<PAGE>   1

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

                                    FORM 10-K


(Mark One)

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

                   For the fiscal year ended December 31 1999
                                       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)

<TABLE>
<S>                                                                       <C>
                           Delaware                                                    91-1043807
---------------------------------------------------------------           --------------------------------------
(State or other jurisdiction of incorporation or organization)            (I.R.S. Employer 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:

                Title of each class                                 Name of exchange on which registered

                    Common Stock                                       New York Stock Exchange, Inc.
-----------------------------------------------------        ---------------------------------------------------
</TABLE>


          Securities registered pursuant to Section 12(g) of the Act:

                                       N/A
                                (Title of class)

      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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
                                    Yes [X]  No [ ]

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

      The aggregate market value of the voting stock held by nonaffiliates of
the registrant as of March 1, 2000 was $197,781,190.

      The number of shares outstanding of each of the registrant's classes of
common stock as of March 1, 2000 was:

             Title of Class                       Number of Shares Outstanding
             --------------                       ----------------------------
      Common Stock, $.01 Par Value                     23,877,107 shares
  Class B Common Stock, $.01 Par Value                 11,088,700 shares

                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Proxy Statement relating to the Annual Meeting of
Shareholders to be held on May 1, 2000, are incorporated by reference under Part
III of this Report.

<PAGE>   2

                                     PART I

                                ITEM 1 - BUSINESS


GENERAL INFORMATION

        The Ackerley Group, Inc. was founded in 1975 as a Washington
corporation. In 1978, we were reincorporated under Delaware law. We are a
diversified media and entertainment company which engages in four principal
businesses: outdoor media, television broadcasting, radio broadcasting, and
sports & entertainment. Our outdoor media, television broadcasting, radio
broadcasting, and sports & entertainment segments accounted for approximately
36%, 29%, 10%, and 25%, respectively, of our net revenue for the year ended
December 31, 1999.

        -   Outdoor Media. We engage in outdoor advertising in Massachusetts and
            the Pacific Northwest and, until recently, in Florida. We have 6,519
            outdoor displays in the markets of Boston-Worcester, Massachusetts;
            Seattle-Tacoma, Washington; and Portland, Oregon. On January 5,
            2000, we sold our outdoor advertising operations in Florida for
            approximately $300.0 million. We believe that we have leading
            positions in the primary markets in which we operate, based upon the
            number of outdoor advertising displays.

        -   Television Broadcasting. We engage in television broadcasting in New
            York, California, Oregon, Washington, and Alaska. We own twelve
            television stations and program three additional television stations
            under time brokerage or local marketing agreements ("LMAs").
            Consistent with our strategy of local news leadership, nine of the
            thirteen network-affiliated television stations we own or program
            ranked first or second in their designated market areas ("DMAs"), in
            terms of local news ratings points delivered, according to the
            November 1999 Nielsen Station Index.

        -   Radio Broadcasting. We own and operate four radio stations in the
            Seattle-Tacoma, Washington market. We also provide sales and other
            services for KFNK(FM), another station in the Seattle-Tacoma market,
            pursuant to a joint sales agreement with the owner of that station.
            KUBE(FM) is tied for first place as the highest ranked FM station in
            the market in terms of share of its market service area ("MSA"),
            according to the Fall 1999 Arbitron Radio Market Report, and KJR(AM)
            is the only sports talk station in the market.

        -   Sports & Entertainment. Our sports & entertainment business includes
            ownership of the Seattle SuperSonics, the National Basketball
            Association's Pacific Division Champions for the three of the last
            five NBA seasons, and the Seattle Storm, a WNBA expansion team. Our
            Full House Sports & Entertainment division provides marketing and
            promotional support for the SuperSonics and the Storm and
            coordinates related cross-media activities within our company. We
            also consider investments in other Seattle-area sports and
            entertainment activities that would utilize our marketing and



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            promotional infrastructure, such as our recent arrangement with the
            management of the Tacoma Dome to act as the exclusive booking agent
            for events at that site.

BUSINESS STRATEGY

        Our primary strategy is to develop and acquire media assets that enable
us to offer advertisers a choice of media outlets for distributing their
marketing messages. To this end, we have assembled a diverse portfolio of media
assets. We believe our businesses are linked by a common goal of increasing the
number of advertising impressions made, regardless of whether the impression is
made via radio, television, or outdoor media display. Further, we seek to
exploit the operating synergies that we believe exist from our ownership of both
distribution (the television broadcasting, radio broadcasting, and outdoor media
businesses) and content (the sports & entertainment business) assets.

        We seek to grow by investing in the expansion of our existing operations
through additions and upgrades to our facilities and programming. We also look
to grow through opportunistic acquisitions in our existing business lines and by
exploring new synergistic business ventures and investments. We target markets
where we see an opportunity to improve market share, take advantage of regional
efficiencies, and develop our television stations into local news franchises.

        We believe the following elements of our strategy provide us with
competitive advantages:

        Maintain and Develop Leadership Positions in Markets Served. We seek to
be a leader in each of our markets. We believe that we own the most outdoor
advertising display faces in each of the primary geographic markets in which we
operate, based on the Traffic Audit Bureau's most recent Summary of Audited
Markets, issued in July 1999. Nine of the thirteen network-affiliated television
stations we own or program ranked first or second in their DMAs, in terms of
local news ratings points delivered, according to the November 1999 Nielsen
Station Index. Our four radio stations include KUBE(FM), which is tied for first
place as the highest ranked FM station in the Seattle-Tacoma market in terms of
share of its MSA, according to the Fall 1999 Arbitron Radio Market Report, and
KJR(AM), the only sports talk station in the market. We believe this market
leadership enables us to provide advertisers a cost-effective means of
delivering a quality message to their target audiences.

        Use Advanced Communications Technology to Create Regional Television
Groups. On April 6, 1999, we announced the launch of Digital CentralCasting(TM),
a digital broadcast system which allows us to operate multiple television
stations using the back-office functions of a single station. The system
contemplates that all of our television stations in a geographic area will be
linked through a fiber optic-based communications network, and that the stations
themselves will switch from analog to digital broadcasting equipment. This
permits the stations to share digital programming and other data along the
fiber-optic network, as well as allowing a single station within the geographic
area to perform back-office functions such as operations, programming and
advertising scheduling, and accounting for all of our television stations in the
area. To



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implement this strategy, we have organized thirteen of the television stations
we own or program into the following regional station groups: New York (WIXT,
WOKR, WIVT, WBGH-LP, WUTR, and WETM), Central California (KCOY, KION, and KGET),
and North Coast (KCBA, KMTR, KVIQ, and KFTY).

        While the advantages of owning multiple stations in a market are evident
in radio broadcasting, current television ownership rules prohibit the ownership
of more than one station in a designated market, with some exceptions. We
believe that the confluence of falling prices for fiber-optic-based
communications services and the advancement of digital transmission technology
has created an opportunity to realize the benefits of multi-station ownership by
linking several distinct television markets into one regional group. We believe
that we are among the first companies to introduce this technology in the
industry. We anticipate that Digital CentralCasting(TM) will enhance our
operational efficiency through economies of scale and the sharing of resources
and programming among our stations. However, we cannot guarantee that the
implementation of Digital CentralCasting(TM) will be achieved in an effective
manner and can give no assurance as to the timing or extent of the anticipated
benefits.

        Capitalize Upon Our Ownership of the Seattle SuperSonics and the Seattle
Storm. We believe that our ownership of the Seattle SuperSonics and the Seattle
Storm enhances the effectiveness of our media operations by (1) providing
regionally significant programming, (2) generating listener loyalty for our
radio stations, and (3) increasing the number of individuals exposed to the
advertising we provide. We seek to extract additional value from our ownership
of the Seattle SuperSonics and the Seattle Storm through the sale of team
sponsorships, which includes sales of advertising on signs in Seattle's Key
Arena and on radio and television broadcasts of SuperSonics and Storm games. We
also receive revenue from our interest in activities coordinated by the NBA and
WNBA, such as advertising on nationally televised games and other licensing
arrangements. As a result of our ownership of different media outlets, our
sports & entertainment business can offer advertisers greater choice than a
single outlet entity. We believe this helps our advertisers to more effectively
reach their target audiences.

        Utilize the Regional Marketing and Promotional Expertise of Our Sports &
Entertainment Segment. Historically, our sports & entertainment segment has
provided marketing and promotional support solely for the Seattle SuperSonics.
We have begun pursuing additional opportunities to provide marketing and
promotional services for other regional events and entertainment, capitalizing
upon the expertise developed from our experience with the Seattle SuperSonics.

        Experienced Management; Decentralized Management Structure. We believe
that our efficient management structure and the experience of our management
team enable us to respond effectively to competitive challenges across our
markets and our business segments. We have granted the management of our
operating units the authority and autonomy necessary to run each unit as a
business and to respond to changes in each market environment. Experienced local
managers enhance our ability to respond to local challenges rapidly and
effectively. The average experience of our ten division managers in their
respective industries is approximately 18 years. These local managers are
supported and guided by an experienced and cohesive executive team. Four of our
five executive



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officers have worked together for over eight years. Our five executive officers
collectively have an aggregate of 108 years of experience in the various
industries in which we are involved.

        Barry A. Ackerley, one of our founders and our current Chairman and
Chief Executive Officer, has been actively involved with this company since our
inception in 1975. Early in our history, Mr. Ackerley recognized the synergies
that could be achieved through ownership of outdoor advertising, television and
radio broadcasting, and sports and entertainment assets. With this vision, Mr.
Ackerley led our expansion from outdoor advertising into television and radio
broadcasting and sports and entertainment well before the current trend toward
consolidation among these industries


OUTDOOR  MEDIA

        Our outdoor media business sells advertising space on outdoor displays
and often participates in the design of advertisements and the construction of
outdoor structures that carry those displays. Until our airport advertising
operations were sold on June 30, 1998, we sold advertising space on displays
located in airport terminals.

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 relatively
low-cost means of reaching large audiences. Outdoor advertising is used by large
national advertisers as part of multi-media and other advertising campaigns, as
well as by local and regional advertisers seeking to reach local and regional
markets.

        We believe that outdoor advertising is a cost-effective form of
advertising, particularly when compared to television, radio, and print, on a
"cost-per-rating point" basis (meaning cost per 1,000 impressions). Displays
provide advertisers with advertising targeted at a specified percentage of the
general population and are generally placed in appropriate well-traveled areas
throughout a geographic area. This results in the advertisement's broad exposure
within a market.

        Outdoor advertising companies generally establish and publish "rate
cards" periodically, typically once a year, which list monthly rates for
bulletins, posters, and junior posters. 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 bulletins, posters, and junior posters usually
have terms of one year or less.

        While outdoor advertising has been a stable source of revenue for us
over the last five years, the number and diversity of our advertisers have
increased. For example, we have seen an increase in outdoor advertising revenues
from retail, real estate, entertainment, media, and financial services
companies. In addition, we have seen an increase in customers who have not
traditionally used outdoor advertising, such as fashion designers, internet
service providers and internet-based businesses, and telecommunications
companies.



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        Operations. We operate primarily in the markets of Seattle-Tacoma,
Washington; Portland, Oregon; and Boston-Worcester, Massachusetts. Until we sold
our Florida outdoor advertising business in January 2000, we also operated in
Miami, Fort Lauderdale, West Palm Beach and Fort Pierce, Florida. Based on the
Traffic Audit Bureau's Summary of Audited Markets issued in July 1999, we had
more outdoor advertising displays in each of these markets than any other
outdoor advertising company.

        We believe that our presence in large markets, the geographic diversity
of our operations, and our emphasis on local advertisers within each of our
markets lend stability to our revenue base, reduce our reliance on any
particular regional economy or advertiser, and mitigate the effects of
fluctuations in national advertising expenditures. However, because of zoning
and other regulatory limitations on the development of new outdoor advertising
displays, we anticipate that future growth in our outdoor advertising business
will result primarily through diversification of our customer base, increased
demand brought about by advertisers who have not historically used outdoor
media, such as internet-related companies, creative marketing, and increased
rates.

        Our outdoor advertising operations involve the sale of space on
advertising display faces. They also include, in many cases, the design of
advertisements and the construction of outdoor structures that carry those
displays. Our principal outdoor advertising display is the billboard, of which
there are three standard sizes:

        -   Bulletins: Bulletins are generally 14 feet high and 48 feet wide.
            Generally, bulletins are covered with a single sheet of vinyl,
            called "Superflex," on which an image has been printed by computer.
            The Superflex is 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. Bulletins are usually
            located near major highways for maximum impact. Space is usually
            sold to advertisers for periods of four to twelve months.

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

        -   Junior posters: Junior posters are generally 6 feet high by 12 feet
            wide. These displays are prepared and mounted in the same manner as
            posters. Most junior posters, because of their smaller size, 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.

        We have 824 bulletins, 5,263 posters, and 432 junior posters. The
following chart itemizes markets we served and their designated market area
(DMA) rank:



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<TABLE>
<CAPTION>
                                         DMA                               JUNIOR
                     MARKET(1)         RANK(2)     BULLETINS     POSTERS   POSTERS
                     ---------         -------     ---------     -------   -------
        <S>                            <C>         <C>           <C>       <C>
        NORTHWEST(3):
            Seattle-Tacoma...........     12           230        1,836       328
            Portland.................     23           217        1,142         0

        BOSTON:
            Boston-Worcester.........      6(4)        377        2,285       104
</TABLE>

----------

(1)  Does not include our operations in Florida, which were sold in January
     2000. See "-Sale of Florida Outdoor Advertising Operations."

(2)  Source: Television & Cable Factbook, 1999 Edition. DMA rank is a measure of
     market size in the United States based on population as reported by the
     Nielsen Rating Service.

(3)  In the first quarter of 2000, we purchased outdoor advertising assets in
     Eugene and Salem, Oregon (which for operating purposes we deem to be part
     of the Portland market) and Bellingham, Washington (which for operating
     purposes we deem to be part of the Seattle-Tacoma market). See
     "-Acquisitions."

(4)  Reflects DMA rank for the Boston market.

        We own substantially all of our outdoor displays. These displays
generally are located on leased property. The typical property lease provides
for a term ranging from 5 to 15 years and for a reduction in or termination of
rental payments if the display becomes obstructed during the lease term. In
certain circumstances leases may be terminated, such as where the property owner
develops or sells the property. If a lease is terminated, we generally seek to
relocate the display in order to maintain our inventory of advertising displays
in the particular geographic region. Display relocation is typically subject to
local zoning laws.

        Sales and Marketing. We sell advertising space directly to advertisers
and also sell to advertising agencies and specialized media buying services.
These agencies charge us a commission for their services. In recent years, we
have focused increasingly on selling directly to local and regional advertisers.

        Competition. We compete directly with other outdoor advertising
companies, and with other types of advertising media companies, including
television, radio, newspapers, magazines, transit advertising, yellow page
directories, direct mail, local cable systems, and satellite broadcasting
systems. Substantial competition exists among all advertising media on a
cost-per-rating-point basis and on the ability to effectively reach a particular
demographic section of the market. As a general matter, competition is confined
to defined geographic markets.

        Regulation. Outdoor advertising displays are subject to governmental
regulation at the federal, state, and local levels. These regulations, in some
cases, limit the height, size, location, and operation of outdoor displays and,
in some circumstances, regulate the content of the advertising copy displayed on
outdoor displays. Certain jurisdictions have recently proposed or enacted
regulations restricting or banning outdoor advertising of tobacco or liquor.
Likewise, regulations in certain jurisdictions prohibit the construction of new
outdoor displays or the replacement, relocation, enlargement, or upgrading of
existing structures.



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        Our outdoor advertising operations are significantly affected by local
zoning regulations. Some jurisdictions impose a limitation on the number of
outdoor advertising structures permitted within the city limits. In addition,
local zoning ordinances can restrict or prohibit outdoor advertising displays in
specific areas. Most of our outdoor advertising structures are located in
commercial and industrial zones subject to such regulations. Some states and
localities have also enacted restrictions on the content of outdoor advertising
signs.

        Federal and corresponding state outdoor advertising statutes require
compensation payment for removal of existing structures by governmental order in
some circumstances. Some jurisdictions have adopted ordinances which have sought
the removal of existing structures without compensation. Ordinances requiring
the removal of a billboard without compensation have been challenged in various
state and federal courts on both statutory and constitutional grounds, with
differing results.

        Federal law also imposes additional regulations upon our operations.
Under the Federal Highway Beautification Act of 1965, states are required to
adopt programs regulating outdoor advertising along federal highways. The Act
also provides for the payment of compensation to the owner of a lawfully erected
outdoor advertising structure that is removed by operation of the statute.

        Our policy, when a governmental entity seeks to remove one of our
outdoor advertising displays, is to actively resist unless adequate compensation
is paid. Although we have been successful in the past in challenging
circumstances in which our displays have been subject to removal, we cannot
predict whether we will be successful in the future and what effect, if any,
such regulations may have on our operations. In addition, we are unable to
predict what additional regulations may be imposed on outdoor advertising in the
future. Legislation regulating the content of billboard advertisements has been
introduced in the U.S. Congress from time to time in the past.

        Acquisitions. In 1999 and the first quarter of 2000, we acquired the
following outdoor advertising companies:

        -   On February 19, 1999, we purchased substantially all of the assets
            of an outdoor advertising company in the Boston-Worcester,
            Massachusetts market for approximately $11.0 million.

        -   On January 31, 2000, we purchased substantially all of the assets of
            an outdoor advertising company in Bellingham, Washington, for
            approximately $2.9 million.

        -   On January 13, 2000, we entered into agreements to purchase
            substantially all of the assets of an outdoor advertising company
            serving portions of Washington and Oregon for approximately $14.5
            million plus the assumption of certain liabilities. The Company paid
            $7.5 million of the purchase price on February 1, 2000 and the
            remaining balance on March 1, 2000.



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        -   On February 22, 2000, we entered into an agreement to purchase
            substantially all of the assets of an outdoor advertising company in
            New Jersey and New York City for approximately $19.8 million.

        Sale of Florida Outdoor Advertising Operations. On January 5, 2000, we
sold substantially all of the assets of our Miami-Fort Lauderdale and West Palm
Beach-Fort Pierce, Florida outdoor billboard operations to Eller Media Company,
a subsidiary of Clear Channel Communications, Inc., for approximately $300.0
million in cash, plus the assumption of certain liabilities. We expect to
recognize a gain on the transaction of approximately $273.3 million.

AIRPORT ADVERTISING

        On June 30, 1998, we sold substantially all of the assets of our airport
advertising operations to Sky Sites, Inc., a subsidiary of Havas, S.A., pursuant
to an agreement dated May 19, 1998. The sale price consisted of a base cash
price of $40.0 million, paid on the closing date of the transaction, and an
additional cash payment of approximately $2.8 million, of which $1.2 million was
paid in December 1998 and the remainder was paid in January 1999. Prior to the
sale, we engaged in airport advertising for 18 years.

TELEVISION BROADCASTING

        Our television broadcasting operations involve the sale of advertising
time to a broad range of national, regional, and local advertisers. We own
and/or program fifteen television stations in markets that offer a large and
affluent population base that is attractive to many advertisers.

        Industry Overview. Television stations in the United States are either
"very high frequency" or "VHF" stations, transmitting on channels 2 through 13,
or "ultra high frequency" or "UHF" stations, transmitting on channels 14 through
69. Broadcast licenses are issued by the Federal Communications Commission
("FCC"). Television station revenue comes primarily from local, regional and
national advertising. Revenue also comes, to a lesser extent, from network
compensation and from studio rental and commercial production activities.

        Advertising rates are based upon (1) a program's popularity among the
viewers whom an advertiser wishes to attract, (2) the number of advertisers
competing for the available time, (3) the size and demographic makeup of the
market, and (4) the availability of alternative advertising media in the market
area. The size of a television station's audience is measured and reported by
independent rating service surveys.

        Affiliation with a major network (e.g., ABC, NBC, CBS, or FOX) can have
a significant impact on a station's revenue, expenses and operations. A typical
affiliate receives a significant portion of its daily programming from a
network. Networks provide programming, and in some cases cash payments, to the
affiliate in exchange for a substantial majority of the advertising time during
network programs. The network sells this advertising time and retains the
revenues.



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        Operations. We currently own twelve television stations and program
three stations under time brokerage or local marketing agreements ("LMAs"). The
following table sets forth information about our portfolio of television
stations and the markets in which they operate.

<TABLE>
<CAPTION>
                                                                                                 NO. OF
                                                                                               COMMERCIAL
                                             DATE                            PROPOSED   DMA    TV STATIONS
                              CALL       ACQUIRED OR   NETWORK       NTSC    DIGITAL   MARKET   RANKED IN
MARKET                       LETTERS     AFFILIATED  AFFILIATION  CHANNEL(1) CHANNEL   RANK(2)   MARKET(3)
------                       -------     ----------- -----------  ---------- --------  ------- -----------
<S>                          <C>         <C>         <C>          <C>        <C>       <C>     <C>
NEW YORK
Syracuse, New York
  (owned)................      WIXT          May 1982     ABC         9         17        74     3 VHF
                                                                                                 2 UHF(4)

Rochester, New York
  (owned)................      WOKR        April 1999     ABC        13         59        77     3 VHF
                                                                                                 1 UHF
Binghamton, New York
  (owned)................      WIVT      July 1997(5)     ABC        34          3       154     1 VHF
                                                                                                 2 UHF
Binghamton, New York
  (LMA)..................   WBGH-LP   February 2000(6)    NBC         8        -(7)       154    1 VHF
                                                                                                 2 UHF
Utica, New York (owned)..      WUTR      June 1997(8)     ABC        20         30       168     1 VHF
                                                                                                 2 UHF
Elmira, New York (LMA) ..      WETM   February 2000(9)    NBC        18          2       171     3 UHF

CENTRAL COAST
Santa Barbara-Santa
  Maria-San Luis Obispo,
  California (owned).....      KCOY   January 1999(10)    CBS        12         19       116     3 VHF

Monterey-Salinas,
  California (owned).....      KION    April 1996(11)     CBS        46         32       119     1 VHF
                                                                                                 3 UHF(12)
Bakersfield, California
  (owned)................      KGET      October 1983     NBC        17         25       130     4 UHF(13)

NORTH COAST
Monterey-Salinas,
  California (LMA).......      KCBA     June 1986 (14)    FOX        35         13       119     1 VHF
                                                                                                 3 UHF(12)
Eugene, Oregon (owned)...      KMTR   December 1998(15)   NBC        16         17       121     2 VHF
                                                                                                 3 UHF
Eureka, California
  (owned)................      KVIQ     July 1998(16)     CBS         6         17       191     2 VHF
                                                                                                 2 UHF
Santa Rosa, California
  (owned)................      KFTY        April 1996    None        50         54     -(17)     6 VHF
                                                                                                 12 UHF
</TABLE>



                                       9
<PAGE>   11

<TABLE>
<CAPTION>
                                                                                                     NO. OF
                                                                                                  COMMERCIAL
                                            DATE                               PROPOSED   DMA     TV STATIONS
                                CALL    ACQUIRED OR     NETWORK       NTSC     DIGITAL   MARKET    RANKED IN
MARKET                         LETTERS  AFFILIATED    AFFILIATION  CHANNEL(1)  CHANNEL   RANK(2)    MARKET(3)
------                         -------  -----------   -----------  ----------  --------  -------  -----------
<S>                            <C>      <C>           <C>          <C>         <C>       <C>      <C>
PACIFIC NORTHWEST
Fairbanks, Alaska (owned)....    KTVF   August 1999      NBC/UPN      11          26       203      4 VHF
Vancouver, British
  Columbia and portions
  of Seattle, Washington
  (owned)....................    KVOS     June 1985       None        12          35      -(18)     -(18)
</TABLE>

--------------
(1)   Refers to the current analog channel used by such station.

(2)   Source: Television & Cable Fact Book, 1999 Edition

(3)   Source: Television & Cable Fact Book, 1999 Edition. The number of stations
      listed does not include digital television stations, public broadcasting
      stations, satellite stations, low-power stations, or translators that
      rebroadcast signals from distant stations, and also may not include
      smaller television stations whose rankings fall below reporting
      thresholds.

(4)   One additional UHF channel has been allocated in the Syracuse market;
      however, there has been no construction activity to date with respect to
      this channels.

(5)   We acquired WIVT in August 1998. Pending closing of the transaction, we
      programmed the station under an LMA with the previous owner. The date in
      this column reflects the date the LMA was entered into.

(6)   In February 2000, we acquired substantially all of the assets of WBGH-LP,
      other than the FCC license. Pending FCC approval of the transfer of the
      FCC license to us, we are programming the station under an LMA with the
      FCC licensee. The date in this column reflects the date the LMA was
      entered into.

(7)   As a low power station, WGBH-LP has not been assigned a proposed digital
      channel.

(8)   We acquired WUTR in January 2000. Pending closing of the transaction, we
      programmed the station under an LMA with the previous owner. The date in
      this column reflects the date the LMA was entered into.

(9)   We do not own WETM but program the station under an LMA with the current
      owner of the station. The date in this column reflects the date the LMA
      was entered into. See "--Acquisitions and Local Marketing Agreements."

(10)  In May 1999, we exchanged the assets of KKTV, our former television
      station in Colorado Springs, Colorado for the assets of KCOY and a cash
      payment. Pending closing of the transaction, we programmed KCOY under an
      LMA with the previous owner. The date in this column reflects the date
      that the LMA was entered into.

(11)  We acquired KION in January 2000. Pending closing of the transaction, we
      programmed the station under an LMA with the previous owner. The date in
      this column reflects the date the LMA was entered into.

(12)  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.

(13)  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.

(14)  In January 2000, we sold substantially all the assets of KCBA. We program
      15% of the station's weekly broadcast hours and provide sales and other
      services under an LMA with the purchaser. The date in this column reflects
      the date we originally acquired the station.

(15)  We acquired KMTR in March 1999. Pending closing of the transaction, we
      programmed the station under an LMA with the previous owner. The date in
      this column reflects the date the LMA was entered into. The acquisition
      includes the assets of two satellite stations, KMTX (Roseburg, Oregon) and
      KMTZ (Coos Bay, Oregon), and one low power station, KMOR-LP (Eugene,
      Oregon).

(16)  We acquired KVIQ in January 1999. Pending closing of the transaction, we
      programmed the station under an LMA with the previous owner. The date in
      this column reflects the date this LMA was entered into.

(17)  While KFTY is included in the San Francisco-Oakland-San Jose DMA market,
      which has a DMA rank of 5, the station principally serves the community of
      Santa Rosa, which is not separately ranked.



                                       10
<PAGE>   12

(18)  KVOS, located in Bellingham, Washington, serves primarily the Vancouver,
      British Columbia market (located in size, according to the Nielsen Rating
      Service as of February 2000, between the markets of Denver, Colorado and
      Pittsburgh, Pennsylvania, which have DMA rankings of 18 and 19,
      respectively, and a portion of the Seattle, Washington market (DMA rank
      12) and the Whatcom County, Washington market. The station's primary
      competition consists of five Canadian stations. DMA rankings are from the
      Television & Cable Factbook, 1999 Edition.

        Programming. Our network-affiliated television stations operate under
standard contracts. These standard contracts are automatically renewed for
successive terms unless we or the network exercises cancellation rights. The
networks offer our network-affiliated stations a variety of programs. Our
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.

        Our network-affiliated stations often pre-empt network programming with
alternative programming. By emphasizing non-network programming during certain
time periods, we increase the amount of commercial time available to us. Such
programming includes locally produced news, as well as syndicated and first-run
talk programs, children's programming and movies acquired from independent
sources.

        KVOS(TV), which does not have a network affiliation, is located in
Bellingham, Washington and serves primarily the market of Vancouver, British
Columbia, Canada. Canadian regulations require Canadian cable television
operators to delete the signals of U.S.-based stations broadcasting network
programs in regularly scheduled time slots and to replace them with the signals
of the Canadian-based network affiliates broadcasting at the same time. By
broadcasting non-network programming, however, KVOS(TV) is able to increase the
amount of time it is on the air in the Vancouver market.

        Acquisitions and Local Marketing Agreements. We seek to acquire
television broadcast stations generally in DMA markets ranking from 50 to 200.
We also enter into time brokerage or local marketing agreements ("LMAs") with
owners of television stations. Under those agreements, we provide programming
and sales services and make monthly payments to station owners in exchange for
the right to receive revenues from advertising and, in some cases, network
compensation. Over the past year, we have acquired, or entered into LMAs to
provide programming services to, the following stations:

        -   On January 5, 1999, we purchased substantially all of the assets of
            KVIQ(TV), the CBS affiliate licensed to Eureka, California, for
            approximately $5.5 million, pursuant to an agreement dated July 15,
            1998. Pending closing of the transaction, we provided programming
            and sales services under an LMA with the previous owner.

        -   On March 16, 1999, we purchased substantially all of the assets of
            KMTR(TV), the NBC affiliate licensed to Eugene, Oregon, together
            with two satellite stations licensed to Roseburg and Coos Bay,
            Oregon, and a low power station licensed to Eugene. The purchase
            price was approximately $26.0 million. From December 1, 1998 until
            closing of the transaction, we provided programming and sales
            services under an LMA with the previous owner.



                                       11
<PAGE>   13

        -   On April 12, 1999, we purchased substantially all of the assets of
            WOKR(TV), the ABC affiliate licensed to Rochester, New York, for
            approximately $128.2 million. In September 1998, we paid $12.5
            million of the purchase price into an escrow account, with the
            balance paid at closing.

        -   On May 1, 1999, we exchanged substantially all of the assets plus
            certain liabilities of KKTV(TV), the CBS affiliate licensed to
            Colorado Springs, Colorado, for substantially all of the assets plus
            certain liabilities of KCOY(TV), the CBS affiliate licensed to Santa
            Maria, California. In conjunction with the transaction, we received
            a cash payment of approximately $9.0 million. Pending closing of the
            transaction, we programmed KCOY(TV) and the former owner of KCOY(TV)
            programmed KKTV(TV) under LMAs.

        -   On August 2, 1999, we purchased substantially all of the assets of
            KTVF(TV), the NBC affiliate licensed to Fairbanks, Alaska, for
            approximately $7.2 million.

        In addition, we have acquired, or entered into LMAs with respect to, the
following stations in 2000:

        -   On January 12, 2000, we sold substantially all of the assets of
            KCBA(TV), the FOX affiliate licensed to Monterey, California, for
            approximately $11.0 million, and entered into an LMA with the
            purchaser to provide programming and sales services. Concurrent with
            this sale, we purchased substantially all of the assets of KION(TV),
            the CBS affiliate licensed to Salinas, California, for approximately
            $7.7 million, subject to certain reductions. From April 24, 1996
            until closing of the transaction, we provided programming and sales
            services under an LMA with the previous owner.

        -   On January 20, 2000, we purchased substantially all of the assets of
            WUTR(TV), the ABC affiliate licensed to Utica, New York, for
            approximately $7.9 million. From June 30, 1997 until closing of the
            transaction, we provided programming and sales services under an LMA
            with the previous owner.

        -   On February 1, 2000, we entered into an LMA with Smith Television of
            New York, Inc. ("STNY") to provide programming and sales services to
            WETM(TV), the NBC affiliate licensed to Elmira, New York. We also
            purchased a 20% non-voting equity interest in STNY for approximately
            $17.0 million. Beginning in August 2003, STNY may require us to
            exchange our interest in STNY, plus $11.0 million in cash, for all
            of the assets of WETM(TV). Under certain circumstances we may have
            an option to purchase all or a controlling interest in STNY.

        -   On February 1, 2000, we purchased substantially all of the assets,
            other than the FCC license, of WBGH-LP, a low-power NBC affiliate
            licensed to Binghamton, New York for approximately $9.0 million. We
            entered into an LMA with the FCC licensee of WBGH-LP pending FCC
            approval of the transaction. Upon closing of the transaction, the
            FCC license will be transferred to us for no additional
            consideration.



                                       12
<PAGE>   14

        Sales and Marketing. We receive revenues from our television
broadcasting operations from the sale of advertising time, usually 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 or on behalf of national and regional
advertisers.

        During 1999, local spot or schedule advertising, which is sold by our
personnel at each broadcast station, accounted for approximately 48% of our
television stations' total revenue. National spot or schedule advertising, which
is sold primarily through national sales representative firms on a
commission-only basis, accounted for approximately 46% of our television
stations' total revenue.

        In certain cases, we also receive revenue from our network affiliations.
The networks pay us an hourly rate that is tied to the number of network
programs that our television stations broadcast. Hourly rates are established in
our agreements with the networks and are subject to change by the networks. We
have the right, however, to terminate a network agreement if the network effects
a decrease in hourly rates. Overall, network compensation revenue was not a
significant portion of our television stations' total revenue for 1999.

        Competition. We compete directly with other television stations, and
indirectly with other types of advertising media companies, including radio,
magazines, newspapers, outdoor advertising, transit advertising, yellow page
directories, direct mail marketing, local cable systems, and satellite
broadcasting systems. Substantial competition exists among all advertising media
on a cost-per-rating-point basis and on the ability to effectively reach a
particular demographic section of the market. As a general matter, competition
is confined to defined geographic markets.

        Maintenance of our competitive positions in our broadcast markets
generally depends upon the management experience of each station's managers, the
station's authorized broadcasting power, the station's assigned frequency, the
station's network affiliation, the station's access to non-network programming,
the audience's identification with the station and its acceptance of the
station's programming, and the strength of the local competition.

        In addition, our television stations compete for both audience and
advertising 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. Historically, cable operators have not competed with local
broadcast stations for a share of the local news audience. If they do, however,
the increased competition for local news audiences could have an adverse effect
on our advertising revenue.

        We also face 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, our television stations compete with other forms of
home entertainment, such as home videotape and video disc players.



                                       13
<PAGE>   15

Moreover, the television industry is continually faced with technological change
and innovation, the possible rise in popularity of competing entertainment and
communications media, and changes in labor conditions and government
regulations.

        We believe that the advertising revenues generated by our television
stations are significantly influenced by rankings of their local news programs
in their respective markets. Nine of the thirteen network-affiliated television
stations we currently own or program rank first or second in their respective
geographic markets in local news ratings points delivered, according to the
November 1999 Nielsen Station Index.

RADIO BROADCASTING

        Our radio broadcasting operations involve the sale of air time to a
broad range of national, regional, and local advertisers. In addition, we earn
revenue from the sale of sponsorships to a variety of events, such as concerts.
We own and operate four radio stations and provide sales and other services to a
fifth radio station in the Seattle-Tacoma area.

        Industry Overview. Radio stations in the United States operate either on
the "amplitude modulation" ("AM") band, comprising 107 different frequencies
located between 540 and 1700 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 public's perception that stereo broadcasting, which until
recently was only available on FM radio stations, provides enhanced sound
quality.

        Our radio stations derive most of their revenue from local, regional,
and national advertising and, to a lesser extent, from network compensation. In
1999, approximately 68% of our radio broadcasting revenue was derived from local
advertising generated by the stations' local sales staffs. National sales, on
the other hand, are usually generated by national independent sales
representatives acting as agents for the stations. The representatives obtain
advertising from national advertising agencies and receive commissions based on
a percentage of gross advertising revenue generated. The principal costs
incurred in the operation of radio stations are salaries, programming, promotion
and advertising, sports broadcasting rights fees, rental of premises for
studios, costs of transmitting equipment, and music license royalty fees.

        Operations. We own four radio stations, which consist of KHHO(AM) in
Tacoma, Washington and KJR(AM), KJR-FM and KUBE(FM) in Seattle, Washington. We
also provide sales and other services to KFNK(FM) in Eatonville, Washington.

        The following table sets forth information about our portfolio of radio
stations.



                                       14

<PAGE>   16

<TABLE>
<CAPTION>
                                                                         NO. OF
                                                                       COMMERCIAL     RADIO STATION
                                                              MSA         RADIO         FORMAT AND
                                     CALL        DATE        MARKET     STATIONS          PRIMARY
          MARKET                   LETTERS     ACQUIRED      RANK(1)  IN MARKET(1)  DEMOGRAPHIC TARGET
          ------                   -------     --------      -------  ------------  ------------------
<S>                                <C>         <C>           <C>      <C>           <C>
Seattle-Tacoma, Washington         KJR(AM)     May 1984        14         11 AM         Sports Talk;
                                                  (2)                                   Men 25-54
                                                                                           (3)

                                    KJR-FM   October 1987                 19 FM        Classic Hits;
                                                 (2)                                    Adults 25-54

                                   KJR(AM)    July 1994                           Rhythmic Contemporary
                                                 (4)                                       Hits;
                                                                                      Persons 18-34

                                  KHHO(AM)     March 1998                              Sports Talk;
                                                                                        Men 24-54

                                  KFNK(FM)   September 1999                            Alternative;
                                                   (5)                                  Men 18-24
</TABLE>

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

(1)  Source: Fall 1999 Arbitron Radio Market Report. Metro Service Area ("MSA")
     market rank is based on population as reported upon by The Arbitron
     Company.

(2)  Reflects the dates on which we originally acquired the stations. We
     contributed the stations' assets to New Century Seattle Partners L.P., a
     Delaware limited partnership ("the Partnership") in 1994. We first acquired
     a limited partnership interest in the Partnership in 1994 and, in 1998, the
     Partnership became a wholly-owned subsidiary. Since then, the broadcast
     licenses have been transferred to one of our other subsidiaries, and the
     Partnership has been dissolved.

(3)  KJR (AM) serves as the Seattle SuperSonics' flagship radio station.

(4)  The date shown in the column reflects the date on which the Partnership
     acquired the station from Cook Inlet, Inc.

(5)  The date shown in the column reflects the date on which we entered into an
     agreement to provide sales and other services.

        Acquisitions and Dispositions. Over the past year, we have entered into
the following transactions:

        -   On July 6, 1999, we sold a radio broadcasting tower for
            approximately $2.8 million. In connection with the transaction, we
            recorded a loss from disposition of assets of $1.2 million in the
            second quarter of 1999.

        -   On September 13, 1999, we entered into a joint sales agreement with
            the owner of radio station KFNK(FM) in Eatonville, Washington. Under
            the agreement, we pay the owner a monthly fee for the right to sell
            advertising on the station. In connection with the transaction, we
            paid $4.0 million under a put and call agreement whereby we may
            elect, or be required by the owner, to purchase the station's assets
            any time after November 2002. The gross purchase price of the
            station's assets, which is primarily based on the station's ratings
            at the time of the sale, ranges from $4.5 million to $11.7 million.
            The gross purchase price would be reduced by our $4.0 million
            payment under the put and call agreement plus accrued interest.

        Sales and Marketing. Most of our radio broadcasting revenue comes from
the sale of air time to local advertisers. Each station's advertising rates
depend upon, among other things, (1) the station's ability to attract audiences
in its target demographic group, and (2) the number of



                                       15
<PAGE>   17

stations competing in the market area. The size of a radio station's audience is
measured by independent rating service surveys.

        Much like our television broadcasting stations, the radio stations sell
local spot or schedule advertising. During 1999, such advertising accounted for
approximately 68% of the radio stations' revenue. In contrast, approximately 26%
of the radio stations' 1999 revenue was received from national spot or schedule
advertising, which is sold primarily through national sales representative firms
on a commission-only basis. The remaining revenue consisted of tower rentals and
production fees.

        Competition. We compete directly with other radio stations and
indirectly with other types of advertising media companies, including
television, newspapers, magazines, outdoor advertising, transit advertising,
yellow page directories, direct mail, local cable systems, and satellite
broadcasting systems. Substantial competition exists among all advertising media
on a cost-per-rating-point basis and on the ability to effectively reach a
particular demographic section of the market. As a general matter, competition
is confined to defined geographic markets.

        A radio station's ability to maintain its competitive position in a
market is dependent upon a number of factors, including (1) the station's rank
within the market, (2) transmitter power, (3) assigned frequency, (4) audience
characteristics, (5) audience acceptance of the station's local programming, and
(6) the number and types of other stations in the market area.

        Radio stations frequently change their broadcasting formats and radio
personalities in order to seize a larger percentage of the market. Thus, our
radio stations' ratings are regularly affected by changing formats.

TELEVISION AND RADIO BROADCASTING REGULATION

        General. Our television and radio operations are heavily regulated under
the Communications Act of 1934 and other federal laws. The Communications Act,
for instance, limits the number of broadcast properties that we may acquire and
operate. It also restricts ownership of broadcasting properties by foreign
individuals and foreign companies.

        The Communications Act authorizes the FCC to supervise the
administration of federal communications laws, and to adopt additional rules
governing broadcasting. Thus, our television and radio broadcasting operations
are primarily regulated by the FCC. The FCC, for example, approves all
transfers, assignments and renewals of our broadcasting properties.

        KVOS(TV), which derives much of its revenue from the Vancouver, British
Columbia market, is additionally regulated and affected by Canadian law. Unlike
U.S. law, for instance, a Canadian firm cannot deduct expenses for advertising
on a U.S.-based television station which broadcasts into a Canadian market. In
order to compensate for this disparity, KVOS(TV) sells advertising time in
Canada at a discounted rate. In addition, Canadian law limits KVOS(TV)'s ability
to broadcast certain programming.

        Ownership. FCC rules limit the number and type of broadcasting
properties that we may own in the same geographic market. Thus, in a particular
geographic market, we cannot own the



                                       16
<PAGE>   18

following combinations: more than one television station (with certain
exceptions); a cable system and a television station; or a radio station and a
daily newspaper. In addition, there are limitations which vary according to the
size of the market, on the number of radio stations that we may own in a market.

        In addition, the Communications Act and FCC rules prohibit aliens from
owning of record or voting more than one-fifth of the capital stock of a
corporation holding a radio or television station license or more than
one-fourth of the capital stock of a corporation holding the stock of a
broadcast licensee. Our Bylaws provide that none of our shares of capital stock
may be issued or transferred to any person where such issuance or transfer will
result in a violation of the Communications Act or any regulations promulgated
thereunder, and that any purported transfer in violation of those restrictions
is void.

        Local Marketing Agreements. Prior to November 16, 1999, FCC rules
prohibited the common ownership of two television stations in a single market.
Under rules effective November 16, 1999, common ownership of two television
stations (commonly known as a duopoly) in one market became permissible in
certain limited circumstances. The new rules also permit a television station
owner to program up to 15% of the weekly broadcast hours of another station in
the same market pursuant to agreements known as time brokerage agreements or
local marketing agreements ("LMAs"), provided that the licensee of the other
station maintains ultimate control and responsibility for the programming and
operations of the station and compliance with applicable FCC rules and policies.
Currently there are no television duopolies in any of our markets.

        Programming and Advertising. The Communications Act requires
broadcasters to serve the public interest. Thus, our television and radio
stations are required to present some programming that is responsive to
community problems, needs, and interests. We must also broadcast informational
and educational programming for children, and limit the amount of commercials
aired during children's programming. We are also required to maintain records
demonstrating our broadcasting of public interest programming. FCC rules impose
restrictions on the broadcasting of political advertising, sponsorship
identifications, and the advertisement of contests and lotteries.

        Affirmative Action. FCC rules require us to develop and implement
programs designed to promote equal employment opportunities. We must submit
annual reports to the FCC documenting our compliance with those rules.

        Cable Television. In many parts of the country, cable television
operators rebroadcast television signals via cable. In connection with cable
rebroadcasts of those signals, each television station is granted, pursuant to
the Cable Television Consumer Protection and Competition Act of 1992, either
"must-carry rights" or "retransmission consent rights." Each television
broadcaster must choose either must-carry rights or retransmission consent
rights with regard to its local cable operators.

        If a broadcaster chooses must-carry rights, then the cable operator will
probably will be required to carry the local broadcaster's signal. Must-carry
rights are not absolute, however, and



                                       17
<PAGE>   19

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 the broadcast station which duplicates the programming of another
broadcast station with must-carry rights.

        If a broadcaster chooses retransmission consent rights, the broadcaster
is entitled to (1) prohibit a cable operator from carrying its signal, or (2)
consent to a cable operator's rebroadcast of the broadcaster's signal, either
without compensation or pursuant to a negotiated compensation arrangement.

        All of the television stations that we own or program have, in the
majority of cases, chosen retransmission consent rights, rather than must-carry
rights, within their respective markets.

        Digital Television. The Telecommunications Act requires the FCC to
oversee the transition from current analog television broadcasting to Digital
Television ("DTV") broadcasting. During the transition period, the FCC will
issue one digital broadcast license to each existing television licensee that
files a license application. Network affiliates in larger broadcast markets were
required to begin DTV broadcasts during 1999. Our stations are required to begin
construction of their digital transmission facilities by May 1, 2002. All of the
television stations that we own or program have received construction permits
from the FCC for their DTV facilities. The stations will then be allowed to
broadcast two signals using two channels, one digital and one analog, during the
transition period, which will extend until December 31, 2006. At the end of the
transition period, broadcasters will be required to choose whether they will
continue broadcasting on the digital or the analog channel, and to return the
other channel to the FCC.

        FCC Rule Changes. Communications laws and FCC rules are subject to
change. For example, the FCC recently adopted rules that reduce the required
distance between existing stations and allow the utilization of directional
antennas, terrain shielding, and other engineering techniques. Another recent
rule change resulted in the expansion of the AM radio band. Other changes may
result in the addition of more AM and FM stations, or increased broadcasting
power for existing AM and FM stations, thus increasing competition to our
broadcasting operations.

        Congress and the FCC are currently considering many new laws,
regulations, and policies that could affect our broadcasting operations. For
instance, Congress and/or the FCC currently are considering proposals to:

        -   impose spectrum use or other fees upon broadcasters;

        -   revise rules governing political broadcasting, which may require
            stations to provide free advertising time to political candidates;

        -   restrict or prohibit broadcast advertising of alcoholic beverages;

        -   change broadcast technical requirements; and

        -   expand the operating hours of daytime-only stations.



                                       18
<PAGE>   20

        We cannot predict the likelihood of Congress or the FCC adopting any of
these proposals. If any should be adopted, we cannot assess their impact on our
broadcasting operations. In addition, we cannot predict the other changes that
Congress or the FCC might consider in the future.

        Low Power FM. The FCC has adopted rules creating a new, low power FM
(LPFM) radio service, which may create new competition in the radio industry.
The new LPFM service is limited to non-commercial operation. The LPFM service
will consist of two classes of LPFM radio stations with maximum power levels of
10 watts and 100 watts. The 10 watt stations would reach an area with a radius
of between one and two miles, the 100 watt stations would reach an area with a
radius of approximately three and a half miles. These LPFM stations would
operate throughout the FM band. There can be no assurance that the development
and introduction LPFM service will not have an adverse effect on the radio
broadcast industry.

        Digital Audio Broadcasting. The radio broadcasting industry is subject
to competition from new media technologies that are being developed or
introduced, including the delivery of audio programming by digital audio
broadcasting ("DAB"). The FCC has issued a Notice of Proposed Rulemaking to
address alternative approaches to introducing DAB to the American public. DAB
may provide a medium for the delivery by satellite or terrestrial means of
multiple new audio programming formats to local and national audiences. This new
capability may provide an additional source of competition in our markets.
Historically, the radio broadcasting industry has grown in terms of total
revenues despite the introduction of new technologies for the delivery of
entertainment and information, such as television broadcasting, cable
television, audio tapes and compact disks. There can be no assurance, however,
that the development or introduction in the future of any new media technology
will not have an adverse effect on the radio broadcast industry. We are unable
to predict the effect such technologies will have on our broadcasting
operations, but the capital expenditures necessary to implement such
technologies could be substantial.

        Equal Employment Opportunity Rules. On January 20, 2000, the FCC adopted
new Equal Employment Opportunity ("EEO") rules in response to the D.C. Circuit
Court of Appeals decision in 1998 in Lutheran Church Missouri Synod v. FCC
(Lutheran Church), which held that certain aspects of the FCC's previous
broadcast EEO outreach requirements were unconstitutional. The new rules require
broadcast licensees to widely disseminate information about job openings to all
segments of the community to ensure that all qualified applicants, including
minorities and women, have sufficient opportunities to compete for jobs in the
broadcast industry. The new rules do not require broadcasters to hire any
particular applicant, nor do they place pressure on such decisions. As in the
past, broadcast stations with fewer than five full-time employees and cable
entities with fewer than six full-time employees will not be required to
demonstrate compliance with the EEO program requirements. However, all other
broadcasters must place an annual EEO report in their public file detailing
their outreach efforts and must file a Statement of Compliance every second,
fourth and sixth year of the license term certifying compliance with the EEO
rule. In addition, all television stations and radio stations with more than 10
full-time employees must submit their annual EEO reports to the FCC midway
through the license term and at renewal. At these times, the FCC will review the
station's outreach efforts. The FCC also reinstated the requirement that
broadcasters file annual



                                       19
<PAGE>   21

employment reports, which was suspended by the FCC following the Lutheran Church
decision and retains the requirement that cable entities file annual employment
reports. The FCC will use the information in the annual employment reports only
to monitor industry employment trends and prepare reports to Congress.

        Satellite Home Viewer Improvements Act. The Satellite Home Viewer
Improvement Act of 1999 ("SHVIA"), signed into law on November 29, 1999, permits
satellite companies to provide local broadcast TV signals to all subscribers who
reside in a particular DMA. This ability to provide local broadcast channels is
commonly referred to as "local into local" service. The SHVIA also permits
satellite companies to provide "distant" network broadcast stations to eligible
satellite subscribers. A distant network signal is a signal from a market other
than the local market. To be eligible to receive a distant network signal, a
television viewing household must be an unserved household unable to receive a
local network signal, as determined pursuant to criteria established by the FCC.
The SHVIA generally seeks to place satellite carriers on an equal footing with
local cable television operators when it comes to the availability of broadcast
programming, and thus gives consumers more and better choices in selecting a
multichannel video program distributor (MVPD), such as cable or satellite
service. Local-into-local service is not available in any of our television
markets, however, and distant network signals are generally available only to a
limited number of unserved television households which cannot receive our
broadcast television signal using a conventional rooftop antenna. There can be
no assurance that satellite delivered television programming will not have an
adverse effect on our broadcasting operations.

        Low Power Television Stations - Digital Television Maximization. The
Community Broadcasters Protection Act was signed into law on November 29, 1999.
This law gives many low power television ("LPTV") stations the opportunity to
achieve primary status. Presently, LPTV stations are secondary, meaning that
they are not protected from full power stations and are subject to being
displaced by applications to construct new or to modify existing full power
stations. LPTV stations that qualify will now be entitled to receive protection
from all other stations in their service area. This class of low power stations
will now be known as "Class A". There can be no assurance that the development
and introduction a new class of low power stations will not have an adverse
effect on our broadcasting operations. However, the legislation also gave full
power television stations an opportunity to maximize their digital facilities in
advance of the LPTV reclassification. Each full power station had an opportunity
to preserve its right to seek an authorization for digital facilities that
replicate its analog coverage area, and/or that maximize the digital facilities
for the digital television allotment in question, without regard to the
existence of low power stations. All of the full power stations that we own or
program have advised the FCC of their intent to maximize their facilities.

        Purchase and Sale Transactions. We are seeking FCC approval to acquire
the broadcasting licenses for one television station and will be required to
obtain FCC approval to acquire additional broadcasting licenses and
authorizations in the future. In connection with the application to acquire a
broadcasting license, the FCC considers factors generally similar to those
discussed under "Renewal of Broadcasting Licenses" below. In addition, the
filing by third parties of petitions to deny, informal objections or comments to
a proposed transaction can result in significant delays to, as well as denial
of, FCC action on a particular application.



                                       20
<PAGE>   22

        Renewal of Broadcasting Licenses. Our broadcasting operations' success
depends upon our ability to renew our broadcasting licenses, and the ability of
the station owners to renew the licenses for the stations we operate under LMAs.
Television and radio licenses (including renewals) currently are issued for
terms of eight years.

        In considering whether to renew a license, the FCC considers several
factors, including the licensee's compliance with the FCC's children's
television rules, the FCC's equal employment opportunity rules, and the FCC's
radio frequency rules. The FCC also considers the Communications Act's
limitations on license ownership by foreign individuals and foreign companies,
and rules limiting common ownership of broadcast, cable and newspaper
properties. The FCC also considers the licensee's general character, including
the character of persons holding interests in the licensee. In addition, the FCC
considers complaints from the public concerning the license holder, and
applications from third parties to acquire an existing license.

        The FCC usually renews a license holder's broadcasting license. Because
the FCC may not grant renewal, however, we have no assurance that any of our
broadcasting licenses will be renewed, especially if third parties challenge our
renewal applications or file competing applications to acquire our licenses.

        None of our primary broadcasting licenses, and broadcasting licenses
owned by the owners of television stations we program under LMAs, are subject to
renewal within the next two years. There are no pending challenges or competing
applications with respect to any of our broadcasting licenses.

SPORTS & ENTERTAINMENT

        Our sports & entertainment business consists of ownership of our
professional sports franchise, the Seattle SuperSonics, and our sports marketing
business, Full House Sports & Entertainment ("Full House"). We also have been
awarded operating rights to a WNBA expansion team, the Seattle Storm. We are
also considering other investments in Seattle-area sports and entertainment
activities.

THE SEATTLE SUPERSONICS

        The SuperSonics franchise is one of 29 members of the National
Basketball Association, or "NBA." NBA teams play a regular season schedule of 82
games from November through April, in addition to several preseason exhibition
games. Due to the NBA lockout, however, the 1998-99 NBA preseason and regular
season games scheduled through February 4, 1999, were cancelled. The season
resumed on February 5, 1999 and consisted of a shortened regular season in which
each team played 50 games (25 at home and 25 on the road) and playoffs in the
usual NBA format. 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 four of the last five years and played for the
NBA championship in 1996.

        Industry Overview. We are a member of the NBA by virtue of our ownership
of the SuperSonics franchise. Thus, we share in profits generated by the NBA as
a whole, and share joint and several liability for the NBA's debts and other
obligations. Revenues shared equally by



                                       21
<PAGE>   23

NBA members include profits from television broadcasting agreements,
merchandising, the award of new NBA franchises, and related activities.

        As a member of the NBA, we must abide by the NBA's Constitution and
Bylaws, NBA rules, and by the NBA Board of Governors' implementation of those
regulations. The Board of Governors consists of representatives appointed by
each NBA member. The Board of Governors, in turn, elects a Commissioner. The
Commissioner and the Board (1) arbitrate disputes between franchises, (2) assure
that the conduct of franchises, players, and officials is in accordance with the
NBA Constitution and Bylaws, (3) review and authorize player transactions
between franchises and (4) impose 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 NBA's
franchise owners.

        The Constitution and Bylaws of the NBA impose limitations on the
transfer and ownership of our Common Stock. In particular, so long as we have
more than 500 stockholders, NBA approval is required for, among other things,
any transfer of any "interest" in The Ackerley Group if (1) the interest
proposed to be transferred represents a direct or indirect interest of 5% or
more in The Ackerley Group, (2) the transfer would result in any person or
entity (or group of persons or entities acting in concert) that has not been
approved by the NBA directly or indirectly owning a 5% or greater interest in
The Ackerley Group, or (3) the effect of such proposed transfer is or may be to
change the ownership or effective control of The Ackerley Group. As used in
these restrictions, references to an "interest" in The Ackerley Group include
Common Stock and Class B Common Stock and, although the matter is not free from
doubt, we believe that the number of outstanding shares of Common Stock and
Class B Common Stock should be aggregated for purposes of determining whether a
5% or greater interest has been transferred or acquired. Other similar
restrictions would apply if we have less than 500 stockholders.

        Operations. The NBA granted Seattle an NBA franchise in 1966. The
SuperSonics, throughout their history, have played in the Seattle-Tacoma area.
In November 1995, the team began using the Key Arena, a 17,100-seat events
facility, under a 15-year lease with the City of Seattle.

        We acquired the SuperSonics in 1983. The SuperSonics franchise, as
permitted by the NBA's Constitution and Bylaws, is authorized to operate for an
indefinite term of years, so long as we maintain our NBA 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. In addition, the SuperSonics' operations are subject to a NBA
collective bargaining agreement, which is discussed under "Employees" below.

        Sales and Marketing. All sales and marketing activities for the
SuperSonics are managed by Full House. Our revenues from the SuperSonics come
from (1) our own activities, such as ticket sales, merchandising, concessions,
and multi-media advertising packages (called



                                       22
<PAGE>   24

sponsorship packages) that include local television and radio broadcast
advertising and display and sign advertising in Key Arena, and (2) our share of
NBA revenues, such as network broadcasting rights, merchandising, and the
granting of new NBA franchises to new cities. In addition, Full House manages
sales and operations of the luxury suites and concessions for all events at Key
Arena.

        A major source of revenue in the sports & entertainment segment is
ticket sales for home games. We receive substantially all of the revenue in this
segment from SuperSonics ticket sales. Revenue from ticket sales depends highly
on the SuperSonics win/loss record. Average paid attendance per game was 14,451
in the 1998-1999 season, down from 15,424 in the prior season due to the NBA
lockout.

        A majority of the SuperSonics games are broadcast on a Seattle-Tacoma
area television station, KONG, and a cable station, FOX. All of the SuperSonics'
games are broadcast exclusively in the Seattle-Tacoma area over radio stations
KJR(AM) and KHHO(AM), which we own. We also license radio stations owned by
other broadcasting companies to carry SuperSonics games.

        We share equally with the other NBA franchises in revenues generated by
the NBA as a whole. A large portion of these revenues consists of broadcast
licenses granted to networks. Such broadcast rights have increased significantly
in recent years and are expected to become a more significant portion of total
NBA revenue, primarily due to the growth of cable television. In the spring of
1993, the NBA entered into new contracts with NBC and TBS/TNT providing for the
television broadcast of certain league games through the 1997-98 season. These
contracts provide for minimum total payments to the NBA over the four-year
contract period of $1.1 billion. Recently, the NBA renewed its contracts with
NBC and TBS/TNT through the 2001-2002 season. These contracts provided for
minimum total payments to the NBA over the four-year contract period of $2.6
billion. However, as a result of the NBA lockout, the NBA may not receive the
full $2.6 billion over the life of these contracts.

THE SEATTLE STORM

        The Storm is one of four WNBA expansion teams to commence play during
the 2000 WNBA season. The WNBA consists of 16 women's professional basketball
teams, each of which is associated with an NBA team. During the 2000 season,
each WNBA team will play a 32-game regular season schedule (16 home and 16
away). Eight teams will qualify for the WNBA playoffs. The Storm will commence
their pre-season games on May 13, and will play their first regular season game
on May 31.

        Operations. Like the SuperSonics, the Storm will play at the Key Arena.
The Storm will maintain an active roster of 11 players. Unlike NBA players, WNBA
players contract directly with, and are paid by, the WNBA pursuant to a
collective bargaining agreement.

        Sales and Marketing. All sales and marketing activities for the Storm
are managed by Full House. Our revenues from the Storm will come from ticket
sales, merchandising, concessions, and sponsorship packages.



                                       23
<PAGE>   25

        Certain WNBA games are televised nationally on NBC, ESPN, and Lifetime
stations. In addition, each WNBA team is required to televise at least six of
its games locally. Revenues from the national broadcast contracts are retained
by the WNBA and applied to operational costs and player salaries. Accordingly,
we will not receive income from the WNBA's national broadcast contracts.

COMPETITION

        We compete directly with other professional and amateur sporting
franchises and events, both in the Seattle-Tacoma market area and nationally via
sports broadcasting. We also compete indirectly with other types of
entertainment, including television, radio, newspapers, live performances, and
other events. Because we own the only NBA and WNBA franchises located in the
Seattle-Tacoma metropolitan area, we experience no significant local competition
involving professional basketball. We compete with professional football and
baseball franchises located in the Seattle-Tacoma metropolitan area.

EMPLOYEES

        As of December 31, 1999, we employed 1,626 full-time persons. The
following table sets forth a breakdown of employment in each of our operating
segments and our corporate offices:

<TABLE>
<CAPTION>
               OPERATING SEGMENT/CORPORATE OFFICE           PERSONS EMPLOYED
               ----------------------------------           ----------------
               <S>                                         <C>
                        Outdoor Media(1)                           370

                     Television Broadcasting                      1,003

                       Radio Broadcasting                          78

                     Sports & Entertainment                        109

                        Corporate Offices                          66
</TABLE>

----------------
(1)  On January 5, 2000, we sold our Florida outdoor advertising operations,
     which had 116 full-time employees.

        Approximately 124 of our employees are represented by unions under 15
collective bargaining agreements. Collective bargaining agreements covering
approximately 8% of our employees are terminable during 2000. We believe that
these collective bargaining agreements will be renegotiated or automatically
extended and that any renegotiation will not materially adversely affect our
operations.

        Players in the NBA are covered by the terms of a collective bargaining
agreement, which was originally scheduled to expire on June 30, 2001. On March
23, 1998, the Board of Governors of the NBA voted to exercise their option to
reopen the NBA's collective bargaining agreement with the National Basketball
Players Association. As a result, the collective bargaining agreement expired on
June 30, 1998 and the players were locked out. Preseason and regular season
games scheduled through February 4, 1999 were cancelled. On January 7, 1999,



                                       24
<PAGE>   26

the NBA Board of Governors ratified a new six-year collective bargaining
agreement between the NBA and the National Basketball Players Association, and
the season resumed on February 5, 2000.

RESTRICTIONS ON OUR OPERATIONS

        In addition to restrictions on our operations imposed by governmental
regulations, franchise relationships and other restrictions discussed above, our
operations are subject to additional restrictions imposed by our current
financing arrangements.

        Our operations are subject to restrictions imposed by (1) a credit
agreement with various lending banks, dated January 22, 1999, as amended (the
"1999 Credit Agreement"), and (2) an indenture (the "Indenture"), dated December
14, 1998, respecting our 9% Senior Subordinated Notes due 2009 (the "9% Senior
Subordinated Notes"). Some of those provisions restrict our ability to:

        -   apply cash flow in excess of certain levels or proceeds from our
            sale of capital stock, debt securities or certain asset
            dispositions;

        -   incur additional indebtedness;

        -   pay dividends on, redeem or repurchase our capital stock, or make
            investments;

        -   issue or allow any person to own any preferred stock of restricted
            subsidiaries;

        -   enter into sale and leaseback transactions;

        -   incur or permit to exist certain liens;

        -   sell assets;

        -   in the case of our subsidiaries (other than unrestricted
            subsidiaries), guarantee indebtedness;

        -   in the case of our subsidiaries (other than unrestricted
            subsidiaries), create or permit to exist dividend or payment
            restrictions with respect to The Ackerley Group, Inc.;

        -   engage in transactions with affiliates;

        -   enter into new lines of business; and

        -   consolidate, merge, or transfer all or substantially all of our
            assets and the assets of our subsidiaries on a consolidated basis.



                                       25
<PAGE>   27

        In addition, we are required to maintain specified financial ratios,
including maximum leverage ratios, a minimum interest ratio, and a minimum fixed
charge coverage ratio. The 1999 Credit Agreement also provides that it is an
event of default thereunder if the Ackerley family (as defined) owns less than
51% of the outstanding voting stock of our company. Similarly, upon a Change of
Control (as defined in the Indenture), the 9% Senior Subordinated Note holders
may require us to repurchase their notes.

        The 1999 Credit Agreement also requires, subject to certain exceptions,
that we apply 50% of the net cash proceeds (as defined in the 1999 Credit
Agreement) received by us from the sale of our capital stock, 100% of the net
cash proceeds received by us from the sale of our debt securities, 100% of the
net cash proceeds received by us from certain asset dispositions, and, under
certain circumstances, up to 50% of our excess cash flow (as defined in the 1999
Credit Agreement) to repay borrowings under the 1999 Credit Agreement. It
further provides that the amount of borrowings available under the 1999 Credit
Agreement will be permanently reduced by the amount of such repayments.

        We have pledged substantially all of the stock and material assets of
our subsidiaries to secure our obligations under the 1999 Credit Agreement. In
addition, nearly all of our subsidiaries are have provided guarantees of
obligations under the 1999 Credit Agreement and the Indenture. In the event of a
default under the 1999 Credit Agreement, the bank lenders could demand immediate
payment of the principal of and interest on all such indebtedness, and could
force a sale of all or a portion of our subsidiaries to satisfy our obligations.
Likewise, because of cross-default provisions in our debt instruments, a default
under the 1999 Credit Agreement or the Indenture could result in acceleration of
indebtedness outstanding under other debt instruments.

        Additional information concerning the 1999 Credit Agreement and the
Indenture is set forth in Note 7 to the Consolidated Financial Statements.

FINANCIAL INFORMATION REGARDING BUSINESS SEGMENTS

        Financial information concerning each of our business segments is set
forth in Note 15 to the Consolidated Financial Statements.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS

        The following risk factors and other information included in this Annual
Report should be carefully considered. The risks and uncertainties described
below are not the only ones we face. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial also may impair our
business operations. If any of the following risks actually occur, our business,
financial condition, and operating results could be materially adversely
affected.

LEVERAGE; RESTRICTIONS UNDER DEBT INSTRUMENTS; COVENANT COMPLIANCE

        Financial Leverage. As of December 31, 1999, we had approximately $414.6
million of outstanding indebtedness. On January 5, 2000, we applied proceeds
from the sale of our Florida



                                       26
<PAGE>   28

outdoor advertising operations to fully repay outstanding borrowings under our
1999 Credit Agreement of $193.0 million.

        In addition, we intend to continue to acquire additional outdoor media
and television and radio broadcasting businesses, subject to the availability of
required financing. We may assume the indebtedness of businesses that we
acquire. We may also make acquisitions or capital expenditures that are financed
with the proceeds from borrowings. As a result of such acquisitions, our
outstanding indebtedness and interest expense will increase, perhaps
substantially. Likewise, further acquisitions will likely increase our
depreciation and amortization expenses, perhaps substantially.

        Our degree of leverage could have important consequences to investors,
including the following:

        -   our ability to obtain additional financing in the future for working
            capital, capital expenditures, acquisitions, general corporate
            purposes, or other purposes may be impaired;

        -   restrictive covenants in debt instruments, as well as the need to
            apply cash to make debt service payments, may limit payment of
            dividends on our outstanding Common Stock and Class B Common Stock:

        -   Operating Cash Flow (defined as net revenue less operating expenses
            before amortization, depreciation, interest, litigation, and stock
            compensation expenses and net gain on dispositions of assets)
            available for purposes other than payment of principal and interest
            on indebtedness may be reduced;

        -   we may be exposed to the risk of increased interest rates since a
            portion of our borrowings, including borrowings under the 1999
            Credit Agreement (as defined below), bear interest at floating
            rates;

        -   we may be at a competitive disadvantage compared to competitors that
            are less leveraged than we are;

        -   we may have limited ability to adjust to changing market conditions;

        -   we may have decreased ability to withstand competitive pressures;
            and

        -   we may have increased vulnerability to a downturn in general
            economic conditions or our business.

        Our ability to make scheduled payments on or to refinance our
indebtedness will depend on our financial and operating performance, which in
turn will be subject to economic conditions and to financial, business, and
other factors beyond our control. In order to fund our debt service and other
obligations, we may be forced to reduce or delay planned expansion and capital
expenditures, sell assets, obtain additional equity capital or debt financing
(if available), or restructure our debt. Accordingly, we cannot guarantee that
our operating results, Operating



                                       27
<PAGE>   29

Cash Flow, and capital resources will be sufficient for future payments of our
indebtedness, to make planned capital expenditures, to finance acquisitions, or
to pay our other obligations.

        Restrictions Imposed by Debt Instruments. We are subject to a number of
significant operating and financial restrictions and are required to maintain
specified financial ratios, which restrict our operations. See "-Restrictions on
Our Operations." Our ability to comply with such covenants and financial ratios
may be affected by events beyond our control.

        Covenant Compliance. In the past, we have from time to time obtained
amendments or waivers to certain provisions of our debt instruments, including
the 1999 Credit Agreement, in order to remain in compliance with the financial
covenants thereunder. There can be no assurance that we will not be required to
seek additional waivers or amendments under our debt instruments in the future.
Any failure to obtain a necessary amendment or waiver could result in a default
under the relevant debt instrument. A default by us under our senior debt
instruments could result in an acceleration of indebtedness under the senior
debt instruments and other loan documents. If the indebtedness under any of
these debt instruments were accelerated, there can be no assurance that we would
be able to repay such indebtedness.

REGULATION OF OUTDOOR ADVERTISING

        Outdoor advertising displays are subject to governmental regulation at
the federal, state, and local levels. These regulations, in some cases, limit
the height, size, location, and operation of outdoor displays and, in some
circumstances, regulate the content of the advertising copy displayed on outdoor
displays. Changes in laws and regulations affecting outdoor advertising at any
level of government may have a material adverse effect on our business,
financial condition, or results of operations. See "-Outdoor Media-Outdoor
Advertising-Regulation."

TELEVISION AND RADIO BROADCASTING

        Government Regulation of Broadcasting Industry. Pursuant to the
Communications Act, the domestic broadcasting industry is subject to extensive
federal regulation. In addition, our television station, KVOS, which is located
in Bellingham, Washington and broadcasts into Vancouver, British Columbia, is
regulated and affected by Canadian law. The restrictions and obligations imposed
by these laws and regulations, including their amendment, interpretation, or
enforcement, could have a material adverse effect on our business, financial
condition, or results of operations. See "-Television and Radio Broadcasting
Regulation."

        Renewal of Broadcasting Licenses. Our business will continue to be
dependent upon acquiring and maintaining broadcasting licenses issued by the
FCC. Such licenses are currently issued for a term of eight years. Historically,
we have been able to renew our broadcast licenses on a regular basis. However,
we cannot guarantee that pending or future applications to acquire or renew
broadcasting licenses will be approved, or will not include conditions or
qualifications adversely affecting our operations, any of which could have a
material adverse effect on us. Moreover, governmental regulations and policies
may change over time and we cannot guarantee that such changes would not have a
material adverse impact on our business, financial condition,



                                       28
<PAGE>   30

or results of operations. See "--Television and Radio Broadcasting
Regulation--Renewal of Broadcasting Licenses."

        Approval of Purchase and Sale Transactions. We are seeking FCC approval
to acquire the broadcasting license for one television station and will be
required to obtain FCC approval to acquire additional broadcasting licenses in
the future. We cannot guarantee that the FCC will approve our applications for
the broadcasting license we are seeking or in the future may seek to acquire.
There can be no assurance that the FCC will approve our disposition of
broadcasting stations we may seek to sell in the future. Failure to obtain FCC
approval to transfer broadcasting licenses in connection with such transactions
could adversely affect our business, financial condition, or results of
operations. See "--Television and Radio Broadcasting Regulation--Purchase and
Sale Transactions."

        KJR (AM) Transmission Facilities. One of our radio stations, KJR(AM),
broadcasts from transmission facilities located on property leased from the Port
of Seattle, currently on a month-to-month basis. We are negotiating with the
Port of Seattle to continue broadcasting from the present tower location or from
an alternative site KJR(AM) can broadcast from the KHHO site and are exploring
our legal options in the event that the Port of Seattle attempts to evict us
from the current site before we are able to use the new site. See "Item
2--Properties." While management expects to successfully resolve this matter,
there can be no assurance that it will do so or that this matter will not have a
material adverse effect on our business, financial condition, or results of
operations.

SPORTS & ENTERTAINMENT

        Labor Relations in Professional Sports. On March 23, 1998, the Board of
Governors of the NBA voted to exercise their option to reopen the NBA's
collective bargaining agreement with the National Basketball Players
Association, which was originally scheduled to expire on June 30, 2001. As a
result, the collective bargaining agreement expired on June 30, 1998 and the
players were locked out. Preseason and regular season games scheduled through
February 4, 1999 were cancelled, which adversely affected our results of
operations for fiscal year 1998 and the first quarter of 1999. On January 20,
1999, the NBA Board of Governors and the National Basketball Players Association
entered into a new six-year collective bargaining agreement.

        The shortened 1998-99 season and other effects of NBA lockout adversely
affected our results for 1999 and may adversely affect our future results of
operations. There can be no assurance that the NBA or the Seattle SuperSonics
will not experience other labor relations difficulties in the future, which
could have a material adverse effect on our business, financial condition, or
results of operations.

        Future Revenues From NBA Broadcast Contracts May Be Reduced. We share
equally with the other NBA members in revenues generated by the NBA as a whole.
Contracts between the NBA and two major television networks (NBC and TBS/TNT)
accounted for a total of approximately $12.0 million of our net revenue for
fiscal year 1997. In 1998, the NBA renewed its contracts with NBC and TBS/TNT
through the 2001-02 season. These contracts provide for total payments to the
NBA over the four-year contract period of up to $2.6 billion, plus, under



                                       29
<PAGE>   31

certain circumstances, revenue sharing payments. Over the course of the year,
fees are paid by NBC in five installments and by TBS/TNT in six installments.
However, as a result of the NBA lockout, the NBA may not receive the full $2.6
billion over the life of these contracts.

        Dependence on Competitive Success. Our financial results and those of
our sports & entertainment segment depend, to a large extent, on the performance
of the Seattle SuperSonics and its ranking relative to other NBA teams in its
division. By qualifying for the NBA playoffs, for example, we can receive
significant additional revenue from ticket sales for home playoff games and from
selling advertising during broadcasts of playoff games. In that regard, the
Seattle SuperSonics qualified for the NBA playoffs in their 1996-97 and 1997-98
seasons, which substantially increased our net revenue and Operating Cash Flow,
as well as the net revenue and Operating Cash Flow for our sports &
entertainment segment, for fiscal years 1997 and 1998. However, the Seattle
SuperSonics did not quality for the NBA playoffs for the 1998-99 season. Our
results of operations and those for our sports & entertainment segment were
adversely affected for the second quarter of 1999 and for fiscal year 1999 by
the fact that the Seattle SuperSonics did not qualify for the NBA playoffs for
the 1998-99 season, and may also be adversely affected in future years by poor
performance by the Seattle SuperSonics in subsequent seasons, and there can be
no assurance that the Seattle SuperSonics will perform well or qualify for the
playoffs in the future.

        League Membership Risks. Because the NBA is a joint venture, the Seattle
SuperSonics and other members of the NBA are generally jointly and severally
liable for the debts and other liabilities of the NBA. Any failure of other
members of the NBA to pay their pro rata share of any such debts and other
liabilities could adversely affect our business, financial condition, or results
of operations. The success of the NBA and its member teams depends in part on
the competitiveness of other NBA teams and their ability to maintain fiscally
sound franchises. Certain NBA teams have at limes encountered financial
difficulties, and there can be no assurance that the NBA and its members will
continue to be able to operate on a fiscally stable and effective basis. In
addition, as a member of the NBA we must abide by a number of rules,
regulations, and agreements, including the Constitution and Bylaws of the NBA,
national television contracts, and collective bargaining agreements, and the NBA
Board of Governors' interpretation and implementation of those matters. For
example, the NBA Constitution requires that the sale of any NBA franchise, or
the transfer of an equity interest of more than 5% in an NBA member, is subject
to the approval of the NBA. See "--Restrictions on the Ownership and Transfer of
Common Stock." The Board of Governors consists of representatives appointed by
each NBA member. The Board of Governors, in turn elects a Commissioner. The
Commissioner and the Board of Governors (1) arbitrate disputes between
franchises, (2) assure that the conduct of franchises, players, and officials is
in accordance with the NBA Constitution and Bylaws, (3) review and authorize
player transactions between franchises and (4) impose sanctions (including fines
and suspensions) on members, players, and officials who are found to have
breached NBA rules. The Commissioner's interpretations are final and binding on
the Company, the Seattle SuperSonics, and its personnel. In addition, member
clubs of the NBA may not resort to the courts to enforce or maintain rights or
claims against other member clubs, or to seek resolution of any dispute or
controversy between member clubs. Instead, all such matters will be decided by
the Commissioner of the NBA without any right of appeal to the courts or
otherwise. Any interpretations of or changes to these rules, regulations, and
agreements



                                       30
<PAGE>   32

adopted by the NBA will be binding upon us regardless of whether we agree or
disagree with them, and it is possible that any such interpretations or changes
could adversely affect our business, financial condition, or results of
operations.

        Dependence on Talented Players; Risks Related to Player Salaries. The
success of the Seattle SuperSonics will depend upon the team's continued ability
to retain and attract talented players. The Seattle SuperSonics compete with
other United States and foreign basketball teams for available players. There
can be no assurance that the Seattle SuperSonics will be able to retain players
upon expiration of their contracts or identify and obtain new players of
comparable talent to replace players who retire or are injured, traded, or
released. Even if the Seattle SuperSonics are able to retain or obtain players
who have had successful college or professional careers, there can be no
assurance that their performance for the Seattle SuperSonics in subsequent years
will be at the same level as their prior performance. Players' salaries in the
NBA have increased significantly in recent years. Significant further increases
in players' salaries could occur and could have a material adverse effect on our
business, financial condition, or results of operations. NBA player contracts
generally provide that a player is entitled to receive his salary even if he is
unable to play as a result of injuries sustained from basketball-related
activities during the course of his employment. These salaries represent
significant financial commitments of the Seattle SuperSonics. Disability
insurance for NBA players (which in certain instances provides up to 80% of
salary reimbursement after 41 consecutive games are missed) is costly to
maintain, and, as required by NBA rules, the Seattle SuperSonics carry such
insurance for their six most highly compensated players. In the event an injured
player is not insured or insurance does not cover the entire amount of the
injured player's salary, we would be obligated to pay all or a portion, as the
case may be, of the injured player's salary. In addition, if we acquire a new
player to replace the injured player, we would also be required to pay the
salary of the replacement player. To the extent that our financial results are
dependent on the Seattle SuperSonics' competitive success (as discussed above),
the likelihood of achieving such success is substantially reduced by serious
injuries to key players. There can be no assurance that key players for the
Seattle SuperSonics will not sustain serious injuries during any given season.
As a result, injuries to players could have a material adverse effect on our
business, financial condition, or results of operations.

COMPETITION

        Our four business segments are in highly competitive industries. Our
broadcasting and outdoor media businesses compete for audiences and advertising
revenue with other broadcasting stations and outdoor media advertising
companies, as well as with other media forms. Such other media forms may include
newspapers, magazines, transit advertising, yellow page directories, direct
mail, local cable systems, and satellite broadcasting systems. Audience ratings
and market shares are subject to many variables. Any change, and any adverse
change in a particular market, could have a material adverse effect on our
business, financial condition, or results of operations. Changes which could
have an adverse effect on us include economic conditions, both general and
local; shifts in population and other demographics; the level of competition for
advertising dollars; a station's market rank; broadcasting power, assigned
frequency, network affiliation, and audience identification; fluctuations in
operating costs; technological changes and innovations; changes in labor
conditions; and changes in



                                       31
<PAGE>   33

governmental regulations and policies and actions of federal regulatory bodies.
There can be no assurance that we will be able to maintain or increase our
current audience ratings and advertising revenue. In this respect, the entrance
of a new television station in the Vancouver, British Columbia market in October
1997 has adversely affected the financial performance of our television station
in Bellingham, Washington (KVOS).

        Certain of our competitors, including a few outdoor advertising
companies that are substantially larger than our outdoor advertising operations
have significantly greater financial, marketing, sales and other resources than
we have. There can be no assurance that we will be able to compete successfully
against our competitors in the future.

        The Seattle SuperSonics and the Seattle Storm compete directly with
other professional and amateur sporting franchises and events, both in the
Seattle-Tacoma market area and nationally via sports broadcasting. See
"--Sports & Entertainment - Competition."

DEPENDENCE ON MANAGEMENT

        Certain of our executive officers and divisional managers, including
Barry A. Ackerley, are especially important to our direction and management. The
loss of the services of such persons could have a material adverse effect on the
Company, and there can be no assurance that we would be able to find
replacements for such persons with equivalent business experience.

VOTING CONTROL BY PRINCIPAL STOCKHOLDER

        Each share of Common Stock has one vote per share and each share of
Class B Common Stock has ten votes per share. As of March 1, 2000, Barry A.
Ackerley, our Chairman of the Board and Chief Executive Officer, beneficially
owns approximately 37.2% of the outstanding shares of Common Stock and
approximately 98.7% of the outstanding shares of Class B Common Stock, giving
him approximately 87.8% of the combined voting power of our voting securities.
See "Item 12 - Security Ownership of Certain Beneficial Owners and Management."

        As a director, the Chairman and Chief Executive Officer, and the
majority stockholder of The Ackerley Group, Mr. Ackerley has certain fiduciary
duties to minority stockholders under applicable law. However, so long as Mr.
Ackerley continues to own or control stock having a majority of the combined
voting power of our voting securities, he will have the power to elect all of
our directors and effect fundamental corporate transactions, such as mergers,
asset sales, and "going private" transactions, without the approval of any other
stockholders. Moreover, Mr. Ackerley's voting control would effectively delay or
prevent any other person or entity from acquiring or taking control of The
Ackerley Group without his approval, whether or not the transaction could
provide stockholders with a premium over the then-prevailing market price of
their shares or would otherwise be in their best interests.

RESTRICTIONS ON THE OWNERSHIP AND TRANSFER OF COMMON STOCK

        We are a member of the NBA and are subject to its Constitution and
Bylaws. See "--Sports & Entertainment--League Membership Risks." These
limitations may adversely affect the ability of investors to acquire, sell or
otherwise transfer our Common Stock. Any violation of



                                       32
<PAGE>   34

the foregoing restrictions could result in the termination of our NBA franchise
and other sanctions by the NBA, which could have a material adverse effect on
our business, financial condition, or results of operations.

        In addition, our Bylaws contain certain restrictions on the transfer of
our capital stock in order to comply with the prohibitions on foreign ownership
of radio and television stations contained in the Communications Act of 1934 and
FCC rules. See "--Television and Radio Broadcasting Regulation--Ownership."
These restrictions in our Bylaws, as well as certain related provisions in our
Certificate of Incorporation, may adversely affect the ability of investors to
acquire, hold, or otherwise transfer our Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE

        As of March 1, 2000, 9,104,948 shares of Common Stock and 11,004,056
shares of Class B Common Stock were held by officers and directors who are
considered to be our "affiliates" for purposes of Rule 144 under the Securities
Act. As noted above, each share of Class B Common Stock is convertible by the
holder at any time into one share of Common Stock. Our affiliates may sell these
shares in the public market subject to the volume and other limitations (other
than the holding Period limitations, which have been satisfied) of Rule 144
under the Securities Act. No prediction can be made as to the effect, if any,
that future sales of shares, or the availability of shares for future sale, will
have on the market price of the Common Stock from time to time. Sales of
substantial amounts of Common Stock in the public market (including Common Stock
issued upon conversion of Class B Common Stock), or the perception that such
sales could occur, could have a material adverse effect on prevailing market
prices for the Common Stock.

YEAR 2000

        The Year 2000 or Y2K problem is a result of the inability of computer
software programs to recognize the year 2000, as most programs and systems were
designed to store calendar years in the 1900s by assuming the "19" and storing
only the last two digits of the year.

        We have not experienced any significant Y2K problems and have not been
informed of any material Y2K problems by our customers or vendors. However,
although January 1, 2000 is past, it is possible that some problems have gone
undetected, or that other dates in the future may further affect computer
software and systems, or equipment with embedded chip technology.

        These problems could disrupt our business and require us to incur
significant, unanticipated expenses to remedy them. They could also result in
claims and litigation against us, which could subject us to significant costs
and could require substantial attention from our management. Similarly, our
business could be severely harmed if third parties on which our services depend
encounter Year 2000 issues, or if Year 2000 problems cause malfunctions at our
facilities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Year 2000."

ITEM 2 - PROPERTIES



                                       33
<PAGE>   35

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

        The following table sets forth certain information regarding our
facilities as of December 31, 1999:

<TABLE>
<CAPTION>
                                                                Approximate
                                                                   Square        Approximate
                                                                   Footage         Square
Location                                    Nature of Facility      Owned      Footage Leased
--------                                    ------------------  -----------    --------------
<S>                                         <C>                 <C>            <C>
OUTDOOR MEDIA
   Seattle, Washington (Outdoor                    Plant            35,889          1,185
   Advertising)
   Boston Massachusetts (Outdoor                   Plant            31,882          3,825
   Advertising)
   Miami, Florida (Outdoor Advertising)(1)         Plant           242,980            ---

TELEVISION BROADCASTING
   Syracuse, New York (WIXT)                Station Operations      40,000            ---
   Rochester (WOKR)                         Station Operations      45,000            ---
   Binghamton, New York (WIVT)              Station Operations      10,819            ---
   Utica, New York (WUTR)(2)                Station Operations      12,148            ---
   Santa Barbara - Santa Maria - San Luis   Station Operations      13,000          1,150
    Obispo, California (KCOY)
   Salinas-Monterey, California (KCBA,      Station Operations      30,000         20,841
   KION(2))
   Bakersfield, California (KGET)           Station Operations      30,450            ---
   Eugene, Oregon (KMTR)                    Station Operations       3,000          9,230
   Eureka, California (KVIQ)                Station Operations      10,162            ---
   Santa Rosa, California (KFTY)            Station Operations      13,500            ---
   Bellingham, Washington (KVOS)            Station Operations      13,130         11,856
   Fairbanks, Alaska (KTVF)                 Station Operations          84         12,967

RADIO BROADCASTING
   Seattle, Washington (KJR(AM), KJR-FM,    Station Operations          --         16,082
   KUBE(FM))
   Tacoma, Washington (KHHO(AM))            Station Operations          --          4,252

SPORTS & ENTERTAINMENT
   Seattle, Washington                      Office & Operating      30,000         27,246
                                                Facilities

OTHER
   Seattle, Washington (Corporate Offices)        Offices               --         16,814
   National Sales Offices in New York,
   Los Angeles,                                   Offices               --          9,164
     Chicago, and San Francisco
</TABLE>

--------------------
(1)  On January 5, 2000, we sold our Florida outdoor advertising operations.

(2)  As of December 31, 1999, we programmed these stations under LMAs.
     Accordingly, this table reflects data for the properties which are owned or
     leased by the station owners for whom we program the stations.

        In general, we believe that our facilities are adequate for our present
business and that additional space is generally available for expansion without
significant delay. Additionally, we are replacing and expanding our radio
broadcasting and sports & entertainment operating facilities in Seattle and our
outdoor advertising operating facilities in Portland. These facilities will be
completed in 2000. In 1999, we paid aggregate annual rentals on office space and
operating facilities of approximately $3.5 million.

        KJR(AM) broadcasts from transmission facilities located on property
leased from the Port of Seattle, currently on a month-to-month basis. We have
filed an application with the FCC to co-locate KJR(AM)'s transmission facilities
with KHHO's facilities in Tacoma, Washington.



                                       34
<PAGE>   36

On May 5, 1998 the FCC issued a construction permit granting us authority to
begin construction of the transmission facilities at the KHHO site. Construction
was substantially completed in February 2000, and testing of the facilities is
underway. We are negotiating with the Port of Seattle to continue broadcasting
from the present tower location or from an alternative site until KJR(AM) can
broadcast from the KHHO site and are exploring our legal options in the event
that the Port of Seattle attempts to eject us from the current site before we
are able to use the new site.

        Effective October 1, 1995, we entered into a fifteen-year lease with the
City of Seattle for the Key Arena, a 17,100-seat events facility. It was first
occupied and used by the SuperSonics in November 1995, the beginning of the
1995-1996 season.

        At December 31, 1999, we owned 285 vehicles and leased 190 vehicles of
various types for use in our operations. This included 64 owned vehicles and 15
leased vehicles at our Florida outdoor advertising operations, which we sold on
January 5, 2000. We own a variety of broadcast-related equipment, including
broadcast towers, transmitters, generators, microwave systems and audio and
video equipment used in our broadcasting business. We presently lease, under a
private carrier agreements, a Gulfstream jet and Lear jet that are used for
executive travel between our facilities. In February 1998, we purchased a Boeing
727 jet aircraft to replace the BAC 1-11 that we previously leased, which we use
for travel involving the SuperSonics.

        We believe that all of our buildings and equipment are adequately
insured in accordance with industry practice.

ITEM 3 - LEGAL PROCEEDINGS

        We become involved, from time to time, in various claims and lawsuits
incidental to the ordinary course of our operations, including such matters as
contract and lease disputes and complaints alleging employment discrimination.
In addition, we participate in various governmental and administrative
proceedings relating to, among other things, condemnation of outdoor advertising
structures without payment of just compensation and matters affecting the
operation of broadcasting facilities.

        Lambert v. Ackerley. Following the U.S. Supreme Court's denial of our
petition for review of the decision of the Ninth Circuit Court of Appeals, we
paid the awarded damages, accrued interest thereon, and plaintiff's attorney's
fees of approximately $7.5 million in the first quarter of 2000. See Note 13 of
the Notes to Consolidated Financial Statements.

        Van Alstyne v. The Ackerley Group, Inc. On June 7, 1996, a former sales
manager for television station WIXT, Syracuse, New York filed a complaint in the
U.S. District Court for the Northern District of New York against The Ackerley
Group, Inc., WIXT and the current and former general managers of WIXT. The
complaint seeks unspecified damages and injunctive relief for discrimination on
the basis of gender and disability, as well as unlawful retaliation, under both
state and federal law. We have filed a motion for summary judgment, which is
currently pending. A trial date has not been set.



                                       35
<PAGE>   37

        RSA Media Inc. v. AK Media Group, Inc. On June 4, 1997, RSA Media Inc.,
a supplier of outdoor advertising in Massachusetts, filed a complaint in the
U.S. District Court for the District of Massachusetts (the "Court") alleging
that we have unlawfully monopolized the Boston-area billboard market in
violation of the Sherman Antitrust Act, engaged in unlawful restraint of trade
in violation of the Sherman Antitrust Act, and committed unfair trade practices
in violation of Massachusetts state law. The plaintiff is seeking in excess of
$20.0 million in damages. On May 22, 1998, the Court, in a ruling from the
bench, dismissed count 2 of plaintiff's complaint, which alleged that the
existence of leases between us and landowners restricted the landowners' ability
to lease that same space to the plaintiff in violation of the Sherman Antitrust
Act. We have filed a motion for summary judgment which is currently pending. A
trial date has not been set.

                         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 1999.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

        Our executive officers are:

<TABLE>
<CAPTION>
             Name                           Age           Position
             ----                           ---           --------
        <S>                                 <C>     <C>
        Barry A. Ackerley                    65     Chairman and Chief Executive Officer

        Gail A. Ackerley                     61     Co-Chairman

        Denis M. Curley                      52     Co-President, Chief Operating Officer and
                                                    Chief Financial Officer, Secretary and
                                                    Treasurer

        Christopher H. Ackerley              30     Co-President

        Keith W. Ritzmann                    47     Senior Vice President and Chief Technology
                                                    Officer, Controller and Assistant
                                                    Secretary
</TABLE>

        Mr. Barry A. Ackerley, one of our founders, has been the Chief Executive
Officer and a director of The Ackerley Group and its predecessor and subsidiary
companies since 1975. He currently serves as our Chairman.

        Ms. Gail A. Ackerley was elected to our Board of Directors in May 1995,
and became Co-Chairman in September 1996. She served as one of our Co-Presidents
from November 1997 to February 15, 2000. Ms. Ackerley has served as our Chairman
of Ackerley Corporate Giving since 1986, supervising our charitable activities,
and also serves as Chairman of the Seattle Storm.

        Mr. Denis M. Curley, who joined us in December 1984, was elected as
Chief Operating Officer on February 15, 2000, and as one of our Co-Presidents in
November 1997. Previously, he served as Executive Vice President from March 1995
until his election as one of our Co-Presidents. Before then, he served as Senior
Vice President from January 1990 through the date



                                       36
<PAGE>   38

of his election as Executive Vice President. He has served as our Chief
Financial Officer since May 1988. Mr. Curley also presently serves as our
Secretary and Treasurer.

        Mr. Christopher H. Ackerley was named Co-President on February 15, 2000,
with principal responsibility for overseeing our marketing, investor relations,
information technology, and technology-venture investments. He joined The
Ackerley Group in 1995, and was elected Vice President for Marketing and
Development in May 1998. He also served as Executive Vice President, Operations
and Development from December 1998 until his election as Co-President.

        Mr. Keith W. Ritzmann was named Senior Vice President and Chief
Technology Officer on February 15, 2000. He has served as a Senior Vice
President since January 1998, and also served as Chief Information Officer from
such date until his election as Chief Technology Officer. He served as a Vice
President from January 1990 through the date of his election as Senior Vice
President. He also presently serves as our Assistant Secretary and Controller.

        Barry A. Ackerley and Gail A. Ackerley are husband and wife. Christopher
H. Ackerley is their son. There are no other family relationships among any of
our executive officers. All officers serve at the pleasure of our Board of
Directors.


                                     PART II

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

        As of March 1, 2000, 34,965,807 shares of our common stock were issued
and outstanding, of which 23,877,107 shares were Common Stock and 11,088,700
shares were Class B Common Stock. The Common Stock was held by 545 shareholders
of record; the Class B Common Stock was held by 28 shareholders of record.

        Our Board of Directors declared a cash dividend of $.02 per share in
each of 1998 and 1999. Recently, the Board declared a cash dividend of $.02 per
share payable on April 14, 2000 to shareholders of record on March 23, 2000.
Payment of any future dividends is at the discretion of the Board of Directors
and depends on a number of conditions. Among other things, dividend payments
depend upon our results of operations and financial condition, capital
requirements and general economic conditions. The 1999 Credit Agreement and the
Indenture impose certain limits upon our ability to pay dividends and make other
distributions. In addition, we are subject to the General Corporation Law of
Delaware, which restricts our ability to pay dividends in certain circumstances.

COMMON STOCK

        On December 15, 1997, our Common Stock became listed and began trading
on the New York Stock Exchange under the symbol "AK." Our Common Stock
previously traded on the American Stock Exchange.




                                       37
<PAGE>   39
        The table below sets forth the high and low sales prices of our Common
Stock for each full quarterly period in the two most recent fiscal years
according to the New York Stock Exchange.

<TABLE>
<CAPTION>
1999                High          Low            1998                High         Low
----                ----          ---            ----                ----         ---
<S>                 <C>           <C>            <C>                 <C>          <C>
First Quarter       $19 1/4       $16 1/2        First Quarter       $24 3/8      $14 5/8
Second Quarter      $20           $16 5/8        Second Quarter      $22 1/2      $19 7/16
Third Quarter       $19 1/4       $11 1/8        Third Quarter       $24 7/8      $19 1/2
Fourth Quarter      $18 1/2       $11 3/8        Fourth Quarter      $21 1/16     $16 1/2
</TABLE>

        On March 1, 2000, the high and low sales prices of our Common Stock,
according to the New York Stock Exchange, were $13 5/16 and $12 7/16,
respectively.

CLASS B COMMON STOCK

        Our Class B Common Stock, which we initially issued in June 1987, is not
publicly traded. Persons owning shares of our Class B Common Stock may trade
such shares only as permitted by our Certificate of Incorporation, which imposes
restrictions on such transfer. Thus, there is no trading market for shares of
our Class B Common Stock.

                        ITEM 6 - SELECTED FINANCIAL DATA

        The table below sets forth selected consolidated financial data
regarding our operations. The information in the table has been derived from
audited consolidated financial statements.

        You should read the information in the table in conjunction with the
sections titled "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements (and Notes)
included elsewhere in this report.

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                           ---------------------------------------------------------------
                                              1999           1998        1997           1996       1995
                                           ---------      ---------   ---------      ---------   ---------
                                                          (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>            <C>         <C>            <C>         <C>
Consolidated Statement of Operations Data:
Revenue                                    $ 315,319      $ 292,907   $ 306,169      $ 279,662   $ 235,820
Agency commissions and discounts             (37,131)       (36,256)    (34,994)       (32,364)    (28,423)
                                           ---------      ---------   ---------      ---------   ---------
Net revenue                                  278,188        256,651     271,175        247,298     207,397
Expenses (other income):
    Operating expenses                       227,697        209,030     210,752        186,954     156,343
    Restructuring expenses                     1,125             --          --             --          --
    Depreciation and amortization expense     28,348         16,574      16,103         16,996      13,243
    Interest expense                          35,632         25,109      26,219         24,461      25,010
    Stock compensation expense                   559            452       9,344(1)          --          --
    Net gain on dispositions of assets       (28,999)(2)    (33,524)(2)      --             --          --
    Litigation expense (adjustment)               --             --      (5,000)(3)         --      14,200(3)
                                           ---------      ---------   ---------      ---------   ---------
      Total expenses and other income        264,362        217,641     257,418        228,411     208,796
                                           ---------      ---------   ---------      ---------   ---------
Income (loss) before income taxes
    and extraordinary item                    13,826         39,010      13,757         18,887      (1,399)
Income tax expense (benefit)                   5,863         15,487     (19,172)(4)      2,758       1,515
                                           ---------      ---------   ---------      ---------   ---------
Income (loss) before                           7,963         23,523      32,929         16,129      (2,914)
    extraordinary item
Extraordinary item - loss on
    extinguishment of debt                    (1,373)        (4,346)         --           (355)         --
                                           ---------      ---------   ---------      ---------   ---------
Net income (loss) applicable
    to common shares                       $   6,590      $  19,177   $  32,929      $  15,774   $  (2,914)
                                           =========      =========   =========      =========   =========
Per common share:
    Income (loss) before                   $     .24      $     .75   $    1.05      $     .52   $    (.09)
    extraordinary item
    Extraordinary item                          (.04)          (.14)         --           (.01)         --
                                           ---------      ---------   ---------      ---------   ---------
    Net income (loss)                      $     .20      $     .61   $    1.05      $     .51   $    (.09)
                                           =========      =========   =========      =========   =========
</TABLE>



                                       38
<PAGE>   40

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                           ---------------------------------------------------------------
                                              1999           1998        1997           1996       1995
                                           ---------      ---------   ---------      ---------   ---------
<S>                                        <C>            <C>         <C>            <C>         <C>
    Common shares used in per share
       computation                            32,932         31,627      31,345         31,166      31,052
Per common share - assuming dilution:
    Income (loss) before                   $     .24      $     .74   $    1.04      $     .51   $    (.09)
    extraordinary item
    Extraordinary item                          (.04)          (.14)         --           (.01)         --
                                           ---------      ---------   ---------      ---------   ---------
    Net income (loss)                      $     .20      $     .60   $    1.04      $     .50   $    (.09)
                                           =========      =========   =========      =========   =========
    Common shares used in per share
      computation - assuming dilution         33,110         31,883      31,652         31,760      31,052
Dividends                                  $     .02      $     .02   $     .02      $     .02   $    .015
                                           =========      =========   =========      =========   =========
Consolidated Balance Sheet Data
   (at end of period):
Working capital                            $  21,704      $  15,706   $  12,019      $  11,154   $  15,110
Total assets                                 528,436        316,126     266,385        224,912     189,882
Total long-term debt                         403,761        266,999     213,294        229,350     215,328
Total debt                                   414,593        270,100     229,424        235,141     220,147
Stockholders' equity (deficiency)             27,289        (25,841)    (44,909)       (83,839)    (99,093)
</TABLE>

-------------
(1)  See Note 11 to the Consolidated Financial Statements.

(2)  See Note 3 to the Consolidated Financial Statements.

(3)  See Note 13 to the Consolidated Financial Statements.

(4)  See Note 8 to the Consolidated Financial Statements.

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

FORWARD-LOOKING STATEMENTS

        Statements appearing in this section, Management's Discussion and
Analysis of Financial Condition and Results of Operations, which are not
historical in nature (including the discussions of the effects of recent
acquisitions and dispositions, business transactions, and similar information),
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. We caution our shareholders and potential
investors that any forward-looking statements or projections set forth in this
section are subject to risks and uncertainties which may cause actual results to
differ materially from those projected. After the date of this Annual Report, we
will not make any public announcements updating any forward-looking statement
contained in this section.

        Important factors that could cause the results to differ materially from
those expressed in this section include:

        -   material adverse changes in general economic conditions, including
            changes in inflation and interest rates;

        -   changes in laws and regulations affecting the outdoor advertising
            and television and radio broadcasting businesses, including changes
            in the FCC's treatment of local marketing agreements and related
            matters, and the possible inability to obtain FCC consent to
            proposed or pending acquisitions or dispositions of broadcasting
            stations;

        -   competitive factors in the outdoor advertising, television
            broadcasting, radio broadcasting, and sports & entertainment
            businesses;

        -   material changes to accounting standards;



                                       39
<PAGE>   41

        -   expiration or non-renewal of broadcasting licenses and local
            marketing agreements;

        -   labor matters, including the aftereffects of the NBA lockout,
            changes in labor costs, renegotiation of labor contracts, and risk
            of work stoppages or strikes;

        -   matters relating to our level of indebtedness, including
            restrictions imposed by financial covenants;

        -   the win-loss record of the SuperSonics, which has a substantial
            influence on attendance, and whether the team participates in the
            NBA playoffs;

        -   recessionary influences in the regional markets that we serve.

OVERVIEW

        We reported net income of $6.6 million in 1999, compared to $19.2
million in 1998. Net revenue in 1999 increased by $21.5 million, or 8%, from
1998, and our Operating Cash Flow (as defined below) increased by $1.8 million,
or 4%.

        Refinancing. In January 1999, we replaced our existing $300.0 million
credit agreement with a new $325.0 million credit agreement. In February 1999,
we issued additional 9% Senior Subordinated Notes due 2009 in the aggregate
amount of $25.0 million. In March 1999, we redeemed the $20.0 million
outstanding principal of the 10.48% Senior Subordinated Notes due 2000 with
borrowings under the revolving credit facility of the new credit agreement.

        Acquisitions and Dispositions. During 1999, we acquired five television
stations and an outdoor advertising company, and we sold one television station
and a radio broadcasting tower. During the first quarter of 2000, we sold our
Florida outdoor advertising operations and acquired two outdoor advertising
companies. In addition, we acquired two television stations for which we
previously provided programming and sales services under local marketing
agreements. We also entered into local marketing agreements to provide
programming and sales services to two additional television stations.

        Stock Offering. During the third quarter of 1999, we received
approximately $46.5 million in net proceeds from the issuance of 3,250,000
shares of common stock pursuant to an underwritten public offering.

        As with many media companies, our acquisitions and dispositions have
resulted in significant non-cash and non-recurring charges to income. For this
reason, in addition to net income, our management believes that Operating Cash
Flow (defined as net revenue less operating expenses before amortization,
depreciation, interest, litigation, and stock compensation expenses and net gain
on dispositions of assets) is an appropriate measure of our financial
performance. Similarly, we believe that Segment Operating Cash Flow (defined as
Operating Cash Flow before corporate overhead) is an appropriate measure of our
segments' financial performance. These measures exclude certain expenses that
management does not consider to be costs of ongoing operations. We use Operating
Cash Flow to pay interest and principal on our long-term debt as well as to
finance capital expenditures. Operating Cash Flow and Segment



                                       40
<PAGE>   42

Operating Cash Flow, however, are not to be considered as alternatives to net
income as an indicator of our operating performance or to cash flows as a
measure of our liquidity.

RESULTS OF OPERATIONS

        The following tables set forth certain historical financial and
operating data for each of the three years in the period ended December 31,
1999, including net revenue, operating expenses, and Operating Cash Flow
information by segment:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                  ------------------------------------------------------------------------
                                            1999                    1998                     1997
                                  ----------------------   ----------------------   ----------------------

                                                 AS % OF                  AS % OF                  AS % OF
                                                   NET                      NET                      NET
                                    AMOUNT       REVENUE    AMOUNT        REVENUE     AMOUNT       REVENUE
                                  ---------     ---------  --------      ---------  ---------     ---------
                                                           (DOLLARS IN THOUSANDS)
<S>                               <C>             <C>      <C>             <C>      <C>             <C>
Net revenue                       $ 278,188       100.0%   $ 256,651       100.0%   $ 271,175       100.0%
Segment operating expenses          212,475        76.4      194,539        75.8      200,739        74.0
Corporate overhead                   16,347         5.9       14,491         5.6       10,013         3.7
                                  ---------                ---------                ---------
  Total operating expenses          228,822        82.3      209,030        81.4      210,752        77.7
                                  ---------                ---------                ---------
Operating Cash Flow                  49,366        17.7       47,621        18.6       60,423        22.3
Other expenses and (income):
  Depreciation and
    amortization expenses            28,348        10.2       16,574         6.5       16,103         5.9
  Interest expense                   35,632        12.8       25,109         9.8       26,219         9.7
  Stock compensation expense            559         0.2          452         0.2        9,344         3.4
  Net gain on dispositions of
    assets                          (28,999)      (10.4)     (33,524)      (13.1)          --          --
  Litigation adjustment                  --        --             --        --         (5,000)       (1.8)
                                  ---------                ---------                ---------
    Total other expenses and
        (income)                     35,540        12.8        8,611         3.4       46,666        17.2
Income before income taxes and
  extraordinary item                 13,826         5.0       39,010        15.2       13,757         5.1
Income tax expense (benefit)          5,863         2.1       15,487         6.0      (19,172)       (7.1)
                                  ---------                ---------                ---------
Income before
  extraordinary item                  7,963         2.9       23,523         9.2       32,929        12.1
                                  ---------                ---------                ---------
Extraordinary item                   (1,373)       (0.5)      (4,346)       (1.7)          --          --
                                  ---------                ---------                ---------
Net income                        $   6,590         2.4    $  19,177         7.5    $  32,929        12.1
                                  =========                =========                =========
</TABLE>




                                       41
<PAGE>   43

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                              ---------------------------------------
                                                 1999           1998           1997
                                              ---------      ---------      ---------
                                                       (DOLLARS IN THOUSANDS)
<S>                                           <C>            <C>            <C>
NET REVENUE:
    Outdoor media                             $  98,751      $ 108,560      $ 113,162
    Television broadcasting                      81,669         68,467         63,611
    Radio broadcasting                           27,163         24,474         20,970
    Sports & entertainment                       70,605         55,150         73,432
                                              ---------      ---------      ---------
       Total net revenue                      $ 278,188      $ 256,651      $ 271,175
                                              =========      =========      =========
SEGMENT OPERATING EXPENSES:
    Outdoor media                             $  56,877      $  65,605      $  72,159
    Television broadcasting                      69,608         55,996         46,935
    Radio broadcasting                           15,563         14,819         12,983
    Sports & entertainment                       70,427         58,119         68,662
                                              ---------      ---------      ---------
       Total segment operating expenses       $ 212,475      $ 194,539      $ 200,739
                                              =========      =========      =========
OPERATING CASH FLOW:
    Outdoor media                             $  41,874      $  42,955      $  41,003
    Television broadcasting                      12,061         12,471         16,676
    Radio broadcasting                           11,600          9,655          7,987
    Sports & entertainment                          178         (2,969)         4,770
                                              ---------      ---------      ---------
       Total Segment Operating Cash Flow         65,713         62,112         70,436
    Corporate overhead                          (16,347)       (14,491)       (10,013)
                                              ---------      ---------      ---------
       Operating Cash Flow                    $  49,366      $  47,621      $  60,423
                                              =========      =========      =========
CHANGE IN NET REVENUE FROM PRIOR PERIODS:
    Outdoor media                                  (9.0)%         (4.1)%         13.4%
    Television broadcasting                        19.3            7.6            9.9
    Radio broadcasting                             11.0           16.7           16.8
    Sports & entertainment                         28.0          (24.9)           2.5
       Change in total net revenue                  8.4           (5.4)           9.7
SEGMENT OPERATING EXPENSES AS A % OF NET
  REVENUE:
    Outdoor media                                  57.6%          60.4%          63.8%
    Television broadcasting                        85.2           81.8           73.8
    Radio broadcasting                             57.3           60.5           61.9
    Sports & entertainment                         99.7          105.4           93.5
       Total segment operating expenses as
          a % of total net revenue:                76.4           75.8           74.0
OPERATING CASH FLOW AS A % OF NET REVENUE:
    Outdoor media                                  42.4%          39.6%          36.2%
    Television broadcasting                        14.8           18.2           26.2
    Radio broadcasting                             42.7           39.5           38.1
    Sports & entertainment                          0.3           (5.4)           6.5
      Operating Cash Flow as a % of total
        net revenue                                17.7           18.6           22.3
</TABLE>



                                       42
<PAGE>   44

1999 COMPARED WITH 1998

        Net Revenue. Our 1999 net revenue was $278.2 million. This represented
an increase of $21.5 million, or 8%, compared to $256.7 million in 1998. Changes
in net revenue were as follows:

        -   Outdoor Media. Our 1999 net revenue from our outdoor media segment
            decreased by $9.8 million, or 9%, from 1998. This decrease was
            primarily due to the absence of our airport advertising operations,
            which we sold in June 1998. Excluding our airport advertising
            operations, our 1999 net revenue from our outdoor media segment
            increased by $6.4 million, or 7%, from 1998. This increase mainly
            resulted from an increase in both national and local sales.

        -   Television Broadcasting. Our 1999 net revenue from our television
            broadcasting segment increased by $13.2 million, or 19%, from 1998.
            This increase was mainly due to the exchange of station KKTV for
            station KCOY in January 1999 and the addition of stations KVIQ in
            July 1998, KMTR in December 1998, WOKR in April 1999, and KTFV in
            August 1999. Excluding these transactions, our 1999 net revenue from
            our television broadcasting segment decreased by $3.2 million, or
            6%, from 1998. This decrease was primarily due to the lack of
            political advertising during 1999, partially offset by increased
            national and local sales.

        -   Radio Broadcasting. Our 1999 net revenue from our radio broadcasting
            segment increased by $2.7 million, or 11%, from 1998. This increase
            was primarily due to an increase in both national and local sales.

        -   Sports & Entertainment. Our 1999 net revenue from our sports &
            entertainment segment increased by $15.4 million, or 28%, from 1998.
            This increase was primarily due to the commencement of a full
            basketball season in the fourth quarter 1999 in contrast to the
            delayed season in 1998 as result of the NBA lockout.

        Segment Operating Expenses. Our 1999 segment operating expenses (which
exclude corporate overhead) were $212.5 million. This represented an increase of
$18.0 million, or 9%, compared to $194.5 million in 1998. Changes in segment
operating expenses were as follows:

        -   Outdoor Media. Our 1999 operating expenses from our outdoor media
            segment decreased by $8.7 million, or 13%, from 1998. This decrease
            was primarily due to the absence of our airport advertising
            operations, which we sold in June 1998. Excluding our airport
            advertising operations, our 1999 operating expenses from our outdoor
            media segment increased by $6.1 million, or 12%, from 1998. This
            increase was primarily due to higher lease costs, increased
            employment-related expenses, and increased expenses related to the
            expansion of our national sales force.

        -   Television Broadcasting. Our 1999 operating expenses from our
            television broadcasting segment increased by $13.6 million, or 24%,
            from 1998. This increase was mainly due to the exchange of station
            KKTV for station KCOY in January 1999 and the addition of



                                       43
<PAGE>   45

            stations KVIQ in July 1998, KMTR in December 1998, WOKR in April
            1999, and KTVF in August 1999. This increase was also due to a
            restructuring charge of $1.1 million recognized in connection with
            our ongoing implementation of Digital CentralCasting(TM). This
            restructuring charge consisted primarily of costs associated with
            employee staff reductions. See further discussion in Note 14 to the
            Consolidated Financial Statements. Excluding these transactions, our
            1999 operating expenses from our television broadcasting segment
            increased by $0.8 million, or 2%, from 1998. This increase was
            primarily due to higher program, promotion, and production expenses
            relating to the expansion of local news.

        -   Radio Broadcasting. Our 1999 operating expenses from our radio
            broadcasting segment increased by $0.8 million, or 5%, from 1998.
            This increase was primarily due to higher expenses relating to
            increased sales activity.

        -   Sports & Entertainment. Our 1999 operating expenses from our sports
            & entertainment segment increased by $12.3 million, or 21%, from
            1998. This increase was primarily due to the commencement of a full
            basketball season in the fourth quarter of 1999 in contrast to the
            delayed season in 1998 as result of the NBA lockout.

        Corporate Overhead Expenses. Our corporate overhead expenses were $16.3
million in 1999. This represented an increase of $1.8 million, or 12%, from
1998. This increase was primarily a result of increased marketing costs,
increased travel costs, and higher utilization of outside services.

        Operating Cash Flow. Our Operating Cash Flow was $49.4 million in 1999.
This represented an increase of $1.8 million, or 4%, compared to $47.6 million
in 1998. The increase in Operating Cash Flow from our radio broadcasting and
sports & entertainment segments was partially offset by the decrease in
Operating Cash Flow from our outdoor media and television broadcasting segments
and the increase in corporate overhead expenses. Operating Cash Flow as a
percentage of total net revenue decreased to 18% in 1999 compared to 19% in
1998.

        Depreciation and Amortization Expenses. Our depreciation and
amortization expenses were $28.3 million in 1999. This represented an increase
of $11.7 million, or 70%, compared to $16.6 million in 1998. This increase
primarily resulted from depreciation and amortization expenses relating to our
business acquisitions during 1999.

        Interest Expense. Our interest expense was $35.6 million in 1999. This
represented an increase of $10.5 million, or 42%, from 1998. This increase was
primarily due to higher average debt balances during 1999 reflecting the
financing of our various acquisitions.

        Stock Compensation Expense. We recognized stock compensation expense of
$0.6 million in 1999 compared to $0.5 million in 1998. These expenses primarily
related to the amendment of certain stock option agreements.

        Net Gain on Dispositions of Assets. We recognized a net gain on
disposition of assets of $29.0 million. This gain consisted primarily of a $28.6
million gain from the exchange of the



                                       44
<PAGE>   46

assets of television station KKTV for the assets of television station KCOY, a
$1.6 million gain relating to the sale of our airport advertising operations,
and a $1.2 million loss on the sale of a radio broadcasting tower. In 1998, we
recognized a $33.5 million gain on disposition of assets primarily relating to
the sale of our airport advertising operations in June 1998.

        Income Tax Expense. We recognized income tax expense of $5.9 million in
1999, compared to $15.5 million in 1998. The effective rate in 1999 was 42%
compared to 40% in 1998.

        Extraordinary Item. In 1999, we replaced our existing credit agreement
with a new $325.0 million credit agreement and redeemed our $20.0 million 10.48%
Senior Subordinated Notes. These transactions resulted in an aggregate charge of
$1.4 million, net of taxes, primarily consisting of the write-off of deferred
financing costs and prepayment fees. In 1998, we redeemed our 10.75% Senior
Secured Notes with proceeds under the 1998 Credit Agreement. This transaction
resulted in a charge of $4.3 million, net of taxes, consisting of the write-off
of deferred financing costs and prepayment fees.

        Net Income. Our net income was $6.6 million in 1999. This represented a
decrease of $12.6 million, or 66%, from $19.2 million in 1998. Net income as a
percentage of net revenue decreased to 2% in 1999 from 8% in 1998.

1998 COMPARED WITH 1997

        Net Revenue. Our 1998 net revenue was $256.7 million. This represented a
decrease of $14.5 million, or 5%, from $271.2 million in 1997. Changes in net
revenue were as follows:

        -   Outdoor Media. Our 1998 net revenue from our outdoor media segment
            decreased by $4.6 million, or 4%, from 1997. This decrease was
            mainly due to the absence of airport advertising operations in the
            third and fourth quarters of 1998, partially offset by increased
            national sales.

        -   Television Broadcasting. Our 1998 net revenue from our television
            broadcasting segment increased by $4.9 million, or 8%, from 1997.
            This increase resulted primarily from the addition of television
            station KVIQ in July 1998, the completion of a full 12 months of
            operations at WUTR and WIVT, higher political advertising, and
            higher national and local sales.

        -   Radio Broadcasting. Our 1998 net revenue from our radio broadcasting
            segment increased by $3.5 million, or 17%, from 1997. This increase
            was primarily due to an increase in both national and local sales.

        -   Sports & Entertainment. Our 1998 net revenue from our sports &
            entertainment segment decreased by $18.2 million, or 25%, from 1997.
            This decrease was primarily due to decreased revenue in the fourth
            quarter as a result of the NBA lockout, partially offset by
            increased ticket and sponsorship sales during the 1997-98 basketball
            season.



                                       45
<PAGE>   47

        Segment Operating Expenses. Our 1998 segment operating expenses (which
exclude corporate overhead) were $194.5 million. This represented a decrease of
$6.2 million, or 3%, compared to $200.7 in 1997. Changes in segment operating
expenses were as follows:

        -   Outdoor Media. Our 1998 operating expenses from our outdoor media
            segment decreased by $6.6 million, or 9%, from 1997. This decrease
            was due mainly to the absence of airport advertising operations in
            the third and fourth quarters of 1998, partially offset by higher
            expenses related to increased sales activity.

        -   Television Broadcasting. Our 1998 operating expenses from our
            television broadcasting segment increased by $9.1 million, or 19%,
            from 1997. This increase was primarily a result of the addition of
            television station KVIQ in July 1998, the completion of a full 12
            months of operations at WUTR and WIVT, and higher program, promotion
            and production expenses relating to the expansion of local news.

        -   Radio Broadcasting. Our 1998 operating expenses from our radio
            broadcasting segment increased by $1.8 million, or 14%, from 1997.
            This increase primarily resulted from higher expenses related to
            increased sales activity.

        -   Sports & Entertainment. Our 1998 operating expenses from our sports
            & entertainment segment decreased by $10.6 million, or 15%, from
            1997. This decrease was mainly attributable to decreased expenses in
            the fourth quarter due to the NBA lockout, partially offset by
            increased basketball operating expenses related to team costs during
            the 1997-98 basketball season.

        Corporate Overhead Expenses. Our corporate overhead expenses were $14.5
million in 1998. This represented an increase of $4.5 million, or 45%, from
1997. This increase was mainly due to increased personnel costs, increased
travel costs, increased insurance costs, and higher utilization of outside
services.

        Operating Cash Flow. Our Operating Cash Flow decreased from $60.4
million to $47.6 million. The decrease in Operating Cash Flow from our
television broadcasting and sports & entertainment segments and the increase in
our corporate overhead expenses were partially offset by the increase in our
Operating Cash Flow from our outdoor and radio broadcasting segments. Operating
Cash Flow as a percentage of net revenue decreased to 19% in 1998 from 22% in
1997.

        Depreciation and Amortization Expenses. Our depreciation and
amortization expenses were $16.6 million in 1998. This represented an increase
of $0.5 million, or 3%, from 1997.

        Interest Expense. Our interest expense was $25.1 million in 1998. This
represented a decrease of $1.1 million, or 4%, from 1997. This decrease is
primarily due to lower average interest rates and interest income from our
interest rate swap agreements in 1998.

        Stock Compensation Expense. In 1998, we recognized stock compensation
expense of $0.5 million, primarily relating to the amendment of certain stock
option agreements. In 1997,



                                       46
<PAGE>   48

we recognized stock compensation expense of $9.3 million, which was primarily
due to the conversion of certain incentive stock options into nonqualified stock
options.

        Net Gain on Disposition of Assets. In 1998, we recognized a gain of
$33.5 million relating to the sale of our airport advertising operations. There
was no gain on disposition of assets in 1997.

Litigation Adjustment. In 1997, we reduced an accrual for litigation expense by
$5.0 million. There was no such adjustment in 1998.

        Income Tax Expense. Our income tax expense was $15.5 million in 1998,
which represented an effective rate of 40%. In 1997, we incurred an income tax
benefit of $19.2 million, which primarily resulted from the recognition of our
deferred tax asset.

        Extraordinary Item. In 1998, we redeemed our 10.75% Senior Secured Notes
with proceeds under the 1998 Credit Agreement. This transaction resulted in a
charge of $4.3 million, net of taxes, consisting of prepayment fees and the
write-off of deferred financing costs. There were no extraordinary items in
1997.

        Net Income. Our net income was $19.2 million in 1998. This represented a
decrease of $13.7 million, or 42%, from 1997. Net income as a percentage of net
revenue decreased to 8% in 1998 from 12% in 1997.

LIQUIDITY AND CAPITAL RESOURCES

        On January 22, 1999, we replaced the $300.0 million 1998 Credit
Agreement with the new $325.0 million 1999 Credit Agreement, consisting of a
$150.0 million term loan facility (the "Term Loan") and a $175.0 million
revolving credit facility (the "Revolver"), which includes up to $10.0 million
in standby letters of credit. This transaction resulted in a charge of
approximately $0.6 million, net of taxes, consisting of the write-off of
deferred financing costs.

        Under the 1999 Credit Agreement, we can choose to have interest
calculated at rates based on either a base rate of LIBOR plus defined margins
which vary based on our total leverage ratio. As of December 31, 1999, the
weighted average interest rate of borrowings under the 1999 Credit Agreement was
approximately 9.00%.

        As of December 31, 1999, we had borrowed $150.0 million of the Term Loan
and $43.0 million of the Revolver. Principal repayments under the Term Loan are
due quarterly from March 31, 2000 through December 31, 2005. The Revolver
requires scheduled annual commitment reductions, with required principal
repayments of outstanding amounts in excess of the commitment levels, quarterly
beginning March 31, 2001.

        On February 24, 1999, we issued additional 9% Senior Subordinated Notes
due 2009 in the aggregate principal amount of $25.0 million. The total aggregate
amount of 9% Senior Subordinated Notes issued and outstanding is $200.0 million.
The 9% Senior Subordinated Notes bear interest at 9%, which is payable
semi-annually in January and July. Principal is payable in full in January 2009.



                                       47
<PAGE>   49

        On March 15, 1999, we redeemed the $20.0 million outstanding principal
of our 10.48% Senior Subordinated Notes due 2000 with borrowings under the
Revolver. This transaction resulted in a charge of approximately $0.8 million,
net of taxes, consisting of prepayment fees and the write-off of deferred
financing costs.

        On August 6, 1999, we issued 3,000,000 shares of common stock at a price
of $15.25 per share pursuant to an underwritten public offering. Our net
proceeds were approximately $42.9 million, which were used primarily to repay
borrowings outstanding under the Revolver. On September 7, 1999, we received
approximately $3.6 million in net proceeds from the issuance of 250,000 shares
of common stock upon the exercise of the underwriters' overallotment option,
which were also used to repay borrowings under the Revolver. Subject to the
terms of the 1999 Credit Agreement, we are entitled to make further borrowings
under the Revolver. Borrowings under the Revolver have historically been used
for general corporate purposes, including acquisitions and capital expenditures.

        On August 6, 1999, we received proceeds of $2.0 million upon the
termination of an interest rate swap agreement with a notional principal amount
of $70.0 million.

        During 1999, we purchased the assets of an outdoor advertising company
in the Boston-Worcester, Massachusetts market and television stations KVIQ,
KMTR, WOKR, and KTVF. These acquisitions were financed with borrowings under our
1998 and 1999 Credit Agreements. In addition, we exchanged television station
KKTV for television station KCOY and $9.0 million in cash. These transactions
are more fully described in Note 3 to the Consolidated Financial Statements.

        We have pledged substantially all of our subsidiaries' outstanding stock
and assets as collateral for amounts due under the 1999 Credit Agreement. Thus,
if we default under the 1999 Credit Agreement, the lenders may take possession
of and sell substantially all of our subsidiaries and their assets.

        In addition, the 1999 Credit Agreement and the 9% Senior Subordinated
Notes restrict, among other things, our ability to borrow, pay dividends,
repurchase outstanding shares of our stock, and sell or transfer our assets.
They also contain restrictive covenants requiring us to maintain certain
financial ratios.

        Our working capital increased to $21.7 million at December 31, 1999 from
$15.7 million at December 31, 1998. This increase was primarily due to increased
accounts receivable, increased prepaid expenses, and decreased deferred revenue
relating to the commencement of a full basketball season in the fourth quarter
of 1999 in contrast to the delayed season in 1998 as a result of the NBA
lockout.

        Capital expenditures were $29.1 million in 1999, compared to $32.7
million in 1998. Capital expenditures in 1999 were primarily for broadcasting
equipment, computer equipment, and advertising signs. Our management anticipates
that 2000 capital expenditures, consisting primarily of broadcast equipment,
buildings and leasehold improvements, and other capital additions, will be
between $30.0 million to $35.0 million. This includes the expansion of our



                                       48
<PAGE>   50

radio broadcasting and sports & entertainment operating facilities in Seattle
and our outdoor advertising operating facilities in Portland. This
forward-looking statement is, however, subject to the qualification set forth
under "Forward-Looking Statements" above.

        For the periods presented, we financed our working capital needs
primarily from cash provided by operating activities and bank borrowings. Over
those periods, our long-term liquidity needs, including for acquisitions and to
refinance our indebtedness, have been financed through additions to our
long-term debt, principally through bank borrowings and the sale of senior and
subordinated debt securities and, to a lesser extent, through issuance of common
stock. Capital expenditures for new property and equipment have been financed
with both cash provided by operating activities and long-term debt. Cash used in
operating activities was $0.2 million in 1999, which represented a decrease from
cash provided by operating activities of $14.8 million in 1998.

SUBSEQUENT EVENTS

        During the first quarter of 2000, we entered into the following
transactions:

        Sale of Florida Outdoor Advertising Operations. On January 5, 2000, we
sold substantially all of our assets of our outdoor advertising operations
serving the Miami-Fort Lauderdale and West Palm Beach-Fort Pierce, Florida
markets for approximately $300.0 million in cash, plus the assumption of certain
liabilities. We expect to recognize a gain on the transaction of approximately
$273.3 million. Concurrent with the transaction, we applied net proceeds from
the sale to fully repay outstanding borrowings under the 1999 Credit Agreement,
consisting of $43.0 million under the Revolver and $150.0 million under the Term
Loan. These transactions are more fully described in Notes 3 and 7 to the
Consolidated Financial Statements.

        Acquisitions and Local Marketing Agreements. In January and February
2000, we acquired two outdoor advertising companies and two television stations.
We also entered into local marketing agreements to provide programming and sales
services to two additional television stations. These transactions are more
fully described in Note 3 to the Consolidated Financial Statements.

        Dividend Declaration. On February 15, 2000, our Board of Directors
declared an annual cash dividend of $.02 per share payable on April 14, 2000 to
shareholders of record as of March 23, 2000.

        Award of WNBA Expansion Team. We have been awarded operating rights to a
WNBA expansion team, the Seattle Storm, which is scheduled to play its first
game on May 31, 2000.

QUARTERLY VARIATIONS

        Our results of operations may vary from quarter to quarter due in part
to the timing of acquisitions or dispositions and to seasonal variations in the
operations of the television broadcasting, radio broadcasting, and sports &
entertainment segments. In particular, our net revenue and Operating Cash Flow
historically have been affected positively during the NBA



                                       49
<PAGE>   51

basketball season (the first, second, and fourth quarters) and by increased
advertising activity in the second and fourth quarters.

TAXES

        At December 31, 1999, we had a net operating loss carryforward for
federal income tax purposes of approximately $17.7 million that expires in the
years 2006, 2007, and 2014, and an alternative minimum tax credit carryforward
of approximately $2.8 million.

INFLATION

        The effects of inflation on our costs generally have been offset by our
ability to correspondingly increase our rate structure.

NEW ACCOUNTING STANDARD

        In June 1999, the Financial Accounting Standards Board issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133. The Statement deferred for one
year the effective date of Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. Statement No. 133 will now apply to all
fiscal quarters of all fiscal years beginning after June 15, 2000. The impact of
the Statement is currently being studied, and the effect of the new statement on
the financial statements has not been determined.

YEAR 2000

        The Year 2000 or Y2K problem is a result of the inability of computer
software programs to recognize the year 2000, as most programs and systems were
designed to store calendar years in the 1900s by assuming the "19" and storing
only the last two digits of the year. As we have reported in the past, we have
spent considerable effort in preparing for Y2K in the period leading up to
January 1, 2000.

        We have not experienced any significant Y2K problems and have not been
informed of any material Y2K problems by our customers or vendors. However,
although January 1, 2000 is past, it is possible that some problems have gone
undetected, or that other dates in the future may further affect computer
software and systems, or equipment with embedded chip technology.

        We will continue to monitor the Y2K compliance of our own computer
systems and equipment with embedded technology, as well as any Y2K related
problems that may be reported to us by third parties with whom we do business.

        As discussed in our Form 10-Q for the fiscal quarter ended September 30,
1999, the estimated costs of remediation associated with the Y2K issue were
$750,000. We believe, based on our review of such costs to March 1, 2000, that
total remediation costs will not be materially higher than the amount previously
estimated. However, as noted above, it is possible that additional costs will be
incurred in connection with Y2K problems that may still occur in the future.



                                       50
<PAGE>   52

               ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

        Our interest income and expense are most sensitive to changes in the
general level of interest rates. In this regard, changes in LIBOR and U.S.
interest rates affect the interest earned on our cash equivalents as well as
interest paid on our debt. To mitigate the impact of fluctuations in interest
rates, we generally maintain a portion of our debt as fixed rate in nature
either by borrowing on a long-term basis or entering into interest rate swap
transactions.

        The table below provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates, which consist of interest rate swaps and debt obligations for
the years ended December 31, 1999 and 1998. For debt obligations, the table
presents principal cash flows and related weighted average interest rates by
maturity dates. For interest rate swaps, the table presents notional amounts and
weighted average interest rates by expected (contractual) maturity dates.
Notional amounts are used to calculate the contractual payments to be exchanged
under the contracts.

                            INTEREST RATE SENSITIVITY
                PRINCIPAL (NOTIONAL) AMOUNT BY EXPECTED MATURITY
                          AVERAGE INTEREST (SWAP) RATE
--------------------------------------------------------------------------------
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                      There-
1999:                            2000         2001        2002      2003     2004      after       Total     12/31/99
                             -----------    --------    -------   -------   -------   --------    --------   --------
<S>                          <C>            <C>         <C>       <C>       <C>       <C>         <C>        <C>
Long-term debt, including
current portion
   Fixed rate                         --          --         --        --        --   $200,000    $200,000   $194,000
   Average interest rate              --          --         --        --        --       9.00%
   Variable rate             $     7,500    $ 19,300    $31,100   $38,600   $48,250   $ 48,250    $193,000   $193,000
   Average Interest Rate              (a)         (a)        (a)       (a)       (a)        (a)

Interest rate swaps
Pay fixed/receive variable            --    $130,000         --        --        --         --    $130,000   $  4,892
Average pay rate                      --        4.60%        --        --        --         --
Average receive rate                  --        6.20%        --        --        --         --

                                                                                      There-
1998:                            1999         2000        2001      2002     2003      after       Total     12/31/98
                             -----------    --------    -------   -------   -------   --------    --------   --------

Long-term debt, including
current portion
   Fixed rate                $    20,000          --         --        --        --   $175,000    $195,000   $195,875
   Average interest rate           10.48%         --         --        --        --       9.00%
   Variable rate                      --    $  7,500    $15,000   $22,500   $ 6,811         --    $ 51,811   $ 51,811
   Average Interest Rate              --          (a)        (a)       (a)       (a)        --

Interest rate swaps
Pay fixed/receive variable   $   200,000          --         --        --        --         --    $200,000   $  2,706
Average pay rate                    4.61%         --         --        --        --         --
Average receive rate                5.20%         --         --        --        --         --
</TABLE>

(a)  The interest rate is based on a base rate or LIBOR plus defined margins
     which vary based on our total leverage ratio.



                                       51

<PAGE>   53

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Information called for by this item is included in Item 14, pages F-1
through F-27.

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

                                      None.



                                       52
<PAGE>   54

                                    PART III

          ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


        For information concerning our directors and certain executive officers,
see the sections entitled "Item 1 - Election of Directors" and "Management
Information" in our definitive Proxy Statement dated March 31, 2000, which is
incorporated into this section 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 sections
entitled "Item 1 - Election of Directors" and "Management Information" in our
definitive Proxy Statement dated March 31, 2000, which information is
incorporated into this section by reference.


                     ITEM 12 - SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

        As of March 15, 2000, Barry A. Ackerley and Gabelli Funds, Inc. were the
only persons, to our knowledge, owning beneficially more than 5% of the
outstanding shares of Common Stock and Class B Common Stock. For information
concerning these shareholders' holdings as well as the security ownership of
management, see the section entitled "Management Information - Share Ownership"
in our definitive Proxy Statement dated March 31, 2000, which information is
incorporated into this section by reference.


            ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        For information concerning certain relationships and related
transactions, see the Section entitled "Management Information - Certain
Relationships and Related Transactions" in our definitive Proxy Statement dated
March 31, 2000, which information is incorporated into this section by
reference.



                                       53
<PAGE>   55

                                     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

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                    Number
                                                                                    ------
<S>                                                                                 <C>
Report of Ernst & Young, LLP, Independent Auditors.....................................F-1

Consolidated balance sheets as of December 31, 1999 and 1998...........................F-2

Consolidated statements of income for the years ended
December 31, 1999, 1998 and 1997.......................................................F-3

Consolidated statements of stockholders' equity (deficiency) for
the years ended December 31, 1999, 1998 and 1997.......................................F-4

Consolidated statements of cash flows for the years ended
December 31, 1999, 1998 and 1997.......................................................F-5

Notes to consolidated financial statements.............................................F-7
</TABLE>

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.

(3)  Exhibits:

<TABLE>
<CAPTION>
Exhibit
  No.         Exhibit
-------       -------
<S>           <C>
  3.1         Fourth Restated Certificate of Incorporation.(1)

  3.2         Amended and Restated Bylaws.

  10.1        Credit Agreement dated January 22, 1999, by and among The Ackerley
              Group, Inc., certain lenders named therein, and First Union
              National Bank, Fleet Bank, N.A., Union Bank of California, N.A.,
              KeyBank National Association, and Bank of Montreal, Chicago
              Branch, as agents.(2)
</TABLE>



                                       54
<PAGE>   56

<TABLE>
<CAPTION>
Exhibit
  No.         Exhibit
-------       -------
<S>           <C>
  10.2        First Amendment to Credit Agreement, dated as of June 11, 1999,
              among The Ackerley Group, Inc., certain lenders named therein, and
              First Union National Bank, Fleet Bank, N.A., Union Bank of
              California, N.A. and KeyBank National Association, as agents.

  10.3        Second Amendment to Credit Agreement, dated as of September 10,
              1999, among The Ackerley Group, Inc., certain lenders named
              therein, and First Union National Bank, Fleet Bank, N.A., Union
              Bank of California, N.A. and KeyBank National Association, as
              agents.

  10.4        Third Amendment to Credit Agreement, dated as of January 7, 2000,
              among The Ackerley Group, Inc., certain lenders named therein, and
              First Union National Bank, Fleet Bank, N.A., Union Bank of
              California, N.A. and KeyBank National Association, as agents.

  10.5        Fourth Amendment to Credit Agreement, dated as of February 11,
              2000, among The Ackerley Group, Inc., certain lenders named
              therein, and First Union National Bank, Fleet Bank, N.A., Union
              Bank of California, N.A. and KeyBank National Association, as
              agents.

  10.6        Security Agreement dated January 22, 1999 between The Ackerley
              Group, Inc. and First Union National Bank, as administrative
              agent.(2)

  10.7        Pledge Agreement dated January 22, 1999 between The Ackerley
              Group, Inc. and First Union National Bank, as administrative
              agent.(2)

  10.8        Indenture dated December 14, 1998 between The Ackerley Group, Inc.
              and The Bank of New York, as Trustee, relating to the 9% Senior
              Subordinated Notes due 2009.(3)

  10.9        First Supplemental Indenture dated as of April 8, 1999 between The
              Ackerley Group, Inc., the guarantors named therein, and The Bank
              of New York, as Trustee.

  10.10       Employees Stock Option Plan, as amended and restated on May 11,
              1999.(4)

  10.11       Nonemployee-Director's Equity Compensation Plan.(5)

  10.12       Employee Stock Purchase Plan.(6)

  10.13       Premises Use and Occupancy Agreement between The City of Seattle
              and SSI Sports, Inc. dated March 2, 1994.(7)

  10.14       Purchase and Sale Agreement between Sky Sites, Inc. and Ackerley
              Airport Advertising, Inc., dated as of May 19, 1998.(8)
</TABLE>



                                       55
<PAGE>   57

<TABLE>
<CAPTION>
Exhibit
  No.         Exhibit
-------       -------
<S>           <C>
  10.15       Purchase and Sale Agreement between Sinclair Communications, Inc.
              and The Ackerley Group, Inc., dated as of September 25, 1998.(9)

  10.16       Asset Purchase Agreement dated as of November 10, 1999 between AK
              Media, Inc. and Eller Media Company.(10)

  10.17       Amendment No. 1 to Asset Purchase Agreement dated as of December
              28, 1999 between AK Media, Inc., AK Florida, Inc. and Eller Media
              Company.(10)

  21          Subsidiaries of The Ackerley Group.

  23          Consent of Independent Auditors.

  27          Financial Data Schedule.
</TABLE>

-----------------
(1)   Incorporated by reference to Exhibit 3.0 to The Ackerley Group's Quarterly
      Report on Form 10-Q for the quarter ended March 31, 1998.

(2)   Incorporated by reference to Exhibits 10.1, 10.2, and 10.3,
      respectively, to Amendment No. 1 to The Ackerley Group's Registration
      Statement on Form S-4 (Registration No. 333-71583), filed March 10, 1999.

(3)   Incorporated by reference to Exhibit 4.1 to The Ackerley Group's
      Registration Statement on Form S-4 (Registration No. 333-71583), filed
      February 2, 1999.

(4)   Incorporated by reference to Exhibit 10 to The Ackerley Group's Quarterly
      Report on Form 10-Q for the quarter ended March 31, 1999.

(5)   Incorporated by reference to Exhibit 99.1 to The Ackerley Group's
      Registration Statement on Form S-8, filed on May 14, 1996.

(6)   Incorporated by reference to Exhibit 4.1 to The Ackerley Group's
      Registration Statement on Form S-8, filed on December 27, 1999.

(7)   Incorporated by reference to Exhibit 10.22 to The Ackerley Group's 1994
      Annual Report of Form 10-K.

(8)   Incorporated by reference to Exhibit 10 to The Ackerley Group's Current
      Report on Form 8-K, filed on July 15, 1998.

(9)   Incorporated by reference to Exhibit 10 to The Ackerley Group's Quarterly
      Report on Form 10-Q for the quarter ended September 30, 1998.

(10)  Incorporated by reference to Exhibits 10.1 and 10.2, respectively, to The
      Ackerley Group's Current Report on Form 8-K, filed on January 12, 2000.


(b)     Reports on Form 8-K.

        No reports on Form 8-K were filed during the fourth quarter of the year
        ended December 31, 1999.



                                       56
<PAGE>   58

(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.



                                       57
<PAGE>   59

                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, The Ackerley Group has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 29th
day of March, 2000.


                                       THE ACKERLEY GROUP, INC.



                                       By: /s/ BARRY A. ACKERLEY
                                          ----------------------------------
                                       Barry A. Ackerley, Chairman 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
Ackerley Group and in the capacities and on the dates indicated, on the 29th
day of March, 2000.


<TABLE>
<S>                                         <C>
A Majority of the Board of Directors:       Principal Executive Officer:


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


/s/ GAIL A. ACKERLEY
-------------------------------------
Gail A. Ackerley, Co-Chairman
                                            Principal Financial Officer:


/s/ CHRISTOPHER H. ACKERLEY                 /s/ DENIS M. CURLEY
-------------------------------------       -------------------------------------
Christopher H. Ackerley, Director           Denis M. Curley, Co-President, Chief
                                            Operating Officer and Chief Financial
                                            Officer, Treasurer and Secretary


/s/ EDWARD G. ACKERLEY
-------------------------------------
Edward G. Ackerley, Director
                                            Principal Accounting Officer:


/s/ DEBORAH L. BEVIER                       /s/ KEITH W. RITZMANN
-------------------------------------       -------------------------------------
Deborah L. Bevier, Director                 Keith W. Ritzmann, Senior Vice President
                                            and Chief Technology Officer, Assistant
                                            Secretary and Controller

/s/ CHRIS W. BIRKELAND
-------------------------------------
Chris W. Birkeland, Director
</TABLE>



                                       58
<PAGE>   60

/s/ KIMBERLEY ACKERLEY CLEWORTH
-------------------------------------
Kimberley Ackerley Cleworth, Director


/s/ KEITH GRINSTEIN
-------------------------------------
Keith Grinstein, Director

/s/ MICHAEL T. LENNON
-------------------------------------
Michael T. Lennon, Director

/s/ MICHEL C. THIELEN
-------------------------------------
Michel C. Thielen, Director


*By: _________________________________
 Attorney-in-Fact




                                       59
<PAGE>   61

                REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS



The Board of Directors and Shareholders
The Ackerley Group, Inc.



We have audited the accompanying consolidated balance sheets of The Ackerley
Group, Inc., as of December 31, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity (deficiency), and cash flows for each
of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Ackerley
Group, Inc. at December 31, 1999 and 1998, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.

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


Seattle, Washington
February 1, 2000 except for Note 3, as to which
  the date is February 22, 2000



                                      F-1
<PAGE>   62

                            THE ACKERLEY GROUP, INC.

                           CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                     ASSETS
                                                                         December 31,
                                                                   -----------------------
                                                                      1999          1998
                                                                   ---------     ---------
                                                                        (In thousands)
<S>                                                                <C>           <C>
Current assets:
    Cash and cash equivalents                                      $   2,808     $   4,630
    Accounts receivable, net of allowance
      (1999-$1,865, 1998-$1,435)                                      61,133        44,680

    Current portion of broadcast rights                                6,752         7,339
    Prepaid expenses                                                  15,777        10,212
    Deferred tax asset                                                13,819         4,497
    Other current assets                                               3,607         3,883
                                                                   ---------     ---------
        Total current assets                                         103,896        75,241

Property and equipment, net                                          142,851       113,108
Goodwill, net                                                        219,478        70,034
Other intangibles, net                                                22,899         7,780
Other assets                                                          39,312        49,963
                                                                   ---------     ---------
        Total assets                                               $ 528,436     $ 316,126
                                                                   =========     =========

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
    Accounts payable                                               $   6,827     $   8,004
    Accrued interest                                                  10,936           694
    Accrued wages and commissions                                      5,475         1,353
    Other accrued liabilities                                         10,902        10,508
    Deferred revenue                                                  21,067        27,736
    Current portion of broadcasting obligations                        8,242         8,139
    Litigation accrual                                                 7,911            --
    Current portion of long-term debt                                 10,832         3,101
                                                                   ---------     ---------
        Total current liabilities                                     82,192        59,535
Long-term debt, less current portion                                 403,761       266,999
Litigation accrual                                                        --         8,016
Other long-term liabilities                                           15,194         7,417
                                                                   ---------     ---------
        Total liabilities                                            501,147       341,967
Commitments and contingencies
Stockholders' equity (deficiency)
    Common stock, par value $.01 per share--authorized
      50,000,000 shares; issued 1999-25,251,419 and
      1998-21,951,380 shares; and outstanding 1999-23,876,473            252           219
      and 1998-20,576,434

    Class B common stock, par value $.01 per share--authorized
      11,406,510 shares; issued and outstanding 1999-11,088,730
      and 1998-11,051,230 shares                                         111           111

    Capital in excess of par value                                    57,478        10,339
    Accumulated deficit                                              (20,463)      (26,421)
    Less common stock in treasury, at cost (1,374,946 shares)        (10,089)      (10,089)
                                                                   ---------     ---------
      Total stockholders' equity (deficiency)                         27,289       (25,841)
                                                                   ---------     ---------
        Total liabilities and stockholders' equity (deficiency)    $ 528,436     $ 316,126
                                                                   =========     =========
</TABLE>

                             See accompanying notes



                                      F-2
<PAGE>   63

                                   THE ACKERLEY GROUP, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                         -------------------------------------
                                                            1999          1998          1997
                                                         ---------     ---------     ---------
                                                        (In thousands, except per share amounts)
<S>                                                      <C>           <C>           <C>
Revenue                                                  $ 315,319     $ 292,907     $ 306,169
Less agency commissions and discounts                       37,131        36,256        34,994
                                                         ---------     ---------     ---------
Net revenue                                                278,188       256,651       271,175

Expenses (other income):
    Operating expenses                                   $ 227,697       209,030       210,752
    Restructuring expenses                                   1,125            --            --
    Amortization expense                                    14,167         4,839         4,146
    Depreciation expense                                    14,181        11,735        11,957
    Interest expense                                        35,632        25,109        26,219
    Stock compensation expense                                 559           452         9,344
    Net gain on dispositions of assets                     (28,999)      (33,524)           --
    Litigation adjustment                                       --            --        (5,000)
                                                         ---------     ---------     ---------
Total expenses and other income                            264,362       217,641       257,418

Income before income taxes and extraordinary item           13,826        39,010        13,757
Income tax expense (benefit)                                 5,863        15,487       (19,172)
                                                         ---------     ---------     ---------
Income before extraordinary item                             7,963        23,523        32,929
Extraordinary item:  loss on debt extinguishment,
    net of taxes 1999-$842 and 1998-$2,491                  (1,373)       (4,346)           --
                                                         ---------     ---------     ---------
Net income                                               $   6,590     $  19,177     $  32,929
                                                         =========     =========     =========

Earnings per common share:
Income per common share, before extraordinary item       $     .24     $     .75     $    1.05
Extraordinary item:  loss on debt extinguishment              (.04)         (.14)           --
                                                         ---------     ---------     ---------
Net income per common share                              $     .20     $     .61     $    1.05
                                                         =========     =========     =========

Earnings per common share - assuming dilution:
Income per common share, before extraordinary item       $     .24     $     .74     $    1.04
Extraordinary item:  loss on debt extinguishment              (.04)         (.14)           --
                                                         ---------     ---------     ---------
Net income per common share - assuming dilution          $     .20     $     .60     $    1.04
                                                         =========     =========     =========

Weighted average number of shares                           32,932        31,627        31,345
Weighted average number of shares - assuming dilution       33,110        31,883        31,652
</TABLE>

                             See accompanying notes



                                      F-3
<PAGE>   64

                            THE ACKERLEY GROUP, INC.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(DEFICIENCY)
                    (In thousands, except share information)


<TABLE>
<CAPTION>
                                                                 Class B                                      Common
                                      Common Stock            Common Stock        Capital in                 Stock in
                                  -------------------    ----------------------    Excess of  Accumulated    Treasury
                                    Shares     Amount      Shares        Amount    Par Value    Deficit     (at cost)     Total
                                  ----------   ------    ----------     -------     -------    --------     ---------    --------
<S>                               <C>          <C>       <C>            <C>         <C>        <C>          <C>          <C>
Balance, January 1, 1997          21,186,724    $212     11,353,810     $   114     $ 3,195    $(77,271)    $(10,089)    $(83,839)

Stock compensation, exercise
of stock options and stock
conversions                          668,674       6       (300,300)         (3)      6,621          --           --        6,624

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

Net income                                --      --             --          --          --      32,929           --       32,929
                                  ----------    ----     ----------     -------     -------    --------     --------     --------

Balance, December 31, 1997        21,855,398     218     11,053,510         111       9,816     (44,965)     (10,089)     (44,909)

Stock compensation, exercise
of stock options and stock
conversions                           95,982       1         (2,280)         --         523          --           --          524

Cash dividend, $0.02 per                  --      --             --                      --        (633)                     (633)
share

Net income                                --      --             --          --          --      19,177           --       19,177
                                  ----------    ----     ----------     -------     -------    --------     --------     --------

Balance, December 31, 1998        21,951,380     219     11,051,230         111      10,339     (26,421)     (10,089)     (25,841)

Stock compensation, exercise
of stock options and stock
conversions                           50,039      --         37,500          --         693          --           --          693

Stock issued at $15.25 per
share, net of stock issuance
costs of $3,084                    3,250,000      33             --          --      46,446          --           --       46,479

Cash dividend, $0.02 per share            --      --             --          --          --        (632)          --         (632)

Net income                                --      --             --                      --       6,590                     6,590
                                  ----------    ----     ----------     -------     -------    --------     --------     --------

Balance, December 31, 1999        25,251,419    $252     11,088,730     $   111     $57,478    $(20,463)    $(10,089)    $ 27,289
                                  ==========    ====     ==========     =======     =======    ========     ========     ========
</TABLE>


                             See accompanying notes



                                      F-4
<PAGE>   65

                            THE ACKERLEY GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>

                                                                       Year Ended December 31,
                                                               ------------------------------------
                                                                  1999          1998          1997
                                                               ---------     ---------     --------
                                                                           (In thousands)
<S>                                                            <C>           <C>           <C>
Cash flows from operating activities:
Reconciliation of net income to net cash provided by
  (used in) operating activities:
    Net income                                                 $   6,590     $  19,177     $ 32,929
    Adjustment to reconcile net income to net
    cash provided by operating activities:
        Depreciation and amortization                             28,348        16,574       16,103
        Net gain on dispositions of assets                       (28,999)      (33,524)        (155)
        Amortization of broadcast rights                          11,094        10,283        8,957
        Deferred tax expense (benefit)                             5,453        15,130      (19,798)
        Stock compensation expense                                   559           452        9,344
        Litigation adjustment                                         --            --       (5,000)
        Loss on debt extinguishment, net of taxes                  1,373          (394)          --
        Amortization of deferred financing costs                   1,648           713        1,790
        Income from barter transactions                           (1,785)       (1,645)      (1,535)
        Gain on termination of interest rate
          swap agreement                                            (371)           --           --
    Change in assets and liabilities:
        Accounts receivable                                      (13,184)        7,760       (9,169)
        Prepaid expenses                                          (5,353)        1,958          976
        Other current assets and other assets                      1,413        (3,545)      (3,418)
        Accounts payable, accrued interest, and
          accrued wages and commissions                           13,154        (7,239)       4,260
        Other accrued liabilities and other
         long-term liabilities                                    (2,560)       (3,282)      (1,803)
        Deferred revenues                                         (6,669)        3,879        3,807
        Current portion of broadcast obligations                 (10,878)      (11,453)      (9,278)
                                                               ---------     ---------     --------
    Net cash provided by (used in) operating activities             (167)       14,844       28,010
Cash flows from investing activities:
    Proceeds from disposition of assets                           13,423        41,237           --
    Proceeds from sale of property and equipment                     510           294          275
    Payments for acquisitions                                   (166,625)      (55,759)      (2,483)
    Capital expenditures                                         (29,114)      (32,719)     (17,593)
    Payments for investments                                      (5,000)           --           --
                                                               ---------     ---------     --------
        Net cash used in investing activities                   (186,806)      (46,947)     (19,801)
Cash flows from financing activities:
    Borrowings under credit agreements                           309,063       461,100       27,000
    Repayments under credit agreements                          (163,704)     (419,588)     (33,283)
    Payments under capital lease obligations                        (903)         (765)        (817)
    Note redemption prepayment fees                               (1,208)           --           --
    Dividends paid                                                  (632)         (633)        (623)
    Payments of deferred financing costs                          (6,083)       (7,109)          --
    Net proceeds from stock issuance                              46,613            72          260
    Proceeds from termination of interest rate
      swap agreement                                               2,005            --           --
                                                               ---------     ---------     --------
        Net cash provided by (used in) financing activities      185,151        33,077       (7,463)
                                                               =========     =========     ========
</TABLE>



                                      F-5
<PAGE>   66

<TABLE>
<S>                                                            <C>           <C>           <C>
Net increase (decrease) in cash and cash equivalents              (1,822)          974          746
Cash and cash equivalents at beginning of period                   4,630         3,656        2,910
                                                               ---------     ---------     --------
    Cash and cash equivalents at end of period                 $   2,808     $   4,630     $  3,656
                                                               =========     =========     ========
</TABLE>




                                      F-6
<PAGE>   67

                            THE ACKERLEY GROUP, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                                     ---------------------------------
                                                       1999         1998         1997
                                                     -------      -------      -------
                                                              (In thousands)
<S>                                                  <C>          <C>          <C>
Supplemental cash flow information:
    Interest paid, net of capitalized interest       $22,073      $27,697      $23,163
    Income taxes paid                                    670        1,069          836
    Noncash transactions:
        Broadcast rights acquired and broadcast
         obligations assumed                         $ 7,531      $ 8,828      $12,201
        Property and equipment acquired through
         barter                                          969        1,234        1,053
        Exchange of television station assets         24,000           --           --
</TABLE>


                             See accompanying notes



                                      F-7

<PAGE>   68


                            THE ACKERLEY GROUP, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



1.      Summary of significant accounting policies

        (a) Organization - The Ackerley Group, Inc. and its subsidiaries (the
"Company") is a diversified media and entertainment company that engages in four
principal business segments: (i) outdoor media, (ii) television broadcasting;
(iii) radio broadcasting; and (iv) sports & entertainment. The Company currently
conducts its outdoor media advertising operations principally in the markets of
Seattle-Tacoma, Washington; Portland, Oregon; and Boston-Worcester,
Massachusetts. The Company currently owns twelve television stations and
provides programming and sales services to three television stations located in
New York, California, Oregon, Washington, and Alaska. The Company currently owns
two AM and two FM radio stations and provides sales and other services to a
third FM radio station in the Seattle-Tacoma market. The sports & entertainment
segment includes ownership of the Seattle SuperSonics, a franchise of the
National Basketball Association, and the Seattle Storm, a WNBA expansion team.

        (b) Principles of consolidation - The accompanying financial statements
consolidate the accounts of the Company, all of which are wholly-owned. All
significant intercompany transactions have been eliminated in consolidation.

        (c) Revenue recognition - Outdoor 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 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 games are played.

        (d) Barter transactions - The Company also accepts nonmonetary
compensation, such as goods and services, for its advertising space or time.
These barter transactions are recorded at the estimated fair value of the asset
or service received. Revenue is recognized when the advertising is provided and
assets or expenses are recorded when assets are received or services are used.
Goods and services due to the Company in excess of advertising provided are
recorded in other current assets. Advertising to be provided in excess of goods
and services received are recorded in other accrued liabilities.

        (e) Property and equipment - Property and equipment are carried at cost.
The Company depreciates large groups of assets with homogeneous characteristics
and useful lives. Under group depreciation, no gain or loss on disposals is
recognized unless the asset group is fully depreciated. For assets accounted for
under group depreciation, the Company recognizes gains on disposals primarily
from proceeds received from condemnations of fully-depreciated advertising
structures. The Company recognizes gains and losses on disposals of individual,
non-homogeneous assets. 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-8
<PAGE>   69

        (f) Intangible assets - Intangible assets are carried at cost and
amortized principally on the straight-line method over estimated useful lives.
Goodwill represents the cost of acquired businesses in excess of amounts
assigned to certain tangible and intangible assets at the dates of acquisition.
Long-lived assets (including related goodwill and other intangible assets) are
reviewed on a regular basis for the existence of facts or circumstances that may
suggest impairment. If such impairment is identified, the impairment loss will
be measured by comparing the estimated future undiscounted cash flows to the
asset's carrying value. To date, no such impairment has been identified.

        (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 for the gross amount
of the contract at the time the rights are available for broadcasting. Broadcast
rights 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. Broadcast
obligations are stated at contractual amounts and balances due within one year
are reported as current obligations.

        (h) Stock based compensation - The Company generally 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 compensation expense for incentive stock option grants using the
intrinsic method.

        (i) Earnings per share - Basic earnings per share excludes dilution and
is computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflect the potential dilution that could occur if options and rights to
purchase common stock were exercised.

        The dilutive effects of the weighted-average number of shares
representing options and rights included in the calculation of diluted earnings
per share were 177,587 shares, 256,079 shares, and 306,982 shares in 1999, 1998,
and 1997, respectively. There were no differences between net income amounts
used to calculate basic and diluted earnings per share for any of the periods
presented.

        (j) 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.

        (k) 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 carrying value of financial instruments, which include
cash, receivables, payables, and long-term debt, approximates fair value at
December 31, 1999.



                                      F-9
<PAGE>   70

        The Company uses interest rate swap agreements to modify the interest
rate characteristics of its long-term debt. Each interest rate swap agreement is
designated with all or a portion of the principal balance and term of a specific
debt obligation. These agreements generally involve the exchange of floating for
fixed-rate payment obligations over the life of the agreement without an
exchange of 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 net amount payable to or
receivable from counterparties is included in accrued interest. The fair values
of the swap agreements and changes in their fair value as a result of changes in
market interest rates are not recognized in the financial statements. Gains and
losses on termination of interest rate swap agreements are deferred and
amortized as an adjustment to interest expense related to the debt over the
remaining term of the original contract life of the terminated swap agreement.

        (l) 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.

        (m) Reclassifications - Certain prior years' amounts have been
reclassified to conform to the 1999 presentation.

2.      New accounting standard

        In June 1999, the Financial Accounting Standards Board issued Statement
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133. The statement deferred for one
year the effective date of Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. Statement No. 133 will now apply to all
fiscal quarters of all fiscal years beginning after June 15, 2000. The impact of
the statement is currently being studied, and the effect of the new statement on
the financial statements has not been determined.

3.      Acquisitions and dispositions

        Partnership Redemption. The Company's wholly-owned subsidiary, KJR
Radio, Inc., was a limited partner in New Century Seattle Partners, L.P. (the
"Partnership") which owned and operated radio stations in the Seattle-Tacoma
area. On February 17, 1998, the Partnership redeemed the limited partnership
interests and satisfied certain other obligations of the former limited partners
for $18.0 million. Effective April 30, 1998, the Partnership redeemed all the
interests of Century Management, Inc., its general partner, for approximately
$17.8 million. Upon closing, KJR Radio, Inc. became the Partnership's sole
general partner and licensee of the radio stations held by the Partnership and
at that same time, AK Media Group, Inc., the Company's principal operating
subsidiary, became the Partnership's nominal and sole limited partner. Effective
December 31, 1998, the Partnership was dissolved and KJR Radio, Inc. was merged
into AK Media Group. Inc.

        Sale of Airport Advertising Operations. On June 30, 1998, the Company
sold substantially all of the assets of its airport advertising operations to
Sky Sites, Inc., a subsidiary



                                      F-10
<PAGE>   71

of Havas, S.A., pursuant to an agreement dated May 19, 1998. The sale price
consisted of a base cash price of $40.0 million, paid on the closing date of the
transaction, and an additional cash payment of approximately $2.8 million, of
which $1.2 million was paid in December 1998 and the remainder was paid in
January 1999. The pre-tax gain recognized from this transaction was
approximately $33.5 million in 1998 and approximately $1.6 million in 1999.

        Acquisition of WIVT(TV). On August 31, 1998, the Company exercised its
option to purchase the assets of WIVT(TV), the ABC affiliate licensed to
Binghamton, New York, for $9.0 million. The Company recorded net assets with
estimated fair values aggregating $1.2 million and goodwill of $7.8 million. The
Company previously provided programming and sales services under a local
marketing agreement with the previous owner.

        Acquisition of Outdoor Advertising Company in Miami, Florida. On
September 4, 1998, the Company purchased substantially all of the assets of an
outdoor advertising company in Miami, Florida for approximately $2.4 million.

        Acquisition of KVIQ(TV). On January 5, 1999, the Company purchased
substantially all of the assets of KVIQ(TV), the CBS affiliate licensed to
Eureka, California, for approximately $5.5 million, pursuant to an agreement
dated July 15, 1998. Pending closing of the transaction, the Company provided
programming and sales services under a local marketing agreement with the
previous owner. The Company recorded net assets with estimated fair values
aggregating $0.5 million and goodwill of $5.0 million in connection with the
transaction.

        Acquisition of Outdoor Advertising Company in Boston-Worcester,
Massachusetts. On February 19, 1999, the Company purchased substantially all of
the assets of an outdoor advertising company in the Boston-Worcester,
Massachusetts market for approximately $11.0 million. The Company recorded net
assets with estimated fair values aggregating $0.6 million and goodwill of $10.4
million in connection with the transaction.

        Acquisition of KMTR(TV). On March 16, 1999, the Company purchased
substantially all of the assets of KMTR(TV), the NBC affiliate licensed to
Eugene, Oregon, together with two satellite stations licensed to Roseburg and
Coos Bay, Oregon, and a low power station licensed to Eugene. The purchase price
was approximately $26.0 million. From December 1, 1998 until closing of the
transaction, the Company provided programming and sales services under a local
marketing agreement with the previous owner. The Company recorded net assets
with estimated fair values aggregating $3.0 million and goodwill of $23.0
million in connection with the transaction.

        Acquisition of WOKR(TV). On April 12, 1999, the Company purchased
substantially all of the assets of WOKR(TV), the ABC affiliate licensed to
Rochester, New York, for approximately $128.2 million. In September 1998, the
Company paid $12.5 million of the purchase price into an escrow account, with
the balance paid at closing. The Company recorded net assets with estimated fair
values aggregating $10.3 million and goodwill of $117.9 million in connection
with the transaction.

        The following table summarizes, on an unaudited pro forma basis, the
consolidated results of operations of the Company for the year ended December
31, 1999 and 1998, giving pro



                                      F-11
<PAGE>   72

forma effect to the acquisition of WOKR(TV) as if the acquisition had been made
at the beginning of the periods presented. These pro forma consolidated
statements do not necessarily reflect the results of operations which would have
occurred had such an acquisition taken place on the date indicated.

<TABLE>
<CAPTION>
                                                     For the Year Ended December 31,
                                                     -------------------------------
                                                         1999              1998
                                                      ---------         ---------
                                                       (In thousands, except per
                                                              share amounts)
<S>                                                   <C>               <C>
Net revenue                                           $ 282,086         $ 274,941
Operating expenses                                     (231,374)         (224,052)
Income before extraordinary item                          8,078            25,441
Net income                                                6,705            21,095
Net income per common share                                 .20               .67
Net income per common share, assuming dilution              .20               .66

</TABLE>

        Exchange of KKTV(TV) for KCOY(TV). On May 1, 1999, the Company exchanged
substantially all of the assets plus certain liabilities of KKTV(TV), the CBS
affiliate licensed to Colorado Springs, Colorado, for substantially all of the
assets plus certain liabilities of KCOY(TV), the CBS affiliate licensed to Santa
Maria, California. In conjunction with the transaction, the Company received a
cash payment of approximately $9.0 million. In connection with the transaction,
the Company recorded net assets with estimated fair values aggregating $7.2
million, intangible assets of $16.8 million, and a gain of $28.6 million in the
second quarter of 1999. Pending closing of the transaction, the Company
programmed KCOY(TV) and the previous owner of KCOY(TV) programmed KKTV(TV) under
local marketing agreements.

        Sale of Radio Broadcasting Tower. On July 6, 1999, the Company sold a
radio broadcasting tower for approximately $2.8 million. In connection with the
transaction, the Company recorded a loss from disposition of assets of $1.2
million, which represented the write-down of the property and equipment's
carrying cost to fair value, in the second quarter of 1999.

        Acquisition of KTVF(TV). On August 2, 1999, the Company purchased
substantially all of the assets of KTVF(TV), the NBC affiliate licensed to
Fairbanks, Alaska, for approximately $7.2 million. The Company recorded net
assets with estimated fair values aggregating $1.8 million and goodwill of $5.4
million in connection with the transaction.

        Investment in KFNK(FM). On September 13, 1999, the Company entered into
a joint sales agreement with the owner of radio station KFNK(FM) in Eatonville,
Washington. Under the agreement, the Company pays the owner a monthly fee for
the right to sell advertising on the station. In connection with the
transaction, the Company paid $4.0 million under a put and call agreement
whereby the Company may elect, or be required by the owner, to purchase the
station's assets any time after November 2002. The gross purchase price of the
station's assets, which is primarily based on the station's ratings at the time
of the sale, ranges from $4.5 million to $11.7 million. The gross purchase price
would be reduced by the Company's $4.0 million payment under the put and call
agreement plus accrued interest.

        Sale of Florida Outdoor Advertising Operations. On January 5, 2000, the
Company sold substantially all of the assets of its outdoor advertising
operations serving the Miami-Fort



                                      F-12
<PAGE>   73

Lauderdale and West Palm Beach-Fort Pierce, Florida markets to Eller Media
Company, a subsidiary of Clear Channel Communications, Inc. for approximately
$300.0 million in cash, plus the assumption of certain liabilities.

        Sale of KCBA(TV) and Acquisition of KION (TV). On January 12, 2000, the
Company sold substantially all of the assets of KCBA(TV), the FOX affiliate
licensed to Monterey, California, for approximately $11.0 million and entered
into a local marketing agreement with the purchaser to provide programming and
sales services. Concurrent with this sale, the Company purchased substantially
all the assets of KION(TV), the CBS affiliate licensed to Salinas, California,
for approximately $7.7 million, subject to certain reductions. From April 24,
1996 until closing of the transaction, the Company provided programming and
sales services under a local marketing agreement with the previous owner.

        Acquisition of WUTR(TV). On January 20, 2000, the Company purchased
substantially all of the assets of WUTR(TV), the ABC affiliate licensed to
Utica, New York, for approximately $7.9 million. From June 30, 1997 until
closing of the transaction, the Company provided programming and sales services
under a local marketing agreement with the previous owner.

        Acquisition of Outdoor Advertising Company in Bellingham, Washington. On
January 31, 2000, the Company purchased substantially all of the assets of an
outdoor advertising company in Bellingham, Washington for approximately $2.9
million.

        Acquisition of Outdoor Advertising Company in Washington and Oregon. On
January 13, 2000, the Company entered into agreements to purchase substantially
all of the assets of an outdoor advertising company serving portions of
Washington and Oregon for approximately $14.5 million plus the assumption of
certain liabilities. The Company paid $7.5 million of the purchase price on
February 1, 2000 and the remaining balance on March 1, 2000.

        Investment in WETM(TV). On February 1, 2000, the Company entered into a
local marketing agreement with Smith Television of New York, Inc. ("STNY") to
provide programming and sales services to WETM(TV), the NBC affiliate licensed
to Elmira, New York. The Company also purchased a 20% non-voting equity interest
in the STNY for approximately $17.0 million. Beginning in August 2003, STNY may
require the Company to exchange the interest in STNY, plus $11.0 million in
cash, for all the assets of WETM(TV). Under certain circumstances, the Company
may have an option to purchase all or a controlling interest in STNY.

        Acquisition of WBGH-LP. On February 1, 2000, the Company purchased
substantially all of the assets, other than the FCC license, of WBGH-LP, a
low-power NBC affiliate licensed to Binghamton, New York, for approximately $9.0
million. The Company entered into a local marketing agreement with the FCC
licensee of WBGH-LP pending FCC approval of the transaction. Upon closing of the
transaction, the FCC license will be transferred to the Company for no
additional consideration.

        Acquisition of Outdoor Advertising Company in New Jersey and New York
City. On February 22, 2000, the Company entered into an agreement to purchase
substantially all of the



                                      F-13
<PAGE>   74

assets of an outdoor advertising company in New Jersey and New York City for
approximately $19.8 million.

        4. Accounts receivable and allowance for doubtful accounts

        As of December 31, 1999 and 1998, accounts receivable includes employee
receivables of $0.7 million and $2.4 million, respectively.

        The activity in the allowance for doubtful accounts is summarized as
follows:

<TABLE>
<CAPTION>
                                                            1999          1998
                                                          -------       -------
                                                              (In thousands)
        <S>                                               <C>           <C>
        Balance at beginning of year                      $ 1,435       $ 1,498
        Additions charged to operating expense              1,611         1,023
        Write-offs of receivables, net of recoveries       (1,181)       (1,086)
                                                          -------       -------
        Balance at end of year                            $ 1,865       $ 1,435
                                                          =======       =======
</TABLE>

5.      Property and equipment

        At December 31, 1999 and 1998, property and equipment consisted of the
following:

<TABLE>
<CAPTION>
                                                                                   Estimated
                                                       1999            1998        Useful Life
                                                    ---------       ---------      -----------
                                                         (In thousands)
       <S>                                          <C>             <C>            <C>
       Land                                         $   9,735       $   7,719
       Advertising structures                          79,171          75,023      6-20 years
       Broadcast equipment                             57,841          57,891      6-20 years
       Building and improvements                       50,310          40,387      3-40 years
       Office furniture and equipment                  32,341          26,909      5-10 years
       Transportation and other equipment              31,870          29,573      5-6 years
       Equipment under capital leases                   8,008           8,008       10 years
       Construction in progress                        11,680           7,766
                                                    ---------       ---------
                                                      280,956         253,276
       Less accumulated depreciation                  138,105         140,168
                                                    ---------       ---------
                                                    $ 142,851       $ 113,108
                                                    =========       =========
</TABLE>

6.      Intangibles

        At December 31, 1999 and 1998, intangibles consisted of the following:

<TABLE>
<CAPTION>
                                                                                  Estimated
                                                       1999            1998       Useful Life
                                                    ---------       ---------     -----------
                                                         (In thousands)
       <S>                                          <C>             <C>           <C>
       Goodwill                                     $ 245,033       $  84,032     15-40 years
       Favorable leases and contracts                  17,422          17,462       20 years
       Broadcasting agreements                          4,000           4,000       15 years
       Other                                           22,877           6,196      5-30 years
                                                 ------------    ------------
                                                      289,332         111,690
       Less accumulated amortization                   46,955          33,876
                                                 ------------    ------------
                                                    $ 242,377       $  77,814
                                                 ============    ============
</TABLE>



                                      F-14
<PAGE>   75

        The increase in intangibles in 1999 is primarily due to the recording of
goodwill and other intangibles related to the acquisitions of an outdoor
advertising company and television stations KVIQ, KMTR, WOKR, KCOY, and KTVF, as
discussed in Note 3. Goodwill related to these acquisitions is being amortized
over an estimated useful life of fifteen years.

7.      Debt

        On January 28, 1998, the Company replaced the 1996 Credit Agreement with
a $265.0 million credit agreement (the "1998 Credit Agreement") and in October
1998 used borrowings to redeem its $120.0 million 10.75% Senior Secured Notes.
This resulted in a charge of approximately $4.3 million, net of applicable taxes
of $2.5 million, consisting of prepayment fees and the write-off of deferred
financing costs.

        On December 14, 1998, the Company issued 9% Senior Subordinated Notes
due 2009 (the "9% Senior Subordinated Notes") in the aggregate principal amount
of $175.0 million. These notes were issued under an indenture which allows for
an aggregate principal amount of up to $250.0 million. These notes bear interest
at 9% which is payable semi-annually in January and July. Principal is payable
in full in January 2009.

        On January 22, 1999, the Company replaced the 1998 Credit Agreement with
a new $325.0 million credit agreement (the "1999 Credit Agreement"), consisting
of a $150.0 million term loan facility (the "Term Loan") and a $175.0 million
revolving credit facility (the "Revolver"), which includes up to $10.0 million
in standby letters of credit. The transaction resulted in a charge of
approximately $0.6 million, net of applicable taxes of $0.4 million, consisting
of the write-off of deferred financing costs.

        Principal repayments under the Term Loan are due quarterly from March
31, 2000 through December 31, 2005. The Revolver requires scheduled annual
commitment reductions, with required principal repayments of outstanding amounts
in excess of the commitment levels, quarterly beginning March 31, 2001 through
December 31, 2005.

        The Company can choose to have interest calculated at rates based on
either a base rate or LIBOR plus defined margins which vary based on the
Company's total leverage ratio. The commitment fees under the Revolver are
payable quarterly at a rate based on the Company's total leverage ratio. At
December 31, 1999, the weighted average interest rate of borrowings under the
1999 Credit Agreement was approximately 9.0%.

        On February 24, 1999, the Company issued additional 9% Senior
Subordinated Notes in the aggregate amount of $25.0 million. In connection with
the transaction, the Company recorded a premium of $1.1 million, which is being
amortized over the remaining term of the 9% Senior Subordinated Notes. The total
aggregate amount of 9% Senior Subordinated Notes issued



                                      F-15
<PAGE>   76

and outstanding is $200.0 million. At December 31, 1999, the trading price of
the 9% Senior Subordinated Note was 97.00%.

        On March 15, 1999, the Company redeemed its $20.0 million outstanding
principal of the 10.48% Senior Subordinated Notes due 2000 with borrowings under
the Revolver. This transaction resulted in a charge of approximately $0.8
million, net of applicable taxes of $0.5 million, consisting of prepayment fees
and the write-off of deferred financing costs.

        On August 6, 1999, the Company received proceeds of $2.0 million upon
the termination of an interest rate swap agreement with a notional principal
amount of $70.0 million. In connection with the transaction, the gain on the
termination of the interest rate swap agreement has been deferred and is being
amortized as an adjustment to interest expense over the remaining term of the
interest rate swap agreement's original contract life.

        On January 5, 2000, the Company applied proceeds from the sale of its
Florida outdoor advertising operations (as discussed in Note 3) to fully repay
outstanding borrowings under the 1999 Credit Agreement, consisting of $43.0
million under the Revolver and $150.0 million under the Term Loan. In connection
with the transaction, the Company amended the 1999 Credit Agreement to waive, on
a one-time basis, the mandatory requirement to apply 100% of net proceeds from
asset dispositions to permanently repay borrowings under the Revolver and to
provide for a new commitment amount under the Revolver of approximately $147.9
million. Additionally, the Company amended the 1999 Credit Agreement to provide
for a delayed-draw term loan facility of approximately $126.8 million (the "2000
Term Loan"). The Company may borrow, through no more than two separate
borrowings, the maximum amount available under the 2000 Term Loan.

        At December 31, 1999 and 1998, outstanding balances under letter of
credit agreements totaled $1.1 million and $3.8 million, respectively.

        Other debt consists primarily of notes payable related to the
acquisition of an aircraft for the Seattle SuperSonics and obligations under
deferred compensation agreements.

        At December 31, 1999 and 1998, long-term debt consisted of the
following:

<TABLE>
<CAPTION>
                                                            1999          1998
                                                          --------      --------
                                                              (In thousands)
        <S>                                               <C>           <C>
        Credit agreements                                 $193,000      $ 51,811
        Senior subordinated notes                          201,027       195,000
        Capital lease obligation (net of imputed
          interest of $648 in 1999 and $987 in 1998)         4,782         5,686
        Other debt                                          15,784        17,603
                                                          --------      --------
                                                           414,593       270,100
        Less amounts classified as current                  10,832         3,101
                                                          --------      --------
                                                          $403,761      $266,999
                                                          ========      ========
</TABLE>

        Approximately $0.8 million of interest was capitalized in 1998. There
was no capitalized interest in 1999.



                                      F-16
<PAGE>   77

        Future aggregate annual payments of long-term debt for the years ending
December 31 are as follows:

<TABLE>
<CAPTION>
                                  Credit
                                 Agreement      Capital Lease        Other
                                 and Notes        Obligation          Debt           Total
                                 ---------      -------------       --------       ---------
                                                       (In thousands)
        <S>                      <C>               <C>              <C>            <C>
        2000                     $   7,575         $    963         $  2,294       $  10,832
        2001                        19,380            1,027            2,640          23,047
        2002                        31,188            1,094            2,775          35,057
        2003                        38,695            1,698            3,013          43,406
        2004                        48,353              ---            1,429          49,782
        Later years                248,836              ---            3,633         252,469
                                 ---------         --------         --------       ---------
        Total                    $ 394,027         $  4,782         $ 15,784       $ 414,593
                                 =========         ========         ========       =========
</TABLE>

        Substantially all of the outstanding stock and material assets of the
Company's subsidiaries are pledged as collateral under the 1999 Credit
Agreement. In addition, the 1999 Credit Agreement and the indenture under the 9%
Senior Subordinated Notes restrict, among other things, the Company's
borrowings, dividend payments, stock repurchases, sales or transfers of assets
and contain certain other restrictive covenants which require the Company to
maintain certain debt coverage and other financial ratios. On January 7, 2000,
the Company obtained a waiver through June 2001 to certain provisions under the
1999 Credit Agreement.

        At December 31, 1999, the Company had outstanding interest rate contacts
with financial institutions which involve the exchange of fixed for floating
rate of LIBOR on a notional principal amount of $130.0 million. The Company's
risk in this transaction is the cost of replacing, at current market rates, the
contracts in the event of default by the counterparties. At December 31, 1999,
the fair value of the contracts, as quoted by the counterparties, were $4.9
million. Management believes the risk of incurring a loss as a result of
non-performance by the counterparties is remote as the contracts are with major
financial institutions.

8.      Income taxes

        Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. At December 31,
1999 and 1998 significant components of the Company's deferred tax assets and
liabilities are as follows:



                                      F-17
<PAGE>   78

<TABLE>
<CAPTION>
                                                       1999         1998
                                                      -------      -------
                                                          (In thousands)
        <S>                                           <C>          <C>
        Deferred tax assets:
           Net operating loss carryforwards           $ 6,329      $ 5,497
           Litigation accrual                           3,006        3,046
           Tax credit carryforwards                     2,750        2,346
           Capital lease obligation                     1,817        2,160
           Deferred compensation agreements               855          828
           Other                                        3,723        3,095
                                                      -------      -------
        Total deferred tax assets                      18,480       16,972

        Deferred tax liabilities:
           Tax over book depreciation                   8,328        7,562
           Basis difference in intangible assets        5,707          348
                                                      -------      -------
        Total deferred tax liabilities                 14,035        7,910
                                                      -------      -------

        Net deferred tax assets                       $ 4,445      $ 9,062
                                                      =======      =======
</TABLE>

        Significant components of the income tax expense (benefit) are as
follows:

<TABLE>
<CAPTION>
                                            1999         1998           1997
                                          -------      --------       --------
                                                    (In thousands)
        <S>                               <C>          <C>            <C>
        Current:
            Federal                       $   410      $    387       $    263
            State                              --           (30)           363
                                          -------      --------       --------
                                              410           357            626
        Deferred:
            Federal                         5,070        14,094        (18,235)
            State                             383         1,036         (1,563)
                                          -------      --------       --------
                                            5,453        15,130        (19,798)
                                          -------      --------       --------
        Income tax expense (benefit)      $ 5,863      $ 15,487       $(19,172)
                                          =======      ========       ========
</TABLE>

        The reconciliation of income taxes computed at the U.S. federal
statutory tax rate to income tax expense (benefit) is as follows:

<TABLE>
<CAPTION>
                                               1999        1998          1997
                                              ------      -------      --------
                                                       (In thousands)
        <S>                                   <C>         <C>          <C>
        Tax at U.S. statutory rate            $4,839      $13,654      $  4,815
        Non-deductible expenses                  659          831           929
        State taxes and other                    365        1,002           363
        Net operating loss carryforwards          --           --        (5,744)
        Change in valuation account               --           --       (19,535)
                                              ------      -------      --------
        Income tax expense (benefit)          $5,863      $15,487      $(19,172)
                                              ======      =======      ========
</TABLE>

        In 1997, the Company's valuation allowance decreased by $27.2 million,
primarily through utilization of net operating loss carryforwards and the
elimination of the remaining balance due to improved recent and anticipated
future operating results.



                                      F-18
<PAGE>   79

        At December 31, 1999, the Company has net operating loss carryforwards
for federal income tax purposes of approximately $17.7 million that expire in
the years 2006, 2007, and 2014 and alternative minimum tax credit carryforwards
of approximately $2.8 million.

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 1% to 15% of their compensation up to a limit imposed by the Internal
Revenue Code. The Company matches participating employee contributions up to 4%
of their compensation and may also make an additional voluntary contribution to
the plan. The Company's contributions totaled $1.3 million in 1999, $1.4 million
in 1998, and $1.1 million in 1997.

10.     Stockholders' equity

        During the third quarter of 1999, the Company issued 3,250,000 shares of
common stock at $15.25 per share pursuant to an underwritten public offering. In
conjunction with the transaction, the Company received net proceeds of
approximately $46.5 million.

        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. Each outstanding share of Class B common
stock may be converted into one share of common stock at any time at the option
of the stockholder.

        The Company had various stock purchase agreements to sell shares of its
common stock and Class B common stock to key employees and officers at fair
market value. These agreements expired in 1999. The agreements provided for
distribution of one share of Class B common stock at no extra cost to the holder
for each share of common stock at the time the shares were purchased. In 1998,
15,000 shares of common stock and 15,000 shares of Class B common stock were
purchased under these agreements. In 1999, the remaining 37,500 shares of common
stock and 37,500 shares of Class B common stock were purchased under these
agreements.

        The Company's Nonemployee-Directors' Equity Compensation Plan (the
"Directors' Plan") was approved by the Board of Directors in 1995 and the
stockholders of the Company in 1996. The Directors Plan's purpose is to allow
nonemployee directors to elect to receive directors' fees in the form of common
stock instead of cash. There are 100,000 shares of common stock authorized under
the Directors' Plan.

        At December 31, 1999, the Company had an aggregate of 12,157,607 shares
of common stock reserved for future issuance, consisting of 11,088,730 shares
reserved for conversion of Class B common stock, 980,250 shares reserved under
the Fourth Amended and Restated Employees Stock Option Plan, and 88,627 shares
reserved under the Directors' Plan.

11.     Stock Option Plan

        The Company's Employees Stock Option Plan (the "Plan") was approved by
the Board of Directors and the stockholders of the Company in 1983. In 1994, the
Plan was amended to extend the term of the Plan and to increase the amount of
common stock reserved for issuance to



                                      F-19
<PAGE>   80

1,000,000 shares. On May 11, 1999, the Company amended the Plan to increase the
amount of common stock reserved for issuance to 1,500,000 shares. As of December
31, 1999, there were 520,250 shares of common stock available for future grants
under the Plan.

        Under the Plan, the exercise price of the options equals the market
price of the Company's stock on the date of grant and the options' maximum life
is 10 years. The options vest at the end of five years of continuous employment.

        In 1999 and 1998, the Company recognized stock compensation expense of
$0.5 million and $0.4 million, respectively, primarily due to the amendment of
certain stock option agreements.

        In 1997, the Company amended certain employees' stock option agreements,
converting 338,000 incentive stock options to nonqualified stock options. In
conjunction with this transaction, the Company declared bonuses to the option
holders to pass on the Company's projected tax savings, representing deductions
attributable to the exercise of these nonqualified options, to the option
holders. Accordingly, the Company recognized total compensation expense of $8.3
million, consisting of stock compensation expense of $5.4 million and bonus
expense of $2.9 million. The Company also granted 70,000 nonqualified options at
below-market exercise prices and recorded compensation expense of $1.0 million.

        A summary of the Company's stock option activity and related information
for the years ended December 31 is as follows:

<TABLE>
<CAPTION>
                                            1999                  1998                1997
                                   -------------------    -------------------   ------------------
                                              Weighted               Weighted             Weighted
                                              Average                Average              Average
                                              Exercise               Exercise             Exercise
                                   Options      Price     Options     Price     Options     Price
                                   -------    --------    -------    --------   -------   --------
        <S>                        <C>         <C>        <C>         <C>       <C>         <C>
        Options outstanding at
          beginning of year        260,000     $  5.69    320,600     $ 4.75    658,000     $ 2.96
        Granted                    210,000       19.50         --        --      70,000       0.69
        Exercised                  (10,000)       7.63    (60,600)      0.69   (367,400)      0.69
        Canceled                        --          --         --        --     (40,000)      5.53
                                   -------                -------               -------
        Options outstanding at
          end of year              460,000     $ 11.95    260,000     $ 5.69    320,600     $ 4.75

        Exercisable at end of
          year                          --         --      10,000     $ 7.63     60,600     $ 0.69

        Weighted average fair
          value of options
          granted during year      $ 12.05                    --                $ 14.00

</TABLE>



                                      F-20
<PAGE>   81

        Exercise prices for options outstanding at December 31, 1999 ranged from
$3.44 to $19.50. A summary of options outstanding as of December 31, 1999 is as
follows:

<TABLE>
<CAPTION>
                                          Weighted-Average
      Range of              Options          Remaining       Weighted-Average
   Exercise Price         Outstanding     Contractual Life    Exercise Price     Exercisable
   --------------         -----------     ----------------   ----------------    -----------
   <S>                    <C>             <C>                <C>                 <C>
   $0.00 - $ 3.44           120,000             5.1                $3.44             --
   $3.45 - $ 7.63           130,000             6.0                 7.63             --
   $7.64 - $19.50           210,000             9.5                19.50             --
                            -------
   $0.00 - $19.50           460,000             7.3 years         $11.95
</TABLE>

        As required by Financial Accounting Standards Board Statement No. 123,
the pro forma information regarding net income and earnings per share has been
calculated as if the Company had accounted for its employee stock options under
the fair value method of that statement. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 1999 and 1997,
respectively (there were no grants in 1998): Dividend yield of 0%; expected
volatility of 52% and 55%; risk-free interest rate of 5.7% and 6.0%; and a
weighted-average expected life of the options of 7.5 years.

        For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. The Company's pro forma
net income and earnings per common share follows:

<TABLE>
<CAPTION>
                                             1999          1998        1997
                                           -------       --------    --------
                                        (In thousands, except per share amounts)
        <S>                                <C>           <C>         <C>
        Pro forma net income               $ 6,103       $ 18,971    $ 32,742
        Pro forma net income per common
           share                           $  0.19       $   0.60    $   1.04
        Pro forma net income per common
           share - assuming dilution       $  0.18       $   0.60    $   1.03
</TABLE>

        The pro forma amounts above may not be representative of the pro forma
effect on reported net income in future years because options vest over several
years and additional options may be granted each year.

12.     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 and matters
affecting the operation of broadcasting facilities. The Company believes that
the



                                      F-21
<PAGE>   82

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, except for the matters discussed in Note 13.

        The Company has employment contracts with certain employees, including
basketball coaches and players of the Seattle SuperSonics, extending beyond
December 31, 1999. Most of these contracts require that payments continue to be
made if the individual should be unable to perform because of death or
disability. Future minimum obligations under these contracts for the years
ending December 31 are as follows:

<TABLE>
<CAPTION>
                                              (In thousands)
       <S>                                     <C>
       2000                                     $   38,388
       2001                                         37,122
       2002                                         26,320
       2003                                         24,941
       2004                                         16,899
       Later years                                  24,581
                                                ----------
                                                $  168,251
                                                ==========
</TABLE>

        The Seattle SuperSonics maintains disability and life insurance policies
on most of its key players. The level of insurance coverage maintained is based
on the determination of the insurance proceeds which would be required to meet
its guaranteed obligations in the event of permanent or total disability of its
key players.

        The Company is required to make future minimum payments for equipment
and facilities under non-cancelable operating lease agreements and broadcast
agreements which expire in more than one year for the years ending December 31
as follows:

<TABLE>
<CAPTION>
                                Equipment/Facilities     Broadcast Obligations
                                --------------------     ---------------------
                                               (In thousands)
          <S>                   <C>                      <C>
          2000                        $  7,568                 $  8,973
          2001                           7,177                    4,852
          2002                           6,264                    2,076
          2003                           5,806                      151
          2004                           5,547                      ---
          Later years                   24,642                      ---
                                      --------                 --------
                                      $ 57,004                 $ 16,052
                                      ========                 ========
</TABLE>

        Rent expense for operating leases aggregated $5.8 million in 1999, $5.2
million in 1998, and $5.2 million in 1997. Broadcasting film and programming
expense aggregated $11.2 million in 1999, $10.4 million in 1998, and $8.4
million in 1997.

        The Company incurred transportation costs under an operating lease
agreement of $1.3 million in 1998 and $2.0 million in 1997, to a company
controlled by the Company's major stockholder. There were no such amounts in
1999. Principal amounts outstanding on loans to the Company's major stockholder
was approximately $2.0 million at December 31, 1998. There



                                      F-22
<PAGE>   83

were no outstanding amounts on loans to the Company's major stockholder at
December 31, 1999.

13.     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. At December 31, 1995, the Company initially
recorded an accrual of $14.2 million, including estimated additional legal
costs, related to the verdict. Following post-trial motions, the punitive
damages award was reduced, and in 1997, the Company reduced the accrual related
to this litigation by $5.0 million.

        On October 1, 1998, the U.S. Court of Appeals for the Ninth Circuit
ruled in the Company's favor, holding that the plaintiffs did not have a valid
claim under the Federal Fair Labor Standards Act and striking the award of
damages, including all punitive damages. The Court of Appeals remanded the case
for further consideration of whether the plaintiffs have a valid claim under the
Washington State Fair Labor Standards Act.

        On March 9, 1999, the Court of Appeals issued an order referring the
case to an 11-judge panel for a new hearing, which was held on April 23, 1999.
On June 10, 1999, the Court of Appeals reinstated the District Court verdict in
favor of the plaintiffs. The Company petitioned for review of this decision by
the U.S. Supreme Court, which was denied without comment by the Court on January
18, 2000. Accordingly, the Company paid awarded damages, accrued interest
thereon, and plaintiff attorney's fees, of approximately $7.5 million in the
first quarter of 2000.

14.     Television Broadcasting Group Restructuring

        On April 6, 1999, the Company announced the launch of Digital
CentralCasting(TM), a digital broadcasting system which allows the Company to
consolidate back-office functions such as operations, programming, advertising
scheduling, and accounting for all of the television stations within a regional
group at one station. To implement this strategy, the Company has organized
eleven of the television stations it owns and/or programs into the following
three regional station groups: New York (WIXT, WOKR, WIVT, WBGH-LP, WUTR, and
WETM), Central California (KCOY, KION, and KGET), and North Coast (KCBA, KMTR,
KVIQ, and KFTY).

        The Company expects to complete the implementation of Digital
CentralCasting(TM) for all of its television station groups by the second
quarter of 2000. The Company recorded a $1.1 million restructuring charge in the
second quarter of 1999 relating to the implementation of Digital
CentralCasting(TM). This restructuring charge consisted primarily of costs
associated with employee staff reductions. As of December 31, 1999, termination
benefits of approximately $0.3 million, representing approximately 30 employees,
had been paid and charged to the restructuring accrual. Approximately 100 total
employees are currently estimated to be terminated in connection with the
restructuring.

15.     Industry segment information



                                      F-23
<PAGE>   84

        The Company organizes its segments based on the products and services
from which revenues are generated. The Company evaluates segment performance and
allocates resources based on Segment Operating Cash Flow. The Company defines
Operating Cash Flow as net revenue less operating expenses before amortization,
depreciation, interest, litigation, and stock compensation expenses and net gain
on dispositions of assets. Segment Operating Cash Flow is defined as Operating
Cash Flow before corporate overhead.

        Selected financial information for these segments for the years ended
December 31, 1999, 1998 and 1997 is presented as follows:

<TABLE>
<CAPTION>
                                         Outdoor    Television     Radio       Sports &
                                          Media    Broadcasting Broadcasting Entertainment Consolidated
                                        ---------  ------------ ------------ ------------- ------------
                                                               (In thousands)
        <S>                             <C>        <C>          <C>          <C>            <C>
        1999:
        -----
        Net revenue                     $  98,751    $  81,669    $  27,163    $  70,605    $ 278,188
        Segment operating expenses        (56,877)     (69,608)     (15,563)     (70,427)    (212,475)
                                        ---------    ---------    ---------    ---------    ---------
        Segment Operating Cash Flow     $  41,874    $  12,061    $  11,600    $     178       65,713
                                        =========    =========    =========    =========
        Corporate overhead                                                                    (16,347)
                                                                                            ---------
       Operating Cash Flow                                                                    49,366
        Other (expenses) income:
          Depreciation and
            amortization                                                                      (28,348)
          Interest expense                                                                    (35,632)
          Stock compensation expense                                                             (559)
          Net gain on dispositions
           of assets                                                                           28,999
                                                                                            ---------
        Income before income taxes
          and extraordinary item                                                            $  13,826
                                                                                            =========
        Segment assets                  $  92,911    $ 273,072    $  59,873    $  45,470    $ 471,326
                                        =========    =========    =========    =========
        Corporate assets                                                                       57,110
                                                                                            ---------
        Total assets                                                                        $ 528,436
                                                                                            =========
        Capital expenditures            $   7,346    $   7,765    $   3,780    $   5,289    $  24,180
                                        =========    =========    =========    =========
        Corporate capital
          expenditures                                                                          4,934
                                                                                            ---------

        Total capital expenditures                                                          $  29,114
                                                                                            =========
</TABLE>

<TABLE>
<CAPTION>
                                         Outdoor    Television     Radio       Sports &
                                          Media    Broadcasting Broadcasting Entertainment Consolidated
                                        ---------  ------------ ------------ ------------- ------------
        <S>                             <C>        <C>          <C>          <C>            <C>
        1998:
        Net revenue                       $ 108,560    $  68,467    $  24,474    $  55,150    $ 256,651
        Segment operating expenses          (65,605)     (55,996)     (14,819)     (58,119)    (194,539)
                                          ---------    ---------    ---------    ---------    ---------
        Segment Operating Cash Flow       $  42,955    $  12,471    $   9,655    $  (2,969)      62,112
                                          =========    =========    =========    =========
        Corporate overhead                                                                      (14,491)
                                                                                              ---------
        Operating Cash Flow                                                                      47,621
        Other (expenses) income:
          Depreciation and
            amortization                                                                        (16,574)
          Interest expense                                                                      (25,109)
          Stock compensation
            expense                                                                                (452)
          Net gain on dispositions
           of assets                                                                             33,524
                                                                                              ---------
        Income before income taxes
          and extraordinary item                                                              $  39,010
                                                                                              =========
</TABLE>



                                      F-24
<PAGE>   85

<TABLE>
<CAPTION>
                                         Outdoor    Television     Radio       Sports &
                                          Media    Broadcasting Broadcasting Entertainment Consolidated
                                        ---------  ------------ ------------ ------------- ------------
        <S>                             <C>        <C>          <C>          <C>            <C>
        Segment assets                    $  75,113    $  87,308    $  59,650    $  31,546    $ 253,617
                                          =========    =========    =========    =========
        Corporate assets                                                                         62,509
                                                                                              ---------
        Total assets                                                                          $ 316,126
                                                                                              =========

        Capital expenditures              $   6,986    $   4,415    $   1,389    $     238    $  13,028
                                          =========    =========    =========    =========
        Corporate capital expenditures                                                           19,691
                                                                                              ---------
        Total capital expenditures                                                            $  32,719
                                                                                              =========
</TABLE>



                                      F-25
<PAGE>   86

<TABLE>
<CAPTION>
                                         Outdoor    Television     Radio       Sports &
                                          Media    Broadcasting Broadcasting Entertainment Consolidated
                                        ---------  ------------ ------------ ------------- ------------
        <S>                             <C>        <C>          <C>          <C>            <C>
        1997:
        -----
        Net revenue                       $ 113,162    $  63,611    $  20,970    $  73,432    $ 271,175
        Segment operating expenses          (72,159)     (46,935)     (12,983)     (68,662)    (200,739)
                                          ---------    ---------    ---------    ---------    ---------
        Segment Operating Cash Flow       $  41,003    $  16,676    $   7,987    $   4,770       70,436
                                          =========    =========    =========    =========
        Corporate overhead                                                                      (10,013)
                                                                                              ---------
        Operating Cash Flow                                                                      60,423
        Other (expenses) income:
          Depreciation and
            amortization                                                                        (16,103)
          Interest expense                                                                      (26,219)
          Stock compensation expense                                                             (9,344)
          Litigation adjustment                                                                   5,000
                                                                                              ---------
        Income before income taxes                                                            $  13,757
                                                                                              =========

        Segment assets                    $  79,208    $  75,955    $  29,568    $  45,261    $ 229,992
                                          =========    =========    =========    =========
        Corporate assets                                                                         36,393
                                                                                              ---------
        Total assets                                                                          $ 266,385
                                                                                              =========

        Capital expenditures              $   6,523    $   7,211    $     873    $   1,706    $  16,313
                                          =========    =========    =========    =========
        Corporate capital expenditures                                                            1,280
                                                                                              ---------
        Total capital expenditures                                                            $  17,593
                                                                                              =========
</TABLE>


16.     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. For the fourth quarter
of 1998, net revenue and Operating Cash Flow were adversely affected by the NBA
lockout.

        The following table sets forth a summary of the quarterly results of
operations for the years ended December 31, 1999 and 1998:


<TABLE>
<CAPTION>
                                                      First          Second         Third       Fourth
                                                     Quarter         Quarter       Quarter      Quarter
                                                     --------        -------       --------     --------
                                                          (In thousands, except per share amounts)
        <S>                                         <C>             <C>           <C>          <C>
        1999
        ----
        Net revenue                                 $ 67,696        $71,400       $ 56,069     $ 83,023
        Operating Cash Flow                            7,532         13,540         11,466       16,828
        Income before extraordinary item              (2,548)        15,572(1)      (3,742)      (1,319)
        Extraordinary loss                            (1,373)(2)         --             --           --
        Net income                                    (3,921)        15,572         (3,742)      (1,319)
        Net income per share                            (.12)           .49           (.11)        (.04)
        Net income per share - assuming dilution        (.12)           .49           (.11)        (.04)
</TABLE>

                                      F-26
<PAGE>   87

<TABLE>
<CAPTION>
                                                      First          Second         Third       Fourth
                                                     Quarter         Quarter       Quarter      Quarter
                                                     --------        -------       --------     --------
        <S>                                         <C>             <C>           <C>          <C>
        1998
        ----
        Net revenue                                 $ 81,046        $75,837       $ 48,087     $ 51,681
        Operating Cash Flow                           11,658         13,940         10,903       11,120
        Income before extraordinary item                 809         22,398(1)         229           87
        Extraordinary loss                                --             --             --       (4,346)(2)
        Net income                                       809         22,398            229       (4,259)
        Net income per share                             .03            .71            .01         (.14)
        Net income per share - assuming dilution         .03            .70            .01         (.14)
</TABLE>


(1)  Includes net gain on dispositions of assets, as discussed in Note 3.

(2)  Represents loss on debt extinguishment, as discussed in Note 7.


                                      F-27