<PAGE>


                          SECURITIES AND EXCHANGE COMMISSION


                               Washington, D.C.  20549

                                      FORM 10-K


 /XX/          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
               EXCHANGE ACT OF 1934
For the fiscal year ended        December 31, 1996

                                          OR

/  /        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
            EXCHANGE ACT OF 1934
for the transition period from _____________ to _____________________________

                            Commission File Number 1-10321


                               THE ACKERLEY GROUP, INC.
                (Exact name of Registrant as specified in its charter)

                        Delaware                                  91-1043807
               -------------------------------                -----------------
               (State or other jurisdiction of                (I.R.S. Employer
               incorporation or organization)                Identification No.)


               1301 Fifth Avenue, Suite 4000
               Seattle, Washington                                   98101
               -------------------------------                 -----------------
               (Address of principal executive offices)          (Zip code)

Registrant's telephone number, including area code: (206) 624-2888

Securities registered pursuant to Section 12(b) of the Act: Common Stock

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

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes   X             No  ___

Aggregate market value of voting Common Stock held by nonaffiliates of
Registrant as of March 14, 1997:  $120,030,253.

Number of shares of common stock, $.01 par value, outstanding as of March 14,
1997:  19,813,002 Common Stock and 11,353,810 Class B Common Stock.

Documents incorporated by reference and parts of Form 10-K into which
incorporated:  Registrant's Definitive Proxy Statement for May 5, 1997 Annual
Meeting--Part III

<PAGE>

                                        PART I

                                  ITEM 1 - BUSINESS

General

    The Ackerley Group, Inc. (the "Company"), formerly known as Ackerley
Communications, Inc., was founded in 1975.  It is a diversified communications
company which, through its operating subsidiaries, engages in three principal
businesses: (i) out-of-home media, including outdoor and airport advertising;
(ii) television and radio broadcasting; and (iii) sports marketing and
promotion, primarily through its Full House Sports & Entertainment division,
which includes the ownership of the Seattle SuperSonics (the "SuperSonics"), a
franchise of the National Basketball Association ("NBA"), and the Seattle
SeaDogs, a franchise of the Continental Indoor Soccer League.

    The Company's businesses generally are leaders in their respective markets,
positions that the Company believes to be sustainable by virtue of the
substantial governmental regulation of outdoor advertising and broadcasting and
the exclusive franchising practices in airport advertising and professional
sports.  The Company believes that the diversity of its operations minimizes its
reliance on any particular geographic region, advertising medium or customer.

    Strategy.  Since 1993, the Company's strategy has been to build its more
mature and stable out-of-home media business and to control costs in each
business segment.  Additionally, the Company instituted plans to expand and
enhance its broadcasting business and to pursue additional revenue producing
opportunities through the development of a new arena in Seattle.  The Company's
continuing strategy includes:

-   Improving the profitability of its outdoor advertising business by
    increasing revenue while controlling operating costs.  Prior to 1993, the
    Company had increased net revenue and improved operating performance in its
    existing markets by constructing and, in some cases, acquiring additional
    displays, thereby achieving comprehensive coverage and economies of scale
    in those markets.  Since 1993, however, the Company has focused its
    management and sales efforts on optimizing the mix of rate and usage of its
    current display inventory in each of its markets.  In order to increase
    sales, the Company expanded its sales force and instituted a
    commission-based sales compensation plan.

-   Renegotiating its airport advertising franchise agreements when they expire
    to improve their economic terms.  Alternatively, to the extent that an
    expiring franchise agreement does not meet the Company's selection criteria
    for new franchise agreements, generally based on projected Operating Cash
    Flow, the Company will not renew or bid on the agreement.

-   Pursuing television broadcast station acquisitions generally in Designated
    Market Area ("DMA") markets ranking from 50 to 150.  The Company's
    television business historically has grown through opportunistic
    acquisitions.  The Company intends to pursue acquisitions of

                                       2

<PAGE>

    stations in situations where the Company believes its management approach
    can be successfully employed.  Specifically, the Company will seek to
    acquire, on financially attractive terms, stations that currently generate
    positive cash flow but which offer opportunities for revenue and cash
    flow enhancement.  The purchase of television station KFTY in Santa Rosa
    in April 1996 exemplifies this strategy.

-   Creating additional interest in sports marketing and promotion through the
    development of a new arena in Seattle and pursuing other revenue-generating
    opportunities related to the new arena.  Construction of the new arena was
    completed in time for the 1995-1996 NBA season.  In-arena advertising and
    additional seating in the new arena provides opportunities for greater
    revenue generation, while the luxury boxes and concessions provide sources
    of revenue not previously available to the Company.  Since the Company
    shares in revenues generated by events at the arena, the Company has
    acquired an indoor soccer franchise and will consider acquiring additional
    sports franchises under certain circumstances.

Out-of-Home Media

    The Company's out-of-home media business segment involves the sale of
advertising space on outdoor displays and on display units located in airport
terminal facilities.  National advertisers generally categorize outdoor and
airport advertising as out-of-home media because, unlike radio and television
broadcasting, newspapers and magazines, the primary focus of outdoor and airport
advertising is to disseminate the advertiser's message outside the home
environment.

Outdoor Advertising

    Industry Overview.  During the nineteenth century, companies began to lease
out space on wooden boards for advertising messages, or "bills." Today, outdoor
advertising extends nationwide, providing advertisers with a low-cost means of
reaching large audiences.  It is currently used by large national advertisers as
part of multi-media advertising campaigns and increasingly by local merchants as
a means of contacting their target markets.

    The Company believes that outdoor advertising is one of the most
cost-effective forms of advertising.  Poster space generally is sold in packages
called "showings," which comprise a given number of displays in a market area.
Posters provide advertisers with access either to a specified percentage of the
general population or to a specific target audience.  Displays making up a
showing are placed in well-traveled areas and are distributed so as to reach a
wide audience in a particular market.  An outdoor advertising company
establishes and publishes rate cards periodically, typically once a year, which
set monthly rates for painted bulletins, poster panels and junior posters for
each market it covers.  Rates are based, in part, on surveys made by independent
traffic audits that determine a given display's exposure to the public.  Actual
rates charged to customers are subject to negotiation.  Advertising contracts
relating to painted bulletins, poster panels and junior posters generally have
terms of one year or less.

                                       3

<PAGE>

    In addition to cost-effectiveness, outdoor advertising has other advantages
for certain types of advertisers.  Because the advertising message can be placed
to reach potential customers close to the point of sale, restaurants, motels,
service stations and similar businesses find outdoor advertising particularly
attractive.  In addition, repeated viewings by people traveling the same route
on a daily basis makes outdoor advertising especially suitable for companies,
such as banks, insurance companies, soft drink manufacturers and radio and
television stations, that sell their products by promoting a particular image.

    While outdoor advertising remains a stable and predictable source of
revenue, the Company believes that the number and diversity of advertisers using
the medium has increased.  Over the past few years the emphasis has shifted from
national to local and regional sales and to customers who have not traditionally
used outdoor advertising.  Advertisers shifting a significant portion of their
advertising dollars into outdoor advertising include city and state governments
(lottery advertising), health care services, specialty retailers, food products
companies and telephone equipment and service companies.

    Operations.  The Company's outdoor advertising business involves the sale of
space on advertising display faces and includes, in many cases, the design of
advertisements and the construction of outdoor structures that carry these
displays.  The Company operates its outdoor advertising business primarily in
the greater metropolitan areas of Seattle and Tacoma, Washington; Portland,
Oregon; Boston and Worcester, Massachusetts; and Miami, Fort Lauderdale and West
Palm Beach, Florida.  The Company, which has a total of approximately 9,070
advertising displays nationwide, is the dominant operator of outdoor advertising
in each of its markets.  The Company believes that its strong market position,
the geographical diversity of its operations and its emphasis on local
advertisers lend stability to its revenue base, reduce its reliance on any
single local economy or advertiser and mitigate the effects of fluctuations in
national advertising expenditures.  The Company also believes that its outdoor
advertising operation will continue to be a substantial source of revenue but
anticipates that any future growth in this business will result primarily
through diversification of its customer base and increased demand brought about
by creative marketing.

    The principal outdoor advertising display used by the Company is the
billboard, of which there are three standardized types:

-   Painted bulletins, which generally are 14 feet high and 48 feet wide,
    consist of panels that are hand painted at the Company's facilities in
    accordance with design specifications supplied by the advertiser or, less
    frequently, panels covered with a single sheet of vinyl on which an image
    has been printed by computer.  The panels are then transported to the site
    of the billboard and mounted to the face of the display.  To attract more
    attention, panels may extend beyond the linear edges of the display face
    and may include three-dimensional embellishments.  Painted bulletins are
    usually located near major highways for maximum impact.  Space is usually
    sold to advertisers for periods of four to twelve months.

                                       4

<PAGE>

-   Poster panels, which generally are 12 feet high by 25 feet wide, are the
    most common type of billboard.  Lithographed or silk-screened paper sheets
    that are supplied by the advertiser are prepasted and packaged in airtight
    bags by the Company and applied, like wallpaper, to the face of the
    display.  Poster panels are usually located on major traffic arteries.
    Space is usually sold to advertisers for periods of one to twelve months.

-   Junior posters are usually 6 feet high by 12 feet wide.  The displays are
    prepared and mounted in the same manner as poster panels.  Most junior
    posters, because of their smaller size, generally are concentrated on city
    streets and are targeted to pedestrian traffic.  Space on junior posters
    usually is sold to advertisers for periods of one to twelve months.

At December 31, 1996, the Company owned 1,414 painted bulletins, 6,244 poster
panels and 1,411 junior posters distributed among markets served as follows:

                              DMA       Painted   Poster   Junior
      Market                 Rank(1)   Bulletins  Panels   Posters
      ------                 ------    ---------  ------   -------

Northwest:
    Seattle/Tacoma..........    12         224     1,635       329
    Portland................    24         144     1,152       --
Boston:
    Boston/Worcester........     6         345     1,983        83
Florida:
    Miami/Fort Lauderdale...    16         502     1,136       999
    West Palm Beach.........    45         199       338       --


_______________

(1)   Source:  Stations Volume of the Television-Cable Fact Book, 1996
Edition.  DMA rank is a common measure of market size based on population used
by the media industry and reported upon by the Nielsen Rating Service.

    The Company owns all of its outdoor displays, which generally are located
on leased property.  The typical lease provides for a term ranging from five to
15 years and for a reduction in or termination of rental payments in the event
the view of the advertising structure becomes obstructed during the lease term.
Usually, a property owner may terminate the lease in the event the site
undergoes development.  In the event of such lease termination, the Company
seeks to relocate the structure at an alternate site, subject to zoning
requirements, in order to maintain its inventory of advertising displays in the
particular geographic region.

    Sales and Marketing.  The Company sells advertising space on the Company's
outdoor displays directly to advertisers, especially in the case of local and
regional sales.  The Company also sells advertising space to advertising
agencies and specialized media buying services acting on behalf of national
advertisers.  These agencies charge the Company a commission for their services.
In recent years, the Company has focused increasingly on selling to local and
regional advertisers.

    A broad cross-section of advertisers utilize the Company's outdoor
advertising services, including tobacco, food and beverage, financial service,
automotive and entertainment companies.

                                       5

<PAGE>

As a result of the Company's efforts to diversify its advertiser base and to
reduce the percentage of its net revenue attributable to the advertising of
tobacco products, the Company's largest outdoor advertising customer
accounted for less than 3% of the Company's gross revenue in 1996.

    Competition.  The Company's outdoor advertising business competes directly
with others engaged in the same business and indirectly with other types of
advertising media, including television, radio, magazines, newspapers, business
publications and direct mail marketing.  Substantial competition exists among
the various advertising media on a cost-per-rating-point basis and on the
ability to reach effectively a particular demographic section of the market.  As
a general matter, competition is confined to a defined geographic market.  While
there are a few companies in the outdoor advertising business that are
substantially larger than the Company, the Company is the largest owner and
operator of outdoor advertising displays in the geographic markets in which it
operates.  The Company believes that it provides higher graphic quality, more
timely installation and better sign maintenance than other outdoor advertisers
in its markets.

    Regulation.  The location of outdoor advertising structures is regulated
through zoning regulations adopted by state and local governments.  Typically,
the Company's outdoor advertising structures are located in commercial and
industrial zones.  In some jurisdictions there is a limitation on the number of
outdoor advertising structures that can be located within the city limits.
Local zoning ordinances either restrict or prohibit outdoor advertising
structures in specific areas in the various markets in which the Company
operates.  In addition, the 1965 Federal Highway Beautification Act (the "FHBA")
requires states to adopt programs of effective regulation of outdoor advertising
along federal highways in order to qualify for their full share of federal
highway aid.  However, the FHBA provides for the payment of compensation to the
owner of a lawfully erected outdoor advertising structure that is removed by
operation of the statute.  In the event that a governmental entity seeks to
compel the removal of one of the Company's outdoor advertising structures, the
Company follows a policy of actively resisting unless adequate compensation is
paid.  The Company has initiated several lawsuits of this character and has
prevailed in each such action.  In addition, the Company has negotiated
resolutions to other disputes without recourse to litigation.

Airport Advertising

    Industry Overview.  Practically all airport complexes across the United
States grant franchises for the use of displays, signs and other units to
provide advertising services.  Airport advertising is particularly attractive
to advertisers targeting an affluent audience with travel-related needs.  The
airport advertising business is dominated by less than five competitors, with
the Company the largest by a significant margin based on revenues.

    The airport advertising business requires a prospective franchisee to
obtain from the appropriate airport authority a franchise agreement authorizing
the franchisee to install, maintain and sell advertising space on advertising
display units in the airport's terminal facilities.  Many airport authorities
have established advertising guidelines for, and some airport authorities
reserve the right to approve, the location and content of advertising materials.

                                       6

<PAGE>

    Airport franchise agreements are individually negotiated with the
appropriate authority charged with the management of the airport facility,
usually a county, city or other governmental authority.  In some instances, the
franchisee enters into agreements with individual airlines maintaining separate
terminal facilities under terms similar to those negotiated with the relevant
airport authority.  The franchise agreements have an average initial term of
three to five years and require the payment of a concession fee to the airport
authority based on a negotiated percentage of gross revenue derived from
advertising in the airport facility.  The amount generally is based on the size
of the facility, the number of display units that can be located in the facility
and the size and demographic characteristics of travelers using the facility.
Many franchise agreements also require guaranteed minimum annual payments to be
made in the event the fees otherwise payable to the airport authority are less
than such minimum amount.  Typically, at the conclusion of the initial franchise
term, the franchise is either extended indefinitely, on an at-will basis, or
subjected to a competitive bidding process.

    Operations.  The Company is the largest owner and operator of airport
advertising displays in the United States.  It owns, maintains and sells
advertising space on approximately 4,800 advertising display units in over 110
airport terminals throughout the United States, including principal airports
serving the greater metropolitan areas of Boston, Washington, D.C., Miami,
Houston, St. Louis and Seattle.

    Airport advertising display units generally consist of freestanding
displays (primarily 4 x 4 feet in size, with some 8 x 8 feet and some 10 x 20
feet), interior-lighted units (3 x 5 feet) and multiple display hotel and motel
reservation boards with direct telephone lines to the advertised facilities.
With the permission of the governing authority, the Company may install other
types of display units at an airport.  The Company sells advertising space on
airport advertising display units for periods ranging from one month to one
year.

    Sales and Marketing.  National and local advertisers purchase airport
advertising from the Company at rates based on passenger traffic surveyed at the
relevant airport.  The Company sells advertising space on the Company's airport
advertising display units directly to the advertisers and also sells to
advertising agencies and specialized media buying services acting on behalf of
national advertisers.  A broad cross-section of advertisers utilize the
Company's airport advertising services, including hotels, motels and automobile
rental companies, media and telecommunication companies and financial services
companies.  The Company's largest airport advertising customer accounted for
less than 1% of the Company's gross revenue in 1996.

    Competition.  The award of an advertising franchise at each airport terminal
facility generally is the result of a competitive process.  Franchises are
awarded based on the amount of any guaranteed minimum payment offered and the
percentage of gross revenue to be paid to the airport authority, the
franchisee's ability to meet specialized needs set forth in the governing
agency's specifications and the franchisee's reputation and experience.  The
Company believes that its position as industry leader, its history in the
business, its reputation for quality service and reliability and the size and
expertise of its sales force generally provides it with a competitive advantage.

                                       7

<PAGE>
Broadcasting

    The Company's broadcasting business segment involves the sale of air time
to a broad range of national and local advertisers.  The Company operates in six
geographically diverse markets that offer a large and affluent population base
attractive to many advertisers.

Television

    Industry Overview.  Television station revenue is derived primarily from
local, regional and national advertising and, to a lesser extent, from network
compensation from studio rental and commercial production activities.
Advertising rates are based upon a program's popularity among the viewers an
advertiser wishes to attract, the number of advertisers competing for the
available time, the size and demographic makeup of the market served by the
station and the availability of alternative advertising media in the market
area.  The size of a television station's audience is determined by independent
rating service surveys.

    Affiliation with one of the major networks has a significant impact on the
composition of the station's revenue, expenses and operations.  A typical
affiliate receives the majority of its programming each day from the network.
This programming, together with cash payments, is provided to the affiliate by
the network in exchange for a substantial majority of the advertising time
during network programs.  The network sells this advertising time and retains
the revenue so generated.






                                  8

<PAGE>


    Operations.  The following table sets forth certain information with respect
to the Company's television stations and the markets in which they operate:

<TABLE>
<CAPTION>
                                                                                           No. of
                                                                                         Commercial
                                                                                         Stations
                                              Call     Date      Network       DMA       Ranked in
Market                                      Letters  Acquired  Affiliation    Rank(1)    Market(2)    Frequency(3)
------                                      -------  --------  -----------    -------    --------     ------------
<S>                                          <C>      <C>      <C>            <C>         <C>         <C>
Syracuse, New York......................     WIXT     May 1982     ABC       69          3 VHF          VHF
                                                                                          2 UHF(4)
Colorado Springs/Pueblo, Colorado.......     KKTV     January      CBS       97          3 VHF          VHF
                                                        1983                              1 UHF(5)
Bakersfield, California.................    KGET     October       NBC      132          4 UHF(6)       UHF
                                                        1983
Vancouver, British Columbia and portions
of Seattle, Washington (station
located in Bellingham,
Washington).............................    KVOS  June 1985       None       (7)         (7)            VHF

Salinas/Monterey, California............    KCBA  June 1986       FOX       122          1 VHF          UHF
                                            KION   (8)            CBS                    3 UHF(9)       UHF


Santa Rosa, California...................    KFTY  April 1996      None       5          6 VHF          UHF
                                                                                        12 UHF
</TABLE>
_______________
(1) Source: Stations Volume of the Television Cable Fact Book, 1996 Edition .
(2) Source: Stations Volume of the Television Cable Fact Book, 1996 Edition.
    Does not include public broadcasting stations, satellite stations or
    translators which rebroadcast signals from distant stations.
(3) Very high frequency ("VHF") stations transmit on channels 2 through 13;
    ultra high frequency ("UHF") stations transmit on channels 14 through 69.
    Technical factors, such as station power, antenna location and height and
    topography of the area, determine the geographic market served by a
    television station. In general, a UHF station requires greater power or
    antenna height to cover the same area as a VHF station.
(4) Two additional UHF channels have been allocated in the Syracuse market;
    however, there has been no construction activity to date with respect to
    these channels.
(5) Two additional UHF channels have been allocated in the Colorado
    Springs/Pueblo market; however, there has been no construction activity to
    date with respect to these channels.
(6) Two additional UHF channels have been allocated in the Bakersfield market;
    however, there has been no construction activity to date with respect to
    these channels.
(7) KVOS, located in Bellingham, Washington, serves primarily the Vancouver,
    British Columbia market (located in size between the markets of
    Sacramento-Stockton-Modesto, California, and Orlando-Daytona
    Beach-Melbourne, Florida, which have DMA rankings of 21 and 22,
    respectively) and a portion of the Seattle, Washington market (DMA rank 12)
    and Whatcom County, Washington (equivalent in size to Eureka, California ,
    with an DMA rank of 188). The station's primary competition consists of 4
    Canadian VHF stations.
(8) The Company did not purchase the station.  It entered into a local
    marketing agreement with Harron Television of Monterey, the owner of
    television station KION (formerly KCCN) licensed to the market of Monterey,
    California.  The Company provides programming and sales services to KION
    and makes a monthly payment to Harron in exchange for the right of the
    Company to receive all revenues from network compensation and advertising
    sold on the station
(9) One additional UHF channel has been allocated in the Salinas/Monterey
    market; however, there has been no construction activity to date with
    respect to this channel.

    The Company's major-network affiliated television stations operate under
standard contracts which are automatically renewed for successive terms unless
the Company or the network

                                       9

<PAGE>

exercises its right to cancel.  Under the terms of a network contract, the
networks offer the Company's network-affiliated stations a variety of
programs.  The Company's network-affiliated stations have a right of first
refusal to broadcast network programs before those programs can be offered to
any other television station in the same market.

    The Company generally seeks to maximize the amount of commercial time it
has available to sell to advertisers to attract broader and better defined
audiences within its markets by emphasizing non-network programming during
certain significant time periods.  Such programming includes locally produced
news, as well as syndicated and first-run talk programs, children's programming
and movies acquired from independent sources.

    In the case of KVOS, which is located in Bellingham, Washington and serves
primarily the market of Vancouver, British Columbia, Canada, the percentage of
network programming preempted by alternate programming is substantial.  This
preemption is due primarily to Canadian regulations that require Canadian cable
television operators to delete the signals of United States-based stations
broadcasting network programs in regularly scheduled time slots and replace them
with the signals of the Canadian-based network affiliates broadcasting at the
same time.  By substituting this alternate programming, KVOS is able to maximize
the amount of time it is on the air in the Vancouver market.

    On April 2, 1996, the Company purchased for approximately $7.8 million
television station KFTY, licensed to the market of Santa Rosa, California.  On
April 24, 1996, the Company entered into a local marketing agreement with Harron
Television of Monterey, the owner of television station KION (formerly KCCN)
licensed to the market of Monterey, California.  The Company provides
programming and sales services to KCCN and makes a monthly payment to Harron in
exchange for the right of the Company to receive all revenues from network
compensation and advertising sold on the station

    Sales and Marketing.  The principal sources of television broadcasting
revenue for the Company are the sale of time to advertisers in the form of
local, regional and national spot or schedule advertising and, to a much
lesser extent, network compensation.  Spot or schedule advertising consists
of short announcements and sponsored programs either on behalf of advertisers
in the immediate area served by the station (local) or on behalf of national
and regional advertisers (national).

    During 1996, local spot or schedule advertising, which is sold by the
Company's personnel at each station, accounted for approximately 40% of the
total revenue generated by the Company's television stations.  National spot or
schedule advertising, which is sold primarily through national sales
representative firms on a commission-only basis, accounted for approximately 55%
of the total revenue generated by the Company's television stations in 1996.

    Network compensation revenue is based upon network hourly rates payable to
a station by a network and is tied to the number of network programs broadcast.
Network hourly rates are fixed by the terms of the contract between the network
and the station and are subject to change by the network, although the station
has the right to terminate the contract if the change involves a

                                       10

<PAGE>

decrease in rates.  In the aggregate, network compensation revenue does not
represent a significant portion of the total net revenue generated by the
Company's stations.

    Competition.  The Company's television stations compete for revenue with
other television stations in their respective markets, as well as with other
advertising media, such as newspapers, radio, magazines, outdoor advertising,
transit advertising, yellow page directories, direct mail and local cable
systems.  Factors material to maintaining an individual station's competitive
position in the television broadcast industry include the station's management
experience, authorized power, assigned frequency, network affiliation, audience
identification and local program acceptance, together with the strength of the
local competition.

    The Company's television stations compete for both audience and advertising
with stations within their markets, as well as with cable television and other
news and entertainment media serving the same markets.  Cable television
systems, which operate generally on a subscriber-payment basis, compete by
carrying television signals from outside the broadcast market and by
distributing programming originated exclusively for cable systems.  Cable
operators historically have not sought to compete with broadcast stations for a
share of the local news audience.  To the extent they elect to do so, increased
competition from cable operators for local news audiences could have an adverse
effect on the Company's advertising revenue.  The Company also faces competition
from high-powered direct broadcast satellite services which transmit programming
directly to homes equipped with special receiving antennas or to cable
television systems for transmission to their subscribers.  In addition, the
Company's television stations compete for audience with other forms of home
entertainment, such as home videotape and disc players.  Moreover, the
television industry is continually faced with technological change and
innovation, the possible rise in popularity of competing entertainment and
communications media, changes in labor conditions and in government regulations.

Radio

    Industry Overview.  Radio stations in the United States operate either on
the amplitude modulation ("AM") band, comprising 107 different frequencies
located between 540 and 1600 kilohertz ("KHz") in the low frequency band of
the electromagnetic spectrum, or the frequency modulation ("FM") band,
comprising approximately 100 different frequencies located between 88 and 108
megahertz ("MHz") in the very high frequency band of the electromagnetic
spectrum.  FM radio stations have captured a high percentage of the listening
audience, in part because of the perception that stereo broadcasting, which
was once only available on FM radio stations, provides enhanced sound quality.

    Radio station revenue is derived substantially from local, regional and
national advertising and, to a lesser extent, from network compensation.
Approximately 76% of the Company's radio broadcasting revenue, realized through
its investment in the Partnership, is derived from local advertising generated
by a station's local sales staff.  National sales are made on a station's behalf
by a national independent sales representative.  The representative obtains
advertising from national advertising agencies and receives a commission based
on a percentage of gross advertising revenue generated.  The principal costs
incurred in the operation of radio stations are salaries, programming,

                                    11

<PAGE>

promotion and advertising, sports broadcasting rights fees, rental of
premises for studios and transmitting equipment and music license royalty
fees.

    Operations.    The Company purchased KJR(AM), located in Seattle,
Washington, in May 1984.  KJR(AM) acquired the broadcast rights to SuperSonics
games from the Company in the 1987-1988 season, and now serves as the
SuperSonics' flagship radio station.  In October 1987, the Company acquired
KLTX(FM), also located in Seattle and changed the name to KJR(FM).

    On February 4, 1994, the Company entered into an agreement with Century
Management, Inc. which resulted in the formation of New Century Seattle
Partners, L.P. (the "Partnership") for the purpose of owning and operating the
assets of KJR(AM), KJR(FM) and KUBE(FM).  This venture was approved by the
Federal Communications Commission ("FCC") and closed on July 14, 1994.  Under
the terms of the Amended and Restated Limited Partnership Agreement dated July
14, 1994, the Partnership purchased certain assets of KUBE(FM) from affiliated
companies of Cook Inlet, Inc., an Alaska-based Native American corporation, and
KJR Radio, Inc. contributed certain assets of KJR(AM) and KJR(FM) to the
Partnership.  Century Management, Inc. is the general partner of the Partnership
and, as such, controls the operations of the three radio stations.  KJR Radio,
Inc., a wholly-owned subsidiary of the Company, along with ASDP/New Century,
Inc., a Massachusetts corporation, and Union Venture Corporation, a California
corporation, are limited partners of the Partnership.

The following table sets forth certain information with respect to the radio
stations owned by the Partnership:

<TABLE>
<CAPTION>
                                                                           Radio Station
                                          Radio                No. of        Format and
                                         Station             Commercial        Primary
                   Call        Date      Power     Arbitron  Stations in    Demographic
  Market         Letters      Acquired   (WATTS)    Rank(1)   Market(1)         Target
  ------         -------      --------   -------   -------- ------------    ------------
<S>              <C>          <C>         <C>      <C>       <C>             <C>

Seattle/Tacoma,   KJR (AM)    May 1984       5,000      13         11 AM     Sports Talk;
Washington                                                                   Men 25-54
                  KJR (FM)(2) October 1987 100,000                 20 FM     70's Hits
                                                                             Adults 25-54
                  KUBE (FM)   July 1994    100,000                           Top 40 CHR
                                                                             Persons 18-34
</TABLE>
__________________________
(1) Source: Arbitron, Fall 1996 Edition.
(2) Formerly KLTX (FM)

    On March 9, 1994, the Company sold radio station WAXY(FM) in Fort
Lauderdale, Florida, to Clear Channel Radio, Inc. for approximately $14.0
million in cash, of which $13.0 million was for the assets of the radio station
and $1.0 million was for a prepaid outdoor advertising contract.  At December
31, 1993, the net book value of WAXY(FM) was approximately $10.7 million.

                                       12

<PAGE>

    Sales and Marketing.  The principal source of radio broadcasting revenue for
the Company, through its interest in the Partnership, is the sale of air time to
local advertisers.  Advertising rates charged by each of the Partnership's radio
stations are based primarily on the station's ability to attract audiences in
the target demographic groups and the number of stations competing in the market
area.  The size of a radio station's audience is measured by independent rating
service surveys.

    During 1996, local spot or schedule advertising, which is sold by the
Partnership's personnel at each station, accounted for approximately 76% of the
revenue generated by the Partnership's radio stations.  National spot or
schedule advertising, which is sold primarily through national sales
representative firms on a commission-only basis, accounted for approximately 22%
of the Partnership's radio broadcasting revenue in 1996.  The remaining revenue
consisted of tower rentals and production fees.

    Competition.  Radio stations compete with other broadcasting stations in
their respective market areas, as well as with other advertising media such as
newspapers, television, cable television, magazines, outdoor advertising,
transit advertising and mail marketing.  Competition within the radio
broadcasting industry occurs primarily in individual market areas, and a station
in one market generally does not compete with stations in other market areas.
In addition to management experience, factors material to competitive position
include the station's rank in its market, transmitter power, assigned frequency,
audience characteristics, local program acceptance and the number and
characteristics of the stations in the market area.  A competing station or a
station changing its format could enter into direct competition with, and
precipitate a decline in the ratings of, any one of the Partnership's stations.

    In addition, because a radio station's success in the ratings may depend to
a large extent upon the presence of radio personalities who are able to develop
large followings among listeners in a particular radio market, the arrival of a
radio personality at a competing station or the loss of such person at one of
the Partnership's radio stations could adversely affect that station's ratings.

    Congress and the FCC have under consideration, and may in the future
consider and adopt, new laws, regulations and policies regarding a wide variety
of matters that may have an adverse competitive impact on the Partnership's
radio broadcast properties.  See "-- Broadcasting Regulation" below.

Broadcasting Regulation

    The television and radio industries are subject to extensive federal
regulation under the Communications Act of 1934, as amended (the "Communications
Act"), which, among other things, requires approval by the FCC of transfers,
assignments and renewals of broadcasting licenses, limits the number of
broadcasting properties the Company may acquire and restricts alien ownership of
capital stock of licensees.  The FCC's multiple ownership rules limit certain
ownership of media interests in the same market, such as stations of the same
type (radio or television) serving the same geographic market, a radio station
and a television station serving the

                                       13

<PAGE>

same geographic market, a cable system and a television station serving the
same geographic market and a radio station and a daily newspaper serving the
same geographic market.

    On February 8, 1996, the Telecommunications Act of 1996, Pub. L. No.
104-104, 110 Stat. 56, was enacted.  The new law requires the FCC to
substantially change many of its rules regulating the television and radio
industries.  In general, the new law requires the FCC to conduct various
rulemaking proceedings to change its existing rules as required by the new law.
The FCC has issued a tentative timetable for conducting the various rulemaking
proceedings, which indicates that many FCC rules may change between March 1996
and the end of the year.  The rule changes required by the new law will include
changes (i) allowing one entity to own an unlimited number of radio stations
nationwide, and allowing one entity to own an increased number of radio stations
in a market, (ii) allowing one entity to own television stations reaching up to
thirty five percent of the national audience, (iii) extending radio and
television license terms to eight years, and (iv) relaxing the radio and
television license renewal process.  The new law also requires the FCC to
conduct a rulemaking proceeding to determine whether to change its rule limiting
the number of television stations an entity can own in a single market.

    The final rules that the FCC may adopt to implement the above-referenced
provisions of the new law, as well as rules implementing other provisions of the
new law and not referenced above, may have an adverse competitive impact on the
Company's business.  The Company currently is in compliance with the FCC's rules
governing the number of stations which may be owned.  These limitations on
ownership may affect the Company's ability to acquire additional stations in the
future.

    The success of the Company's broadcasting segment depends upon its
continuing to hold broadcast licenses from the FCC.  Radio and television
station licenses are issued for terms of eight years.  The Company's television
stations have licenses which expire (subject to renewal) as follows:  KCBA, KGET
and KCTY, December 1, 1998; KVOS, February 1, 1998; KKTV, April 1, 1998; and
WIXT, June 1, 1999.  Television stations KGET and KKTV each has a license
renewal application currently pending at the FCC.  No competing applications
have been filed, although petitions to deny the license renewal applications of
television stations KKTV and KGET have been filed by various parties.  The
Partnership's radio stations, KJR(AM), KJR(FM) and KUBE (FM), have licenses
which expire (subject to renewal) on February l, 1998.  While in the vast
majority of cases licenses are renewed by the FCC, there can be no assurance
that the Company's broadcasting licenses will be renewed, especially if
competing applications to obtain the licenses are filed.

    In determining whether to grant or renew a broadcast license, the FCC
considers a number of factors pertaining to the licensee, including compliance
with the Communications Act's limitations on alien ownership, compliance with
various rules limiting common ownership of broadcast, cable and newspaper
properties and the "character" of the licensee and those persons holding
attributable interests therein.

    The Communications Act requires broadcasters to serve the "public
interest." Since the late 1970s, the FCC gradually has relaxed or eliminated
many of the more formalized procedures it

                                       14

<PAGE>

developed to promote the broadcast of certain types of programming responsive
to the needs of a station's community of license.  However, licensees
continue to be required to present programming that is responsive to
community problems, needs and interests and to maintain certain records
demonstrating such responsiveness.  Complaints from listeners or viewers
concerning a station's programming often will be considered by the FCC when
it evaluates renewal applications of a licensee, although such complaints may
be filed at any time.  Stations also must follow various rules promulgated
under the Communications Act that regulate, among other things, political
advertising, sponsorship identifications, the advertisement of contests and
lotteries and technical operations, including limits on radio frequency
radiation.  In addition, licensees must develop and implement affirmative
action programs designed to promote equal employment opportunities and must
submit reports to the FCC with respect to these matters on an annual basis
and in connection with a renewal application.  Licenses must also provide
specific informational and educational programming for children and limit the
amount of commercials aired during children's programming.

    In March 1993, the FCC issued new rules establishing must-carry rights and
retransmission consent rights for television stations, as required by the Cable
Television Consumer Protection and Competition Act of 1992 (the "Cable Act").
By June 17, 1993, each local television station had to elect either (i) to
require its local cable television operator to carry its signal (the "must-carry
option"), or (ii) to grant its consent to the local cable operator (the
"retransmission consent option").  If a broadcaster chooses the must-carry
option, the cable operator generally is required to carry such broadcaster's
signal.  However, the must-carry rights are not absolute, and their exercise
depends on variables such as the number of activated channels on, and the
location and size of, the cable system and the amount of duplicative programming
on a broadcast station.  If a broadcaster chooses the retransmission consent
option, it may prohibit cable systems from carrying its signal or permit
carriage under a negotiated compensation arrangement.

    The Company's four network-affiliated stations have chosen the
retransmission consent option within their respective markets.  By September 6,
1993, all cable systems were required to notify their subscribers which TV
stations they would be carrying when the new cable TV rules went into full
effect on October 6, 1993.  Of the Company's four network-affiliated television
stations, three (KKTV, KCBA and KGET) granted retransmission consents to their
local cable systems, while the other (WIXT) agreed to extend for one year the
deadline to complete its negotiations with its local cable systems.  WIXT has
continued to extend that deadline by subsequent agreements.  While the Company
believes that the remaining negotiation will be concluded successfully and that
even if it is not successful the Company's operation would suffer no material
adverse effect, there can be no assurance that this will be the case.

    FCC rules are subject to change.  These changes may have an adverse
competitive impact on the Company.  For example, the FCC has adopted rule
changes which will result in the expansion of the AM radio band, addition of
more AM and FM stations, or increased power for existing AM and FM stations, by
reducing the mileage spacing between existing stations and allowing the
utilization of certain other engineering techniques (e.g., directional antennas
and terrain shielding).  Investigations by Congressional committees, the FCC and
other governmental agencies into certain practices and conditions in the
broadcasting industry (including broadcasting

                                       15

<PAGE>

spectrum and/or license fees, copyright law revisions, advertising practices,
cable television and trafficking rules) have resulted in various proposals or
inquiries now pending or which may be considered in the future by such
governmental bodies.

    Congress and the FCC have under consideration, and may in the future
consider and adopt, additional new laws, regulations and policies regarding a
wide variety of matters that could, directly or indirectly, affect the
operation, ownership and profitability of the Company's broadcast properties.
Such matters include, for example, proposals to impose spectrum use or other
governmentally imposed fees upon licensees; proposals to amend the FCC's equal
employment opportunity rules and other matters relating to minority and female
involvement in the broadcasting industry; proposals to change rules relating to
political broadcasting; technical and frequency allocation matters, including
those relative to the implementation of digital audio broadcasting on both a
satellite and terrestrial basis; proposals to permit expanded use of FM
translator stations; proposals to restrict or prohibit the advertising of beer,
wine and other alcoholic beverages on radio; changes to broadcast technical
requirements; proposals to auction the right to use the radio and television
broadcast spectrum to the highest bidders; and proposals for the expansion of
operating hours of daytime-only stations.  The Company cannot predict whether,
or to what extent, any of these matters will be adopted, nor can it judge in
advance what impact, if any, any such matters might have on its business.  In
addition, the Company cannot predict what other changes might be considered in
the future, nor can it judge in advance what impact, if any, such other changes
might have on its business.

    The FCC has proposed the adoption of rules for implementing advanced
(including high-definition) television service ("ATV") in the United States.
Implementation of ATV will improve the technical quality of television.  Under
certain circumstances, however, conversion to ATV operations may reduce a
station's geographical coverage area.  Implementation of ATV will impose
additional costs on television stations providing the new service, due to
increased equipment and operating costs.  At the same time, there is a potential
for increased revenues derived through the use of high-definition television.
While the Company believes the FCC will authorize ATV in the United States, the
Company cannot predict when such authorization might be given or the effect such
authorization might have on the Company's business.

    Television station KVOS, which derives much of its revenue from the
Vancouver, British Columbia market, is regulated by certain aspects of Canadian
law.  In particular, although under Canadian tax laws advertising expenses are
ordinarily deductible as business expenses, a Canadian firm may not deduct the
cost of advertising on a United States-based television station which is
directed into a Canadian market.  In order to compensate for this disparity,
KVOS sells advertising time in Canada at a discount from its standard rate.
KVOS also is subject to certain restrictions on its broadcast of network
programming.  See "-- Operations" above.

Other Businesses

    The Company's third business segment includes its basketball and indoor
soccer operations.  This segment, however, also incorporates the operations of
the Company's real estate holdings and the expenses of the Company's corporate
office.

                                       16

<PAGE>

The Seattle SuperSonics

    The SuperSonics franchise is one of 29 members of the NBA.  Teams in the
NBA play a regular season schedule of 82 games from November through April and
play several preseason exhibition games.  Based on their regular season records,
16 teams qualify for post-season play, which culminates in the NBA championship.
The SuperSonics have qualified for post-season play in each of the last three
years.

    Industry Overview.  NBA members share equally in the association's
profits and have joint and several liability for its obligations.  NBA
affairs are supervised by a Board of Governors made up of a representative
selected by each of the members.  Through its elected Commissioner, the Board
of Governors arbitrates disputes between members, assures that the conduct of
members, players and officials is in accordance with the NBA Constitution and
Bylaws, reviews and authorizes player transactions between members and
imposes sanctions (including fines and suspensions) on members, players and
officials who are found to have breached NBA rules.  The sale of any NBA
franchise is subject to the approval of a majority of the association's
owners.

    Operations.  Since 1983 the Company has owned and operated the SuperSonics,
the NBA franchise for Seattle, Washington.  The franchise has been operated in
Seattle since it was granted by the NBA in 1966.  The franchise, which is
subject to the Constitution and Bylaws of the NBA, operates for an indefinite
term of years so long as the Company maintains its membership in good standing.

    Currently, the SuperSonics maintain a full roster of 12 active players.
The minimum roster under NBA rules is 11 players.  The SuperSonics acquire new
players primarily through the college draft, by signing veteran free agents
uncommitted to another NBA franchise or by trading players with another
franchise.  NBA rules limit the aggregate annual salaries payable by each team
to its players.

    Sales and Marketing.  A major source of revenue for the SuperSonics is
ticket sales for home games, as 100% of the revenue from these sales are
retained by the home team.  Average paid attendance per game increased from
13,250 for the 1993-94 regular season to 13,846 for the 1994-95 regular
season, and to 15,277 for the 1995-96 regular season.  Average paid
attendance for the 1996-97 through February 28, 1997 regular season increased
to 15,621. The SuperSonics maintained consistent growth in average paid
attendance from the 1993-94 season through the 1995-96 season, attributable
mainly to the team's improved win/loss record.  The substantial increase in
the 1995-96 average paid attendance is mainly due to the SuperSonics move to
the new Key Arena in November 1995.

    In November 1993, the NBA granted franchises to the cities of Toronto and
Vancouver, Canada for $125 million each to begin play in the 1995-96 season.
The SuperSonics has received its proportionate share of the franchisee fees
received from these additional franchises.  The SuperSonics share equally with
the other NBA teams in revenue resulting from NBA agreements with television
networks for the broadcast of league games and other NBA activities.  The

                                       17

<PAGE>

proportion of revenue resulting from the sale of broadcast rights, particularly
television broadcast rights, has increased significantly in recent years and is
expected to become a more significant portion of total NBA revenue, primarily
because of the growth of cable television.  In the spring of 1993, the NBA
entered into a new contract with NBC providing for the television broadcast of
certain league games through the 1997-98 season.  This contract provides for a
minimum payment to the NBA of $750 million over the four-year term of the
contract.

    Other sources of revenue for the Company derived from its ownership of the
SuperSonics include broadcast licensing, team advertising sponsorships and
in-arena advertising.  All of the SuperSonics' games are broadcast exclusively
over KJR(AM), the Partnership-owned radio station in Seattle.  Broadcasting
rights to the SuperSonics' games are licensed to local cable systems and,
outside the Seattle/Tacoma market, additional radio stations not affiliated with
the Company. Broadcast revenue related to the SuperSonics, including the current
contracts with NBC and Turner Network Television, is included in the Company's
broadcasting segment.

Employees

    As of December 31, 1996, the Company employed approximately 370 persons in
its out-of-home media segment, 768 persons in its broadcasting segment and 71
persons in its other businesses segment.  A sales force of approximately 54
employees based in New York, St. Louis and the Washington, D.C. area and in
other regional offices, which is responsible for selling advertising space on
the Company's outdoor advertising structures and airport displays, is included
in this tabulation.

    Approximately 280 of the Company's employees are represented by various
unions under 14 collective bargaining agreements.  The Company believes that its
employee relations are good.  Collective bargaining agreements covering
approximately 10% of the Company's employees are terminable during 1997.  The
Company believes that these collective bargaining agreements will be
renegotiated or automatically extended and that any renegotiation will not
materially adversely affect its operations.

Financial Information Regarding Business Segments


    Financial information concerning each of the business segments in which the
Company is engaged is set forth in Note 13 to the Notes to Consolidated
Financial Statements.

Restrictions on Operations

    On September 30, 1996, the Company entered into an Amended and Restated
Credit Agreement (the "1996 Credit Agreement") with the senior bank lenders,
increasing the aggregate principal amount under the lending facility from
$65.0 million to $77.5 million.  The 1996 Credit Agreement, the Indenture
dated October 7, 1993 (the "Indenture") respecting its 10 3/4% Senior Secured
Notes Due 2003 ("Senior Notes"), and its Note Agreements dated December 20,
1988 and Note Agreements dated December 1, 1989, with certain insurance
company lenders as amended (collectively the "Subordinated Note Agreements")
contain restrictions on the Company's



                                  18

<PAGE>

operations.  The 1996 Credit Agreement, Indenture and Subordinated Note
Agreements include restrictions on aggregate indebtedness, acquisitions of
securities or assets of operating businesses, stock issuances, the creation
of liens, loans and advances, investments, capital expenditures, guarantees,
dividends on or purchases of its capital stock, changes in lines of business,
and transactions with affiliates.  The 1996 Credit Agreement and Indenture
also restrict the Company's ability to prepay other debt.  The 1996 Credit
Agreement and Subordinated Note Agreements generally prohibit the Company
from engaging in a merger or certain sales of assets without the consent of
the respective lenders.  Additionally, acquisitions of additional business
operations would generally require consents or waivers from certain of the
Company's lenders with respect to several of the above restrictions.

    The Company has pledged the stock of all its subsidiaries to secure its
obligations under the 1996 Credit Agreement and Indenture.  In the event of a
monetary default under the 1996 Credit Agreement or Senior Notes, the pledgee
under the Pledge Agreement, on behalf of the bank lenders and Senior
Noteholders, could force a sale of all or a portion of the stock of the
subsidiaries to satisfy the Company's obligations.

    Additional information concerning the 1996 Credit Agreement, Senior Notes
and Subordinated Note Agreements is set forth in Note 7 to the Notes to
Consolidated Financial Statements.

                                 ITEM 2 - PROPERTIES

    The principal executive offices of the Company are located at 1301 Fifth
Avenue, Suite 4000, Seattle, Washington 98101.  These offices, which consist of
approximately 16,800 square feet, are leased by the Company pursuant to a lease
that expires in 2006.

                                       19

<PAGE>

    The following table sets forth certain information regarding the Company's
operating facilities as of December 31, 1996:

<TABLE>
<CAPTION>
                                                                  Approximate
                                                                     Square    Approximate
                                                                     Footage   Square Footage
Location                               Nature of Facility            Owned        Leased
--------                               ------------------         -----------  -------------
<S>                                    <C>                        <C>          <C>
Out-of-Home Media:
  Seattle, Washington (Outdoor)                   Plant               35,889            --
  Boston, Massachusetts (Outdoor)                 Plant               31,882         4,900
  Miami, Florida (Outdoor)                        Plant              242,980            --
  Airport Advertising                            Offices                  --        12,544

Broadcasting:
  Syracuse, New York (WIXT)                 Station Operations        25,000          --
  Colorado Springs, Colorado (KKTV)         Station Operations        31,100           753
  Bakersfield, California (KGET)            Station Operations            --        13,440
  Bellingham, Washington (KVOS)             Station Operations        13,130        11,856
  Salinas, California (KCBA)                Station Operations        30,000         3,000
  Santa Rosa, California (KFTY)             Station Operations        13,000
  Portland, Oregon                           Antenna Facility          3,500           --

Other Businesses:
  Seattle, Washington (Sports Operations)  Offices & Practice         30,000         19,325
  Seattle, Washington (Corporate)            Facility Offices             --         30,014
</TABLE>

    The Company believes that its facilities are adequate for its present
business and that additional space is generally available for expansion without
significant delay.  In 1996, the Company paid aggregate annual rentals on office
space of approximately $1.6 million.

    Effective October 1, 1995, the Company entered into a fifteen-year lease
with the City of Seattle for the new Key Arena, a 17,100-seat events facility.
Construction for the arena was completed in September 1995.  It was first
occupied and used by the SuperSonics in November 1995, the beginning of the
1995-1996 season.  In 1996, the SeaDogs also began using Key Arena.

    At December 31, 1996, the Company owned 292 vehicles and leased 65 vehicles
of various types for use in its operations.  The Company owns a variety of
broadcast-related equipment, including broadcast towers, transmitters,
generators, microwave systems and audio and video equipment used in its
broadcasting business.  The Company leases two airplanes under private carrier
agreements:  one is used for executive travel between the various Company
facilities, and the other is used by the SuperSonics.

    The Company believes that all of its buildings and equipment are adequately
insured in accordance with industry practice.

                                       20

<PAGE>

                           ITEM 3 - LEGAL PROCEEDINGS

    The Company reported in its Current Report on Form 8-K, filed with the
Securities and Exchange Commission on or around February 29, 1996, a $13 million
award against certain of the Company's subsidiaries and officers in connection
with a wrongful termination claim by former Company employees.  The Company is
appealing the verdict.  See Note 12 to the Company's Consolidated Financial
Statements.

    The Company becomes involved from time to time in various claims and
lawsuits incidental to the ordinary course of its operations, including such
matters as contract and lease disputes and complaints alleging employment
discrimination.  In addition, the Company participates in various governmental
and administrative proceedings relating to, among other things, condemnation of
outdoor advertising structures without payment of just compensation, disputes
regarding airport franchises and matters affecting the operation of broadcasting
facilities.  Other than as indicated above, the Company believes that the
outcome of any such pending claims or proceedings, individually or in the
aggregate, will not have a material adverse effect upon its business or
financial condition.

    The NBA regularly becomes involved in litigation with present or former
players, league employees, persons with interests in franchises and others.  The
Company is unaware of any pending or threatened litigation which would have a
material adverse effect upon the business or financial condition of the NBA or
any of its members, including the SuperSonics.

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

    No matters were submitted to a vote of security holders in the fourth
quarter of 1996.

                         EXECUTIVE OFFICERS OF THE REGISTRANT

    The executive officers of the Company currently are as follows:

    Barry A. Ackerley        62   Chairman of the Board, President and Chief
                                  Executive Officer
    William N. Ackerley      36   President and Chief Operating Officer
    Denis M. Curley          49   Executive Vice President and Chief Financial
                                  Officer, Treasurer and Secretary
    Keith W. Ritzmann        44   Vice President and Controller

    Mr. Barry Ackerley, one of the founders of the Company, assumed the
responsibilities of President and Chief Operating Officer of the Company
following the resignation of Donald E. Carter effective March 1991 and until the
appointment of William N. Ackerley as Senior Vice President and Chief Operating
Officer effective April 1992.  He has been the chief executive officer and a
director of the Company and its predecessor and subsidiary companies since 1975
and is the Chairman of the Board.

                                       21

<PAGE>

    Mr. William Ackerley was elected President in August 1993.  He has served
as Chief Operating Officer of the Company since 1991 during which time he also
served as General Manager of Ackerley Communications of the Northwest, Inc.
(from March through July 1993) and as General Manager of KJR Radio, Inc. (from
September through November 1991).  He has been with the Company since 1986 and
has served in the following capacities: from March 1986 to October 1988, as Vice
President of the SuperSonics, in front office administration; from October 1988
to September 1989, as Vice President of the Company, working on special
projects; from September 1989 to April 1991, as Project Manager with the
Company's subsidiary, The New Seattle Arena, Inc., responsible for the
development of a proposed sports arena.

    Mr. Curley, who joined the Company in December 1984, was named on March 1,
1995 to the position of Executive Vice President and Chief Financial Officer
after having served as Senior Vice President and Chief Financial Officer of the
Company since January 1990.  He has been Vice President of Finance, serving as
Chief Financial Officer of the Company, since May 1988, and Treasurer and
Assistant Secretary of the Company since November 1985.

    Mr. Ritzmann, who joined the Company in November 1980, was named in January
1990 to the position of Vice President.  He has been the Controller of the
Company since 1986.

    Barry A. Ackerley and William N. Ackerley are father and son.  Gail A.
Ackerley, Co-Chairman of the Board of Directors and a nominee for re-election as
a director at the 1997 annual shareholder's meeting, is Barry Ackerley's wife
and William Ackerley's mother.  There are no other family relationships among
any of the directors or executive officers.  All officers serve at the pleasure
of the Board of Directors.

                                       PART II

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

    On September 19, 1996, the Board of Directors declared an increase of all
classes of its common stock which the Company is authorized to issue from
56,972,230 shares to 61,406,510 shares.  In conjunction with this increase, the
Board also declared a two-for-one stock split effective October 15 for
stockholders of record on October 4.  The stock split resulted in the issuance
of 15,582,794 additional shares.  All share and per share data have been
restated to reflect this split.

    As of March 14, 1997, the Company had 31,166,812 shares of outstanding
common stock, 19,813,002 shares of which are voting common stock ("Common
Stock") and 11,353,810 of which are Class B voting common stock ("Class B Common
Stock").  As of the same date, there were 583 and 29 shareholders of record of
Common Stock and Class B Common Stock, respectively.  First Union National Bank
of North Carolina is the stock transfer agent for all common stock.

    The Board of Directors declared a dividend of $.03 a share in 1995 and $.04
in 1996.  Recently, the Company declared its third annual cash dividend of $.02
per share (reflecting the

                                       22

<PAGE>

October 1996 stock split) payable on April 15, 1997 to shareholders of record
on March 25, 1997.  The Company's Board of Directors presently intends to pay
a similar dividend next year.  Such payment and any other future payment of
dividends will depend upon, among other things, the Company's earnings and
financial condition, capital requirements and general economic conditions.
In this respect, payment of dividends is restricted by the terms of the 1996
Credit Agreement and Subordinated Note Agreements and the Indenture.
Additionally, the Delaware general corporation law would restrict the payment
of dividends under certain circumstances.

    The Company's Common Stock is listed and traded on AMEX under the symbol
AK.  The table below sets forth the high and low sales prices according to AMEX,
for each full quarterly period within the two most recent fiscal years.  These
quotations reflect inter-dealer prices, without retail markup, markdown or
commission and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
1996                      High         Low              1995            High       Low
----                      ----         ---              ----            ----       ---
<S>                       <C>          <C>              <C>             <C>        <C>
First Quarter             $10 1/4      $ 9 7/16         First Quarter    $5 1/4    $3 1/4

Second Quarter            $13 15/16    $11 15/16        Second Quarter    $6 1/4    $4 3/8

Third Quarter             $16 15/16    $13 5/8          Third Quarter     $7 13/16  $6 1/8

Fourth Quarter            $12 7/8      $11 1/8          Fourth Quarter    $7 15/16  $6 5/8
</TABLE>

    As of March 14, 1997, the high and low sales price of the Common Stock were
$13 3/8 and $13 1/4 and respectively.

    No market has existed for the Class B Common Stock since its initial
issuance in June 1987.  Moreover, there are significant restrictions, set forth
in the Company's Third Restated Certificate of Incorporation, on the ability of
a stockholder to transfer shares of Class B Common Stock.  As a consequence,
there does not exist an established trading market for the Class B Common Stock.

                                       23

<PAGE>

                           ITEM 6 - SELECTED FINANCIAL DATA

    The following selected consolidated financial data with respect to the
Company for the years ended December 31, 1992 through 1996 have been derived
from the audited consolidated financial statements of the Company. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the "Consolidated Financial Statements" and Notes thereto included elsewhere in
this report.
<TABLE>
<CAPTION>
                                                                      Year End December 31,
                                             ----------------------------------------------------------
                                              1996       1995        1994        1993         1992
                                              ----       ----        ----        ----         ----
<S>                                          <C>        <C>          <C>        <C>          <C>
                                                    (In thousands except per share data)
Consolidated Statement of
   Operations Data:
Revenue                                      $279,662   $235,820     $211,728   $192,958     $187,295
 Less agency commissions and discounts        (32,364)   (28,423)     (25,626)   (22,341)     (22,769)
                                             --------   ---------    --------   ---------    --------
Net revenue                                   247,298    207,397      186,102    170,617     164,526
Expenses and other income
    Operating expenses                        186,846    156,399      143,469    132,774     125,441
    Disposition of assets                           --        --        (2,506)       759      (2,147)
    Depreciation and Amortization              16,996      13,243       10,883     12,018       13,915
    Interest expense                           24,461      25,010       25,909     22,431       23,809
    Litigation expense                             --      14,200           --         --          --
    Other (Income) expense                        108         (56)       (657)       (458)         13
                                             --------   ---------    --------   ---------    --------
      Total expenses and other income         228,411     208,796     177,098     167,524     161,031
                                             --------   ---------    --------   ---------    --------
Income (loss) before income taxes
   and extraordinary item                      18,887      (1,399)       9,004       3,093      3,495
Income taxes                                    2,758       1,515           73         133      1,188
                                             --------   ---------    --------   ---------    --------
Income (loss) before extraordinary item        16,129      (2,914)       8,931       2,960      2,307
Extraordinary item - loss on
 extinguishment of debt in 1996,
 1994 and 1993; utilization of tax
 loss carry forward in 1992                      (355)         --       (2,009)       (625)     1,188
                                             --------   ---------    --------   ---------    --------
Net income (loss) applicable to
   common shares                             $ 15,774   $ (2,914)    $  6,832    $  2,335    $  3,495
                                             --------   ---------    --------   ---------    --------
                                             --------   ---------    --------   ---------    --------
Per common share:
   Income (loss) before
      extraordinary item                     $   .51   $   (.09)    $   .28     $    .09    $    .07
   Extraordinary item                           (.01)        --        (.06)        (.02)        .04
                                             --------   ---------    --------   ---------    --------
   Net income (loss)                         $   .50    $  (.09)     $   .22    $    .07    $    .11
                                             --------   ---------    --------   ---------    --------
                                             --------   ---------    --------   ---------    --------
   Dividends                                 $    .02  $   .015      $    --    $     --    $     --
                                             --------   ---------    --------   ---------    --------
                                             --------   ---------    --------   ---------    --------
   Common shares used in per
      share computation                        31,760      31,545      31,483      31,204      30,900

Consolidated Balance Sheet
   Data (at end of period):
Working capital                             $    1,154   $  15,110   $  16,783     $  7,970   $ (17,375)
Total assets                                   224,912     189,882     170,783      160,491     165,824
Total long-term debt                           229,350     215,328     225,613      213,165     195,448
Total debt                                     235,141     220,147     228,646      224,080     233,617
Stockholder's deficiency                       (83,839)    (99,093)    (95,958)    (102,852)   (105,228)
</TABLE>

                                       24


<PAGE>

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

Overview

    The Company reported net income of $15.8 million in 1996, a net loss of
$2.9 million in 1995, and net income of $6.8 million in 1994.  Historically, the
Company has sought to expand its businesses through acquisitions.  This
acquisition strategy has led the Company to incur substantial depreciation and
amortization expense and interest expense on long-term debt.  Financial results
for the past three years reflect the decreased acquisition activity of the early
1990s combined with the increased profitability of the Company's existing
operations.

    On February 17, 1995, the Company completed a refinancing of its senior
indebtedness (the "1995 Refinancing") to obtain more favorable interest rates
and repayment terms respecting its senior bank indebtedness.  In connection with
the 1995 Refinancing, the Company entered into a credit agreement with a new
group of bank lenders (the "1995 Credit Agreement") providing for up to $65
million in borrowings including up to $7.5 million dollars in standby letters of
credit.  The net proceeds from the initial borrowing under the 1995 Credit
Agreements were used to repay all outstanding indebtedness of approximately
$51.3 million under the 1993 Credit Agreement.

    On April 2, 1996, the Company purchased for approximately $7.8 million
television station KFTY, licensed to the market of Santa Rosa, California.  On
April 24, 1996, the Company entered into a local marketing agreement ("LMA")
with Harron Television of Monterey, the owner of television station KION
(formerly KCCN) licensed to the market of Monterey, California.  The Company
provides programming and sales services to KION and makes a monthly payment to
Harron in exchange for the right of the Company to receive all revenues from
network compensation and advertising sold on the station.  In conjunction with
the transaction, the Company paid Harron Television approximately $5.6 million
dollars for an option to purchase the station.  All of the above transactions
were financed through its credit facilities.

    On September 30, 1996, the Company entered into an Amended and Restated
Credit Agreement with the senior bank lenders (the "1996 Credit Agreement"),
increasing the aggregate principal amount under the lending facility from $65.0
million to $77.5 million.

    On October 1, 1996, the Company amended its Certificate of Incorporation to
change its name from Ackerley Communications, Inc. to The Ackerley Group, Inc.
and implemented a new marketing plan for its businesses.

    On October 15, 1996, the Company effected a two-for-one stock split of its
outstanding common stock, including its outstanding Class B Common Stock, for
the shareholders of record at the close of business on October 4.  In order to
effect the split, the Company amended its Certificate of Incorporation on
September 26 to increase the number of shares of its authorized capital stock
from 59,972,230 to 61,406,510 shares, including the number of shares of its
Class B Common Stock from 6,972,230 to 11,406,510 shares.  The stock split
resulted in the issuance of 15,582,794 additional shares.

                                       25

<PAGE>

    In November 1996, the Company purchased for approximately $13.0 million 60
billboard faces and three land parcels in the Boston area.

    Certain subsidiaries of the Company and two of its executive officers were
defendants in a wrongful termination suit brought by former employees.  On
February 29, 1996, a jury issued a verdict awarding the plaintiffs compensatory
and punitive damages of approximately $13.0 million.  The Company has recorded
an accrual of $14.2 million related to the verdict including an estimate for
additional legal costs.  The Company is appealing the verdict.

    In addition, during the past three years, the Company maintained growth in
net revenue, completed the development of a new sports arena,  purchased
television station KFTY in Santa Rosa, California, and continued the cost
containment program initiated in 1991.  One by-product of the cost containment
effort that has remained an important part of the Company's operating strategy
is increased scrutiny of expenses.  Rather than concentrating solely on
maximizing revenues, the Company focuses on maximizing the Operating Cash Flow
of each of its business segments.  Proposed expenses are evaluated in light of
the enhancements to revenue anticipated to flow from such expenditures.

    As with many media companies that have grown through acquisitions, the
Company's acquisitions and dispositions of television and radio stations have
resulted in significant non-cash and non-recurring charges to income.  For this
reason, in addition to net income (loss), management believes that Operating
Cash Flow (defined as net revenue less operating expenses plus other income
before amortization, depreciation, interest expense, litigation expense and
disposition of assets) is an appropriate measure of the Company's financial
performance.  This measure excludes expenses consisting of depreciation,
amortization, interest, litigation expense, and disposition of assets because
these expenses are not considered by the Company to be costs of ongoing
operations.  The Company uses Operating Cash Flow to pay interest and principal
on its long-term debt as well as to finance capital expenditures.  Operating
Cash Flow, however, is not to be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to cash flows
as a measure of the Company's liquidity.

    The regional markets the Company serves, from time to time, experience
varying degrees of recessionary influences.  Management cannot presently
determine the potential negative impact of such recessionary influences on the
Company's operations and its financial condition.

                                       26

<PAGE>

Results of Operations

    The following tables set forth certain historical financial and operating
data of the Company for the three-year period ended December 31, 1996, including
separate net revenue, operating expense and other income and Operating Cash Flow
information by segment:

<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                                 -----------------------------------------------------------
                                       1996                 1995                 1994
                                 -----------------    -----------------   -----------------

                                            As %                  As %                As %
                                           of Net                of Net              of Net
                                 Amount   Revenue    Amount     Revenue   Amount     Revenue
                                 ------   -------    ------    --------   ------     -------
                                                        (In thousands)
<S>                              <C>      <C>       <C>        <C>        <C>        <C>

Net revenue                     $247,298   100.0%   $207,397    100.0%   $186,102    100.0%
Operating expenses and other
  (income) expense:
  Operating expenses             186,846    75.6     156,399     75.4     143,469     77.1
  Other (income) expense, net        108    (0.0)        (56)    (0.0)       (657)    (0.4)
                                 -------              -----               -------
    Total operating expenses and
       other income              186,954    75.6     156,343      75.4    142,812     76.7
                                 -------              -----               -------

Operating Cash Flow               60,344    24.4       51,054     24.6     43,290     23.3
Other expenses:
  Depreciation and amortization   16,996      6.9      13,243       6.4    10,883     5.8
  Interest expense                24,461      9.9      25,010      12.1    25,909    13.9
                                 -------              -----               -------
     Total other expenses         41,457     16.8      38,253      18.5    36,792    13.9
Income before disposition of
assets, income taxes, and
litigation expense, and
 extraordinary item               18,887      7.6      12,801       6.1      6,498    3.5
  Litigation expense                 --        --      14,200       6.8         --     --
  Disposition of assets              --        --         --         --     (2,506)   1.3
  Income tax expense               2,758       1.1      1,515       0.7        73      --
                                 -------              -----                -------
Income (loss) before
  extraordinary item              16,129       6.5     (2,914)     (1.4)     8,931    4.8
Extraordinary item                  (355)     (0.1)        --        --     (2,099)  (1.1)
                                 -------              -----                -------
Net income (loss)             $   15,774       6.4    $(2,914)     (1.4)   $ 6,832    3.7
                                 -------              -----                -------
                                 -------              -----                -------
</TABLE>

                                       27

<PAGE>

<TABLE>
<CAPTION>
                                                                                 Year Ended December 31,
                                                                        -------------------------------------------------
                                                                          1996               1995                 1994
                                                                        --------            --------           ----------
                                                                                    (Dollars in thousands)
<S>                                                                     <C>                 <C>                 <C>
Net revenue:
  Out-of-home media                                                    $ 99,833            $ 93,177            $ 85,436
  Broadcasting                                                          118,171              94,108              83,463
  Other                                                                  29,294              20,112              17,203
                                                                        --------            --------            --------
    Total net revenue                                                   $247,298            $207,397            $186,102
                                                                        --------            --------            --------
                                                                        --------            --------            --------
Operating expense and other income:
  Out-of-home media                                                     $ 63,924            $ 61,199            $ 58,409
  Broadcasting                                                            69,291              54,601              49,901
  Other                                                                   53,739              40,543              34,502
                                                                        --------            --------            --------
    Total operating expenses and other income                           $186,954            $156,343            $142,812
                                                                        --------            --------            --------
                                                                        --------            --------            --------
Operating Cash Flow:
  Out-of-home media                                                     $ 35,909            $ 31,978            $ 27,027
  Broadcasting                                                            48,880               39,507             33,562
  Other                                                                  (24,445)            (20,431)            (17,299)
                                                                        --------            --------            --------
                                                                        --------            --------            --------
    Total Operating Cash Flow                                           $ 60,344            $ 51,054            $ 43,290
                                                                        --------            --------            --------
                                                                        --------            --------            --------
Change in net revenue from prior periods:
  Out-of-home media                                                          7.1%                9.1%               14.1%
  Broadcasting                                                              25.6                12.8                 7.9
  Other                                                                      45.7                16.9                (6.6)
    Change in total net revenue                                             19.2                11.4                 9.1
Operating data as a percentage
 of net revenue:
   Operating expenses and other income:

    Out-of-home media                                                       64.0%               65.7%                68.4%
    Broadcasting                                                            58.6                58.0                 59.8
    Other                                                                  183.4                201.6               200.6
      Total operating expenses and other income                             75.6                 75.4                76.7
   Operating Cash Flow:
    Out-of-home media                                                       36.0%                 34.3%              31.6%
    Broadcasting                                                            41.4                  42.0               40.2
    Other                                                                  (83.4)               (101.6)             (100.6)
      Total Operating Cash Flow                                             24.4                  24.6                23.3
</TABLE>

1996 Compared with 1995

    Net Revenue.  Net revenue for 1996 increased by $39.9 million, or 19.2%, to
$247.3 million from $207.4 million in 1995.  Net revenue in the Company's
out-of-home media segment increased by $6.7 million, or 7.1%, in 1996 from 1995.
This increase was due to increased sales volume

                                       28

<PAGE>

reflecting a strengthening market for national advertising. The net revenue
of the Company's broadcasting segment increased $24.1 million or 25.6%
resulting from local broadcast revenue related to sports operations, the
addition of KFTY, and increased rates and sale volumes.  The Company's other
businesses segment's net revenue increased $9.1 million or 45.7% mainly due
to the SuperSonics participating in 21 games of the 1996 NBA playoffs
compared to 4 games in 1995.

    Operating Expenses and Other Income.  Operating expenses and other income
increased $30.6 million, or 19.6%, to $186.9 million from $156.3 million in
1995.  In 1996, the Company's out-of-home media operating expenses and other
income increased $2.7 million or 4.5%, from the previous year's level due to
expenses related to increased business activity.  Operating expenses and other
income in the Company's broadcasting segment increased $14.7 million or 26.9% to
$64.3 million due to broadcast expenses related to sports operations,  the
addition of KFTY, the addition of the KION LMA and higher programming,
promotion, and production expenses.  Operating expenses and other income from
the Company's other segment increased $13.2 million to $53.7 million or 32.5%
mainly from increased basketball operating expenses related to the SuperSonics
participating in 17 more NBA playoff games in 1996 than in 1995.

    Operating Cash Flow.  Because the increase in revenues exceeded the increase
in operating expenses and other income for the same period, Operating Cash Flow
increased by $9.3 million or 18.2% in 1996 from 1995. The increase in Operating
Cash Flow in the out-of-home media and broadcasting segments more than offset
the decrease in the other businesses segment's Operating Cash Flow.  Operating
Cash Flow as a percentage of net revenue slightly decreased to 24.4% in 1996
from 24.6% in 1995.

    Depreciation and Amortization.  Depreciation and amortization expenses
increased by $3.8 million, or 28.3%, to $17.0 million in 1996 as compared to
$13.2 million in 1995. The increase is mainly the result of depreciation
expense related to the Key Arena leasehold improvements in October 1995 and
the addition of KFTY in April 1996.

    Interest Expense.  Interest expense for 1996 decreased by $0.5 million, or
2.2%, to $24.5 million from $25.0 million in 1995.  This decrease was due mainly
to a combination of lower average debt balances in 1996 and to favorable
interest rate contracts in 1996.

    Litigation Expense.  In 1995, the Company recorded an accrual for a
litigation expense of $14.2 million.  There was no such accrual in 1996.

    Income Tax Expense.  In 1996, the Company incurred $2,758,000 of income tax
expense the majority of which was for state income taxes ($1,088,000) related to
a pending settlement of certain prior year tax returns and for the federal
alternative minimum tax ($1,561,000).  Management anticipates that the Company
will continue to incur income tax expense under the alternative minimum tax
until operating loss carryforwards are substantially reduced.  The Company will
also incur income tax expense in certain states in which it operates.

                                       29

<PAGE>
    Extraordinary Item. As a result of the 1996 Amended and Restated Credit
Agreement, the Company wrote off in 1996 deferred costs of $0.4 million related
to the 1995 Credit Agreement.  There were no extraordinary items for 1995.

    Net Income (Loss). Net income for 1996 was $15.8 million, an increase of
$18.7 million from the net loss of $2.9 million in 1995.  The increase was
mainly due to the effect of recording an accrual for a litigation expense in
1995.  Net income as a percentage of net revenue increased to 6.4% in 1996
from (1.4%) in 1995.

1995 Compared with 1994

    Net Revenue.  Net revenue for 1995 increased by $21.3 million, or 11.4%, to
$207.4 million from $186.1 million in 1994.  Net revenue in the Company's
out-of-home media segment increased by $7.7 million, or 9.1%, in 1995 from 1994.
This increase was due to increased sales volume reflecting a strengthening
market for national advertising.  The Company's broadcasting segment showed an
increase in net revenue of $10.6 million, or 12.8%, for 1995 mainly due to
increased rates and sales volumes.  Year-to-date net revenue for the Company's
other businesses segment increased $2.9 million, or 16.9%, in 1995 as compared
with the same period in the previous year, mainly due to increased ticket sales
from SuperSonics home games.

    Operating Expenses and Other Income.  Operating expenses and other income
increased $13.5 million, or 9.5%, to $156.3 million from $142.8 million in 1994.
However, operating expenses and other income as a percentage of net revenue
decreased to 75.4% for 1995 from 76.7% for 1994.  In 1995, the Company's
out-of-home media operating expenses and other income increased $2.8 million or
4.8%, from the previous year's level due to expenses related to increased
business activity.  Operating expenses and other income in the Company's
broadcasting segment increased by $4.7 million or 9.4% to $54.6 million in 1995
from $49.9 million in 1994, mainly because of the addition of the operations of
KUBE(FM).  The other businesses segment's operating expenses and other income
increased $6.0 million, or 17.5%, to $40.5 million in 1995 from $34.5 million in
1994 principally because of increases in SuperSonics player compensation.

    Operating Cash Flow.  Because the increase in revenues exceeded the increase
in operating expenses and other income for the same period, Operating Cash Flow
increased by $7.8 million or 17.9% in 1995 from 1994. The increase in Operating
Cash Flow in the out-of-home media and broadcasting segments more than offset
the decrease in the other businesses segment's Operating Cash Flow.  As a
result, Operating Cash Flow as a percentage of net revenue slightly increased to
24.6% in 1995 from 23.3% in 1994.

    Depreciation and Amortization.  Depreciation and amortization expenses
increased by $2.4 million, or 21.7%, to $13.2 million in 1995 as compared to
$10.9 million in 1994.  The majority of this increase resulted from the
amortization of film broadcasting rights.  Depreciation and amortization
expenses were further increased by a full year's depreciation and
amortization of the assets of radio station KUBE(FM) which was purchased in
July 1994.

                                       30

<PAGE>

    Interest Expense.  Interest expense for 1995 decreased by $0.9 million,
or 3.5%, to $25.0 million from $25.9 million in 1994.  This decrease was due
mainly to a combination of lower average interest rates and a slightly lower
average debt level during 1995 compared to 1994.

    Litigation Expense.  In 1995, the Company recorded an accrual for a
litigation expense of $14.2 million.  There was no such accrual in 1994.

    Income Tax Expense.  In 1995, the Company's income tax expense increased
to $1.5 million from $0.1 million in 1994 mainly due to the settlement of a
state income tax matter and the effects of alternative minimum taxes.  The
Company benefited from its ability to utilize operating loss carryforwards to
minimize income tax expense in 1995 and anticipates to continue to incur
income tax expense under the alternative minimum tax until operating loss
carryforwards are substantially reduced.

    Extraordinary Item. As a result of the 1995 Refinancing, the Company
wrote off deferred costs of $2.1 million related to the 1993 Credit Agreement
in 1994. There were no extraordinary items for 1995.

    Net Income (Loss). Net loss for 1995 was $2.9 million, a decrease of $9.7
million from the net income in 1994.  This was mainly due to the effect of
recording an accrual for a litigation expense.  Net income as a percentage of
net revenue decreased to (1.4%) in 1995 from 3.7% in 1994.

Liquidity and Capital Resources

    On February 17, 1995, the Company completed the 1995 Refinancing to
obtain more favorable interest rates and repayment terms respecting its
senior bank indebtedness.  In connection with the 1995 Refinancing, the
Company entered into the 1995 Credit Agreement, initially providing for up to
$65 million in borrowings including up to $7.5 million dollars in standby
letters of credit. The net proceeds from the initial borrowing under the 1995
Credit Agreements were used to repay all outstanding indebtedness of
approximately $51.3 million under the 1993 Credit Agreement.

    On September 30, 1996, the Company entered into an Amended and Restated
Credit Agreement with the senior bank lenders, increasing the aggregate
principal amount under the lending facility from $65.0 million to $77.5
million.

    Under the 1996 Credit Agreement, the Company presently has approximately
$18.0 million available for borrowing under the revolving credit facility.
The 1996 Credit Agreement and Subordinated Note Agreements require the
consent of the banks and other lenders prior to any material expansion of the
Company's operations.

    Borrowings under the 1996 Credit Agreement bear annual interest at either
the prime rate plus 0.75% or LIBOR plus 2.00% for up to $77.5 million.  The
Credit Agreement also provides for up to $7.5 million in a letter of credit
facility, which constitutes part of the $77.5 million maximum borrowings and
incurs 2% annual fees.  These borrowings and the Senior Notes are subject to

                                      31

<PAGE>


the Company's compliance with certain financial covenants and are secured by
a pledge of stock of the Company's subsidiaries.

    The Company's working capital decreased to $11.2 million at December 31,
1996 from $15.1 million at December 31, 1995.  Cash from operating activities
was used to finance capital expenditures in the amount of $14.4 million in
1996.

    The Company's working capital decreased to $15.1 million at December 31,
1995 from $16.8 million at December 31, 1994.  Cash from operating activities
was used to finance capital expenditures in the amount of $15.1 million in
1995.

    For the periods presented, the Company has financed its working capital
needs from cash provided by operating activities.  Historically, the
Company's long-term liquidity needs for acquisitions have been financed
through additions to its long-term debt, principally through bank borrowings
or private placements of subordinated debt.  Capital expenditures for new
property and equipment have been financed with both cash provided by
operating activities and long-term debt.  Cash provided by operating
activities for 1996 decreased to $23.2 million from $36.7 million in 1995
mainly due to advance payments made in 1996 related to SuperSonic players'
contracts.

    At December 31, 1996, the Company's capital resources consisted of $2.9
million in cash and cash equivalents and $21.0 million available under the
1996 Credit Agreement.

    The Company expended $8.8 million, $23.1 million and $14.4 million for
capital additions in 1994, 1995 and 1996, respectively.  The Company
anticipates that 1997 capital expenditures consisting primarily of
construction and maintenance of billboard structures,  broadcasting
equipment, and other capital additions will be between $13.0 million and
$16.0 million.

    On April 2, 1996, the Company purchased for approximately $7.8 million
television station KFTY, licensed to the market of Santa Rosa, California.
On April 24, 1996, the Company entered into a local marketing agreement with
Harron Television of Monterey, the owner of television station KION licensed
to the market of Monterey, California.  The Company provides programming and
sales services to KION and makes a monthly payment to Harron in exchange for
the right of the Company to receive all revenues from network compensation
and advertising sold on the station.  In conjunction with the transaction,
the Company paid Harron Television approximately $5.6 million dollars for an
option to purchase the station and has guaranteed  a Harron debt totaling
$4.8 million.  No impact on liquidity is expected from this guarantee.  All
of the above transactions were financed through its credit facilities.

    In November 1996, the Company purchased for approximately $13.0 million
60 billboard faces and three land parcels in the Boston area.

    On March 9, 1994, the Company sold radio station WAXY(FM), in Fort
Lauderdale, Florida, to Clear Channel Radio, Inc.  for approximately $14.0
million in cash, of which $13.0 million was for the assets of the radio
station and $1.0 million was for a prepaid outdoor advertising contract.  At

                                      32

<PAGE>

the date of sale, the net book value of WAXY(FM) was approximately $10.5
million.  The funds received from the sale were used to reduce long-term debt.

    On February 4, 1994, the Company entered into an agreement with Century
Management, Inc. which resulted in the formation of New Century Seattle
Partners, L.P. (the "Partnership") for the purpose of owning and operating
the assets of KJR(AM), KJR(FM) and KUBE(FM).   On July 14, 1994, the
Partnership purchased certain assets of KUBE(FM) from affiliated companies of
Cook Inlet, Inc., an Alaska-based native American corporation.  In order to
effect the purchase, the Partnership incurred approximately $18.1 million of
debt.

Quarterly Variations

    The Company's results of operations may vary from quarter to quarter due
in part to the timing of acquisitions and to seasonal variations in the
operations of the broadcasting segment.  In particular, the Company's net
revenue and Operating Cash Flow historically have been affected positively
during the NBA basketball season (the first, second and fourth quarters) and
by increased advertising activity in the second and fourth quarters.

Taxes

    At December 31, 1996 the Company had a net operating loss carryforward
for federal income tax purposes of approximately $59.5 million and an
investment tax credit carryforward of approximately $1.3 million.  These
carryforwards expire during the years 1997 to 2007.

Inflation

    The effects of inflation on the Company's costs generally have been
offset by the Company's ability to correspondingly increase its rate
structure.

                 ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Information called for by this item is included in Item 14, pages F-1
through F-20.


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

                                        None.

                                           33

<PAGE>

                                       PART III

             ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    For information concerning directors and certain executive officers of
the Company, see the section entitled "Election of Directors" in the
Company's definitive Proxy Statement dated March 28, 1997 ("Proxy Statement")
which is incorporated herein by reference and "Executive Officers of the
Registrant" under Part I of this report.

                           ITEM 11 - EXECUTIVE COMPENSATION

    For information concerning executive compensation see the section
entitled "Election of Directors" in the Proxy Statement, which information is
incorporated herein by reference.

                       ITEM 12 - SECURITY OWNERSHIP OF CERTAIN
                           BENEFICIAL OWNERS AND MANAGEMENT

    As of March 14, 1997, Barry A. Ackerley and Gabelli Funds, Inc. were the
only persons to the Company's knowledge owning beneficially more than 5% of
the outstanding shares of Common Stock and Class B Common Stock.  For
information concerning Mr. Ackerley's security ownership and the ownership of
management see the section entitled "Election of Directors" in the Proxy
Statement, which information is incorporated herein by reference.

                         ITEM 13 - CERTAIN RELATIONSHIPS AND
                                 RELATED TRANSACTIONS

    For information concerning certain relationships and related
transactions, see the Section entitled "Election of Directors" in the Proxy
Statement, which information is incorporated herein by reference, except for
the Sections entitled "Board Report on Executive Compensation" and
"Shareholder Return Performance Presentation".

                                      34

<PAGE>

                                     PART IV

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

(a)(1) and (2)  Financial Statements and Schedules.
    The following documents are being filed as part of this Report:

                            INDEX TO FINANCIAL STATEMENTS
                                                                         Page
                                                                         Number

Report of Ernst & Young, LLP, independent auditors.......................   F-1

Consolidated balance sheets as of December 31, 1996
  and 1995...............................................................   F-2

Consolidated statements of operations for the
  years ended December 31, 1996, 1995 and 1994...........................   F-3

Consolidated statements of stockholders' deficiency
  for the years ended December 31, 1996, 1995 and 1994...................   F-4

Consolidated statements of cash flows for the years
  ended December 31, 1996, 1995 and 1994.................................   F-5

Notes to consolidated financial statements...............................   F-6

Schedules are omitted for the reason that they are not required or are not
applicable, or the required information is shown in the consolidated
financial statements or notes thereto. Columns omitted from schedules filed
have been omitted because the information is not applicable.

                                     35

<PAGE>

(3) Exhibits:

<TABLE>
<CAPTION>

Exhibit
  No.                              Exhibit
---------                        ----------
<S>      <C>
 3.1     Third Restated Certificate of Incorporation(1)
 3.2     Certificate of Amendment dated May 11, 1994 to Third Restated Certificate
         of Incorporation(1)
 3.3     Certificate of Amendment dated October 1,1996 to Third Restated Certificate
         of Incorporation(2)
 3.4     Certificate of Amendment dated September 26,1996 to Third Restated
         Certificate of Incorporation(2)
 3.5     Amended and Restated Bylaws(4)
 4.1     Indenture dated October 1, 1993 between the Company and First Bank National
         Association, relating to the 10 3/4% Series A Senior Secured Notes and the
         10 3/4% Senior Secured Notes Due 2003(5)
 4.2     Form of Specimen 10 3/4% Senior Secured Note Due 2003(5)
10.1     Amended and Restated Credit Agreement dated as of September 30, 1996, by
         and among First Union National Bank of North Carolina, Natwest Bank, N.A.,
         Key Bank, Union Bank and Long-Term Credit Bank of Japan, Ltd.(2)
10.2     Pledge Agreement dated as of October 1, 1993 between the Company and First
         Trust of California, National Association(5)
10.3     Composite Conformed Copies of Note Agreement between the Company and
         certain insurance companies, dated as of December 1, 1988(4)
10.4     Composite Conformed Copies of Note Agreement between the Company and
         certain insurance companies, dated as of December 1, 1989(6)
10.5     Amendment No. 1 dated October 18, 1991 to Note Agreements dated December 1,
         1988 and December 1, 1989(7)
10.6     Agreements of Waiver and Amendment dated as of September 30, 1990, relating
         to the Note Agreements(8)
10.7     Implementation and Waiver Agreement dated October 18, 1991(7)
10.8     Interest Rate Conversion Agreement dated June 20, 1989 and between the
         Company and The Bank of California, N.A.(6)
10.9     ISDA Master Agreement dated June 23, 1994 between the Company and National
         Westminster Bank USA(1)
10.10    The Company's Employee Stock Option Plan, as amended and restated on
         March 4, 1996(9)
10.11    Nonemployee-Director's Equity Compensation Plan(10)
10.12    Amended and Restated Limited Partnership Agreement of New Century
         Seattle Partners, L.P. dated July 14, 1994(3)

</TABLE>
                                      36

<PAGE>

<TABLE>
<CAPTION>

<S>      <C>

10.13    Premises Use and Occupancy Agreement between The City of Seattle and
         SSI Sports, Inc. dated March 2, 1994(1)
21       Subsidiaries of the Company (9)
23       Consent of Ernst & Young LLP
24       Power of Attorney for each of Gail A. Ackerley, Richard D. Cooley, M. Ian
         G. Gilchrist and Michel C. Thielen dated March 12, 1997
27       Financial Data Schedule
__________
(1)      Incorporated by reference to Exhibits 3.1, 3.2, 10.1, 10.8 and 10.22,
         respectively, to the Company's 1994 Annual Report on Form 10-K
(2)      incorporated by reference to Exhibits 3.1, 3.2, and 10, respectively, the
         Company's Quarterly Report on Form 10-Q for the quarter ended
         September 30, 1996
(3)      Incorporated by reference to Exhibit 10 to the Company's Quarterly Report
         on Form 10-Q for the quarter ended September 30, 1994
(4)      Incorporated by reference to Exhibits 3.3 and 10.12, respectively, to the
         Company's 1988 Annual Report on Form 10-K
(5)      Incorporated by reference to Exhibits 4.1, 4.2 and 10.21 of the Company's
         Registration Agreement on Form S-1, File No. 33-70936
(6)      Incorporated by reference to Exhibits 10.13 and 10.16, respectively, to the
         Company's 1989 Annual Report on Form 10-K
(7)      Incorporated by reference to Exhibits 10.9, 10.10 and 10.16, respectively,
         to the Company's 1991 Annual Report on Form 10-K
(8)      Incorporated by reference to Exhibit 10.20 to the Company's 1990 Annual
         Report on Form 10-K
(9)      Incorporated by reference to Exhibits 10.10 and 27.1, respectively, to the
         Company's 1995 Annual Report on Form 10-K
(10)     Incorporated by reference to Exhibit 99.1 to the Company's Registration
         Statement on Form S-8, filed on May 14, 1996.
</TABLE>

(b)      Reports on Form 8-K.
         No reports on Form 8-K were filed during the fourth quarter ending
         December 31, 1996.

(c)      Exhibits required by Item 601 of Regulation S-K are being filed
         herewith. See Item 14(a)(3) above.

(d)      Financial statements required by Regulation S-X are being filed
         herewith. See Item 14(a)(1) and (2) above.


                                      37

<PAGE>

                                      SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 27th day of
March, 1997.

                                       THE ACKERLEY GROUP, INC.


                                       By: /s/ BARRY A. ACKERLEY
                                       -----------------------------
                                       Barry A. Ackerley, Chairman of the Board
                                       and Chief Executive Officer

    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
Company and in the capacities and on the dates indicated, on the 27th day of
March, 1997.

A Majority of the Board of Directors:            Principal Executive Officer:

/s/ BARRY A. ACKERLEY                       /s/ BARRY A. ACKERLEY
----------------------------                --------------------------------
Barry A. Ackerley, Chairman                 Barry A. Ackerley, Chairman
of the Board                                of the Board and Chief Executive
Officer


/s/ GAIL A. ACKERLEY*                       Principal Financial Officer:
----------------------------
Gail A. Ackerley, Director

                                            /s/ DENIS M. CURLEY
                                            --------------------------------
/s/ RICHARD P. COOLEY*                      Denis M. Curley, Executive Vice
----------------------------                 President and Chief Financial
Richard P. Cooley, Director                  Officer, Treasurer and Secretary

/s/ M. IAN G. GILCHRIST*                    Principal Accounting Officer:
----------------------------
M. Ian G. Gilchrist, Director

                                            /s/ KEITH W. RITZMANN
                                            --------------------------------
/s/ MICHEL C. THIELEN*                      Keith W. Ritzmann
----------------------------                Vice President and Controller
Michel C. Thielen, Director

*By:/s/ DENIS M. CURLEY
----------------------------
Attorney-in-Fact


                                      38

<PAGE>

                  REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


The Board of Directors
The Ackerley Group, Inc.

We have audited the accompanying consolidated balance sheets of The Ackerley
Group, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' deficiency, and cash flows for each
of the three years in the period ended December 31, 1996.  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 generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of The Ackerley Group, Inc. at December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.



                                 /s/ Ernst & Young LLP
                              ----------------------------------------

Seattle, Washington
February 28, 1997


                                     F-1

<PAGE>

                               THE ACKERLEY GROUP, INC.
                             CONSOLIDATED BALANCE SHEETS
                                    -----------
                                       ASSETS
<TABLE>
<CAPTION>
<S>                                                                                  <C>                   <C>
                                                                                               December 31,
                                                                                        1996                  1995
                                                                                       ------                ------
                                                                                              (In thousands)
Current assets:
    Cash and cash equivalents                                                        $    2,910            $    6,421
    Accounts receivable, net                                                             43,754                43,590
    Current portion of broadcast rights                                                   5,656                 5,779
    Prepaid and other current assets                                                     16,845                 9,423
                                                                                     -----------           -----------
         Total current assets                                                            69,165                65,213

Property and equipment, net                                                              88,136                81,368
Intangibles                                                                              41,856                31,412
Other assets                                                                             25,755                11,889
                                                                                     -----------           -----------
         Total assets                                                                $  224,912            $  189,882
                                                                                     -----------           -----------
                                                                                     -----------           -----------

                        LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
    Accounts payable                                                                 $    5,019            $    4,284
    Accrued interest                                                                      3,959                 3,628
    Other accrued liabilities                                                            16,160                12,958
    Deferred revenue                                                                     20,050                18,269
    Current portion of broadcasting obligations                                           7,032                 6,145
    Current portion of long-term debt                                                     5,791                 4,819
                                                                                     -----------           -----------
         Total current liabilities                                                       58,011                50,103

Long-term debt                                                                          229,350               215,328
Litigation accrual                                                                       13,248                14,200
Other long-term liabilities                                                               8,142                 9,344
                                                                                     -----------           -----------
         Total liabilities                                                              308,751               288,975

Stockholders' deficiency:
    Common stock, par value $.01 per share-authorized 50,000,000 shares;
    issued 21,186,724 and 20,777,012  shares at December 31, 1996 and 1995
    respectively; and outstanding 19,811,778  and 19,402,066 shares
    at December 31, 1996 and 1995 respectively                                              212                   208

    Class B common stock, par value $.01 per share-authorized 11,406,510
    shares;issued and outstanding 11,353,810 and 11,731,522 shares at
    December 31, 1996 and 1995 respectively                                                 114                   117

    Capital in excess of par value                                                        3,195                 3,093
    Deficit                                                                             (77,271)              (92,422)
    Less common stock in treasury, at cost                                              (10,089)              (10,089)
                                                                                     -----------           -----------
         Total stockholders' deficiency                                                 (83,839)              (99,093)
                                                                                     -----------           -----------
         Total liabilities and stockholders' deficiency                              $  224,912            $  189,882
                                                                                     -----------           -----------
                                                                                     -----------           -----------

</TABLE>
                             See accompanying notes

                                     F-2
<PAGE>

                               THE ACKERLEY GROUP, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
<S>                                           <C>            <C>              <C>
                                                      Year Ended December 31,
                                              -----------------------------------------
                                              1996           1995             1994
                                              ----           ----             ----
                                                         (In thousands, except
                                                           per share amounts)
Revenue                                       $ 279,662      $ 235,830        $ 211,728
Less Agency commissions and discounts             2,364         28,423           25,626
                                             -----------    -----------      -----------
Net Revenue                                     247,298        207,397          186,102

Expenses and other income:
  Operating expenses                            186,846        156,399          143,469
  Amortization                                    6,404          5,734            3,794
  Depreciation                                   10,592          7,509            7,089
  Interest expense                               24,461         25,010           25,909
  Other (income) expense                            108            (56)            (657)
  Litigation expense                                ---         14,200              ---
  Disposition of assets                             ---            ---           (2,506)
                                             -----------    -----------      -----------
Total expenses and other income                 228,411        208,796          177,098

Income (loss) before income taxes
  and extraordinary items                        18,877         (1,399)           9,004
Income taxes                                      2,758          1,515               73
                                             -----------    -----------      -----------
Income (loss) before extraordinary items         16,129         (2,914)           8,931
Extraordinary items: loss on debt
  extinguishment in 1996 and 1994                  (355)           ---           (2,099)
                                             -----------    -----------      -----------
Net income (loss)                             $  15,774      $  (2,914)       $   6,832
                                             -----------    -----------      -----------
                                             -----------    -----------      -----------
Income (loss) per common share,
  before extraordinary items                  $     .51      $    (.09)       $     .28
Extraordinary items                                (.01)           ---             (.06)
                                             -----------    -----------      -----------
Net income (loss) per common share            $     .50      $    (.09)       $     .22
                                             -----------    -----------      -----------
                                             -----------    -----------      -----------
Weighted average number of shares                31,760         31,545           31,483

</TABLE>

                             See accompanying notes

                                     F-3

<PAGE>

                               THE ACKERLEY GROUP, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY

<TABLE>
<CAPTION>
<S>                                <C>      <C>        <C>              <C>             <C>
                                                                                         Common
                                              Class B     Capital in                     stock in
                                    Common     common    excess of par                   treasury
                                     stock      stock       value          Deficit       (at cost)
                                   -------------------------------------------------------------------
Balance, January 1, 1994           $   204   $   118     $ 2,789          $  (95,876)    $ (10,089)
Exercise of stock options and
stock conversions                        1       ---          62                 ---           ---

Net income                             ---       ---         ---              (6,832)          ---
                                   --------   -------   ---------        -------------  -----------
Balance, December 31, 1994             205       118       2,851             (89,044)      (10,089)

Exercise of stock options and
stock conversions                        3        (1)        242                 ---           ---

Cash dividend, $0.015 per share        ---       ---         ---                (464)          ---

Net income                             ---       ---         ---              (2,914)          ---
                                   --------   -------   ---------        -------------  -----------
Balance, December 31, 1995             208       117       3,093             (92,422)      (10,089)

Exercise of stock options and
stock conversions                        4        (3)        102                 ---           ---

Cash dividend, $0.02 per share         ---       ---         ---                (623)          ---

Net income                             ---       ---         ---              15,744           ---
                                   --------   -------   ---------        -------------  -----------
Balance, December 31, 1996         $   212   $   114     $ 3,195          $  (77,271)    $ (10,089)
                                   --------   -------   ---------        -------------  -----------
                                   --------   -------   ---------        -------------  -----------

</TABLE>

                                      See accompanying notes

                                     F-4


<PAGE>
<TABLE>
<CAPTION>
<S>                                                        <C>            <C>            <C>
                                                                  Year ended December 31,
                                                          -------------------------------------------
                                                             1996          1995            1994
                                                            ------        -----           ------
                                                                      (In thousands)
Cash flows from operating activities:
  Cash received from customers                             $ 238,209      $ 215,321      $ 178,524
  Cash paid to suppliers and employees                      (193,518)      (154,564)      (144,073)
  Interest paid, net of amount capitalized                   (21,524)       (24,032)       (22,784)
                                                          ------------   ------------   ------------
  Net cash provided by operating activities                   23,167         36,725         11,667

Cash flows from investing activities:
  Proceeds from the sale of properties                         1,474            478         13,306
  Payments from acquisitions                                 (20,445)           ---        (17,397)
  Capital expenditures                                       (13,124)       (15,098)        (8,794)
  Other, net                                                  (7,524)          (457)        (6,162)
                                                          ------------   ------------   ------------
    Net cash used in investing activities                    (39,619)       (15,077)       (19,047)

Cash flows from financing activities:
  Borrowings from Credit Agreements                           38,000         64,379         30,126
  Payments under Credit Agreements                           (21,907)       (79,695)       (27,180)
  Dividends paid                                                (623)          (464)           ---
  Other, net                                                  (2,529)        (1,735)           (10)
                                                          ------------   ------------   ------------
    Net cash provided (used in) financing activities          12,941        (17,515)         2,936
                                                          ------------   ------------   ------------

Net increase (decrease) in cash and cash equivalents          (3,511)         4,133         (4,444)
Cash and cash equivalents at beginning of period               6,421          2,288          6,732
                                                          ------------   ------------   ------------
    Cash and cash equivalents at end of period             $   2,910      $   6,421      $   2,288
                                                          ------------   ------------   ------------
                                                          ------------   ------------   ------------
Reconciliation of net income to net cash provided by
 operating  activities:
  Net income (loss) applicable to common shares            $  15,774      $  (2,914)     $   6,832
  Adjustment to reconcile net income to net cash
   provided by operating activities:
    Litigation expense                                           ---         14,200            ---
    Disposition of assets                                        ---            ---         (2,506)
    Loss on debt extinguishment                                  355            ---          2,099
    Depreciation and amortization                             16,996         13,243         10,883
    Gain on sale of property and equipment                      (423)           (50)          (209)
    NBA expansion proceeds                                    (3,132)         5,165            ---
  Changes in assets and liabilities, net                      (6,403)         7,081         (5,432)
                                                          ------------   ------------   ------------
  Net cash provided by operating activities                $  23,167      $  36,725      $  11,667
                                                          ------------   ------------   ------------
                                                          ------------   ------------   ------------
Supplemental disclosure of noncash transactions:
  Broadcast rights acquired and broadcast obligations
   assumed                                                     9,165      $  10,337      $   6,020
  Assets acquired through barter transactions                  1,342          1,065            479
  Capitalized leases                                             ---          7,982            ---

</TABLE>

                                  See accompanying notes

                                     F-5

<PAGE>

                               THE ACKERLEY GROUP, INC.
                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of significant accounting policies

    (a)  Organization - The Ackerley Group, Inc. (formerly know as Ackerley
Communications, Inc.) and its subsidiaries (the "Company") is a diversified
communications company that engages in three principal business:  (i)
out-of-home media, including outdoor and airport advertising; (ii) television
and radio broadcasting; and (iii) other businesses consisting principally of
professional basketball through ownership of the Seattle SuperSonics, a
franchise of the National Basketball Association, and professional indoor
soccer through ownership of the Seattle Sea Dogs, a franchise of the
Continental Indoor Soccer League.  Outdoor advertising operations are
conducted principally in the Seattle, Portland, Boston, Miami, Ft.
Lauderdale, and West Palm Beach markets, whereas airport advertising
operations are conducted in airports throughout the United States.  The
markets served by the Company's television stations and their affiliations
are as follows:  Syracuse, New York (ABC affiliate); Colorado Springs,
Colorado (CBS affiliate); Santa Rosa, California (independent), Bakersfield,
California (NBC affiliate); Salinas/Monterey, California (FOX affiliate and
CBS affiliate through a local management agreement); and Bellingham,
Washington/Vancouver, British Columbia (independent).  Radio broadcasting
consists of one AM and two FM stations serving the Seattle/Tacoma area.

    (b)  Principles of consolidation - The accompanying financial statements
consolidate the accounts of The Ackerley Group, Inc. and its subsidiaries,
substantially all of which are wholly owned.  Minority interest is not
material. All significant intercompany transactions have been eliminated in
consolidation.

    (c)  Revenue recognition - Display advertising revenue is recognized
ratably on a monthly basis over the period in which advertisement displays
are posted on the advertising structures or in the display units.  Broadcast
revenue is recognized in the period in which the advertisements are aired.
Payments from clients, which are received in excess of one month's
advertising, are recorded as deferred revenue.  Ticket payments are recorded
as deferred revenue when received and recognized as revenue ratably as home
basketball and soccer games are played.

    (d)  Barter transactions - The Company engages in nonmonetary
transactions in which it provides advertising in exchange for goods or
services.  The barter transactions are recorded at the estimated fair value
of the asset or service received in accordance with Financial Standards Board
Statement No. 29, "Accounting for Nonmonetary Transactions."  Revenue is
recognized when the advertising is provided and assets or expenses are
recorded when assets are received or services used.  Advertising provided for
which goods or services have not yet been received is recorded in prepaid and
other current assets. Goods and services received for which advertising has
not yet been provided are recorded in other accrued liabilities.

                                     F-6


<PAGE>

    (e)  Property and equipment - Property and equipment are carried on the
basis of cost.  Maintenance, repairs, and renewals, which neither materially
add to the value of the property nor appreciably prolong its life, are
charged to expense as incurred.  When operating property and equipment are
retired or sold, any funds received are credited to an asset pool with no
gain or loss recognized, unless all assets in the pool are fully depreciated.
 Depreciation of property and equipment, including the cost of assets
recorded under capital lease agreements, is provided on the straight-line and
accelerated methods over the estimated useful lives of  the assets or lease
terms.

    (f)  Intangible assets - Intangible assets are carried on the basis of
cost and are amortized principally on the straight-line method over estimated
useful lives, ranging from 1 to 40 years.  Franchises are recorded at cost
and represent the acquisition cost of the rights to operate display units in
airports.  Goodwill represents the cost of acquired businesses in excess of
amounts assigned to certain tangible and intangible assets at the dates of
acquisition.

    (g)  Broadcast rights and obligations - Television films and syndication
rights acquired under license agreements (broadcast rights) and the related
obligations incurred are recorded as assets and liabilities at the time the
rights are available for broadcasting based upon the gross amount of the
contract.  The capitalized costs are amortized on an accelerated basis over
the contract period or the estimated number of showings, whichever results in
the greater aggregate monthly amortization.  Broadcast rights are carried at
the lower of unamortized cost or net realizable value.  The estimated cost of
broadcast rights to be amortized during the next year has been classified as
a current asset.

    (h)  Deferred compensation - Certain player and other personnel contracts
include deferred compensation provisions.  The present value of such deferred
compensation is recorded as an obligation and charged to operating expenses
ratably over the contract period.

    (i)  Stock based compensation - The Company grants stock options for a
fixed number of shares to employees with an exercise price equal to the fair
value of the shares at the date of grant.  The Company has elected to account
for stock option grants in accordance with APB Opinion No. 25, "Accounting
for Stock Issued to Employees" and related Interpretations, and recognizes no
compensation expense for the stock option grants.  In management's opinion,
the alternative fair value accounting method provided for under FASB No. 123,
"Accounting for Stock-Based Compensation," does not necessarily provide a
reliable single measure of the fair value of its employee stock options.  The
effect of valuing the stock option grants using FASB No. 123's method results
in net income and earnings per share amounts that are not materially
different from the reported amounts.

    (j)  Stock split - In October, 1996, the Company declared a two-for-one
stock split.  All share, per share, and exercise price information has been
restated to reflect the increase in stock shares and decrease in exercise
price caused by the split.

                                     F-7

<PAGE>

    (k)  Income per common share -  Income per common share is calculated by
dividing net income by the weighted average number of shares of common stock,
Class B common stock, and if dilutive, common stock equivalents outstanding
during the period.

    (l)  Cash equivalents - The Company considers investments in highly
liquid debt instruments with a maturity of three months or less when
purchased to be cash equivalents.

    (m)  Concentration of credit risk and financial instruments - The Company
sells advertising to local and national companies throughout the United
States. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral.  The Company maintains an allowance
for doubtful accounts at a level which management believes is sufficient to
cover potential credit losses.  The Company invests its excess cash in
short-term investments with major banks.  The Company has not experienced any
losses on these investments.  The carrying value of financial instruments,
which include cash, receivables, payables, and long-term debt, approximates
market value at December 31, 1996.

    The Company uses interest rate swap and cap agreements to modify the
interest rate characteristics of its long-term debt and attempts to
effectively maintain a portion of the debt with floating interest rates.
These agreements generally involve the exchange of fixed or floating rate
payment obligations without an exchange of the underlying principal amount.
The differential to be paid or received is accrued as interest rates change
and is recognized as an adjustment to interest expense related to the debt.
The related amount payable to or receivable from counterparties is included
in other current liabilities or assets.  The fair values of the swap and cap
agreements are not recognized in the financial statements.

    (n)  Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes.  Actual results could differ
from those estimates.

    (o)  Reclassifications  -  Certain prior years' amounts have been
reclassified to conform to the 1996 presentation.

2.  Investment in radio partnership

    The Company entered into an agreement with Century Management, Inc.,
which resulted in the  formation of New Century Seattle Partners, L.P. (the
"Partnership") for the purpose of owning and operating the assets of this
radio stations in the Seattle market.  Upon the venture's approval by the
Federal Communications Commission ("FCC") on July 14, 1994, the Company
contributed the assets of two stations, with a book value of $5.5 million, to
the Partnership. Also in July 1994, the Partnership purchased the assets of a
third station for approximately $17.7 million financed by bank borrowings.

                                     F-8

<PAGE>

    Century Management, Inc. is the general partner of the Partnership and
KJR Radio, Inc., a wholly owned subsidiary of the Company, is a limited
partner in the Partnership.

    The following table summarizes on an unaudited, pro forma basis the
consolidated results of operations of the Company for 1994 giving pro forma
effect to the investment in New Century Seattle Partners, L.P. as if the
investment had been made at the beginning of the years presented.  These pro
forma consolidated statements do not necessarily reflect the results of
operations which would have occurred had such investment taken place on the
date indicated.  The result of the partnership's operations after the actual
date of investment are included in the Company's financial statements.
Minority interests are not material.  (In thousands except per share
amounts):

                                                   1994
                                                  ------
    Net revenue                                  $ 188,945
    Operating expenses                             182,762
    Income before extraordinary items                8,282
    Net income applicable to common shares           6,183
    Net income per common share                        .20

3. Allowance for Doubtful Accounts

   The allowance for doubtful accounts is summarized as follows (in thousands):

                                                 1996       1995        1994
                                                ------     ------      ------
Balance at beginning of year                    $ 1,163    $ 1,160    $   941
Additions charged to operating expense            1,386        979      1,375
Write-offs of receivables, net of recoveries     (1,123)      (976)    (1,156)
                                               ---------- ---------- ----------
Balance at end of year                          $ 1,426    $ 1,163    $ 1,160
                                               ---------- ---------- ----------
                                               ---------- ---------- ----------


4.  Current Assets and Current Liabilities

    At December 31, 1996 and 1995, prepaid and other current assets consist
of the following (in thousands):


                                     1996                1995
                                   -------              ------
Prepaid assets                    $ 13,336             $ 7,421
Other current assets                 3,509               2,002
                                 ----------           ---------
                                  $ 16,845             $ 9,423
                                 ----------           ---------
                                 ----------           ---------


                                     F-9

<PAGE>
    At December 31, 1996 and 1995, other accrued liabilities consist of the
following (in thousands):


                                    1996               1995
                                   ------             ------
Accrued wages                    $   3,969           $  1,861
Other accrued liabilities           12,191             11,097
                                -----------         ----------
                                  $ 16,160           $ 12,958
                                -----------         ----------
                                -----------         ----------


5.  Property and equipment

    At December 31, 1996 and 1995, property and equipment consisted of the
following (in thousands):
                                                                Estimated
                                        1996        1995        useful life
                                      --------    --------      ------------
    Land                              $  6,976    $  6,906
    Advertising structures              82,325      76,904       9-15  years
    Broadcast equipment                 52,712      49,635         10  years
    Building and improvements           33,264      29,959      20-40  years
    Office furniture and equipment      22,738      19,170         10  years
    Transportation and other equipment   9,238       9,964       5-15  years
    Equipment under capital leases       7,982       7,982         10  years
                                      --------    --------
                                       215,235     200,520
    Less accumulated depreciation      127,099     119,152
                                      --------    --------
                                      $ 88,136    $ 81,368
                                      --------    --------
                                      --------    --------

6.  Intangibles

    At December 31, 1996 and 1995, intangibles consisted of the following (in
thousands):

                                                                    Estimated
                                              1996       1995       useful life
                                            --------   --------     -----------
    Goodwill                                $ 48,923   $ 32,660     3-40 years
    Favorable leases and contracts            15,294     15,294     1-10 years
    Broadcasting licenses and agreements       7,083      7,083     1-10 years
    Other                                      4,250      4,302     1-30 years
                                            -------    --------
                                              75,550     59,339
    Less accumulated amortization             33,694     27,927
                                            -------    --------
                                            $ 41,856   $ 31,412
                                            -------    --------
                                            -------    --------


                                     F-10

<PAGE>

    Cost represents the net assets' appraised value or management's best
estimate of the fair value at the dates of acquisition.

    During 1996, the majority of the additions to Intangible Assets came from
two acquisitions:  $4,482,000 from the Santa Rosa, California television
station, and $11,274,000 from billboards and three land parcels in the Boston
area.  The Company does not consider the acquisitions' operating results to
have a material impact on the Company's consolidated results.

7.  Debt

    Long-term debt at December 31, 1996 and 1995 reflected the following
(in thousands):

<TABLE>
<CAPTION>
    <S>                                               <C>              <C>
                                                          1996             1995
                                                      -------------    ------------
    Credit Agreement                                  $    55,000      $   35,000
    Senior notes                                          120,000         120,000
    Subordinated notes payable                             35,000          35,000
    Partnership debt                                       13,903          16,879
    Capital lease obligation                                7,268           7,982
    Deferred employment compensation, net of
      imputed interest discount of $1,395 in 1996
      and $955 in 1995                                      3,378           4,137
    Other                                                     592           1,149
                                                      -------------    ------------
                                                          235,141         220,147
    Less amounts classified as current                      5,791           4,819
                                                      -------------    ------------
                                                      $   229,350      $  215,328
                                                      -------------    ------------
                                                      -------------    ------------
</TABLE>

    Aggregate annual payments of long-term debt during the next five years
are as follows (in thousands):

                   Credit Agreement             Deferred
                   And Subordinated           Compensation
                        Notes                   And Other
                   ----------------         ----------------
     1997          $     5,125              $     740
     1998               15,610                    520
     1999               29,406                    963
     2000               29,149                    271
     2001               19,414                    594

                                     F-11

<PAGE>

    Future minimum payments under the capitalized lease obligation are as
follows (in thousands):

                                                  Capitalized
                                                     Lease
                                                -----------------
    1997                                          $ 1,237
    1998                                            1,237
    1999                                            1,237
    2000                                            1,237
    2001                                            1,237
    Later years                                     2,937
                                                -----------------
                                                    9,122
    Less amount representing interest               1,854
                                                -----------------
    Present value of lease payments                 7,268
    Less amount classified as current                 750
                                                -----------------
      Long-term capitalized lease obligation      $ 6,518
                                                -----------------
                                                -----------------

    On September 30, 1996, the Company entered into an Amended and Restated
Credit Agreement (the "Credit Agreement") with the senior bank lenders
increasing the aggregate principal amount under the lending facility from
$65.0 million to $77.5 million.  Losses of $355,000 related to the amendment
of Credit Agreement are reflected as an extraordinary item in the 1996
statement of operations.  Losses of $2,099,000 related to refinancing the
Company's senior bank debt in 1994 are reflected as an extraordinary item in
1994.

    At December 31, 1996, the Credit Agreement provided for borrowings up to
$77.5 million from five banks which includes the availability of up to $7.5
million of a letter of credit facility.  Usage of the letter of credit
facility reduces total available borrowings.  At December 31, 1996, $55.0
million of borrowings were outstanding, and $1.5 million of the letter of
credit facility was utilized.  Interest on borrowings is payable quarterly
based on either the prime rate or LIBOR, at the discretion of the Company,
plus a margin determined by the Company's total leverage ratio, as defined in
the Credit Agreement.  At December 31, 1996, interest on borrowings was
payable at LIBOR (5.6875% at December 31, 1996) plus 2.00%.  The fee on the
letter of credit facility is payable quarterly at  a rate determined by the
Company's total leverage ratio.  At December 31, 1996, the fee on the letter
of credit facility was payable at 2.00%.  Based on the balance outstanding,
principal payments are due quarterly from March 31, 1998, through March 31,
2002. The Credit Agreement has certain restrictive covenants which require,
among other things, that the Company maintain certain debt coverage ratios.
In addition, the Company is restricted as to borrowings, the amount of
dividend payments on common stock, stock repurchases, and sales of assets.

    The Company has $120 million borrowed at December 31, 1996 under senior
secured notes, with an effective interest rate of 10.75%.  Interest payments
are due semiannually in April and October.  All principal is due in a single
payment of $120 million on October 1, 2003.  The senior notes include certain
restrictive covenants similar to the Credit Agreement mentioned above.

    All outstanding stock of the Company's subsidiaries is pledged as
collateral for the Credit Agreement and senior notes.  In addition, the

                                     F-12

<PAGE>

Company and its subsidiaries are subject to restrictions on the transfer of
assets by the Company's senior debt covenants.

    The Company has $35 million borrowed at December 31, 1996 from several
insurance companies under various subordinated notes payable agreements, with
effective interest rates ranging from 10.48% to 11.2%.  Interest payments are
due quarterly.  Principal payments of $2.5 million, $12.5 million, $10
million, and $10 million are due in 1997 through 2000, respectively.  The
subordinated notes payable agreements include certain restrictive covenants
similar to the Credit Agreement mentioned above.

    Partnership debt is related to the Company's interest in the New Century
Seattle Partners, L.P., and includes the following:

       A senior term loan of $7,300,000 bearing interest at the election of the
       Partnership of either prime plus 1.25% or the Eurodollar rate plus 2.5%.
       Principal and interest is payable quarterly through September 30, 2000.
       The loan requires additional payments from excess cash flow, and
       includes certain penalties if repaid prior to July 15, 1997.  A senior
       term loan of $1,000,000 due December 31, 2000 bearing interest at the
       election of the Partnership of either prime plus 3.75% or the Eurodollar
       rate plus 5.0%.  Substantially all of the Partnership's assets are
       pledged as collateral for these senior term loans.

       Subordinated notes payable of $5,602,847 bearing interest at 18.0% per
       annum due July 7, 2001.  The notes can be repaid without penalty after
       July 15, 1998.

       Miscellaneous contracts payable of $333,274.

    At December 31, 1996, the Company had outstanding an interest rate
contract with a financial institution which involves the exchange of fixed
for floating rate of LIBOR (5.625% at December 27, 1996) on a notional
principal amount of $30 million.  The Company's risk in this transaction is
the cost of replacing, at current market rates, the contract in the event of
default by the counterparty.  At December 31, 1996, the fair value of the
contract, as quoted by the counterparty, was $110,000.  Management believes
the risk of incurring a loss as a result of non-performance by the
counterparty is remote as the contract is with a major financial institution.

                                     F-13

<PAGE>

8.  Income taxes

     At December 31, 1996, the Company has net operating loss carryforwards
of approximately $59.5 million that expire in the years 2002 through 2007 and
investment tax credit carryforwards of approximately $1.3 million that expire
in the years 1997 through 2000.

    Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
At December 31, 1996 and 1995 significant components of the Company's
deferred tax liabilities and assets are as follows (in thousands):



                                                 1996            1995
                                                ------          ------
Deferred tax liabilities:
  Tax over book depreciation                   $   8,701       $   8,265
  Prepaid play compensation                        4,457               0
Total deferred tax liabilities                    13,158           8,265

Deferred tax assets:
  Net operating loss carryforwards                22,752          25,793
  Book over tax amortization                       5,210           1,990
  Tax credit carryforwards                           951           2,116
  Deferred compensation agreements                 1,293           1,582
  Litigation accrual                               5,067           5,432
  Deferred NBA expansion revenue                   1,958           3,166
  Other                                            3,129           2,657
                                               ----------      ----------
Total deferred tax assets                         40,360          42,736
Valuation allowance for deferred tax assets      (27,202)        (34,471)
                                               ----------      ----------
Net deferred tax assets                           13,158           8,265
                                               ----------      ----------
Net deferred taxes                             $       0       $       0
                                               ----------      ----------
                                               ----------      ----------

    Significant components of the provision for income taxes attributable to
continuing operations are as follows (in thousands):

                                         1996      1995     1994
                                         ----      ----     ----
    Current:
      Federal                          $ 1,561    $  422   $  68
      State                              1,197     1,093       5
                                       -------    ------   -----
    Provision for income taxes         $ 2,758    $1,515   $  73
                                       -------    ------   -----
                                       -------    ------   -----

    At December 31, 1996, 1995, and 1994 the reconciliation of income taxes
attributable to continuing operations computed at the U.S. federal statutory
tax rate to income tax expense is as follows (in thousands):

                                    F-14

<PAGE>

                                         1996       1995        1994
                                         ----       ----        ----
Tax at U.S. statutory rate (34%)       $  6,422   $   (476)   $  2,348
State income taxes and other              1,732      1,569         283
Net operating loss carryforwards         (7,004)       ---      (2,626)
Alternative minimum tax                   1,608        422          68
                                       ---------  ---------   ---------
Provision for income taxes             $  2,758   $  1,515    $     73
                                       ---------  ---------   ---------
                                       ---------  ---------   ---------

    The Company made income tax payments of  $2,157,000 in 1996, $538,000 in
1995, and $1,302,000 in 1994.

9.  Employee benefit plan

    The Company has a voluntary defined contribution 401(k) savings and
retirement plan for the benefit of its nonunion employees, who may contribute
from 2% to 15% of their compensation.  This amount, plus a matching amount up
to 4% provided by the Company, is contributed to the plan ($1,058,000 in
1996, $831,000 in 1995, and $700,000 in 1994).  The Company may also make an
additional voluntary contribution to the plan.

10. Stockholders' deficiency

    On September 19, 1996, the Board of Directors declared an increase of all
classes of its common stock which the Company is authorized to issue from
56,972,230 shares to 61,406,510 shares.  In conjunction with this increase,
the Board also declared a two-for-one stock split effective October 15 for
stockholders of record on October 4.  The stock split resulted in the
issuance of 15,582,794 additional shares.

    The Class B common stock has the same rights as common stock, except that
the Class B common stock has ten times the voting rights of common stock and
is restricted as to its transfer.  The Class B common stock may be converted
into common stock at any time at the option of the stockholder.  Giving
effect to the stock split in 1996, the amount of authorized shares of Class B
on December 31, 1995 was 11,784,222 shares.

    Between January and June 1981, the Company agreed to sell shares of its
common stock and Class B common stock to key employees and officers at fair
market value at the time the agreements were executed.  The stock is issued
upon payment to the Company of the agreed purchase price.  At December 31,
1995 and 1996, rights to purchase 52,500 shares of common stock and Class B
common stock were outstanding at $2.00 per share (an aggregate of $105,000).
In 1995, rights to purchase 82,500 shares of common and 82,500 shares of
Class B common were exercised at an average price of $0.9287 per share.  No
rights were exercised in 1996.

    The Company's Employee Stock Option Plan (the "Plan") was approved by the
Board of Directors and the stockholders of the Company in 1983.  In 1994, the

                                     F-15

<PAGE>

Plan was amended to extend the term of the plan and to increase the amount of
common stock reserved for issuance to 1,000,000 shares.  In connection with
the Class B common stock dividend in June 1987, the Company amended the Plan
to provide for the distribution of one share of Class B common stock for each
share of common stock subject to outstanding options under the Plan on such
date, which distribution occurs at the time an optionee exercises an option.

    At December 31, 1996, options to purchase 658,000 shares of common stock
were outstanding under the Plan at prices ranging from $0.688 to $7.625 (an
aggregate of $1,947,725).  Options to purchase 690,000 of common stock were
outstanding at December 31, 1995.  Options to purchase 20,000 shares of
common stock were exercisable at December 31, 1995.  No options were
exercisable at December 31, 1996.  Options to purchase 32,000 shares of
common stock were exercised in 1996 at an average price of $3.22 per share.
Options to purchase 20,000 shares of common stock and 20,000 shares of Class
B common stock were exercised in 1995 at a price of $2.25 per share.

11. Commitments and contingencies

    The Company becomes involved from time to time in various claims and
lawsuits incidental to the ordinary course of its operations, including such
matters as contract and lease disputes and complaints alleging employment
discrimination.  In addition, the Company participates in various
governmental and administrative proceedings relating to, among other things,
condemnation of outdoor advertising structures without payment of just
compensation, disputes regarding airport franchises and matters affecting the
operation of broadcasting facilities.  Other than as indicated above, the
Company believes that the outcome of any such pending claims or proceedings,
individually or in the aggregate, will not have a material adverse effect
upon its business or financial condition.

    The Company incurred expenses of $457,000 in 1996, $290,000 in 1995, and
$288,000 in 1994, for legal services provided by a law firm, one of whose
partners is an officer of the Company.  The Company has incurred
transportation costs of $2,041,000 and made advance payments of $38,000 at
December 31, 1996, to a company controlled by the Company's major stockholder.

    The Company has employment contracts extending beyond December 31, 1996.
Most of these contracts require that payments continue to be made if the

                                     F-16
<PAGE>

individual should be unable to  perform because of death or disability.
Future minimum obligations under these contracts are as follows (in
thousands):

         1997                     $    29,121
         1998                          32,015
         1999                          23,418
         2000                          22,726
         2001                          22,487
         Later years                   44,350
                                  -------------
                                  $   174,117
                                  -------------
                                  -------------

    The Company is required to make the following minimum operating lease
payments for equipment and facilities under non-cancelable lease agreements,
guaranteed display advertising franchises, and broadcasting obligations which
expire in more than one year as follows (in thousands):

<TABLE>
<CAPTION>
<S>                   <C>                       <C>              <C>
                      Equipment/Facilities      Franchises       Broadcast Obligations
                      ---------------------     -----------      ----------------------
1997                        $   4,675            $ 11,937             $ 5,363
1998                            4,297               7,325               2,384
1999                            3,819               5,087               1,105
2000                            3,133               4,252                 285
2001                            2,876               2,624                 133
Later years                    13,864                 704                   0
                            ----------           ---------            ---------
                            $  32,664            $ 31,929             $ 9,270
                            ----------           ---------            ---------
                            ----------           ---------            ---------

</TABLE>

    Rent expense for operating leases aggregated $4,513,000 in 1996,
$3,167,000 in 1995, and $2,609,000 in 1994. Franchise fee expense aggregated
$16,116,000 in 1996, $17,236,000 in 1995, and $17,551,000 in 1994.
Broadcasting film and programming expense aggregated $8,205,000 in 1996,
$6,679,000 in 1995, and $7,507,000 in 1994.

    At December 31, 1996, in conjunction with a time brokerage agreement with
a FCC licensee, the Company has guaranteed a bank loan obligation of the
licensee which had an aggregate principal amount of $4,825,000 maturing in
April 1999.  The Company began making payment under this guarantee in January
1997.  No revenue is being recognized as part of this guarantee agreement.


12. Litigation accrual

    The Company and two of its executive officers were defendants in a
wrongful termination suit brought by former employees.  On February 29, 1996,
a jury issued a verdict awarding the plaintiffs compensatory and punitive
damages of approximately $13.0 million.  The Company recorded an accrual of
$14.2 million related to the verdict which also included an estimate for

                                     F-17

<PAGE>

additional legal costs.  The verdict is currently under appeal.  The appeal
will likely defer settlement of the liability beyond 1997, and therefore, it
is classified as non-current.

13. Supplement Cash Flow Information

The following table summarizes the change in operating assets and liabilities
(in thousands):

<TABLE>
<CAPTION>
<S>                                                  <C>          <C>         <C>
                                                       1996         1995         1994
                                                       ----         ----         ----
Accounts receivable                                  $   (164)    $ (1,037)   $  (6,691)
Other current assets                                   (7,422)         965          315
Accounts payable and accruals                           3,937          818       (2,821)
Accrued interest                                          331       (1,171)         820
Deferred revenue                                        1,781        4,574        2,191
Other, net                                             (4,866)       2,932          754
                                                     -----------  ----------  ------------
 Changes in operating assets and liabilities, net    $ (6,403)    $  7,081    $  (5,432)
                                                     -----------  ----------  ------------
                                                     -----------  ----------  ------------
</TABLE>

14. Industry segment information

    The Company is engaged in three business segments:  Out-of-home media,
Broadcasting, and Other.  Selected financial information for these segments
for the years ended December 31, 1996, 1995 and 1994 is presented as follows
(in thousands):

<TABLE>
<CAPTION>
<S>                                                   <C>            <C>                <C>               <C>
                                                      Out-of-home    Broad-
                                                        media        casting            Other             Consolidated
                                                      -----------    -------------      -----------       -------------
1996
----
Net revenue                                           $ 99,833       $ 118,171          $  29,294         $  247,298
                                                      -----------    -------------      -----------       -------------
                                                      -----------    -------------      -----------       -------------
Operating cash flow before expenses listed below:     $ 35,909       $  48,880          $ (24,446)            60,344
  Depreciation and amortization                         (5,615)        (10,273)            (1,107)           (16,996)
                                                      -----------    -------------      -----------       -------------
Income (loss) before expenses listed below:           $ 30,294       $  38,607          $ (25,553)            43,348
                                                      -----------    -------------      -----------
                                                      -----------    -------------      -----------
Interest expenses                                                                                             24,461
                                                                                                          -------------
Income before taxes and extraordinary item                                                                $   18,887
                                                                                                          -------------
                                                                                                          -------------
Identifiable assets                                   $ 67,918       $ 124,656          $  32,238         $  224,912
                                                      -----------    -------------      -----------       -------------
                                                      -----------    -------------      -----------       -------------
Capital expenditures, net of proceeds from
  retirements and disposals                           $  4,590       $   5,214          $   1,846         $   11,650
                                                      -----------    -------------      -----------       -------------
                                                      -----------    -------------      -----------       -------------



1995
----
Net revenue                                           $ 93,177       $  94,108          $  20,112         $  207,397
                                                      -----------    -------------      -----------       -------------
                                                      -----------    -------------      -----------       -------------
Operating cash flow before expenses listed below:     $ 31,978       $  39,507          $ (20,431)        $   51,054
  Depreciation and amortization                         (5,226)         (7,223)              (794)           (13,243)
                                                      -----------    -------------      -----------       -------------
Income (loss) before expenses listed below:           $ 26,752       $  32,284          $ (21,225)            37,811
                                                      -----------    -------------      -----------
                                                      -----------    -------------      -----------
Litigation expense                                                                                            14,200
Interest expenses                                                                                             25,010
                                                                                                          -------------
Income before taxes and extraordinary item                                                                $   (1,399)
                                                                                                          -------------
                                                                                                          -------------
Identifiable assets                                   $ 53,281       $ 112,430          $  24,171         $  189,882
                                                      -----------    -------------      -----------       -------------
                                                      -----------    -------------      -----------       -------------
Capital expenditures, net of proceeds from
  retirements and disposals                           $  2,631       $  19,098          $     873         $   22,602
                                                      -----------    -------------      -----------       -------------
                                                      -----------    -------------      -----------       -------------

</TABLE>

                                     F-18

<PAGE>

<TABLE>
<CAPTION>
<S>                                                      <C>            <C>                <C>               <C>
                                                         Out-of-home    Broad-
                                                           media        casting            Other             Consolidated
                                                         -----------    -------------      -----------       -------------
1994
----
Net revenue                                                $ 85,436       $ 83,463          $  17,203         $  186,102
                                                         -----------    -------------      -----------       -------------
                                                         -----------    -------------      -----------       -------------
Operating cash flow before gain expenses listed below:     $ 27,028       $ 33,561          $ (17,299)            43,290
  Disposition of assets                                         ---          2,506                ---              2,506
  Depreciation and amortization                              (5,297)        (4,954)              (632)           (10,883)
                                                         -----------    -------------      -----------       -------------
Income (loss) before expenses listed below:                $ 21,731       $  31,113         $ (17,931)            34,913
                                                         -----------    -------------      -----------
                                                         -----------    -------------      -----------
Interest expenses                                                                                                 25,909
                                                                                                             -------------
Income before taxes and extraordinary item                                                                    $    9,004
                                                                                                             -------------
                                                                                                             -------------
Identifiable assets                                        $ 54,291       $  86,952          $ 29,540         $  170,783
                                                         -----------    -------------      -----------       -------------
                                                         -----------    -------------      -----------       -------------
Capital expenditures, net of proceeds from
  retirements and disposals                                $  2,709       $   2,036          $  3,990         $    8,735
                                                         -----------    -------------      -----------       -------------
                                                         -----------    -------------      -----------       -------------

</TABLE>

    The Other segment consists of basketball operations (other than the
    basketball team's TV, radio, and related operations which are included in
    the "Broadcasting" segment), soccer operations, and the Corporate office in
    1996, 1995, and 1994.  Net revenue for the Other segment consists
    principally of revenues from the sports ticket sales.

15. Summary of quarterly financial data (unaudited)

    The Company's results of operations may vary from quarter to quarter due
in part to the timing of acquisitions and to seasonal variations in the
operations of the broadcasting segment.  In particular, the Company's net
revenue and operating cash flow historically have been affected positively
during the NBA basketball season (the first, second, and fourth quarters) and
by increased advertising activity in the second and fourth quarters.

    The following table sets forth a summary of the quarterly results of
operations for the years ended December 31, 1996 and 1995 (in thousands,
except per share information):

<TABLE>
<CAPTION>

<S>                                                   <C>            <C>           <C>            <C>
                                                       First         Second        Third          Fourth
1996                                                   Quarter       Quarter       Quarter        Quarter
----                                                  ----------     ----------    -----------    -----------
Net revenue                                           $62,927        $68,235       $45,842         $70,294
Operating cash flow before depreciation,
  amortization, and interest expense                   12,674         19,986        11,255          16,428
Income before extraordinary item                        3,123          9,147           379           3,480
Extraordinary loss                                        ---            ---           ---             355
Net income
Net income per share before extraordinary item          3,123          9,147           379           3,125
Net income per share                                      .10            .29           .01             .11
                                                          .10            .29           .01             .10

</TABLE>
                                     F-19

<PAGE>

<TABLE>
<CAPTION>
<S>                                                 <C>         <C>        <C>        <C>
1995
----
Net revenue                                         $56,791     $49,404    $40,548    $60,654
Operating cash flow before depreciation,
  amortization, litigation, and interest expense      9,480      13,947     10,199     17,428
Net income (loss)                                       434       3,689      1,079    *(8,116)
Net income (loss) per share                             .01         .12        .03       (.25)
___________
  * Reflects litigation accrual discussed in Note 12.

</TABLE>

                                     F-20