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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999  COMMISSION FILE NUMBER:333-26427-01


                                   KDSM, INC.
             (Exact name of Registrant as specified in its charter)

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

               MARYLAND                              52-1975792
       (State of incorporation)         (I.R.S. Employer Identification No.)

                              10706 BEAVER DAM ROAD
                             COCKEYSVILLE, MD 21030
                    (Address of principal executive offices)
                                 (410) 568-1500
              (Registrant's telephone number, including area code)


                                SINCLAIR CAPITAL
             (Exact name of Registrant as specified in its charter)

                              ---------------------
               DELAWARE                              52-2026076
       (State of incorporation)         (I.R.S. Employer Identification No.)

                              10706 BEAVER DAM ROAD
                             COCKEYSVILLE, MD 21030
                    (Address of principal executive offices)
                                 (410) 568-1500
              (Registrant's telephone number, including area code)

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

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

Indicate  by  check  mark if disclosure of delinquent files pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in  Part  III of this Form 10-K or any amendment to
this Form 10-K. [X]

As of March 24,  2000,  there are 100 shares of class A common  stock,  $.01 par
value of KDSM, Inc., issued and outstanding.

In addition,  2,000,000 shares of $200 million aggregate liquidation value of 11
5/8 % high yield trust  offered  preferred  securities  of Sinclair  Capital,  a
subsidiary trust of KDSM, Inc., are issued and outstanding.
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<PAGE>

                                    PART I


FORWARD-LOOKING STATEMENTS

     This report includes or incorporates  forward-looking  statements.  We have
based  these   forward-looking   statements  on  our  current  expectations  and
projections about future events. These forward-looking statements are subject to
risks, uncertainties and assumptions about us, including, among other things:

     o    the impact of changes in national and regional economies,

     o    pricing fluctuations in local and national advertising,

     o    volatility in programming costs and

     o    the effects of governmental regulation of broadcasting.

     Other matters set forth in this report may also cause actual results in the
future  to  differ  materially  from  those  described  in  the  forward-looking
statements.  We undertake no obligation to update or revise any  forward-looking
statements, whether as a result of new information,  future events or otherwise.
In light of these risks,  uncertainties  and  assumptions,  the  forward-looking
events discussed in this report might not occur.

ITEM 1. BUSINESS

     KDSM is an indirect wholly owned  subsidiary of Sinclair  Broadcast  Group,
Inc.  (Sinclair),  which owns all of the  assets  related  to the  operation  of
television station KDSM.

     KDSM,  Channel 17, is located in Des Moines, the state capital of Iowa. The
Des Moines market is currently  served by five commercial  television  stations,
all of which are network  affiliated.  KDSM,  the Fox  affiliate,  is pursuing a
counter-programming  strategy against the other network  affiliates  designed to
attract   additional   audience  share  in  demographic  groups  not  served  by
programming on competing stations.

     The following  table sets forth certain market  revenue,  size and audience
share information for the Des Moines designated market area:

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                      -------------------------------------------
                                                           1997           1998           1999
                                                      -------------   ------------   ------------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                   <C>             <C>            <C>
   ----------------------------------------------------------------------------------------------
   Market revenue .................................      $39,944       $  44,699      $  44,739
   Annual market revenue growth/(decline) .........         (4.9%)          11.9%           0.1%
   Station rank within market .....................            4               3              3
   Television homes ...............................      383,000         388,000        393,000
   KDSM audience share ............................          6.8%            6.3%           6.0%
</TABLE>

     KDSM had station broadcast revenues of $8.5 million and broadcast cash flow
of $3.4 million in 1999.

     The  principal  office  of  KDSM is  located  at  10706  Beaver  Dam  Road,
Cockeysville, MD 21030 and its telephone number is 410-568-1500.

SINCLAIR CAPITAL

     Sinclair  Capital is a special  purpose  statutory  business  trust created
under Delaware law pursuant to a trust  agreement  executed by KDSM as depositor
for the trust,  First Union  National Bank of Maryland as property  trustee (the
property  trustee),  and First Union Bank of Delaware as Delaware  trustee  (the
Delaware  trustee),  and the filing of a certificate  of trust with the Delaware
Secretary of State.

     The property trustee acts as sole trustee under the trust agreement for the
purposes of compliance  with the Trust  Indenture  Act. The trust exists for the
exclusive purposes of:

                                       2

<PAGE>

     o    issuing  the   preferred   securities   and  the  common   securities,
          representing  undivided  beneficial  interests  in the  assets  of the
          trust,

     o    purchasing the KDSM senior  debentures  with the proceeds from sale of
          the preferred securities and the common securities and

     o    engaging  in only  those  other  activities  necessary  or  incidental
          thereto.

     All of the common securities of Sinclair Capital are owned by KDSM and KDSM
has agreed in the KDSM senior  debenture  indenture to maintain such  ownership.
KDSM acquired common securities having an aggregate  liquidation amount equal to
3% of the total capital of the trust. The trust has a term expiring in 2015, but
may terminate  earlier as provided in the trust agreement.  The trust's business
affairs will be conducted by the property trustee,  the Delaware trustee and the
administrative  trustee. The holder of the common securities,  or the holders of
at least a  majority  in the  aggregate  liquidation  value of then  outstanding
preferred securities if an event of default has occurred and is continuing, will
be entitled to appoint, remove or replace the trustees of the trust.

     The  duties and  obligations  of the  trustees  are  governed  by the trust
agreement.  David D. Smith and David B. Amy,  each an officer of Sinclair,  were
appointed  as  administrative  trustees  of the  trust  (in such  capacity,  the
administrative trustees) pursuant to the terms of the trust agreement. Under the
trust  agreement,  the  administrative  trustees have certain  duties and powers
including, but not limited to, the delivery of certain notices to the holders of
the preferred  securities,  the appointment of the preferred  securities  paying
agent and the preferred  securities  registrar,  the registering of transfers of
the preferred  securities and the common  securities and preparing and filing on
behalf of the trust all United States  federal,  state and local tax information
and  returns  and  reports  required  to be filed by or in respect of the trust.
Under the trust  agreement,  the property trustee has certain duties and powers,
including, but not limited to, holding legal title to the KDSM senior debentures
on behalf of the trust, the collection of payments in respect of the KDSM senior
debentures,  maintenance of the payment account , the sending of default notices
with respect to the preferred  securities and the  distribution of the assets of
the trust in the event of a winding-up of the trust.

TELEVISION BROADCASTING

OPERATING STRATEGY

     Our television operating strategy includes the following key elements:

ATTRACTING VIEWERSHIP

     We seek to  attract  viewership  and  expand  our  audience  share  through
selective, high-quality programming.

     Popular  Programming.  We believe  that an important  factor in  attracting
viewership is our network  affiliation  with Fox. The affiliation  enables us to
attract viewers by virtue of the quality first-run original programming provided
by this network and the network's  promotion of  such programming.  We also seek
to  obtain,  at  attractive  prices,  popular  syndicated  programming  that  is
complementary  to  the  station's  network  affiliation.   Examples  of  popular
syndicated  programming  obtained by us for broadcast are "The Simpsons",  "Home
Improvement",  "Seinfeld",  "Drew Carey", "Frasier",  "Third Rock", "Caroline in
the City", and "Cheers".

     Counter-Programming.  Our  programming  strategy  on our Fox  station  also
includes "counter-programming," which consists of broadcasting programs that are
alternatives  to the types of programs  being shown  concurrently  on  competing
stations.  This  strategy is designed to attract  additional  audience  share in
demographic groups not served by concurrent  programming on competing  stations.
We believe that  implementation  of this strategy enables our station to achieve
competitive  rankings in households in the 18-49 and 25-54  demographics  and to
offer greater diversity of programming in its DMA.

                                       3

<PAGE>

     Popular  Sporting  Events.  We attempt to capture a portion of  advertising
dollars  designated  to sports  programming.  Affiliates  of Fox are  subject to
prohibitions  against preemptions of network  programming.  We have been able to
acquire  the local  television  broadcast  rights for certain  sporting  events,
including Major League Baseball, NFL football, NHL hockey, Big Ten football, and
Iowa and Big Ten basketball.

INNOVATIVE LOCAL SALES AND MARKETING

     We believe that we are able to attract new  advertisers  to our station and
increase  our share of  existing  customers'  advertising  budgets by creating a
sense of partnership with those  advertisers.  We develop such  relationships by
training  our  sales  force  to offer  new  marketing  ideas  and  campaigns  to
advertisers.  These  campaigns  often involve the  sponsorship by advertisers of
local  promotional  events that  capitalize on the station's  local identity and
programming franchises.  For example, KDSM has a local Family Fair, which allows
station  advertisers  to reinforce  their on-air  advertising  with their target
audience. Through our strong local sales and marketing focus, we seek to capture
an increasing share of our revenues from local sources, which are generally more
stable than national advertising.

CONTROL OF OPERATING AND PROGRAMMING COSTS

     By employing a disciplined approach to managing programming acquisition and
other costs,  Sinclair has been able to achieve  operating margins that Sinclair
believes are among the highest in the television  broadcast  industry.  Sinclair
has sought and will continue to seek to acquire  quality  programming for prices
at or below  prices paid in the past which  directly  affects us. As an owner or
provider of  programming  services to 61 stations  located in 40  geographically
diverse markets,  Sinclair believes that it is able to negotiate favorable terms
for the acquisition of programming. Moreover, Sinclair emphasizes control of our
programming  and  operating  costs  through  program-specific  profit  analysis,
detailed  budgeting,  tight control over staffing levels and detailed  long-term
planning models.

ATTRACT AND RETAIN HIGH QUALITY MANAGEMENT

     We believe  that much of our  success is due to our  ability to attract and
retain highly  skilled and motivated  managers,  both at the corporate and local
station  levels.  A portion of the  compensation  provided to general  managers,
sales managers and other station  managers is based on their  achieving  certain
operating  results.  We also provide our  corporate  and station  managers  with
deferred compensation plans offering options to acquire class A common stock.

COMMUNITY INVOLVEMENT

     We actively  participate  in various  community  activities and offers many
community  services.  Our activities include  broadcasting  programming of local
interest and sponsorship of community and charitable  events.  We also encourage
our station  employees  to become  active  members of their  communities  and to
promote  involvement in community and charitable affairs. We believe that active
community  involvement by our station provides increased exposure in our DMA and
ultimately increases viewership and advertising support.

PROGRAMMING AND AFFILIATIONS

     Sinclair continually reviews our existing  programming  inventory and seeks
to purchase the most profitable and cost-effective syndicated programs available
for each time period.  In developing  its  selection of syndicated  programming,
Sinclair balances the cost of available syndicated programs with their potential
to increase  advertising revenue and the risk of their reduced popularity during
the term of the program contract. Sinclair seeks to purchase only those programs
with  contractual   periods  that  permit  programming   flexibility  and  which
complement a station's  overall  programming  strategy  and  counter-programming
strategy.  Programs that can perform  successfully  in more than one time period
are  more  attractive  due to the long  lead  time  and  multi-year  commitments
inherent in program purchasing.

                                       4

<PAGE>

     On August 21, 1996,  Sinclair  entered into an agreement  with Fox (the Fox
agreement) which,  among other things,  provides that the affiliation  agreement
between Fox and KDSM would be amended to have a new five-year term commencing on
the date of the Fox  agreement.  Fox has the  option to extend  the  affiliation
agreement  for an  additional  five-year  term and must extend all of Sinclair's
affiliation  agreements if it extends any (except that Fox may selectively renew
affiliation  agreements if any station has breached its affiliation  agreement).
The Fox  agreement  also  includes  provisions  limiting  the ability of KDSM to
preempt Fox programming  except where it has existing  programming  conflicts or
where KDSM  preempts to serve a public  purpose.  Fox produces  and  distributes
programming  in  exchange  for  KDSM's  commitment  to air  the  programming  at
specified times and for commercial announcement time during the programming.

FEDERAL REGULATION OF TELEVISION BROADCASTING

     The  ownership,  operation  and sale of television  and radio  stations are
subject to the  jurisdiction of the FCC, which acts under  authority  granted by
the  Communications  Act of 1934, as amended  (Communications  Act). Among other
things,  the FCC;  assigns  frequency  bands for  broadcasting;  determines  the
particular  frequencies,  locations  and  operating  power of stations;  issues,
renews,  revokes and modifies  station  licenses;  regulates  equipment  used by
stations;  adopts and  implements  regulations  and  policies  that  directly or
indirectly affect the ownership, operation and employment practices of stations;
and has the  power  to  impose  penalties  for  violations  of its  rules or the
Communications Act.

     The   following  is  a  brief   summary  of  certain   provisions   of  the
Communications  Act,  the  Telecommunications  Act of 1996  (the  1996  Act) and
specific  FCC  regulations  and  policies.  Reference  should  be  made  to  the
Communications  Act, the 1996 Act, FCC rules and the public  notices and rulings
of the FCC for further  information  concerning the nature and extent of federal
regulation of broadcast stations.

LICENSE GRANT AND RENEWAL

     Television and radio stations  operate  pursuant to  broadcasting  licenses
that are granted by the FCC for maximum  terms of eight years and are subject to
renewal  upon  application  to the FCC.  During  certain  periods  when  renewal
applications  are pending,  petitions  to deny license  renewals can be filed by
interested  parties,  including  members of the public.  The FCC will  generally
grant a renewal application if it finds:

     o    that the  station  has  served the public  interest,  convenience  and
          necessity;

     o    that there  have been no serious  violations  by the  licensee  of the
          Communications Act or the rules and regulations of the FCC; and

     o    that  there  have  been no other  violations  by the  licensee  of the
          Communications  Act or the rules and regulations of the FCC that, when
          taken together, would constitute a pattern of abuse.

     KDSM's FCC license  will expire on  February 1, 2006.  Although  renewal of
license is granted in the vast majority of cases even when petitions to deny are
filed,  there can be no  assurance  that the licenses of such  stations  will be
renewed.

OWNERSHIP MATTERS

     General.  The  Communications  Act prohibits the  assignment of a broadcast
license or the  transfer  of control of a broadcast  licensee  without the prior
approval of the FCC. In determining whether to permit the assignment or transfer
of  control  of,  or the  grant or  renewal  of, a  broadcast  license,  the FCC
considers a number of factors pertaining to the licensee,  including  compliance
with  various  rules  limiting  common  ownership  of  media   properties,   the
"character" of the licensee and those persons holding  "attributable"  interests
in that licensee,  and compliance with the  Communications  Act's limitations on
alien ownership.

     To obtain the FCC's prior consent to assign a broadcast license or transfer
control of a broadcast licensee, appropriate applications must be filed with the
FCC. If the application involves a "substantial change" in ownership or control,
the application must be placed on public notice for a period of

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<PAGE>

approximately  30 days during  which  petitions to deny the  application  may be
filed by interested parties, including members of the public. If the application
does not involve a  "substantial  change" in ownership or control,  it is a "pro
forma"  application.  The "pro forma" application is not subject to petitions to
deny or a  mandatory  waiting  period,  but is  nevertheless  subject  to having
informal  objections  filed  against  it.  If the FCC  grants an  assignment  or
transfer application,  interested parties have approximately 30 days from public
notice of the grant to seek  reconsideration or review of the grant.  Generally,
parties  that do not  file  initial  petitions  to deny or  informal  objections
against the application face difficulty in seeking  reconsideration or review of
the grant. The FCC normally has approximately an additional 10 days to set aside
such  grant  on its own  motion.  When  passing  on an  assignment  or  transfer
application,  the FCC is prohibited from considering whether the public interest
might be  served by an  assignment  or  transfer  to any  party  other  than the
assignee or transferee specified in the application.

     The FCC generally applies its ownership limits to "attributable"  interests
held by an individual,  corporation,  partnership or other  association.  In the
case of corporations  holding, or through  subsidiaries  controlling,  broadcast
licenses,  the  interests  of  officers,  directors  and those who,  directly or
indirectly, have the right to vote 5% or more of the corporation's stock (or 20%
or more of such stock in the case of insurance  companies,  investment companies
and  bank  trust   departments   that  are  passive   investors)  are  generally
attributable, except that, in general, no minority voting stock interest will be
attributable  if there is a single  holder of more  than 50% of the  outstanding
voting  power  of  the  corporation.  In  August,  1999,  the  FCC  revised  its
attribution and multiple ownership rules, and adopted the equity-debt-plus  rule
that causes  certain  creditors  or  investors  to be  attributable  owners of a
station,  regardless of whether there is a single majority  stockholder or other
applicable  exception  to the FCC's  attribution  rules.  Under this new rule, a
major programming supplier (any programming supplier that provides more than 15%
of the station's weekly  programming  hours) or same-market media entity will be
an attributable  owner of a station if the supplier or same-market  media entity
holds debt or equity,  or both,  in the station  that is greater than 33% of the
value of the station's total debt plus equity. For purposes of this rule, equity
includes all stock,  whether voting or non-voting,  and equity held by insulated
limited  partners  in  partnerships.   Debt  includes  all  liabilities  whether
long-term or short-term.

     The  Communications Act prohibits the issuance of broadcast licenses to, or
the holding of a broadcast license by, any corporation of which more than 20% of
the  capital  stock is owned of record or voted by  non-U.S.  citizens  or their
representatives  or by a foreign government or a representative  thereof,  or by
any corporation  organized  under the laws of a foreign  country  (collectively,
aliens).  The  Communications Act also authorizes the FCC, if the FCC determines
that it would be in the public interest, to prohibit the issuance of a broadcast
license to, or the holding of a broadcast  license by, any corporation  directly
or indirectly  controlled by any other corporation of which more than 25% of the
capital  stock is owned  of  record  or  voted  by  aliens.  The FCC has  issued
interpretations  of existing law under which these restrictions in modified form
apply to other forms of business organizations, including partnerships.

     As a result of these  provisions,  the licenses granted to our subsidiaries
by the FCC could be revoked  if,  among other  restrictions  imposed by the FCC,
more than 25% of our stock were directly or indirectly owned or voted by aliens.
Sinclair and its subsidiaries are domestic corporations,  and the members of the
Smith  family  (who  together  hold  over 90% of the  common  voting  rights  of
Sinclair) are all United States citizens.  The amended and restated  articles of
incorporation of Sinclair (the amended certificate) contain limitations on alien
ownership and control that are  substantially  similar to those contained in the
Communications Act. Pursuant to the amended certificate,  Sinclair has the right
to  repurchase  alien-owned  shares at their  fair  market  value to the  extent
necessary,  in the judgment of its board of directors,  to comply with the alien
ownership restrictions.

     Radio/Television   Cross-Ownership   Rule.   The   FCC's   radio/television
cross-ownership  rule (the "one to a market" rule) generally  permits a party to
own a  combination  of up to two  television  stations  and six  radio  stations
depending on the number of independent media voices in the market.

     Local Television/Cable  Cross-Ownership Rule. While the 1996 Act eliminates
a previous  statutory  prohibition  against the common ownership of a television
broadcast station and a cable system that serve

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the same local  market,  the 1996 Act leaves the current FCC rule in place.  The
legislative  history of the Act  indicates  that the repeal of the statutory ban
should not prejudge the outcome of any FCC review of the rule.

     Broadcast Network/Cable  Cross-Ownership Rule. The 1996 Act directs the FCC
to  eliminate  its rules which  formerly  prohibited  the common  ownership of a
broadcast  network and a cable  system,  subject to the  provision  that the FCC
revise its rules as  necessary  to ensure  carriage,  channel  positioning,  and
non-discriminatory  treatment  of  non-affiliated  broadcast  stations  by cable
systems  affiliated with a broadcast  network.  In March 1996, the FCC issued an
order implementing this legislative change.

     Broadcast/Daily  Newspaper  Cross-Ownership  Rule. The FCC's rules prohibit
the common  ownership  of a radio or  television  broadcast  station and a daily
newspaper in the same market.  In October  1996,  the FCC initiated a rulemaking
proceeding  to determine  whether it should  liberalize  its waiver  policy with
respect to  cross-ownership  of a daily newspaper and one or more radio stations
in the same market.

     Dual Network  Rule. A network  entity is permitted to operate more than one
television  network,  provided,  however,  that ABC,  CBS,  NBC,  and/or Fox are
currently  prohibited  from  merging  with each  other or with  another  network
television entity such as WB or UPN.

     Antitrust  Regulation.  The DOJ  and  the  Federal  Trade  Commission  have
increased their scrutiny of the television and radio industry since the adoption
of the 1996 Act,  and have  reviewed  matters  related to the  concentration  of
ownership  within markets  (including  LMAs and JSAs) even when the ownership or
LMA or JSA in question is permitted under the laws administered by the FCC or by
FCC rules and  regulations.  For  instance,  the DOJ has for some time taken the
position  that an LMA entered into in  anticipation  of a station's  acquisition
with the  proposed  buyer of the  station  constitutes  a change  in  beneficial
ownership of the station which,  if subject to filing under the HSR Act,  cannot
be implemented  until the waiting  period  required by that statute has ended or
been terminated.

     National  Ownership  Rule. No individual or entity may have an attributable
interest  in  television  stations  reaching  more  than  35%  of  the  national
television  viewing  audience.  Historically,  VHF stations have shared a larger
portion of the market than UHF stations.  Therefore, only half of the households
in the market area of any UHF station are included when  calculating  whether an
entity or  individual  owns  television  stations  reaching more than 35% of the
national  television  viewing audience.  All but seven of the stations owned and
operated by us, or to which we provide programming services,  are UHF. KDSM is a
UHF station.

     Duopoly  Rule. Under  the  FCC's  new  local  television ownership rules, a
party may own two television stations in the same market:

     o    if there is no Grade B overlap between the stations;

     o    if the stations are in two different Nielsen  Designated Market Areas;
          or

     o    if the market  containing  both the  stations  contains at least eight
          separately-owned  full-power television stations and not more than one
          station is among the top-four rated stations in the market.

     In  addition,  a party may request a waiver of the rule to acquire a second
station in the market if the station to be acquired is  economically  distressed
or unbuilt and there is no party who does not own a local television station who
would purchase the station for a reasonable price.

     Expansion of our broadcast  operations  on both a local and national  level
will continue to be subject to the FCC's ownership rules and any changes the FCC
or  Congress  may adopt.  Concomitantly,  any  further  relaxation  of the FCC's
ownership  rules may  increase the level of  competition  in the market in which
KDSM is located, more specifically to the extent that any of our competitors may
have greater  resources and thereby be in a superior  position to take advantage
of such changes.

     THE SATELLITE HOME VIEWER ACT (SHVA). In 1988,  Congress enacted SHVA which
enabled satellite  carriers to provide broadcast  programming to those satellite
subscribers   who  were   unable  to  obtain   broadcast   network   programming
over-the-air. SHVA did not permit satellite carriers to retransmit local

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broadcast  television signals directly to their subscribers.  The Satellite Home
Viewer Act of 1999 (SHIVA)  revised SHVA to reflect changes in the satellite and
broadcasting industry. This new legislation allows satellite carriers to provide
local  television  signals by satellite  within a station  market,  but does not
require  satellite  carriers to carry all local  signals in a market until 2002.
Satellite  carriers now are  permitted to carry these local  television  station
signals without the express consent of broadcasters for a six-month period until
the end of May 2000. During that six-month period,  broadcasters are required to
participate in good faith in retransmission  consent negotiations with satellite
carriers and other multichannel video programming distributors.  If an agreement
has not been reached by the end of the six-month period,  the television station
signal may not be carried  without the express  consent of the  broadcaster.  We
cannot predict the impact of SHIVA or any modifications of the FCC's regulations
as a result of those changes.

MUST-CARRY/RETRANSMISSION CONSENT

     Pursuant to the Cable Act of 1992, television  broadcasters are required to
make   triennial   elections  to  exercise   either  certain   "must-carry"   or
"retransmission  consent"  rights in  connection  with their  carriage  by cable
systems in each broadcaster's local market. By electing the must-carry rights, a
broadcaster  demands carriage on a specified channel on cable systems within its
Designated  Market  Area,  in general as defined by the  Nielsen  DMA Market and
Demographic  Rank  Report of the prior  year.  These  must-carry  rights are not
absolute, and their exercise is dependent on variables such as

     o    the number of activated channels on a cable system,

     o    the location and size of a cable system, and

     o    the amount of programming on a broadcast  station that  duplicates the
          programming of another broadcast station carried by the cable system.

     Therefore, under certain circumstances, a cable system may decline to carry
a  given  station.   Alternatively,   if  a  broadcaster   chooses  to  exercise
retransmission  consent rights,  it can prohibit cable systems from carrying its
signal or grant the  appropriate  cable system the authority to  retransmit  the
broadcast signal for a fee or other  consideration.  In October 1999, we elected
must-carry  or  retransmission  consent  with  respect  to each  of the  non-Fox
affiliated  stations based on our  evaluation of the respective  markets and the
position of our owned or programmed  station(s) within the market.  Our stations
continue to be carried on all  pertinent  cable  systems,  and we do not believe
that our  elections  have  resulted  in the  shifting  of our  stations  to less
desirable cable channel locations. Many of the agreements we have negotiated for
cable   carriage  are  short  term,   subject  to   month-to-month   extensions.
Accordingly,  we may need to  negotiate  new long  term  retransmission  consent
agreements  for our stations to ensure  carriage on those relevant cable systems
for the balance of this triennial period (i.e., through December 31, 2002).

     The FCC has initiated a rulemaking  proceeding to consider whether to apply
must-carry rules to require cable companies to carry both the analog and digital
signals of local broadcasters  during the DTV transition period between 2002 and
2006 when television stations will be broadcasting both signals. If the FCC does
not require DTV  must-carry,  cable  customers in our broadcast  markets may not
receive the station's digital signal.

SYNDICATED EXCLUSIVITY/TERRITORIAL EXCLUSIVITY

     The FCC's  syndicated  exclusivity  rules allow local broadcast  television
stations  to  demand  that  cable  operators  black out  syndicated  non-network
programming  carried on "distant signals" (i.e.,  signals of broadcast stations,
including so-called  "superstations,"  which serve areas  substantially  removed
from the cable  system's  local  community).  The FCC's network  non-duplication
rules allow local broadcast network television  affiliates to require that cable
operators black out duplicating  network programming carried on distant signals.
However,  in a number of markets in which we own or program stations  affiliated
with a network,  a station that is affiliated  with the same network in a nearby
market is carried on cable systems

                                       8

<PAGE>

in our market.  This is not in  violation of the FCC's  network  non-duplication
rules.  However,  the carriage of two network  stations on the same cable system
could result in a decline of viewership  adversely affecting the revenues of our
owned or programmed station.

RESTRICTIONS ON BROADCAST ADVERTISING

     Advertising of cigarettes  and certain other tobacco  products on broadcast
stations  has been  banned for many years.  Various  states  also  restrict  the
advertising of alcoholic beverages.

     The  Communications  Act and  FCC  rules  also  place  restrictions  on the
broadcasting  of  advertisements  by legally  qualified  candidates for elective
office. Among other things,

     o    stations must provide  "reasonable access" for the purchase of time by
          legally qualified candidates for federal office,

     o    stations  must  provide  "equal  opportunities"  for the  purchase  of
          equivalent amounts of comparable broadcast time by opposing candidates
          for the same elective office, and

     o    during the 45 days preceding a primary or primary run-off election and
          during the 60 days  preceding a general or special  election,  legally
          qualified  candidates for elective  office may be charged no more than
          the   station's   "lowest   unit   charge"   for  the  same  class  of
          advertisement, length of advertisement, and daypart.

     Both the  President  of the United  States and the Chairman of the FCC have
called for rules that would require  broadcast  stations to provide free airtime
to political  candidates.  We cannot predict the effect of such a requirement on
our stations' advertising revenues.

PROGRAMMING AND OPERATION

     General. The Communications Act requires  broadcasters to serve the "public
interest."  The FCC has  relaxed  or  eliminated  many  of the  more  formalized
procedures  it had  developed  in the past to promote the  broadcast  of certain
types of  programming  responsive  to the  needs  of a  station's  community  of
license. FCC licensees continue to be required,  however, to present programming
that is responsive to their communities' issues, and to maintain certain records
demonstrating  such   responsiveness.   Complaints  from  viewers  concerning  a
station's  programming  may be considered  by the FCC when it evaluates  renewal
applications  of a licensee,  although such  complaints may be filed at any time
and generally  may be considered by the FCC at any time.  Stations also must pay
regulatory and application  fees, and follow various rules promulgated under the
Communications  Act that regulate,  among other things,  political  advertising,
sponsorship  identifications,  the  advertisement  of  contests  and  lotteries,
obscene and indecent broadcasts,  and technical operations,  including limits on
radio  frequency  radiation.  The FCC recently  adopted  rules  reaffirming  its
authority to have an Equal Employment  Opportunity (EEO)  nondiscrimination rule
and policies  and to require  broadcast  licensees  to create  equal  employment
outreach  programs and maintain records and make filings with the FCC evidencing
such efforts.

     Children's  Television  Programming. Television  stations  are  required to
broadcast  a  minimum  of  three hours per week of "core" children's educational
programming, which the FCC defines as programming that

     o    services the educational and informational  needs of children 16 years
          of age and under as a significant purpose;

     o    is  regularly  scheduled,  weekly and at least 30 minutes in duration;
          and

     o    is aired  between the hours of 7:00 a.m.  and 10:00 p.m.  Furthermore,
          "core" children's  educational  programs, in order to qualify as such,
          are  required  to  be  identified  as  educational  and  informational
          programs over the air at the time they are broadcast, and are required
          to be identified in the children's  programming reports required to be
          placed  quarterly  in  stations'  public  inspection  files  and filed
          annually with the FCC.

                                       9

<PAGE>

     Additionally,  television  stations  are  required to identify  and provide
information  concerning "core"  children's  programming to publishers of program
guides and listings.

     Television Violence. The television industry has developed a ratings system
that has  been  approved  by the  FCC.  Furthermore,  the FCC  requires  certain
television  sets to include the so-called  "V-chip," a computer chip that allows
blocking of rated programming.

DIGITAL TELEVISION

     The FCC has taken a number of steps to implement  digital  television (DTV)
broading  services.  The FCC has adopted an  allotment  table that  provides all
authorized television stations with a second channel on which to broadcast a DTV
signal.  The FCC has attempted to provide DTV coverage areas that are comparable
to stations' existing service areas. The FCC has ruled that television broadcast
licensees may use their digital  channels for a wide variety of services such as
high-definition television, multiple standard definition television programming,
audio, data, and other types of communications,  subject to the requirement that
each broadcaster provide at least one free video channel equal in quality to the
current  technical   standard  and  further  subject  to  the  requirement  that
broadcasters pay a fee of 5% of gross revenues on all DTV subscription services.

     DTV channels are generally  located in the range of channels from channel 2
through channel 51. The FCC required that affiliates of ABC, CBS, Fox and NBC in
the top 10 television markets begin digital broadcasting by May 1, 1999 and that
affiliates of these networks in markets 11 through 30 begin digital broadcasting
by November  1999. All other  commercial  stations are required to begin digital
broadcasting  by May 1, 2002.  The  majority  of our  stations  are  required to
commence digital operations by May 1, 2002.  Applications for digital facilities
for all of our stations were filed by November 1, 1999. The FCC's plan calls for
the DTV transition period to end in the year 2006, at which time the FCC expects
that television broadcasters will cease non-digital  broadcasting and return one
of their two channels to the government,  allowing that spectrum to be recovered
for other uses.  The FCC has been  authorized by Congress to extend the December
31, 2006 deadline for reclamation of a television station's  non-digital channel
if, in any given case:

     o    one or more television  stations  affiliated with ABC, CBS, NBC or Fox
          in a market is not broadcasting digitally, and the FCC determines that
          such stations have  "exercised due diligence" in attempting to convert
          to digital broadcasting, or

     o    less than 85% of the  television  households in the  station's  market
          subscribe to a multichannel  video service  (cable,  wireless cable or
          direct-to-home broadcast satellite television ("DBS")) that carries at
          least one  digital  channel  from each of the local  stations  in that
          market, or

     o    less than 85% of the  television  households in the market can receive
          digital  signals off the air using either a set-top  converter box for
          an analog television set or a new DTV television set.

     Congress  also  directed  the FCC to auction  the  non-digital  channels by
September  30, 2002 even though they are not to be reclaimed  by the  government
until at least  December  31,  2006.  Broadcasters  are  permitted to bid on the
non-digital  channels in cities with populations greater than 400,000,  provided
the channels are used for DTV. The FCC has  initiated  separate  proceedings  to
consider the surrender of existing television channels and how these frequencies
will be used after they are eventually recovered from broadcasters.

     Implementation   of  digital   television  will  also  impose   substantial
additional costs on television stations because of the need to replace equipment
and because some stations will need to operate at higher utility costs and there
can be no  assurance  that  our  television  stations  will be able to  increase
revenue to offset  such costs.  The FCC has also  proposed  imposing  new public
interest  requirements on television  licensees in exchange for their receipt of
DTV channels. In addition, Congress has held hearings on broadcasters' plans for
the use of their digital  spectrum.  As part of its first biennial review of the
DTV transition  process,  the FCC has issued a rulemaking  seeking comments on a
number of issues  effecting  the  transition,  including a review of the digital
transmission standard.

                                       10

<PAGE>

PENDING MATTERS

     The  Congress and the FCC have under  consideration,  and in the future may
consider and adopt, new laws,  regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly,  the operation,  ownership
and  profitability  of our  broadcast  stations,  result in the loss of audience
share and  advertising  revenues  for our  broadcast  stations,  and  affect our
ability to acquire  additional  broadcast stations or finance such acquisitions.
In addition to the changes and proposed  changes  noted above,  such matters may
include, for example, the license renewal process,  spectrum use fees, political
advertising rates, potential restrictions on the advertising of certain products
(beer,  wine and hard  liquor,  for  example),  and the rules and policies to be
applied in enforcing the FCC's equal employment opportunity regulations.

     Other   matters  that  could  affect  our  broadcast   properties   include
technological  innovations and developments  generally affecting  competition in
the mass communications  industry, such as direct radio and television broadcast
satellite service,  creation of low power radio and class A television services,
the continued  establishment  of wireless cable systems and low power television
stations, digital television and radio technologies, the Internet and the advent
of  telephone  company  participation  in the  provision  of  video  programming
service.

OTHER CONSIDERATIONS

     The foregoing  summary does not purport to be a complete  discussion of all
provisions  of the  Communications  Act or  other  congressional  acts or of the
regulations and policies of the FCC. For further  information,  reference should
be made to the Communications Act, other congressional acts, and regulations and
public  notices  promulgated  from time to time by the FCC. There are additional
regulations  and  policies  of the FCC and other  federal  agencies  that govern
political  broadcasts,  advertising,  equal  employment  opportunity,  and other
matters affecting our business and operations.

EMPLOYEES

     As of December 31, 1999, we had  approximately  49  employees.  None of the
employees  are  represented  by labor  unions  under any  collective  bargaining
agreement.  We have not experienced  significant  labor problems and we consider
our overall labor relations to be good.

ITEM 2. PROPERTIES

     We  have  facilities  consisting  of  offices,  studios  and  tower  sites.
Transmitter  and tower sites are located to provide  maximum signal  coverage of
the stations'  markets.  The following table  generally  describes our principal
owned and leased real property in the Des Moines market:

<TABLE>
<CAPTION>
TELEVISION PROPERTIES     TYPE OF FACILITY AND USE        OWNED OR LEASED(A)              APPROXIMATE SIZE (SQ. FEET)
-----------------------   -----------------------------   -----------------------------   ----------------------------
<S>                       <C>                             <C>                             <C>
Des Moines Market         KDSM Studio & Office Site       Owned                           13,000
                          KDSM Transmitter bldg/tower     Owned                           2,000
                          KDSM Transmitter land           Leased (expires 11/08/2034)     40 Acres
</TABLE>

     We believe that all of our properties, both owned and leased, are generally
in good operating  condition,  subject to normal wear and tear, and are suitable
and adequate for our current business operations.

ITEM 3. LEGAL PROCEEDINGS

     Lawsuits and claims are filed  against us from time to time in the ordinary
course of business.  These  actions are in various  preliminary  stages,  and no
judgments  or  decisions  have  been  rendered  by  hearing  boards  or  courts.
Management,  after reviewing  developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on us.

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

     No matters were submitted to a vote of our  stockholders  during the fourth
quarter of 1999.

                                       11

<PAGE>

                                    PART II


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

     None.


ITEM 6. SELECTED FINANCIAL DATA

     The selected  consolidated  financial data for the years ended December 31,
1995, 1996, 1997, 1998 and 1999 have been derived from our audited  Consolidated
Financial Statements.  The Consolidated Financial Statements for the years ended
December 31, 1997, 1998 and 1999 are included elsewhere in this Form 10-K.

     The  information  below should be read in  conjunction  with  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
the Consolidated Financial Statements included elsewhere in this Form 10-K.










                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                      PREDECESSOR   COMBINED (A)               THE COMPANY
                                                     ------------- -------------- --------------------------------------
                                                                          YEARS ENDED DECEMBER 31,
                                                     -------------------------------------------------------------------
                                                          1995          1996          1997         1998         1999
                                                     ------------- -------------- ------------ ------------ ------------
                                                                           (DOLLARS IN THOUSANDS)
<S>                                                  <C>           <C>            <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA
Net broadcast revenues (b) .........................   $   7,478     $   8,218     $    8,140   $   8,363    $   8,461
Barter revenues ....................................          --           204            398         552          541
                                                       ---------     ---------     ----------   ---------    ---------
Total revenues .....................................       7,478         8,422          8,538       8,915        9,002
                                                       ---------     ---------     ----------   ---------    ---------
Operating costs (c) ................................       3,489         3,773          3,658       3,742        3,997
Expenses from barter arrangements ..................          --           225            283         377          392
Depreciation and amortization (d) ..................       3,338         2,616          3,521       4,349        3,555
Stock-based compensation ...........................          --            --             23          23           23
                                                       ---------     ---------     ----------   ---------    ---------
Broadcast operating income .........................         651         1,808          1,053         424        1,035
Parent preferred stock dividend income .............          --            --         20,826      26,033       26,033
Subsidiary trust minority interest expense (e) .....          --            --        (18,600)    (23,250)     (23,250)
Interest and other income ..........................          12            --             --         239          671
                                                       ---------     ---------     ----------   ---------    ---------
Income before income taxes .........................   $     663     $   1,808     $    3,279   $   3,446    $   4,489
                                                       =========     =========     ==========   =========    =========
Net income .........................................   $     663     $   1,323     $    1,895   $     729    $   8,977
                                                       =========     =========     ==========   =========    =========
Net income available to common shareholders ........   $     663     $   1,323     $    1,895   $     729    $   8,977
                                                       =========     =========     ==========   =========    =========
OTHER DATA:
Broadcast cash flow (f) ............................   $   2,922     $   3,727     $    3,661   $   3,693    $   3,433
Broadcast cash flow margin (g) .....................        39.1%         45.4%          45.0%       44.2%        40.6%
Adjusted EBITDA (h) ................................   $   2,772     $   3,291     $    3,378   $   3,423    $   3,175
Adjusted EBITDA margin (g) .........................        37.1%         40.0%          41.5%       40.9%        37.5%
Program contract payments ..........................   $   1,217     $   1,133     $    1,219   $   1,373    $   1,438
Corporate overhead expense .........................         150           436            283         270          258
Capital expenditures ...............................         139           190            197         235          151
Cash flows from operating activities ...............       2,813         1,647          4,060       4,210       10,428
Cash flows from investing activities ...............        (121)         (190)      (207,973)       (235)        (151)
Cash flows from financing activities ...............      (2,686)       (1,485)       203,921      (3,979)     (10,275)
BALANCE SHEET DATA:
Cash and cash equivalents ..........................   $      62     $       3     $       11   $       7    $       9
Total assets .......................................       8,344        40,674        258,540     259,519      268,061
HYTOPS (i) .........................................          --            --        200,000     200,000      200,000
Total equity of partnership 1995 to 1996, total
 stockholders' equity 1997 to 1999 .................       5,046        37,516         53,749      54,478       63,455
</TABLE>

----------------
(a)  The  combined  column  represents  the results of  operations  for the five
     months   ended  May  31,  1996  of  KDSM-TV,   a  division  of  River  City
     Broadcasting,  L.P. (the predecessor) and the results of operations for the
     seven months ended December 31, 1996 of KDSM, Inc. and subsidiaries.

(b)  "Net  broadcast  revenues" are defined as broadcast  revenues net of agency
     commissions.

(c)  Operating  costs  include  program and  production  expenses  and  selling,
     general and administrative expenses.

(d)  Depreciation  and  amortization  includes  amortization of program contract
     costs and net realizable value  adjustments,  depreciation and amortization
     of  property  and  equipment,   and  amortization  of  acquired  intangible
     broadcasting  assets and other assets  including  amortization  of deferred
     financing costs and costs related to excess syndicated programming.

(e)  Subsidiary trust minority interest expense  represents the distributions on
     the HYTOPS (see footnote i).

(f)  "Broadcast  cash  flow" is  defined  as  broadcast  operating  income  plus
     corporate  overhead  expense,  special bonuses paid to executive  officers,
     stock-based  compensation,  depreciation and  amortization  (including film
     amortization  and excess  syndicated  programming),  less cash payments for
     program  rights.  Cash program  payments  represent  cash payments made for
     current  programs  payable  and do not  necessarily  correspond  to program
     usage.  Special bonuses paid to executive  officers are considered  unusual
     and  non-recurring.  We have presented  broadcast cash flow data,  which we
     believe  are  comparable  to the data  provided by other  companies  in the
     industry,  because such data are commonly used as a measure of  performance
     for broadcast companies.  However,  broadcast cash flow does not purport to
     represent  cash  provided  by  operating  activities  as  reflected  in our
     consolidated  statements  of cash  flows,  is not a  measure  of  financial
     performance under generally accepted  accounting  principles and should not
     be considered in isolation or as a substitute  for measures of  performance
     prepared in accordance with generally accepted accounting principles.

                                       13

<PAGE>

(g)  "Broadcast  cash flow margin" is defined as broadcast  cash flow divided by
     net broadcast  revenues.  "Adjusted  EBITDA  margin" is defined as Adjusted
     EBITDA divided by net broadcast revenues.

(h)  "Adjusted EBITDA" is defined as broadcast cash flow less corporate expenses
     and is a commonly  used measure of  performance  for  broadcast  companies.
     Adjusted  EBITDA does not purport to represent  cash  provided by operating
     activities as reflected in our  consolidated  statements of cash flows,  is
     not a measure of financial  performance under generally accepted accounting
     principles and should not be considered in isolation or as a substitute for
     measures of  performance  prepared in accordance  with  generally  accepted
     accounting principles.

(i)  HYTOPS  represents  our  Obligated   Mandatorily   Redeemable  Security  of
     Subsidiary Trust Holding Solely KDSM Senior  Debentures  representing  $200
     million aggregate liquidation value.

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

INTRODUCTION

     Our operating revenues are derived from local and national advertisers. Our
revenues from local advertisers have continued to trend upward and revenues from
national  advertisers  have  continued  to trend  downward  when  measured  as a
percentage  of total  broadcast  revenue.  We believe  this  trend is  primarily
resulting  from an increase in the number of media  outlets  providing  national
advertisers a means by which to advertise their goods and services.  Our efforts
to mitigate this trend include continuing our efforts to increase local revenues
and the development of innovative  marketing  strategies to sell traditional and
non-traditional services to national advertisers.

     Our primary operating expenses involved in owning, operating or programming
the  television  station are  syndicated  program  rights fees,  commissions  on
revenues,  employee  salaries and station  promotional  costs.  Amortization and
depreciation  of costs  associated  with the acquisition of the station are also
significant factors in determining our overall profitability.

     Set forth below are the principal types of broadcast  revenues  received by
our station for the periods  indicated and the percentage  contribution  of each
type to our total gross broadcast revenues:

                              BROADCAST REVENUES
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                       ----------------------------------------------------------------------------
                                                1997                      1998                       1999
                                       -----------------------   -----------------------   ------------------------
<S>                                    <C>          <C>          <C>          <C>          <C>           <C>
Local/regional advertising .........    $  6,132        65.6%     $  6,618        69.2%     $  6,996         72.7%
National advertising ...............       3,146        33.7%        2,769        29.0%        2,536         26.4%
Network compensation ...............          --         0.0%           53         0.5%           --          0.0%
Political advertising ..............          --         0.0%           34         0.4%           17          0.2%
Production .........................          66         0.7%           89         0.9%           73          0.7%
                                        --------       -----      --------       -----      --------        -----
Broadcast revenues .................       9,344       100.0%        9,563       100.0%        9,622        100.0%
                                        ========       =====      ========       =====      ========        =====
Less: agency commissions ...........      (1,204)                   (1,200)                   (1,161)
                                        --------                  --------                  --------
Broadcast revenues, net ............       8,140                     8,363                     8,461
Barter revenues ....................         398                       552                       541
                                        --------                  --------                  --------
Total revenues .....................    $  8,538                  $  8,915                  $  9,002
                                        ========                  ========                  ========
</TABLE>

     Our primary types of programming and their approximate  percentages of 1999
net broadcast revenues were syndicated programming (64.6%),  network programming
(19.9%),  sports  programming  (9.1%),  paid  programming  (4.8%) and children's
programming  (1.6%).  Similarly,  our six largest  categories of advertising and
their  approximate  percentages of 1999 net broadcast  revenues were  automotive
(19%), services (16%),  restaurants (12%), food (7%),  retail/department  stores
(6%),  home products (6%), and soft drinks (6%). No other  advertising  category
accounted for more than 6% of our net broadcast  revenues in 1999. No individual
advertiser accounted for more than 5% of the station's net broadcast revenues in
1999.

                                       14

<PAGE>

     The following  table sets forth certain of our operating data for the years
ended December 31, 1997, 1998 and 1999. For definitions of items,  see footnotes
on pages 13 and 14 of this document.

                                OPERATING DATA
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31,
                                                           ------------------------------------------
                                                               1997           1998           1999
                                                           ------------   ------------   ------------
<S>                                                        <C>            <C>            <C>
Net broadcast revenues (b) .............................    $    8,140     $   8,363      $   8,461
Barter revenues ........................................           398           552            541
                                                            ----------     ---------      ---------
Total revenues .........................................         8,538         8,915          9,002
                                                            ----------     ---------      ---------
Operating costs (c) ....................................         3,658         3,742          3,997
Expenses from barter arrangements ......................           283           377            392
Depreciation and amortization (d) ......................         3,521         4,349          3,555
Stock-based compensation ...............................            23            23             23
                                                            ----------     ---------      ---------
Broadcast operating income .............................         1,053           424          1,035
Parent preferred stock dividend income .................        20,826        26,033         26,033
Subsidiary trust minority interest expense (e) .........       (18,600)      (23,250)       (23,250)
Interest and other income ..............................            --           239            671
                                                            ----------     ---------      ---------
Income before income taxes .............................    $    3,279     $   3,446      $   4,489
Net income .............................................    $    1,895     $     729      $   8,977
                                                            ----------     ---------      ---------
Basic and diluted net income available to common
 shareholders ..........................................    $    1,895     $     729      $   8,977
                                                            ==========     =========      =========
BROADCAST CASH FLOW (BCF)
 DATA:
 BCF (f) ...............................................    $    3,661     $   3,693      $   3,433
 BCF margin (g) ........................................          45.0%         44.2%          40.6%

OTHER DATA: ............................................
 Adjusted EBITDA (h) ...................................    $    3,378     $   3,423      $   3,175
 Adjusted EBITDA margin (g) ............................          41.5%         40.9%          37.5%
 Program contract payments .............................    $    1,219     $   1,373      $   1,438
 Corporate overhead expense ............................           283           270            258
 Capital expenditures ..................................           197           235            151
 Cash flows from operating activities ..................         4,060         4,210         10,428
 Cash flows from investing activities ..................      (207,973)         (235)          (151)
 Cash flows from financing activities ..................       203,921        (3,979)       (10,275)
</TABLE>

                                       15

<PAGE>

RESULTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 1999 AND 1998

     Net  broadcast  revenues  increased  to $8.5  million  for the  year  ended
December  31, 1999 from $8.4 million for the year ended  December  31, 1998,  or
1.2%. When comparing the year ended December 31, 1999 to the year ended December
31, 1998, revenues from local advertisers increased  approximately  $378,000, or
5.7% and revenues from national advertisers decreased approximately $233,000, or
8.4%.  Our  decrease in national  advertising  was  mitigated  by an  offsetting
increase in local  advertising  revenue.  The decrease in national  revenue is a
trend that we  believe  is  resulting  from an  increase  in the number of media
outlets providing national advertisers a means by which to advertise their goods
and services.  Station  operating  costs  increased to $4.0 million for the year
ended  December 31, 1999 from $3.7 million for the year ended December 31, 1998,
or 8.1%.  The increase in operating  costs for the year ended December 31, 1999,
as  compared to the year ended  December  31, 1998  primarily  resulted  from an
increase in promotion and programming costs.

     Depreciation and amortization  decreased to $3.6 million for the year ended
December  31, 1999 from $4.3 million for the year ended  December  31, 1998,  or
16.3%. The decrease in depreciation and amortization for the year ended December
31, 1999 as compared to the year ended  December 31, 1998 was  primarily  due to
the write-off of deferred financing costs in May 1998.

     Broadcast  operating  income  increased  to $1.0 million for the year ended
December 31, 1999 from  $424,000 for the year ended  December 31, 1998, or 136%.
The increase in broadcast  operating income for the year ended December 31, 1999
as compared to the year ended  December 31, 1998 was primarily  attributable  to
the decrease in depreciation and  amortization  combined with an increase in net
broadcast revenues as noted above.

     Parent  preferred stock dividend income of $26.0 million for the year ended
December  31,  1999 is related to our  investment  in 12 5/8% series C preferred
stock (the parent preferred securities) issued by Sinclair,  completed March 12,
1997.  Subsidiary trust minority  interest expense of $23.3 million for the year
ended  December 31, 1999 is related to the private  placement of the  subsidiary
trust preferred  securities (the HYTOPS).  Our ability to make future subsidiary
trust  minority  interest  payments is  directly  contingent  upon the  parent's
ability to pay dividends on parent preferred stock.

     We  recorded  an income  tax  benefit  of $4.5  million  for the year ended
December  31, 1999  compared to an income tax  provision of $2.7 million for the
year ended  December  31,  1998.  The change in income  taxes for the year ended
December  31,  1999  as  compared  to  the  year  ended  December  31,  1998  is
attributable to the dividends received deduction associated with the HYTOPS. Our
effective tax rate for the year ended December 31, 1999 was (100.0%) as compared
to 78.8% for the year ended December 31, 1998. The decrease in our effective tax
rate  for  1999  primarily   resulted  from  the  dividends  received  deduction
associated with the HYTOPS.

     Deferred state tax liability decreased to zero as of December 31, 1999 from
$846,000 as of December 31, 1998.  The decrease in our deferred tax liability as
of December 31, 1999 as compared to December  31, 1998 is  primarily  due to the
dividends  received deduction  associated with the HYTOPS.  Federal income taxes
are allocated to or from us by Sinclair at the statutory  rate,  are  considered
payable or  receivable  currently and are reflected as an adjustment to due from
parent or due to parent in our balance sheet  depending  upon whether there is a
tax benefit or provision, respectively.

     Net income  increased to $9.0 million for the year ended  December 31, 1999
from $729,000 for the year ended  December 31, 1998.  The increase in net income
for the year ended  December 31, 1999 as compared to the year ended December 31,
1998 is primarily due to the change in income taxes  combined with a decrease in
depreciation and amortization and an increase in net broadcast revenues as noted
above.

     Broadcast  cash flow  decreased to $3.4 million for the year ended December
31, 1999 from $3.7 million for the year ended  December 31, 1998,  or 8.1%.  Our
broadcast  cash flow margin  decreased to 40.6% for the year ended  December 31,
1999 from 44.2% for the year ended December 31, 1998. The

                                       16

<PAGE>

decrease  in  broadcast  cash flow and  broadcast  cash flow margin for the year
ended  December  31,  1999 as  compared  to the year  ended  December  31,  1998
primarily  resulted  from an  increase  in  operating  expenses  as noted  above
combined with an increase in program contract  payments offset by an increase in
net broadcast revenues.

     Adjusted  EBITDA  decreased to $3.2 million for the year ended December 31,
1999 from $3.4  million  for the year ended  December  31,  1998,  or 5.9%.  Our
Adjusted  EBITDA margin  decreased to 37.5% for the year ended December 31, 1999
from 40.9% for the year ended December 31, 1998. The decrease in adjusted EBITDA
and adjusted  EBITDA margin for the year ended  December 31, 1999 as compared to
the year  ended  December  31,  1998  primarily  resulted  from an  increase  in
operating  expenses as noted above combined with an increase in program contract
payments offset by an increase in net broadcast revenues.

YEARS ENDED DECEMBER 31, 1998 AND 1997

     Total  revenues  increased to $8.9 million for the year ended  December 31,
1998 from $8.5 million for the year ended December 31, 1997, or 4.7%.  Excluding
the effects of non-cash barter transactions, net broadcast revenues for the year
ended  December  31,  1998  increased  by 2.7% when  compared  to the year ended
December 31, 1997.  When  comparing the year ended December 31, 1998 to the year
ended December 31, 1997, revenues from local advertisers increased approximately
$486,000 or 7.9% and revenues from national advertisers decreased  approximately
$377,000 or 12.0%.  Our  decrease in national  advertising  was  mitigated by an
offsetting  increase  in local  advertising  revenue.  The  decrease in national
revenue is a trend that we believe is  resulting  from an increase in the number
of media outlets  providing  national  advertisers a means by which to advertise
their goods and services.

     Station  operating  costs for the year ended  December  31,  1998  remained
consistent compared to the year ended December 31, 1997.

     Broadcast  operating  income  decreased to $424,000  for the twelve  months
ended  December 31, 1998 from $1.1 million for the twelve months ended  December
31, 1997,  or 61.5%.  The decrease in  broadcast  operating  income for the year
ended  December  31, 1998 as compared  to the year ended  December  31, 1997 was
primarily  attributable  to increases in  amortization  and selling  general and
administrative expenses partially offset by an increase in total revenues.

     Parent  preferred stock dividend income of $26.0 million for the year ended
December  31,  1998 is related to our  investment  in 12 5/8% series C preferred
stock (the parent preferred securities) issued by Sinclair,  completed March 12,
1997.  Subsidiary trust minority  interest expense of $23.3 million for the year
ended  December 31, 1998 is related to the private  placement of the  subsidiary
trust preferred  securities (the HYTOPS).  Our ability to make future subsidiary
trust  minority  interest  payments is  directly  contingent  upon the  parent's
ability to pay dividends on parent preferred stock.

     The income  tax  provision  increased  to $2.7  million  for the year ended
December  31, 1998 from $1.4 million for the year ended  December 31, 1997.  The
increase for the year ended December 31, 1998 as compared to the combined twelve
months ended  December  31, 1997 is  attributable  to deferred  tax  liabilities
associated  with the HYTOPS.  Our effective tax rate for the year ended December
31, 1998 was 78.8% as compared to 42.2% for the year ended  December  31,  1997.
The increase in our  effective  tax rate for 1998  primarily  resulted  from the
deferred tax liability associated with the HYTOPS.

     Deferred state tax liability  increased to $846,000 as of December 31, 1998
from  $334,000  as of December  31,  1997.  The  increase  in our  deferred  tax
liability  as of December 31, 1998 as compared to December 31, 1997 is primarily
due to pre-tax income for the year ended December 31, 1998. Federal income taxes
are allocated to us by Sinclair at the statutory  rate, are  considered  payable
currently  and are  reflected as an adjustment to due from parent in our balance
sheet.

     Net income for the year ended  December 31, 1998 was  $729,000  compared to
net income of $1.9 million for the year ended December 31, 1997.

     Adjusted  EBITDA and  Broadcast  Cash Flow for the year ended  December 31,
1998 remained consistent compared to the year ended December 31, 1997.

                                       17

<PAGE>

     Our  Broadcast  Cash Flow  margin  decreased  to 44.2%  for the year  ended
December 31, 1998 from 45.0% for the year ended  December 31, 1997. The decrease
in Broadcast  Cash Flow margins for the year ended December 31, 1998 as compared
to the year ended  December  31,  1997  primarily  resulted  from  decreases  in
national  revenues as noted above  combined with  increases in program  contract
payments.

     Our Adjusted  EBITDA margin  decreased to 40.9% for the year ended December
31,  1998 from 41.5% for the year ended  December  31,  1997.  The  decrease  in
Adjusted  EBITDA margin for the year ended  December 31, 1998 as compared to the
year ended  December  31, 1997  primarily  resulted  from  decreases in national
revenues as noted above combined with increases in program contract payments.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 1999, we had cash balances of  approximately  $9,000 and
working capital of  approximately  $647,000.  Our primary source of liquidity is
cash  from  operations  which  management  believes  to be  sufficient  to  meet
operating cash  requirements.  Cash  requirements or excess cash from operations
are funded by or deposited into Sinclair's  centralized  banking system utilized
by all of its wholly owned subsidiaries.

     We do not  anticipate  capital  expenditures  in the coming  year to exceed
historical capital expenditures,  which were approximately  $151,000 in 1999. If
we  are  required  to  make  capital  expenditures  to  keep  up  with  emerging
technologies, management believes we will be able to fund such expenditures from
cash flow and from the proceeds of  indebtedness or financing that is allowed to
be incurred or obtained under our senior debenture  indenture (provided that our
debt to Adjusted  EBITDA ratio is 4 to 1 or less) or from capital  contributions
from Sinclair to the extent permitted under Sinclair's debt  instruments.  Under
these   instruments,   Sinclair   would   currently  be  able  to  make  capital
contributions  to us in an amount  sufficient to cover such costs if it chose to
do so.

SEASONALITY

     Our results usually are subject to seasonal  fluctuations,  which result in
fourth  quarter  broadcast  operating  income being greater  usually than first,
second  and third  quarter  broadcast  operating  income.  This  seasonality  is
primarily  attributable to increased expenditures by advertisers in anticipation
of holiday season spending and an increase in viewership  during this period. In
addition, revenues from political advertising tend to be higher in even numbered
years.

YEAR 2000 COMPLIANCE

     Sinclair spent  approximately $2.5 million over the past two years updating
hardware and software systems to ensure Year 2000 compliance. The four phases of
Sinclair's  Year  2000  plan  consisted  of:   inventory  and  data  collection;
compliance requests; test fix and verify; final testing and new item compliance.
Each of the four phases of Sinclair's  Year 2000 process have been  successfully
completed and no disruptions to operations occurred as a result of Year 2000.

     Although we have completed all phases of our Year 2000  compliance  project
and currently  believe all of our systems to be Year 2000  compliant,  we cannot
assure you that any of our systems will be Year 2000  compliant in future dates.
In addition, we cannot assure you that outside systems indirectly related to our
operations  are Year 2000  complaint  or will be Year 2000  compliant  in future
dates.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCUSSION ABOUT MARKET RISKS

     Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Our financial  statement and  supplementary  data required by this item are
filed as exhibits,  are listed under Item 14(a)(1) and (2), and are incorporated
by reference.

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

     None.

                                       18

<PAGE>

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Set forth below is certain information  relating to our executive officers,
directors,  certain  key  employees  and persons  expected  to become  executive
officers, directors or key employees.

            NAME                AGE             TITLE
----------------------------   -----   -----------------------
David D. Smith .............    49     President and Director
David B. Amy ...............    47     Secretary and Director
Dr. David McCarus ..........    48     Director

     Members of the board of directors are elected for one-year  terms and until
their  successors  are  duly  elected  and  qualified.  Executive  officers  are
appointed  by the board of directors  annually to serve for  one-year  terms and
until their successors are duly appointed and qualified.

     David D. Smith has served as  President  of KDSM  since  April of 1996.  In
addition,  Mr.  Smith has  served as  President,  Chief  Executive  Officer  and
Chairman of the Board for Sinclair  Broadcast Group,  Inc. since September 1990.
Prior to that, he served as General Manager of WPTT,  Pittsburgh,  Pennsylvania,
from  1984,  and  assumed  the  financial  and  engineering  responsibility  for
Sinclair,  including the construction of WTTE, Columbus, Ohio, in 1984. In 1980,
Mr. Smith founded Comark Television, Inc., which applied for and was granted the
permit  for  WPXT-TV  in  Portland,   Maine  and  which  purchased   WDSI-TV  in
Chattanooga, Tennessee. WPXT-TV was sold one year after construction and WDSI-TV
was  sold two  years  after  its  acquisition.  From  1978 to  1986,  Mr.  Smith
co-founded and served as an officer and director of Comark Communications, Inc.,
a  company  engaged  in the  manufacture  of  high  power  transmitters  for UHF
television stations.  His television career began with WBFF in Baltimore,  where
he helped in the  construction  of the  station  and was in charge of  technical
maintenance until 1978.

     David  B.  Amy  has served as Secretary and Director of KDSM since April of
1996.  In  addition  he  has  served  as  Executive  Vice  President of Sinclair
Broadcast  Group,  Inc. since September 1999. Prior to that time, Mr. Amy served
as  Chief  Financial  Officer  (CFO)  of  Sinclair  since  October  of  1994. In
addition,  he serves as Secretary of Sinclair Communications, Inc., the Sinclair
subsidiary  which  owns  and  operates the broadcasting operations. Prior to his
appointment,  Mr.  Amy  served as the Corporate Controller of Sinclair beginning
in  1986.  Mr. Amy has over sixteen years of broadcast experience, having joined
Sinclair  as  a  business manager for WPTT-TV in Pittsburgh. Mr. Amy received an
MBA  degree  from  the  University of Pittsburgh in 1981. Mr. Amy is currently a
member   of   the   board   of   directors  of  Acrodyne  Communications,  Inc.,
BeautyBuys.com, Inc., and an advisor to Allegiance Capital.

     Dr.  David  C.  McCarus  has  served  as Director of KDSM since February 9,
1999.  Dr.  McCarus is Board Certified in Obstetrics and Gynecology and has been
in  private  practice  since  1983. Dr. McCarus has served on various committees
and  medical staff for the Greater Baltimore Medical Center. He currently serves
as  a member of the Quality Assurance Committee of Aetna US Healthcare and is an
active  member  of  the  St.  Joseph Medical Center staff. He also serves as the
Head  of the Division of Gynecology for MedTrend Health Systems, Inc. and Towson
Surgery  Center,  located in Maryland. Dr. McCarus received his M.D. Degree from
the  West  Virginia  University  School  of Medicine and completed his residency
training at the Greater Baltimore Medical Center.


                                       19

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

     The following table sets forth certain information regarding the annual and
long-term  compensation  by Sinclair  for  services  rendered in all  capacities
during the year ended  December 31, 1999 by the President and the other officers
of KDSM who received  total annual  salary and bonus of $100,000 or more in 1999
(Named Executive Officers):

                          SUMMARY COMPENSATION TABLE
                              ANNUAL COMPENSATION

<TABLE>
<CAPTION>
                                                                     LONG-TERM
                               ANNUAL COMPENSATION                  COMPENSATION
      NAME AND         ------------------------------------    SECURITIES UNDERLYING        ALL OTHER
 PRINCIPAL POSITION     YEAR        SALARY       BONUS (A)      OPTIONS GRANTED (#)      COMPENSATION (B)
--------------------   ------   -------------   -----------   -----------------------   -----------------
<S>                    <C>      <C>             <C>           <C>                       <C>
David D. Smith
 President .........   1999      $1,072,500      $603,115                  --                $ 6,409
                       1998       1,290,000       502,526                  --                  6,515
                       1997       1,354,490        98,224                  --                  6,306
David B. Amy
 Secretary .........   1999         300,000        75,000                                     10,945
                       1998         200,000        75,000             135,000                 11,136
                       1997         189,000        50,000              25,000                 10,140
</TABLE>

(a)  The  bonuses  reported in this column  represent  amounts  awarded and paid
     during the fiscal  years  noted but relate to the fiscal  year  immediately
     prior to the year noted.

(b)  All other compensation  consists of income deemed received for personal use
     of KDSM-leased  automobiles,  our 401 (k) contribution,  life insurance and
     long-term disability coverage.

STOCK OPTIONS

     The following table shows the number of stock options exercised during 1999
and the 1999  year-end  value of the stock  options held by the named  executive
officers:

<TABLE>
<CAPTION>
                                                                                            POTENTIAL REALIZABLE
                                                                                                    VALUE
                                NUMBER OF                                                 AT ASSUMED ANNUAL RATES
                                SECURITIES                                                     OF STOCK PRICE
                                UNDERLYING                                                      APPRECIATION
                            OPTIONS GRANTED TO                                              FOR OPTION TERM (A)
                               EMPLOYEES IN           EXERCISE               EXPIRATION   ------------------------
      NAME                     FISCAL YEAR       PRICE PER SHARE               DATE           0%        5%    10%
------------------------   -------------------   -----------------          -----------       -         -     --
<S>                        <C>                   <C>                 <C>    <C>           <C>       <C>       <C>
David D. Smith .........           --                   --           --         --           --        --      --
David B. Amy ...........           --                   --           --         --           --        --      --
</TABLE>

----------
Aggregated  Option  Exercises  in  Last Fiscal Year and December 31, 1999 Option
Values


<TABLE>
<CAPTION>
                                                                       NUMBER OF
                                                            SECURITIES UNDERLYING         VALUE OF UNEXERCISED
                                                             UNEXERCISED OPTIONS         "IN-THE-MONEY" OPTIONS
                                                            AT DECEMBER 31, 1999          AT DECEMBER 31, 1999
                          SHARES ACQUIRED      VALUE    ----------------------------- ----------------------------
          NAME              ON EXERCISE     REALIZED(A)  EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
------------------------ ----------------- ------------ ------------- --------------- ------------- --------------
<S>                      <C>               <C>          <C>           <C>             <C>           <C>
David D. Smith .........        --              --              --             --             --          --
David B. Amy ...........        --              --          65,000        135,000        $25,545          --
</TABLE>

(a)  An  "In-the-Money"  option is an option for which the  option  price of the
     underlying  stock is less than the market price at December  31, 1999,  and
     all of the value shown reflects stock price appreciation since the granting
     of the option.

EMPLOYMENT AGREEMENTS

     Sinclair  entered  into  an  employment  agreement  with  David  D.  Smith,
President  and Chief  Executive  Officer of Sinclair,  on June 12,  1995,  which
expired on June 12, 1998. Sinclair has not entered into a new agreement with Mr.
Smith and does not currently  anticipate  entering into a new  agreement.  As of
January 1, 2000, David Smith receives a base salary of approximately $1,000,000.

                                       20

<PAGE>

     In September 1998,  Sinclair entered into an amended  employment  agreement
with David B. Amy, then Vice President and Chief  Financial  Officer of Sinclair
and  Secretary of KDSM.  The agreement  does not have any specified  termination
date,  and Sinclair has the right to terminate the  employment of Mr. Amy at any
time,  with or without cause,  subject to the payment of severance  payments for
termination  without cause. The severance  payment due upon termination  without
cause  is  equal  to one  month's  base  salary  in  effect  at the  time of the
termination  times the number of the years of continuous  employment by Sinclair
or its  predecessor.  During  each  year,  Mr. Amy will be  entitled  to receive
compensation  as  determined  by  the  compensation  committee  of  Sinclair  in
consultation   with  the  Chief  Executive   Officer  of  Sinclair.   Mr.  Amy's
compensation  may  include a bonus in the sole  discretion  of the  compensation
committee  of  Sinclair.   The  agreement  also  contains   non-competition  and
confidentiality restrictions on Mr. Amy. In September 1999, Mr. Amy was promoted
to Executive Vice President, Sinclair Broadcast Group, Inc.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Other than as  follows,  no named  executive  officer  is a  director  of a
corporation  that has a director or executive  officer who is also a director of
KDSM.  Each of David D.  Smith  and  David B.  Amy,  both of whom are  executive
officers  and  directors  of KDSM,  is a director  and/or  executive  officer of
Sinclair.

     During  1999,  none of the named  executive  officers  participated  in any
deliberations of our board of directors or the compensation  committee  relating
to compensation of the named executive officers.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the beneficial
ownership of KDSM,  Inc.  common stock as of March 24, 2000,  by holders  having
beneficial ownership of more than five percent of KDSM, Inc. common stock.

<TABLE>
<CAPTION>
                                                       COMMON STOCK
                                          --------------------------------------
        NAME OF BENEFICIAL OWNER           NUMBER OF SHARES     PERCENT OF CLASS
---------------------------------------   ------------------   -----------------
<S>                                       <C>                  <C>
Sinclair Communications, Inc. .........          100                 100%
 10706 Beaver Dam Road
 Cockeysville, MD 21030
</TABLE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.

                                       21

<PAGE>

                                    PART IV

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

(a) (1) Index to Financial Statements

     The financial  statements required by this item are submitted in a separate
section beginning on page F-1 of this report.

<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                       -----
<S>                                                                                    <C>
   Index to Financial Statements ...................................................    F-1
   Report of Independent Public Accountants ........................................    F-2
   Consolidated Balance Sheets as of December 31, 1998 and 1999 ....................    F-3
   Consolidated Statements of Operations for the Years Ended December 31, 1997,
     1998, and 1999 ................................................................    F-4
   Consolidated Statements of Changes in Stockholder's Equity for the Years Ended
     December 31, 1997, 1998, and 1999 .............................................    F-5
   Consolidated Statements of Cash Flows for the Years Ended December 31, 1997,
     1998, and 1999 ................................................................    F-6
   Notes to Consolidated Financial Statements ......................................    F-7
</TABLE>

(a) (2) Index to Financial Statements Schedules

     The financial  statements  schedules required by this item are submitted on
pages S-1 through S-3 of this report.

<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                       -----
<S>                                                                                    <C>
   Index to Schedules ..............................................................    S-1
   Report of Independent Public Accountants ........................................    S-2
   Schedule II -- Valuation and Qualifying Accounts ................................    S-3
</TABLE>

     All other  schedules  are omitted  because they are not  applicable  or the
required information is shown in the financial statements or the notes thereto.

(a) (3) Index to Exhibits

     The  exhibit  index in Item  14(c) is  incorporated  by  reference  in this
report.

(b) Reports on Form 8-K

     There were no reports on Form 8-K filed by the registrant during the fourth
quarter of the fiscal year ended December 31, 1999.

                                       22

<PAGE>

(c) Exhibits

   The following exhibits are filed with this report:

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                             DESCRIPTION
--------   -------------------------------------------------------------------------------------------
<S>        <C>
           Amended and Restated Trust Agreement, dated as of March 12, 1997 among KDSM, Inc.,
           First Union National Bank of Maryland, First Union Bank of Delaware, David D. Smith and
 3.1       David B. Amy (1)
 3.2       Articles of Incorporation of KDSM, Inc., as of April 22, 1996 (1)
 3.3       By-Laws of KDSM, Inc. (1)
           Indenture, dated as of March 12, 1997 among KDSM, Inc., Sinclair Broadcast Group, Inc. and
 4.1       First Union National Bank of Maryland (1)
           Pledge and Security Agreement dated as of March 12, 1997 between KDSM, Inc. and First
 4.2       Union National Bank of Maryland (1)
 4.3       Form of 11 5/8 % High Yield Trust Offered Preferred Securities of Sinclair Capital (1)
 4.4       Form of 11 5/8% Senior Debentures due 2009 of KDSM, Inc. (included in Exhibit 4.1) (1)
           Form of Parent Guarantee Agreement between Sinclair Broadcast Group,Inc. and First
 4.5       Union National Bank of Maryland (1)
 27        Financial Data Schedule of KDSM, Inc.
</TABLE>

----------
(1)  Incorporated by reference from the Company's Registration Statement on Form
     S-4, No. 333-26427.

(d)  Financial Statements Schedules

     The financial  statement  schedules  required by this Item are listed under
Item 14 (a) (2).

                                       23

<PAGE>

                                  SIGNATURES

     Pursuant to the  requirements  of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report on Form 10-K to
be signed on its behalf by the  undersigned,  thereunto duly  authorized on this
30th day of March 2000.

                                        KDSM, INC.

                                        By: /s/ David D. Smith
                                          -------------------------------------
                                           David D. Smith
                                           President
                                           Principal Executive Officer

                                        SINCLAIR CAPITAL

                                        By: /s/ David B. Amy
                                          -------------------------------------
                                           David B. Amy
                                           Administrative Trustee


                               POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS,  that each person whose  signature  appears
below under the heading "Signature" constitutes and appoints David B. Amy as his
or her true and lawful  attorneys-in-fact  each acting alone, with full power of
substitution  and  resubstitution,  for him or her and in his or her name, place
and stead in any and all  capacities to sign any or all  amendments to this 10-K
and to file  the  same,  with all  exhibits  thereto,  and  other  documents  in
connection therewith,  with the SEC, granting unto said  attorneys-in-fact  full
power and authority to do and perform each and every act and thing requisite and
necessary  to be done in and about the  premises,  as fully for all  intents and
purposes  as he or she  might  or  could  do in  person,  hereby  ratifying  and
confirming all that said  attorneys-in-fact,  or their substitutes,  each acting
alone, may lawfully do or cause to be done by virtue hereof.

     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.

<TABLE>
<CAPTION>
         SIGNATURE                                 TITLE                             DATE
---------------------------   ----------------------------------------------   ---------------
<S>                           <C>                                              <C>
      /s/ David D. Smith      Director and President                           March 30, 2000
-------------------------      (principal executive officer)
         David D. Smith       KDSM, Inc.
                               Administrative Trustee
                               (principal executive officer)
                               Sinclair Capital

        /s/ David B. Amy      Director and Secretary                           March 30, 2000
-------------------------      (principal financial and accounting officer)
        David B. Amy          KDSM, Inc.
                               Administrative Trustee
                               (principal financial and accounting officers)
                               Sinclair Capital
  /s/ Dr. David McCarus
-------------------------     Director                                         March 30, 2000
       Dr. David McCarus       KDSM, Inc.
</TABLE>

<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                       -----
<S>                                                                                    <C>
KDSM, INC. AND SUBSIDIARIES
 Report of Independent Public Accountants ..........................................    F-2
 Consolidated Balance Sheets as of December 31, 1998 and 1999 ......................    F-3
 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1998,
   and 1999 ........................................................................    F-4
 Consolidated Statements of Changes in Stockholder's Equity for the Years Ended
   December 31, 1997, 1998, and 1999 ...............................................    F-5
 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1998,
   and 1999 ........................................................................    F-6
 Notes to Consolidated Financial Statements ........................................    F-7
</TABLE>








                                      F-1
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of
Sinclair Broadcast Group, Inc.:

     We have audited the accompanying  consolidated balance sheets of KDSM, Inc.
(a Maryland  corporation) and subsidiaries (the Company) as of December 31, 1998
and 1999, and the related consolidated  statements of operations,  stockholder's
equity and cash flows for the years ended  December  31, 1997,  1998,  and 1999.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial position of KDSM, Inc. and subsidiaries
as of December 31, 1998 and 1999, and the results of its operations and its cash
flows for the years ended December 31, 1997,  1998, and 1999, in conformity with
accounting principles generally accepted in the United States.

                                        ARTHUR ANDERSEN, LLP


Baltimore, Maryland,
February 24, 2000


                                      F-2
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            AS OF DECEMBER 31,
                                                                          -----------------------
                                                                             1998         1999
                                                                          ----------   ----------
<S>                                                                       <C>          <C>
                                 ASSETS
CURRENT ASSETS:
 Cash. ................................................................    $      7     $      9
 Accounts receivable, net of allowance for doubtful accounts of $33
   and $19, respectively...............................................       2,107        1,901
 Dividends receivable from parent .....................................       1,085        1,085
 Current portion of program contract costs ............................         910          961
 Prepaid expenses and other current assets ............................          25            9
 Deferred barter costs ................................................          28           29
                                                                           --------     --------
    Total current assets ..............................................       4,162        3,994
PROPERTY AND EQUIPMENT, net ...........................................       3,062        2,813
PROGRAM CONTRACT COSTS, less current portion ..........................         534          890
INVESTMENT IN PARENT PREFERRED SECURITIES .............................     206,200      206,200
DUE FROM PARENT .......................................................       6,652       16,927
OTHER ASSETS, net of accumulated amortization of $1,889 and
 $1,786, respectively..................................................       6,532        5,892
ACQUIRED INTANGIBLE BROADCASTING ASSETS, net of
 accumulated amortization of $2,501 and $3,533, respectively...........      32,377       31,345
                                                                           --------     --------
    Total Assets ......................................................    $259,519     $268,061
                                                                           ========     ========
                    LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
 Accounts payable .....................................................    $     17     $     58
 Accrued liabilities ..................................................         386          353
 Current portion of program contracts payable .........................       1,920        1,915
 Deferred barter revenues .............................................         102           52
 Subsidiary trust minority interest expense payable ...................         969          969
                                                                           --------     --------
    Total current liabilities .........................................       3,394        3,347
PROGRAM CONTRACTS PAYABLE .............................................         801        1,259
DEFERRED STATE TAXES ..................................................         846            -
                                                                           --------     --------
    Total liabilities .................................................       5,041        4,606
                                                                           --------     --------
COMMITMENTS AND CONTINGENCIES
COMPANY OBLIGATED MANDATORILY REDEEMABLE
 SECURITIES OF SUBSIDIARY TRUST HOLDING SOLELY
 KDSM SENIOR DEBENTURES ...............................................     200,000      200,000
                                                                           --------     --------
STOCKHOLDER'S EQUITY:
 Common stock, $.01 par value, 1,000 shares authorized and 100 shares
   issued and outstanding .............................................          --           --
 Additional paid-in capital ...........................................      51,149       51,149
 Retained earnings ....................................................       3,329       12,306
                                                                           --------     --------
    Total stockholder's equity ........................................      54,478       63,455
                                                                           --------     --------
    Total Liabilities and Stockholder's Equity ........................    $259,519     $268,061
                                                                           ========     ========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                      F-3
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                           1997           1998           1999
                                                                       ------------   ------------   ------------
<S>                                                                    <C>            <C>            <C>
REVENUES:
 Station broadcast revenues, net of agency commissions of $1,204,
   $1,200 and $1,161, respectively..................................    $   8,140      $   8,363      $   8,461
 Revenues realized from station barter arrangements ................          398            552            541
                                                                        ---------      ---------      ---------
    Total revenues .................................................        8,538          8,915          9,002
                                                                        ---------      ---------      ---------
OPERATING EXPENSES:
 Program and production ............................................        1,199          1,153          1,393
 Selling, general and administrative ...............................        2,482          2,612          2,627
 Expenses realized from station barter arrangements ................          283            377            392
 Amortization of program contract costs and net realizable value
   adjustments .....................................................        1,579          1,710          1,483
 Depreciation of property and equipment ............................          354            381            400
 Amortization of acquired intangible broadcasting assets and other
   assets ..........................................................        1,588          2,258          1,672
                                                                        ---------      ---------      ---------
    Total operating expenses .......................................        7,485          8,491          7,967
                                                                        ---------      ---------      ---------
    Broadcast operating income .....................................        1,053            424          1,035
                                                                        ---------      ---------      ---------
OTHER INCOME (EXPENSE):
 Parent preferred stock dividend income ............................       20,826         26,033         26,033
 Subsidiary trust minority interest expense ........................      (18,600)       (23,250)       (23,250)
 Interest income ...................................................            -            239            671
                                                                        ---------      ---------      ---------
    Income before allocation of consolidated federal income taxes
      and state income taxes .......................................        3,279          3,446          4,489
ALLOCATION OF CONSOLIDATED FEDERAL INCOME TAX
 PROVISION (BENEFIT) ...............................................        1,123          2,205         (3,642)
STATE INCOME TAX PROVISION (BENEFIT) ...............................          261            512           (846)
                                                                        ---------      ---------      ---------
NET INCOME .........................................................    $   1,895      $     729      $   8,977
                                                                        =========      =========      =========
Basic and diluted net income per common share ......................    $  18,950      $   7,290      $  89,770
                                                                        =========      =========      =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .........................          100            100            100
                                                                        =========      =========      =========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                      F-4
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      ADDITIONAL                      TOTAL
                                           COMMON       PAID-IN      RETAINED     STOCKHOLDER'S
                COMPANY                     STOCK       CAPITAL      EARNINGS        EQUITY
---------------------------------------   --------   ------------   ----------   --------------
<S>                                       <C>        <C>            <C>          <C>
BALANCE, December 31, 1996 ............      $--        $36,811      $   705         $37,516
 Parent capital contributions .........       --         14,338           --          14,338
 Net income ...........................       --             --        1,895           1,895
                                             ---        -------      -------         -------
BALANCE, December 31, 1997 ............       --         51,149        2,600          53,749
 Net income ...........................       --             --          729             729
                                             ---        -------      -------         -------
BALANCE, December 31, 1998 ............       --         51,149        3,329          54,478
 Net income ...........................       --             --        8,977           8,977
                                             ---        -------      -------         -------
BALANCE, December 31, 1999 ............      $--        $51,149      $12,306         $63,455
                                             ===        =======      =======         =======
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.







                                      F-5
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
             FOR THE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  1997            1998           1999
                                                                             -------------   -------------   -----------
<S>                                                                          <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income ..............................................................    $    1,895       $   729        $   8,977
 Adjustments to reconcile net income to net cash flows from
   operating activities--
   Depreciation of property and equipment ................................           354           381              400
   Amortization of acquired intangible broadcasting assets and
    other assets .........................................................         1,588         2,258            1,672
   Amortization of program contract costs and net realizable value
    adjustments ..........................................................         1,579         1,710            1,483
   Increase (decrease) in deferred state taxes ...........................           261           512             (846)
   Net effect of change in deferred barter revenues and deferred
    barter costs .........................................................            39           (35)             (51)
 Changes in assets and liabilities, net of effects of acquisitions and
   dispositions--
   (Increase) decrease in accounts receivable, net .......................           (98)           43              206
   Increase in dividend receivable from parent ...........................        (1,085)           --               --
   Decrease in prepaid expenses and other current assets .................            53             8               17
   (Decrease) increase in accounts payable and accrued liabilities.                 (276)          (23)               8
   Increase in subsidiary trust minority interest expense payable ........           969            --               --
 Payments on program contracts payable ...................................        (1,219)       (1,373)          (1,438)
                                                                              ----------       --------       ---------
 Net cash flows from operating activities ................................         4,060         4,210           10,428
                                                                              ----------       --------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Investment in Parent Preferred Securities ...............................      (206,200)           --               --
 Payment for exercise of purchase option .................................        (1,576)           --               --
 Acquisition of property and equipment ...................................          (197)         (235)            (151)
                                                                              ----------       --------       ---------
 Net cash flows from investing activities ................................      (207,973)         (235)            (151)
                                                                              ----------       --------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Net change in due from parent ...........................................        (2,611)       (3,979)         (10,275)
 Contributions of capital ................................................        13,776            --               --
 Net proceeds from subsidiary trust securities offering ..................       192,756            --               --
                                                                              ----------       --------       ---------
 Net cash flows from financing activities ................................       203,921        (3,979)         (10,275)
                                                                              ----------       --------       ---------
NET INCREASE (DECREASE) IN CASH ..........................................             8            (4)               2
CASH, beginning of period ................................................             3            11                7
                                                                              ----------       ---------      ---------
CASH, end of period ......................................................    $       11       $     7        $       9
                                                                              ==========       =========      =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
 AND FINANCING ACTIVITIES:
 Contribution of capital - building ......................................    $      562       $    --        $      --
                                                                              ==========       =========      =========
 Subsidiary trust minority interest payments .............................    $   17,631       $23,250        $  23,250
                                                                              ==========       =========      =========
 Parent preferred stock dividend income ..................................    $   19,742       $26,033        $  26,033
                                                                              ==========       =========      =========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                      F-6
<PAGE>

                    KDSM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       DECEMBER 31, 1997, 1998 AND 1999


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of KDSM,
Inc., Sinclair Capital (a subsidiary trust), and KDSM Licensee,  Inc., which are
collectively  referred to hereafter as "the Company" or "KDSM." The Company is a
television broadcaster serving the Des Moines, Iowa area through station KDSM on
Channel 17, a Fox affiliate. Sinclair Broadcast Group, Inc. (Sinclair) purchased
the non-license  assets of KDSM-TV from River City  Broadcasting,  L.P. (RCB) on
May 31, 1996,  and exercised its option to acquire the license assets of KDSM-TV
from RCB on April 22, 1997. KDSM owns all of the issued and  outstanding  common
stock of KDSM Licensee,  Inc. and all of the common trust  interests of Sinclair
Capital. All intercompany amounts are eliminated in consolidation.

The  accompanying  December 31, 1998 and 1999  consolidated  balance  sheets and
related consolidated statements of operations and cash flows for the years ended
December 31, 1997, 1998, and 1999 are presented on a new basis of accounting.

USE OF ESTIMATES

The preparation of financial  statements in accordance  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses in the
financial   statements  and  in  the   disclosures  of  contingent   assets  and
liabilities. While actual results could differ from those estimates,  management
believes  that actual  results  will not be  materially  different  from amounts
provided in the accompanying consolidated financial statements.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Unless otherwise stated, the financial  instruments in the accompanying  balance
sheets approximate fair value.

PROGRAMMING

The  Company  has  agreements  with  distributors  for the rights to  television
programming  over contract  periods which generally run from one to seven years.
Contract payments are made in installments over terms that are generally shorter
than the contract period.  Each contract is recorded as an asset and a liability
when the  license  period  begins  and the  program is  available  for its first
showing.  The  portion  of the  program  contracts  payable  within  one year is
reflected  as a  current  liability  in the  accompanying  consolidated  balance
sheets.

The rights to program  materials are reflected in the accompanying  consolidated
balance  sheets at the lower of  unamortized  cost or estimated  net  realizable
value.  Estimated net realizable values are based upon management's  expectation
of future  advertising  revenues net of sales commissions to be generated by the
program material.  Amortization of program contract costs is generally  computed
under either a four year accelerated method or based on usage,  whichever yields
the greater  amortization for each program.  Program contract costs estimated by
management  to be amortized in the  succeeding  year are  classified  as current
assets.  Payments  of  program  contract  liabilities  are  typically  paid on a
scheduled  basis  and  are not  affected  by  adjustments  for  amortization  or
estimated net realizable value.

BARTER ARRANGEMENTS

Certain  program  contracts  provide for the exchange of advertising air time in
lieu of cash payments for the rights to such  programming.  These  contracts are
recorded  as  the  programs  are  aired  at  the  estimated  fair  value  of the
advertising  air  time  given  in  exchange  for  the  program  rights.  Network
programming is excluded from these calculations.

                                      F-7
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                DECEMBER 31, 1997, 1998 AND 1999 - (CONTINUED)

The Company broadcasts certain customers' advertising in exchange for equipment,
merchandise and services. The estimated fair value of the equipment, merchandise
or services  received is recorded as deferred barter costs and the corresponding
obligation to broadcast advertising is recorded as deferred barter revenues. The
deferred barter costs are expensed or capitalized as they are used,  consumed or
received.  Deferred barter revenues are recognized as the related advertising is
aired.

OTHER ASSETS

Other assets primarily consist of costs related to the issuance of the HYTOPS in
March of 1997.  These costs are being  amortized on a straight line basis over a
12 year period which represents the date they are mandatorily redeemable.

ACQUIRED INTANGIBLE BROADCASTING ASSETS

Acquired  intangible  broadcasting assets are being amortized over periods of 15
to 40 years.  These  amounts  result from the  acquisition  of the  broadcasting
assets of KDSM-TV by Sinclair  from RCB. The Company  monitors  and  continually
evaluates the  realizability of intangible and tangible assets and the existence
of any impairment to its recoverability based on the projected undiscounted cash
flows of the respective stations.  Management believes that the carrying amounts
of the Company's tangible and intangible assets have not been impaired.

Intangible  assets,  at cost,  as of December 31, 1998 and 1999,  consist of the
following (in thousands):

<TABLE>
<CAPTION>
                                                    AMORTIZATION
                                                       PERIOD         1998         1999
                                                   -------------   ----------   ----------
<S>                                                <C>             <C>          <C>
       Goodwill ................................   40 years         $ 26,777     $ 26,777
       Decaying advertiser base ................   15 years            1,452        1,452
       FCC licenses ............................   25 years            4,966        4,966
       Network affiliations ....................   25 years            1,683        1,683
                                                                    --------     --------
                                                                      34,878       34,878
       Less - Accumulated amortization .........                      (2,501)      (3,533)
                                                                    --------     --------
                                                                    $ 32,377     $ 31,345
                                                                    ========     ========
</TABLE>

ACCRUED LIABILITIES

Accrued  liabilities  consist of the  following as of December 31, 1998 and 1999
(in thousands):

<TABLE>
<CAPTION>
                                  1998      1999
                                 ------   -------
<S>                              <C>      <C>
  Compensation ...............    $206     $211
  Other ......................     180      142
                                  ----     ----
                                  $386     $353
                                  ====     ====
</TABLE>

REVENUES

Broadcasting  revenues are derived principally from the sale of program time and
spot  announcements  to local,  regional and national  advertisers.  Advertising
revenue is  recognized  in the period  during  which the  program  time and spot
announcements are broadcast.

RECLASSIFICATIONS

Certain   reclassifications  have  been  made  to  the  prior  years'  financial
statements to conform with the current year presentation.

                                      F-8
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                DECEMBER 31, 1997, 1998 AND 1999 - (CONTINUED)

2.   PROPERTY AND EQUIPMENT:

Property  and  equipment  are  stated at cost,  less  accumulated  depreciation.
Depreciation  is computed  under the  straight-line  method  over the  following
estimated useful lives:

<TABLE>
<S>                                                 <C>
         Buildings and improvements .............   10--35 years
         Station equipment ......................    5--10 years
         Office furniture and equipment .........    5--10 years
         Leasehold improvements .................   10--31 years
         Automotive equipment ...................    3-- 5 years
</TABLE>

Property and  equipment  consisted of the  following as of December 31, 1998 and
1999 (in thousands):

<TABLE>
<CAPTION>
                                                                1998          1999
                                                             ----------   -----------
<S>                                                          <C>          <C>
         Buildings and improvements ......................     $  800      $    800
         Station equipment ...............................      2,843         2,926
         Office furniture and equipment ..................        285           328
         Leasehold improvements ..........................         34            34
         Automotive equipment ............................         26            51
                                                               ------      --------
                                                                3,988         4,139
         Less - Accumulated depreciation and amortization.       (926)       (1,326)
                                                               ------      --------
                                                               $3,062      $  2,813
                                                               ======      ========
</TABLE>

3.   PROGRAM CONTRACTS PAYABLE:

Future  payments  required  under program  contracts  payable as of December 31,
1999, are as follows (in thousands):

<TABLE>
<S>                                                        <C>
         2000 ..........................................    $  1,915
         2001 ..........................................         777
         2002 ..........................................         394
         2003 ..........................................          76
         2004 ..........................................          12
                                                            --------
                                                               3,174
         Less - Current portion ........................      (1,915)
                                                            --------
         Long-term portion of program contracts payable.    $  1,259
                                                            ========
</TABLE>

Included in the current portion amounts are payments due in arrears of $416,000.
In addition,  the Company has entered into noncancelable  commitments for future
program rights aggregating $2.1 million as of December 31, 1999.

The Company has  estimated the fair value of its program  contract  payables and
noncancelable  commitments at approximately $2.4 million and $2.0, respectively,
as of December 31, 1998,  and $2.8 million and $1.7  million,  respectively,  at
December  31,  1999,  based on future  cash flows  discounted  at the  Company's
current borrowing rate.

4.   RELATED PARTY TRANSACTIONS:

The  financial  statements  of  KDSM,  Inc. and subsidiaries are included in the
consolidated  financial  statements of Sinclair. Sinclair corporate expenses are
allocated  to  KDSM  and each of the Sinclair subsidiaries to cover the salaries
and expenses of senior management. Total management fees and


                                      F-9
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                DECEMBER 31, 1997, 1998 AND 1999 - (CONTINUED)

expenses,  including allocated corporate expenses,  for the years ended December
31, 1997, 1998, and 1999, were approximately  $283,000,  $270,000, and $258,000,
respectively.  Management  believes these amounts  approximate the charges which
would have been incurred had the services been purchased from independent  third
parties.  Sinclair  also provides and receives  short-term  cash advances to and
from the  Company  through a central  cash  management  system.  No  interest is
charged or received for these  advances.  The total amount due from Sinclair was
approximately $6.7 million and $16.9 million as of December 31, 1998 and 1999.

In connection with the acquisition of KDSM's non-license assets by Sinclair,  on
May 31, 1996,  Sinclair entered into a local marketing  agreement (LMA) with RCB
to provide  programming  services.  Sinclair made specified periodic payments to
RCB in exchange  for the right to program  and sell  advertising.  During  1997,
Sinclair  made  $8,000 of  payments  related  to the LMA with RCB before the FCC
license was  transferred  to KDSM (see Note 11). These payments were included in
the accompanying  statement of operations as program and production expenses for
the year ended December 31, 1997. KDSM  reimbursed  Sinclair for these payments,
and any amounts due to  Sinclair  have been  included in the net due from Parent
amount in the accompanying consolidated balance sheets.

5.   INCOME TAXES:

Sinclair files a consolidated federal tax return, and separate state tax returns
for each of its  subsidiaries.  It is  Sinclair's  policy to charge KDSM for its
federal income tax provision through intercompany  charges, and KDSM is directly
responsible for its current state tax liabilities.  The  accompanying  financial
statements  have been prepared in accordance  with the separate return method of
FASB 109,  whereby the  allocation of federal tax provision due to the Parent is
based on what the subsidiary's  current and deferred federal tax provision would
have been had the  subsidiary  filed a federal  income  tax return  outside  its
consolidated  group.  Given that KDSM is required to reimburse  Sinclair for its
federal  tax  provision,  the  federal  income tax  provision  is recorded as an
intercompany charge and included as a reduction of the due from Parent amount in
the  accompanying   consolidated   balance  sheets  as  a  current   obligation.
Accordingly,  KDSM has no federal deferred income taxes.  Since KDSM is directly
responsible  for its state taxes,  all deferred  tax assets or  liabilities  are
related to state income taxes. The Company had no alternative minimum tax credit
carryforwards as of December 31, 1998 and 1999.

The  allocation of  consolidated  income taxes consists of the following for the
years ended December 31, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                     1998         1999
                                                  ---------   ------------
<S>                                               <C>         <C>
  Current
    Federal .....................................    $2,205       $ (3,642)
    State .......................................        --             --
                                                     ------       --------
                                                      2,205         (3,642)
                                                     ------       --------
  Deferred
    Federal .....................................        --             --
    State .......................................       512           (846)
                                                     ------       --------
                                                     $2,717       $ (4,488)
                                                     ======       ========
</TABLE>

                                      F-10
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                DECEMBER 31, 1997, 1998 AND 1999 - (CONTINUED)

The  following is a  reconciliation  of federal  income taxes at the  applicable
statutory rate to the recorded provision:

<TABLE>
<CAPTION>
                                                               1998           1999
                                                            ----------   -------------
<S>                                                         <C>          <C>
         Statutory federal income taxes .................   35.0%           35.0%
         Adjustments-
          State income taxes ............................    7.9             7.9
          Non-deductible expense items ..................    0.2             1.0
          Tax liability (benefit) related to dividends on
            Parent Preferred Stock (a) ..................   35.6          (130.0)
          Other .........................................    0.1          ( 13.9)
                                                            -----         ------
         Provision for income taxes .....................   78.8%         (100.0)%
                                                            =====         ======

</TABLE>

----------
(a)  In March 1997, the Company issued the HYTOPS securities. In connection with
     this  transaction,  Sinclair  Broadcast  Group,  Inc. (the "Parent") issued
     $206.2 million of Series C Preferred Stock (the "Parent  Preferred  Stock")
     to KDSM, Inc., a wholly owned subsidiary.  Parent Preferred Stock dividends
     paid to KDSM,  Inc. are considered  taxable income for Federal tax purposes
     and not considered income for book purposes. Also for Federal tax purposes,
     KDSM, Inc. is allowed a tax deduction for dividends  received on the Parent
     Preferred  Stock in an amount  equal to Parent  Preferred  Stock  dividends
     received  in each  taxable  year  limited to the extent  that the  Parent's
     consolidated group has "earnings and profits." To the extent that dividends
     received by KDSM,  Inc.  are in excess of the Parent's  consolidated  group
     earnings  and  profits,  the Parent will reduce its tax basis in the Parent
     Preferred  Stock  which  gives  rise to a  deferred  tax  liability  (to be
     recognized upon redemption) and KDSM,  Inc.'s dividend income is treated as
     a permanent  difference between taxable income and book income.  During the
     years  ended  December  31,  1997 and 1998,  the  Parent  did not  generate
     "earnings and profits" in an amount greater than or equal to dividends paid
     on the Parent Preferred Stock. This resulted in a reduction in basis of the
     Parent's  Series C Preferred  Stock and  generated a related  deferred  tax
     liability.  During the year ended  December  31,  1999,  the Parent  earned
     sufficient  earnings and profits such that there was no adjustment to basis
     of the Parent's Series C Preferred Stock.

The following table summarizes the state tax effects of the significant types of
temporary differences between financial reporting basis and tax basis which were
generated during the years ended December 31, 1998 and 1999 (in thousands):

<TABLE>
<CAPTION>
                                                             1998          1999
                                                         -----------   -----------
<S>                                                      <C>           <C>
         Net operating losses ........................    $  2,572      $  3,865
         Film amortization ...........................          42            34
         Fixed asset depreciation ....................         (89)          (93)
         Intangible amortization .....................        (241)         (361)
         Parent preferred stock deferred tax liability
          [see (a) above] ............................      (3,152)       (3,462)
         Other .......................................          22            17
                                                          --------      --------
                                                          $   (846)     $     --
                                                          ========      ========
</TABLE>

The deferred state tax assets and  liabilities  represent the state tax benefits
related to the temporary differences listed above. The estimated blended federal
and state  statutory  rate was 41.9% for the years ended  December  31, 1998 and
1999.

6.   EMPLOYEE BENEFITS:

KDSM participates in Sinclair's  retirement savings plan under Section 401(k) of
the Internal Revenue Code. This plan covers  substantially  all employees of the
Company who meet minimum age or service  requirements and allows participants to
defer a portion of their annual compensation on a pre-tax basis.

                                      F-11
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                DECEMBER 31, 1997, 1998 AND 1999 - (CONTINUED)

Contributions from the Company are made on an annual basis in an amount equal to
50%  of  the   participating   employee   contributions,   to  the  extent  such
contributions do not exceed 4% of the employees'  eligible  compensation  during
the year.

7.   COMMITMENTS AND CONTINGENCIES:

LITIGATION

The  Company is  involved in certain  litigation  matters  arising in the normal
course  of  business.  In the  opinion  of  management,  these  matters  are not
significant  and  will not  have a  material  adverse  effect  on the  Company's
financial position.

OPERATING LEASES

The Company leases certain property and equipment under noncancellable operating
lease agreements.  Rental expense charged to income for the years ended December
31, 1997,  1998,  and 1999,  was  approximately  $25,000,  $31,000,  and $23,000
respectively.  Future  minimum lease  payments  under  noncancellable  operating
leases are approximately (in thousands):

<TABLE>
<S>                                                    <C>
        2000 .......................................    $ 12
        2001 .......................................      11
        2002 .......................................      10
        2003 .......................................      10
        2004 .......................................      10
        2005 and thereafter ........................     312
                                                        ----
                                                        $365
                                                        ====
</TABLE>

8.   ACQUISITION OF BUSINESS:

On May 31, 1996,  Sinclair acquired all of the non-license assets of the Company
from RCB for approximately $36.8 million. In connection with this purchase,  the
Company  purchased  an  option  to  acquire  the  license  assets  of  KDSM  for
approximately  $3.4 million,  with an option  exercise price of $1.6 million and
entered into an LMA with RCB as described in Note 4. None of the current  assets
of KDSM were  acquired.  The  acquisition  was  accounted for under the purchase
method of  accounting  whereby the purchase  price was allocated to property and
equipment,  acquired intangible broadcasting assets, other intangible assets and
purchase options of $2.8 million, $3.1 million,  $27.5 million and $3.4 million,
respectively.

9.   COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARY
     TRUST HOLDING SOLELY KDSM SENIOR DEBENTURES:

In March  1997,  the  Company  completed  a private  placement  of $200  million
aggregate  liquidation  value of 11 5/8%  High  Yield  Trust  Offered  Preferred
Securities (the "Trust Preferred  Securities") of Sinclair Capital, a subsidiary
trust of the Company. The Trust Preferred Securities were issued March 12, 1997,
mature March 15, 2009, are mandatorily  redeemable at maturity,  and provide for
quarterly distributions to be paid in arrears beginning June 15, 1997. The Trust
Preferred Securities were sold to "qualified  institutional  buyers" (as defined
in Rule 144A under the  Securities Act of 1933, as amended) and a limited number
of  institutional  "accredited  investors"  and the  offering  was  exempt  from
registration  under the  Securities  Act of 1933,  as amended  (the  "Securities
Act"), pursuant to Section # 4(2) of the

                                      F-12
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                DECEMBER 31, 1997, 1998 AND 1999 - (CONTINUED)

Securities Act and Rule 144A  thereunder.  The Company  utilized the proceeds of
the private  placement  combined  with other  capital  contributions  to acquire
$206.2  million  of 12 5/8%  Series C  Preferred  Stock (the  "Parent  Preferred
Securities") of Sinclair.

Pursuant to a Registration  Rights Agreement entered into in connection with the
private  placement of the Trust Preferred  Securities,  Sinclair Capital offered
holders  of the  Trust  Preferred  Securities  the right to  exchange  the Trust
Preferred  Securities with new Trust Preferred  Securities having the same terms
as the existing securities,  except that the exchange of the new Trust Preferred
Securities for the existing Trust Preferred Securities has been registered under
the Securities  Act. On May 2, 1997, the Company filed a registration  statement
on Form S-4 with the  Securities  and  Exchange  Commission  for the  purpose of
registering the new Trust Preferred Securities to be offered in exchange for the
aforementioned  existing  Trust  Preferred  Securities  issued by the Company in
March 1997 (the "Exchange  Offer").  The Company's Exchange Offer was closed and
became  effective  on August 11, 1997,  at which time all of the existing  Trust
Preferred Securities were exchanged for new Trust Preferred Securities.

10.  PARENT PREFERRED SECURITIES:

In March  1997,  the  Company  utilized  the  proceeds  of the  Trust  Preferred
Securities  combined with other capital  contributions to acquire $206.2 million
of 12 5/8% Parent Preferred Securities, issued by Sinclair. The Parent Preferred
Securities  were issued March 12, 1997,  mature March 15, 2009, are  mandatorily
redeemable at maturity,  and provide for quarterly  distributions  to be paid in
arrears beginning June 15, 1997.

Pursuant to a Registration  Rights Agreement entered into in connection with the
private placement of the Trust Preferred  Securities,  Sinclair was obligated to
exchange the existing Parent Preferred  Securities (the "Old Parent  Preferred")
with New Parent  Preferred  Securities (the "New Parent  Preferred")  registered
under the Securities Act. The terms of the New Parent Preferred are identical in
all  material  respects  to those of the Old Parent  Preferred.  A  registration
statement  was filed on May 2, 1997 with respect to  registering  the New Parent
Preferred, and was declared effective on July 14, 1997 and the exchange has been
completed.

11.  EXERCISE OF OPTION TO ACQUIRE LICENSE ASSETS:

During  1997,  the FCC granted  approval for transfer of the FCC license of KDSM
from RCB to the Company. The Company exercised its option to acquire the License
Assets (the assets essential for broadcasting a television  signal in compliance
with regulatory  guidelines) of KDSM from RCB for an option exercise  payment of
$1.6 million.

                                      F-13
<PAGE>

                          KDSM, INC. AND SUBSIDIARIES

                               INDEX TO SCHEDULES


Report of Independent Public Accountants ................................. S - 2
Schedule II - Valuation and Qualifying Accounts .......................... S - 3


All  schedules  except those listed above are omitted as not  applicable  or not
required or the required  information is included in the consolidated  financial
statements or in the notes thereto.

                                      S-1
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Stockholders of
Sinclair Broadcast Group, Inc.:

We have audited in accordance with auditing standards  generally accepted in the
United  States,  the  consolidated  balance  sheets,  statements of  operations,
changes in  stockholder's  equity and cash flows of KDSM, Inc. and  Subsidiaries
included in this Form 10-K and have issued our report thereon dated February 24,
2000.  Our audit was made for the  purpose  of  forming  an opinion on the basic
financial  statements  taken as a whole. The schedule listed in the accompanying
index is the  responsibility  of the Company's  management  and is presented for
purposes of complying with the Securities and Exchange  Commissions rules and is
not part of the basic financial statements.  This schedule has been subjected to
the auditing  procedures applied in the audit of the basic financial  statements
and, in our opinion,  fairly states in all material  respects the financial data
required to be set forth therein in relation to the basic  financial  statements
taken as a whole.

                                        ARTHUR ANDERSEN, LLP



Baltimore, Maryland,
February 24, 2000

                                      S-2
<PAGE>

                                                                    SCHEDULE II


                          KDSM, INC. AND SUBSIDIARIES
                       VALUATION AND QUALIFYING ACCOUNTS
             FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                                (IN THOUSANDS)


<TABLE>
<CAPTION>
                                              BALANCE AT     CHARGED TO                     BALANCE
                                               BEGINNING      COSTS AND                     AT END
                DESCRIPTION                    OF PERIOD      EXPENSES      DEDUCTIONS     OF PERIOD
------------------------------------------   ------------   ------------   ------------   ----------
<S>                                          <C>            <C>            <C>            <C>
1997
 Allowance for doubtful accounts .........        $39            $39            $48           $30

1998
 Allowance for doubtful accounts .........         30             13             10            33

1999
 Allowance for doubtful accounts .........         33             25             39            19

</TABLE>

                                      S-3