SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

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

                  For the fiscal year ended September 30, 1998
                                       OR
[ ]  TRANSACTION  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ____________ to _______________

Commission File No. 333-02302

                        ALLBRITTON COMMUNICATIONS COMPANY
             (Exact name of registrant as specified in its charter)

         Delaware                                          74-1803105
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)


808 Seventeenth Street, N.W., Suite 300
Washington, D.C.                                           20006-3903
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code:        (202) 789-2130

Securities registered pursuant to Section 12(b) of the Act: None


Indicate by check mark if the 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  the  registrant's   knowledge,  in  definitive  proxy  of  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.

                                       [X]

Indicate  by check  mark  whether  this  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 [  ]

The  aggregate   market  value  of  the   registrant's   Common  Stock  held  by
non-affiliates is zero.

As of December 22, 1998,  there were 20,000  shares of Common  Stock,  par value
$.05 per share, outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

None


<PAGE>

As used herein,  unless the context  otherwise  requires,  the term "ACC" or the
"Company" refers to Allbritton Communications Company.  Depending on the context
in which  they are  used,  the  following  "call  letters"  refer  either to the
corporate owner of the station indicated or to the station itself: "WJLA" refers
to WJLA-TV, a division of ACC (operator of WJLA-TV,  Washington,  D.C.);  "WHTM"
refers  to  Harrisburg  Television,  Inc.  (licensee  of  WHTM-TV,   Harrisburg,
Pennsylvania);  "KATV"  refers to KATV,  LLC  (licensee  of KATV,  Little  Rock,
Arkansas);  "KTUL"  refers to KTUL,  LLC  (licensee of KTUL,  Tulsa,  Oklahoma);
"WCIV"  refers to WCIV,  LLC  (licensee of WCIV,  Charleston,  South  Carolina);
"WSET" refers to WSET, Incorporated (licensee of WSET-TV, Lynchburg,  Virginia);
"WCFT"  refers to  WCFT-TV,  Tuscaloosa,  Alabama;  "WBMA"  refers  to  WBMA-LP,
Birmingham,  Alabama; and "WJSU" refers to WJSU-TV, Anniston, Alabama). The term
"ATP" refers to Allbritton Television  Productions,  Inc., the term "ANB" refers
to Allbritton  News Bureau,  Inc. and the term  "Perpetual"  refers to Perpetual
Corporation,  which is controlled by Joe L.  Allbritton,  Chairman of ACC. "AGI"
refers to Allbritton Group,  Inc., which is controlled by Perpetual and is ACC's
parent.  "Westfield" refers to Westfield News Advertiser,  Inc., an affiliate of
ACC that is wholly-owned by Joe L.  Allbritton.  "Allfinco"  refers to Allfinco,
Inc.,  a  wholly-owned  subsidiary  of ACC.  "Harrisburg  Television"  refers to
Harrisburg  Television,  Inc., an 80%-owned subsidiary of Allfinco. "TV Alabama"
refers to TV Alabama,  Inc.,  an 80%-owned  subsidiary of Allfinco that programs
WJSU and owns WCFT and WBMA. "Allnewsco" refers to ALLNEWSCO, Inc., an affiliate
of ACC that is an 80%-owned  subsidiary of Perpetual.  "RLA Trust" refers to the
Robert  Lewis  Allbritton  1984 Trust for the  benefit of Robert L.  Allbritton,
President  and a Director of ACC,  that owns 20% of  Allnewsco.  "RLA  Revocable
Trust"  refers to the trust of the same name that owns 20% of each of Harrisburg
Television and TV Alabama.





<PAGE>

                                TABLE OF CONTENTS

                                                                        PAGE

Part I
 Item 1.  Business.........................................................1
 Item 2.  Properties......................................................17
 Item 3.  Legal Proceedings...............................................19
 Item 4.  Submission of Matters to a Vote of Security Holders.............19

Part II
 Item 5.  Market for Registrant's Common Equity and
                 Related Stockholder Matters..............................19
 Item 6.  Selected Consolidated Financial Data............................20
 Item 7.  Management's Discussion and Analysis of Financial
                 Condition and Results of Operations......................22
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk......39
 Item 8.  Consolidated Financial Statements and Supplementary Data........39
 Item 9.  Changes in and Disagreements with Accountants
                 on Accounting and Financial Disclosure...................39

Part III
 Item 10.  Directors and Executive Officers of the Registrant.............40
 Item 11.  Executive Compensation.........................................43
 Item 12.  Security Ownership of Certain Beneficial Owners and
                 Management...............................................44
 Item 13.  Certain Relationships and Related Transactions.................45

Part IV
 Item 14.  Exhibits, Financial Statement Schedules and Reports
                  on Form 8-K.............................................48

<PAGE>

THIS ANNUAL REPORT ON FORM 10-K,  INCLUDING ITEM 7 "MANAGEMENT'S  DISCUSSION AND
ANALYSIS  OF  FINANCIAL   CONDITION   AND  RESULTS  OF   OPERATIONS,"   CONTAINS
FORWARD-LOOKING  STATEMENTS  WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1994, AS AMENDED,  THAT ARE NOT  HISTORICAL  FACTS AND INVOLVE A
NUMBER OF RISKS AND  UNCERTAINTIES.  THERE ARE A NUMBER OF  FACTORS  THAT  COULD
CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER  MATERIALLY FROM THOSE PROJECTED IN
SUCH FORWARD-LOOKING STATEMENTS.  THESE FACTORS INCLUDE, WITHOUT LIMITATION, THE
COMPANY'S  OUTSTANDING  INDEBTEDNESS  AND  ITS  HIGH  DEGREE  OF  LEVERAGE;  THE
RESTRICTIONS IMPOSED ON THE COMPANY BY THE TERMS OF THE COMPANY'S  INDEBTEDNESS;
THE HIGH DEGREE OF COMPETITION  FROM BOTH  OVER-THE-AIR  BROADCAST  STATIONS AND
PROGRAMMING  ALTERNATIVES  SUCH AS CABLE  TELEVISION,  WIRELESS  CABLE,  IN-HOME
SATELLITE DISTRIBUTION SERVICE AND PAY-PER-VIEW AND HOME VIDEO AND ENTERTAINMENT
SERVICES;  THE IMPACT OF NEW  TECHNOLOGIES;  CHANGES  IN FEDERAL  COMMUNICATIONS
COMMISSION  ("FCC")  REGULATIONS;  THE  VARIABILITY  OF THE COMPANY'S  QUARTERLY
RESULTS AND THE COMPANY'S  SEASONALITY;  AND THE UNCERTAINTY ASSOCIATED WITH THE
IMPACT OF YEAR 2000 ISSUES ON THE COMPANY, ITS CUSTOMERS, ITS VENDORS AND OTHERS
WITH WHOM IT DOES BUSINESS.

ALL WRITTEN OR ORAL FORWARD-LOOKING  STATEMENTS  ATTRIBUTABLE TO THE COMPANY ARE
EXPRESSLY QUALIFIED BY THE FOREGOING CAUTIONARY STATEMENTS.

READERS  ARE  CAUTIONED  NOT TO PLACE UNDUE  RELIANCE  ON THESE  FORWARD-LOOKING
STATEMENTS  WHICH  REFLECT  MANAGEMENT'S  VIEW ONLY AS OF THE DATE  HEREOF.  THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS
TO THESE  FORWARD-LOOKING  STATEMENTS  WHICH  MAY BE MADE TO  REFLECT  EVENTS OR
CIRCUMSTANCES   AFTER  THE  DATE  HEREOF  OR  TO  REFLECT  THE   OCCURRENCE   OF
UNANTICIPATED EVENTS.


                                     PART I

                                ITEM 1. BUSINESS

The Company

Allbritton  Communications  Company ("ACC" or the "Company")  itself and through
subsidiaries  owns  and  operates  ABC  network-affiliated  television  stations
serving seven diverse  geographic  markets:  WJLA in Washington,  D.C.;  WCFT in
Tuscaloosa  (Birmingham),  Alabama;  WHTM in Harrisburg,  Pennsylvania;  KATV in
Little Rock, Arkansas; KTUL in Tulsa, Oklahoma; WSET in Lynchburg, Virginia; and
WCIV in Charleston,  South Carolina.  The Company's owned and operated  stations
broadcast to the 8th, 39th,  46th,  57th,  59th, 68th and 120th largest national
media markets in the United States, respectively, as defined by the A.C. Nielsen
Co.  ("Nielsen").  The Company also owns a low power  television  station (WBMA)
licensed to Birmingham, Alabama and programs a station in Anniston (Birmingham),
Alabama.

WJLA is owned and  operated  by ACC,  while the  Company's  remaining  owned and
operated  stations are owned by Harrisburg  Television,  Inc. (WHTM),  KATV, LLC
(KATV),  KTUL, LLC (KTUL),  WSET,  Incorporated  (WSET), WCIV, LLC (WCIV) and TV
Alabama,  Inc. (WCFT and

                                      -1-
<PAGE>

WBMA).  Each of these is a  wholly-owned  subsidiary of ACC,  except  Harrisburg
Television and TV Alabama,  each of which is an indirect 80%-owned subsidiary of
ACC. TV Alabama  began  programming  WJSU,  licensed  to Anniston  (Birmingham),
Alabama,  under a ten-year  Time  Brokerage  Agreement  (referred to herein as a
Local Marketing  Agreement  ("LMA"))  effective December 29, 1995 (the "Anniston
LMA"). The Company also engages in other  activities  relating to the production
and  distribution  of  television   programming  through  Allbritton  Television
Productions,  Inc. ("ATP"), a wholly-owned subsidiary of ACC. ACC was founded in
1974 and is a subsidiary of Allbritton Group, Inc. ("AGI"),  which is controlled
by Perpetual  Corporation,  which in turn is  controlled  by Joe L.  Allbritton,
ACC's Chairman.  ACC and its subsidiaries  are Delaware  corporations or limited
liability companies.  ACC's corporate headquarters is located at 808 Seventeenth
Street, N.W., Suite 300, Washington,  D.C. 20006-3903,  and its telephone number
at that address is (202) 789-2130.

Television Industry Background

Commercial television broadcasting began in the United States on a regular basis
in the 1940s.  Currently,  there is a limited  number of channels  available for
broadcasting in any one geographic  area, and the license to operate a broadcast
television  station is granted by the FCC.  Television  stations that  broadcast
over  the  VHF  band  (channels  2-13)  of  the  spectrum  generally  have  some
competitive  advantage over television stations that broadcast over the UHF band
(channels 14-69) of the spectrum because VHF channels usually have better signal
coverage and operate at a lower transmission cost.  However,  the improvement of
UHF transmitters and receivers, the complete elimination from the marketplace of
VHF-only  receivers and the expansion of cable  television  systems have reduced
the competitive advantage of television stations broadcasting over the VHF band.

Television  station  revenues are  primarily  derived  from local,  regional and
national  advertising and, to a much lesser extent,  from network  compensation,
revenues from studio rental and commercial  production  activities.  Advertising
rates are set based upon a variety of factors,  including a program's popularity
among viewers whom an advertiser  wishes to attract,  the number of  advertisers
competing for the available time, the size and demographic  makeup of the market
served by the station and the availability of alternative  advertising  media in
the market area.  Advertising  rates are also determined by a station's  overall
ability to attract viewers in its market area, as well as the station's  ability
to attract viewers among particular demographic groups that an advertiser may be
targeting.  Because broadcast television stations rely on advertising  revenues,
they are sensitive to cyclical changes in the economy.  The size of advertisers'
budgets,  which are affected by broad economic trends, affect both the broadcast
industry  in  general  and  the  revenues  of  individual  broadcast  television
stations.

United  States  television  stations are grouped by Nielsen  into 211  generally
recognized  television market areas that are ranked in size according to various
formulae based upon actual or potential audience. Each market area is designated
as an  exclusive  geographic  area  consisting  of all  counties  in  which  the
home-market commercial stations receive the greatest percentage of total viewing
hours.  The specific geographic markets are called Designated Market Areas or
DMAs.

                                      -2-
<PAGE>

Nielsen, which provides audience-measuring services, periodically publishes data
on estimated  audiences for television  stations in the various DMAs  throughout
the country.  These  estimates are expressed in terms of both the  percentage of
the  total  potential  audience  in the DMA  viewing a  station  (the  station's
"rating") and the percentage of the audience actually  watching  television (the
station's "share").  Nielsen provides such data on the basis of total television
households  and  selected  demographic  groupings  in the DMA.  Nielsen uses two
methods of determining a station's  ratings and share.  In larger DMAs,  ratings
are  determined  by a  combination  of meters  connected  directly  to  selected
household  television  sets and weekly  viewer-completed  diaries of  television
viewing, while in smaller markets ratings are determined by weekly diaries only.
Of the market areas in which the Company conducts business, Washington, D.C. and
Birmingham,  Alabama are metered markets while the remaining  markets are weekly
diary markets.

Historically,  three  major  broadcast  networks--ABC,  NBC  and  CBS--dominated
broadcast  television.  In recent  years,  FOX has evolved into the fourth major
network,  although  the hours of  network  programming  produced  by FOX for its
affiliates are fewer than those produced by the other three major  networks.  In
addition,  UPN, WB and  recently  PAX TV have been  launched  as new  television
networks.

The  affiliation  by a  station  with  one  of the  four  major  networks  has a
significant  impact on the composition of the station's  programming,  revenues,
expenses and operations. A typical affiliate station receives approximately 9 to
13 hours of each day's  programming from the network.  This  programming,  along
with cash payments ("network compensation"), is provided to the affiliate by the
network in exchange  for a  substantial  majority of the  advertising  time sold
during the airing of network  programs.  The network then sells this advertising
time for its own account.  The  affiliate  retains the  revenues  from time sold
during breaks in and between network  programs and during  programs  produced by
the affiliate or purchased from non-network sources. In acquiring programming to
supplement  network  programming,  network  affiliates  compete  primarily  with
affiliates  of other  networks and  independent  stations in their market areas.
Cable  systems  generally  do not compete with local  stations for  programming,
although  various  national  cable  networks  from  time to time  have  acquired
programs that would have otherwise been offered to local television stations. In
addition,   a  television  station  may  acquire   programming   through  barter
arrangements. Under barter arrangements, which are becoming increasingly popular
with both network  affiliates and independents,  a national program  distributor
can receive  advertising time in exchange for the programming it supplies,  with
the station paying no fee or a reduced fee for such programming.

An  affiliate  of UPN,  WB or PAX TV  receives  a smaller  portion of each day's
programming  from its network  compared to an affiliate of ABC, CBS, NBC or FOX.
As a result,  affiliates of UPN, WB or PAX TV must purchase or produce a greater
amount of their  programming,  resulting in generally higher  programming costs.
These stations, however, retain a larger portion of the inventory of advertising
time and the revenues obtained  therefrom  compared to stations  affiliated with
the major networks, which may partially offset their higher programming costs.

In contrast to a network affiliated station, an independent station purchases or
produces  all of the  programming  that it  broadcasts,  generally  resulting in
higher programming costs,  although the independent  station is, in theory, able
to retain  its  entire  inventory  of  advertising  time and all of the

                                  -3-

<PAGE>

revenue obtained from the sale of such time. Barter and  cash-plus-barter
arrangements, however, have become increasingly popular among all stations.

Public  broadcasting   outlets  in  most  communities  compete  with  commercial
broadcasters for viewers but not for advertising dollars.

Broadcast  television  stations compete for advertising  revenues primarily with
other  broadcast  television  stations  and,  to a  lesser  extent,  with  radio
stations, cable system operators and programmers and newspapers serving the same
market. Traditional network programming, and recently FOX programming, generally
achieve higher  audience  levels than syndicated  programs aired by independent
stations.  However,  as greater amounts of advertising time become available for
sale by independent  stations and FOX affiliates in syndicated  programs,  those
stations typically achieve a share of the television market advertising revenues
greater than their share of the market area's audience.

Through the 1970s, network television  broadcasting enjoyed virtual dominance in
viewership  and  television  advertising  revenues  because   network-affiliated
stations only competed with each other in local markets. Beginning in the 1980s,
this  level of  dominance  began to  change  as the FCC  authorized  more  local
stations  and  marketplace  choices  expanded  with the  growth  of  independent
stations and cable television services.

Cable television  systems were first  constructed in significant  numbers in the
1970s and were initially used to retransmit broadcast television  programming to
paying  subscribers  in areas  with  poor  broadcast  signal  reception.  In the
aggregate,  cable-originated programming has emerged as a significant competitor
for  viewers of  broadcast  television  programming,  although  no single  cable
programming  network  regularly attains audience levels amounting to more than a
small fraction of any of the major broadcast networks.  The advertising share of
cable networks increased during the 1970s and 1980s as a result of the growth in
cable penetration (the percentage of television households that are connected to
a  cable  system).  Notwithstanding  such  increases  in  cable  viewership  and
advertising,  over-the-air broadcasting remains the dominant distribution system
for mass market television advertising.

Direct Broadcast Satellite ("DBS") service has recently been introduced as a new
competitive  distribution  method.  Home users purchase or lease  satellite dish
receiving  equipment and subscribe to a monthly service of programming  options.
At present,  the nature of DBS service permits  primarily  national  programming
and, except in limited circumstances, does not offer locally originated programs
or advertising.

The Company  believes that the market shares of television  stations  affiliated
with ABC,  NBC and CBS  declined  during  the  1980s  primarily  because  of the
emergence of FOX and certain strong independent stations and secondarily because
of increased  cable  penetration.  Independent  stations  have emerged as viable
competitors  for television  viewership  share,  particularly as a result of the
availability of first-run,  network-quality  programming. In addition, there has
been substantial growth in the number of home satellite dish receivers and video
cassette  recorders,  which has  further  expanded  the  number  of  programming
alternatives   available  to  household   audiences.

                                      -4-
<PAGE>

Terrestrially-distributed  television broadcast stations use analog transmission
technology.  Recent  advances in digital  transmission  technology  formats have
enabled  some   broadcasters   to  begin   migration   from  analog  to  digital
broadcasting.  Digital  technologies  provide cleaner video and audio signals as
well as the ability to transmit "high definition television" with theatre screen
aspect  ratios,   higher  resolution  video  and  "noise-free"  sound.   Digital
transmission  also permits  dividing the  transmission  frequency  into multiple
discrete channels of standard definition television. The FCC recently authorized
a transition plan to convert  existing analog stations to digital by temporarily
authoring a second channel to transmit programming  digitally with the return of
the analog channel after the transition period. Of the Company's stations,  only
WJLA in Washington,  D.C.  broadcasts  with both an analog and digital signal at
this time.

Station Information

The  following  table sets forth general  information  for each of the Company's
owned and/or programmed stations as of November 1998 :

<TABLE>
<CAPTION>

                                                                                   Total
                                                                         Market    Commercial   Station    Rank
        Designated                                Network    Channel     Rank or   Competitors  Audience     in        Acquisition
        Market Area                Station       Affiliation Frequency   DMA<F1>   in Market<F2>Share<F3>  Market<F4>    Date      
        -----------                -------       ----------- ---------   -------  ----------------------------------------------
<S>                           <C>                   <C>      <C>           <C>         <C>       <C>        <C>       <C>

Washington, D.C.<F5>                 WJLA            ABC      7/VHF           8         6          22%       3         01/29/76
Birmingham (Anniston and
      Tuscaloosa), AL<F7>      WBMA /WCFT/WJSU       ABC           -         39         6          24%       3              -
      Birmingham<F5> <F7>            WBMA            ABC      58/UHF          -         -          -         -         08/01/97
      Anniston<F8>                   WJSU            ABC      40/UHF          -         -          -         -              -
      Tuscaloosa<F5>                 WCFT            ABC      33/UHF          -         -          -         -         03/15/96
Harrisburg-Lancaster-York-Lebanon,
      PA <F5>                        WHTM            ABC      27/UHF         46         5          24%       2         03/01/96
Little Rock, AR <F5>                 KATV            ABC      7/VHF          57         5          32%       1         04/06/83
Tulsa, OK <F5>                       KTUL            ABC      8/VHF          59         5          30%       2         04/06/83
Roanoke-Lynchburg, VA <F5>           WSET            ABC      13/VHF         68         4          24%       2         01/29/76<F6>
Charleston, SC <F5>                  WCIV            ABC      4/VHF         120         5          17%       3         01/29/76<F6>
---------
<FN>
<F1>     Represents market rank based on the Nielsen Station Index for November 1998.
<F2>     Represents the total number of commercial  broadcast  television  
         stations in the DMA with an audience share of at least 1% in
         the 6:00 a.m. to 2:00 a.m., Sunday through Saturday, time period.
<F3>     Represents the station's share of total viewing of commercial broadcast
         television stations in the DMA for the time period of 6:00 a.m. to 2:00
         a.m., Sunday through Saturday.
<F4>     Represents  the  station's  rank in the DMA based on its share of total
         viewing of commercial  broadcast television stations in the DMA for the
         time period of 6:00 a.m. to 2:00 a.m., Sunday through Saturday.
<F5>     Owned Station.
<F6>     WSET and WCIV have been  indirectly  owned and  operated  by Joe L.  
         Allbritton  since 1976.  On March 1, 1996,  WSET and WCIV
         became wholly-owned subsidiaries of ACC.
<F7>     TV Alabama serves the Birmingham market by simultaneously  broadcasting
         identical  programming  over  WBMA,  WCFT and WJSU  (which  TV  Alabama
         programs  pursuant to the Anniston  LMA).  The stations are listed on a
         combined  basis by  Nielsen  as WBMA,  the call  sign of the low  power
         television station.
<F8>     Programmed Station.
</FN>
</TABLE>

                                      -5-
<PAGE>


Business and Operating Strategy

The Company's  business strategy is to focus on building net operating  revenues
and net cash  provided by operating  activities.  The Company  intends to pursue
selective  acquisition  opportunities as they arise.  The Company's  acquisition
strategy is to target  network-affiliated  television stations where it believes
it can successfully  apply its operating strategy and where such stations can be
acquired on attractive terms.  Targets include midsized growth markets with what
the Company believes to be advantageous business climates.  Although the Company
continues to review  strategic  investment  and  acquisition  opportunities,  no
agreements  or  understandings  are  currently in place  regarding  any material
investments or acquisitions.

In addition, the Company constantly seeks to enhance net operating revenues at a
marginal  incremental cost through its use of existing personnel and programming
capabilities.  For example,  KATV operates the Arkansas Razorback Sports Network
("ARSN"),  which provides University of Arkansas sports programming to a network
of 71 radio  stations in six states and  pay-per-view  cable viewing to selected
Arkansas cable system viewers.

The Company's operating strategy focuses on four key elements:

Local News and Community  Leadership.  The Company's stations strive to be local
news  leaders  to  exploit  the  revenue  potential  associated  with local news
leadership.  Since the  acquisition of each station,  the Company has focused on
building that station's local news  programming  franchise as the foundation for
building  significant  audience share. In each of its market areas,  the Company
develops  additional  information-oriented  programming  designed  to expand the
stations' hours of commercially  valuable local news and other  programming with
relatively  small  incremental  increases  in  operating  expenses.  Local  news
programming is commercially  valuable because of its high viewership  level, the
attractiveness to advertisers of the demographic  characteristics of the typical
news audience  (allowing  stations to charge higher rates for advertising  time)
and the enhanced  ratings of other  programming in time periods  adjacent to the
news.  In  addition,  management  believes  strong local news product has helped
differentiate  local  broadcast  stations  from the  increasing  number of cable
programming competitors that generally do not provide this material.

High Quality  Non-Network  Programming.  The Company's stations are committed to
attracting   viewers  through  an  array  of  syndicated  and   locally-produced
programming  to fill those periods of the  broadcast  day not  programmed by the
network.  This  programming is selected by the Company on its ability to attract
audiences highly valued in terms of demographic makeup on a cost-effective basis
and reflects a focused  strategy to migrate and hold  audiences  from program to
program  throughout  dayparts.  Audiences  highly valued in terms of demographic
makeup  include  women aged 18-49 and all adults aged 25-54.  These  demographic
groups are  perceived by  advertisers  as the groups with the majority of buying
authority and decision-making in product selection.

Local Sales Development  Efforts.  The Company believes that television stations
with a  strong  local  presence  and  active  community  relations  can  realize
additional  revenue from  advertisers  through the  development and promotion of
special  programming and marketing  events.  Each of the 

                                      -6-
<PAGE>

Company's  stations  has  developed  such  additional  products,  including
high quality  programming  of local  interest  (such as  University  of Arkansas
football and basketball games, Washington Redskins pre-season football games and
related  shows) and sponsored  community  events.  These  sponsored  events have
included health fairs, contests, job fairs, parades and athletic events and have
provided  advertisers,   who  are  offered  participation  in  such  events,  an
opportunity  to  direct  a  marketing  program  to  targeted  audiences.   These
additional products have proven successful in attracting incremental advertising
revenues.  The stations also seek to maximize their local sales efforts  through
the use of extensive research and targeted demographic studies.

Cost Control.  Management believes that controlling costs is an essential factor
in achieving and  maintaining  the  profitability  of its stations.  The Company
believes that by delivering  highly  targeted  audience  levels and  controlling
programming and operating  costs, the Company's  stations can achieve  increased
levels of revenue  and  operating  cash flow.  As the  provider  of ABC  network
programming in each of its market areas,  the Company has entered into long-term
affiliation  agreements.  Further,  each station rigorously manages its expenses
through project accounting,  a budgetary control process, which includes daypart
revenue analysis, and expense analysis.  Moreover,  each of the stations closely
monitors its staffing levels.

Owned and/or Programmed Stations

WJLA: Washington, D.C.

Acquired by the Company in 1976, WJLA is an ABC network affiliate pursuant to an
affiliation agreement that expires on October 1, 2005. The Station's FCC license
expires on October 1, 2004.  Washington,  D.C. is the eighth  largest DMA,  with
approximately  1,956,000 television  households.  The Company believes that this
position  historically   permitted  stations  in  this  market  to  earn  higher
advertising  rates  than its other  owned and  operated  stations  because  many
national advertising  campaigns  concentrate their spending in the top ten media
markets and on  issue-oriented  advertising in  Washington,  D.C. The Washington
market is served by six commercial television stations.

WBMA/WCFT/WJSU: Birmingham (Anniston and Tuscaloosa), Alabama

The Company acquired WCFT in March 1996 and commenced  programming WJSU pursuant
to the Anniston LMA in December  1995.  The Anniston LMA expires on December 29,
2005. Both stations are ABC affiliates pursuant to an affiliation agreement that
expires on September 1, 2006. The FCC licenses for both stations expire on April
1, 2005.  The  Company  also owns a low power  television  station  licensed  to
Birmingham,  Alabama (WBMA).  In October 1998,  Nielsen collapsed the Tuscaloosa
DMA (187th largest) and the Anniston DMA (201st largest) into the Birmingham DMA
creating the 39th largest DMA with approximately 657,000 television  households.
The Birmingham DMA is served by six commercial television stations.

In  connection  with the  Anniston  LMA,  the Company  entered into an option to
purchase the assets of WJSU (the  "Anniston  Option").  The cost of the Anniston
Option was  $15,348,000 and it is exercisable  for additional  consideration  of
$3,337,000.  Exercise of the Anniston  Option is subject

                                      -7-
<PAGE>

to certain  conditions,  including a change in FCC rules or a waiver  permitting
common ownership of WCFT and WJSU (see Legislation and Regulation).

The  Company  serves  the  Birmingham  market  by  simultaneously   transmitting
identical  programming  from its studio in Birmingham  over WCFT, WJSU and WBMA.
The  stations  are  listed on a combined  basis by  Nielsen as WBMA.  TV Alabama
maintains studio facilities in Birmingham for the operation of the stations. The
Company has retained a news and sales presence in both  Tuscaloosa and Anniston,
while at the same  time  maintaining  its  primary  news and sales  presence  in
Birmingham.

WHTM: Harrisburg-Lancaster-York-Lebanon, Pennsylvania

Acquired by the Company in 1996, WHTM is an ABC network affiliate pursuant to an
affiliation agreement that expires on January 1, 2005. The Station's FCC license
expires August 1, 1999. The  application  for renewal of the FCC license will be
submitted by April 1, 1999.  Harrisburg,  Pennsylvania,  which  consists of nine
contiguous  counties located in central  Pennsylvania,  is the 46th largest DMA,
reaching approximately 592,000 television households.  Harrisburg is the capital
of Pennsylvania,  and the government represents the area's largest employer. The
Harrisburg market is served by five commercial television stations, one of which
is a VHF station.

KATV: Little Rock, Arkansas

Acquired by the Company in 1983, KATV is an ABC network affiliate pursuant to an
affiliation  agreement  that expires on July 31, 2005. The Station's FCC license
expires on June 1, 2005.  The Little Rock market is the 57th largest  DMA,  with
approximately  484,000  television  households.  The  Little  Rock  market has a
diversified economy,  both serving as the seat of state and local government and
housing a  significant  concentration  of  businesses  in the medical  services,
transportation  and  insurance  industries.  The Little Rock market is served by
five commercial television stations.

Capitalizing  on its exclusive  rights to the University of Arkansas  basketball
and football  schedules through the year 2003, KATV launched ARSN in Fiscal 1994
by entering into  programming  sublicense  agreements with a network of 71 radio
stations in six states.  Pay-per-view and home video rights are also controlled
by ARSN.

KTUL: Tulsa, Oklahoma

Acquired by the Company in 1983, KTUL is an ABC network affiliate pursuant to an
affiliation  agreement  that expires on July 31, 2005. The Station's FCC license
expires  on  June 1,  2006.  Tulsa,  Oklahoma  is the  59th  largest  DMA,  with
approximately  473,000  television   households.   Because  of  the  demographic
characteristics of the Tulsa DMA, the Company believes many advertisers consider
it an excellent  national  test market.  Consequently,  it believes KTUL derives
incremental  advertising  revenues from  advertisers  seeking to test-market new
products. The Tulsa market is served by five commercial television stations.

                                   -8-
<PAGE>

WSET: Roanoke-Lynchburg, Virginia

Acquired by the Company in 1996, WSET has been indirectly  owned and operated by
Joe L. Allbritton since 1976. The Station is an ABC network  affiliate  pursuant
to an affiliation  agreement  that expires on July 31, 2005.  WSET's FCC license
expires on October 1, 2004. The hyphenated  central Virginia market comprised of
Lynchburg,  Roanoke and  Danville is the 68th largest  DMA,  with  approximately
402,000  television  households.  The Lynchburg DMA is served by four commercial
television stations.

WCIV: Charleston, South Carolina

Acquired by the Company in 1996, WCIV has been indirectly  owned and operated by
Joe L.  Allbritton  since 1976.  The Station is an ABC affiliate  pursuant to an
affiliation  agreement  that  expires on August  20,  2006.  WCIV's FCC  license
expires on December 1, 2004.  Charleston,  South  Carolina is the 120th  largest
DMA, with  approximately  216,000 television  households.  The Charleston DMA is
served by five commercial television stations.

Network Affiliation Agreement and Relationship

WJLA,  WBMA/WCFT/WJSU,   WHTM,  KATV,  KTUL,  WSET  and  WCIV  are  ABC  network
affiliates:  their  current  affiliation  agreement  expires  September 1, 2006,
January 1, 2005,  October 1, 2005,  July 31, 2005,  July 31, 2005 and August 20,
2006,  respectively.  ABC has routinely renewed the affiliation  agreements with
these  stations;  however,  there can be no  assurance  that  these  affiliation
agreements will be renewed in the future.  Continuation of the ABC's affiliation
agreement  with  WCFT  and  WJSU  is  conditional  on  WJSU's  continuing  to be
programmed  by ACC under the Anniston  LMA for the  duration of the  affiliation
agreement. Changes by Congress or by the FCC in the current regulatory treatment
of LMAs for  television  stations  could have a material  adverse  effect on the
Anniston  LMA  which,  in turn,  could  jeopardize  the  Company's  ABC  network
affiliation in the Birmingham  market. As one of the largest group owners of ABC
network  affiliates in the nation,  ACC believes it enjoys  excellent  relations
with the ABC network.

Generally,  each affiliation  agreement provides the Company's stations with the
right to broadcast programs  transmitted by the network that includes designated
advertising time the revenue from which the network  retains.  For every hour or
fraction thereof that the station elects to broadcast network  programming,  the
network  pays  the  station  compensation,  as  specified  in  each  affiliation
agreement, or as agreed upon by the network and the stations.  Typically, "prime
time"   programming   generates  the  highest  hourly  rates.   Under  specified
conditions,  rates are subject to increase or decrease by the network during the
term of each affiliation agreement, with provisions for advance notice and right
of termination on behalf of the station in the event of a reduction in rates.

Competition

Competition  in the television  industry,  including each of the market areas in
which the Company's stations compete, takes place on several levels: competition
for audience,  competition for

                                      -9-
<PAGE>

programming (including news) and competition for advertisers. Additional factors
material to a television station's  competitive position include signal coverage
and assigned  frequency.  The  television  broadcasting  industry is continually
faced with  technological  change and  innovation,  the possible rise or fall in
popularity of competing  entertainment and  communications  media and actions of
federal regulatory bodies, including the FCC, any of which could possibly have a
material adverse effect on the Company's operations.

Audience:  Stations  compete for  audience  on the basis of program  popularity,
which has a direct  effect on  advertising  rates.  A majority of the  Company's
daily programming is supplied by ABC. In those periods, the stations are totally
dependent  upon  the  performance  of the ABC  network  programs  in  attracting
viewers.  Non-network  time  periods  are  programmed  by  the  station  with  a
combination  of  self-produced  news,  public  affairs  and other  entertainment
programming, including news and syndicated programs purchased for cash, cash and
barter or barter-only.  Independent stations,  the number of which has increased
significantly over the past decade,  have also emerged as viable competitors for
television  viewership share,  particularly as the result of the availability of
first-run network-quality programming from FOX.

The development of methods of television  transmission  other than  over-the-air
broadcasting   and,  in   particular,   the  growth  of  cable   television  has
significantly altered competition for audience share in the television industry.
These  alternative   transmission   methods  can  increase   competition  for  a
broadcasting  station both by bringing into its market area distant broadcasting
signals not otherwise  available to the  station's  audience and by serving as a
distribution   system  for   programming   originated   on  the  cable   system.
Historically, cable operators have not sought to compete with broadcast stations
for a share of the local news audience.  To the extent cable  operators elect to
do so,  increased  competition  for local news  audiences  could have an adverse
effect on the Company's advertising revenues.

Other sources of competition include home entertainment systems (including video
cassette recorder and playback systems, videodiscs and television game devices),
multipoint  distribution systems,  multichannel multipoint distribution systems,
wireless cable,  satellite master antenna  television systems and some low-power
and in-home  satellite  services.  The Company's  television  stations also face
competition from  high-powered  direct  broadcast  satellite  services,  such as
DIRECT-TV,  which transmit  programming  directly to homes equipped with special
receiving  antennas or to cable  television  systems for  transmission  to their
subscribers.

Further advances in technology may increase  competition for household audiences
and advertisers.  Video  compression  techniques,  now under development for use
with current cable  channels,  or direct  broadcast  satellites  are expected to
reduce  the  bandwidth  required  for  television  signal  transmission.   These
compression  techniques,  as  well  as  other  technological  developments,  are
applicable to all video delivery systems,  including over-the-air  broadcasting,
and have the potential to provide vastly expanded programming to highly targeted
audiences.  Reduction in the cost of creating  additional channel capacity could
lower  entry  barriers  for  new  channels  and  encourage  the  development  of
increasingly  specialized niche programming.  This ability to reach very defined
audiences  is  expected  to  alter  the  competitive  dynamics  for  advertising
expenditures.  The Company is unable to predict  the effect  that  technological
changes will have on the broadcast  television

                                      -10-
<PAGE>

industry or the future results of the Company's operations.

Programming:  Competition for  programming  involves  negotiating  with national
program  distributors or syndicators  which sell first-run and rerun packages of
programming.  The Company's stations compete against in-market broadcast station
competitors for off-network  reruns (such as "Home  Improvement")  and first-run
product  (such as "The  Oprah  Winfrey  Show")  for  exclusive  access  to those
programs.  Cable  systems  generally  do not  compete  with local  stations  for
programming,  although  various  national  cable networks from time to time have
acquired  programs that would have  otherwise  been offered to local  television
stations. Competition for exclusive news stories and features is also endemic to
the television industry.

Advertising:  Advertising  rates are based upon the size of the  market  area in
which a  station  operates,  the  program's  popularity  among  the  viewers  an
advertiser  wishes to  attract,  the  number of  advertisers  competing  for the
available time, the demographic makeup of the market area served by the station,
the  availability  of  alternative  advertising  media in the  market  area,  an
aggressive  and  knowledgeable  sales  forces and the  development  of projects,
features and programs that tie advertiser messages to programming. The Company's
television  stations  compete for  advertising  revenues  with other  television
stations in their respective  markets as well as with other  advertising  media,
such as newspapers, radio, magazines, outdoor advertising,  transit advertising,
yellow page  directories,  direct mail and local cable systems.  Competition for
advertising dollars in the broadcasting  industry occurs primarily in individual
market areas.  Generally,  a television  broadcasting station in the market does
not compete  with  stations in other  market  areas.  The  Company's  television
stations are located in highly competitive market areas.

Legislation and Regulation

The  ownership,  operation  and sale of  television  stations are subject to the
jurisdiction   of  the  FCC   under   the   Communications   Act  of  1934  (the
"Communications  Act").  Matters subject to FCC oversight  include,  but are not
limited to, the  assignment  of frequency  bands for broadcast  television;  the
approval of a television station's frequency,  location and operating power; the
issuance,  renewal,  revocation or  modification  of a television  station's FCC
license;  the  approval of changes in the  ownership  or control of a television
station's licensee;  the regulation of equipment used by television stations and
the adoption and  implementation  of  regulations  and policies  concerning  the
ownership,  operation,   programming  and  employment  practices  of  television
stations. The FCC has the power to impose penalties,  including fines or license
revocations, upon a licensee of a television station for violations of the FCC's
rules and regulations.

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

License Renewal: Broadcast television licenses are generally granted for maximum
terms of eight years.  License terms are subject to renewal upon  application to
the FCC, but they may be renewed for a shorter  period upon a finding by the FCC
that the "public  interest,  convenience and necessity"

                                      -11-
<PAGE>

would  be  served  thereby.  Under  the  Telecommunications  Act  of  1996  (the
"Telecommunications  Act"), the FCC must grant a renewal application if it finds
that the  station  has served the  public  interest,  there have been no serious
violations of the  Communications Act or FCC rules, and there have been no other
violations of the  Communications  Act or FCC rules by the licensee that,  taken
together,  would  constitute a pattern of abuse.  If the licensee  fails to meet
these requirements, the FCC may either deny the license or grant it on terms and
conditions as are appropriate after notice and opportunity for hearing.

In the vast majority of cases,  television broadcast licenses are renewed by the
FCC even when  petitions to deny or  competing  applications  are filed  against
broadcast license renewal applications.  However, there can be no assurance that
each of the Company's  broadcast  licenses will be renewed in the future. All of
the stations' existing licenses were renewed for full terms and are currently in
effect.

Programming and Operation: The Communications Act requires broadcasters to serve
the "public  interest."  Since the late 1970s,  the FCC gradually has relaxed or
eliminated  many of the more  formalized  procedures it had developed to promote
the  broadcast  of certain  types of  programming  responsive  to the needs of a
station's  community  of license.  However,  broadcast  station  licensees  must
continue to present  programming that is responsive to local community problems,
needs  and  interests  and  to  maintain  certain  records   demonstrating  such
responsiveness. Complaints from viewers concerning a station's programming often
will be considered by the FCC when it evaluates  license  renewal  applications,
although  such  complaints  may  be  filed  at any  time  and  generally  may be
considered by the FCC at any time.  Stations also must follow  various FCC rules
that  regulate,   among  other  things,   political   advertising,   sponsorship
identifications,  the  advertisements  of contests  and  lotteries,  obscene and
indecent  broadcasts  and  technical  operations,   including  limits  on  radio
frequency  radiation.  The FCC also has  adopted  rules  that  place  additional
obligations on television  station  operators for maximum amounts of advertising
and minimum amounts of programming  specifically  targeted for children, as well
as additional public information and reporting requirements.

Digital  Television:   The  FCC  has  adopted  rules  for  implementing  digital
(including  high-definition)  television  ("DTV")  service in the United States.
Implementation   of  DTV  is  intended  to  improve  the  technical  quality  of
television.  Under certain circumstances,  however, conversion to DTV operations
may reduce a station's geographical coverage area. The FCC has allotted a second
broadcast  channel to each  full-power  commercial  television  station  for DTV
operation.  Under the proposal,  stations will be required to phase-in their DTV
operations on the second channel over a transition period and to surrender their
non-DTV channel later.  Implementation of advanced television service may impose
additional  costs on  television  stations  providing  the new  service,  due to
increased  equipment costs, and may affect the competitive  nature of the market
areas in which the Company  operates if competing  stations  adopt and implement
the new technology before the Company's stations.  The FCC has adopted standards
for the transmission of advanced television signals.  These standards will serve
as the basis for the phased conversion to digital transmission. Of the Company's
stations,  only WJLA in  Washington,  D.C.  currently  operates a DTV channel in
concert with its analog signal.

                                      -12-
<PAGE>

Ownership  Matters:  The Communications Act contains a number of restrictions on
the ownership and control of broadcast licenses.  Together with the FCC's rules,
it places limitations on alien ownership;  common ownership of broadcast,  cable
and  newspaper  properties;  and  ownership  by those  persons  not  having  the
requisite  "character"  qualifications and those persons holding  "attributable"
interests in the license.

The FCC's television  national multiple ownership rules limit the audience reach
of television stations in which any entity may hold an attributable  interest to
35 percent of total United States audience reach. The FCC's television  multiple
ownership local contour overlap rule, the "Duopoly"  rule,  generally  prohibits
ownership of attributable interests by a single entity in two or more television
stations which serve the same geographic market area. The Telecommunications Act
directs the FCC to reevaluate its local  ownership  rules to consider  potential
modifications  permitting  ownership  of more than one station in a market area.
The FCC has  proposed  to redefine  the market area for  purposes of the Duopoly
rule from a station's "Grade B" contour to its DMA so long as there is no "Grade
A" overlap in signals of the two stations. The FCC also seeks comment on whether
ownership of two UHF stations or a UHF/VHF combination should be permissible.

The FCC generally applies its ownership limits to "attributable"  interests held
by an individual,  corporation,  partnership or other association. When applying
its multiple  ownership or cross-ownership  rules, the FCC generally  attributes
the  interests of corporate  licensees to the holders of corporate  interests as
follows:  (i) any  voting  interest  amounting  to five  percent  or more of the
outstanding  voting power of the corporate  broadcast licensee generally will be
attributable;  (ii) in  general,  no minority  voting  stock  interests  will be
attributable  if there is a single  holder of more  than  fifty  percent  of the
outstanding voting power of a corporate broadcast licensee and (iii) in general,
certain  investment  companies,  insurance  companies  and banks  holding  stock
through their trust  departments in trust accounts will be considered to have an
attributable  interest only if they hold ten percent or more of the  outstanding
voting power of a corporate broadcast licensee. Furthermore,  corporate officers
and  directors  and  general  partners  and  uninsulated   limited  partners  of
partnerships  are  personally   attributed  with  the  media  interests  of  the
corporations or partnerships of which they are officers,  directors or partners.
In the case of corporations  controlling  broadcast licenses through one or more
intermediate   entities,   similar  attribution  standards  generally  apply  to
stockholders, officers and directors of such corporations.

The FCC is  conducting  rulemaking  proceedings  to determine  whether it should
relax  its  rules  to  facilitate  greater  minority  and  female  ownership  of
broadcasting   facilities  and  whether  it  should  modify  its  rules  by  (i)
restricting the availability of the single majority shareholder exemption,  (ii)
attributing  certain  interests such as non-voting  stock,  debt and holdings in
limited liability companies and (iii) changing the attribution  benchmarks.  The
Company cannot predict the outcome of these  proceedings or how they will affect
the  Company's   business.   In  light  of  the  FCC's  multiple  ownership  and
cross-ownership  rules,  an individual  or entity that acquires an  attributable
interest in the Company may violate the FCC's rules if that acquirer also has an
attributable  interest  in  other  television  or  radio  stations,  or in cable
television systems or daily newspapers,  depending on the number and location of
those  radio  or  television   stations,   cable  television  systems  or  daily
newspapers. Such an acquirer also may be restricted in the companies in which it
may invest,  to the extent that those  investments  give rise to an attributable
interest.  If an  individual  or entity  with an

                                      -13-
<PAGE>

attributable  interest in the Company violates any of these ownership rules, the
Company  may be  unable  to  obtain  from the FCC the  authorizations  needed to
conduct its television  station  business,  may be unable to obtain FCC consents
for  certain  future  acquisitions,  may be  unable to  obtain  renewals  of its
licenses and may be subject to other material adverse consequences.

Under  its  "cross-interest  policy,"  the FCC  considers  certain  "meaningful"
relationships  among  competing  media  outlets in the same market,  even if the
FCC's ownership rules do not specifically  prohibit these  relationships.  Under
this policy, the FCC may consider  significant equity interests combined with an
attributable  interest in a media outlet in the same market,  joint ventures and
common key  employees  among  competitors.  The  cross-interest  policy does not
necessarily  prohibit all of these  interests but requires that the FCC consider
whether,   in  a  particular  market,  the  "meaningful"   relationships   among
competitors could have a significant adverse effect upon economic competition or
program  diversity.  Neither  the  Company  nor,  to the  best of the  Company's
knowledge, any officer, director or shareholder of the Company holds an interest
in  another  radio or  television  station,  cable  television  system  or daily
newspaper that is inconsistent with the FCC's ownership rules and policies.

Related to the Duopoly  rule,  the FCC has  proposed  the adoption of rules that
would modify the current treatment of the control and ownership attribution with
respect to LMAs entered into by television stations.  The FCC proposes that time
brokerage  of any other  television  station  in the same  market  for more than
fifteen percent of the brokered station's weekly broadcast hours would result in
counting the brokered station toward the brokering licensee's national and local
multiple  ownership limits. The FCC has proposed that LMAs in existence prior to
November  6, 1996 be  grandfathered  for the length of their  terms so as not to
place  owners of stations in  violation of the rules if such owners also operate
another station  pursuant to such LMAs.  Although the Company cannot predict the
outcome  of this  proceeding,  if the  local  multiple  ownership  rules are not
relaxed as proposed,  attribution  could preclude  television LMAs in any market
where the time broker owns or has an attributable interest in another television
station.  Changes by the FCC in its current policy regarding LMAs for television
stations could  potentially  have a material adverse effect on the Anniston LMA,
which, in turn,  could  jeopardize the Company's ABC network  affiliation in the
Birmingham market.

Additional  Competition in the Video Services Industry:  The  Telecommunications
Act also  eliminates  the  overall ban on  telephone  companies  offering  video
services and permits the  ownership of cable  television  companies by telephone
companies  in their  service  areas (or vice  versa) in  certain  circumstances.
Telephone companies providing such video services will be regulated according to
the transmission  technology they use. The  Telecommunications  Act also permits
telephone  companies to hold an ownership  interest in the  programming  carried
over such systems. Although the Company cannot predict the effect of the removal
of these  barriers to  telephone  company  participation  in the video  services
industry,  it may have the effect of increasing  competition  in the  television
broadcast industry in which the Company operates.

Other Legislation:  Finally, Congress and the FCC have under consideration,  and
in the future  may  consider  and adopt,  (i) other  changes to  existing  laws,
regulations and policies or (ii) new laws,  regulations and policies regarding a
wide  variety  of  matters  that  could  affect,  directly  or  indirectly,

                                      -14-
<PAGE>

the operation,  ownership and profitability of the Company's broadcast stations,
result in the loss or gain of audience  share and  advertising  revenues for the
Company's  stations  and/or  affect  the  ability  of the  Company to acquire or
finance additional broadcast stations.

Employees

As of  September  30, 1998,  the Company  employed in  full-time  positions  806
persons,  including 198 at WJLA,  107 at KATV,  113 at KTUL, 104 at WHTM, 115 at
WBMA/WCFT/WJSU,  92 at WSET, 63 at WCIV and 14 in its corporate  office.  Of the
employees at WJLA, 106 are represented by three unions: the American  Federation
of  Television  and Radio  Artists  ("AFTRA"),  the  Directors  Guild of America
("DGA")   or   the   National    Association   of   Broadcast    Employees   and
Technicians/Communications  Workers of America ("NABET/CWA"). The AFTRA contract
was  renegotiated  effective  June 1, 1996 through  September 30, 1999.  The DGA
contract was renegotiated  effective July 16, 1996 through January 16, 2000. The
NABET/CWA contract expired June 1, 1995. Members of this union have been working
without a  contract  since  that  time.  WJLA  management  is in the  process of
negotiating  a new contract and  anticipates  resolving the  outstanding  issues
without  any  material  adverse  impact  to the  station.  No  employees  of the
Company's other owned and/or programmed  stations are represented by unions. The
Company believes its relations with its employees are satisfactory.

Environmental Matters

The  Company is  subject  to  changing  federal,  state and local  environmental
standards,  including  those  governing  the  handling and disposal of solid and
hazardous  wastes,  discharges  to the air and  water  and  the  remediation  of
contamination associated with releases of hazardous substances.

In  particular,  the  Company is subject to  liability  under the  Comprehensive
Environmental   Response,   Compensation   and   Liability   Act,  the  Resource
Conservation and Recovery Act and analogous state laws for the investigation and
remediation of  environmental  contamination at properties owned and/or operated
by it and at  off-site  locations  where it has  arranged  for the  disposal  of
hazardous substances. Courts have determined that liability under these laws is,
in most cases,  joint and several,  meaning that any responsible  party could be
held liable for all costs necessary for  investigating and remediating a release
or threatened release of hazardous substances.

WCIV is currently involved in remediating contamination associated with releases
of  hazardous   substances  at  its   transmitter   site.  In  September   1994,
approximately   2,000  gallons  of  electric  generator  fuel  spilled  from  an
above-ground  tank on the premises of WCIV. With the assistance of environmental
consultants and under supervision of the South Carolina Department of Health and
Environmental  Control  ("SCDHEC"),  WCIV  has  undertaken  remediation  of  the
contamination  by installing  wells for recovery of free product and  monitoring
wells.  Based upon the scope of the  remediation  required as  determined by the
environmental  consultants,  the Company has estimated that any remaining  costs
associated with the monitoring  wells and related testing are minimal.  However,
there  can be no  assurance  that  SCDHEC  will  not  require  further  remedial
activities.

In October 1994, the  Pennsylvania  Department of  Environmental  Resources (the
"Pennsylvania

                                      -15-
<PAGE>

Department")  notified  WHTM that it  should  remediate  soils  and  groundwater
believed  to  be  adversely   affected  by  contamination   associated  with  an
underground  tank.  The  station's  environmental  consultant  has  advised  the
Pennsylvania  Department that it appears that contamination  remaining on WHTM's
property did not emanate from its underground tank, which has been removed,  but
is from an offsite  source  and that  there is no threat to human  health or the
environment which requires remediation. The matter remains unresolved.

In August 1995,  concentrations  of certain metals  including  arsenic,  barium,
chromium  and lead in the soil of a septic  leach field were  discovered  on the
property of WCFT. The Company has been advised that these  concentrations are in
the range of background  concentrations  for the area. As long as concentrations
are  demonstrated  to be below  background to the  satisfaction  of the State of
Alabama, response action would not be anticipated.

Although there can be no assurance of the final resolution of these matters, the
Company  does not believe that the amount of its  liability at these  properties
individually,  or in the aggregate,  will have a material  adverse effect on the
Company's consolidated financial condition, results of operations or cash flows.

                                      -16-
<PAGE>
                               ITEM 2. PROPERTIES


The Company maintains its corporate headquarters in Washington,  D.C., occupying
leased office space of approximately 9,300 square feet.

The  types of  properties  required  to  support  each of the  stations  include
offices, studios, transmitter sites and antenna sites. The stations' studios are
co-located with their office space while transmitter sites and antenna sites are
generally  located  away from the  studios in  locations  determined  to provide
maximum market signal coverage.

KATV's broadcast tower, which met non-governmental  wind-loading  standards when
built, does not meet the current guidelines for wind-loading on broadcast towers
adopted  in 1992.  Because  standards  were  modified  subsequent  to the  tower
construction,  KATV's  tower is  "grandfathered"  under  the  prior  guidelines.
Engineering  studies,  however,  indicate  that the tower  may be  significantly
overstressed under the revised guidelines, particularly at sustained winds of 70
miles per hour and at risk of failing in such  sustained  winds.  KATV has taken
steps to limit  access to the area  around  the  tower and to avoid  work on the
tower  during  windy  conditions.  KATV is in the  final  stages  of  completing
structural modifications to the tower to bring it within current guidelines. The
owner of KETS-TV,  which has an antenna on the tower,  has received a grant from
the National Telecommunications and Information Administration in the Department
of Commerce for matching  funds to help offset the costs of tower  modification.
KATV's share of the estimated costs for this work is approximately  $300,000. In
the event the tower failed prior to completion of structural modifications, KATV
would seek to continue  transmission  by direct fiber feeds to cable  television
systems and  temporary  leased  space on another  neighboring  broadcast  tower,
although there can be no assurance  that such an alternative  would be available
at such time.

The  following  table  describes  the general  characteristics  of the Company's
principal real property:

                                      -17-
<PAGE>


<TABLE>
<CAPTION>
                                                                   Approximate       Lease Expiration
Facility                   Market/Use          Ownership               Size                 Date
--------                   ----------          ---------               ----                 ----
<S>                  <C>                       <C>               <C>                <C>   
WJLA                  Washington, D.C.
                      Office/Studio              Leased            88,828 sq. ft.         11/31/03
                      Tower/Transmitter          Joint Venture     108,000 sq. ft.          N/A

WHTM                  Harrisburg, PA
                      Office/Studio              Owned             14,000 sq. ft.           N/A
                      Tower/Transmitter          Owned              2,801 sq. ft.           N/A
                      Adjacent Land              Leased             6,808 sq. ft.        10/31/00

KATV                  Little Rock, AR
                      Office/Studio              Owned             20,500 sq. ft.           N/A
                      Tower/Transmitter          Owned             188 Acres                N/A
                      Annex/Garage               Owned             67,400 sq. ft.           N/A

KTUL                  Tulsa, OK
                      Office/Studio              Owned             13,520 sq. ft.           N/A
                      Tower/Transmitter          Owned             160 acres                N/A
                      Tower                      Leased            1 acre                 5/30/05

WSET                  Lynchburg, VA
                      Office/Studio              Owned             15,500 sq. ft.           N/A
                      Tower/Transmitter          Owned             2,700 sq. ft.            N/A

WCIV                  Mt. Pleasant, SC
                      Office/Studio              Owned             21,700 sq. ft.           N/A
                      Tower/Transmitter          Leased            2,000 sq. ft.          8/31/06

WCFT/WJSU <F1>        Birmingham, AL
                      Office/Studio              Leased            26,357 sq.ft           9/30/06
                      Satellite Dish Farm        Leased            0.5 acres              9/30/06
                      Tower/Relay-Pelham         Leased            .08 acres             10/31/01
                      Tower/Relay-Red Mtn.       Owned             .21 acres                N/A

                      Tuscaloosa, AL
                      Office/Studio              Owned             9,475 sq. ft.            N/A
                      Tower-Tuscaloosa           Owned             10.5 acres               N/A
                      Tower-AmSouth              Leased            134.3 acres            4/30/06

                      Anniston, AL  <F2>
                      Office/Studio              Leased            7,273 sq. ft.       6 months notice
                      Tower-Blue Mtn.            Owned             1.7 acres                N/A
                      Gadsden Office             Leased            1,000 sq. ft.          Monthly
                      Tower-Bald Rock            Leased            1 acre                 8/29/16
----------
<FN>
<F1>     TV  Alabama  uses the  pre-existing  facilities  of WCFT and WJSU to operate  news and sales  bureaus  in the  Tuscaloosa
         and Anniston market areas.
<F2>     Although TV Alabama is currently operating these properties under the Anniston LMA, Flagship is the owner and lessee.
</FN>
</TABLE>

                                      -18-
<PAGE>

                            ITEM 3. LEGAL PROCEEDINGS


The Company currently and from time to time is involved in litigation incidental
to the conduct of its business, including suits based on defamation. The Company
is not currently a party to any lawsuit or proceeding  which,  in the opinion of
management,  if  decided  adverse  to the  Company,  would be  likely  to have a
material  adverse  effect on the  Company's  consolidated  financial  condition,
results of operations or cash flows.


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

Not Applicable.

                                     PART II

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

Not Applicable.

                                      -19-
<PAGE>



<PAGE>


                  ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
                             (Dollars in thousands)


The selected  consolidated  financial  data below should be read in  conjunction
with the Company's  Consolidated Financial Statements and notes thereto included
elsewhere  in this  Report.  The selected  consolidated  financial  data for the
fiscal years ended  September 30, 1994,  1995,  1996,  1997 and 1998 are derived
from the Company's audited Consolidated Financial Statements.

<TABLE>
<CAPTION>
                                                           Fiscal Year Ended September 30,
                                                           ------------------------------                              
                                      1994             1995              1996             1997            1998
                                      ----             ----              ----             ----            ----
<S>                                <C>               <C>               <C>              <C>            <C>   
Statement of Operations Data <F1>:
Operating revenues, net             $125,830          $138,151          $155,573         $172,828       $182,484
Television operating expenses,
    excluding depreciation and
    amortization                      67,745            75,199            92,320          105,630        106,147
Depreciation and amortization          5,122             4,752            10,257           19,652         18,922
Corporate expenses                     4,250             3,753             5,112            4,382          4,568
Operating income                      48,713            54,447            47,884           43,164         52,847
Interest expense                      22,303            22,708            35,222           42,870         44,340
Interest income                        2,292             2,338             3,244            2,433          3,339
Income before extraordinary
    items and cumulative
    effect of changes in
    accounting principles             17,360            19,909             8,293              424          5,746
Extraordinary loss <F2>                   --                --            (7,750)              --         (5,155)
Cumulative effect of change in
    accounting principle <F3>          3,150                --              --                 --             --
Net income                            20,510            19,909               543              424            591
</TABLE>

<TABLE>
<CAPTION>
                                                                   As of September 30,
                                                                   -------------------    
                                         1994           1995             1996              1997           1998
                                         -----          ----             -----             ----           ----
<S>                                 <C>               <C>              <C>              <C>             <C>  
Balance Sheet Data <F1>:
Total assets                         $94,079           $99,605          $281,778         $280,977        $279,521
Total debt <F4>                      199,473           198,919           402,993          415,722         429,691
Redeemable preferred stock <F5>          168               168                --               --             --
Stockholder's investment            (136,961)         (133,879)         (172,392)        (185,563)       (203,776)
</TABLE>

<TABLE>
<CAPTION>
                                                             Fiscal Year Ended September 30,
                                                             -------------------------------
                                       1994              1995              1996            1997            1998
                                       ----              ----              ----            ----            ----
<S>                                 <C>               <C>              <C>              <C>             <C>  
Cash Flow Data <F1> <F6>:
Cash flow from operating
     activities                      $18,267           $22,145           $28,370          $15,551         $28,022
Cash flow from investing activities   (1,420)           (2,543)         (165,109)         (17,363)         (8,190)
Cash flow from financing activities  (16,905)          (18,549)          145,031           (2,875)        (13,404)
</TABLE>

                                      -20-
<PAGE>

<TABLE>
<CAPTION>
                                                           Fiscal Year Ended September 30,
                                       1994              1995              1996             1997           1998
                                       ----              ----              ----             ----           ---- 
<S>                                 <C>               <C>              <C>              <C>             <C>  
Financial Ratios and Other Data <F1>:
Operating Cash Flow <F7>             $53,835           $59,199           $58,141          $62,816         $71,769
Operating Cash Flow Margin <F8>        42.8%             42.9%             37.4%            36.3%           39.3%
Capital expenditures                   3,264             2,777            20,838           12,140           8,557



<FN>
<F1>     The consolidated statement of operations data, balance sheet data, cash
         flow data and  financial  ratios  and other data as of and for the year
         ended   September   30,  1996   include  the  effects  of   significant
         transactions consummated by the Company during the year that impact the
         comparability of Fiscal 1996 data to previous years.  Such transactions
         include the effects of a $275,000 offering of 9.75% Senior Subordinated
         Debentures  due 2007,  the  asset  acquisitions  of WHTM and WCFT,  the
         acquisition  of  the  Anniston  LMA  and  Anniston  Option,  the  early
         repayment of approximately  $74,704 in debt and payment of a prepayment
         penalty on such debt of $12,934.  These  transactions  are discussed in
         Management's Discussion and Analysis of Financial Condition and Results
         of  Operations  as  well  as  Notes 3 and 6 of  Notes  to  Consolidated
         Financial Statements. In addition, the comparability of Fiscal 1997 and
         1998 data to Fiscal  1996  data is  impacted  by the fact that that the
         results of operations of WHTM,  WCFT and WJSU are included for the full
         year in Fiscal 1997 and 1998 as compared to the period from the date of
         acquisition and the effective date of the Anniston LMA in Fiscal 1996.
<F2>     The  extraordinary  losses during Fiscal 1996 and Fiscal 1998 resulted
         from the early  repayment  of  long-term  debt (see Note 6 of Notes to
         Consolidated Financial Statements).
<F3>     As required by generally accepted  accounting  principles,  the Company
         changed its method of accounting for income taxes during Fiscal 1994.
<F4>     Total debt is defined as long-term debt (including the current portion
         thereof,  and net of  discount),  short-term  debt and  capital  lease
         obligations.
<F5>     In September 1996, the Company purchased for cash the Series A
         redeemable  preferred stock at its redemption  value of $168.
<F6>     Cash flows from operating, investing and financing activities were
         determined   in  accordance   with   generally   accepted   accounting
         principles.   See   Consolidated   Financial   Statements-Consolidated
         Statements of Cash Flows.
<F7>     "Operating Cash Flow" is defined as operating income plus  depreciation
         and  amortization.  Programming  expenses  are  included in  television
         operating  expenses.  The Company has included Operating Cash Flow data
         because it understands that such data is used by investors to measure a
         company's  ability to fund its operations  and service debt.  Operating
         Cash Flow does not  purport to  represent  cash  flows  from  operating
         activities  determined in accordance with generally accepted accounting
         principles as reflected in the Consolidated  Financial  Statements,  is
         not  a  measure  of  financial  performance  under  generally  accepted
         accounting  principles,  should not be  considered in isolation or as a
         substitute for net income or cash flows from  operating  activities and
         may not be comparable to similar measures reported by other companies.
<F8>     "Operating Cash Flow Margin" is defined as Operating Cash Flow as a
         percentage of operating revenues, net.
</FN>
</TABLE>

                                      -21-
<PAGE>



<PAGE>


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


General Factors Affecting the Company's Business

The Company owns and/or  programs  ABC  network-affiliated  television  stations
serving seven diverse  geographic  markets:  WJLA in Washington,  D.C.;  WHTM in
Harrisburg,  Pennsylvania;  KATV  in  Little  Rock,  Arkansas;  KTUL  in  Tulsa,
Oklahoma; WSET in Lynchburg,  Virginia; WCIV in Charleston,  South Carolina; and
WCFT in  Tuscaloosa,  Alabama (west of  Birmingham,  Alabama).  The Company also
programs  the  ABC  network  affiliate  WJSU  in  Anniston,   Alabama  (east  of
Birmingham,  Alabama)  under the Anniston  LMA, and owns a low power  television
station  licensed to Birmingham,  Alabama (WBMA).  The Company operates WCFT and
programs WJSU in tandem with WBMA serving the viewers of Birmingham,  Tuscaloosa
and Anniston.

The  operating  revenues  of the Company  are  derived  from local and  national
advertisers  and,  to a much  lesser  extent,  from  the  networks  and  program
syndicators for the broadcast of programming and from commercial  production and
tower rental  activities.  The primary operating expenses involved in owning and
operating  television  stations are  employee  compensation,  programming,  news
gathering, production, promotion and the solicitation of advertising.

Television  stations  receive revenues for advertising sold for placement within
and  adjoining  locally  originated  programming  and  adjoining  their  network
programming.  Advertising is sold in time increments and is priced  primarily on
the basis of a program's  popularity  among the specific  audience an advertiser
desires to reach,  as measured  principally by quarterly  audience  surveys.  In
addition,  advertising rates are affected by the number of advertisers competing
for the  available  time,  the size and  demographic  makeup of the market areas
served  and the  availability  of  alternative  advertising  media in the market
areas.  Rates are highest  during the most  desirable  viewing hours  (generally
during local news  programming and prime time),  with  corresponding  reductions
during other hours.

The Company's  advertising revenues are generally highest in the first and third
quarters of each fiscal year, due in part to increases in retail  advertising in
the period leading up to and including the holiday season and active advertising
in the spring.  The fluctuation in the Company's  operating results is generally
related to fluctuations in the revenue cycle. In addition,  advertising revenues
are  generally  higher  during  election  years  due to  spending  by  political
candidates,  which is  typically  heaviest  during the  Company's  first  fiscal
quarter.  Years in which Olympic Games are held also cause cyclical  fluctuation
in operating results  depending on which television  network is carrying Olympic
coverage.

The  broadcast  television  industry is cyclical  in nature,  being  affected by
prevailing  economic  conditions.   Because  the  Company  relies  on  sales  of
advertising time for  substantially  all of its revenues,  its operating results
are sensitive to general economic  conditions and regional conditions

                                      -22-
<PAGE>

in each of the local market areas in which the Company's  stations operate.  For
Fiscal 1996,  1997 and 1998,  WJLA accounted for  approximately  one-half of the
Company's total revenues.  As a result,  the Company's results of operations are
highly  dependent on WJLA and, in turn, the Washington,  D.C.  economy and, to a
lesser  extent,  on each of the other  local  economies  in which the  Company's
stations   operate.   The  Company  is  also  dependent  on   automotive-related
advertising.  Approximately  25%, 26% and 25% of the Company's  total  broadcast
revenues for the years ended  September 30, 1996,  1997 and 1998,  respectively,
consisted of  automotive-related  advertising.  A  significant  decrease in such
advertising  could  materially  and  adversely  affect the  Company's  operating
results.

Operating Revenues

The following table depicts the principal types of operating  revenues,  net of
agency  commissions,  earned by the  Company  for each of the last three  fiscal
years and the percentage contribution of each to the total broadcast revenues of
the Company, before fees.

<TABLE>
<CAPTION>
                                                             Fiscal Year Ended September 30, 
                                                             -------------------------------
                                          1996                         1997                       1998     
                                          ----                         ----                       ----   
                                 Dollars       Percent         Dollars       Percent       Dollars     Percent      
                                 -------       -------         -------       -------       -------     -------
<S>                            <C>            <C>           <C>            <C>          <C>           <C>
Local/regional <F1>              $ 77,248       48.0%         $ 85,954       48.1%        $ 92,398       49.0%
National <F2>                      64,277       40.0%           71,324       40.0%          75,530       40.0%
Network compensation <F3>           5,443        3.4%            6,223        3.5%           6,237        3.3%
Political <F4>                      3,160        2.0%            4,273        2.4%           3,291        1.8%
Trade and barter <F5>               7,119        4.4%            7,868        4.4%           8,192        4.3%
Other revenues <F6>                 3,489        2.2%            3,002        1.6%           3,065        1.6%
                                 --------       -------       --------     -------        --------     -------
Broadcast revenues                160,736      100.0%          178,644      100.0%         188,713      100.0%
                                               ======                       ======                      ======
Fees <F7>                          (5,541)                      (6,068)                     (6,202)
                                  -------                       ------                     -------
Broadcast revenue,
   net of fees                    155,195                      172,576                     182,511
Non-broadcast revenue <F8>            378                          252                         (27)
                                ---------                    ---------                  ----------
Total net operating revenues     $155,573                     $172,828                    $182,484
                                  =======                      =======                     =======

----------
<FN>
    <F1>  Represents sale of advertising time to local and regional  advertisers
          or agencies  representing  such  advertisers.  
    <F2>  Represents sale of advertising time to agencies  representing national
          advertisers.
    <F3>  Represents  payment by networks for broadcasting or promoting  network
          programming.
    <F4>  Represents  sale of  advertising  time to political  advertisers.
    <F5>  Represents  value of commercial  time exchanged for goods and services
          (trade) or syndicated programs (barter).
    <F6>  Represents  miscellaneous  revenue,  principally  receipts  from tower
          rental,  production  of  commercials  and  revenue  from the  sales of
          University of Arkansas  sports  programming to  advertisers  and radio
          stations.
    <F7>  Represents fees paid to national sales  representatives  and fees paid
          for music licenses.
    <F8>  Represents   revenues  from  program   syndication   sales  and  other
          miscellaneous non-broadcast revenues.
</FN>
</TABLE>

                                      -23-
<PAGE>

Local/regional  and  national  advertising   constitute  the  Company's  largest
categories of operating  revenues,  collectively  representing almost 90% of the
Company's  total  broadcast  revenues  in each of the last three  fiscal  years.
Although  the total  percentage  contribution  of  local/regional  and  national
advertising  has been relatively  constant over such period,  the growth rate of
local/regional and national  advertising revenues varies annually based upon the
demand and rates for local/regional advertising time versus national advertising
time in each  of the  Company's  markets.  Local/regional  advertising  revenues
increased 14.9%, 11.3% and 7.5% in Fiscal 1996, 1997 and 1998, respectively; and
national  advertising  revenues  increased 7.3%,  11.0% and 5.9% during the same
respective periods.  Each other individual category of revenues represented less
than 5.0% of the  Company's  total  revenues  for each of the last three  fiscal
years.


Results of Operations - Fiscal 1998 Compared to Fiscal 1997

As compared to Fiscal 1997, the Company's  results of operations for Fiscal 1998
principally  reflect  increased  demand by advertisers in the  Washington,  D.C.
market as well as  increased  audience  share and  advertising  revenues  in the
Birmingham  market.  The comparative  results are also impacted by the effect of
the Company's $150,000 offering of its 8.875% Senior Subordinated Notes due 2008
(the "8.875%  Notes")  completed on January 22, 1998.  The cash  proceeds of the
offering,  net of offering  expenses,  of  approximately  $146,000  were used to
redeem the Company's 11.5% Senior  Subordinated  Debentures due 2004 (the "11.5%
Debentures")  on March 3, 1998 with the balance  used to repay  certain  amounts
outstanding under the Company's revolving credit facility.  The Company incurred
a  loss,  net  of the  related  income  tax  effect,  of  $5,155  on  the  early
extinguishment of the 11.5% Debentures resulting primarily from the payment of a
call premium and write-off of remaining deferred financing costs.

Set forth below are selected  consolidated  financial data for Fiscal 1997 and
1998,  respectively,  and the percentage  change between the years.

<TABLE>
<CAPTION>

                                                             Fiscal Year Ended September 30, 
                                                             -------------------------------

                                                                                          Percentage
                                                    1997                  1998             Change
                                                    ----                  ----             ------
        <S>                                   <C>                    <C>                <C> 
         Operating revenues, net                  $172,828              $182,484             5.6%
         Total operating expenses                  129,664               129,637             0.0%
                                                   -------               -------
         Operating income                           43,164                52,847            22.4%
         Nonoperating expenses, net                 41,630                41,514           (0.3)%
         Income tax provision                        1,110                 5,587           403.3%
                                                   -------              --------
         Income before extraordinary loss              424                 5,746         1,255.2%
         Extraordinary loss, net of income
               tax benefit                              --                (5,155)           --
                                                 ---------               ------

         Net income                            $       424            $      591            39.4%
                                                  ========              ========

         Operating cash flow                     $  62,816              $ 71,769            14.3%
                                                    ======                ======
</TABLE>

                                      -24-
<PAGE>

Net Operating Revenues

Net operating revenues for Fiscal 1998 totaled $182,484,  an increase of $9,656,
or 5.6%, as compared to Fiscal 1997.  This increase  resulted  principally  from
increased  local/regional  and  national  advertising  demand  in the  Company's
Birmingham and Washington,  D.C.  markets,  partially offset by a decline in the
Tulsa market as well as decreased  political  advertising in the majority of the
Company's  markets.  The  revenue  growth in  Birmingham  was  achieved  through
increased  audience and market share. The expansion in audience and market share
was the result of the Company's development of the Birmingham operation.

Local/regional advertising revenues increased $6,444, or 7.5%, over Fiscal 1997.
The increase was primarily  attributable  to an improvement  in the  Washington,
D.C. and Little Rock local/regional  advertising markets as well as market share
gains by the Birmingham stations, offset by a weakening in the Harrisburg market
for local/regional advertisers.

National advertising revenues increased $4,206, or 5.9%, in Fiscal 1998 over the
prior fiscal year. The increase was principally  attributable to improvements in
the  Washington,  D.C. and Harrisburg  national  advertising  markets and market
share  gains by the  Birmingham  stations,  offset by a  weakening  in the Tulsa
market for national advertisers.

Political  advertising revenues decreased by $982, or 23.0%, in Fiscal 1998 from
Fiscal 1997.  This  decrease  was  primarily  due to the  national  presidential
election as well as various high-profile local races in several of the Company's
markets  that took  place  during  the  first  quarter  of  Fiscal  1997 with no
comparable  political  elections  occurring  during the first  quarter of Fiscal
1998.  The decrease was  partially  offset by  increased  political  advertising
during the third and fourth  quarters of Fiscal 1998 as compared to the last two
quarters of Fiscal 1997.

No individual  advertiser  accounted for more than 5% of the Company's broadcast
revenues during Fiscal 1998 or 1997.

Total Operating Expenses

Total  operating  expenses  in Fiscal  1998 were  $129,637,  a  decrease  of $27
compared to total operating expenses of $129,664 in Fiscal 1997.

Television operating expenses, excluding depreciation and amortization,  totaled
$106,147  in Fiscal  1998,  an  increase  of $517,  or 0.5%,  when  compared  to
television  operating  expenses of $105,630 in Fiscal 1997. The increase in such
expenses was reduced by a  non-recurring  programming  expense of  approximately
$2,000 related to the Company's early termination of a program contract incurred
during Fiscal 1997.  Excluding this charge from Fiscal 1997 television operating
expenses,  such expenses  increased  2.4% in Fiscal 1998 from Fiscal 1997.  This
television  operating  expense increase was primarily  attributable to increased
news expenses across a majority of the Company's  stations,  partially offset by
an overall reduction in television operating expenses in Birmingham, Little Rock
and Charleston.

                                      -25-
<PAGE>

Depreciation and amortization  expense of $18,922 in Fiscal 1998 decreased $730,
or 3.7%, from $19,652 in Fiscal 1997. The decrease was primarily attributable to
the reduced  level of capital  expenditures  from Fiscal 1996 to Fiscal 1997 and
Fiscal 1998.

Corporate expenses in Fiscal 1998 increased $186, or 4.2%, from Fiscal 1997. The
increase  was due to  increases  in various  expenses,  including  compensation,
travel and entertainment.

Operating Income

Operating income of $52,847 in Fiscal 1998 increased $9,683, or 22.4%,  compared
to operating  income of $43,164 in Fiscal 1997.  The operating  profit margin in
Fiscal 1998 increased to 29.0% from 25.0% for the prior fiscal year.

The  increase in  operating  income and margin was due  primarily  to  operating
revenues  increasing  at a greater  rate than  operating  expenses as  discussed
above. The Company's Fiscal 1997 operating  margins were adversely  impacted due
to the investment in the start-up  operations in Birmingham  (e.g.,  programming
and staffing  changes,  marketing and  promotion  activities,  and  depreciation
arising  from  capital  expenditures  for facility  construction  and  equipment
purchases to integrate the operation)  during the initial phase of  Birmingham's
audience share  development  as well as the  non-recurring  program  termination
expense.

Operating Cash Flow

Operating  cash flow  increased to $71,769 in Fiscal 1998 from $62,816 in Fiscal
1997, an increase of $8,953,  or 14.3%. This increase was a result of the growth
in net operating  revenues together with relatively stable television  operating
expenses and corporate  expenses as discussed  above.  The Company believes that
operating  cash  flow,   defined  as  operating  income  plus  depreciation  and
amortization,  is important in measuring the Company's financial results and its
ability to pay principal and interest on its debt because of the Company's level
of non-cash expenses attributable to depreciation and amortization of intangible
assets.  Operating  cash flow does not  purport  to  represent  cash  flows from
operating activities determined in accordance with generally accepted accounting
principles as reflected in the Company's consolidated  financial statements,  is
not a measure of  financial  performance  under  generally  accepted  accounting
principles,  should not be  considered  in isolation or as a substitute  for net
income or cash flows from  operating  activities  and may not be  comparable  to
similar measures reported by other companies.

Nonoperating Expenses, Net

Interest  expense of $44,340 for Fiscal 1998 increased by $1,470,  or 3.4%, from
$42,870 in Fiscal 1997.  This increase was  principally  due to the  incremental
interest expense associated with carrying both the newly-issued 8.875% Notes and
the 11.5%  Debentures  from January 22, 1998 until the  redemption  of the 11.5%
Debentures on March 3, 1998 after the  redemption  notice period was  completed.
Had the Company  redeemed the 11.5%  Debentures  on January 22,  1998,  interest
expense for Fiscal 1998 would have been $42,729, a decrease of $141, or 0.3%, as
compared to 

                                      -26-
<PAGE>

Fiscal 1997.  This  decrease was related to a reduced  average  interest rate on
debt as a result of the  Company's  refinancing  on January 22, 1998,  partially
offset by higher average outstanding debt balances during Fiscal 1998.

The average amount of debt outstanding and the weighted average interest rate on
such debt for Fiscal 1998 and 1997 approximated  $449,431 and 9.7%, and $413,723
and 10.2%,  respectively.  The increased  weighted  average debt balance  during
Fiscal 1998 was primarily due to carrying both the newly-issued 8.875% Notes and
the 11.5%  Debentures  from January 22, 1998 until the  redemption  of the 11.5%
Debentures on March 3, 1998 after the  redemption  notice period was  completed.
Had the Company  redeemed the 11.5% Debentures on January 22, 1998, the weighted
average balance of debt would have been $430,507 for Fiscal 1998.

Interest  income of $3,339 in Fiscal 1998 increased  $906, or 37.2%, as compared
to interest  income of $2,433 in Fiscal 1997.  The increase was primarily due to
interest earned from temporarily investing the majority of the proceeds from the
issuance of the 8.875% Notes for the period from January 22, 1998 until March 3,
1998 at which time the Company redeemed the 11.5% Debentures.

Income Taxes

The provision for income taxes in Fiscal 1998 of $5,587 increased by $4,477,  or
403.3%,  when  compared to the  provision  for income  taxes of $1,110 in Fiscal
1997. The increase was directly  related to the $9,799,  or 638.8%,  increase in
income before income taxes and extraordinary loss. This increase was a result of
the increased  Operating Income and reduced  Nonoperating  Expenses as discussed
above.

Income Before Extraordinary Loss

Income before extraordinary loss in Fiscal 1998 increased by $5,322 from $424 in
Fiscal 1997.  As discussed  previously,  the start-up  nature of the  Birmingham
operation and the non-recurring  program expense adversely  impacted Fiscal 1997
results.

Net Income

Net income for Fiscal 1998 of $591  increased  $167, or 39.4%,  when compared to
net income of $424 in Fiscal 1997.  The increase in net income was  attributable
to  the  improved   operating  results  for  Fiscal  1998  as  discussed  above,
substantially offset by the $5,155 extraordinary loss on early repayment of debt
resulting  primarily  from  the  payment  of a call  premium  and  write-off  of
remaining deferred financing costs.

Balance Sheet

Significant  balance sheet fluctuations from September 30, 1997 to September 30,
1998 consisted of increased cash and cash  equivalents and long-term debt. These
increases  reflect the  Company's  refinancing  transaction  in January 1998. In
addition,  distributions  to owners  increased as a result of net cash  advances
made during Fiscal 1998. 

                                      -27-
<PAGE>

Results of Operations - Fiscal 1997 Compared to Fiscal 1996

Factors Affecting Fiscal 1996

There were significant  factors which affected the results of operations for the
year ended September 30, 1996. In March 1996, the Company, through its 80%-owned
subsidiaries,  acquired the assets and certain  liabilities of WHTM and WCFT for
$115,475  and  $20,181,  respectively  (the  "Acquisitions").   The  results  of
operations  of WHTM and WCFT  are  included  for the  period  subsequent  to the
acquisitions.  Additionally, in December 1995, the Company, through an 80%-owned
subsidiary,  entered into the  ten-year  Anniston LMA with the owners of WJSU, a
television  station operating in Anniston,  Alabama.  The operating revenues and
expenses of WJSU are therefore included in the Company's  consolidated financial
statements since December 1995. References to the "New Stations" in Management's
Discussion and Analysis of Financial  Condition and Results of Operations are to
WHTM, WCFT and WJSU as programmed under the Anniston LMA. In addition,  WSET and
WCIV became  wholly-owned  subsidiaries of the Company through a contribution of
capital  stock (the  "Contribution")  from an affiliate  wholly-owned  by Joe L.
Allbritton.

In February  1996,  the Company  completed  the offering of its  $275,000  9.75%
Senior Subordinated  Debentures due 2007 (the "9.75% Debentures").  The proceeds
from the offering of the 9.75%  Debentures were used to finance the acquisitions
of WHTM and WCFT for $135,656,  acquire the Anniston  Option for $10,000,  repay
approximately  $74,704  of debt  which  was  outstanding  under  senior  secured
promissory  notes  and other  credit  agreements  and pay a  related  prepayment
penalty of $12,934.  The remaining net proceeds were retained by the Company for
the  construction of studio and transmission  facilities in Birmingham,  Alabama
and general corporate purposes.

As compared to Fiscal 1996, the Company's  results of operations for Fiscal 1997
principally reflect the effect of the New Stations as their results are included
for the entire  year in Fiscal  1997 as  compared to the period from the date of
acquisition in Fiscal 1996.  Additional  significant  factors include  increased
demand by  advertisers  in the  Washington,  D.C.  market,  offset by  continued
spending in  Birmingham.  As part of the planned  development  of the Birmingham
operation,  the Company has continued to make enhancements in its local news and
has increased  its marketing  activities to promote WCFT and WJSU as the new ABC
affiliates  for  the  Birmingham  market.  These  activities  have  resulted  in
increased  audience  share,  and management  believes that expansion in audience
share will continue resulting in increasingly higher advertising revenues.

                                      -28-
<PAGE>

Set forth below are  selected  consolidated  financial  data for Fiscal 1996 and
1997, respectively, and the percentage change between the years.
<TABLE>
<CAPTION>

                                                              Fiscal Year Ended September 30, 
                                                              -------------------------------
                                                                                         Percentage
                                                     1996                  1997            Change
                                                     ----                  ----            ------
<S>                                          <C>                    <C>                 <C>  
         Operating revenues, net                  $155,573              $172,828            11.1%
         Total operating expenses                  107,689               129,664            20.4%
                                                   -------               -------
         Operating income                           47,884                43,164           (9.9)%
         Nonoperating expenses, net                 33,079                41,630            25.9%
         Income tax provision                        7,812                 1,110          (85.8)%
                                                   -------              --------
         Income before minority interest
               and extraordinary loss                6,993                   424          (93.9)%
         Minority interest in net losses of
               consolidated subsidiaries             1,300                    --            --
         Extraordinary loss, net of income
               tax benefit                          (7,750)                   --            --
                                                    ------              --------

         Net income                              $     543              $    424          (21.9)%
                                                  ========              ========

         Operating cash flow                     $  58,141              $ 62,816             8.0%
                                                    ======                ======
</TABLE>

Net Operating Revenues

Net operating revenues for Fiscal 1997 totaled $172,828, an increase of $17,255,
or 11.1%, as compared to Fiscal 1996. The New Stations accounted for $11,282, or
65.4%,  of  the  increase  in net  operating  revenues.  The  majority  of  this
significant contribution by the New Stations was due to the fact that results of
the New Stations  were  included for the full year in Fiscal 1997 as compared to
the period  from the date of  acquisition  in Fiscal  1996.  The  balance of the
increase  resulted  principally  from  increased   local/regional  and  national
advertising in the Washington,  D.C. and Little Rock markets offset by a decline
in the Charleston market.

Local/regional  advertising  revenues  increased  $8,706,  or 11.3%, over Fiscal
1996.  The  increase  was  largely   attributable   to  a  $6,127   increase  in
local/regional  revenues by the New Stations and revenue increases  generated by
the Company's stations located in the Washington,  D.C. and Little Rock markets,
offset by  weakening  in the Tulsa and  Charleston  markets  for  local/regional
advertisers.

National  advertising  revenues  increased $7,047, or 11.0%, in Fiscal 1997 over
the prior fiscal  year.  The increase  was  principally  attributable  to $4,003
generated by the New Stations and improvements in the Washington,  D.C.,  Little
Rock and Tulsa  markets  offset by a  weakening  in the  Charleston  market  for
national advertising.

No individual  advertiser  accounted for more than 5% of the Company's broadcast
revenues during Fiscal 1997 or 1996.

                                      -29-
<PAGE>

Increased network  compensation  revenue of $780, or 14.3%, over the Fiscal 1996
level was principally  attributable to the incremental  network  compensation of
the New Stations during Fiscal 1997.

Total Operating Expenses

Total operating  expenses in Fiscal 1997 were $129,664,  an increase of $21,975,
or 20.4%, compared to total operating expenses of $107,689 in Fiscal 1996.

Television operating expenses (before  depreciation,  amortization and corporate
expenses)  totaled  $105,630 in Fiscal 1997,  an increase of $13,310,  or 14.4%,
when  compared  to  television  operating  expenses  of $92,320 in Fiscal  1996.
Television  operating  expenses of the New Stations  accounted  for 79.5% of the
increase.  The New Stations  accounted for a greater  proportionate  increase in
television  operating expenses than in net operating revenues principally due to
the impact of Birmingham as discussed  further below. The remaining  increase in
television operating expenses is largely attributable to approximately $2,000 of
non-recurring  program expense resulting from the Company's early termination of
a program  contract.  Excluding the New Stations and the  non-recurring  program
expense, Fiscal 1997 television operating expenses increased approximately $727,
or 0.9%, over the Fiscal 1996 level.  This expense  increase over the prior year
was  concentrated  in the news  area,  which is  consistent  with the  Company's
operating strategy that emphasizes local news leadership in each of its markets.

Depreciation and amortization expense of $19,652 in Fiscal 1997 increased $9,395
from $10,257 in Fiscal 1996. The New Stations accounted for $8,843, or 88.8%, of
the increase.  This was due to the increased level of depreciable and intangible
assets which  resulted  principally  from the  acquisition of WHTM and WCFT, the
Anniston Option and capital equipment and leasehold improvements associated with
the new studio in Birmingham  and  transmission  facilities  in  Tuscaloosa  and
Anniston.

Corporate  expenses in Fiscal 1997 decreased $730 from Fiscal 1996. The decrease
was principally due to a decrease in charitable contributions.

Operating Income

The operating  results of the New Stations  impacted the Company's  consolidated
performance  trends for Fiscal 1997 as compared to Fiscal 1996  primarily due to
the fact  that they  were  included  for the  entire  period  in Fiscal  1997 as
compared  to the  period  from the date of  acquisition  in the prior  year.  In
addition,  the operating  results of the  Birmingham  operation had a continuing
impact on the  Company's  consolidated  performance  trends  in  Fiscal  1997 as
compared to Fiscal 1996. The operating  margins  generated by the Company in the
aggregate  were  adversely  impacted  primarily due to the Company's  continuing
investment in the start-up  operations in  Birmingham,  (e.g.,  programming  and
staffing  changes,  marketing and promotional  activities) as well as due to the
impact of the intangible  amortization expense arising from the Acquisitions and
increased  depreciation  expense  from  capital  improvements  made  to the  New
Stations.

                                      -30-
<PAGE>

Operating income of $43,164 in Fiscal 1997 decreased $4,720,  or 9.9%,  compared
to operating  income of $47,884 in Fiscal 1996.  The operating  profit margin in
Fiscal 1997 decreased to 25.0% from 30.8% for the comparable period in the prior
year. The decrease in operating profit and margin was due primarily to operating
expenses increasing at a greater rate than operating revenue as discussed above.

Operating Cash Flow

Operating  cash flow  increased to $62,816 in Fiscal 1997 from $58,141 in Fiscal
1996, an increase of $4,675,  or 8.0%.  This increase was a result of the growth
in net operating revenues as discussed above together with smaller  proportional
television operating expenses and corporate expenses.  The Company believes that
operating  cash  flow,   defined  as  operating  income  plus  depreciation  and
amortization,  is important in measuring the Company's financial results and its
ability to pay principal and interest on its debt because of the Company's level
of non-cash expenses attributable to depreciation and amortization of intangible
assets.  Operating  cash flow does not  purport  to  represent  cash  flows from
operating activities determined in accordance with generally accepted accounting
principles as reflected in the Company's consolidated  financial statements,  is
not a measure of  financial  performance  under  generally  accepted  accounting
principles,  should not be  considered  in isolation or as a substitute  for net
income or cash flows from  operating  activities  and may not be  comparable  to
similar measures reported by other companies.

Nonoperating Expenses, Net

Interest expense of $42,870 for Fiscal 1997 increased by $7,648,  or 21.7%, from
$35,222 in Fiscal  1996.  The increase was  attributable  to increased  interest
expense from the  issuance of the  Company's  9.75%  Debentures,  together  with
higher average  working capital debt balances during Fiscal 1997 compared to the
prior year.  The average  amount of debt  outstanding  and the weighted  average
interest  rate on such debt for Fiscal 1997 and 1996  approximated  $413,723 and
10.2%, and $324,824 and 10.5%, respectively.

Interest  income of $2,433 in Fiscal 1997 decreased  $811, or 25.0%, as compared
to interest  income of $3,244 in Fiscal 1996.  The decrease was primarily due to
interest earned from temporarily investing certain proceeds from the sale of the
9.75% Debentures during Fiscal 1996.

Income Taxes

The provision for income taxes in Fiscal 1997 of $1,110 decreased by $6,702,  or
85.8%, when compared to the provision for income taxes of $7,812 in Fiscal 1996.
The decrease is directly  related to the $13,271,  or 89.6%,  decrease in income
before income taxes,  minority  interest and  extraordinary  item (as previously
discussed).

Income Before Minority Interest and Extraordinary Loss

Income before minority interest and extraordinary  loss in Fiscal 1997 decreased
by $6,569,  or

                                      -31-
<PAGE>

93.9%,  from Fiscal 1996. As discussed  previously,  the start-up  nature of the
Birmingham  operation,  the  increased  interest  expense and  depreciation  and
amortization  associated with the  Acquisitions  and the  non-recurring  program
expense adversely impacted the Fiscal 1997 results.

Net Income

Net income for Fiscal 1997 of $424  decreased  $119, or 21.9%,  when compared to
net income of $543 in Fiscal 1996.  The decrease in net income was  attributable
to the  factors  discussed  above.  Additionally,  net income  for  Fiscal  1996
reflects the $7,750 extraordinary loss on early repayment of debt.

Balance Sheet

Significant  balance sheet fluctuations from September 30, 1996 to September 30,
1997 consisted of increased  accounts  receivable and long-term debt,  offset by
decreases  in cash and cash  equivalents  and  accounts  payable.  In  addition,
distributions  to owners  increased  as a result of cash  advances  made  during
Fiscal  1997.  The  increase  in  accounts  receivable  reflects  the  Company's
continued  revenue  growth  while  the  offsetting  decreases  in cash  and cash
equivalents  and accounts  payable were primarily  attributable to the timing of
cash payments.  The increase in long-term  debt was related to additional  draws
under its  revolving  credit  facility  and new capital  leases to fund  capital
expenditures, primarily in Birmingham, Alabama and Washington, D.C.


Liquidity and Capital Resources

Cash Provided by Operations

Cash and cash equivalents  increased $6,428 from September 30, 1997 to September
30, 1998,  principally from net cash provided by operations of $28,022 and a net
increase  in debt of  $12,978,  offset by net  capital  expenditures  of $8,557,
financing   costs  and  a  related   prepayment   penalty  of  $10,323  and  net
distributions to owners of $16,059.  Cash provided by operations was primarily a
result of net income of $591 plus  deprecation  and  amortization of $18,992 and
the extraordinary loss on early repayment of debt of $5,155.

Cash and cash equivalents  decreased $4,687 from September 30, 1996 to September
30, 1997,  principally resulting from net cash provided by operations of $15,551
and a $10,600 increase in borrowings under a revolving line of credit, offset by
net capital  expenditures of $12,140,  the additional payment under the Anniston
Option of $5,348 and net  distributions  to owners of $12,904.  Cash provided by
operations  was primarily a result of net income of $424 plus  depreciation  and
amortization  of  $19,652,  offset by other  changes in assets and  liabilities,
primarily an increase in accounts  receivable,  program rights,  deferred income
taxes and accounts payable.

Distributions to Related Parties

The  Company  periodically  makes  advances  in the  form  of  distributions  to
Perpetual.  Prior to the

                                      -32-
<PAGE>

Contribution,  WSET and WCIV made cash advances to  Westfield.  For Fiscal 1996,
1997 and 1998, the Company made cash advances net of repayments to these related
parties of $39,882,  $12,904 and  $19,237,  respectively.  In  addition,  during
Fiscal 1996 and 1998,  the Company  was  charged  for  federal  income  taxes by
Perpetual  and  Westfield  and  distributed  certain tax  benefits to  Westfield
totaling $836 and $433, respectively.  During Fiscal 1997, the Company generated
a benefit  from  federal  income  taxes of $691.  This  benefit was  effectively
distributed  to Perpetual as such benefit will not be recognized in future years
pursuant to the terms of the tax sharing  agreement  between the  companies.  In
conjunction with the Contribution,  WSET and WCIV declared non-cash dividends in
Fiscal 1996 to Westfield  totaling $18,371 which  represented the cumulative net
advances  made to  Westfield  by WSET and WCIV prior to the  Contribution.  As a
result,  the net change in  distributions to related parties during such periods
were $20,675, $12,904 and $18,804,  respectively.  The advances to these related
parties are  non-interest  bearing and, as such, do not reflect  market rates of
interest-bearing loans to unaffiliated third parties.

At present,  the primary  sources of  repayment  of net  advances is through the
ability of the Company to pay dividends or make other  distributions,  and there
is no immediate intent for the amounts to be repaid. Accordingly, these advances
have been treated as a reduction of  stockholder's  investment and are described
as "distributions" in the Company's Consolidated Financial Statements.

During Fiscal 1991,  the Company made a $20,000  11.06% loan to Allnewsco.  This
amount has been reflected in the Company's  Consolidated Financial Statements on
a  consistent  basis with  other  distributions  to owners.  The loan had stated
repayment terms consisting of annual principal installments approximating $2,220
commencing   January  1997  through   January  2005  and  payments  of  interest
semi-annually.  During Fiscal 1997 and 1998, the Company  deferred the first two
annual principal  installment  payments  pending  renegotiation of the repayment
terms.  Effective July 1, 1998, the note was amended to extend the maturity date
to January 2008 and defer all principal  installments  until maturity,  with the
principal balance also due upon demand. In exchange for the amendment, Allnewsco
paid to the Company the amount of $650.  Interest payments on the loan have been
made in accordance  with the terms of the note, and the Company  expects it will
continue to receive such payments on a current basis. To date, interest payments
from  Allnewsco  have been funded by advances from  Perpetual to Allnewsco.  The
Company  anticipates  that such payments will be funded in a similar  manner for
the foreseeable future.  However,  there can be no assurance that Allnewsco will
have the ability to make such interest payments in the future.

Under  the  terms  of  the  Company's  borrowing  agreements,  future  advances,
distributions   and  dividends  to  related   parties  are  subject  to  certain
restrictions.  The Company  anticipates that, subject to such restrictions,  the
Company will make distributions and loans to related parties in the future.

Indebtedness

The  Company's  total debt,  including  the current  portion of long-term  debt,
increased from $415,722 at September 30, 1997 to $429,691 at September 30, 1998.
This debt,  net of  applicable  discounts,  consists  of  $273,935  of the 9.75%
Debentures,   $150,000  of  the  8.875%  Notes  and  $5,756  of  capital   lease
obligations.  The increase of $13,969 in total debt from  September  30, 1997 to
September 30, 1998 was primarily due to the net increase of $27,000 in principal
of the 8.875%  Notes as

                                      -33-
<PAGE>

compared  to the  11.5%  Debentures,  offset by a $12,700  decrease  in  amounts
outstanding under the revolving credit facility. The Company's $40,000 revolving
credit  facility  is secured by the pledge of the stock of the  Company  and its
subsidiaries and matures April 16, 2001. As of September 30, 1998, there were no
amounts outstanding under the revolving credit facility.

Under  the  existing  borrowing  agreements,  the  Company  agrees  to  abide by
restrictive  covenants that place  limitations  upon payments of cash dividends,
issuance of capital  stock,  investment  transactions,  incurrence of additional
obligations  and  transactions  with  Perpetual  and other related  parties.  In
addition,  the Company must maintain specified levels of operating cash flow (as
defined in the  underlying  borrowing  agreements)  and/or  working  capital and
comply with other financial  covenants.  Compliance with the financial covenants
is  measured at the end of each  quarter,  and as of  September  30,  1998,  the
Company was in compliance with those financial covenants.

Other Uses of Cash

During Fiscal 1996, 1997 and 1998, the Company made $20,838, $12,140 and $8,557,
respectively, of capital expenditures. The decrease in capital expenditures from
Fiscal 1996 to Fiscal 1997 and to Fiscal 1998 was  principally  attributable  to
completion  of the  facility  construction  and  equipment  purchases in Alabama
associated  with the  consolidation  of the  operations of WCFT and WJSU and the
purchase of a corporate  aircraft in Fiscal 1997.  Capital  expenditures  in the
normal  course of business are financed  from cash flow from  operations or with
capitalized leases and are primarily for the acquisition of technical  equipment
and  vehicles  to support  operations.  The  Company  anticipates  that  capital
expenditures   for  Fiscal  1999  will  approximate   $10,000,   which  includes
approximately   $2,000  for   completion  of  the  project  to  enable  WJLA  to
simultaneously  broadcast its programming over its second channel  authorized to
transmit a digital  television  signal.  Management  expects  that the source of
funds  for these  anticipated  capital  expenditures  will be cash  provided  by
operations and capitalized  leases. The Company has a $10,000 annually renewable
lease credit facility for the purpose of financing  capital  expenditures  under
capitalized  leases.  The equipment  under lease is at interest rates which vary
according to the lessor's cost of funds.  This facility expires on March 1, 1999
and is renewable annually on mutually  satisfactory terms. The Company currently
intends to renew this facility.  At September 30, 1998,  $5,756 was  outstanding
under this lease credit facility.

The Company  regularly enters into program  contracts for the right to broadcast
television  programs produced by others and program commitments for the right to
broadcast  programs in the future.  Such  programming  commitments are generally
made to replace  expiring or canceled  program rights.  During Fiscal 1996, 1997
and 1998, the Company made cash payments of approximately  $15,700,  $19,500 and
$17,600, respectively, for rights to television programs. The Fiscal 1997 amount
includes the approximate $2,000 non-recurring program expense resulting from the
Company's early termination of a program contract. As of September 30, 1998, the
Company had commitments to acquire further program rights through  September 30,
2005 totaling  $36,312 and  anticipates  cash  payments for program  rights will
approximate  $18,000 per year for the foreseeable  future. The Company currently
intends to fund these commitments with cash provided by operations.

                                      -34-
<PAGE>

Based upon the Company's current level of operations,  management  believes that
available cash,  together with available  borrowings  under the revolving credit
facility  and lease  credit  facility,  will be adequate  to meet the  Company's
anticipated future  requirements for working capital,  capital  expenditures and
scheduled payments of interest on its debt for the next twelve months.

ACC's cash flow from  operations and consequent  ability to service its debt is,
in part,  dependent upon the earnings of its  subsidiaries  and the distribution
(through  dividends  or  otherwise)  of those  earnings  to ACC,  or upon loans,
advances  or  other  payments  of  funds by  those  subsidiaries  to ACC.  As of
September 30, 1998, 75% of the assets of ACC were held by operating subsidiaries
and for Fiscal 1998,  approximately  50% of ACC's net  operating  revenues  were
derived from the operations of ACC's subsidiaries.

Income Taxes

The operations of the Company are included in a consolidated  federal income tax
return  filed  by  Perpetual.  In  accordance  with the  terms of a tax  sharing
agreement  between the Company and Perpetual,  the Company is required to pay to
Perpetual  its  federal  income tax  liability,  computed  based upon  statutory
federal income tax rates applied to the Company's  consolidated  taxable income.
Taxes payable to Perpetual are not reduced by losses generated in prior years by
the Company.  In addition,  the amount payable by the Company to Perpetual under
the tax  sharing  agreement  is not  reduced  if losses of other  members of the
Perpetual  group are  utilized  to offset  taxable  income  of the  Company  for
purposes of the Perpetual consolidated federal income tax return.

The  Company  files  state  income tax  returns  in the  District  of  Columbia,
Virginia, Maryland, Arkansas, Oklahoma and South Carolina. Separate state income
tax returns are filed by the Company's subsidiaries, except for KATV, KTUL, WCIV
and WSET.  The  operations of KATV,  KTUL and WCIV are included in the Company's
state income tax returns due to their status as single-member  limited liability
companies. The operations of WSET as well as the Company's  Virginia-apportioned
operations  are included in a combined  state income tax return filed with other
affiliates. The resulting state income tax liability is not reduced if losses of
the  affiliates  are used to offset the Virginia  taxable income of WSET and the
Company for purposes of the combined state income tax return.

The provision for income taxes is  determined  in accordance  with  Statement of
Financial  Accounting  Standards (SFAS) No. 109,  "Accounting for Income Taxes,"
which requires that the  consolidated  amount of current and deferred income tax
expense  for a group that files a  consolidated  income tax return be  allocated
among  members  of  the  group  when  those  members  issue  separate  financial
statements.  Perpetual and, prior to the  Contribution,  Westfield,  allocated a
portion of their respective consolidated current and deferred income tax expense
to the Company as if the Company and its subsidiaries  were separate  taxpayers.
The Company  records  deferred tax assets,  to the extent it is considered  more
likely  than not that  such  assets  will be  realized  in future  periods,  and
deferred  tax  liabilities  for the tax effects of the  differences  between the
bases of its assets and liabilities for tax and financial reporting purposes. To
the extent a deferred  tax asset  would be  recorded  due to the  incurrence  of
losses  for  federal  income  tax  purposes,  any  such  benefit

                                      -35-
<PAGE>

recognized is  effectively  distributed to Perpetual as such benefit will not be
recognized in future years pursuant to the tax sharing agreement.

Inflation

The impact of inflation on the Company's  consolidated  financial  condition and
consolidated  results of  operations  for each of the periods  presented was not
material.

Year 2000 Compliance

The Year 2000 issue,  common to most companies,  results from computer programs,
computer  equipment  and embedded  microprocessors  using two digits rather than
four to define the applicable year. Computer applications and equipment that use
date-sensitive software or date-sensitive embedded microprocessors may recognize
a date of "00" as the year 1900 rather than the year 2000. As the Company relies
on various technologies throughout its business operations,  the Year 2000 issue
could  result in a system  failure  or  miscalculations  causing  disruption  of
operations.

The Company has undertaken  various  initiatives to ensure that its  operational
and financial  reporting  systems and equipment  with embedded  technology  will
function  properly  with respect to dates in the Year 2000 and  thereafter.  The
Company is progressing through a comprehensive plan which includes the following
phases:   (i)   identification   of   mission-critical   operating  systems  and
applications;  (ii) inventory of all applications and equipment at risk of being
date  sensitive to the Year 2000;  (iii)  assessment and evaluation of Year 2000
issues; (iv) system modification,  upgrade or replacement; (v) testing; and (vi)
development of contingency plans in the event that  modifications,  upgrades and
replacements  are not completed  timely or do not fully  remediate the Year 2000
issues.

To implement the plan, the Company has established  Year 2000 teams from each of
its television  stations that are responsible for analyzing the Year 2000 impact
on operations  and for  formulating  appropriate  strategies to resolve the Year
2000  issues.  The  Company  has  generally  completed  the  identification  and
inventory  phases  and is  actively  managing  projects  in the  assessment  and
remediation phases of the Year 2000 plan. The Company's  assessment phase of the
plan also  includes  contacting  significant  third  party  vendors  and service
providers  in an effort to determine  the state of their Year 2000  readiness as
all computer  software utilized by the Company is purchased or leased from third
party  vendors.  The  Company  is  undertaking  formal  communications  with its
significant  vendors and  service  providers  and is  monitoring  responses  and
implementing additional follow-up measures as necessary.

The  Company's  plan of  remediation  includes a combination  of installing  new
applications  and  equipment,  upgrading  existing  applications  and equipment,
retiring  obsolete systems and equipment and confirming  significant third party
compliance.  A summary  of  certain of the  Company's  mission-critical  systems
follows:

                                      -36-
<PAGE>

The Company receives network and first-run syndicated programming via satellite.
The Company's  receipt of that  programming is dependent upon the ABC television
network and program  syndicators  resolving  their Year 2000 issues.  Based upon
communications from the ABC television  network,  the Company does not currently
anticipate any disruptions in receiving  programming from ABC. The Company is in
the process of making  inquiries  of program  syndicators  as to their Year 2000
status.  In the event of any  programming  disruptions,  the Company has certain
alternative programming options that it would plan to consider.

The Company uses advertising  inventory management software to manage,  schedule
and bill advertising at each of the Company's television stations. This software
is licensed  from a single  vendor that has  warranted  the system for Year 2000
compliance and advised the Company of the satisfactory completion of a Year 2000
test of the software by other users.

The  Company  utilizes  equipment  and  software to automate  the  insertion  of
advertising  into program breaks.  This equipment and software at certain of the
Company's  television  stations  must be  upgraded  in  order  to be  Year  2000
compliant.  The Company expects to complete  installation of the upgrades by the
end of the third  quarter of Fiscal 1999.  Failure of this software or equipment
would not materially disrupt the Company's  business  operations as this process
can also be performed manually.

The Company uses various  broadcast and studio equipment to produce and transmit
its broadcast signals.  The Company is currently  communicating with third party
vendors and testing  the  equipment  with  respect to embedded  technology.  The
results of the  procedures  thus far have given the Company no reason to believe
that the equipment will not continue to function after 1999. If such  procedures
indicate  that any of the  equipment  will be  impacted  by the Year 2000 issue,
upgrades or replacements will be necessary.

To  date,  costs  toward  achieving  Year  2000  compliance,  including  capital
expenditures, have not been material to the Company's results of operations, its
cash flow or its  financial  position,  and such  costs are not  expected  to be
material in Fiscal 1999 or 2000. Based on the status of the Company's assessment
to date, which is incomplete and ongoing, costs of the Company's Year 2000 plan,
including  those incurred to date, are currently  expected not to exceed $2,000.
Such  costs  have  been,  and  are  expected  to  be,  principally  for  capital
expenditures for replacement  systems.  These systems generally provide enhanced
capabilities and  functionality as well as Year 2000 compliance.  The costs will
be funded with cash provided by  operations.  This  estimate  assumes that third
party vendors have accurately assessed the compliance of their products and that
they will  successfully  correct issues in non-compliant  products.  The Company
does not separately  track internal costs  associated  with the Year 2000 issue;
however,  such costs are not considered to be significant and principally relate
to payroll costs of existing  engineering  personnel.  The Company believes that
none of its other significant  information  technology projects has been delayed
as a result of the Year 2000 compliance efforts.

Although the Company has not adopted a formal overall contingency plan as of the
present  time, it has assessed,  and will continue to assess,  alternatives  and
other specific  contingency plans at the individual project level as highlighted
above.

                                      -37-
<PAGE>

The Company may discover additional Year 2000 issues, including that remediation
or  contingency  plans are not  feasible or that the costs of such plans  exceed
current  expectations.  In many cases, the Company is relying on assurances from
third parties that their systems or that new or upgraded systems acquired by the
Company  will be Year 2000  compliant.  The failure of systems of the Company or
third  parties  could  cause a material  disruption  in the  Company's  business
operations.  In addition,  disruptions in the general economy as a result of the
Year 2000 issue could lead to a reduction of  advertising  spending  which could
adversely  affect the Company.  The Company will continue to evaluate the nature
of  these  risks,  but at this  time  management  is  unable  to  determine  the
probability that any such risk will occur, or if it does occur, what the nature,
length or other effects, if any, it may have on the Company.

The Company will continue to fulfill the elements of its Year 2000 plan in order
to mitigate the impact that any Year 2000 issues may have on the Company.  While
there can be no assurance  that the  Company's  systems or equipment or those of
third  parties on which the  Company  relies  will be Year 2000  compliant  in a
timely manner or that the  Company's or third  parties'  contingency  plans will
mitigate the effects of any  noncompliance,  management  believes that it has an
effective program to resolve the Year 2000 issue in a timely manner and that its
Year 2000 issues will be remediated.

The  information  set forth above is deemed by the Company to  constitute  "Year
2000  Statements"  and to contain "Year 2000  Readiness  Disclosure"  within the
meaning of the "Year 2000 Information and Readiness Act. "

New Accounting Standards

Statements  of  Financial   Accounting  Standards  (SFAS)  No.  130,  "Reporting
Comprehensive  Income"  and SFAS No.  131,  "Disclosures  about  Segments  of an
Enterprise and Related Information" become effective during the Company's Fiscal
1999,  but  will  have  no  impact  on  the  Company's   consolidated  financial
statements.

                                      -38-
<PAGE>




                ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES

Not Applicable.

                    ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
                             AND SUPPLEMENTARY DATA

See Index on page F-1.

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

Not Applicable.

                                      -39-
<PAGE>


                                    PART III

                    ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
                                OF THE REGISTRANT

    Executive officers and directors of ACC are as follows:

         Name             Age         Title
         ----             ---         -----      
Joe L. Allbritton          73   Chairman of the Executive Committee and Director
Barbara B. Allbritton      61   Vice President and Director
Lawrence I. Hebert         52   Chairman, Chief Executive Officer and Director
Robert L. Allbritton       29   President and Director
Frederick J. Ryan, Jr.     43   Vice Chairman, Executive Vice  President, 
                                Chief Operating Officer and Director
Jerald N. Fritz            47   Vice President, Legal and Strategic Affairs,
                                General Counsel
Stephen P. Gibson          33   Vice President and Chief Financial Officer
Ray P. Grimes II           49   Vice President, Broadcast Operations, Deputy
                                Chief Operating Officer

 JOE L.  ALLBRITTON  is the  founder  of ACC and was  Chairman  of the  Board of
Directors from its inception  until 1998. In April 1998, Mr.  Allbritton  became
Chairman  of the  Executive  Committee  of the  Board of  Directors  of ACC.  In
addition to his position with ACC, Mr.  Allbritton has served as Chairman of the
Board of Riggs National  Corporation  ("Riggs") (owner of banking  operations in
Washington,  D.C., Maryland, Virginia, Florida and internationally) from 1981 to
the present;  Chairman of the Board of Riggs Bank N.A. ("Riggs Bank") since 1983
and its Chief Executive  Officer since 1982;  Director of Riggs Bank Europe Ltd.
since 1984 and its  Chairman of the Board since 1992;  Chairman of the Board and
owner since 1958 of Perpetual  (owner of ACC and 80% owner through  Allnewsco of
NewsChannel  8,  a  Virginia-based  cable  programming  service);   Chairman  of
Allnewsco  since its  inception  in 1990;  Chairman of the Board and owner since
1988 of  Westfield;  Chairman of the Board of Houston  Financial  Services  Ltd.
Since 1977;  Chairman of the Board of WSET since 1974;  a Manager of KATV,  KTUL
and WCIV since 1997;  Chairman of the Board of Allfinco,  Harrisburg  Television
and TV  Alabama  since  1995;  Chairman  of the  Board  of  AGI  and  Allbritton
Jacksonville,  Inc.  ("AJI")  since  1996;  and a Trustee and  President  of The
Allbritton  Foundation  since 1971. Mr.  Allbritton is the husband of Barbara B.
Allbritton and the father of Robert L. Allbritton.

BARBARA B.  ALLBRITTON has been a Director of ACC since its inception and one of
its Vice  Presidents  since 1980.  In addition to her  position  with ACC,  Mrs.
Allbritton  has been a  Director  of  Riggs  since  1991;  a  Director  and Vice
President of WSET since 1976; a Vice  President and Director of Perpetual  since
1978;  a Director  of Houston  Financial  Services  since  1977;  a Director  of
Allnewsco since 1990; a Trustee and Vice President of The Allbritton  Foundation
since 1971; a Director of Allfinco,  Harrisburg  Television and TV Alabama since
1995; a Manager of KATV, KTUL and WCIV since 1997; and a Director of AGI and AJI
since 1996.  Mrs.  Allbritton is the wife of Joe L. Allbritton and the mother of
Robert L. Allbritton.

                                      -40-
<PAGE>

LAWRENCE I. HEBERT has been Chairman of the Board and Chief Executive Officer of
ACC since  April  1998 and a Director  of ACC since  1981.  He also  serves as a
member of the Executive Committee of the Board of Directors of ACC. He served as
Vice Chairman of the Board of ACC from 1983 to 1998,  and was its President from
1984 to 1998.  He has been a Director of Perpetual  since 1980 and its President
since 1981;  President  of  Westfield  since 1988;  President  and a Director of
Westfield  News  Publishing,  Inc.  since 1991; a Director of WSET since 1982; a
Manager of KATV, KTUL and WCIV since 1997; Vice Chairman of the Board of Houston
Financial Services since 1977; a Director of Allnewsco since 1989; President and
a Director of ATP since 1989; a Vice  President and a Director of Allfinco since
1995; and a Director of Harrisburg  Television and TV Alabama since 1995. He has
been  President  and a Director  of AGI and a  Director  of AJI since  1996.  In
addition,  Mr. Hebert was Vice Chairman of the Board of Riggs from 1988 to 1993,
and has been a Director  of Riggs  since  1988;  a Director of Riggs Bank Europe
Ltd.  since  1987;  a Director  of Riggs Bank from 1981 to 1988;  a Director  of
Allied Capital II Corporation  (venture  capital fund) since 1989; and a Trustee
of The Allbritton Foundation since 1997.

ROBERT L.  ALLBRITTON  has been President of ACC since April 1998 and a Director
of ACC since 1993. He also serves as a member of the Executive  Committee of the
Board of  Directors  of ACC. He served as  Executive  Vice  President  and Chief
Operating  Officer of ACC from 1994 to 1998. He has been a Director of Allnewsco
since  1992;  a Director  of Riggs Bank from 1994 to 1997 and Riggs Bank  Europe
Ltd.  since  1994;  a  Director  of Riggs  since  1994;  and a Trustee  and Vice
President of The  Allbritton  Foundation  since 1992.  He has been a Director of
Perpetual  since  1993;  President  and  Director  of  Allfinco  and  Harrisburg
Television  since 1995;  Vice President and a Director of TV Alabama since 1995;
Vice  President and a Director of AGI since 1996;  Vice President and a Director
of AJI since 1996 and  President  of KTUL since  1997.  He has been a Manager of
KATV, KTUL and WCIV since 1997. He is the son of Joe L. and Barbara B.
Allbritton.

FREDERICK J. RYAN, JR. has been  Executive  Vice  President and Chief  Operating
Officer of ACC since  April 1998 and a Director  and Vice  Chairman of ACC since
1995.  He served as Senior Vice  President of ACC from 1995 to 1998.  He is also
Executive Vice President of KATV, KTUL, WSET, WCIV,  Harrisburg  Television,  TV
Alabama,  AJI and  Allnewsco.  He previously  served as Chief of Staff to former
President  Ronald  Reagan  (1989-95) and Assistant to the President in the White
House (1982-89).  Prior to his government service, Mr. Ryan was an attorney with
the Los Angeles firm of Hill, Farrer and Burrill. Mr. Ryan presently serves as a
Director of Ford's  Theatre,  Vice  Chairman of the Ronald  Reagan  Presidential
Library  Foundation and Trustee of Ronald Reagan Institute of Emergency Medicine
at  George  Washington  University.  Mr.  Ryan  is a  member  of  the  Board  of
Consultants  for Riggs Bank and a Director  of Riggs Bank  Europe Ltd. in London
since 1996.

JERALD N.  FRITZ has been a Vice  President  of ACC since  1987,  serving as its
General Counsel and overseeing  strategic planning and governmental  affairs. He
also has served as a Vice  President  of  Westfield  and ATP since 1988,  a Vice
President of Allnewsco  since 1989 and a Vice  President of 78 Inc. and Allfinco
since 1995. He has been a Vice  President of AGI since 1996.  From 1981 to 1987,
Mr. Fritz held several positions with the FCC,  including Chief of Staff,  Legal
Counsel  to the 

                                      -41-
<PAGE>

Chairman and Chief of the Common Carrier  Bureau's  Tariff  Division.  Mr. Fritz
practiced  law  with  the  Washington,  D.C.  firm  of  Pierson,  Ball  &  Dowd,
specializing in  communications  law from 1978 to 1981 and from 1980 to 1983 was
on  the  adjunct  faculty  of  George  Mason   University  Law  School  teaching
communications  law and policy. Mr. Fritz began his legal career with the FCC in
1976 and began his  career in  broadcasting  in 1973 with  WGN-TV,  Chicago.  He
currently  serves as a member of the Governing  Committee of the  Communications
Forum of the American Bar Association,  Futures and Copyright  Committees of the
National  Association  of  Broadcasters  and  Legislative  Committee  of the ABC
Affiliates Association.

STEPHEN P. GIBSON has been a Vice President of ACC since 1997 when he joined the
Company.  He  served  as Vice  President  and  Controller  and was  named  Chief
Financial  Officer in November  1998.  He is also Vice  President of AGI,  KATV,
KTUL, WSET, WCIV, Allfinco, Harrisburg Television, TV Alabama, ATP, ANB, AJI and
Allnewsco.  Prior to joining ACC, Mr. Gibson served as Controller for COMSAT RSI
Plexsys Wireless Systems,  a provider of wireless  telecommunications  equipment
and  services,  from 1994 to 1997.  From 1987 to 1994,  Mr.  Gibson held various
positions with the accounting firm of Price  Waterhouse LLP, the latest as Audit
Manager.

RAY P.  GRIMES II has been with ACC since  September  1993.  He was  Director of
Cable  Enterprises/New  Business Development for ACC from April 1994 until April
1995 when he became Vice  President  of  Broadcast  Operations  and Deputy Chief
Operating  Officer.  He has also served as the Acting  General  Manager for WJLA
from December 1994 until March 1995 and the Acting General Manager for WHTM from
November 1996 until  February  1997 and from October 1998 to the present.  Since
1995 he has been a Vice President of Harrisburg Television and TV Alabama. Prior
to joining ACC, Mr. Grimes was associated  with United  Cable/United  Artist/TCI
Cable from 1988 through 1993.

                                      -42-
<PAGE>


                         ITEM 11. EXECUTIVE COMPENSATION

The  following  table  sets  forth  compensation  paid  to the  Company's  Chief
Executive  Officer  and the  four  most  highly  compensated  Company  executive
officers for Fiscal 1998, 1997 and 1996:
<TABLE>
<CAPTION>

                                      Summary Compensation Table (1)

         Name and                Fiscal                                      Other Annual            All Other
    Principal Position            Year         Salary          Bonus         Compensation          Compensation
    ------------------            ----         ------          -----         ------------          ------------
<S>                             <C>          <C>             <C>         <C>                     <C>    
Joe L. Allbritton <F2>           1998        $550,000                                              $106,300 <F3>   
 Chairman of the Executive       1997         550,000                                               115,500 <F3>
 Committee                       1996         550,000                                               115,500 <F3>

Lawrence I. Hebert <F1><F2>                                                                                         
 Chairman and Chief
 Executive Officer               1998         150,000         $50,000

Frederick J. Ryan, Jr. <F4>      1998         150,000          55,000                                 4,700 <F5>
 Chief Operating Officer         1997         150,000                                                 4,000 <F5>
                                 1996         150,000                                                 3,500 <F5>

Jerald N. Fritz  <F6>            1998         160,000          55,000                                 5,200 <F5>
 Vice President, Legal           1997         150,000          50,000                                 4,800 <F5>
 and Strategic Affairs           1996         140,000          50,000                                 5,300 <F5>

Henry D. Morneault <F7>          1998         160,000          50,000                                 5,000 <F5>
 Former Chief Financial Officer  1997         150,000          55,000                                 4,900 <F5>
                                 1996         136,000          50,000                                 5,400 <F5>

Ray P. Grimes II                 1998         190,000          20,000       $34,600 <F8>              4,000 <F5>
 Deputy Chief Operating          1997         185,000          30,000        30,200 <F8>              4,700 <F5>
 Officer                         1996         185,000          25,000        38,400 <F8>              3,800 <F5>
----------
<FN>

<F1>     Lawrence I. Hebert,  Chairman and Chief  Executive  Officer of ACC, and
         Robert L. Allbritton,  President of ACC, are paid cash  compensation by
         Perpetual  for  services to  Perpetual  and other  interests  of Joe L.
         Allbritton,  including ACC.  Except for Mr. Hebert for Fiscal 1998, the
         allocated  portion of such  compensation  to ACC is less than $100,000,
         and is, therefore, not included herein.
<F2>     In  April  1998,  Lawrence I. Hebert  was named  Chairman  and Chief
         Executive Officer of ACC, succeeding Joe L. Allbritton.
<F3>     Represents  the imputed  premium  cost  related to certain  split 
         dollar life insurance policies on the life of Mr. Allbritton.
         The annual premiums on such policies are paid by ACC. Upon the death of
         the insured,  ACC will receive the cash value of the policies up to the
         amount of its investments,  and the remaining  proceeds will be paid to
         the insured's  beneficiary.  The imputed  premium cost is calculated on
         the  difference  between  the  face  value of the  policy  and the cash
         surrender value.
<F4>     Frederick J. Ryan, Jr. receives additional  compensation from Perpetual
         for services to  Perpetual  and other  interests of Joe L.  Allbritton,
         including the Company.  This  additional  compensation is not allocated
         among these interests, and the Company does not reimburse Perpetual for
         any portion of this additional compensation to Mr. Ryan. The portion of
         the additional  compensation  paid by Perpetual to Mr. Ryan that may be
         attributable  to his  services to the Company has not been  quantified.
         Such portion is not material to the consolidated financial condition or
         results of operations of the Company.
<F5>     These amounts reflect annual contributions by ACC to the Company's
         401(k) Plan.
<F6>     Jerald N. Fritz is paid compensation by ACC for services to the Company
         and Perpetual.  Perpetual has  reimbursed  ACC for $12,000,  $4,400 and
         $4,600  of Mr.  Fritz's  compensation  in Fiscal  1996,  1997 and 1998,
         respectively.
<F7>     Henry D.  Morneault  was paid  compensation  by ACC for services to the
         Company  and  Perpetual.  Perpetual  has  reimbursed  ACC for  $33,800,
         $37,500 and $24,000 of Mr.  Morneault's  compensation  in Fiscal  1996,
         1997 and 1998,  respectively.  Mr.  Morneault served as Chief Financial
         Officer of ACC from 1994 until November 1998.
<F8>     Represents  in Fiscal 1998,  the  compensation  related to an incentive
         trip  ($10,600)  and other  miscellaneous  items; in  Fiscal  1997, the
         compensation   related  to  country  club  fees   ($18,100)  and  other
         miscellaneous  items; and in Fiscal 1996, the compensation related to a
         company-provided  automobile  ($10,200),  incentive  trip ($11,600) and
         country club fees ($16,600).
</FN>
</TABLE>
                                      -43-
<PAGE>

The Company does not have a Compensation  Committee  of its Board of  Directors.
Compensation of executive officers is determined by Joe L. Allbritton,  Lawrence
I. Hebert and Robert L. Allbritton.  Directors of the Company are not separately
compensated for membership on the Board of Directors.


                     ITEM 12. SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

The  authorized  capital stock of ACC consists of 20,000 shares of common stock,
par value $0.05 per share (the "ACC Common Stock"), all of which is outstanding,
and 1,000 shares of preferred  stock,  200 shares of which have been  designated
for issue as Series A Redeemable Preferred Stock, par value $1.00 per share (the
"Series A Preferred Stock"), no shares of which are issued and outstanding.

ACC Common Stock

Joe L.  Allbritton  controls  Perpetual.  Perpetual owns 100% of the outstanding
common  stock of AGI,  and AGI owns 100% of the  outstanding  ACC Common  Stock.
There is no established public trading market for ACC Common Stock.

Each  share of ACC  Common  Stock  has an equal  and  ratable  right to  receive
dividends  when and as declared by the Board of  Directors  of ACC out of assets
legally available therefor.

In the event of a liquidation,  dissolution or winding up of ACC, holders of ACC
Common Stock are entitled to share ratably in assets  available for distribution
after  payments to creditors and to holders of any  preferred  stock of ACC that
may at the  time  be  outstanding.  The  holders  of ACC  Common  Stock  have no
preemptive  rights to subscribe to  additional  shares of capital  stock of ACC.
Each  share  of ACC  Common  Stock is  entitled  to one  vote in  elections  for
directors and all other matters submitted to a vote of ACC's stockholder.
    
                                  -44-
<PAGE>


             ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
                             (Dollars in thousands)


Distributions to Related Parties

The  Company  periodically  makes  advances  in the  form  of  distributions  to
Perpetual.  For Fiscal  1998,  the Company  made cash  advances to  Perpetual of
$137,992.  In Fiscal 1998,  Perpetual made  repayments on these cash advances of
$118,755.  In addition,  during Fiscal 1998, the Company was charged for federal
income taxes by Perpetual in the amount of $433. As a result,  the net change in
distributions to related parties during Fiscal 1998 was $18,804. The advances to
Perpetual are non-interest  bearing and, as such, do not reflect market rates of
interest-bearing loans to unaffiliated third parties.

At  present,  the primary  source of  repayment  of net  advances is through the
ability of the Company to pay dividends or make other  distributions,  and there
is no immediate intent for the amounts to be repaid. Accordingly, these advances
have been treated as a reduction of  stockholder's  investment and are described
as "distributions" in the Company's Consolidated Financial Statements.

During Fiscal 1991,  the Company made a $20,000  11.06% loan to Allnewsco.  This
amount has been reflected in the Company's  Consolidated Financial Statements on
a  consistent  basis with  other  distributions  to owners.  The loan had stated
repayment terms  consisting of annual  principal  installments of  approximately
$2,220  commencing  January 1997  through  January 2005 and payments of interest
semi-annually.  During Fiscal 1997 and 1998, the Company  deferred the first two
annual principal  installment  payments  pending  renegotiation of the repayment
terms.  Effective July 1, 1998, the note was amended to extend the maturity date
to January 2008 and defer all principal  installments  until maturity,  with the
principal balance also due upon demand. In exchange for the amendment, Allnewsco
paid to the Company the amount of $650.  Interest payments on the loan have been
made in accordance  with the terms of the note, and the Company  expects it will
continue to receive such payments on a current basis. To date, interest payments
from  Allnewsco  have been funded by advances from  Perpetual to Allnewsco.  The
Company  anticipates  that such payments will be funded in a similar  manner for
the foreseeable future.  However,  there can be no assurance that Allnewsco will
have the ability to make such interest payments in the future.

Under  the  terms  of  the  Company's  borrowing  agreements,  future  advances,
distributions   and  dividends  to  related   parties  are  subject  to  certain
restrictions.  The Company  anticipates that, subject to such restrictions,  ACC
will make  distributions and loans to related parties in the future.  Subsequent
to September 30, 1998 and through November 13, 1998, the Company made additional
net distributions to owners of approximately $15,813.

Management Fees

Management  fees of $344 were paid to  Perpetual by the Company for Fiscal 1998.
The Company also paid executive  compensation  in the form of management fees to
Joe L. Allbritton and Robert L. Allbritton for Fiscal 1998 in the amount of $550
and $60, respectively.  The Company expects to

                                      -45-
<PAGE>

pay  management  fees to  Perpetual,  Mr. Joe L.  Allbritton  and Mr.  Robert L.
Allbritton during Fiscal 1999 of approximately $500, $550 and $80, respectively.
The Company  believes that payments to Perpetual,  Mr. Joe L. Allbritton and Mr.
Robert L.  Allbritton  will  continue  in the  future and that the amount of the
management fees is at least as favorable to the Company as those  prevailing for
comparable transactions with or involving unaffiliated parties.

Income Taxes

The operations of the Company are included in a consolidated  federal income tax
return  filed  by  Perpetual.  In  accordance  with the  terms of a tax  sharing
agreement  between the Company and Perpetual,  the Company is required to pay to
Perpetual  its  federal  income tax  liability,  computed  based upon  statutory
federal income tax rates applied to the Company's  consolidated  taxable income.
Taxes payable to Perpetual are not reduced by losses generated in prior years by
the Company.  In addition,  the amount payable by the Company to Perpetual under
the tax  sharing  agreement  is not  reduced  if losses of other  members of the
Perpetual  group are  utilized  to offset  taxable  income  of the  Company  for
purposes of the consolidated federal income tax return.

The  Company  files  state  income tax  returns  in the  District  of  Columbia,
Virginia, Maryland, Arkansas, Oklahoma and South Carolina. Separate state income
tax returns are filed by the Company's subsidiaries, except for KATV, KTUL, WCIV
and WSET.  The  operations of KATV,  KTUL and WCIV are included in the Company's
state income tax returns due to their status as single-member  limited liability
companies. The operations of WSET as well as the Company's  Virginia-apportioned
operations  are included in a combined  state income tax return filed with other
affiliates. The resulting state income tax liability is not reduced if losses of
the  affiliates  are used to offset the Virginia  taxable income of WSET and the
Company for purposes of the combined state income tax return.

The provision for income taxes is  determined  in accordance  with  Statement of
Financial  Accounting  Standards (SFAS) No. 109,  "Accounting for Income Taxes,"
which requires that the  consolidated  amount of current and deferred income tax
expense  for a group that files a  consolidated  income tax return be  allocated
among  members  of  the  group  when  those  members  issue  separate  financial
statements.  Perpetual,  and prior to the Contribution,  Westfield,  allocated a
portion of their respective consolidated current and deferred income tax expense
to the Company as if the Company and its subsidiaries  were separate  taxpayers.
The Company  records  deferred tax assets,  to the extent it is considered  more
likely  than not that  such  assets  will be  realized  in future  periods,  and
deferred  tax  liabilities  for the tax effects of the  differences  between the
bases of its assets and liabilities for tax and financial reporting purposes. To
the extent a deferred  tax asset  would be  recorded  due to the  incurrence  of
losses  for  federal  income  tax  purposes,  any  such  benefit  recognized  is
effectively  distributed  to Perpetual as such benefit will not be recognized in
future years pursuant to the tax sharing agreement.

Office Space

ACC leases  corporate  headquarters  space  from  Riggs  Bank which owns  office
buildings in Washington,  D.C. Riggs Bank is a wholly-owned subsidiary of Riggs,
approximately  37.9% of the

                                      -46-
<PAGE>
common  stock of which is  deemed to be  beneficially  owned by Riggs' Chairman,
Joe  L. Allbritton,  including  6.6% over  which  he  may be  deemed  to  share
beneficial  ownership  with  Barbara B.  Allbritton.  During Fiscal  1998,  ACC
incurred  expenses  to Riggs Bank of $263 for this space.  ACC expects to pay
approximately  $265 for such space  during Fiscal 1999.  Management  believes
the same terms and conditions would have prevailed had they been negotiated with
a nonaffiliated  company.  Local Advertising Revenues


Although  WJLA did not receive any local  advertising  revenues  from Riggs Bank
during Fiscal 1998, it is  anticipated  that Riggs Bank may advertise on WJLA in
the future.  The amount of  advertising  it may purchase is unknown.  Management
believes that the terms of the transactions  would be substantially  the same or
at least as favorable to ACC as those  prevailing  for  comparable  transactions
with or involving nonaffiliated companies.


                                      -47-
<PAGE>


                                     PART IV

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


(a) The following documents are filed as part of this report:

     (1) Consolidated Financial Statements

         See Index on p. F-1 hereof.

     (2) Financial Statement Schedule II - Valuation and Qualifying Accounts
          and Reserves

         See Index on p. F-1 hereof.

     (3) Exhibits

         See Index on p. A-1 hereof.

(b) No reports on Form 8-K were filed during the fourth quarter of Fiscal 1998.

                                      -48-
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                       






                        ALLBRITTON COMMUNICATIONS COMPANY

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                          Page

Report of Independent Accountants.....................................     F-2
Consolidated Balance Sheets as of September 30, 1997 and 1998.........     F-3
Consolidated Statements of Operations and Retained Earnings
 for the Years Ended September 30, 1996, 1997 and 1998................     F-4
Consolidated Statements of Cash Flows for the Years Ended
 September 30, 1996, 1997 and 1998...................................      F-5
Notes to Consolidated Financial Statements...........................      F-6
Financial Statement Schedule for the Years Ended
 September 30, 1996, 1997 and 1998
 II- Valuation and Qualifying Accounts and Reserves..................     F-21

                                      F-1
<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholder
Allbritton Communications Company

In our opinion,  the consolidated  financial  statements  listed in the index on
page F-1 present fairly,  in all material  respects,  the financial  position of
Allbritton  Communications  Company (an  indirectly  wholly-owned  subsidiary of
Perpetual  Corporation) and its subsidiaries at September 30, 1997 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended  September 30, 1998, in conformity  with generally  accepted
accounting principles.  These financial statements are the responsibility of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in accordance  with  generally  accepted  auditing  standards  which
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,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.




PRICEWATERHOUSECOOPERS LLP

Washington, D.C.
November 13, 1998



                                      F-2
<PAGE>

<TABLE>
<CAPTION>


                        ALLBRITTON COMMUNICATIONS COMPANY
                           CONSOLIDATED BALANCE SHEETS
                 (Dollars in thousands except share information)

                                                                                          September 30,
                                                                                          -------------
                                                                                   1997                1998
                                                                                   ----                ----
<S>                                                                            <C>               <C>

              ASSETS
Current assets
     Cash and cash equivalents..............................................    $  7,421          $   13,849
     Accounts receivable, less allowance for doubtful
        accounts of $1,618 and $1,371.......................................      34,569              33,568
     Program rights.........................................................      15,244              17,199
     Deferred income taxes..................................................       2,617               1,706
     Interest receivable from related party.................................         492                 492
     Other..................................................................       2,405               2,003
                                                                                --------           ---------
        Total current assets................................................      62,748              68,817

Property, plant and equipment, net..........................................      51,921              47,559
Intangible assets, net......................................................     150,493             144,804
Deferred financing costs and other..........................................      10,477              10,856
Cash surrender value of life insurance......................................       4,674               5,648
Program rights .............................................................         664               1,837
                                                                                --------           ---------
                                                                                $280,977            $279,521
                                                                                 =======             =======

          LIABILITIES AND STOCKHOLDER'S INVESTMENT

Current liabilities
     Current portion of long-term debt......................................    $  1,320          $    1,436
     Accounts payable.......................................................       3,620               2,648
     Accrued interest payable...............................................      10,765              11,156
     Program rights payable.................................................      19,718              20,249
     Accrued employee benefit expenses......................................       3,728               4,860
     Other accrued expenses.................................................       5,079               4,257
                                                                                --------           ---------
        Total current liabilities...........................................      44,230              44,606

Long-term debt .............................................................     414,402             428,255
Program rights payable......................................................         966               1,722
Deferred rent and other.....................................................       3,067               3,436
Accrued employee benefit expenses...........................................       1,836               1,977
Deferred income taxes.......................................................       2,039               3,301
                                                                                --------          ----------
        Total liabilities...................................................     466,540             483,297
                                                                                 -------             -------

Commitments and contingent liabilities (Note 10)
Stockholder's investment
       Preferred stock, $1 par value, 800 shares authorized, none issued....         --                  --
       Common stock, $.05 par value, 20,000 shares authorized, issued
        and outstanding.....................................................           1                   1
       Capital in excess of par value.......................................       6,955               6,955
       Retained earnings....................................................      44,835              45,426
       Distributions to owners, net (Note 8)................................    (237,354)           (256,158)
                                                                                 -------             -------
        Total stockholder's investment......................................    (185,563)           (203,776)
                                                                                 -------             -------
                                                                                $280,977            $279,521
                                                                                 =======             =======

    See  accompanying   notes  to  consolidated financial statements.

</TABLE>
                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                        ALLBRITTON COMMUNICATIONS COMPANY
           CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
                             (Dollars in thousands)

                                                                          Years Ended September 30,
                                                                1996                1997               1998
                                                                ----                ----               ----   
<S>                                                           <C>               <C>                 <C>

Operating revenues, net...................................     $155,573           $172,828           $182,484
                                                                -------            -------            -------

Television operating expenses, excluding
  depreciation and amortization...........................       92,320            105,630            106,147
Depreciation and amortization.............................       10,257             19,652             18,922
Corporate expenses........................................        5,112              4,382              4,568
                                                               --------          ---------          ---------

                                                                107,689            129,664            129,637
                                                                -------            -------            -------

Operating income..........................................       47,884             43,164             52,847

Nonoperating income (expense)
  Interest income
     Related party........................................        2,212              2,212              2,222
     Other  ..............................................        1,032                221              1,117
  Interest expense........................................      (35,222)           (42,870)           (44,340)
  Other, net..............................................       (1,101)            (1,193)              (513)
                                                              ---------           --------           --------

Income before income taxes, minority interest and
  extraordinary loss......................................       14,805              1,534             11,333
Provision for income taxes................................        7,812              1,110              5,587
                                                               --------          ---------          ---------
Income before minority interest and extraordinary
   loss...................................................        6,993                424              5,746
Minority interest in net losses of consolidated
   subsidiaries...........................................        1,300                 --                 --
Extraordinary loss on early repayment of debt,
   net of income tax benefit of $5,387 in 1996
     and $3,176 in 1998...................................       (7,750)                --             (5,155)
                                                              ----------       -----------         ----------

Net income................................................          543                424                591
Retained earnings, beginning of year......................       62,940             45,102             44,835
Dividend from WSET and WCIV to
   Westfield (Note 8).....................................      (18,371)                --                 --
Tax benefit distributed...................................          (10)              (691)                --    
                                                             ----------          ----------       -----------

Retained earnings, end of year............................     $ 45,102           $ 44,835           $ 45,426
                                                                =======            =======            =======


 See     accompanying     notes    to consolidated financial statements.
</TABLE>
                                      F-4
<PAGE>

<TABLE>
<CAPTION>
                        ALLBRITTON COMMUNICATIONS COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

                                                                     Years Ended September 30,
                                                                     -------------------------
                                                                1996                1997                1998
                                                                ----                ----                ----
<S>                                                       <C>                <C>                 <C> 
Cash flows from operating activities:
 Net income.............................................   $    543           $     424           $     591
                                                              -------            --------            --------
 Adjustments to reconcile net income to net
    cash provided by operating activities:
   Depreciation and amortization........................     10,257              19,652              18,922
   Minority interest in net losses of
    consolidated subsidiaries...........................     (1,300)                --                   --
   Other noncash charges................................        997               1,182               1,267
   Noncash tax benefit distributed......................        --                 (691)                 --
   Extraordinary loss on early repayment of debt........      7,750                 --                5,155
   Provision for doubtful accounts......................        752                 576                 268
   Loss (gain) on disposal of assets....................         90                  28                 (53)
   Changes in assets and liabilities:
    (Increase) decrease in assets:
      Accounts receivable...............................     (1,130)             (5,926)                733
      Program rights....................................     (1,240)              1,042              (3,128)
      Receivable from related party.....................     (1,578)              1,578                  --
      Other current assets..............................         21                (342)                525
      Other noncurrent assets...........................     (1,370)               (545)               (270)
      Deferred income taxes.............................      1,686                 971                  --
     Increase (decrease) in liabilities:
      Accounts payable..................................      3,483              (2,471)               (972)
      Accrued interest payable..........................      6,249                  41                 391
      Program rights payable............................      1,589                (906)              1,287
      Accrued employee benefit expenses.................        547                 815               1,273
      Other accrued expenses............................        887                 257                (682)
      Deferred rent and other liabilities...............        137                (134)                369
      Deferred income taxes.............................         --                 --                2,346
                                                           --------             -------            --------
          Total adjustments ............................     27,827              15,127              27,431
                                                           --------             -------             -------
          Net cash provided by operating activities          28,370              15,551              28,022
                                                           --------             -------             -------
Cash flows from investing activities:
 Capital expenditures ..................................    (20,838)            (12,140)             (8,557)
 Purchase of option to acquire assets of WJSU...........    (10,000)             (5,348)                --
 Proceeds from disposal of assets.......................         85                 125                 367
 Acquisitions, net of cash acquired.....................   (135,656)                --                  --
 Minority interest investment in
  consolidated subsidiaries.............................      1,300                 --                  --
                                                           --------             -------         -----------
          Net cash used in investing activities.........   (165,109)            (17,363)             (8,190)
                                                            -------              ------             -------
Cash flows from financing activities:
 Proceeds from issuance of debt.........................    285,725                 --              150,000
 Deferred financing costs...............................     (7,605)                --               (4,481)
 Prepayment penalty on early repayment
    of debt.............................................    (12,934)                --               (5,842)
 (Repayments) draws under lines of credit, net..........     (5,000)             10,600             (12,700)
 Principal payments on long-term debt and
    capital leases......................................    (80,365)               (571)           (124,322)
 Distributions to owners, net of certain charges........    (47,397)            (52,597)           (134,814)
 Repayments of distributions to owners..................     12,785              39,693             118,755
 Other..................................................       (178)                --                  --
                                                           --------            ---------           --------
      Net cash provided by (used in) financing activities   145,031              (2,875)            (13,404)
                                                            -------             --------           --------
Net increase (decrease) in cash and cash equivalents....      8,292              (4,687)              6,428
Cash and cash equivalents, beginning of year............      3,816              12,108               7,421
                                                           --------             -------           ---------
Cash and cash equivalents, end of year..................  $  12,108           $   7,421          $   13,849
                                                           ========            ========           =========

  See  accompanying   notes  to  consolidated financial statements.

</TABLE>
                                      F-5
<PAGE>

                        ALLBRITTON COMMUNICATIONS COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             (Dollars in thousands)

NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

Allbritton  Communications  Company (the Company) is an indirectly  wholly-owned
subsidiary of Perpetual Corporation (Perpetual),  a Delaware corporation,  which
is controlled  by Mr. Joe L.  Allbritton.  The Company owns and/or  programs ABC
network-affiliated television stations serving seven diverse geographic markets:

         Station           Market
         WJLA              Washington, D.C.
         WBMA/WCFT/WJSU    Birmingham (Anniston and Tuscaloosa), Alabama
         WHTM              Harrisburg-Lancaster-York-Lebanon, Pennsylvania
         KATV              Little Rock, Arkansas
         KTUL              Tulsa, Oklahoma
         WSET              Roanoke-Lynchburg, Virginia
         WCIV              Charleston, South Carolina

The Company also engages in various  activities  relating to the  production and
distribution of television programming.

Consolidation-The  consolidated financial statements include the accounts of the
Company and its wholly and majority-owned  subsidiaries after elimination of all
significant intercompany accounts and transactions. Minority interest represents
a  minority  owner's  20%  share  of the  net  losses  of  two of the  Company's
subsidiaries, to the extent of the minority interest investment.

Use of estimates  and  assumptions-The  preparation  of financial  statements in
conformity with generally accepted accounting  principles requires management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and the reported  amounts of revenue and expenses
during the reporting  period.  Actual results could differ from those  estimates
and assumptions.

Revenue  recognition-Revenues are generated principally from sales of commercial
advertising and are recorded as the  advertisements  are broadcast net of agency
and national  representative  commissions  and music license  fees.  For certain
program  contracts which provide for the exchange of advertising time in lieu of
cash  payments  for the  rights to such  programming,  revenue  is  recorded  as
advertisements are broadcast at the estimated fair value of the advertising time
given in exchange for the program rights.

                                      F-6
<PAGE>


                        ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

Cash and cash  equivalents-The  Company considers all highly liquid  investments
purchased  with  original  maturities  of  three  months  or  less  to  be  cash
equivalents.

Program  rights-The  Company  has  entered  into  contracts  for the  rights  to
television programming. Payments related to such contracts are generally made in
installments  over the  contract  period.  Program  rights  which are  currently
available  and the  liability  for  future  payments  under such  contracts  are
reflected in the  consolidated  balance  sheets.  Program  rights are  amortized
primarily  using the  straight-line  method over the twelve month rental period.
Certain  program  rights with lives  greater than one year are  amortized  using
accelerated  methods.  Program rights expected to be amortized in the succeeding
year and amounts  payable  within one year are  classified as current assets and
liabilities,  respectively. The program rights are reflected in the consolidated
balance  sheets at the lower of  unamortized  cost or estimated  net  realizable
value  based on  management's  expectation  of the net  future  cash flows to be
generated by the programming.

Property, plant and equipment-Property, plant and equipment are recorded at cost
and depreciated over the estimated  useful lives of the assets.  Maintenance and
repair  expenditures  are charged to expense as incurred  and  expenditures  for
modifications  and improvements  which increase the expected useful lives of the
assets are capitalized. Depreciation expense is computed using the straight-line
method for buildings and  straight-line  and accelerated  methods for furniture,
machinery  and  equipment.   Leasehold  improvements  are  amortized  using  the
straight-line  method  over the lesser of the term of the  related  lease or the
estimated  useful lives of the assets.  The useful lives of property,  plant and
equipment for purposes of computing depreciation and amortization expense are:

    Buildings.................................................     15-40 years
    Leasehold improvements....................................      5-32 years
    Furniture, machinery and equipment
           and equipment under capital leases.................      3-20 years

Intangible  assets-Intangible  assets  consist of values  assigned to  broadcast
licenses and network  affiliations,  favorable terms on contracts and leases and
the option to acquire the assets of WJSU (the  Option) (see Note 3). The amounts
assigned  to  intangible  assets  were  based  on  the  results  of  independent
valuations  and are  amortized  on a  straight-line  basis over their  estimated
useful lives.  Broadcast licenses and network affiliations are amortized over 40
years,  the premiums for  favorable  terms on contracts and leases are amortized
over the terms of the  related  contracts  and leases (19 to 25 years),  and the
Option  is  amortized  over  the term of the  Option  and the  associated  local
marketing  agreement  (10 years).  The Company  assesses the  recoverability  of
intangible  assets on an ongoing  basis by  evaluating  whether  amounts  can be
recovered  through  undiscounted  cash  flows  over the  remaining  amortization
period.  Deferred  financing  costs-Costs  incurred in  connection  with the
issuance of long-term  debt are deferred and  amortized to other  nonoperating
expense on a straight-line basis over the term of the 

                                      F-7
<PAGE>


                        ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)


underlying  financing  agreement.  This method does not differ significantly
from the effective interest rate method.

Deferred  rent-Rent  concessions and scheduled rent increases in connection with
operating   leases  are  recognized  as  adjustments  to  rental  expense  on  a
straight-line basis over the associated lease term.

Concentration of credit risk-Financial  instruments that potentially subject the
Company to concentrations of credit risk consist principally of certain cash and
cash  equivalents  and  receivables  from  advertisers.  The Company invests its
excess cash with high-credit quality financial institutions and at September 30,
1998 had an overnight  repurchase  agreement  with a financial  institution  for
$12,401.  Concentrations  of  credit  risk  with  respect  to  receivables  from
advertisers  are limited as the  Company's  advertising  base  consists of large
national advertising  agencies and high-credit quality local advertisers.  As is
customary in the broadcasting  industry, the Company does not require collateral
for its credit sales which are typically due within thirty days.

Income  taxes-The  operations  of the  Company are  included  in a  consolidated
federal income tax return filed by Perpetual.  In accordance with the terms of a
tax sharing agreement between the Company and Perpetual, the Company is required
to pay to  Perpetual  its  federal  income tax  liability,  computed  based upon
statutory federal income tax rates applied to the Company's consolidated taxable
income.  Taxes payable to Perpetual are not reduced by losses generated in prior
years by the  Company.  In  addition,  the  amount  payable  by the  Company  to
Perpetual  under the tax  sharing  agreement  is not  reduced if losses of other
members of the  Perpetual  group are  utilized to offset  taxable  income of the
Company for purposes of the Perpetual consolidated federal income tax return.

Prior to the  Contribution  (see Note 2), the  operations  of WSET and WCIV were
included in a  consolidated  federal  income tax return filed by Westfield  News
Advertiser, Inc. (Westfield), an affiliate of the Company which is 100% owned by
Mr. Joe L.  Allbritton.  In accordance with the terms of tax sharing  agreements
between Westfield and WSET and WCIV,  federal income tax liabilities of WSET and
WCIV were paid to  Westfield  and were  computed  based upon  statutory  federal
income tax rates applied to each entity's taxable income. For periods subsequent
to the  Contribution,  the  operations  of WSET  and WCIV  are  included  in the
consolidated federal income tax return filed by Perpetual in accordance with the
tax sharing agreement between the Company and Perpetual.

A District of Columbia  income tax return is filed by the Company,  and separate
state  income tax returns are filed by the  Company's  subsidiaries,  except for
WSET.  The operations of WSET are 

included in a combined state income tax return filed with other affiliates.
WSET's state income tax liability is not reduced if losses of the  affiliates
are used to  offset  the  taxable  income of WSET for purposes of the combined
state income tax return.

                                     F-8
<PAGE>
 
                        ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)


The provision for income taxes is  determined  in accordance  with  Statement of
Financial  Accounting  Standards (SFAS) No. 109,  "Accounting for Income Taxes,"
which requires that the  consolidated  amount of current and deferred income tax
expense  for a group that files a  consolidated  income tax return be  allocated
among  members  of  the  group  when  those  members  issue  separate  financial
statements.  Perpetual,  and prior to the  Contribution,  Westfield,  allocate a
portion of their respective consolidated current and deferred income tax expense
to the Company as if the Company and its subsidiaries  were separate  taxpayers.
The Company  records  deferred tax assets,  to the extent it is more likely than
not that such  assets  will be  realized in future  periods,  and  deferred  tax
liabilities  for the tax  effects of the  differences  between  the bases of its
assets and liabilities for tax and financial reporting purposes. To the extent a
deferred tax asset would be recorded due to the incurrence of losses for federal
income tax purposes,  any such benefit recognized is effectively  distributed to
Perpetual as such benefit will not be recognized in future years pursuant to the
tax sharing agreement.

Fair value of financial  instruments-The  carrying  amount of the Company's cash
and cash equivalents,  accounts receivable,  accounts payable,  accrued expenses
and program rights payable  approximate  fair value due to the short maturity of
those  instruments.  The Company  estimates the fair value of its long-term debt
using either  quoted market prices or by  discounting  the required  future cash
flows under its debt using borrowing  rates currently  available to the Company,
as applicable.

Earnings per  share-Earnings  per share data are not presented since the Company
has only one shareholder.

New pronouncements-SFAS No. 130, "Reporting Comprehensive Income" and SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information" are
effective  during  the Company's fiscal year  1999, but  will not  effect the 
Company's consolidated financial statements.

NOTE 2 - CONTRIBUTION OF WSET AND WCIV

The common stock of WSET and WCIV,  which was formerly  held by  Westfield,  was
contributed  to the  Company  on March 1,  1996  (the  Contribution).  Since the
Contribution  represents  a transfer of assets  between  entities  under  common
control,  the amounts  transferred were recorded at historical cost. Further, as
the Company,  WSET and WCIV were  indirectly  owned by Mr. Joe L. Allbritton for
all periods in which the consolidated  financial  statements are presented,  the
Company's  consolidated  financial  statements for the year ended  September 30,
1996 have been retroactively restated to reflect the Contribution (See Note 8).

                                      F-9
<PAGE>

                       ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

NOTE 3 - ACQUISITIONS, LOCAL MARKETING AGREEMENT AND ASSOCIATED OPTION 

In March 1996,  the Company  acquired an 80%  interest in the assets and certain
liabilities of WHTM and WCFT for approximately  $135,656.  The acquisitions were
accounted for as purchases and  accordingly,  the cost of the acquired  entities
was assigned to the  identifiable  tangible and intangible  assets  acquired and
liabilities  assumed based on their fair values at the  respective  dates of the
purchases.  The  results  of  operations  of WHTM and WCFT are  included  in the
Company's  consolidated  financial  statements for the period  subsequent to the
acquisitions.

In December 1995, the Company,  through an 80%-owned subsidiary,  entered into a
ten-year local  marketing  agreement  (LMA) with the owner of WJSU, a television
station  operating  in  Anniston,  Alabama.  The LMA provides for the Company to
supply  program  services  to WJSU,  to operate  the  station  and to retain all
revenues  from  advertising  sales.  In  exchange,  the Company pays all station
operating  expenses and certain  management  fees to the  station's  owner.  The
operating  revenues and expenses of WJSU are therefore included in the Company's
consolidated  financial  statements  since December 1995. In connection with the
LMA, the Company entered into the Option to acquire the assets of WJSU. The cost
of the Option  totaled  $15,348,  of which $10,000 was paid in December 1995 and
$5,348 was paid in January  1997.  The Option is  exercisable  through  December
2005, subject to certain conditions, for additional consideration of $3,337.

The following pro forma summary presents the unaudited  consolidated  results of
operations of the Company for the year ended  September 30, 1996 as if the above
acquisitions, LMA and associated financing transaction (see Note 6) had occurred
at the  beginning  of fiscal year 1996.  The results  presented in the pro forma
summary do not  necessarily  reflect the results that would have  actually  been
obtained if the offering,  acquisitions and LMA had occurred at the beginning of
the year.

                                                                (Unaudited)
                                                  Year Ended September 30, 1996
                                                  -----------------------------

         Operating revenues, net.......................        $164,933
         Income before extraordinary item..............           4,204
         Net loss......................................          (3,546)

                                      F-10
<PAGE>


NOTE 4 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>

                                                                                September 30,
                                                                                -------------
                                                                         1997                1998 
                                                                         ----                ----
        <S>                                                           <C>                <C>  
         Buildings and leasehold improvements.....................      $ 20,391           $ 20,537
         Furniture, machinery and equipment.......................        97,685            103,498
         Equipment under capital leases...........................         7,277              7,864
                                                                       ---------          ---------
                                                                         125,353            131,899
         Less accumulated depreciation............................       (78,353)           (89,075)
                                                                        --------           --------
                                                                          47,000             42,824
         Land.....................................................         2,508              2,880
         Construction-in-progress.................................         2,413              1,855
                                                                        --------           --------

                                                                        $ 51,921           $ 47,559
                                                                         =======            =======
</TABLE>


Depreciation  and amortization  expense was $6,723,  $14,155 and $13,233 for the
years ended  September 30, 1996,  1997 and 1998,  respectively,  which  includes
amortization of equipment under capital leases.


NOTE 5 - INTANGIBLE ASSETS

Intangible assets consist of the following:
<TABLE>
<CAPTION>
                                                                                September 30,
                                                                                -------------
                                                                           1997               1998
                                                                           ----               ----
        <S>                                                          <C>                <C>  

         Broadcast licenses and network affiliations..............      $150,243           $150,243
         Option to purchase the assets of WJSU....................        15,348             15,348
         Other intangibles........................................         7,648              7,648
                                                                       ---------          ---------
                                                                         173,239            173,239
         Less accumulated amortization............................       (22,746)           (28,435)
                                                                        --------           --------

                                                                        $150,493           $144,804
                                                                         =======            =======
</TABLE>

Amortization expense was $3,534, $5,497 and $5,689 for the years ended September
30, 1996, 1997 and 1998, respectively.  The Company does not separately allocate
amounts between broadcast licenses and network affiliations.

                                      F-11
<PAGE>

                 ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)


NOTE 6 - LONG-TERM DEBT

Outstanding debt consists of the following:
<TABLE>
<CAPTION>

                                                                                         September 30,
                                                                                         -------------
                                                                                   1997                 1998
                                                                                   ----                 ----
<S>                                                                             <C>                  <C> 
Senior Subordinated Debentures, due November 30, 2007
 with interest payable semi-annually at 9.75%..............................      $275,000             $275,000
Senior Subordinated Debentures, due August 15, 2004
   with interest payable semi-annually at 11.5%, mandatory
   sinking fund payment of $60,500 and $62,500 due
   August 15, 2003 and 2004, respectively..................................       123,000              --
Senior Subordinated Notes, due February 1, 2008
     with interest payable semi-annually at 8.875%.........................        --                  150,000
Revolving Credit Agreement, maximum amount of $40,000,
   expiring April 16, 2001,  secured by the outstanding stock of the Company and
   its  subsidiaries,  interest payable quarterly at various rates from prime or
   LIBOR plus 1% to 2%, depending on certain financial  operating tests ($10,000
   at 8.22%
   and $2,700 at 9.75% at September 30, 1997)..............................        12,700               --
Master Lease Finance Agreement, maximum amount of $10,000, secured by the assets
  acquired,  interest  payable  monthly at variable  rates as  determined on the
  acquisition date for each asset purchased (7.56%-8.93% at
  September 30, 1998) (See Note 10)........................................         6,444                5,756
                                                                                ---------            ---------
                                                                                  417,144              430,756
Less unamortized discount .................................................        (1,422)              (1,065)
                                                                                ---------            ---------
                                                                                  415,722              429,691
Less current maturities....................................................        (1,320)              (1,436)
                                                                                ---------            ---------

                                                                                 $414,402             $428,255
                                                                                  =======              =======
</TABLE>

On January 22,  1998,  the Company  completed a $150,000  offering of its 8.875%
Senior  Subordinated  Notes  due 2008  (the  Notes).  The cash  proceeds  of the
offering,  net of offering  expenses,  were used to redeem the  Company's  11.5%
Senior Subordinated  Debentures due 2004 (the 11.5% Debentures) on March 3, 1998
with the balance used to repay certain  amount  outstanding  under the Company's
Revolving Credit Agreement.  A prepayment  penalty on the early repayment of the
11.5%  Debentures and the accelerated  amortization  of the related  unamortized
deferred financing costs totaled  approximately  $8,331 before applicable income
tax benefit of  approximately $3,176.  This loss  was reflected as an
extraordinary loss of $5,155 in the  consolidated  statement of operations  for
the year ended September 30, 1998.

                                      F-12
<PAGE>

                       ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

On February  6, 1996,  the  Company  completed a $275,000  offering of its 9.75%
Senior Subordinated  Debentures due 2007 (the 9.75% Debentures) at a discount of
$1,375.  A portion of the  proceeds  of the  offering  were used to finance  the
acquisitions of WHTM, WCFT and the Option and to repay amounts outstanding under
certain previously  existing financing  facilities.  A prepayment penalty on the
early repayment of one of the facilities and the accelerated amortization of the
related  unamortized  deferred  financing  costs totaled  approximately  $13,137
before  applicable  income tax benefit of  approximately  $5,387.  This loss was
reflected as an extraordinary  loss of $7,750 in the  consolidated  statement of
operations for the year ended September 30, 1996.

Unamortized deferred financing costs of $8,935 and $10,018 at September 30, 1997
and 1998,  respectively,  are  included  in deferred  financing  costs and other
noncurrent  assets  in the  consolidated  balance  sheets.  Amortization  of the
deferred  financing  costs for the years ended September 30, 1996, 1997 and 1998
was  $835,  $1,031  and  $1,136,  respectively,   which  is  included  in  other
nonoperating expenses.

Under  the  existing  financing  agreements,  the  Company  agrees  to  abide by
restrictive  covenants which place  limitations upon payments of cash dividends,
issuance of capital  stock,  investment  transactions,  incurrence of additional
obligations  and  transactions  with  Perpetual  and other related  parties.  In
addition,  the Company must  maintain  specified  levels of operating  cash flow
and/or working capital and comply with other financial covenants. The Company is
also  required  to pay a  commitment  fee of .375% per annum based on any unused
portion of the Revolving Credit Agreement.

The  Company  estimates  the fair value of its Senior  Subordinated  Debentures,
Senior  Subordinated  Notes and amounts  outstanding  under its Revolving Credit
Agreement to be  approximately  $416,800 and $428,200 at September  30, 1997 and
1998, respectively.

                                      F-13
<PAGE>

                        ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

NOTE 7 - INCOME TAXES

The provision (benefit) for income taxes consists of the following:

                                          Years ended September 30,
                                       1996            1997           1998
                                       ----            ----           ----
Current
     Federal.................        $5,297         $  (691)        $3,178
     State...................           812             830             63
                                   --------          ------        -------
                                      6,109             139          3,241
                                    -------          ------          -----
Deferred
    Federal..................           215           1,443          1,185
    State....................         1,488            (472)         1,161
                                      -----          ------        -------
                                      1,703             971          2,346
                                      -----          ------          -----

                                     $7,812          $1,110         $5,587
                                      =====           =====          =====

Prepayment  penalties  on the early  repayment  of certain debt during the years
ended September 30, 1996 and 1998 resulted in extraordinary losses (see Note 6).
For the year ended  September  30,  1998,  the  extraordinary  loss of $5,155 is
presented  net  of  the  applicable  income  tax  benefit  in  the  accompanying
consolidated  statement  of  operations.  The $3,176  benefit  for income  taxes
arising from the  extraordinary  loss  consisted of a $2,745 benefit for federal
income tax  purposes,  a $258  benefit for local  income tax purposes and a $173
deferred tax benefit.  For the year ended September 30, 1996, the  extraordinary
loss of $7,750 is  presented  net of the  applicable  income tax  benefit in the
accompanying consolidated statement of operations. The $5,387 benefit for income
taxes  arising from the  extraordinary  loss  consisted of a $4,598  benefit for
federal  income tax purposes at the statutory rate of 35% and a $789 benefit for
local income tax purposes, net of the federal effect.

                                      F-14

<PAGE>

                         ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

The components of deferred income tax assets (liabilities) are as follows:

                                                                September 30,
                                                              1997        1998
Deferred income tax assets:
   State and local operating loss carryforwards........      $2,924      $2,716
   Deferred rent.......................................       1,118       1,091
   Accrued employee benefits...........................       1,134       1,326
   Allowance for accounts receivable...................         653         545
   Other...............................................         657         346
                                                             ------      ------
                                                              6,486       6,024
   Less: valuation allowance...........................      (1,675)     (2,013)
                                                              -----       -----
                                                              4,811       4,011
                                                              -----       -----
Deferred income tax liabilities:
   Depreciation and amortization ......................      (4,233)     (5,606)
                                                              -----       -----

Net deferred income tax assets (liabilities)...........     $   578     $(1,595)
                                                             ======      ======

The  Company  has  approximately  $54,560  in state  and  local  operating  loss
carryforwards  in certain  jurisdictions  available for future use for state and
local income tax purposes  which expire in various years from 2004 through 2013.
The change in the valuation allowance for deferred tax assets of $1,020,  $(233)
and $338 during the years ended September 30, 1996, 1997 and 1998, respectively,
principally  resulted from management's  evaluation of the recoverability of the
loss carryforwards.

                                      F-15
<PAGE>

                      ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

The following  table  reconciles  the statutory  federal  income tax rate to the
Company's effective income tax rate for income before extraordinary loss:
<TABLE>
<CAPTION>

                                                                        Years ended September 30,
                                                                        ------------------------
                                                                      1996             1997          1998  
                                                                      ----             ----          ------
<S>                                                                 <C>              <C>             <C>  
Statutory federal income tax rate................................     35.0%            34.0%           34.0%
State income taxes, net of federal income tax benefit............      4.8             20.2             7.6
Non-deductible expenses, principally amortization of
  certain intangible assets, insurance premiums and
  meals and entertainment........................................      4.5             33.2             4.7
Change in valuation allowance....................................      6.9            (15.2)            3.0
Other, net.......................................................      1.6              0.2              --
                                                                     -----            -----          ------

Effective income tax rate........................................     52.8%            72.4%           49.3%
                                                                      ====             ====            ====
</TABLE>


NOTE 8 - TRANSACTIONS WITH OWNERS AND RELATED PARTIES

In the ordinary course of business,  the Company makes cash advances in the form
of distributions  to Perpetual.  Prior to the  Contribution,  WSET and WCIV made
cash advances to Westfield.  At present,  the primary source of repayment of the
net  advances  from the  Company is through  the  ability of the  Company to pay
dividends or make other  distributions.  There is no immediate  intent for these
amounts to be repaid. Accordingly, such amounts have been treated as a reduction
of stockholder's  investment and described as  "distributions"  in the Company's
consolidated balance sheets.

                                      F-16
<PAGE>

                      ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

The  following  summarizes  these and certain  other  transactions  with related
parties:
<TABLE>
<CAPTION>

                                                                  Years ended September 30,
                                                                  -------------------------
                                                             1996              1997               1998
                                                             ----              ----               ---- 
<S>                                                       <C>                <C>                <C> 
 Distributions to owners, beginning of
   year..............................................        $203,775         $224,450           $237,354
 Cash advances.......................................          52,667           52,597            137,992
 Repayment of cash advances..........................         (12,785)         (39,693)          (118,755)
 (Charge) benefit for federal income taxes...........            (826)             691               (433)
 Dividends declared by WSET
    and WCIV.........................................         (18,371)             --                 --
 Tax benefit distributed.............................             (10)            (691)               -- 
                                                           ----------       ----------       ------------

Distributions to owners, end of year.................        $224,450         $237,354           $256,158
                                                              =======          =======            =======
Weighted average amount of non-interest
   bearing advances outstanding during
   the year..........................................        $197,205         $218,026           $230,642
                                                              =======          =======            =======
</TABLE>

Subsequent to September 30, 1998 and through November 13, 1998, the Company made
additional net distributions to owners of approximately $15,813.

In connection with the  transactions by which the  Contribution was consummated,
WSET and WCIV declared non-cash  dividends to Westfield in the amount of $18,371
which  represented  the  cumulative  net  advances  made  from  WSET and WCIV to
Westfield as of the date of the  Contribution.  The dividend has therefore  been
reflected as a reduction to retained earnings and distributions to owners during
the year ended September 30, 1996.

Included  in  distributions  to  owners  is a  $20,000  loan made in 1991 by the
Company to  ALLNEWSCO,  Inc.  (Allnewsco),  an affiliate of the Company which is
controlled  by Mr.  Joe L.  Allbritton.  This  amount has been  included  in the
consolidated financial statements on a consistent basis with other cash advances
to related  parties.  The $20,000  note  receivable  from  Allnewsco  had stated
repayment terms consisting of annual principal installments approximating $2,220
commencing  January 1997 through January 2005.  During the years ended September
30,  1997 and  1998,  the  Company  deferred  the  first  two  annual  principal
installment  payments pending  renegotiation  of the repayment terms.  Effective
July 1, 1998,  the note was amended to extend the  maturity to January  2008 and
defer all principal installments until maturity, with the principal balance also
due upon demand.  In exchange for the  amendment,  Allnewsco paid to the Company
the amount of $650. This amount is included in other  noncurrent  liabilities in
the  accompanying  consolidated  balance  sheet  and is  being  amortized  as an
adjustment of interest  income over the remaining term of the amended note using
the interest method.  The note has a stated interest rate of 11.06% and interest
is payable  semi-annually.  During each of the years ended  September  30, 1996,
1997  and  1998,  the  Company  earned   interest income  from  this  note  of
approximately  $2,200.

                                      F-17
<PAGE>
 
                       ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

At September 30, 1997 and 1998,  interest receivable from Allnewsco  under this
note  totaled  $492.  Allnewsco is current on its interest payments.

Management fees of $180, $343 and $344 were paid to Perpetual by the Company for
the years ended  September 30, 1996,  1997 and 1998,  respectively.  The Company
also paid  management  fees to Mr. Joe L.  Allbritton  in the amount of $550 for
each of the years ended  September 30, 1996,  1997 and 1998 and to Mr. Robert L.
Allbritton  in the  amount  of $60  for  the  year  ended  September  30,  1998.
Management  fees  are  included  in  corporate   expenses  in  the  consolidated
statements of operations and management believes such charges to  be reasonable.

Charitable  contributions of approximately  $685 were paid to the Allbritton
Foundation by the Company during the year ended September 30, 1996.

The Company maintains banking relationships with and leases certain office space
from  Riggs  Bank N.A.  (Riggs).  Riggs is a  wholly-owned  subsidiary  of Riggs
National  Corporation,  of which Mr. Joe L.  Allbritton  is the  Chairman of the
Board of Directors and a significant stockholder.  The majority of the Company's
cash and cash  equivalents  was on deposit with Riggs at September  30, 1997 and
1998.  Additionally,  the Company incurred $192, $220 and $263 in rental expense
related to office  space  leased  from Riggs for the years ended  September  30,
1996, 1997 and 1998, respectively.

On July 1, 1995,  78, Inc.,  also a  wholly-owned  subsidiary of Perpetual,  was
formed to provide sales,  marketing and related services to both the Company and
Allnewsco.  Certain  employees of the Company  became  employees of 78, Inc. The
Company was charged  approximately  $7,163  during the year ended  September 30,
1996 for services  provided by 78, Inc., which represents the Company's share of
78, Inc.'s costs relating to the provision of such services, determined based on
the  Company's  usage of such  services.  These costs are included in television
operating  expenses in the  consolidated  statements  of  operations.  Effective
October 1, 1996,  the Company  ceased  utilizing  78, Inc. for the  provision of
these services and re-established these functions internally.


NOTE 9 - RETIREMENT PLANS

A defined  contribution savings plan is maintained for eligible employees of the
Company and certain of its affiliates.  Under the plan, employees may contribute
a portion of their compensation  subject to Internal Revenue Service limitations
and the Company  contributes an amount equal to 50% of the  contribution  of the
employee  not to exceed 6% of the  compensation  of the  employee.  The  amounts
contributed  to the plan by the  Company  on  behalf  of its  employees  totaled
approximately  $602,  $691 and $825 for the years ended September 30, 1996, 1997
and 1998, respectively.

                                      F-18
<PAGE>

                       ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)

The Company also contributes to certain other multi-employer union pension plans
on behalf of certain of its union  employees.  The amounts  contributed  to such
plans totaled  approximately  $308,  $316 and $392 for the years ended September
30, 1996, 1997 and 1998, respectively.


NOTE 10 - COMMITMENTS AND CONTINGENT LIABILITIES

The Company  leases  office and studio  facilities  and  machinery and equipment
under  operating  and capital  leases  expiring in various  years  through 2004.
Certain  leases contain  provisions  for renewal and  extension.  Future minimum
lease  payments  under   operating  and  capital  leases  which  have  remaining
noncancelable  lease terms in excess of one year as of September 30, 1998 are as
follows:

                                                     Operating         Capital
Year ending September 30,                              Leases           Leases

    1999........................................      $ 3,525         $ 1,935
    2000........................................        3,429           1,909
    2001........................................        3,210           1,612
    2002........................................        3,088             782
    2003........................................        3,091              70
    2004 and thereafter.........................        1,917              --
                                                      -------       ---------
                                                      $18,260           6,308
                                                       ======
Less: amounts representing imputed interest.....                         (552)
                                                                       ------
                                                                        5,756
Less: current portion...........................                       (1,436)
                                                                       ------
Long-term portion of capital lease obligations..                      $ 4,320
                                                                       ======


Rental expense under operating leases aggregated  approximately  $2,700, $2,900
and $2,900 for the years ended September 30, 1996, 1997 and 1998, respectively.

                                      F-19
<PAGE>

                       ALLBRITTON COMMUNICATIONS COMPANY
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                             (Dollars in thousands)


The Company has entered into  contractual  commitments in the ordinary course of
business for the rights to television programming which is not yet available for
broadcast as of September  30, 1998.  Under these  agreements,  the Company must
make specific minimum payments approximating the following:

      Year ending September 30,
            1999..............................................      $ 1,948
            2000..............................................       16,673
            2001..............................................        9,074
            2002..............................................        6,061
            2003..............................................          828
            2004 and thereafter...............................        1,728
                                                                    -------
                                                                    $36,312

The Company has entered into various employment contracts. Future payments under
such contracts as of September 30, 1998 approximate $5,609,  $1,305,  $688, $196
and $111 for the years ending  September 30, 1999,  2000,  2001,  2002 and 2003,
respectively.

The Company has entered  into  various  deferred  compensation  agreements  with
certain  employees.  Under  these  agreements,  the  Company is required to make
payments aggregating approximately $2,629 during the years 2000 through 2012. At
September  30, 1997 and 1998,  the Company has recorded a deferred  compensation
liability of approximately $1,035 and $1,177, respectively, which is included as
a component of noncurrent  accrued employee benefit expenses in the consolidated
balance sheets.

The Company currently and from time to time is involved in litigation incidental
to the conduct of its business, including suits based on defamation. The Company
is not currently a party to any lawsuit or proceeding  which,  in the opinion of
management,  if  decided  adverse  to the  Company,  would be  likely  to have a
material  adverse  effect on the  Company's  consolidated  financial  condition,
results of operations or cash flows.

NOTE 11 - SUPPLEMENTARY CASH FLOW INFORMATION

Cash paid for interest  totaled  $28,973,  $42,829 and $43,949  during the years
ended  September  30,  1996,  1997 and 1998,  respectively.  Cash paid for state
income taxes  totaled $679,  $792 and $105 during the years ended  September 30,
1996, 1997 and 1998,  respectively.  Non-cash investing and financing activities
consist of entering into capital leases totaling $3,554,  $2,549 and $634 during
the years ended September 30, 1996, 1997 and 1998, respectively, and declaring a
non-cash  dividend  from WSET and WCIV to Westfield  of $18,371  during the year
ended September 30, 1996.

                                      F-20
<PAGE>
                                                                    
                        ALLBRITTON COMMUNICATIONS COMPANY
                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                                      SCHEDULE II

                                                                                                       
                               Balance at        Charged                                               Balance at
                                beginning        to costs         Charged to                              end of
Classification                  of year        and expenses     other accounts        Deductions           year   
--------------                  -------        ------------     --------------        ----------           ----
<S>                             <C>              <C>            <C>                    <C>              <C> 

Year ended September 30, 1996:
     Allowance for doubtful
        accounts................  $ 1,068          $   752                --             $(435)<F2>       $1,385
                                    =====           ======          ========               ===             =====
     Valuation allowance
        for deferred income
        tax assets..............  $   888           $1,750<F1>            --             $(730)<F3>       $1,908
                                   ======            =====          ========               ===             =====

Year ended September 30, 1997:
     Allowance for doubtful
        accounts................   $1,385          $   576                --             $(343)<F2>       $1,618
                                    =====           ======          ========               ===             =====
     Valuation allowance
        for deferred income
        tax assets..............   $1,908          $   574<F1>            --             $(807)<F3>       $1,675
                                    =====           ======          ========               ===             =====

Year ended September 30,1998:
    Allowance for doubtful
       accounts.................   $1,618          $   268                --             $(515)<F2>       $1,371
                                    =====           ======          ========               ===             =====
    Valuation allowance
       for deferred income
       tax assets...............   $1,675          $   338<F1>            --          $     --            $2,013
                                    =====           ======          ========           =======             =====
<FN>
<F1>    Represents  valuation  allowance  established  related  to  certain  net
        operating  loss  carryforwards  and other  deferred tax assets for state
        income tax purposes.
<F2>    Write-off of uncollectible  accounts, net of recoveries and collection fees.
<F3>    Represents net reduction of valuation allowance relating to certain net
        operating loss carryforwards.
</FN>
</TABLE>

                                      F-21
<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.

                        ALLBRITTON COMMUNICATIONS COMPANY

                        By: /s/ Lawrence I. Hebert
                            -----------------------------
                                Lawrence I. Hebert
                                Chairman and Chief Executive Officer

                        Date: December 22, 1998

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/ Joe L. Allbritton            Chairman of the Executive     December 22, 1998
---------------------------      Committee and Director
    Joe L. Allbritton *                             


/s/ Barbara B. Allbritton        Vice President and            December 22, 1998
---------------------------      Director
    Barbara B. Allbritton *      


/s/ Lawrence I. Hebert           Chairman, Chief Executive     December 22, 1998
---------------------------      Officer and Director 
    Lawrence I. Hebert           (principal executive officer)
                                 

/s/ Robert L. Allbritton         President and Director        December 22, 1998
---------------------------  
    Robert L. Allbritton  *


/s/ Frederick J. Ryan, Jr.       Vice Chairman, Executive      December 22, 1998
---------------------------      Vice President, Chief                          
    Frederick J. Ryan, Jr. *     Operating Officer and Director
                                 

/s/ Stephen P. Gibson            Vice President and            December 22, 1998
---------------------------      Chief Financial Officer
    Stephen P. Gibson            (principal financial and 
                                 accounting officer)


     *By Attorney-in-Fact


/s/ Jerald N. Fritz                        
Jerald N. Fritz

<PAGE>

<TABLE>
<CAPTION>


                                                   EXHIBIT INDEX


Exhibit No.                                     Description of Exhibit                                   Page No.
<S>                <C>                                                                                       <C>

3.1                  Certificate of  Incorporation  of ACC.  (Incorporated by reference to Exhibit              *
                     3.1 of Company's  Registration  Statement on Form S-4, No.  333-02302,  dated
                     March 12, 1996.)
3.2                  Bylaws of ACC.  (Incorporated  by  reference  to Exhibit 3.2 of  Registrant's              *
                     Registration Statement on Form S-4, No. 333-02302, dated March 12, 1996.)
4.1                  Indenture  dated as of February 6, 1996 between ACC and State Street Bank and              *
                     Trust  Company,  as Trustee,  relating to the  Debentures.  (Incorporated  by
                     reference  to Exhibit 4.1 of  Company's  Registration  Statement on Form S-4,
                     No. 333-02302, dated March 12, 1996.)
4.2                  Indenture  dated as of January 22, 1998 between ACC and State Street Bank and              *
                     Trust Company, as Trustee, relating to the Notes.  (Incorporated by reference
                     to  Exhibit  4.1  of  Company's  Registration  Statement  on  Form  S-4,  No.
                     333-45933, dated February 9, 1998.)
4.3                  Form  of  9.75%   Series  B  Senior   Subordinated   Debentures   due   2007.              *
                     (Incorporated   by  reference  to  Exhibit  4.3  of  Company's   Registration
                     Statement on Form S-4, No. 333-02302, dated March 12, 1996.)
4.4                  Revolving  Credit  Agreement  dated  as  of  April  16,  1996  by  and  among              *
                     Allbritton  Communications Company certain Banks, and The First National Bank
                     of  Boston,   as  agent.   (Incorporated  by  reference  to  Exhibit  4.4  of
                     Company's  Quarterly  Report on Form 10-Q,  No.  333-02302,  dated August 14,
                     1996.)
4.5                  Modification  No. 1 dated as of June 19, 1996 to Revolving  Credit  Agreement              *
                     (Incorporated  by reference to Exhibit 4.5 of Company's  Quarterly  Report on
                     Form 10-Q, No. 333-02302, dated May 15, 1997).
4.6                  Modification  No.  2  dated  as of  December  20,  1996 to  Revolving  Credit              *
                     Agreement  (Incorporated  by reference to Exhibit 4.6 of Company's  Quarterly
                     Report on Form 10-Q, No. 333-02302, dated May 15, 1997).

</TABLE>

                                       A-1
<PAGE>

<TABLE>
<CAPTION>


                                                   EXHIBIT INDEX


Exhibit No.                                     Description of Exhibit                                   Page No.
<S>                <C>                                                                                       <C>


4.7                  Modification  No. 3 dated as of May 14, 1997 to  Revolving  Credit  Agreement              *
                     (Incorporated  by reference to Exhibit 4.7 of Company's  Quarterly  Report on
                     Form 10-Q, No. 333-02302, dated May 15, 1997).
4.8                  Modification  No.  4 dated  as of  September  30,  1997 to  Revolving  Credit              *
                     Agreement  (Incorporated  by reference to Exhibit 4.8 of Company's Form 10-K,   
                     No. 333-02302, dated December 22, 1997).                                                    
10.1                 Network Affiliation Agreement (Harrisburg  Television,  Inc.).  (Incorporated              *
                     by reference to Exhibit 10.3 of Company's  Pre-effective  Amendment  No. 1 to
                     Registration Statement on Form S-4, dated April 22, 1996.)
10.2                 Network  Affiliation  Agreement (First  Charleston  Corp.).  (Incorporated by              *
                     reference  to Exhibit  10.4 of  Company's  Pre-effective  Amendment  No. 1 to
                     Registration Statement on Form S-4, dated April 22, 1996.)
10.3                 Network  Affiliation   Agreement  (WSET,   Incorporated).   (Incorporated  by              *
                     reference  to Exhibit  10.5 of  Company's  Pre-effective  Amendment  No. 1 to
                     Registration Statement on Form S-4, dated April 22, 1996.)
10.4                 Network  Affiliation  Agreement  (WJLA-TV).  (Incorporated  by  reference  to              *
                     Exhibit  10.6 of  Company's  Pre-effective  Amendment  No. 1 to  Registration
                     Statement on Form S-4, dated April 22, 1996.)
10.5                 Network  Affiliation  Agreement (KATV  Television,  Inc.).  (Incorporated  by              *
                     reference  to Exhibit  10.7 of  Company's  Pre-effective  Amendment  No. 1 to
                     Registration Statement on Form S-4, dated April 22, 1996.)
10.6                 Network  Affiliation  Agreement (KTUL  Television,  Inc.).  (Incorporated  by              *
                     reference  to Exhibit  10.8 of  Company's  Pre-effective  Amendment  No. 1 to
                     Registration Statement on Form S-4, dated April 22, 1996.)
10.7                 Network   Affiliation   Agreement  (TV  Alabama,   Inc.).   (Incorporated  by              *
                     reference  to Exhibit  10.9 of  Company's  Pre-effective  Amendment  No. 1 to
                     Registration Statement on Form S-4, dated April 22, 1996.)
10.8                 Tax  Sharing  Agreement  effective  as of  September  30,  1991 by and  among              *
                     Perpetual  Corporation,  ACC and ALLNEWSCO,  Inc.,  amended as of October 29,
                     1993.  (Incorporated by reference to Exhibit 10.11 of Company's  Registration
                     Statement on Form S-4, No. 333-02302, dated March 12, 1996.)

</TABLE>
                                      A-2
<PAGE>


<TABLE>
<CAPTION>


                                                   EXHIBIT INDEX


Exhibit No.                                     Description of Exhibit                                   Page No.
<S>                <C>                                                                                       <C>

10.9                 Second Amendment to Tax Sharing Agreement  effective as of October 1, 1995 by              *
                     and among Perpetual Corporation, ACC and ALLNEWSCO, Inc.
                     Time  Brokerage  Agreement  dated as of December  21, 1995 by and between RKZ
10.10                Television,  Inc. and ACC.  (Incorporated  by  reference to Exhibit  10.11 of              *
                     Company's Registration Statement on Form S-4, No. 333-02302,  dated March 12,              
                     1996.)
10.11                Option  Agreement  dated  December  21,  1995  by and  between  ACC  and  RKZ              *
                     Television,  Inc.  (Incorporated  by reference to Exhibit  10.12 of Company's
                     Registration Statement on Form S-4, No. 333-02302, dated March 12, 1996.)
10.12                Amendment  dated May 2, 1996 by and among TV Alabama,  Inc., RKZ  Television,              *
                     Inc.  and  Osborn  Communications   Corporation  to  Option  Agreement  dated
                     December 21, 1995 by and between ACC and RKZ Television,  Inc.  (Incorporated
                     by reference to exhibit 10.13 of Company's  Form 10-K, No.  333-02302,  dated
                     December 30, 1996.)
10.13                Master  Lease  Finance   Agreement  dated  as  of  August  10,  1994  between              *
                     BancBoston Leasing,  Inc. and ACC, as amended.  (Incorporated by reference to               
                     Exhibit  10.16  of  Company's   Registration   Statement  on  Form  S-4,  No.               
                     333-02302, dated March 12, 1996.)
10.14                Amendment to Network Affiliation  Agreement (TV Alabama,  Inc.) dated January              *
                     23, 1997  (Incorporated  by reference to Exhibit 10.15 to the Company's  Form
                     10-Q, No. 333-02302, dated February 14, 1997).
10.15                Pledge of Membership  Interests  Agreement  dated as of September 30, 1997 by              *
                     and among ACC; KTUL,  LLC;  KATV,  LLC; WCIV,  LLC; and  BankBoston,  N.A. as
                     Agent  (Incorporated  by reference to Exhibit  10.16 of Company's  Form 10-K,
                     No. 333-02302, dated December 22, 1997).
10.16                $20,000,000 Promissory Note of ALLNEWSCO, Inc. payable to KTUL, LLC.
21.                  Subsidiaries of the Registrant
24.                  Powers of Attorney
27.                  Financial Data Schedule (Electronic Filing Only)
________________
*Previously filed

</TABLE>


                                      A-3
<PAGE>