Stock                                          1                                                                1
   Common Stock                                           211                            500       $     (500)             211
   Additional paid-in capital                         390,731      284,649            29,817         (314,466)         390,731
   Unearned compensation                                 (297)                                                            (297)
   Retained earnings                                    5,955          607              (590)             (17)           5,955
   Treasury stock                                        (438)                                                            (438)
                                                   ----------    ---------         ---------       ----------       ----------
      Total stockholders' equity                      396,163      285,256            29,727         (314,983)         396,163
                                                   ----------    ---------         ---------       ----------       ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY                                             $  766,736    $ 307,433         $  37,117       $ (314,983)      $  796,303
                                                   ==========    =========         =========       ==========       ==========



                                      F-41




<PAGE>

<CAPTION>

                           AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                             Condensed Consolidating Statement of Operations
                                   For the Year Ended December 31, 1996
                                          (Dollars in thousands)

                                                   Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>

Net broadcast revenues                             $  170,322    $   4,252                                          $  174,574
Tower revenues                                            618                     $    2,897       $      (70)           3,445
License fees charged to Parent                         (7,655)       7,655                                                   0
                                                   ----------    ---------         ---------       ----------       ----------
Total net revenues                                    163,285       11,907             2,897              (70)         178,019


  Operating expenses excluding
    depreciation and amortization, net
    local marketing agreement and
    corporate general and administrative
    expenses                                          115,219        2,662             2,193              (70)         120,004
  Net local marketing agreement expense                10,461       (2,333)                                              8,128
  Depreciation and amortization                         9,873        6,947               990                            17,810
  Corporate general and administrative                  5,046                                                            5,046
                                                   ----------    ---------         ---------       ----------       ----------
Operating income (loss)                                22,686        4,631              (286)               0           27,031

Other income (expense):
  Interest expense                                    (22,287)                                                         (22,287)
  Interest income and other, net                        5,489                             36                             5,525
  Gains (losses) on sale of assets and
    other, net                                           (123)                          (185)                             (308)
  Equity in income (loss) of subsidiaries, net of
    income taxes recorded at the
    subsidiary level                                      127                                            (127)               0
                                                   ----------    ---------         ---------       ----------       ----------
Income (loss) before income taxes                       5,892        4,631              (435)            (127)           9,961
  Provision  for income taxes                             757        4,024                45                             4,826
                                                   ----------    ---------         ---------       ----------       ----------
Net income (loss)                                  $    5,135    $     607         $    (480)      $     (127)       $   5,135
                                                   ==========    =========         =========       ==========       ==========





                                      F-42

<PAGE>

<CAPTION>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                             Condensed Consolidating Statement of Cash Flows
                                   For the Year Ended December 31, 1996
                                          (Dollars in thousands)


                                                    Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>
Cash flows provided from
     operating activities                          $    8,138    $   5,292         $   2,229                        $   15,659
                                                   ----------    ---------         ---------       ----------       ----------
Investing Activities:
  Payments for purchase of property and
        equipment and intangible assets               (15,782)                        (9,327)                          (25,109)
  Proceeds from asset and radio station sales           1,087                                                            1,087
  Proceeds for repayment of station
     investment notes receivables                       1,350                                                            1,350
  Payments for purchase of tower properties                                           (9,797)                           (9,797)
  Payments for purchase of radio stations            (312,591)                                                        (312,591)
  Payments for station investment notes
     receivable and related intangible assets         (56,522)                                                         (56,522)
  Deposits and other long-term assets                 (20,303)                                                         (20,303)
                                                   ----------    ---------         ---------       ----------       ----------
Cash flows used by investing activities              (402,761)                       (19,124)                         (421,885)
                                                   ----------    ---------         ---------       ----------       ----------

Financing Activities:
  Borrowings under  the Credit Agreements             151,500                          2,500                           154,000
  Repayment of  the Credit Agreements                (151,500)                                                        (151,500)
  Repayment of other obligations                         (403)                           (51)                             (454)
  Net proceeds from debt offering - net of
     discount                                         173,581                                                          173,581
  Additions to deferred financing costs                (5,344)                                                          (5,344)
  Dividends paid                                       (4,973)                                                          (4,973)
  Net proceeds from equity offerings and
     exercise of options                              247,474                                                          247,474
  Investment in and advances to subsidiaries          (11,515)     (5,292)            16,807                                 0
                                                   ----------    ---------         ---------       ----------       ----------
Cash flows from financing activities                  398,820      (5,292)            19,256                           412,784
                                                   ----------    ---------         ---------       ----------       ----------
Increase in cash and cash equivalents                   4,197                          2,361                             6,558
Cash and cash equivalents at beginning
       of year                                          3,877                             12                             3,889
                                                   ----------    ---------         ---------       ----------       ----------
Cash and cash equivalents at end of year           $    8,074    $       0        $    2,373       $        0       $   10,447
                                                   ==========    =========         =========       ==========       ==========



                                      F-43

<PAGE>

<CAPTION>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                                  Condensed Consolidating Balance Sheet
                                            December 31, 1995
                                          (Dollars in thousands)


                                                    Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>

ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                       $    3,877                     $       12                        $    3,889
   Accounts receivable, net                            24,352                             37                            24,389
   Prepaid expenses and other current assets            2,277                              4                             2,281
   Note receivable-other                                1,108                                                            1,108
   Deferred income taxes                                1,162                                                            1,162
                                                   ----------    ---------         ---------       ----------       ----------
      Total current assets                             32,776                             53                            32,829


PROPERTY AND EQUIPMENT, NET                            28,027                          3,759                            31,786
OTHER ASSETS:

   Investment in and advances to
    subsidiaries                                       48,792                                      $  (48,792)               0
   Station investment notes receivable                 49,097                                                           49,097
   Goodwill                                            66,464                                                           66,464
   FCC licenses                                                    $45,023                                              45,023
   Other intangible assets, net                        15,831                             33                            15,864
   Deposits and other long-term assets                  7,715                             18                             7,733
                                                   ----------    ---------         ---------       ----------       ----------
      Total other assets                              187,899       45,023                51          (48,792)         184,181
                                                   ----------    ---------         ---------       ----------       ----------
TOTAL ASSETS                                       $  248,702    $  45,023         $   3,863       $  (48,792)      $  248,796
                                                   ==========    =========         =========       ==========       ==========



                                      F-44
<PAGE>

<CAPTION>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                                  Condensed Consolidating Balance Sheet
                                            December 31, 1995
                                          (Dollars in thousands)

                                                    Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>

LIABILITIES AND STOCKHOLDERS'
    EQUITY
CURRENT LIABILITIES
   Current maturities of long-term debt            $      355                                                       $      355
   Accounts payable and accrued expenses                9,821                     $       94                             9,915
   Accrued interest                                       514                                                              514
                                                   ----------    ---------         ---------       ----------       ----------
      Total current liabilities                        10,690                             94                            10,784

NON-CURRENT LIABILITIES
   Deferred income taxes                                7,899                                                            7,899
   Other long-term liabilities                          1,929                                                            1,929
   Long-term debt                                     152,149                                                          152,149
                                                   ----------    ---------         ---------       ----------       ----------
      Total non-current liabilities                   161,977                                                          161,977

STOCKHOLDERS' EQUITY
   Common Stock                                           143                                                              143
   Additional paid-in capital                          70,928      $45,023             3,879       $  (48,902)          70,928
   Retained earnings                                    5,793                           (110)             110            5,793
   Unearned compensation                                 (391)                                                            (391)
   Treasury stock                                        (438)                                                            (438)
                                                   ----------    ---------         ---------       ----------       ----------
      Total stockholders' equity                       76,035       45,023             3,769          (48,792)          76,035
                                                   ----------    ---------         ---------       ----------       ----------
TOTAL LIABILITIES AND
    STOCKHOLDERS'
      EQUITY                                       $  248,702    $  45,023         $   3,863       $  (48,792)      $  248,796
                                                   ==========    =========         =========       ==========       ==========


                                      F-45

<PAGE>

<CAPTION>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                             Condensed Consolidating Statement of Operations
                                   For the year ended December 31, 1995
                                          Dollars in thousands)

                                                   Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>

Net broadcast revenues                             $   97,609                                                       $   97,609
Tower  revenues                                                                   $      163                               163
License fees charged to Parent                     $     (484)   $     484                                                   0
                                                   ----------    ---------         ---------       ----------       ----------
Total net revenues                                     97,125          484               163                            97,772


  Operating expenses excluding depreciation and
     amortization, net local marketing agreement
     and corporate general and
     administrative expenses                           66,148           10               290                            66,448
  Net local marketing agreement expense                   600                                                              600
  Depreciation and amortization                        11,833          474                57                            12,364
  Corporate general and administrative                  3,908                                                            3,908
                                                   ----------    ---------         ---------       ----------       ----------
Operating income (loss)                                14,636            0              (184)                           14,452

Other income (expense):
  Interest expense                                    (12,497)                                                         (12,497)
  Interest income and other, net                        2,435                                                            2,435
  Gains on sale of assets and other, net               11,544                                                           11,544
  Equity in (loss) of subsidiaries, net of income
     taxes recorded at the subsidiary level              (110)                                     $      110                0
                                                   ----------    ---------         ---------       ----------       ----------
Income (loss) before extraordinary item and            16,008                           (184)             110           15,934
     income taxes
Benefit (provision) for income taxes                   (6,903)                            74                            (6,829)
                                                   ----------    ---------         ---------       ----------       ----------
Income (loss) before extraordinary item                 9,105                           (110)             110            9,105
Extraordinary loss on extinguishment of debt, net
    of income tax benefit of $614                        (817)                                                            (817)
                                                   ----------    ---------         ---------       ----------       ----------
Net income (loss)                                  $    8,288    $       0         $    (110)      $      110       $    8,288
                                                   ==========    =========         =========       ==========       ==========

                                      F-46




<PAGE>
<CAPTION>

               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                             Condensed Consolidating Statement of Cash Flows
                                   For the year ended December 31, 1995
                                          (Dollars in thousands)

                                                  Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries     Subsidiary     Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>


Cash flows provided from operating activities      $    9,577    $       -        $      147                         $    9,724
                                                   ----------    ---------        ----------                        ----------

Investing Activities:
  Payments for purchase of property and                (5,926)                                                          (5,926)
    equipment and intangible assets
  Proceeds from asset and radio station sales          15,302                                                           15,302
  Payments for purchase of  tower
    properties                                         (3,218)                        (4,082)                           (7,300)
  Payments for purchase of radio stations             (31,013)                                                         (31,013)
  Payment for station investment
    notes receivable and related intangible
    assets                                            (48,597)                                                         (48,597)
  Proceeds from repayments of
     notes receivable                                   3,000                                                            3,000
  Deposits and other long-term assets                  (6,649)                                                          (6,649)
                                                   ----------    ---------         ---------       ----------       ----------

Cash flows used by investing activities               (77,101)                        (4,082)                          (81,183)
                                                   ----------                      ---------                        ----------

Financing Activities
  Borrowings under the Credit Agreements              225,000                                                          225,000
  Repayment under the Credit Agreements              (202,500)                                                        (202,500)
  Repayment of other obligations                       (1,288)                                                          (1,288)
  Additions to deferred financing costs                (3,896)                                                          (3,896)
  Redemption of Series C Common Stock                 (14,580)                                                         (14,580)
  Purchase of treasury stock                             (438)                                                            (438)
  Net proceeds from equity offering and
    exercise of options                                69,882                                                           69,882
  Investment in and advances to subsidiaries           (3,947)                         3,947
                                                   ----------                       --------                        ----------
Cash flows from financing activities                   68,233                          3,947                            72,180
                                                   ----------                       --------                        ----------


Increase in cash and cash equivalents                     709                             12                               721
Cash and cash equivalents at beginning of
    year                                                3,168                                                            3,168
                                                   ----------    ---------         ---------       ----------       ----------
Cash and cash equivalents at end of year           $    3,877    $       0         $      12       $        0       $    3,889
                                                   ==========    =========         =========       ==========       ==========


                                      F-47


<PAGE>
<CAPTION>
               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                             Condensed Consolidating Statement of Operations
                                   For the Year Ended December 31, 1994
                                          (Dollars in thousands)

                                                   Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries   Subsidiary(a)    Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>

Net broadcast revenues                                                            $   68,034                        $   68,034
License fees charged to Parent                                   $     858              (858)                                0
                                                   ----------    ---------         ---------       ----------       ----------
Total net revenues                                                     858            67,176                            68,034

  Operating expenses excluding
    depreciation and amortization and
    corporate general and administrative
    expenses                                                             3            50,126                            50,129
  Depreciation and amortization                                        855             9,065                             9,920
  Corporate general and administrative                                                 2,229                             2,229
                                                   ----------    ---------         ---------       ----------       ----------
Operating income                                                                       5,756                             5,756

Other income (expense):
  Interest expense                                 $     (100)           0            (7,176)                           (7,276)
  Interest income and other, net                                                         225                               225
  Gains on sale of assets and other                                                    2,278                             2,278
  Provision for loss on station
    investment note receivable                                                          (500)                             (500)
  Equity in (loss) of subsidiaries, net of
    income taxes recorded at the
     subsidiary level                                  (1,133)                                     $    1,133                0
                                                   ----------    ---------         ---------       ----------       ----------
Income (loss) before income taxes and
    extraordinary item                                 (1,233)                           583            1,133              483
  Provision for income taxes                                                            (556)                             (556)
                                                   ----------    ---------         ---------       ----------       ----------
Income (loss) before extraordinary item                (1,233)                            27            1,133              (73)
Extraordinary loss on extinguishment
    of debt, net of income tax
    benefit of $597                                                                   (1,160)                           (1,160)
                                                   ----------    ---------         ---------       ----------       ----------
Net income (loss)                                  $   (1,233)   $       0         $  (1,133)      $    1,133       $   (1,233)
                                                   ==========    =========         =========       ==========       ==========




(a)  Includes American Radio Systems,  Inc. (ARSI), a wholly owned subsidiary of
     the Company until December 1995, which was the borrower.


                                      F-48
<PAGE>
<CAPTION>


               AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.      Subsidiary Guarantees --(Continued)

                             Condensed Consolidating Statement of Cash Flows
                                   For the Year Ended December 31, 1994
                                          (Dollars in thousands)

                                                   Parent and     Guarantor      Non-guarantor                    Consolidated
                                                  its Divisions   Subsidiaries   Subsidiary(a)    Eliminations       Totals
                                                  -------------   ------------   -------------    ------------     ------------
<S>                                               <C>           <C>              <C>             <C>               <C>

Cash flows provided from operating activities                                     $    2,166                        $    2,166
                                                   ----------    ---------         ---------       ----------       ----------
Investing Activities:
Payments for purchase of property and
   equipment and intangible assets                                                    (5,754)                           (5,754)
Proceeds from asset and radio station sales                                            5,620                             5,620
Payments for purchase of radio stations                                              (87,291)                          (87,291)
Payments for station investment notes
   receivable and related intangible assets                                           (5,000)                           (5,000)
Deposits and other long-term assets                                                     (484)                             (484)
                                                   ----------    ---------         ---------       ----------       ----------
Cash flows used by investing activities                                              (92,909)                          (92,909)
                                                   ----------    ---------         ---------       ----------       ----------
Financing Activities:
  Borrowings under the Credit Agreements                                              83,500                            83,500
  Repayment under the Credit Agreements                                               (7,000)                           (7,000)
  Repayment of other obligations                                                      (2,448)                           (2,448)
  Addition to deferred financing costs                                                (1,742)                           (1,742)
  Dividends paid                                                                        (351)                             (351)
  Net Proceeds from stock offerings                                                   17,560                            17,560
                                                   ----------    ---------         ---------       ----------       ----------
Cash flows from financing activities                                                  89,519                            89,519
                                                   ----------    ---------         ---------       ----------       ----------
Decrease in cash and cash equivalents                                                 (1,224)                           (1,224)

Cash and cash equivalents at beginning of year                                         4,392                             4,392
                                                   ----------    ---------         ---------       ----------       ----------
Cash and cash equivalents at end of year           $        0    $       0         $   3,168       $        0       $    3,168
                                                   ==========    =========         =========       ==========       ==========


(a)      Includes American Radio Systems, Inc. (ARSI), a wholly owned subsidiary
         of the Company until December 1995, which was the borrower.

</TABLE>

                                      F-49

<PAGE>
<TABLE>
<CAPTION>

                           AMERICAN RADIO SYSTEMS CORPORATION AND SUBSIDIARIES
                                    VALUATION AND QUALIFYING ACCOUNTS
                                               SCHEDULE II
                           For the Years Ended December 31, 1994, 1995 and 1996
                                              (In thousands)



         Column A                   Column B                 Column C                  Column D                 Column E
         --------                   --------                 --------                  --------                 --------

       Description                 Balance at            Charged to Costs           Deductions (1)          Balance at End of
                              Beginning of Period          and Expenses                                          Period
      Allowance for
    Doubtful Accounts
<S>       <C>                      <C>                       <C>                       <C>                      <C>

           1994                     $   1,180                  $    721                  $   398                 $   1,503
                                    =========                  ========                  =======                 =========
           1995                     $   1,503                  $  1,387                  $   358                 $   2,532
                                    =========                  ========                  =======                 =========
           1996                     $   2,532                  $  2,977                  $   949                 $   4,560
                                    =========                  ========                  =======                 =========
<CAPTION>

     Note Receivable
   Valuation Allowance
<S>       <C>                      <C>                       <C>                       <C>                      <C>

           1994                     $       0                 $     500                  $    0                  $     500
                                    =========                 =========                  ======                  =========
           1995                     $     500                 $       0                  $    0                  $     500
                                    =========                 =========                  ======                  =========
           1996                     $     500                 $       0                  $    0                  $     500
                                    =========                 =========                  ======                  =========



</TABLE>

(1) Uncollectible accounts written off, net of recoveries


                                       S-1
<PAGE>


<TABLE>
<CAPTION>
                                            INDEX TO EXHIBITS
   Exhibit
     No.                           Description of Document
<S>           <C>                                                              <C>

    2.1        Amended and Restated Merger Agreement, by and among the
                   Company, American Merger Corporation and EZ
                   Communications, Inc. dated as of August 5, 1996 and as
                   amended and restated as of September 27, 1996..............  Incorporated herein by reference to Appendix I of
                                                                                the Prospectus which is a part of  the Company's
                                                                                Registration Statement on Form S-4 filed with the
                                                                                SEC on October 31, 1996 (File No. 333-15231)
    10.93      Asset Purchase Agreement, dated November 19, 1996 by the
                   Company and New Generation Broadcasting, Inc...............  Filed herewith as Exhibit 10.93
    10.94      Construction Loan Agreement, dated December 11, 1996 by
                   the Company and Jupiter Radio Partners.....................  Filed herewith as Exhibit 10.94
    10.95      Security Agreement, dated December 11, 1996 by the
                   Company and Jupiter Radio Partners.........................  Filed herewith as Exhibit 10.95
    10.96      Assignment and Pledge Agreement, dated December 11, 1996
                   by the Company and Jupiter Radio Partners..................  Filed herewith as Exhibit 10.96
    10.97      Asset Purchase Agreement, dated December 12, 1996 by Radio
                   Systems of Philadelphia, Inc. and Vista Broadcasting, Inc..  Filed herewith as Exhibit 10.97
    10.98      Asset Purchase Agreement, dated December 17, 1996 by the
                   Company and Brighton Broadcasting, Inc.....................  Filed herewith as Exhibit 10.98
    10.99      Asset Exchange Agreement, dated December 23, 1996 by the
                   Company and Citicasters Co................................   Filed herewith as Exhibit 10.99
    10.100     Assignment, Assumption and Consent, dated December 24,
                   1996 by the Company, Brown Organization, and
                   Entertainment Communications, Inc. ........................  Filed herewith as Exhibit 10.100
    10.101     Time Brokerage Agreement, dated December 24, 1996, by
                   the Company and Entertainment Communications, Inc..........  Filed herewith as Exhibit 10.101
    10.102     Agreement and Plan of Merger, dated January 2, 1997 by the
                   Company and Tsunami Communications of Cincinnati,
                   Inc........................................................  Filed herewith as Exhibit 10.102
    10.103     Agreement to Amend, dated January 10, 1997 by the Company,
                   Tsunami Communications of Cincinnati, Inc., WGRR
                   Limited Partnership and the Dalton Group, Inc..............  Filed herewith as Exhibit 10.103
    10.104     Asset Purchase Agreement, dated January 22, 1997 by the
                   Company WGRR Limited Partnership and The Dalton
                   Group, Inc.................................................  Filed herewith as Exhibit 10.104
    10.105     Asset Purchase Agreement, dated February 3, 1997 by the
                   Company and Amaturo Group of Texas, Ltd....................  Filed herewith as Exhibit 10.105
    10.106     Time Brokerage Agreement, dated February 14, 1996 by the
                   Company and Citicasters Co.................................  Filed herewith as Exhibit 10.106


                                       (i)



<PAGE>
<CAPTION>

                                INDEX TO EXHIBITS
   Exhibit
     No.                           Description of Document
<S>           <C>                                                              <C>
    10.107     Agreement of Sale, dated February 14, 1997 by the Company,
                   American Radio Systems License Corp. and Kimtron, Inc......  Filed herewith as Exhibit 10.107
    10.108     Time Brokerage Agreement, dated February 28, 1997 by the
                   Company and Citicasters Co.................................  Filed herewith as Exhibit 10.108
    10.109     Agreement and Plan of Merger, dated March 3, 1997 by the
                   Company and Alta Broadcasting Company, Inc.................  Filed herewith as Exhibit 10.109
    10.110     Assignment of Option to Purchase Radio Station WNVE(FM)
                   and Consent, dated December 23, 1996, by the Company,
                   Citicasters Co., and The Great Lakes Wireless Talking
                   Machine Limited Liability Company..........................  Filed herewith as Exhibit 10.110
    10.111     Credit Agreements dated January 24 , 1997 by and among the
                   Company, the Bank of new York and the Lenders named
                   therein....................................................  Incorporated by reference to Exhibit 99.1 and 99.2
                                                                                from the Form 8-K filed on February 10, 1997
    10.112     Option Agreement, dated September 20, 1996 by the
                   Company and Jupiter Radio Partners.........................  Filed herewith as Exhibit 10.112
    10.113     Loan Agreement dated as of November 22, 1996
                   among American Tower Systems, Inc., Toronto Dominion
                   (Texas), Inc., as Administrative Agent and the Banks
                   parties thereto............................................  Filed herewith as Exhibit 10.113
    10.114     Asset Purchase Agreement, dated February 5, 1997 by the
                   Company and Meridian Sales and Services Company............  Filed herewith as Exhibit 10.114
    11         Schedule re computation of earnings per share..................  Filed herewith as Exhibit 11
    12         Ratio of earnings to fixed charges.............................  Filed herewith as Exhibit 12
    21         Subsidiaries of Registrant.....................................  Filed herewith as Exhibit 21
    23         Independent Auditors' Consent..................................  Filed herewith as Exhibit 23
    27         Financial Data schedule........................................  Filed herewith.as Exhibit 27

</TABLE>

         Exhibits 2.1 through 10.114 do not contain schedules and exhibits noted
         within the agreements.  This  additional  information is available upon
         request from the Company.


                                      (ii)