EMMIS COMMUNICATIONS CORP, 424B4, 1999-10-27

EMMIS COMMUNICATIONS CORP
424B4, 1999-10-27
RADIO BROADCASTING STATIONS

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PROSPECTUS
OCTOBER 26, 1999

EMMIS COMMUNICATIONS CORPORATION LOGO
EMMIS COMMUNICATIONS CORPORATION
2,500,000 SHARES
6.25% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
- --------------------------------------------------------------------------------

EMMIS:
- - We are one of the largest radio broadcasters in the United States and we also
operate television broadcasting and magazine publishing businesses.
- - Emmis Communications Corporation
One Emmis Plaza
40 Monument Circle
Indianapolis, Indiana 46204
(317) 266-0100

THE OFFERING:
- - We are offering 2,500,000 shares of cumulative convertible preferred stock
and have granted the underwriters an option to purchase an additional 375,000
shares to cover over-allotments. The table below does not reflect any
exercise of this option.
- - We plan to use the net proceeds of this offering, together with the net
proceeds from our concurrent offering of Class A Common Stock, to fund the
acquisition of additional broadcasting properties and acquisition-related
expenses and for general corporate purposes. This offering is not contingent
upon the consummation of any acquisition.
- - Closing: October 29, 1999.

MARKET AND SYMBOL:
- - Nasdaq National Market: "EMMSP"
- - Our Class A Common Stock trades on the Nasdaq National Market under the
symbol "EMMS." On October 26, 1999, the last reported sales price for our
Class A Common Stock was $62.50 per share.

CONCURRENT OFFERING:
- - We are currently offering, by means of a separate prospectus, 3,440,000
shares, and a selling stockholder is selling 240,000 shares, of our Class A
Common Stock, excluding 552,000 shares available to cover over-allotments.
This offering and the Class A Common Stock offering are not dependent on each
other.

THE CONVERTIBLE PREFERRED STOCK:
- - Liquidation Preference: $50 per share.
- - Dividends: 6.25% cumulative annual cash dividends, payable quarterly in
arrears, commencing on January 15, 2000.
- - Conversion Price: $78.125 per share, subject to adjustment (equal to an
initial conversion ratio of 0.6400 shares of our Class A Common Stock for
each share of convertible preferred stock).
- - Conversion Right: convertible into Class A Common Stock at any time at the
applicable conversion ratio.
- - Optional Redemption: redeemable at a redemption premium of 104.911% (plus
accumulated and unpaid dividends) on or after April 15, 2001 but prior to
October 15, 2002 if the trading price for our Class A Common Stock equals or
exceeds $117.1875 per share for a specified period. We will make additional
payments if we redeem shares under the foregoing circumstances. Beginning on
October 15, 2002, shares of the convertible preferred stock may be redeemed,
at any time, at the redemption premiums stated herein, plus accumulated and
unpaid dividends.

<TABLE>
<CAPTION>
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PER SHARE TOTAL
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Public offering price: $ 50.00 $125,000,000
Underwriting fees: $ 1.625 $ 4,062,500
Proceeds to Emmis: $48.375 $120,937,500
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</TABLE>

THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 12.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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<TABLE>
<S> <C>
DONALDSON, LUFKIN & JENRETTE GOLDMAN, SACHS & CO.
Book Running Manager Co-Lead Manager
- ----------------------------------------------------------
DEUTSCHE BANC ALEX. BROWN MORGAN STANLEY DEAN WITTER
</TABLE>
<PAGE> 2
[The inside front cover page of the prospectus contains a graphic consisting of
three pictures across the top and a map and related description beneath the
pictures. The pictures consist of:

(1) the words "Listener by Listener" superimposed on a picture of the
profile of a man;

(2) the words "Advertiser by Advertiser" superimposed on a picture of a
handshake; and

(3) the words "Employee by Employee" superimposed on a picture of a man's
head.

The map identifies 16 locations of Emmis operations on a map of the United
States. The description beneath the map includes:

(A) a corporate logo and the address of the corporate headquarters;

(B) the following locations, call letters and dial positions of Emmis radio
stations and radio networks:

Los Angeles KPWR-FM (Power 106)
New York WRKS (Kiss-FM)
WQHT-FM (Hot 97)
WQCD-FM (CD-101.9)
Chicago WKQX-FM (Q101)
St. Louis KSHE-FM (KSHE95)
WKKX-FM (Kix 106.5)
WXTM-FM (Extreme 104.1)
Indianapolis WENS (97.1 FM)
WIBC (1070 AM)
WNAP (93.1 FM)
WTLC (105.7 FM)
WTLC (1310 AM)
AgriAmerica
Network Indiana
Terre Haute WTHI (99.9 FM)
WTHI (1480 AM)
WWVR (105.5 FM)
Hungary Slager Radio

New Orleans WVUE (Channel 8)
Honolulu KHON (Channel 2)
Green Bay WLUK (Channel 11)
Mobile/Pensacola WALA (Channel 10)
Ft. Myers WFTX (Channel 36)
Terre Haute WTHI (Channel 10)

(D) the following list of Emmis publications:

Indianapolis Monthly
Atlanta
Cincinnati Magazine
Texas Monthly
Country Sampler]

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 12
Use of Proceeds.................... 20
Price Range of Class A Common
Stock............................ 21
Dividend Policy.................... 21
Capitalization..................... 22
Recent Developments................ 23
Selected Consolidated Financial and
Other Data....................... 26
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........ 29
Business........................... 37
Management......................... 46
Certain Relationships and Related
Party Transactions............... 48
</TABLE>

<TABLE>
<CAPTION>
Page
<S> <C>
Principal and Selling
Stockholders..................... 49
Description of Common Stock........ 51
Description of the Convertible
Preferred Stock.................. 54
Certain United States Federal Tax
Considerations................... 65
Description of Certain
Indebtedness..................... 72
Underwriting....................... 75
Legal Matters...................... 77
Experts............................ 77
Where You Can Find More
Information...................... 79
Index to Financial Statements...... F-1
</TABLE>
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PROSPECTUS SUMMARY

You should read the entire prospectus, including the financial data,
related notes and information incorporated by reference, before making an
investment decision. Market and industry data used in this prospectus are based
on independent industry publications, other publicly available information or
the good faith belief of our management. All references to Emmis in this
prospectus mean Emmis Communications Corporation and its subsidiaries
collectively, except where it is clear we mean only the parent corporation. The
information contained in this prospectus assumes that the underwriters do not
exercise the over-allotment option.

EMMIS COMMUNICATIONS

We are one of the largest operators of radio broadcasting stations in the
United States. Approximately 8.5 million listeners tune in to our radio stations
each week. Our focus is primarily large-market radio, and we operate five FM
radio stations in the nation's three largest radio markets of New York City, Los
Angeles and Chicago. In each of these markets we have developed top-performing
radio stations which rank either first or second in terms of primary demographic
target audience share according to the Spring 1999 Arbitron Survey. In addition,
we enjoy strong market positions in St. Louis, Indianapolis and Terre Haute,
Indiana, where we own a total of eight FM radio stations and three AM radio
stations. We are in the process of acquiring additional radio stations in St.
Louis, Missouri which will complement our existing station portfolio.

The combination of our strong large-market radio presence, the diversity of
our station formats and our advertising, sales and programming expertise has
allowed us to achieve same station revenue growth rates in excess of radio
industry growth. In addition to our strong internal growth, we have demonstrated
the ability to selectively acquire underdeveloped properties in desirable
markets and create value by developing those properties. We have been successful
in acquiring these types of radio stations and improving their ratings, revenues
and cash flow with our marketing focus and innovative programming expertise.

While our radio broadcasting operations accounted for greater than 75% of
our broadcast cash flow for the six months ending August 31, 1999, we also own
television broadcasting and magazine publishing operations. In 1998, we acquired
six television stations, located in New Orleans, Louisiana, Mobile, Alabama,
Green Bay, Wisconsin, Honolulu, Hawaii, Fort Myers, Florida and Terre Haute,
Indiana. Like our previous radio station acquisitions, the television stations
were generally underdeveloped properties located in desirable markets. Our goal
is to affiliate our television group with the newer networks such as the WB and
Fox television networks, which best leverage our strengths by targeting younger
viewers and providing a higher degree of programming flexibility. With our
innovative, research-based programming and management experience, we have
successfully increased the broadcast cash flow margins of our television
stations to 32% in the six months ended August 31, 1999 from 26% in the fiscal
year prior to our acquisition, and we believe that we have significant
additional margin enhancement opportunities.
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<PAGE> 5

In addition to our domestic broadcasting properties, we operate news and
agriculture information networks in Indiana, publish Indianapolis Monthly,
Atlanta, Cincinnati, Texas Monthly and Country Sampler and related magazines,
and have a 54% interest in a national radio station in Hungary.

BUSINESS STRATEGY

We are committed to maintaining our leadership position in broadcasting,
enhancing the performance of our broadcast properties, and distinguishing
ourselves through the quality of our operations. Our strategy has the following
principal components:

- Develop innovative programming for our radio and television stations
based on local market research and audience preferences;

- Emphasize a focused sales and marketing strategy based on advertiser
demand and our programming compared to the competitive formats within
each market;

- Pursue strategic acquisitions in desirable markets and enhance their
cash flow; and

- Encourage an entrepreneurial management approach that empowers and
rewards all employees based on performance and promotes equity ownership
in Emmis.

RECENT DEVELOPMENTS
ORLANDO ACQUISITION

Consistent with our acquisition strategy, on June 3, 1999, we entered into
a definitive agreement to purchase substantially all of the assets of television
station WKCF in Orlando, Florida, for approximately $191.5 million in cash. The
Orlando market ranks as the 22nd largest television market in the United States
and is projected to be one of the top five fastest growing markets in terms of
retail sales and population in the nation's largest 25 markets.

ST. LOUIS ACQUISITION

In June 1999, we entered into an agreement with a former executive of
Sinclair Broadcast Group, Inc. to purchase his rights under an option to acquire
certain broadcast properties in St. Louis, Missouri. The option allows us to
purchase, at fair market value, six radio stations and one television station
from Sinclair. The option outlines an appraisal procedure to determine the fair
market value of the stations, provides for the acquisition to be on customary
terms and conditions and includes a mechanism for establishing the closing date.
Although the option has been exercised, the actual purchase price is still to be
determined, and we have not yet reached an understanding with Sinclair on the
material terms and conditions customary for a transaction of this type. Until
the material terms are determined, the acquisition is not considered probable
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<PAGE> 6

for financial reporting purposes. However, we and Sinclair are obligated under
the option to act in good faith in making these determinations, and we do expect
ultimately to consummate the acquisition, subject to FCC and Department of
Justice approval. Due to FCC limitations on the number of stations we can
operate in St. Louis, we anticipate divesting three radio stations in connection
with this acquisition. Even after these divestitures, the remaining radio
stations will complement one another and should allow us to realize greater
operating efficiencies. St. Louis is the nineteenth ranked radio market and the
twenty-first ranked television market in the country.

ARGENTINA ACQUISITIONS

We have signed an agreement to purchase one FM radio station and one AM
radio station in Buenos Aires, Argentina. We are also discussing an additional
potential acquisition of radio broadcast properties in Argentina and are in the
process of negotiating the terms and conditions of a definitive purchase
agreement. Consistent with our international acquisition strategy, we are
pursuing local minority-interest partners for these investments. We expect that
these acquisitions would have an aggregate purchase price of approximately $25
million.

LIBERTY MEDIA INVESTMENT

On October 25, 1999, we entered into an agreement with Liberty Media
Corporation for Liberty to purchase 2.7 million shares of our Class A Common
Stock for approximately $150 million. Liberty will become our second largest
shareholder behind our Chairman and CEO, Jeffrey Smulyan, assuming full exercise
of his outstanding options. Liberty's shares will represent approximately 12% of
our common shares outstanding following the completion of our concurrent
offering of Class A Common Stock, assuming no exercise of the underwriters'
over-allotment option in that offering and excluding common stock issuable upon
conversion of the convertible preferred stock. Closing of the transaction is
subject to certain conditions. We intend to use the proceeds of this investment
to more aggressively pursue attractive opportunities to acquire radio
broadcasting properties in the top 20 markets in the United States.
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STATIONS

The following table sets forth certain information regarding our radio
stations and their broadcast markets. In the table, "Market Rank by Revenue" is
the ranking of the market revenue size of the principal radio market served by
the station among all radio markets in the United States. Market revenue and
ranking figures are from Duncan's Radio Market Guide (1998 ed.). We own a 40%
equity interest in the publisher of Duncan's Radio Market Guide. "Ranking in
Primary Demographic Target" is the ranking of the station among all radio
stations in its market based on the Spring 1999 Arbitron Survey. A "t" indicates
the station tied with another station for the stated ranking. "Station Audience
Share" represents a percentage generally computed by dividing the average number
of persons over age 12 listening to a particular station during specified time
periods by the average number of such persons for all stations in the market
area as determined by Arbitron.

<TABLE>
<CAPTION>
MARKET RANKING IN
STATION RANK PRIMARY PRIMARY STATION
AND BY DEMOGRAPHIC DEMOGRAPHIC AUDIENCE
MARKET REVENUE FORMAT TARGET AGES TARGET SHARE
<S> <C> <C> <C> <C> <C>
Los Angeles, CA 1
KPWR-FM Dance/Contemporary Hit 12-24 1 4.0
New York, NY 2
WQHT-FM Dance/Contemporary Hit 12-24 1 5.4
WRKS-FM Classic Soul/Smooth R&B 25-54 7 3.3
WQCD-FM Contemporary Jazz 25-54 9t 2.9
Chicago, IL 3
WKQX-FM New Rock 18-34 2 4.0
St. Louis, MO 18
KSHE-FM Album Oriented Rock 25-54 9 3.0
WKKX-FM Country 25-54 5t 4.5
WXTM-FM Extreme Rock 18-34 10 2.2
Indianapolis, IN 30
WENS-FM Adult Contemporary 25-54 3 5.2
WIBC-AM News/Talk 35-64 2 9.1
WNAP-FM Classic Rock 18-34 4 4.3
WTLC-FM Urban Contemporary 25-54 10 4.9
WTLC-AM Solid Gold Soul, Gospel and Talk 25-54 19t 1.1
Terre Haute, IN 172
WTHI-FM Country 25-54 1 20.3
WTHI-AM(1) Talk 35-54 8 1.7
WWVR-FM Classic Rock 25-54 3t 7.1
</TABLE>

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

(1) We are currently finalizing an agreement to donate this station to a
charitable organization. The station has projected revenues of less than
$100,000 and a negative projected broadcast cash flow for the current fiscal
year.
4
<PAGE> 8

The following table sets forth certain information regarding our television
stations and their broadcast markets. In the table, "DMA Rank" is estimated by
the A.C. Nielsen Company as of January 1999. Rankings are based on the relative
size of a station's market among the 210 generally recognized Designated Market
Areas ("DMAs"), as defined by Nielsen. "Number of Stations in Market" represents
the number of television stations ("Reportable Stations") designated by Nielsen
as "local" to the DMA, excluding public television stations and stations which
do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative
audience of less than 2.5%) for reporting in the Sunday through Saturday, 9:00
a.m. to midnight time period. "Station Rank" reflects the station's rank
relative to other Reportable Stations based upon the DMA rating as reported by
Nielsen from 9:00 a.m. to midnight, Sunday through Saturday during May 1999. A
"t" indicates the station tied with another station for the stated ranking.
"Station Audience Share" reflects an estimate of the percentage of DMA
households viewing television received by a local commercial station in
comparison to other local commercial stations in the market as measured from
9:00 a.m. to midnight, Sunday through Saturday.

<TABLE>
<CAPTION>
NUMBER OF STATION
TELEVISION METROPOLITAN DMA AFFILIATION/ STATIONS STATION AUDIENCE
STATION AREA SERVED RANK CHANNEL IN MARKET RANK SHARE
<S> <C> <C> <C> <C> <C> <C>
WVUE-TV New Orleans, LA 41 Fox/8 8 4t 7
WALA-TV Mobile, AL-Pensacola, FL 62 Fox/10 5 3t 10
WLUK-TV Green Bay, WI 69 Fox/11 5 4 8
KHON-TV Honolulu, HI 71 Fox/2 6 2 16
WFTX-TV Fort Myers, FL 83 Fox/36 5 4 7
WTHI-TV Terre Haute, IN 139 CBS/10 3 1 24
WKCF-TV(1) Orlando, FL 22 WB/18 7 4 8
</TABLE>

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

(1) We expect our acquisition of this station to close in the fiscal quarter
ending November 30, 1999.
5
<PAGE> 9

THE OFFERING

Convertible preferred stock
offered.................. 2,500,000 shares of our 6.25% Series A Cumulative
Convertible Preferred Stock.

Over-allotment option...... Up to 375,000 shares. If the over-allotment option
is exercised in full by the underwriters, the total
public offering price will be $144 million.
Discounts, commissions and offering expenses are
estimated to be $5 million and net proceeds to us
are estimated to be $139 million.

Liquidation preference..... $50 per share stated liquidation preference, plus
any accumulated and unpaid dividends.

Dividends.................. Cumulative annual cash dividends of $3.125 per
share, payable quarterly in arrears on January 15,
April 15, July 15, and October 15 of each year
commencing January 15, 2000 when, if and as
declared by our board of directors. Our ability to
declare and pay dividends may be limited by
applicable law and the terms of our credit facility
and our subordinated notes.

Conversion................. Each share of convertible preferred stock will be
convertible at any time at the option of the holder
into that number of whole shares of our Class A
Common Stock as is equal to the stated liquidation
preference of $50 per share divided by an initial
conversion price of $78.125 subject to adjustment
upon the occurrence of specified events. As a
result, each share of convertible preferred stock
will initially be convertible into 0.6400 shares of
Class A Common Stock.

Optional redemption........ From April 15, 2001 to October 15, 2002, we may
redeem the convertible preferred stock at a
redemption premium of 104.911% of the stated
liquidation preference, plus accumulated and unpaid
dividends, if any, whether or not declared, if the
closing price of our Class A Common Stock is
greater than $117.1875 (150% of the Conversion
Price) for a specified trading period. In addition
to the foregoing payments, if we undertake a
redemption during this period, holders will also
receive an additional payment equal to the present
value of the dividends that would thereafter have
been payable on the convertible preferred stock
through October 15, 2002.

Beginning on October 15, 2002, we may redeem shares
of convertible preferred stock initially at a
redemption premium of 103.571% of the liquidation
preference and thereafter at prices declining to
100.00%, plus in each case all accumulated and
unpaid dividends, whether or not declared. We would
effect any redemption, in whole or in part, by
delivering cash. Our ability to redeem shares is
limited by provisions of applicable law.
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<PAGE> 10

Change of control.......... In the event of a change of control of Emmis,
holders of the convertible preferred stock will, in
the event that the market price per share of our
Class A Common Stock at such time is less than the
Conversion Price of the convertible preferred
stock, have a one-time option to convert such
holder's shares of convertible preferred stock into
shares of our Class A Common Stock at a conversion
price equal to the greater of (1) the market price
per share of our Class A Common Stock as of the
date of the change of control or (2) 66.67% of the
market price of our Class A Common Stock at the
close of trading on the issue date of the
convertible preferred stock. In lieu of issuing the
shares of our Class A Common Stock issuable upon
conversion in the event of a change of control, we
may, at our option, make a cash payment equal to
the market value of the shares of our Class A
Common Stock otherwise issuable. See "Description
of the Convertible Preferred Stock -- Change of
Control."

Voting rights.............. Holders of convertible preferred stock will have no
voting rights with respect to general corporate
matters except as provided by Indiana law or, in
limited circumstances, as provided in the amendment
to our articles of incorporation relating to the
convertible preferred stock. See "Description of
the Convertible Preferred Stock -- Voting Rights."

Ranking.................... The convertible preferred stock will rank senior to
our common stock and senior to or ratably with
other existing and future series of our preferred
stock. We may issue additional series of preferred
stock that rank ratably with our convertible
preferred stock, including additional shares of
convertible preferred stock, without a vote of the
holders of convertible preferred stock.

Book-entry, delivery and
form..................... The shares of convertible preferred stock will be
issued in the form of one or more fully-registered
global certificates and registered in the name of
the nominee of the Depository Trust Company, which
will act as the securities depositary. See
"Description of the Convertible Preferred
Stock -- Book Entry; The Depository Trust Company."

U.S. Federal income tax
considerations........... The federal income tax considerations of acquiring
and holding our convertible preferred stock and our
Class A Common Stock are described in "Certain
United States Federal Tax Considerations."
Prospective investors are urged to consult their
own tax advisors regarding the tax consequences of
acquiring, holding or disposing of our convertible
preferred stock and Class A Common Stock in light
of their own personal investment circumstances.
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<PAGE> 11

Concurrent Class A Common
Stock offering........... Concurrently with this offering, we are offering
3,440,000 shares and a selling stockholder is
offering 240,000 shares of our Class A Common Stock
(excluding a maximum of 552,000 shares which we may
issue upon exercise of an over-allotment option).
The closing of this offering and the offering of
Class A Common Stock are not contingent upon each
other.

Use of proceeds............ We intend to use the net proceeds from the
convertible preferred stock offering and a
concurrent offering of our Class A Common Stock to
fund the acquisition of additional broadcasting
properties and acquisition-related expenses and for
general corporate purposes. The broadcasting
properties may include television station WKCF in
Orlando, Florida and six radio stations and a
television station in St. Louis, Missouri. However,
neither this offering nor the concurrent offering
of Class A Common Stock are contingent upon the
closing of any acquisitions. Pending these uses, we
may use all or a portion of the net proceeds to
repay amounts outstanding under our credit
facility. We will not receive any of the proceeds
from the sale of our common stock by the selling
stockholder.

Class A Common Stock....... Our Class A Common Stock trades on the Nasdaq
National Market under the symbol "EMMS." On October
26, 1999, the last reported sales price for our
Class A Common Stock was $62.50 per share.

Market and symbol.......... The convertible preferred stock will trade on the
Nasdaq National Market under the symbol "EMMSP."
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The summary consolidated financial and other data has been derived, except
as otherwise noted, from our consolidated financial statements for the years
ended February (29) 28, 1995, 1996, 1997, 1998 and 1999 which have been audited
by Arthur Andersen LLP and from our unaudited condensed consolidated financial
statements for the six months ended August 31, 1998 and 1999. The summary
consolidated financial and other data presented below should be read in
conjunction with, and is qualified in its entirety by reference to, our
consolidated financial statements for the years ended February 28, 1997, 1998,
and 1999 and our unaudited condensed consolidated financial statements for the
six months ended August 31, 1998 and 1999 and related notes, which can be found
at the end of this prospectus, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere in this
prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED(1) AUGUST 31,
---------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues................ $ 74,604 $109,244 $113,720 $140,583 $232,836 $102,493 $153,881
Operating expenses.......... 45,990 62,466 62,433 81,170 143,348 60,858 93,122
International business
development expenses...... 313 1,264 1,164 999 1,477 561 747
Corporate expenses.......... 3,700 4,419 5,929 6,846 10,427 3,926 6,684
Time brokerage fee.......... -- -- -- 5,667 2,220 2,220 --
Depreciation and
amortization.............. 3,827 5,677 5,481 7,536 28,314 9,912 20,045
Noncash compensation........ 600 3,667 3,465 1,482 4,269 2,036 2,293
Operating income............ 20,174 31,751 35,248 36,883 42,781 22,980 30,990
Interest expense(2)......... 7,849 13,540 9,633 13,772 35,650 12,629 27,165
Loss on donation of radio
station................... -- -- -- 4,833 -- -- --
Minority interest........... -- -- -- -- -- 1,875 1,525
Other income (expense),
net....................... (170) (303) 325 6 1,914 1,123 (293)
-------- -------- -------- -------- -------- -------- --------
Income before income taxes
and extraordinary item.... 12,155 17,908 25,940 18,284 9,045 13,349 5,057
Income before extraordinary
item...................... 7,627 10,308 15,440 11,084 2,845 5,949 1,457
-------- -------- -------- -------- -------- -------- --------
Net income.................. $ 7,627 $ 10,308 $ 15,440 $ 11,084 $ 1,248 $ 4,352 $ 1,457
======== ======== ======== ======== ======== ======== ========
Basic net income per
share..................... $ 0.72 $ 0.96 $ 1.41 $ 1.02 $ 0.09 $ 0.33 $ 0.09
======== ======== ======== ======== ======== ======== ========
Diluted net income per
share..................... $ 0.70 $ 0.93 $ 1.37 $ 0.98 $ 0.08 $ 0.32 $ 0.09
======== ======== ======== ======== ======== ======== ========
Weighted average common
shares outstanding:
Basic..................... 10,557 10,691 10,943 10,903 14,453 13,256 15,856
Diluted................... 10,832 11,084 11,291 11,362 14,848 13,662 16,306
</TABLE>

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<TABLE>
<CAPTION>
AS OF FEBRUARY (29) 28, AS OF
------------------------------------------------------ AUGUST 31,
1995 1996 1997 1998 1999 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash................... $ 3,205 $ 1,218 $ 1,191 $ 5,785 $ 6,117 $ 3,061
Working capital........ 10,088 14,761 15,463 21,635 1,249 12,308
Net intangible
assets(3)............ 139,729 135,830 131,743 234,558 802,307 820,789
Total assets........... 183,441 176,566 189,716 333,388 1,014,831 1,079,701
Obligations under
credit facility and
senior subordinated
debt................. 152,000 124,000 115,000 215,000 577,000 619,000
Shareholders' equity
(deficit)............ (2,661) 13,884 34,422 43,910 235,549 245,049
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED(1) AUGUST 31,
------------------------------------------------------- ----------------------
1995 1996 1997 1998 1999 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(4):
Broadcast/publishing
cash flow(5)............ $ 28,614 $ 46,778 $ 51,287 $ 59,413 $ 89,488 $ 41,635 $ 60,759
EBITDA before certain
charges(6).............. 24,601 41,095 44,194 51,568 77,584 37,148 53,328
Cash flows from (used in):
Operating activities.... 15,480 23,221 21,362 22,487 35,121 11,679 6,132
Investing activities.... (102,682) 222 (13,919) (116,693) (541,470) (440,638) (56,785)
Financing activities.... 88,800 (25,430) (7,470) 98,800 506,681 435,936 47,597
Capital expenditures(7)... 1,081 1,396 7,559 16,991 37,383 16,503 20,831
</TABLE>

- ------------------------------
(1) Our fiscal year ends on the last day of February of each year.

(2) Includes debt issuance cost and interest rate cap amortization of $660,
$1,742, $1,071, $2,183 and $839 for the years ended February (29) 28, 1995
through 1999, respectively, and $604 and $1,177 for the periods ended August
31, 1998 and 1999, respectively.

(3) Net intangible assets consist primarily of FCC licenses and excess of cost
over fair value of net assets of purchased businesses, subscription lists
and similar assets, net of accumulated amortization.

(4) In addition, our ratio of earnings to fixed charges was 2.4x, 2.4x, 3.4x,
2.2x and 1.1x for the years ended February (29) 28, 1995 through 1999,
respectively, and 1.8x and 1.1x for the six months ended August 31, 1998 and
1999, respectively. Earnings are calculated by adding fixed charges,
excluding capitalized interest, to income (loss) before taxes, extraordinary
item and minority interest in loss of consolidated subsidiary. Fixed charges
include interest, whether expensed or capitalized, the interest component of
rental expenses and amortization of debt issuance costs.

(5) We evaluate performance of our operating entities based on broadcast cash
flow ("BCF") and publishing cash flow ("PCF"). Management believes that BCF
and PCF are useful because they provide a meaningful comparison of operating
performance between companies in the industry and serve as an indicator of
the market value of a group of stations or publishing entities. BCF and PCF
are generally recognized by the broadcast and publishing industries as a
measure of performance and are used by analysts who report on the
performance of broadcasting and publishing groups. BCF and PCF do not take
into account our debt service requirements and other commitments and,
accordingly, BCF and PCF are not necessarily indicative of amounts that may
be available for dividends, reinvestment in our business or other
discretionary uses. BCF and PCF are not measures of liquidity or of
performance in accordance with generally accepted accounting principles, and
should be viewed as a supplement to and not a substitute for our results of
operations presented on the basis of generally accepted
10
<PAGE> 14

accounting principles. Moreover, BCF and PCF are not standardized measures
and may be calculated in a number of ways. We define BCF and PCF as revenues
net of agency commissions and operating expenses.

(6) EBITDA before certain charges is defined as broadcast/publishing cash flow
less corporate and international business development expenses. EBITDA
before certain charges does not take into account our debt service
requirements and other commitments and, accordingly, it is not necessarily
indicative of amounts that may be available for dividends, reinvestment in
our business or other discretionary uses. EBITDA before certain charges is
not a measure of liquidity or of performance in accordance with generally
accepted accounting principles, and should be viewed as a supplement to and
not a substitute for our results of operations presented on the basis of
generally accepted accounting principles. Moreover, EBITDA before certain
charges is not a standardized measure and may be calculated in a number of
ways.

(7) Capital expenditures for the years ended February 28, 1998 and 1999 and six
months ended August 31, 1998 and 1999 include progress payments totaling
$11,775, $30,029, $13,486 and $14,540, respectively, in connection with the
construction of our new Indianapolis office and studio facility and new
operating facilities at KHON-TV in Hawaii.
11
<PAGE> 15

RISK FACTORS

In connection with this offering, you should consider carefully all of the
information in this prospectus and, in particular, the following factors:

OUR REVENUES ARE SUBSTANTIALLY DEPENDENT UPON THE DEMAND FOR ADVERTISING, WHICH
FLUCTUATES WITH GENERAL ECONOMIC CONDITIONS THAT WE CANNOT CONTROL.

We derive substantially all of our revenues from the sale of advertising on
our radio and television stations and in our magazines. Because advertisers
generally reduce their spending during economic downturns, we could be adversely
affected by a future national recession. In addition, because a substantial
portion of our revenues are derived from local advertisers, our ability to
generate advertising revenues in specific markets could be adversely affected by
local or regional economic downturns. This is particularly true in New York,
where our three radio stations accounted for approximately 25.4% of our net
revenues for the six months ended August 31, 1999.

IF OUR STATIONS CANNOT KEEP OR INCREASE THEIR CURRENT AUDIENCE RATINGS OR MARKET
SHARE, IT WOULD ADVERSELY AFFECT OUR CASH FLOW AND, CONSEQUENTLY, OUR ABILITY TO
FUND OUR OPERATIONS.

The broadcasting industry is very competitive. The success of each of our
stations is dependent upon its audience ratings and share of the overall
advertising revenues within its market. Our stations compete for audiences and
advertising revenues directly with other radio and television stations, and some
of the owners of those competing stations have greater resources than we do.
Although we believe that each of our stations can compete effectively in its
broadcast area, we cannot be sure that any of our stations can keep or increase
its current audience ratings or market share.

The quality and variety of our programming is a principal competitive
factor. However, it is difficult to predict accurately how a program will
perform because television stations often must purchase program rights two or
three years in advance. In addition, because television stations need to
contract for syndicated programming and develop original programming
substantially in advance of the date it is first broadcast, the audience ratings
and broadcast cash flow of our television stations generally does not improve as
a result of the new programming for some time. Other stations may change their
format or programming to compete directly with our stations for audience and
advertisers, or engage in aggressive promotional campaigns. If this happens, the
ratings and advertising revenues of our stations could decrease, the promotion
and other expenses of our stations could increase, and our stations would have
lower broadcast cash flow.

Our stations also compete with other media such as cable television,
newspapers, magazines, direct mail, compact discs, music videos, the Internet
and outdoor advertising. New media technologies are also being introduced to
compete with the broadcasting industry. Some of these new technologies are as
follows:

- Direct broadcast satellite systems, which provide video and audio
programming on a subscription basis to people with a satellite signal
receiving dish and decoder equipment. These systems claim to provide
high picture and sound quality. They do not usually provide the signals
of traditional over-the-air broadcast stations, although they sometimes

12
<PAGE> 16

provide network television stations to subscribers located outside the
coverage area of a local network station. New legislation may increase
the ability of direct broadcast satellite systems to provide the signals
to traditional stations, including both local and out-of-market network
stations.

- Digital audio broadcasting and satellite digital audio radio service,
which provide for the delivery of multiple new, high quality audio
programming formats to local and national audiences.

In addition, the FCC requirement for television stations to begin
broadcasting digital signals by May 2002 may result in a greater number of
channels overall and lead to increased competition for licenses and programming.
We cannot predict at this time the effect, if any, that any of these new
technologies may have on the radio or television broadcasting industry in
general or our stations in particular.

IF OUR STRATEGY TO GROW THROUGH ACQUISITIONS IS LIMITED BY COMPETITION FOR
SUITABLE PROPERTIES OR OTHER FACTORS WE CANNOT CONTROL, IT COULD ADVERSELY
AFFECT OUR FUTURE RATE OF GROWTH.

We intend to selectively pursue acquisitions of radio stations, television
stations and publishing properties as our management believes appropriate. In
order for us to be successful with this strategy, we must be effective at
quickly evaluating markets, obtaining financing to buy stations and publishing
properties on satisfactory terms and obtaining the necessary regulatory
approvals, including approvals of the FCC and the Department of Justice. We must
also do these tasks at reasonable costs. We compete with many other buyers for
television and radio stations and publishing properties. Many of those
competitors have much more money and other resources than we do. We cannot
predict whether we will be successful in buying stations or whether we will be
successful with any station we buy. Also, our strategy is generally to buy
underperforming broadcast and publishing properties and use our experience to
improve their performance. Thus, we will likely benefit over time from any
property we buy, rather than immediately, and we may need to pay large initial
costs for these improvements.

Consummation of our pending acquisitions of television station WKCF in
Orlando, Florida and six radio stations and one television station in St. Louis,
Missouri is subject to numerous closing conditions, including in the case of the
St. Louis stations the receipt of required regulatory approvals. We can give no
assurance that any of these pending acquisitions will be consummated in a timely
manner or on the terms described in this prospectus, if at all.

WE ARE OBLIGATED TO PURCHASE SINCLAIR'S ST. LOUIS STATIONS, BUT THE ACTUAL
PURCHASE PRICE AND OTHER MATERIAL TERMS OF THE ACQUISITION HAVE NOT YET BEEN
DETERMINED. THE PURCHASE PRICE COULD BE HIGHER AND THE OTHER MATERIAL TERMS OF
THE ACQUISITION COULD BE LESS FAVORABLE THAN WE BELIEVE IS APPROPRIATE.

Because the option on Sinclair's St. Louis stations has been exercised, and
we were designated as the purchaser, we believe we have a binding obligation to
buy the St. Louis stations and Sinclair has a binding obligation to sell them.
The option provides that the purchase price is to be the "fair market value" of
the stations and outlines an appraisal process for its determination. Because we
and Sinclair have been unable to agree on the fair market value of

13
<PAGE> 17

the stations, the determination of the purchase price is likely to be made by
independent appraisers.

The Sinclair option provides that the other terms of the final purchase
agreement are to be "customary" for transactions of this type. Sinclair has
proposed certain terms which we do not believe are consistent with this
standard. If we and Sinclair do not agree on what is customary, the
determination would likely be made by a court, which could significantly delay
the transaction or result in transaction terms materially different than we now
expect.

OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.

We have now and, after the offering and the consummation of our pending
acquisitions, will continue to have a significant amount of indebtedness. At
August 31, 1999, our total indebtedness was approximately $636.6 million and our
stockholders' equity was approximately $245.0 million. Our substantial
indebtedness could have important consequences to you. For example, it could:

- increase our vulnerability to general adverse economic and industry
conditions;

- limit our ability to finance future acquisitions;

- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;

- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;

- place us at a competitive disadvantage compared to our competitors that
have less debt; and

- limit, along with the financial and other restrictive covenants in our
credit facility and the indenture governing our subordinated notes,
among other things, our ability to borrow additional funds. Failing to
comply with those covenants could result in an event of default which,
if not cured or waived, could have a material adverse effect on us.

In addition, at August 31, 1999, approximately 76.0% of our total assets
consisted of intangible assets, such as broadcast licenses, excess of cost over
fair value of net assets of purchased businesses, subscription lists and similar
assets, the value of which depends significantly upon the continued operation of
our business. As a consequence, in the event of a default or any other event
which would result in a liquidation of our assets to pay our indebtedness, we
cannot assure you that the proceeds would be sufficient to repay our outstanding
indebtedness.

TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. OUR
ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.

Our ability to make payments on and to refinance our indebtedness and to
fund planned capital expenditures will depend on our ability to generate cash in
the future. This, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors that are
beyond our control. Based on our current level of operations and operating
improvements, we believe our cash flow from operations, available cash and
available borrowings under our credit facility will be adequate to meet our
future liquidity needs for at least the next

14
<PAGE> 18

few years. We cannot assure you, however, that our business will generate
sufficient cash flow from operations, that currently anticipated operating
improvements will be realized on schedule or that future borrowings will be
available to us under our credit facility in an amount sufficient to enable us
to pay our indebtedness or to fund our other liquidity needs. We may need to
refinance all or a portion of our indebtedness on or before maturity. We cannot
assure you that we will be able to refinance any of our indebtedness on
commercially reasonable terms or at all.

ONE SHAREHOLDER CONTROLS A SUBSTANTIAL MAJORITY OF THE VOTING POWER OF THE
COMMON STOCK, AND HIS INTERESTS MAY CONFLICT WITH YOURS.

As of August 31, 1999, our Chairman and Chief Executive Officer, Jeffrey H.
Smulyan, held shares representing approximately 69.9% of the outstanding
combined voting power of all classes of our common stock. Even after our
concurrent offering of Class A Common Stock, including the sale of his shares,
Mr. Smulyan will still hold shares representing approximately 62.5% of the
outstanding combined voting power of all classes of our common stock. As a
result of his voting power, Mr. Smulyan can control the outcome of most matters
submitted to a vote of our shareholders, including the election of a majority of
the directors. We cannot assure you that Mr. Smulyan's interest will always
align with your interest as a holder of convertible preferred stock.

THE LOSS OF ONE OR MORE KEY EXECUTIVES OR ON-AIR TALENT COULD SERIOUSLY IMPAIR
OUR ABILITY TO IMPLEMENT OUR STRATEGY.

Our business depends upon certain key employees, including Jeffrey H.
Smulyan, our Chairman and Chief Executive Officer. We had an employment
agreement with Mr. Smulyan which expired in February 1999. Although we currently
are engaged in discussions regarding a new long-term employment agreement for
Mr. Smulyan and expect to enter into such an agreement, we cannot predict when
or if such an agreement will be completed and signed. In addition, we employ
several on-air personalities with significant loyal audiences. We generally
enter into long-term employment agreements with our key on-air talent, but we
cannot be sure that any of these on-air personalities will remain with our
company.

IF THE COST OF EQUIPPING OUR TELEVISION STATIONS WITH DIGITAL TELEVISION
CAPABILITIES IS TOO GREAT, IT COULD ADVERSELY AFFECT OUR CASH FLOW AND,
CONSEQUENTLY, OUR ABILITY TO FUND OUR OPERATIONS.

Under current rules of the Federal Communications Commission, our
television stations will be required to broadcast a digital signal by May 2002
and then cease analog operations at the end of a digital television transition
period. Digital television will provide additional channels to television
broadcasters which can be used for multiple standard definition program
channels, data transfer and other services as well as digital video programming.
However, our costs to convert our television stations to digital television will
be significant, and we cannot predict whether or when there will be any consumer
demand for digital television services.

15
<PAGE> 19

OUR NEED TO COMPLY WITH COMPREHENSIVE, COMPLEX AND SOMETIMES UNPREDICTABLE
FEDERAL REGULATIONS COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS.

The broadcasting industry in the United States is subject to extensive and
changing regulation by the Federal Communications Commission. Among other
things, the FCC is responsible for the following:

- Assigning frequency bands for broadcasting;

- Determining the particular frequencies, locations and operating power of
stations;

- Issuing, renewing, revoking and modifying station licenses;

- Determining whether to approve changes in ownership or control of
station licenses;

- Regulating equipment used by stations; and

- Adopting and implementing regulations and policies that directly affect
the ownership, operation, programming and employment practices of
stations.

The FCC has the power to impose penalties for violation of its rules or the
applicable statutes. In particular, our business will be dependent upon
continuing to hold broadcasting licenses from the FCC that are issued for terms
of up to eight years. While in the vast majority of cases these licenses are
renewed by the FCC, we cannot be sure that any of our United States stations'
licenses will be renewed at their expiration date. If our licenses are renewed,
we cannot be sure that the FCC will not impose conditions or qualifications that
could cause problems in our business. Although a recent amendment to the law
loosened or eliminated many restrictions on ownership of radio and television
stations in the United States, we are still restricted from owning more than a
certain number of stations in any United States market. This restriction, as
well as rules which could "attribute" ownership of broadcast properties by other
persons to us because those persons are associated with us, may limit our
ability to purchase stations we would otherwise wish to buy. The law also limits
the ability of non-U.S. persons to own our capital stock and to participate in
our affairs. Our articles of incorporation contain provisions which place
restrictions on the ownership, voting and transfer of our capital stock in
accordance with the law.

OUR CURRENT AND ANY FUTURE INTERNATIONAL OPERATIONS ARE SUBJECT TO CERTAIN RISKS
THAT ARE UNIQUE TO OPERATING IN A FOREIGN COUNTRY.

We currently own a 54% interest in a national radio station in Hungary, we
have entered into an agreement to purchase two radio stations in Argentina, and
we are pursuing and intend to continue to pursue opportunities to buy additional
broadcasting properties in Argentina and other foreign countries. The risks of
doing business in foreign countries include the following:

- Changing regulatory or taxation policies;

- Currency exchange risks;

- Changes in diplomatic relations or hostility from local populations;

- Seizure of our property by the government, or restrictions on our
ability to transfer our property or earnings out of the foreign country;
and

16
<PAGE> 20

- Potential instability of foreign governments, which might result in
losses against which we are not insured.

Although we will try to evaluate the risks before we purchase a station in
a foreign country, we cannot be sure whether any of these risks will have an
effect on our business in the future.

IF ONE OR MORE OF THE COMPUTER SYSTEMS UPON WHICH OUR BUSINESS DEPENDS FAILS TO
OPERATE CORRECTLY AFTER JANUARY 1, 2000, OUR ABILITY TO BROADCAST, PUBLISH AND
CONDUCT OUR BUSINESS OPERATIONS COULD BE IMPAIRED FOR A PERIOD OF TIME.

Our ability to conduct business depends upon information technology,
broadcast and other equipment and imbedded technology. If this technology is not
year 2000 compliant prior to January 1, 2000, we might not be able to broadcast,
publish, or process business transactions at particular locations or throughout
the company. Although we have completed our assessment phase of year 2000
compliance and all technology and equipment which has been identified as
noncompliant is scheduled to be replaced before the end of 1999, we have
necessarily relied upon the representations of our vendors as to the year 2000
compliance of products supplied by them. Moreover, the ability of third parties
with whom we transact business to adequately address their year 2000 compliance
issues is outside of our control. The failure of one or more of such third
parties to adequately address their year 2000 compliance issues could interrupt
our broadcasting and other activities and harm our business.

FLUCTUATIONS IN THE MARKET PRICE OF OUR CLASS A COMMON STOCK MAY MAKE IT MORE
DIFFICULT FOR US TO RAISE CAPITAL.

The market price of our Class A Common Stock is extremely volatile and has
fluctuated over a wide range. The fluctuations may impair our ability to raise
capital by offering equity securities. The market price may continue to
fluctuate significantly in response to various factors, including:

- market conditions in the industry;

- announcements or actions by competitors;

- low trading volume;

- sales of large amounts of our Class A Common Stock in the public market
or the perception that such sales could occur;

- quarterly variations in operating results or growth rates;

- changes in estimates by securities analysts;

- regulatory and judicial actions; and

- general economic conditions.

FUTURE SALES OF COMMON STOCK COULD LOWER OUR STOCK PRICE.

Several stockholders own significant amounts of our common stock. If
existing stockholders decide to sell large amounts of our stock, our stock price
could fall. Even the market's perception

17
<PAGE> 21

that this might occur could lower our stock price. In addition, concurrent with
this offering, we intend to sell additional Class A Common Stock.

WE HAVE NOT PAID AND DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK, AND
THEREFORE YOU MAY NOT REALIZE ANY BENEFIT OF CLASS A COMMON STOCK RECEIVED UPON
CONVERSION OF YOUR CONVERTIBLE PREFERRED STOCK WITHOUT SELLING THE CLASS A
COMMON STOCK.

We have never declared or paid any dividends on our common stock. In
addition, under our credit facility, we are restricted in our ability to pay
dividends on our common stock. We intend to retain any earnings to support the
growth and development in our business, and we do not intend to pay cash
dividends any time soon.

WE MAY ISSUE ADDITIONAL PREFERRED STOCK, WHICH COULD DILUTE YOUR INTERESTS OR
DETER A CHANGE OF CONTROL OF EMMIS, EVEN IF THE CHANGE OF CONTROL IS FAVORED BY
OUR SHAREHOLDERS.

Our articles of incorporation do not limit the issuance of additional
series of preferred stock ranking ratably with or junior to the convertible
preferred stock. Our articles of incorporation require approval by holders of
two-thirds of the outstanding convertible preferred stock to issue any of our
stock senior to the convertible preferred stock. The issuance of additional
preferred stock on parity with the convertible preferred stock could dilute the
interests of holders of the convertible preferred stock. None of the provisions
relating to the convertible preferred stock affords the holders of the
convertible preferred stock protection in the event of a highly leveraged or
other transaction that might adversely affect their interests.

WE MAY REDEEM THE CONVERTIBLE PREFERRED STOCK ON OR AFTER APRIL 15, 2001.

We may redeem the convertible preferred stock on or after April 15, 2001,
subject to certain conditions, including payment of additional amounts with
respect to dividends, if the redemption occurs prior to October 15, 2002. You
should assume that we will exercise our redemption option if it is in our
interest to do so.

YOU WILL HAVE LIMITED VOTING RIGHTS.

As a holder of the convertible preferred stock, you will have voting rights
only under certain limited conditions. If we fail to pay dividends to you for
six or more consecutive quarterly periods, the holders of the convertible
preferred stock (together with any other preferred shareholders who have the
same voting rights) may elect two additional directors to serve on our board of
directors. They will serve on the board only until all dividends in arrears and
for the then current distribution period have been paid or set aside for
payment.

OUR ABILITY TO PAY DIVIDENDS IS LIMITED BY INDIANA LAW.

Under Indiana law, we are not permitted to make a distribution to our
shareholders, including dividends on our capital stock if, after giving effect
to the payment we would not be able to pay our debts as they become due in the
usual course of business or our total assets would be less than the sum of our
total liabilities plus (unless the articles of incorporation permit otherwise)
the amount that would be needed if we were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential

18
<PAGE> 22

rights are superior to those receiving the distribution. Consequently, if we
fail to meet these criteria we will be unable to pay dividends on the
convertible preferred stock.

OUR EXISTING INDEBTEDNESS MAY LIMIT OUR ABILITY TO PAY CASH DIVIDENDS.

Dividends on the preferred stock must be paid in cash. Under the indenture
for our subordinated notes, we may pay cash dividends and make other
distributions on or in respect of our preferred stock only if certain financial
tests are met. Under a proposed amendment to the credit facility, we will be
able pay cash dividends and make other distributions on or in respect of the
convertible preferred stock provided certain financial tests are met. There can
be no assurance that these financial tests will be met or that future financing
arrangements will permit us to pay cash dividends on the convertible preferred
stock.

THERE MAY BE NO ACTIVE OR LIQUID MARKET FOR THE CONVERTIBLE PREFERRED STOCK.

There has been no trading market for the convertible preferred stock prior
to this offering. The underwriters have advised us that they intend to make a
market in the convertible preferred stock after the consummation of this
offering. However, they are not obligated to do so and may discontinue market
making activities at any time without notice. There can be no assurance,
therefore, that any market for the convertible preferred stock will develop or,
if one does develop, that it will be maintained. If an active trading market for
the convertible preferred stock fails to develop or be sustained, the trading
price of the convertible preferred stock could be materially adversely affected.
Even if actively traded, the convertible preferred stock may trade at a discount
from its initial offering price depending upon prevailing interest rates, the
market for similar securities, our performance and other factors.

OUR ANTICIPATED ACQUISITIONS MAY NOT BE COMPLETED AND, IF NOT COMPLETED, WE WILL
HAVE THE ABILITY TO APPLY SOME OF THE PROCEEDS OF THIS OFFERING TO FUND AS YET
UNIDENTIFIED ACQUISITIONS OR OTHER INVESTMENTS.

If our anticipated acquisitions are not completed, a significant portion of
the net proceeds from this offering will not be designated for a specific use.
Therefore, we will have broad discretion with respect to the use of such
proceeds. Accordingly, our investors may not have the opportunity to evaluate
the economic, financial and other relevant information that we may consider in
the application of the net proceeds. This offering is not contingent or in any
way dependent on any anticipated acquisitions.

SOME OF OUR FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS MAY NOT TURN OUT TO BE
CORRECT.

Some of the statements contained in this prospectus are forward-looking.
All statements regarding our expected financial position, business and financing
plans are forward-looking statements. These statements can sometimes be
identified by our use of forward-looking words such as "may," "will," "should,"
"expect," "anticipate," "estimate" or "continue." Although we believe that our
expectations in such forward-looking statements are reasonable, we cannot
promise that our expectations will turn out to be correct. Actual results could
be materially different from and worse than our expectations for various
reasons, including those discussed in this section.

19
<PAGE> 23

USE OF PROCEEDS

The net proceeds from the sale of our 6.25% Series A Cumulative Convertible
Preferred Stock will be approximately $121 million, after deducting underwriting
discounts and commissions and offering expenses (net proceeds would be
approximately $139 million if the underwriters' over-allotment option were
exercised in full). The net proceeds from our concurrent sale of 3,440,000
shares of Class A Common Stock will be approximately $205 million, after
deducting underwriting discounts and commissions and offering expenses (net
proceeds would be approximately $238 million if the underwriters' over-allotment
option were exercised in full). We will not receive any proceeds from the
concurrent sale of Class A Common Stock by the selling stockholder.

We intend to use the net proceeds received by us from the sale of
convertible preferred stock under this prospectus, together with the net
proceeds from our concurrent sale of Class A Common Stock, to fund the
acquisition of additional broadcasting properties and acquisition-related
expenses and for general corporate purposes. The broadcasting properties may
include television station WKCF in Orlando, Florida and six radio stations and a
television station in St. Louis, Missouri.

Pending these uses, we may use all or a portion of the net proceeds to
partially repay amounts outstanding on our credit facility. Borrowings under our
credit facility bear interest at a rate that fluctuates with an applicable
margin based on our leverage ratio plus a bank base rate or a Eurodollar base
rate as applicable. At August 31, 1999, the weighted average interest rate on
our credit facility was approximately 7.5% and the principal amount outstanding
was approximately $319 million. The revolving portion of our credit facility
matures on August 31, 2006 and the term portion matures on February 28, 2007.

20
<PAGE> 24

PRICE RANGE OF CLASS A COMMON STOCK

Our Class A Common Stock is traded on the Nasdaq National Market under the
symbol EMMS. The following table sets forth the high and low sale prices of the
Class A Common Stock for the periods indicated.

<TABLE>
<CAPTION>
PRICES
PER SHARE
---------------
HIGH LOW
<S> <C> <C>
FISCAL YEAR ENDED FEBRUARY 28, 1998
First Quarter............................................. $39.50 $31.00
Second Quarter............................................ 51.00 36.25
Third Quarter............................................. 49.75 43.00
Fourth Quarter............................................ 49.75 43.75
FISCAL YEAR ENDED FEBRUARY 28, 1999
First Quarter............................................. 57.13 41.50
Second Quarter............................................ 49.13 36.50
Third Quarter............................................. 39.50 22.13
Fourth Quarter............................................ 51.88 33.88
FISCAL YEAR ENDED FEBRUARY 29, 2000
First Quarter............................................. 50.25 39.00
Second Quarter............................................ 59.13 44.00
Third Quarter (through October 26, 1999).................. 69.50 54.50
</TABLE>

The last reported sale price of our Class A Common Stock on the Nasdaq
National Market on October 26, 1999 was $62.50 per share. As of October 25,
1999, we had 1,720 registered holders of Class A Common Stock.

DIVIDEND POLICY

We have followed a policy of retaining our earnings for use in our business
rather than paying any dividends on our common stock. In addition, under our
credit facility, we are restricted in our ability to pay dividends on our common
stock. Accordingly, we have not paid dividends and do not anticipate paying any
dividends on shares of our common stock in the foreseeable future.

21
<PAGE> 25

CAPITALIZATION

The following table sets forth our capitalization as of August 31, 1999 on
an actual basis, as adjusted to give effect to this offering and as further
adjusted to give effect to this offering and the concurrent Class A Common Stock
offering. The table reflects a temporary repayment of the revolving portion of
our credit facility pending consummation of pending acquisitions and assumes no
exercise of the underwriters' over-allotment option. You should read this
information together with our consolidated financial statements and related
notes, which are included in and incorporated by reference in this prospectus.

<TABLE>
<CAPTION>
AS OF AUGUST 31, 1999
-----------------------------------------
AS FURTHER
ACTUAL AS ADJUSTED ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash............................................. $ 3,061 $ 54,674 $ 260,136
======== ========== ==========
Long-term debt, including current maturities:
Credit facility................................ $319,000 $ 250,000 $ 250,000
Capital leases................................. 827 827 827
Hungarian radio debt(1)........................ 16,754 16,754 16,754
8 1/8% Senior Subordinated Notes due 2009...... 300,000 300,000 300,000
-------- ---------- ----------
Total long-term debt........................ 636,581 567,581 567,581
-------- ---------- ----------
Shareholders' equity:
6.25% Series A Cumulative Convertible Preferred
Stock, $.01 par value; as adjusted,
2,500,000 shares authorized, issued and
outstanding................................. -- 25 25
Class A Common Stock, $.01 par value;
34,000,000 shares authorized; as further
adjusted for common stock offering,
17,051,821 shares issued and
outstanding(2).............................. 134 134 171
Class B Common Stock, $.01 par value; 6,000,000
shares authorized; as further adjusted for
common stock offering, 2,382,125 shares
issued and outstanding(2)................... 26 26 24
Additional paid-in capital..................... 269,241 389,829 595,256
Accumulated deficit............................ (22,848) (22,848) (22,848)
Accumulated other comprehensive income......... (1,504) (1,504) (1,504)
-------- ---------- ----------
Total shareholders' equity.................. 245,049 365,662 571,124
-------- ---------- ----------
Total capitalization................... $881,630 $ 933,243 $1,138,705
======== ========== ==========
</TABLE>

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

(1) Hungarian radio debt represents obligations of our 54% owned Hungarian
subsidiary which are consolidated in our financial statements due to our
majority ownership interest. However, we are not a guarantor of or required
to fund these obligations.

(2) Does not include the 1,254,949 shares of Class A Common Stock and the
500,000 shares of Class B Common Stock issuable upon exercise of stock
options outstanding as of August 31, 1999.

22
<PAGE> 26

RECENT DEVELOPMENTS

ORLANDO ACQUISITION

Consistent with our acquisition strategy, effective June 3, 1999, we
entered into a definitive agreement to purchase substantially all of the assets
of television station WKCF in Orlando, Florida, for approximately $191.5 million
in cash. The station's designated market area, as estimated by the A.C. Nielsen
Company as of January 1999, is ranked 22 out of the 210 generally recognized
designated market areas as defined by Nielsen and is projected to be one of the
top five fastest growing markets in terms of retail sales and population in the
nation's largest 25 markets.

WKCF is an affiliate of the WB television network. Like the Fox television
network, WB targets a younger audience and provides us with a higher degree of
programming flexibility than is available with the three traditional networks.
For the 1998-1999 television season, the WB television network had the highest
growth rate among television networks in the United States in terms of household
viewership and was again the number one network among teens. As part of our
acquisition of WKCF, we will assume and amend the affiliation agreement with WB
so that it will terminate in December 2009, subject to earlier termination as
defined in the agreement. Pursuant to the amended WB affiliation agreement, WB
is to provide WKCF with programming in return for the station's broadcasting of
WB-inserted commercials in that programming. WKCF also retains the right to
include a limited amount of commercials during WB programming.

The FCC approved the acquisition on September 27, 1999. We expect the
transaction to close during our fiscal quarter ending November 30, 1999.

ST. LOUIS ACQUISITION

In June 1999, we entered into an agreement with a former executive of
Sinclair Broadcast Group, Inc., to purchase his right to acquire six radio
stations and one television station in St. Louis from Sinclair. The executive's
employment agreement with Sinclair gave him an option to purchase these stations
at fair market value, and specifically provided that he could purchase the
stations himself or designate a third party to purchase them. After signing the
agreement with us, the executive exercised his option and designated us as the
purchaser.

The option outlines an appraisal procedure to determine the fair market
value of the stations, sets the standard for determining the terms of a
definitive purchase agreement and includes a mechanism for establishing the
closing date. The option also recognizes that many details of the acquisition
are not specified in the agreement and requires that the parties work together
in good faith. Although both we and Sinclair have an obligation to comply with
the process and standard provided in the option to effect our purchase of the
St. Louis stations, the duration of the process is uncertain and specific terms
of the acquisition have not yet been determined. Until the process results in a
determination of the material terms, the acquisition is not probable for
financial reporting purposes.

St. Louis is the nineteenth ranked radio market by revenue size among all
radio markets in the United States, according to BIA's Third Edition of the 1999
Radio Market Report. Sinclair's St. Louis properties complement our existing
radio stations in the St. Louis market and should allow us to realize greater
operating efficiencies. The following table sets forth certain

23
<PAGE> 27

information regarding the St. Louis radio stations covered by the St. Louis
option. In the table, "Ranking in Primary Demographic Target" is the ranking of
the station among all radio stations in the St. Louis market based on the Spring
1999 Arbitron Survey. A "t" indicates the station tied with another station for
the stated ranking. "Station Audience Share" represents a percentage generally
computed by dividing the average number of persons over age 12 listening to a
particular station during specified time periods by the average number of such
persons for all stations in the market area as determined by Arbitron.

<TABLE>
<CAPTION>
RANKING IN
PRIMARY PRIMARY STATION
DEMOGRAPHIC DEMOGRAPHIC AUDIENCE
STATION FORMAT TARGET AGES TARGET SHARE
<S> <C> <C> <C> <C>
WIL-FM Country 25-54 3 7.1
KIHT-FM Classic Hits 25-54 7t 3.3
KPNT-FM Alternative Rock 18-34 6t 3.1
KXOK-FM Classic Rock 25-54 10 2.9
WVRV-FM Modern Adult Contemporary 25-54 11t 2.9
WRTH-AM Adult Standards 35-54 21 2.4
</TABLE>

Under FCC regulations, we can own no more than six radio stations in the
St. Louis market (of which no more than five may be FM stations) in combination
with a television station in that market. As we already own three FM stations in
the St. Louis market, concurrent with the acquisition of the above stations we
must divest three FM stations. We intend to divest the stations with the three
weakest transmitting signals.

The St. Louis television station, KDNL-TV, transmits on channel 30. The
station's designated market area, as estimated by the A.C. Nielsen Company as of
January 1999, is ranked 21 out of the 210 generally recognized designated market
areas as defined by Nielsen. KDNL-TV is one of six television stations
designated by Nielsen as "local" to the St. Louis market area. KDNL-TV ranks
number five out of these six stations based on the rating as reported by Nielsen
from 9:00 a.m. to midnight, Sunday through Saturday, during May 1999. The same
Nielsen report indicates that the station has an audience share of nine,
reflecting an estimate of the percentage of households in the St. Louis
designated market area viewing KDNL-TV in comparison to other local commercial
stations in the market as measured from 9:00 a.m. to midnight, Sunday through
Saturday. KDNL-TV is an ABC affiliate; however, we have not yet discussed with
ABC what effect, if any, our purchase of KDNL-TV will have on the station's
affiliation agreement.

ARGENTINA ACQUISITIONS

24
<PAGE> 28

LIBERTY MEDIA INVESTMENT

25
<PAGE> 29

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated financial and other data has been derived, except
as otherwise noted, from our consolidated financial statements for the years
ended February (29) 28, 1995, 1996, 1997, 1998 and 1999 which have been audited
by Arthur Andersen LLP and from our unaudited condensed consolidated financial
statements for the six months ended August 31, 1998 and 1999. The selected
consolidated financial and other data presented below should be read in
conjunction with, and is qualified in its entirety by reference to, our
consolidated financial statements for the years ended February 28, 1997, 1998,
and 1999 and our unaudited condensed consolidated financial statements for the
six months ended August 31, 1998 and 1999 and related notes, which can be found
at the end of this prospectus, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere in this
prospectus.

26
<PAGE> 30

<TABLE>
<CAPTION>
AS OF FEBRUARY (29) 28, AS OF
------------------------------------------------------ AUGUST 31,
1995 1996 1997 1998 1999 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................. $ 3,205 $ 1,218 $ 1,191 $ 5,785 $ 6,117 $ 3,061
Working capital....... 10,088 14,761 15,463 21,635 1,249 12,308
Net intangible
assets(3)........... 139,729 135,830 131,743 234,558 802,307 820,789
Total assets.......... 183,441 176,566 189,716 333,388 1,014,831 1,079,701
Obligations under
credit facility and
senior subordinated
debt................ 152,000 124,000 115,000 215,000 577,000 619,000
Shareholders' equity
(deficit)........... (2,661) 13,884 34,422 43,910 235,549 245,049
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED(1) AUGUST 31,
------------------------------------------------------- ----------------------
1995 1996 1997 1998 1999 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA(4):
Broadcast/publishing
cash flow(5)........... $ 28,614 $ 46,778 $ 51,287 $ 59,413 $ 89,488 $ 41,635 $ 60,759
EBITDA before certain
charges(6)............. 24,601 41,095 44,194 51,568 77,584 37,148 53,328
Cash flows from (used
in):
Operating activities... 15,480 23,221 21,362 22,487 35,121 11,679 6,132
Investing activities... (102,682) 222 (13,919) (116,693) (541,470) (440,638) (56,785)
Financing activities... 88,800 (25,430) (7,470) 98,800 506,681 435,936 47,597
Capital
expenditures(7)........ 1,081 1,396 7,559 16,991 37,383 16,503 20,831
</TABLE>

- ------------------------------
(1) Our fiscal year ends on the last day of February of each year.

27
<PAGE> 31

as a supplement to and not a substitute for our results of operations
presented on the basis of generally accepted accounting principles.
Moreover, BCF and PCF are not standardized measures and may be calculated in
a number of ways. We define BCF and PCF as revenues net of agency
commissions and operating expenses.

28
<PAGE> 32

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our selected
historical financial statements and other data and the related notes presented
elsewhere in this prospectus, as well as our historical financial statements and
the financial statements of acquired businesses which are incorporated by
reference in this prospectus.

GENERAL

We own and operate sixteen radio stations, six television stations and five
magazine publishing operations in the United States. Our radio stations consist
of thirteen FM and three AM stations serving New York City, Los Angeles,
Chicago, St. Louis, Indianapolis and Terre Haute, Indiana. Our television
stations consist of five Fox affiliated stations serving New Orleans, Louisiana,
Mobile, Alabama, Green Bay, Wisconsin, Honolulu, Hawaii and Fort Myers, Florida
and one CBS affiliated station serving Terre Haute, Indiana. Our publishing
operations consist primarily of four city or regional monthly magazines and one
special interest magazine, including Indianapolis Monthly, Atlanta, Cincinnati,
Texas Monthly, and Country Sampler. In addition, we own a 54% interest in and
operate a national radio station in Hungary.

The principal source of our broadcasting revenues is the sale of
broadcasting time on our radio and television stations for advertising. The sale
of advertising time is primarily affected by the demand for advertising time by
local and national advertisers and the advertising rates charged by our radio
and television stations. We derive a small portion of our broadcasting revenues
from fees paid by the networks and program syndicators for the broadcast of
programming. Our broadcast revenues are generally highest in our second and
third fiscal quarters.

Radio station advertising rates are based in part on a station's ability to
attract audiences in the demographic groups which advertisers wish to reach and
the number of stations competing in the market area, as well as local, regional
and national economic conditions. A station's audience is reflected in rating
service surveys of the size of the audience tuned to the station and the time
spent listening.

Television station advertising is sold for placement in proximity to
specific local or network programming and is priced primarily on the basis of a
program's popularity with the audience advertisers seek to reach, as measured
principally by quarterly audience surveys. In addition, advertising rates are
affected by the number of advertisers competing for the available time, the size
and demographic makeup of the market areas served, and local, regional and
national economic conditions.

In the broadcasting industry, stations often utilize trade (or barter)
agreements to exchange advertising time for goods or services (such as other
media advertising, travel or lodging), in lieu of cash. In order to preserve
most of our on-air inventory for cash advertising, we generally enter into trade
agreements only if the goods or services bartered to us will be used in our
business. We have minimized our use of trade agreements and in fiscal 1997, 1998
and 1999 sold approximately 95% of our advertising time for cash.

29
<PAGE> 33

The principal source of our publishing revenues is the sale of local,
regional and national advertising pages in our magazines. Advertising sales and
the rates that we charge are determined in part by a publication's ability to
attract audiences in the geographic and demographic groups which advertisers
wish to reach and the number of magazines competing in the market area, as well
as local, regional and national economic conditions. Our publications also
derive revenues from the sale of subscriptions to our magazines and the sales of
our magazines at retail locations such as newsstands, bookstores and shops.

The primary operating expenses involved in owning and operating radio
stations are employee salaries and commissions, programming, advertising and
promotion. The primary operating expenses involved in owning and operating
television stations are syndicated program rights fees, employee salaries and
commissions, news gathering, programming, advertising and promotion. The
principal operating expenses involved in owning and operating magazines are
printing, employee salaries and commissions, advertising and promotion. Our net
earnings are also impacted by depreciation, amortization and interest expenses
associated with our acquisition of broadcasting and publishing operations.

We evaluate performance of our operating entities based on broadcast cash
flow ("BCF") and publishing cash flow ("PCF"). We believe that BCF and PCF are
useful because they provide a meaningful comparison of operating performance
between companies in the industry and serve as an indicator of the market value
of a group of stations or publishing entities. BCF and PCF are generally
recognized by the broadcast and publishing industries as a measure of
performance and are used by analysts who report on the performance of
broadcasting and publishing groups. BCF and PCF do not take into account our
debt service requirements and other commitments and, accordingly, BCF and PCF
are not necessarily indicative of amounts that may be available for dividends,
reinvestment in our business or other discretionary uses. BCF and PCF are not
measures of liquidity or of performance in accordance with generally accepted
accounting principles, and should be viewed as a supplement to and not a
substitute for our results of operations presented on the basis of generally
accepted accounting principles. Moreover, BCF and PCF are not standardized
measures and may be calculated in a number of ways. We define BCF and PCF as
revenues net of agency commissions and operating expenses.

SIX MONTHS ENDED AUGUST 31, 1999 COMPARED TO SIX MONTHS ENDED AUGUST 31, 1998

Net revenues for the six months ended August 31, 1999 were $153.9 million
compared to $102.5 million for the same period of the prior year, an increase of
$51.4 million or 50.1%. The increase in net revenues for the six-month period
ended August 31, 1999 is primarily the result of the SF Broadcasting and Wabash
Valley acquisitions ($25.4 million) and Country Sampler acquisition ($5.6
million). Excluding these transactions, net revenues for the six months ended
August 31, 1999 would have increased $20.4 million or 21.1%. This increase is
principally due to the ability to realize higher advertising rates at certain
broadcasting properties, resulting from higher ratings at certain broadcasting
properties, as well as increases in general radio spending in the markets in
which we operate.

Operating expenses for the six months ended August 31, 1999 were $93.1
million compared to $60.9 million for the same period of the prior year, an
increase of $32.2 million or 53.0%. The increase in operating expenses for the
six-month period ended August 31, 1999 is primarily the

30
<PAGE> 34

result of the SF Broadcasting and Wabash Valley acquisitions ($17.5 million) and
Country Sampler acquisition ($4.7 million). Excluding these transactions,
operating expenses for the six months ended August 31, 1999 would have increased
$10.0 million or 17.7%. This increase is principally due to higher advertising
and promotional spending at certain of our properties as well as an increase in
sales-related costs.

Broadcast/publishing cash flow for the six months ended August 31, 1999 was
$60.8 million compared to $41.6 million for the same period of the prior year,
an increase of $19.2 million or 45.9%. The increase in broadcast/publishing cash
flow for the six-month period ended August 31, 1999 is primarily the result of
the SF Broadcasting and Wabash Valley acquisitions ($8.0 million) and Country
Sampler acquisition ($0.8 million). Excluding these transactions,
broadcast/publishing cash flow for the six months ended August 31, 1999 would
have increased $10.4 million or 26.1%. This increase is principally due to
increased net revenues partially offset by increased operating expenses as
discussed above.

International business development expenses for the six months ended August
31, 1999 were $0.7 million compared to $0.6 million for the same period of the
prior year. These expenses reflect costs associated with Emmis International
Broadcasting Corporation. The purpose of this wholly owned subsidiary is to
identify, investigate and develop international broadcast investments or other
international business opportunities. Expenses consist primarily of salaries,
travel and various administrative costs.

Corporate expenses for the six months ended August 31, 1999 were $6.7
million compared to $3.9 million for the same period of the prior year, an
increase of $2.8 million or 70.2%. This increase is due to an increase in the
number of corporate employees in all departments as a result of our growth.

EBITDA before certain charges is defined as broadcast/publishing cash flow
less corporate and international business development expenses. EBITDA before
certain charges for the six months ended August 31, 1999 was $53.3 million
compared to $37.1 million for the same period of the prior year, an increase of
$16.2 million or 43.6%. This increase is principally due to an increase in
broadcast/publishing cash flow partially offset by an increase in corporate
expenses.

Depreciation and amortization expense for the six months ended August 31,
1999 was $20.0 million compared to $9.9 million for the same period of the prior
year, an increase of $10.1 million or 102.2%. The increase in depreciation and
amortization expense for the six-month period ended August 31, 1999 is primarily
the result of the SF Broadcasting and Wabash Valley acquisitions ($5.1 million),
the acquisition of WQCD-FM ($1.8 million) and the Country Sampler acquisition
($1.0 million).

Non-cash compensation expense for the six months ended August 31, 1999 was
$2.3 million compared to $2.0 million for the same period of the prior year, an
increase of $0.3 million or 12.6%. Non-cash compensation includes compensation
expense associated with stock options granted, restricted common stock issued
under employment agreements and common stock contributed to our profit sharing
plan. This increase was due primarily to shares granted to certain executives
under employment agreements for which the fair market value of the shares at the
date of grant was higher than the fair market value of shares granted under
previous employment agreements.

31
<PAGE> 35

Interest expense for the six months ended August 31, 1999 was $27.2 million
compared to $12.6 million for the same period of the prior year, an increase of
$14.6 million or 115.1%. This increase reflects higher outstanding debt due to
the acquisition of WQCD-FM, the SF Broadcasting and Wabash Valley acquisitions
and the Country Sampler acquisition and an increase in interest rates.

YEAR ENDED FEBRUARY 28, 1999 COMPARED TO YEAR ENDED FEBRUARY 28, 1998

Net revenues for the year ended February 28, 1999 were $232.8 million
compared to $140.6 million for the same period of the prior year, an increase of
$92.2 million or 65.6%. This increase was principally due to the acquisitions of
Cincinnati and Texas Monthly magazines and additional Indianapolis radio
stations that occurred toward the end of fiscal 1998 and the acquisitions of six
television stations and three radio stations that occurred in fiscal 1999.
Additionally, we realized higher advertising rates at our broadcasting
properties, resulting from higher ratings at certain broadcasting properties, as
well as increases in general radio spending in the markets in which we operate.

Operating expenses for the year ended February 28, 1999 were $143.3 million
compared to $81.2 million for the same period of the prior year, an increase of
$62.1 million or 76.6%. This increase was principally attributable to the
acquisitions in fiscal 1998 and 1999 and increased promotional spending at our
broadcasting properties.

Broadcast/publishing cash flow for the year ended February 28, 1999 was
$89.5 million compared to $59.4 million for the same period of the prior year,
an increase of $30.1 million or 50.6%. This increase was due to increased net
revenues partially offset by increased operating expenses as discussed above.

Corporate expenses for the year ended February 28, 1999 were $10.4 million
compared to $6.8 million for the same period of the prior year, an increase of
$3.6 million or 52.3%. This increase was primarily due to an increase in the
number of corporate employees as a result of our growth and increased travel and
other expenses related to potential acquisitions that were not finalized.

EBITDA before certain charges is defined as broadcast/publishing cash flow
less corporate and international development expenses. EBITDA before certain
charges for the year ended February 28, 1999 was $77.6 million compared to $51.6
million for the same period of the prior year, an increase of $26.0 million or
50.4%. This increase was principally due to the increase in broadcast/publishing
cash flow partially offset by an increase in corporate expenses.

Depreciation and amortization expense for the year ended February 28, 1999
was $28.3 million compared to $7.5 million for the same period of the prior
year, an increase of $20.8 million or 275.7%. This increase was primarily due to
the acquisitions in fiscal 1998 and 1999, including the acquisition of WQCD-FM.

Non-cash compensation expense for the year ended February 28, 1999 was $4.3
million compared to $1.5 million for the same period of the prior year, an
increase of $2.8 million or 188.1%. Non-cash compensation includes compensation
expense associated with stock options granted, restricted common stock issued
under employment agreements and common stock contributed to our Profit Sharing
Plan. The increase in non-cash compensation relates primarily

32
<PAGE> 36

to options awarded the CEO in fiscal 1999 under his employment contract which
were not awarded in fiscal 1998.

Interest expense was $35.7 million for the year ended February 28, 1999
compared to $13.8 million for the same period of the prior year, an increase of
$21.9 million or 158.9%. This increase reflected higher outstanding debt due to
the acquisitions in fiscal 1998 and 1999, including the acquisition of WQCD-FM.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash provided by operations and
availability under our credit facility. At August 31, 1999, we had cash and cash
equivalents of $3.1 million and net working capital of $12.3 million. At August
31, 1999 we had up to $331.0 million available under our credit facility. We
expect that cash flow from operating activities will be sufficient to fund all
debt service for debt existing at August 31, 1999, working capital and capital
expenditure requirements. In addition, we also have access to public equity and
debt markets.

Effective June 3, 1999, we entered into a definitive agreement to purchase
substantially all of the assets of television station WKCF in Orlando, Florida,
for approximately $191.5 million in cash payable at closing, of which we made an
escrow deposit of $12.5 million in June 1999. This acquisition will be accounted
for under the purchase method of accounting. The FCC approved the acquisition on
September 27, 1999. We expect to close on this acquisition in our fiscal quarter
ending November 30, 1999.

Effective June 25, 1999, we entered into an agreement with a former
executive of Sinclair Broadcast Group, Inc. to purchase his right to acquire the
assets of certain broadcast properties in St. Louis, Missouri. The right allows
us to purchase, at fair market value, six radio stations (five FM and one AM)
and one ABC-affiliated television station from Sinclair. We are currently in the
process of determining with Sinclair the fair market value of the stations and
the related terms of a definitive purchase agreement. The acquisition will be
accounted for under the purchase method of accounting.

We expect to finance these acquisitions with the proceeds of the offerings
of our Class A Common Stock and convertible preferred stock and additional
borrowings under our credit facility. We believe we have sufficient capital
resources to fund all of these acquisitions.

At August 31, 1999, five of our six television stations were Fox
affiliates. In July 1999, the Fox Network entered into an agreement with its
affiliates which requires the affiliates to buy prime time spots from the
network. Our agreement with the Fox Network commences on July 15, 1999 and
terminates on June 30, 2002. As a result of this agreement, we expect our
broadcast cash flow will decrease by approximately $0.6 million annually.

33
<PAGE> 37

Included in our capital expenditures budget for the year ended February 29,
2000 is approximately $16.3 million for the construction of new operating
facilities at KHON-TV in Hawaii. Capital expenditures incurred for the six
months ended August 31, 1999 were approximately $20.8 million, including $14.5
million at KHON-TV.

As part of our business strategy, we continually evaluate potential
acquisitions of radio and television stations as well as publishing properties.
In connection with future acquisition opportunities, we may incur additional
debt or issue additional equity or debt securities depending on market
conditions and other factors.

In connection with this offering, we have requested and expect to receive
an amendment to our credit facility to permit the payment of dividends on the
preferred stock.

INFORMATION REGARDING OPERATING GROUPS

For the six-month period ended August 31, 1999, we derived approximately
60.3% of our net revenue from radio operations, approximately 22.8% of our net
revenue from television operations and approximately 16.9% of our net revenue
from publishing and other operations. The following table sets forth selected
information regarding our operating groups for the fiscal year ended February
28, 1999 and for the six-month period ended August 31, 1999:

<TABLE>
<CAPTION>
CORPORATE
RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
YEAR ENDED FEBRUARY 28, 1999 (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues................ $155,028 $ 39,623 $36,476 $ 1,709 $ 232,836
Operating expenses.......... 84,907 26,130 31,491 820 143,348
-------- -------- ------- -------- ----------
Broadcast/publishing
cash flow................. 70,121 13,493 4,985 889 89,488
International business
development expenses...... -- -- -- 1,477 1,477
Corporate expenses.......... -- -- -- 10,427 10,427
Time brokerage fee.......... 2,220 -- -- -- 2,220
Depreciation and
amortization.............. 13,990 8,352 4,813 1,159 28,314
Non-cash compensation....... -- -- -- 4,269 4,269
-------- -------- ------- -------- ----------
Operating income............ $ 53,911 $ 5,141 $ 172 $(16,443) $ 42,781
======== ======== ======= ======== ==========
Total assets................ $460,065 $439,279 $44,171 $ 71,316 $1,014,831
======== ======== ======= ======== ==========
SIX MONTHS ENDED AUGUST 31, 1999
Net revenues................ $ 92,742 $ 35,046 $25,210 $ 883 $ 153,881
Operating expenses.......... 46,766 23,737 21,973 646 93,122
-------- -------- ------- -------- ----------
Broadcast/publishing
cash flow................. 45,976 11,309 3,237 237 60,759
International business
development expenses........ -- -- -- 747 747
Corporate expenses.......... -- -- -- 6,684 6,684
</TABLE>

34
<PAGE> 38

<TABLE>
<CAPTION>
CORPORATE
YEAR ENDED FEBRUARY 28, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Depreciation and
amortization.............. 8,129 6,985 3,263 1,668 20,045
Non-cash compensation....... -- -- -- 2,293 2,293
-------- -------- ------- -------- ----------
Operating income............ $ 37,847 $ 4,324 $ (26) $(11,155) $ 30,990
======== ======== ======= ======== ==========
Total assets................ $468,079 $454,088 $68,327 $ 89,207 $1,079,701
======== ======== ======= ======== ==========
</TABLE>

YEAR 2000 COMPLIANCE

We have completed our assessment phase of year 2000 compliance for
information technology, other equipment, including broadcast equipment, and
embedded technology. Certain technology and equipment is represented by our
vendors to be year 2000 compliant. Technology and equipment that is currently
not represented as year 2000 compliant will be upgraded or replaced, and tested
prior to October 31, 1999. The ability of third parties with whom we transact
business to adequately address their year 2000 compliance issues is outside of
our control. Therefore, we cannot give any assurance that the failure of such
third parties to adequately address their year 2000 compliance issues will not
have a material adverse effect on our business, financial condition, cash flows
and results of operations.

We have trained certain of our employees at each of our broadcast and
publishing properties regarding year 2000 issues and compliance and have made
them responsible for that property's year 2000 compliance. Our information
systems department is currently auditing the year 2000 compliance of each
property. This audit includes:

(1) verifying that critical applications have been identified;

(2) testing of critical applications;

(3) ensuring that year 2000 compliance documentation exists;

(4) verifying that remediation is occurring as planned; and

(5) developing written contingency plans.

Steps 1 through 4 of the audit have been performed at substantially all of
our broadcast and publishing properties. The audit should be complete by October
31, 1999.

We estimate that the cost of the year 2000 remediation effort will be
approximately $1.0 million, which will be funded from current operations. We
began tracking costs relating to year 2000 compliance in May 1999. As of August
31, 1999, these costs totaled $0.5 million.

If certain broadcast equipment and information technology is not year 2000
compliant prior to January 1, 2000, the station or magazine using that equipment
and information technology might not be able to broadcast or publish and process
transactions. If this were to occur, we could implement temporary solutions or
processes not involving the malfunctioning equipment. Contingency plans are
being documented in the event we must implement such temporary solutions. If we
implement temporary solutions and recognize new issues, we may adjust the focus
of our efforts, and costs to address our year 2000 compliance may be adjusted.

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<PAGE> 39

MARKET RISK

General. Market risk represents the risk of loss that may impact our
financial position, results of operations or cash flows due to adverse changes
in financial and commodity market prices and rates. We are exposed to market
risk from changes in domestic and international interest rates (i.e. prime and
LIBOR) and foreign currency exchange rates. To manage this exposure we
periodically enter into interest rate derivative agreements. We do not use
financial instruments for trading and are not a party to any leveraged
derivatives.

Interest Rates. At August 31 1999, our entire outstanding balance under
our credit facility, or approximately $319 million, bears interest at variable
rates. We currently hedge a portion of our outstanding debt with interest rate
caps that effectively cap our credit facility's underlying base rate at a
weighted average rate of 7.1% on the three-month LIBOR for agreements in place
as of August 31, 1999. Assuming the current level of borrowings protected under
interest rate cap agreements and that LIBOR increased from the rates at August
31, 1999 to the cap rates, interest expense would have increased by
approximately $5.0 million and net income would have decreased by approximately
$3.0 million. Our credit facility requires us to maintain interest rate
protection agreements through July 2001. The notional amount required varies
based upon our ratio of adjusted debt to EBITDA, as defined in our credit
facility. The notional amount of the agreements at August 31, 1999 totaled $274
million, and the agreements expire at various dates ranging from April 2000 to
February 2001. The fair value of the interest rate cap agreements was nominal at
August 31, 1999.

Foreign Currency. We own a 54% interest in a Hungarian subsidiary which is
consolidated in our financial statements. This subsidiary's operations are
measured in its local currency. We have a natural hedge through some of the
subsidiary's long-term obligations being denominated in Hungarian forints. We
maintain no other derivative instruments to mitigate the exposure to translation
and/or transaction risk. However, this does not preclude the adoption of
specific hedging strategies in the future. We estimate that a 10% change in the
value of the U.S. dollar to the Hungarian forint would not be material.

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<PAGE> 40

BUSINESS

BUSINESS STRATEGY

We are committed to maintaining our leadership position in broadcasting,
enhancing the performance of our broadcast and publishing properties, and
distinguishing ourselves through the quality of our operations. Our strategy has
the following principal components:

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<PAGE> 41

DEVELOP INNOVATIVE PROGRAMMING.

We believe that knowledge of local markets and innovative programming
developed to target specific demographic groups are the most important
determinants of individual radio and television station success. We conduct
extensive market research to identify underserved segments of the markets we
serve or to assure that we are meeting the needs of our target audience.
Utilizing the research results, we concentrate on providing a focused
programming format carefully tailored to the demographics of our markets and
our audiences' preferences.

EMPHASIZE FOCUSED SALES AND MARKETING STRATEGY.

We design our local and national sales efforts based on advertiser demand
and our programming compared to the competitive formats within each market.
We provide our sales force with extensive training and the technology for
sophisticated inventory management techniques which provide frequent price
adjustments based on regional and market conditions. We seek to maximize
sources of non-traditional, non-spot revenue and have led the industry in
developing "vendor co-op" advertising revenue. Although this source of
advertising revenue is common in the newspaper and magazine industry, we
were among the first radio broadcasters to recognize and take advantage of
the potential of vendor co-op advertising.

PURSUE STRATEGIC ACQUISITIONS AND CREATE CASH FLOW GROWTH BY ENHANCING STATION
PERFORMANCE.

We have built our station portfolio by selectively acquiring underdeveloped
media properties in desirable markets at reasonable purchase prices where
our experienced management team has been able to enhance value. We intend to
pursue acquisitions of radio stations in those of our current markets where
we believe we can increase broadcast cash flow. We will also consider
acquisitions of individual radio stations or groups of radio stations in new
markets where we expect we can achieve a leadership position. We believe
that continued consolidation in the radio broadcasting industry will create
attractive acquisition opportunities as the number of potential buyers for
radio assets declines due to government regulations on the number of
stations a company can own in one market. We believe that attractive
acquisition opportunities are also increasingly available in the television
broadcasting industry. We intend to evaluate acquisitions of international
broadcasting stations in conjunction with strong local minority-interest
partners and magazine publishing properties that present opportunities to
capitalize on our management expertise to enhance cash flow at attractive
purchase price multiples with minimal capital requirements.

ENCOURAGE AN ENTREPRENEURIAL MANAGEMENT APPROACH.

We believe that broadcasting is primarily a local business and that much of
its success is the result of the efforts of regional and local management
and staff. We have attracted and retained an experienced team of broadcast
professionals who understand the viewing and listening preferences,
demographics and competitive opportunities of their particular market. Our
decentralized approach to station management gives local management
oversight of station spending, long-range planning and resource allocation
at their individual stations and rewards all employees based on those
stations' performance. In addition, we encourage our

38
<PAGE> 42
managers and employees to own a stake in the company, and over 95% of all
full-time employees have an equity ownership position in Emmis. We believe that
our entrepreneurial management approach has created a distinctive corporate
culture, making Emmis a highly desirable employer in the broadcasting industry
and significantly enhancing our ability to attract and retain experienced and
highly motivated employees and management.

RADIO AND TELEVISION STATIONS

The following tables set forth certain information regarding our radio and
television stations and their broadcast markets.

RADIO STATIONS

In the following table, "Market Rank by Revenue" is the ranking of the
market revenue size of the principal radio market served by the station among
all radio markets in the United States. Market revenue and ranking figures are
from Duncan's Radio Market Guide (1998 ed.). We own a 40% equity interest in the
publisher of Duncan's Radio Market Guide. "Ranking in Primary Demographic
Target" is the ranking of the station among all radio stations in its market
based on the Spring 1999 Arbitron Survey. A "t" indicates the station tied with
another station for the stated ranking. "Station Audience Share" represents a
percentage generally computed by dividing the average number of persons over age
12 listening to a particular station during specified time periods by the
average number of such persons for all stations in the market area as determined
by Arbitron.

<TABLE>
<CAPTION>
RANKING IN
MARKET PRIMARY PRIMARY STATION
RANK BY DEMOGRAPHIC DEMOGRAPHIC AUDIENCE
STATION AND MARKET REVENUE FORMAT TARGET AGES TARGET SHARE
<S> <C> <C> <C> <C> <C>
Los Angeles, CA 1
KPWR-FM.............. Dance/Contemporary Hit 12-24 1 4.0
New York, NY 2
WQHT-FM.............. Dance/Contemporary Hit 12-24 1 5.4
WRKS-FM.............. Classic Soul/Smooth R&B 25-54 7 3.3
WQCD-FM.............. Contemporary Jazz 25-54 9t 2.9
Chicago, IL 3
WKQX-FM.............. New Rock 18-34 2 4.0
St. Louis, MO 18
KSHE-FM.............. Album Oriented Rock 25-54 9 3.0
WKKX-FM.............. Country 25-54 5t 4.5
WXTM-FM.............. Extreme Rock 18-34 10 2.2
Indianapolis, IN 30
WENS-FM.............. Adult Contemporary 25-54 3 5.2
WIBC-AM.............. News/Talk 35-64 2 9.1
WNAP-FM.............. Classic Rock 18-34 4 4.3
WTLC-FM.............. Urban Contemporary 25-54 10 4.9
WTLC-AM.............. Solid Gold Soul, Gospel and Talk 25-54 19t 1.1
Terre Haute, IN 172
WTHI-FM.............. Country 25-54 1 20.3
WTHI-AM(1)........... Talk 35-54 8 1.7
WWVR-FM.............. Classic Rock 25-54 3t 7.1
</TABLE>

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

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<PAGE> 43

TELEVISION STATIONS

In the following table, "DMA Rank" is estimated by the A.C. Nielsen Company
as of January 1999. Rankings are based on the relative size of a station's
market among the 210 generally recognized Designated Market Areas ("DMAs"), as
defined by Nielsen. "Number of Stations in Market" represents the number of
television stations ("Reportable Stations") designated by Nielsen as "local" to
the DMA, excluding public television stations and stations which do not meet
minimum Nielsen reporting standards (i.e., a weekly cumulative audience of less
than 2.5%) for reporting in the Sunday through Saturday, 9:00 a.m. to midnight
time period. "Station Rank" reflects the station's rank relative to other
Reportable Stations based upon the DMA rating as reported by Nielsen from 9:00
a.m. to midnight, Sunday through Saturday during May 1999. A "t" indicates the
station tied with another station for the stated ranking. "Station Audience
Share" reflects an estimate of the percentage of DMA households viewing
television received by a local commercial station in comparison to other local
commercial stations in the market as measured from 9:00 a.m. to midnight, Sunday
through Saturday.

<TABLE>
<CAPTION>
NUMBER OF STATION
TELEVISION METROPOLITAN DMA AFFILIATION/ STATIONS STATION AUDIENCE
STATION AREA SERVED RANK CHANNEL IN MARKET RANK SHARE
<S> <C> <C> <C> <C> <C> <C>
WVUE-TV.............. New Orleans, LA 41 Fox/8 8 4t 7
WALA-TV.............. Mobile, AL-Pensacola, FL 62 Fox/10 5 3t 10
WLUK-TV.............. Green Bay, WI 69 Fox/11 5 4 8
KHON-TV.............. Honolulu, HI 71 Fox/2 6 2 16
WFTX-TV.............. Fort Myers, FL 83 Fox/36 5 4 7
WTHI-TV.............. Terre Haute, IN 139 CBS/10 3 1 24
WKCF-TV(1)........... Orlando, FL 22 WB/18 7 4 8
</TABLE>

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

(1) We expect our acquisition of this station to close in the fiscal quarter
ending November 30, 1999.

We also own KAII-TV and KHAW-TV, which operate as satellite stations of
KHON-TV and primarily re-broadcast the signal of KHON-TV. The stations are
considered one station for FCC multiple ownership purposes. Low power television
translators W40AN and K55D2 retransmit stations WLUK-TV and KHON-TV,
respectively.

RADIO NETWORKS

In addition to our other radio broadcasting operations, we own and operate
two radio networks. Network Indiana provides news and other programming to
approximately 60 affiliated radio stations in Indiana. Additionally, AgriAmerica
Network provides farm news, weather information and market analysis to nearly 60
radio stations across Indiana.

PUBLISHING OPERATIONS

We publish the following magazines through our publishing division:

Indianapolis Monthly. We have published Indianapolis Monthly magazine
since September 1988. Indianapolis Monthly covers local personalities, homes and
lifestyles and

40
<PAGE> 44

currently has a paid monthly circulation of approximately 45,000. With a large
advertising base and a popular editorial focus, Indianapolis Monthly is the
market's leading general interest magazine focusing on the Indianapolis area. In
three of the last six years the magazine has won the City and Regional Magazine
Association's First Place General Excellence Award for a city magazine.

Atlanta. We acquired and began publishing Atlanta magazine in August 1993.
Atlanta covers area personalities, issues and style and currently has a paid
monthly circulation of approximately 66,000. The magazine was unprofitable for
several years before we acquired it for a nominal investment. Certain
initiatives, including downsizing staff, increasing sales efforts and
repositioning the editorial focus, have contributed to improving profitability.

Cincinnati. We acquired Cincinnati magazine in October 1997. Cincinnati
magazine was founded by the Greater Cincinnati Chamber of Commerce in 1967 and,
under its prior owners, the magazine grew to a paid monthly circulation of
approximately 22,000. We repositioned the editorial product to an up-to-date
city/regional magazine covering people and entertainment in Cincinnati, doubled
the existing sales staff and marketed the newly designed magazine to the
Cincinnati area. Following these efforts, the magazine currently has a paid
monthly circulation of approximately 31,000.

Texas Monthly. We acquired Texas Monthly magazine in February 1998. The
critically acclaimed magazine, which has received eight National Magazine
Awards, has a paid monthly circulation of approximately 300,000, and we believe
it is read by more than two million people. It marked its 25th anniversary with
the publication of the February 1998 issue, which set a single issue advertising
record. Since acquiring the magazine, we have worked to increase Texas Monthly's
operating efficiencies while leaving the highly regarded editorial product
intact.

Country Sampler. We purchased Country Sampler and related publications in
April 1999. Launched in 1984, Country Sampler provides nearly two million
readers with innovative decorating ideas and country lifestyle resources,
including extensive catalog information with which readers can purchase
handcrafted accessories directly from artisans across the country. Country
Sampler and its related publications have a paid circulation of approximately
650,000.

COMMUNITY INVOLVEMENT

We believe that to be successful, we must be integrally involved in the
communities we serve. To that end, each of our stations participates in many
community programs, fundraisers and activities that benefit a wide variety of
organizations. Charitable organizations that have been the beneficiaries of our
marathons, walkathons, dance-a-thons, concerts, fairs and festivals include,
among others, The March of Dimes, American Cancer Society, Riley Children's
Hospital and research foundations seeking cures for cystic fibrosis, leukemia
and AIDS and helping to fight drug abuse. In addition to our planned activities,
our stations take leadership roles in community responses to natural disasters.

INDUSTRY INVOLVEMENT

We have an active leadership role in a wide range of industry
organizations. Our senior managers have served in various capacities with
industry associations, including as directors of

41
<PAGE> 45

the National Association of Broadcasters, the Radio Advertising Bureau, the
Radio Futures Committee and the Arbitron Advisory Council and as founding
members of the Radio Operators Caucus. In addition, our managers have been voted
Radio President of the Year and General Manager of the Year, and at various
times we have been voted Most Respected Broadcaster in polls of radio industry
chief executive officers and managers.

REGULATORY DEVELOPMENTS

On August 5, 1999, the FCC decided to revise its television ownership and
attribution rules. Effective November 16, 1999, the FCC will define a television
station's local market based on its assigned Designated Market Area (or DMA)
instead of the area covered by its broadcast signal, allowing a single
broadcaster to own two stations which have overlapping signals but are assigned
to different DMAs. One broadcaster will now also be able to own two television
stations assigned to the same DMA so long as either:

- the television stations do not have overlapping broadcast signals; or

- there will remain eight independently owned, full power noncommercial or
commercial operating television stations and one of the two
commonly-owned stations is not ranked in the top four based on audience.

The FCC will also consider waiving these conditions in certain cases
involving failing or failed stations or stations which are not yet built.

In addition to the television stations a broadcaster is permitted to own,
it may also own:

- up to six radio stations in any market where at least 20 independent
voices remain after the acquisition;

- up to four radio stations in any market where at least 10 independent
voices remain after the acquisition; and

- one radio station regardless of the number of independent voices
remaining after the acquisition.

The broadcaster must still comply with the local radio ownership rules with
respect to the maximum number of radio stations it could own in a market, except
that if it were permitted to own two television stations and six radio stations
it could choose instead to own up to one television and seven radio stations.
The FCC defines "independent voices" to include most local television and radio
stations, local daily newspapers that serve more than five percent of the
population in the DMA and wired cable service.

In addition, the FCC eliminated its cross-interest policy and revised its
rules for attribution of broadcast licenses as follows:

- The threshold for attribution of ownership interests held by certain
passive investors was raised from 10% to 20%.

- Where an owner of one or more radio or television stations supplies more
than 15% of the programming of another radio or television station in
the same market through a time brokerage arrangement, the programmer
will be deemed to have an attributable interest in that station. In
addition, where an owner of one or more stations or other

42
<PAGE> 46

media of mass communication, or a program supplier (including a network),
holds equity and/or debt in a station in the same market which in the
aggregate exceeds 33% of the total asset value of that station, it will
be deemed to have an attributable interest in that station.

Earlier this year, the U.S. House of Representatives and the U.S. Senate
passed legislation designed to facilitate delivery of traditional over-the-air
television stations by direct broadcast satellite systems to their subscribers.
Generally, the legislation permits such systems to provide local stations to
their subscribers and requires such systems to provide all local stations
eventually. The legislation would also give direct broadcast satellite systems
additional flexibility to provide out-of-market network stations, which under
current law may be provided only to subscribers located outside the coverage
area of a local network station. The legislation was passed by the House and
Senate in different forms, and a conference committee of the two houses is
attempting to resolve the differences. The legislation does not apply to digital
television.

ADVERTISING SALES

Our stations derive their advertising revenue from local and regional
advertising in the marketplaces in which they operate, as well as from the sale
of national advertising. Local and most regional sales are made by a station's
sales staff. National sales are made by firms specializing in such sales which
are compensated on a commission-only basis. We believe that the volume of
national advertising revenue tends to adjust to shifts in a station's audience
share position more rapidly than does the volume of local and regional
advertising revenue.

We have led the industry in developing "vendor co-op" advertising revenue
whereby a manufacturer or distributor pays to promote its particular goods
together with local retail outlets for those goods. Although this source of
advertising revenue is common in the newspaper and magazine industry, we were
among the first radio broadcasters to recognize, and take advantage of, the
potential of vendor co-op advertising. Our Revenue Development Systems division
has established a network of radio stations which share information about
sources of vendor co-op revenue. In addition, each of our stations has a
salesperson devoted exclusively to the development of cooperative advertising.
We also use this approach at our television stations. At the end of the last
fiscal year we acquired substantially all of the assets of the Co-Opportunities
division of Jefferson-Pilot Communications. We believe that the business of
Co-Opportunities, which focuses more on co-op advertising for television
stations and cable systems, provides an excellent complement to Revenue
Development Systems.

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<PAGE> 47

COMPETITION

Radio and television broadcasting stations compete with the other
broadcasting stations in their respective market areas, as well as with other
advertising media such as newspapers, magazines, outdoor advertising, transit
advertising, the Internet and direct mail marketing. Competition within the
broadcasting industry occurs primarily in individual market areas, so that a
station in one market does not generally compete with stations in other market
areas. In each of our markets, our stations face competition from other stations
with substantial financial resources, including stations targeting the same
demographic groups. In addition to management experience, factors which are
material to competitive position include the station's rank in its market,
authorized power, assigned frequency, audience characteristics, local program
acceptance and the number and characteristics of other stations in the market
area. We attempt to improve our competitive position with programming and
promotional campaigns aimed at the demographic groups targeted by our stations,
and through sales efforts designed to attract advertisers that have done little
or no broadcast advertising by emphasizing the effectiveness of radio and
television advertising in increasing the advertisers' revenues. Recent changes
in the policies and rules of the FCC permit increased joint ownership and joint
operation of local stations. Those stations taking advantage of these joint
arrangements may in certain circumstances have lower operating costs and may be
able to offer advertisers more attractive rates and services. Although we
believe that each of our stations can compete effectively in its market, there
can be no assurance that any of our stations will be able to maintain or
increase its current audience ratings or advertising revenue market share.

Although the broadcasting industry is highly competitive, some barriers to
entry exist. The operation of a broadcasting station in the United States
requires a license from the FCC, and the number of stations that can operate in
a given market is limited by the availability of the frequencies that the FCC
will license in that market, as well as by the FCC's multiple ownership rules
regulating the number of stations that may be owned and controlled by a single
entity. The FCC's multiple ownership rules have changed significantly as a
result of the Telecommunications Act of 1996. In addition, the FCC recently made
a number of changes in its ownership and attribution rules. See "-- Regulatory
Developments."

The broadcasting industry historically has grown in terms of total revenues
despite the introduction of new technology for the delivery of entertainment and
information, such as cable television, audio tapes and compact discs. We believe
that radio's portability in particular makes it less vulnerable than other media
to competition from new methods of distribution or other technological advances.
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
or television broadcasting industry.

EMPLOYEES

As of August 31, 1999 we had approximately 1,309 full-time employees and
approximately 314 part-time employees. We have approximately 202 employees at
various radio and television stations represented by unions. We consider
relations with our employees to be good.

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<PAGE> 48

LITIGATION

We currently and from time to time are involved in litigation incidental to
the conduct of our business. However, we are not a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on us.

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<PAGE> 49

MANAGEMENT

The following table sets forth information about our executive officers and
directors as of August 31, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Jeffrey H. Smulyan................... 52 Chairman, President and Chief
Executive Officer
Doyle L. Rose........................ 50 Radio Division President and Director
Greg A. Nathanson.................... 52 Television Division President and
Director
Richard F. Cummings.................. 48 Executive Vice President -
Programming
Walter Z. Berger..................... 43 Executive Vice President, Chief
Financial Officer and Treasurer
Norman H. Gurwitz.................... 52 Executive Vice President - Human
Resources and Secretary
Gary L. Kaseff....................... 51 Executive Vice President, General
Counsel and Director
Susan B. Bayh........................ 39 Director
Richard A. Leventhal................. 52 Director
Frank V. Sica........................ 48 Director
Lawrence B. Sorrel................... 40 Director
</TABLE>

Jeffrey H. Smulyan founded Emmis in 1981 and is the Chairman of the Board
of Directors, President and Chief Executive Officer. He has held the positions
of Chairman of the Board of Directors and Chief Executive Officer since 1981 and
the position of President since 1994. Mr. Smulyan began working in radio in
1973, and has owned one or more radio stations since then. Formerly, he was also
the owner and chief executive officer of the Seattle Mariners major league
baseball team. He is a Director of the Radio Advertising Bureau and The Finish
Line, a sports apparel manufacturer, and serves as a Trustee of Ball State
University. Mr. Smulyan has been chosen Radio Executive of the Year by a radio
industry group and was voted one of the Ten Most Influential Radio Executives in
the Past 20 Years in a poll in Radio and Records magazine.

Doyle L. Rose has been Radio Division President of Emmis since 1989, and
General Manager of KPWR-FM in Los Angeles from 1991 through 1995. Previously, he
was our Executive Vice President-Operations. Mr. Rose has been a general manager
of one or more radio stations for approximately twenty years and has been a
Director since 1984.

Greg A. Nathanson joined Emmis in 1998 as Television Division President and
a Director. Mr. Nathanson has over 30 years of television broadcasting
experience, most recently as President of Programming and Development for
Twentieth Television from 1996 to 1998, as General Manager of KTLA-TV in Los
Angeles, California from 1992 to 1996 and as President of Fox Television
Stations from 1990 to 1992.

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<PAGE> 50

Richard F. Cummings was the Program Director of WENS from 1981 to March
1984, when he became the National Program Director and a Vice President of
Emmis. He became Executive Vice President -- Programming in 1988.

Walter Z. Berger became Executive Vice President and Chief Financial
Officer of Emmis on March 1, 1999. Most recently, Mr. Berger served as Group
President of the Energy Marketing Division of LG&E Energy Corporation. Prior to
that appointment, he served as Executive Vice President and Chief Financial
Officer of LG&E Energy Corporation. From 1992 to 1996, he held several senior
financial and operating management positions at Enron Corporation and its
affiliates. Mr. Berger also spent seven years in various financial management
roles at Baker Hughes Incorporated. Prior to that he spent eight years at Arthur
Andersen & Co.

Norman H. Gurwitz currently serves as Executive Vice President -- Human
Resources, a position he assumed in 1998. Previously he served as Corporate
Counsel for Emmis from 1987 to 1998 and as a Vice President from 1988 to 1995.
He became Secretary of Emmis in 1989 and became an Executive Vice President in
1995. Prior to 1987, he was a partner in the Indianapolis law firm of Scott &
Gurwitz.

Gary L. Kaseff is employed as Executive Vice President and General Counsel
to Emmis, a post he has held since 1998. Mr. Kaseff also has been a solo
practitioner attorney in Southern California since 1992. Previously, he was
President of the Seattle Mariners major league baseball team and partner with
the law firm of Epport & Kaseff. Mr. Kaseff has been a Director since 1994.

Susan B. Bayh is the Commissioner of the International Joint Commission of
the United States and Canada, and also serves as a Distinguished Visiting
Professor at Butler University, positions she has held since 1994. Previously,
she was an attorney with Eli Lilly & Company. She is a director of Anthem, Inc.,
an insurance company. Mrs. Bayh has been a Director since 1994.

Richard A. Leventhal has owned and operated a wholesale fabric and textile
company in Carmel, Indiana, for 24 years. Mr. Leventhal is the brother-in-law of
Norman H. Gurwitz. Mr. Leventhal has been a Director since 1992.

Frank V. Sica is a Managing Director of Soros Fund Management LLC and head
of Soros Fund Management's Private Equity Operations. He is director of CSG
Systems International, Inc., a computer software company, Global TeleSystems
Group, Inc., a telecommunications company, Kohl's Corporation, a retail company,
and Outboard Marine Corporation, a manufacturer of marine engines and boats.
Prior to joining Soros in 1998, Mr. Sica had been a Managing Director at Morgan
Stanley Dean Witter & Co. Incorporated. Mr. Sica has been a Director since 1998.

Lawrence B. Sorrel is a general partner of Welsh, Carson, Anderson & Stowe,
a private equity investment firm. He is Chairman of the Board of SpectraSite
Communications, Inc., an owner and operator of telecommunications towers, and a
board member of several private companies. Prior to May 1998, he was a Managing
Director of Morgan Stanley Dean Witter & Co. Incorporated, where he had been
employed since 1986. Mr. Sorrel has been a Director since 1993.

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<PAGE> 51

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We have periodically made interest-bearing loans to various officers and
employees. The approximate amount of such indebtedness outstanding at August 31,
1999, and the largest aggregate amount of indebtedness outstanding at any month
end during the last fiscal year, was $963,561 for Jeffrey H. Smulyan, Chairman,
President and Chief Executive Officer, $158,389 for Doyle L. Rose, Radio
Division President and Director, $113,538 for Richard F. Cummings, Executive
Vice President -- Programming, and $85,758 for Norman H. Gurwitz, Executive Vice
President -- Human Resources and Secretary. These loans bear interest at our
cost of senior debt, which at August 31, 1999, was approximately 7.5%.

During the last fiscal year, we purchased approximately $84,000 in
corporate gifts and specialty items from a company owned by the spouse of Norman
H. Gurwitz. Part of these purchases were awarded through competitive bids. Also
during the last fiscal year, we made payments of approximately $235,000 to a
company owned by Mr. Smulyan for use of an airplane to transport employees to
various trade shows and meetings.

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<PAGE> 52

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information known to us with respect
to beneficial ownership of our common stock (1) as of August 31, 1999 and (2)
immediately following our concurrent offering of Class A Common Stock by:

- each person known to us to be the beneficial owner of more than five
percent of our issued and outstanding common stock;

- each director and executive officer;

- all officers and directors as a group; and

- the selling stockholder in our concurrent offering of Class A Common
Stock.

Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
--------------------------------------------- ---------------------
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING PRIOR TO OFFERING
FIVE PERCENT SHAREHOLDERS, --------------------- --------------------- ---------------------
SELLING STOCKHOLDER, PERCENT PERCENT PERCENT
DIRECTORS AND CERTAIN OF OF OF
EXECUTIVE OFFICERS NUMBER CLASS NUMBER CLASS NUMBER CLASS
<S> <C> <C> <C> <C> <C> <C>
Jeffrey H. Smulyan........... 244,319(1) 1.8% 244,319(1) 1.4% 3,022,125(13) 100.0%
Susan B. Bayh................ 15,100(2) * 15,100(2) * -- *
Walter Z. Berger............. -- * -- * -- *
Richard F. Cummings.......... 113,028(3) * 113,028(3) * -- *
Norman H. Gurwitz............ 97,976(4) * 97,976(4) * -- *
Gary L. Kaseff............... 31,926(5) * 31,926(5) * -- *
Richard A. Leventhal......... 30,600(6) * 30,600(6) * -- *
Doyle L. Rose................ 107,281(7) * 107,281(7) * -- *
Greg A. Nathanson............ 122,000(8) * 122,000(8) * -- *
Frank V. Sica................ -- * -- * -- *
Lawrence B. Sorrel........... 4,000 * 4,000 * -- *
Mellon Bank Corporation...... 1,301,411(9) 7.6 1,301,411(9) 7.2 -- *
Westport Asset Management,
Inc......................... 1,001,200(10) 5.9 1,001,200(10) 5.6 -- *
T. Rowe Price Associates,
Inc......................... 961,500(11) 5.6 961,500(11) 5.4 -- *
All Officers and Directors as
a Group (11 persons)........ 751,509(12) 4.4 751,509(12) 4.1 3,022,125(13) 100.0

<CAPTION>
CLASS B COMMON STOCK
-------------------------------
BENEFICIAL OWNERSHIP PERCENT
AFTER OFFERING OF TOTAL
FIVE PERCENT SHAREHOLDERS, ------------------------------- VOTING
SELLING STOCKHOLDER, SHARES PERCENT POWER
DIRECTORS AND CERTAIN BEING OF AFTER
EXECUTIVE OFFICERS OFFERED NUMBER CLASS OFFERING
<S> <C> <C> <C> <C>
Jeffrey H. Smulyan........... 240,000 2,782,125(13) 100.0% 62.5%
Susan B. Bayh................ -- -- * *
Walter Z. Berger............. -- -- * *
Richard F. Cummings.......... -- -- * *
Norman H. Gurwitz............ -- -- * *
Gary L. Kaseff............... -- -- * *
Richard A. Leventhal......... -- -- * *
Doyle L. Rose................ -- -- * *
Greg A. Nathanson............ -- -- * *
Frank V. Sica................ -- -- * *
Lawrence B. Sorrel........... -- -- * *
Mellon Bank Corporation...... -- -- * 3.2
Westport Asset Management,
Inc......................... -- -- * 2.4
T. Rowe Price Associates,
Inc......................... -- -- * 2.4
All Officers and Directors as
a Group (11 persons)........ 240,000 2,782,125(13) 100.0 63.3
</TABLE>

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

* Less than 1%.

(1) Includes 164,319 shares held by Mr. Smulyan as trustee for the Emmis
Communications Corporation Profit Sharing Trust (the "Profit Sharing
Trust"), as to which Mr. Smulyan disclaims beneficial ownership.

(2) Consists of 100 shares owned individually and 15,000 shares represented by
stock options exercisable within 60 days of August 31, 1999.

(3) Consists of 25,808 shares owned individually, 3,376 shares held for the
benefit of Mr. Cummings' children, 1,644 shares held in the Profit Sharing
Trust, and 82,200 shares represented by stock options exercisable within 60
days of August 31, 1999.

(4) Consists of 12,080 shares owned jointly by Mr. Gurwitz and his spouse, 490
shares owned by Mr. Gurwitz's spouse, 2,738 shares owned for the benefit of
Mr. Gurwitz's children, 10,100 shares owned by a corporation of which Mr.
Gurwitz's spouse is a 50% owner, 1,050 shares held in the Profit Sharing
Trust and 71,518 shares represented by stock options exercisable within 60
days of August 31, 1999.

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<PAGE> 53

(5) Consists of 3,274 shares owned individually by Mr. Kaseff, 1,369 shares
owned by Mr. Kaseff's spouse, 283 shares held in the Profit Sharing Trust,
and 27,000 shares represented by stock options exercisable within 60 days
of August 31, 1999.

(6) Consists of 4,000 shares owned individually, 1,500 shares owned by Mr.
Leventhal's spouse, 10,100 shares owned by a corporation of which Mr.
Leventhal is a 50% owner and 15,000 shares represented by stock options
exercisable within 60 days of August 31, 1999.

(7) Consists of 23,437 shares owned individually, 1,644 shares held in the
Profit Sharing Trust, and 82,200 shares represented by stock options
exercisable within 60 days of August 31, 1999.

(8) Consists of 100,000 shares owned individually or jointly with his spouse
and 22,000 shares owned by a trust for the benefit of Mr. Nathanson's
children.

(9) Information concerning these shares was obtained from an Amendment to
Schedule 13G filed in February 1999 by Mellon Bank Corporation on behalf of
itself, Boston Group Holdings, Inc. and The Boston Company, Inc., each of
which has a mailing address c/o Mellon Bank Corporation, One Mellon Bank
Center, Pittsburgh, Pennsylvania 15258.

(10) Information concerning these shares was obtained from an Amendment to
Schedule 13G filed in February 1999 by Westport Asset Management, Inc.,
which has an address of 253 Riverside Avenue, Westport, Connecticut 06880.

(11) Information concerning these shares was obtained from a Schedule 13G filed
in February 1999 by T. Rowe Price Associates, Inc., which has an address of
100 E. Pratt Street, Baltimore, Maryland 21202.

(12) Includes 292,918 shares represented by stock options exercisable within 60
days of August 31, 1999, and 164,319 shares held in the Emmis
Communications Corporation Profit Sharing Trust.

(13) Consists of 2,622,125 shares owned individually and 400,000 shares
represented by stock options exercisable within 60 days of August 31, 1999.
After the Class A Common Stock offering, consists of 2,382,125 shares owned
individually and 400,000 shares represented by stock options exercisable
within 60 days of August 31, 1999.

50
<PAGE> 54

DESCRIPTION OF COMMON STOCK

GENERAL

As of August 31, 1999, our authorized capital stock includes 34,000,000
shares of Class A Common Stock, $.01 par value per share, and 6,000,000 shares
of Class B Common Stock, $.01 par value per share. Holders of common stock have
no preemptive rights. At August 31, 1999, there were 13,371,821 shares of Class
A Common Stock outstanding and 1,254,949 shares reserved for issuance upon the
exercise of outstanding stock options, and there were 2,622,125 shares of Class
B Common Stock outstanding and 500,000 shares reserved for issuance upon the
exercise of outstanding stock options.

Our shares of Class A Common Stock currently outstanding are traded on the
Nasdaq National Market under the symbol EMMS. We anticipate that any additional
shares of Class A Common Stock issued in our concurrent offering will also be so
traded.

Under Indiana law, shareholders are generally not liable for our debts or
obligations. All shares of common stock issued will be duly authorized, fully
paid, and non-assessable.

DIVIDENDS

Holders of record of shares of common stock on the record date fixed by our
board of directors are entitled to receive such dividends as may be declared by
the board of directors out of funds legally available for such distributions.
Emmis may not declare or pay dividends in cash or property on any share of any
class of common stock, however, unless simultaneously the same dividend is
declared or paid on each share of the other class of common stock. In the case
of any stock dividend, holders of Class A Common Stock are entitled to receive
the same percentage dividend (payable in shares of Class A Common Stock) as the
holders of Class B Common Stock receive (payable in shares of Class B Common
Stock). The payment of common stock dividends is currently prohibited by our
credit facility and restricted by the indenture relating to our subordinated
notes.

VOTING RIGHTS

Holders of shares of Class A Common Stock and Class B Common Stock vote as
a single class on all matters submitted to a vote of the shareholders, with each
share of Class A Common Stock entitled to one vote and each share of Class B
Common Stock entitled to ten votes, except:

- for the election of two directors;

- with respect to any proposed "going private" transaction (as defined
below) between the Company and Jeffrey H. Smulyan (the holder of all
shares of the Class B Common Stock), or an affiliate of Mr. Smulyan, or
any group of which Mr. Smulyan or an affiliate of Mr. Smulyan is a
member; and

- as otherwise provided by law.

In the election of directors, the holders of Class A Common Stock are
entitled to vote as a separate class to elect two of our directors, who must be
independent directors. For this purpose, an "independent director" means a
person who is not an Emmis officer or employee,

51
<PAGE> 55

and who does not have a relationship which, in the opinion of the board of
directors, would interfere with the exercise of independent judgement in
carrying out the responsibilities of a director. The holders of Class A Common
Stock and Class B Common Stock are entitled to elect the remaining directors by
voting as a single class with each share of Class A Common Stock entitled to one
vote and each share of Class B Common Stock entitled to ten votes. Holders of
common stock are not entitled to cumulate votes in the election of directors.

The holders of Class A Common Stock and Class B Common Stock vote as a
single class with respect to any proposed "going private" transaction, with each
share of each class of common stock entitled to one vote per share. A "going
private" transaction is any "Rule 13e-3 Transaction," as that term is defined in
Rule 13e-3 promulgated under the Exchange Act, between Emmis and Mr. Smulyan,
any affiliate of Mr. Smulyan or any group of which Mr. Smulyan or an affiliate
of Mr. Smulyan is a member. An "affiliate" is defined as:

- any individual or entity who or that, directly or indirectly, controls,
is controlled by, or is under common control with Mr. Smulyan;

- any corporation or organization (other than Emmis or a majority-owned
subsidiary of Emmis) of which Mr. Smulyan is an officer or partner or
is, directly or indirectly, the beneficial owner of 10% or more of any
class of voting securities, or in which Mr. Smulyan has a substantial
beneficial interest;

- a voting trust or similar arrangement pursuant to which Mr. Smulyan
generally controls the vote of the shares of common stock held by or
subject to such trust or arrangement;

- any other trust or estate in which Mr. Smulyan has a substantial
beneficial interest or as to which Mr. Smulyan serves as trustee or in a
similar fiduciary capacity; or

- any relative or spouse of Mr. Smulyan, or any relative of such spouse,
who has the same residence as Mr. Smulyan.

Under Indiana law, the affirmative vote of the holders of a majority of the
outstanding shares of any class of capital stock is required to approve, among
other things, a change in the designation, rights, preferences or limitations of
the shares of such class of capital stock.

LIQUIDATION RIGHTS

Upon liquidation, dissolution or winding-up of Emmis, the holders of Class
A Common Stock are entitled to share ratably with the holders of Class B Common
Stock in all assets available for distribution after payment in full of
creditors and payment in full to any holders of our preferred stock then
outstanding of any amount required to be paid under the terms of such preferred
stock.

OTHER PROVISIONS

Each share of Class B Common Stock is convertible, at the option of its
holder, into one share of Class A Common Stock at any time. One share of Class B
Common Stock converts automatically and without the requirement of any further
action into one share of Class A Common Stock upon its sale or other transfer to
a person or entity other than Mr. Smulyan or an affiliate of Mr. Smulyan. A
pledge of shares of Class B Common Stock is not considered

52
<PAGE> 56

a transfer for this purpose unless the pledge is enforced. All outstanding
shares of Class B Common Stock will convert automatically and without the
requirement of any further action into an equivalent number of shares of Class A
Common Stock upon the earlier of Mr. Smulyan's death or his ceasing to own at
least 1,520,000 shares of common stock, as adjusted for any stock splits or
stock dividends. The holders of common stock are not entitled to preemptive
rights.

In any merger, consolidation or business combination, the consideration to
be received per share by holders of Class A Common Stock must be identical to
that received by holders of Class B Common Stock, except that in any such
transaction in which shares of common stock are distributed, such shares may
differ as to voting rights to the extent that voting rights now differ among the
classes of common stock. No class of common stock may be subdivided,
consolidated, reclassified or otherwise changed unless concurrently the other
classes of common stock are subdivided, consolidated, reclassified or otherwise
changed in the same proportion and in the same manner.

FOREIGN OWNERSHIP

Our articles of incorporation restrict the ownership, voting and transfer
of our capital stock, including the Class A Common Stock, in accordance with the
Communications Act and the rules of the FCC, to prohibit ownership of more than
25% of our outstanding capital stock or more than 25% of the voting rights it
represents by or for the account of aliens (as defined in the Communications
Act) or corporations otherwise subject to domination or control by aliens. The
articles of incorporation authorize our board of directors to prohibit any
transfer of our capital stock that would cause Emmis to violate this
prohibition. In addition, the articles of incorporation provide that shares of
our capital stock determined by the board of directors to be beneficially owned
by an alien shall always be subject to redemption by Emmis by action of the
board of directors to the extent necessary, in the judgment of the board of
directors, to comply with the alien ownership restrictions of the Communications
Act and FCC rules. The articles of incorporation further authorize our board of
directors to adopt such provisions as it deems necessary to enforce these alien
ownership restrictions.

REGISTRAR AND TRANSFER AGENT

The registrar and transfer agent for our common stock is First Union
National Bank, Charlotte, North Carolina.

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<PAGE> 57

DESCRIPTION OF THE CONVERTIBLE PREFERRED STOCK

The following summary of the terms of our convertible preferred stock is
subject to, and qualified in its entirety by reference to, the provisions of the
designated rights and preferences with respect to our convertible preferred
stock as set forth in our articles of incorporation, a copy of which we will
provide upon request.

GENERAL

Under our articles of incorporation, our board of directors is authorized,
without further shareholder action, to issue up to 10,000,000 shares of
preferred stock, $.01 par value, in one or more series, with such voting powers
or without voting powers, and with such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions, as are set forth in the designating amendment relating to the
preferred stock. A total of 2,875,000 shares of Series A Cumulative Convertible
Preferred Stock will be authorized. The convertible preferred stock is, and any
Class A Common Stock issued upon the conversion or exchange of convertible
preferred stock will be, fully paid and nonassessable. The transfer agent,
registrar, redemption, conversion and dividend disbursing agent for shares of
both the convertible preferred stock and Class A Common Stock into which the
convertible preferred stock is convertible will initially be First Union
National Bank, Charlotte, North Carolina.

RANKING

The convertible preferred stock, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of our company,
ranks:

(1) senior to all classes of our common stock and to each other class of
capital stock or series of preferred stock established after the issue
date of the convertible preferred stock by the board of directors, the
terms of which do not expressly provide that it ranks senior to or on a
parity with the convertible preferred stock as to dividend
distributions and distributions upon the liquidation, winding-up and
dissolution of our company;

(2) ratably with any class of capital stock or series of preferred stock
issued by us established after the issue date of the convertible
preferred stock by the board of directors, the terms of which expressly
provide that such class or series will rank on a parity with the
convertible preferred stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of our
company; and

(3) subject to certain conditions which include the affirmative vote or
consent of the holders of at least 66 2/3% of the outstanding
convertible preferred stock, junior to each class of capital stock or
series of preferred stock issued by us established after the issue date
of the convertible preferred stock by the board of directors, the terms
of which expressly provide that such class or series will rank senior
to the convertible preferred stock as to dividend distributions and
distributions upon liquidation, winding-up and dissolution of our
company.

54
<PAGE> 58

DIVIDENDS

Holders of the convertible preferred stock will be entitled to receive
cumulative cash dividends at an annual rate of 6.25% of the stated liquidation
preference of $50 per share (equivalent to $3.125 per share), payable quarterly
in arrears out of assets legally available therefor, on January 15, April 15,
July 15 and October 15 each year commencing January 15, 2000, when, if and as
declared by our board of directors. Dividends will accumulate and be cumulative
from the issue date whether or not they are declared by our board of directors.
Dividends will be payable to holders of record as they appear on our stock
register on the applicable record dates fixed by our board of directors, which
record dates shall be not more than 60 days nor less than 10 days preceding the
payment dates thereof. Dividends payable on the convertible preferred stock for
each full dividend period will be computed by dividing the annual rate by four.
Dividends payable on the convertible preferred stock for any period less than a
full dividend period (based upon the number of days elapsed during the period)
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. The holders of shares of convertible preferred stock will not be
entitled to any dividends, whether payable in cash, property or securities, in
excess of the full cumulative dividends. No interest, or sum of money in lieu of
interest, will be payable in respect of any dividend payment or payments which
may be in arrears.

No dividends or distributions, other than a dividend or distribution in any
of our stock ranking junior to or ratably with the convertible preferred stock
as to dividends and upon liquidation, dissolution or winding up, may be
declared, made or paid or set apart for payment upon any of our stock ranking
junior to or ratably with the convertible preferred stock as to dividends, nor
may any of our stock ranking junior to or ratably with the convertible preferred
stock as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any monies paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by us (except,
in general and in both cases, by conversion into or exchange for our stock
ranking junior to or ratably with the convertible preferred stock as to
dividends and upon liquidation) unless full cumulative dividends have been or
contemporaneously are paid or declared and a sum sufficient for the payment
thereof is set apart for such payment on the convertible preferred stock for all
dividend payment periods terminating on or prior to the date of such
declaration, payment, redemption, purchase or acquisition.

Notwithstanding the foregoing, if full dividends have not been paid on the
convertible preferred stock and any other preferred stock ranking ratably with
the convertible preferred stock as to dividends, dividends may be declared and
paid on the convertible preferred stock and such other ratable preferred stock,
only so long as the dividends are declared and paid pro rata so that the amounts
of dividends declared per share on the convertible preferred stock and such
other ratable preferred stock will in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of the
convertible preferred stock and such other ratable preferred stock bear to each
other. Our ability to declare and pay dividends may be limited by applicable
Indiana law and the terms of our credit facility and the indenture for our
subordinated notes.

The holders of shares of convertible preferred stock at the close of
business on a dividend payment record date will be entitled to receive the
dividend payment on those shares on the

55
<PAGE> 59

corresponding dividend payment date notwithstanding the subsequent conversion
thereof or our default in payment of the dividend due on that dividend payment
date. The holders of shares called for redemption on a redemption date between a
dividend record date and the corresponding dividend payment date will be
entitled to receive such dividend on such redemption date.

LIQUIDATION PREFERENCE

In the event of any voluntary or involuntary dissolution, liquidation or
winding up of our company, the holders of convertible preferred stock will be
entitled to receive and to be paid out of our assets available for distribution
to our shareholders, before any payment or distribution is made to holders of
our common stock or any other class or series of stock of our company ranking
junior to the convertible preferred stock upon liquidation, the stated
liquidation preference per share of $50, plus accumulated and unpaid dividends,
if any, with respect to each share.

If upon any voluntary or involuntary dissolution, liquidation or winding up
of our company, the amounts payable with respect to the stated liquidation
preference and accumulated and unpaid dividends of the convertible preferred
stock and any other shares of our stock ranking as to any distribution ratably
with the convertible preferred stock are not paid in full, the holders of the
convertible preferred stock and of such other shares will share pro rata in
proportion to $50 per share plus accumulated and unpaid dividends thereon. After
payment in full of amounts owing to the holders of convertible preferred stock
on liquidation, such holders will have no right or claim to any of our remaining
assets. Neither the sale of all or substantially all of our property or
business, other than in connection with the dissolution, liquidation or winding
up of the business, nor our merger or consolidation into or with any other
corporation, will be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, of our company.

OPTIONAL REDEMPTION

The convertible preferred stock is not subject to any sinking fund or other
similar provisions. From April 15, 2001 to October 15, 2002, we may redeem the
convertible preferred stock (the "Provisional Redemption") at a redemption
premium equal to 104.911% of the stated liquidation preference of $50 per share,
plus accumulated and unpaid dividends, if any, whether or not declared to the
redemption date (the "Provisional Redemption Date"), if the closing price of our
Class A Common Stock on the Nasdaq National Market, or any national securities
exchange or authorized quotation system on which our Class A Common Stock is
then listed or authorized for quotation, if not so listed, is greater than 150%
of the Conversion Price ($117.1875), as hereinafter defined, per share for 20
trading days within any 30 consecutive trading day period. If we undertake a
Provisional Redemption, holders of convertible preferred stock that we call for
redemption will also receive a payment (the "Additional Payment") in an amount
equal to the present value of the aggregate value of the dividends (whether or
not declared) that would thereafter have been payable on the convertible
preferred stock called for redemption from the Provisional Redemption Date to
October 15, 2002 (the "Additional Period"). The present value will be calculated
using as the discount rate the bond equivalent yield on U.S. Treasury notes or
bills having a term nearest in length to that of the Additional Period,
calculated as of the day immediately preceding the date on which a notice of
Provisional Redemption is mailed. We will

56
<PAGE> 60

be obligated to make the Additional Payment on all shares of convertible
preferred stock that we have called for the Provisional Redemption whether or
not those shares of convertible preferred stock that we have called are
converted prior to the Provisional Redemption Date.

Beginning on October 15, 2002, we may redeem in cash the convertible
preferred stock, during the twelve-month periods commencing on October 15 of the
years indicated below, at the following redemption premiums (which are expressed
as a percentage of the stated liquidation preference of $50 per share), plus in
each case accumulated and unpaid dividends, if any, whether or not declared to
the redemption date:

<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
2002........................................... 103.571%
2003........................................... 102.679%
2004........................................... 101.786%
2005........................................... 100.893%
2006 and thereafter............................ 100.000%
</TABLE>

We may effect any redemption by delivering notice to the holders of the
convertible preferred stock not less than 30 nor more than 60 days prior to the
scheduled redemption date.

In the event that fewer than all the outstanding shares of the convertible
preferred stock are to be redeemed, the shares to be redeemed will be determined
pro rata or by lot. From and after the applicable redemption date, unless we
default in the payment of the redemption price, dividends on the shares of
convertible preferred stock to be redeemed on such redemption date will cease to
accrue, said shares will no longer be deemed to be outstanding, and all rights
of the holders thereof as our shareholders (except the right to receive the
redemption price) will cease.

We cannot redeem any shares of the convertible preferred stock if any
dividends on the convertible preferred stock are in arrears unless all dividends
in arrears are paid.

VOTING RIGHTS

Except as required by law, holders of convertible preferred stock will have
no voting rights except as set forth below.

Under Indiana law, the holders of the outstanding shares of preferred
stock, which includes the convertible preferred stock and would include any
other preferred stock issued in the future, will be entitled to vote as a
separate voting group upon a proposed amendment to our articles of
incorporation, whether or not entitled to vote thereon by the articles of
incorporation, if the amendment would:

(1) increase or decrease the aggregate number of authorized shares of the
class of preferred stock;

(2) effect an exchange or reclassification of all or part of the shares of
the class into shares of another class;

(3) effect an exchange or reclassification, or create the right of
exchange, of all or part of the shares of another class into shares of
the class of preferred stock;

57
<PAGE> 61

(4) change the designation, rights, preferences, or limitations of all or
part of the outstanding shares of the class of preferred stock;

(5) change the shares of all or part of the class into a different number
of shares of the same class of preferred stock;

(6) create a new class of shares having rights or preferences with respect
to distributions or to dissolution that are prior, superior, or
substantially equal to the shares of the class of preferred stock;

(7) increase the rights, preferences, or number of authorized shares of
any class that, after giving effect to the amendment, have rights or
preferences with respect to distribution or to dissolution that are
prior, superior, or substantially equal to the shares of the class of
preferred stock;

(8) limit or deny an existing preemptive right of all or part of the
shares of the class of preferred stock; or

(9) cancel or otherwise affect rights to distributions or dividends that
have accumulated but not yet been declared on all or part of the
shares of the class of preferred stock.

If a proposed amendment would affect the convertible preferred stock in one
or more of the ways discussed above, the holders of convertible preferred stock
are entitled to vote as a separate voting group on the proposed amendment. If a
proposed amendment would not affect the convertible preferred stock in one or
more of the ways discussed above, the holders are not entitled to vote as a
separate voting group on the proposed amendment.

If the dividends payable on the convertible preferred stock are in arrears
for six consecutive quarterly periods, the holders of convertible preferred
stock voting separately as a class with the shares of any other preferred stock
or preference securities having similar voting rights will be entitled at the
next regular or special meeting of our shareholders to elect two directors to
our board. Such voting rights and the terms of the directors so elected continue
until such time as the dividend arrearage on the convertible preferred stock has
been paid in full.

The affirmative vote or consent of the holders of at least 66 2/3% of the
outstanding convertible preferred stock will be required for the issuance of any
class or series of stock, or security convertible into our stock, ranking senior
to the convertible preferred stock as to dividends, liquidation rights or voting
rights and for amendments to our articles of incorporation that would adversely
affect the rights of holders of the convertible preferred stock; provided,
however, that any issuance of shares of preferred stock which rank ratably with
the convertible preferred stock (including the issuance of additional shares of
our convertible preferred stock) will not, by itself, be deemed to adversely
affect the rights of the holders of the convertible preferred stock. In all such
cases, each share of convertible preferred stock will be entitled to one vote.

CONVERSION RIGHTS

Each outstanding share of the convertible preferred stock will be
convertible at any time at the option of the holder into that number of whole
shares of our Class A Common Stock as is equal to the stated liquidation
preference of $50, divided by an initial conversion price of

58
<PAGE> 62

$78.125, equivalent to 0.6400 shares of Class A Common Stock per share of
convertible preferred stock, subject to adjustment as described below. We refer
to the initial conversion price and the conversion price as adjusted as the
Conversion Price. A share of convertible preferred stock called for redemption
will be convertible into shares of Class A Common Stock up to and including, but
not after, the close of business on the date fixed for redemption unless we
default in the payment of the amount payable upon redemption.

No fractional shares of Class A Common Stock or securities representing
fractional shares of our Class A Common Stock will be issued upon conversion.
Any fractional interest in a share of our Class A Common Stock resulting from
conversion will be paid in cash based on the last reported sale price of our
Class A Common Stock on the Nasdaq National Market, or any national securities
exchange or authorized quotation system on which our Class A Common Stock is
then listed, or authorized for quotation, if not so listed, at the close of
business on the trading day next preceding the date of conversion.

The Conversion Price is subject to adjustment upon the occurrence of
certain events after the issue date in accordance with the provisions of the
designating amendment for the convertible preferred stock, including:

(1) any redemption payment or payment of a dividend or other distribution
payable in shares of our common stock to all holders of any class of
our capital stock, other than the issuance of shares of common stock
in connection with the conversion of convertible preferred stock;

(2) any issuance to all holders of shares of our common stock of rights,
options or warrants entitling them to subscribe for or purchase shares
of our common stock or securities convertible into or exchangeable for
shares of our common stock at less than the market value as of the
record date of such issuance; provided, however, that no adjustment
will be made with respect to such a distribution if the holder of
shares of convertible preferred stock would be entitled to receive
such rights, options or warrants upon conversion at any time of shares
of convertible preferred stock into our common stock, or if such
rights, options or warrants have expired or been redeemed by us prior
to conversion and provided, further, that if such rights, options or
warrants are only exercisable upon the occurrence of certain
triggering events, then the Conversion Price will not be adjusted
until such triggering events occur;

(3) any subdivision, combination or reclassification of our common stock;

(4) any dividend or distribution to all holders of shares of our common
stock, other than a dividend or distribution referred to above, made
pursuant to any shareholder rights plan, "poison pill" or similar
arrangement and excluding regular dividends and distributions paid
exclusively in cash and dividends payable upon the convertible
preferred stock;

(5) any distribution consisting exclusively of cash (excluding any cash
portion of distributions referred to in (4) above, or cash distributed
upon a merger or consolidation to which (6) below applies) to all
holders of shares of our common stock in an aggregate amount that,
combined together with (a) all other such all-cash distributions made
within the then-preceding 12 months in respect of which no

59
<PAGE> 63

adjustment has been made and (b) any cash and the fair market value of
other consideration paid or payable in respect of any tender offer by
us or any of our subsidiaries for shares of our common stock concluded
within the then preceding 12 months in respect of which no adjustment
has been made, exceeds 15% of our market capitalization (defined as the
product of the then current market price of our Class A common stock
times the number of shares of Class A Common Stock and Class B Common
Stock then outstanding on the record date of such distribution);

(6) the completion of a tender or exchange offer which we or any of our
subsidiaries make for shares of our common stock that involves an
aggregate consideration that, together with (a) any cash and other
consideration payable in a tender or exchange offer by us or any of
our subsidiaries for shares of our common stock expiring within the
then preceding 12 months in respect of which no adjustment has been
made and (b) the aggregate amount of any such all-cash distributions
referred to in (5) above to all holders of shares of common stock
within the then preceding 12 months in respect of which no adjustments
have been made, exceeds 15% of our market capitalization just prior to
the expiration of such tender offer; or

(7) a distribution to all holders of our common stock consisting of
evidences of indebtedness, shares of capital stock other than our
common stock or assets, including securities, but excluding those
dividends, rights, options, warrants and distributions referred to
above.

No adjustment of the Conversion Price will be required to be made until the
cumulative adjustments, whether or not made, amount to 1.0% or more of the
Conversion Price as last adjusted. Notwithstanding anything to the contrary, no
Conversion Price adjustment will be made as a result of the issuance of our
common stock on conversion of the convertible preferred stock. Each event
requiring adjustment to the Conversion Price will require only a single
adjustment even though more than one of the adjustment clauses may be applicable
to such event. We reserve the right to make such reductions in the Conversion
Price in addition to those required in the foregoing provisions as we consider
to be advisable in order that any event treated for Federal income tax purposes
as a dividend of stock or stock rights will not be taxable to the recipients. In
the event we elect to make such a reduction in the Conversion Price, we will
comply with the requirements of securities laws and related regulations if and
to the extent that such laws and regulations are applicable in connection with
the reduction of the Conversion Price.

In the event that, after the issuance of the convertible preferred stock,
we distribute rights or warrants (other than those referred to in (2) above) pro
rata to all holders of shares of our common stock, subject to the following
sentence, the holders of convertible preferred stock will not be entitled to
receive such rights or warrants and the Conversion Price will not be subject to
adjustment upon any declaration, distribution or exercise of such rights or
warrants. The holders of any convertible preferred stock surrendered for
conversion will be entitled to receive upon such conversion, so long as any such
rights or warrants have not expired or been redeemed by us, in

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addition to the shares of common stock then issuable upon such conversion (which
we call "Conversion Shares"), a number of rights or warrants to be determined as
follows:

- if such conversion occurs on or prior to the date for the distribution
to the holders of rights or warrants of separate certificates evidencing
such rights or warrants (called the "Distribution Date"), the same
number of rights or warrants to which a holder of a number of shares of
Class A Common Stock equal to the number of Conversion Shares is
entitled at the time of such conversion in accordance with the terms and
provisions applicable to the rights or warrants; and

- if such conversion occurs after such Distribution Date, the same number
or rights or warrants to which a holder of the number of shares of Class
A Common Stock into which such convertible preferred stock was
convertible immediately prior to such Distribution Date would have been
entitled on such Distribution Date in accordance with the terms and
provisions applicable to the rights or warrants.

In case of any reclassification, consolidation or merger of our company
with or into another person or any merger of another person with or into our
company, with certain exceptions, or in case of any sale, transfer or conveyance
of all or substantially all of our assets, computed on a consolidated basis,
each share of convertible preferred stock then outstanding will, without the
consent of any holder of convertible preferred stock, become convertible only
into the kind and amount of securities, cash and other property receivable upon
such reclassification, consolidation, merger, sale, transfer or conveyance by a
holder of the number of shares of our Class A Common Stock into which such
convertible preferred stock was convertible immediately prior thereto, after
giving effect to any adjustment event.

In the case of any distribution by us to our stockholders of substantially
all of our assets, each holder of convertible preferred stock will participate
pro rata in such distribution based on the number of shares of our Class A
Common Stock into which such holder's shares of convertible preferred stock
would have been convertible immediately prior to such distribution.

CHANGE OF CONTROL

Notwithstanding the foregoing, upon a change of control of our company,
holders of convertible preferred stock will, if the market price per share of
our Class A Common Stock at such time is less than the Conversion Price, have a
one-time option to convert all of their outstanding shares of convertible
preferred stock into shares of our Class A Common Stock at a conversion price
equal to the greater of (1) the market price per share of our Class A Common
Stock as of the date of the change of control or (2) 66.67% of the market price
per share of our Class A Common Stock at the close of trading on the date of
issuance of the convertible preferred stock. Such option will be exercisable
during a period of not less than 30 days nor more than 60 days commencing on the
third business day after notice of the change of control is given by us. In lieu
of issuing the shares of our Class A Common Stock issuable upon conversion in
the event of a change of control, we may, at our option, make a cash payment
equal to the market value of such Class A Common Stock otherwise issuable. Our
designating

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amendment containing the rights and preferences for the convertible preferred
stock defines change of control as any of the following events:

- the sale, lease or transfer, in one or a series of related transactions,
of all or substantially all of our assets to any "person or group," as
such terms are used in Section 13(d)(3) of the Securities Exchange Act
of 1934 other than to Permitted Holders (as defined below);

- the adoption of a plan relating to the liquidation or dissolution of our
company;
- the acquisition, directly or indirectly, by any person or group, as such
terms are used in Section 13(d)(3) of the Securities Exchange Act of
1934 as in effect on the original date of issuance of the convertible
preferred stock, other than Permitted Holders, of beneficial ownership
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934 as
in effect on the original date of issuance of the convertible preferred
stock, except that a person will be deemed to have beneficial ownership
of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after passage of time) of
more than 50% of our total outstanding voting stock; provided, however,
that the Permitted Holders beneficially own (as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934 as in effect on the
issue date), directly or indirectly, in the aggregate a lesser
percentage of the total voting power of our voting stock than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of our board of
directors; or

- during any period of two consecutive years, individuals who at the
beginning of such period constituted our board of directors, together
with any new directors whose election by such board of directors or whose
nomination for election by our shareholders was approved by a vote of
66 2/3% of our directors then still in office who were either directors
at the beginning of such period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of our board of directors then in office.

For purposes of the definition of change of control, the term "Permitted
Holders" means Jeffrey H. Smulyan, his spouse, lineal descendents and
ascendants, heirs, executors or other legal representatives and any trusts or
other entities established by or for the benefit of any of the foregoing or
established by any of the foregoing for charitable purposes, or any other person
or entity in which the foregoing persons or entities exercise control.

The phrase "all or substantially all" of our assets is likely to be
interpreted by reference to applicable state law at the relevant time, and will
be dependent on the facts and circumstances existing at such time. As a result,
there may be a degree of uncertainty whether a sale or transfer is of "all or
substantially all" of our assets.

BOOK ENTRY; THE DEPOSITORY TRUST COMPANY

The Depository Trust Company ("DTC") will act as securities depositary for
the shares of convertible preferred stock offered by this offering memorandum.
The shares of convertible preferred stock will be issued only as
fully-registered securities registered in the name of Cede &

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Co., as nominee for DTC. One or more fully-registered global certificates will
be issued, representing in the aggregate the total number of shares of
convertible preferred stock, and will be deposited with DTC (collectively called
the "Global Certificate").

The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the shares of
convertible preferred stock represented by a Global Certificate.

DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants deposit with DTC. DTC also facilitates
the settlement among participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Participants who deposit securities
directly with DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. We call these
types of participants "Direct Participants." DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly. We refer
to these types of participants as "Indirect Participants."

Purchases of shares of convertible preferred stock within the DTC system
must be made by or through Direct Participants, which will receive a credit for
the convertible preferred stock on DTC's records. The ownership interest of each
actual purchaser of a share of convertible preferred stock, or beneficial owner,
is in turn recorded on the Direct or Indirect Participant's records. Beneficial
owners will not receive written confirmation from DTC of their purchases, but
beneficial owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of their holdings,
from the Direct or Indirect Participants through which they purchased the
convertible preferred stock. Transfers of ownership interests in the convertible
preferred stock are accomplished by entries made on the books of participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their ownership interests in the convertible preferred
stock, except upon a resignation of DTC or upon a decision by us to discontinue
the book-entry system for the convertible preferred stock.

To facilitate subsequent transfers, all the convertible preferred stock
deposited by participants with DTC is registered in the name of DTC's nominee,
Cede & Co. The deposit of shares of convertible preferred stock with DTC and
their registration in the name of Cede & Co. effects no change in beneficial
ownership. DTC has no knowledge of the actual beneficial owners of the
convertible preferred stock; DTC's records reflect only the identity of the
Direct Participants to whose accounts such shares of convertible preferred stock
are credited, which may or may not be the beneficial owners. The participants
are responsible for keeping account of their holdings on behalf of their
customers.

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Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
Participants and Indirect Participants to beneficial owners are governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.

Redemption notices with respect to the shares of convertible preferred
stock will be sent to Cede & Co. If less than all of the shares of convertible
preferred stock are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such securities to be
redeemed.

Although voting with respect to the convertible preferred stock is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to the convertible preferred stock. Under its usual
procedures, DTC would mail a proxy conferring on Direct Participants the right
to vote as their interests appear, known as an "Omnibus Proxy," to the Direct
Participants as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the convertible preferred stock is credited on the record
date -- identified in a listing attached to the Omnibus Proxy. We believe that
the arrangements among DTC, Direct and Indirect Participants and beneficial
owners will enable the beneficial owners to exercise rights equivalent in
substance to the rights that can be directly exercised by a Direct Participant.

Cash distribution payments on the shares of convertible preferred stock are
made to DTC. DTC's practice is to credit Direct Participants' accounts on the
relevant payment date in accordance with their respective holdings shown on
DTC's records unless DTC has reason to believe that it will not receive payments
on such payment date. Payments by Participants to beneficial owners are governed
by standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street name,"
and are the responsibility of such participant and not of DTC or us, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is our responsibility, disbursement of such
payments to Direct Participants is the responsibility of DTC and disbursement of
such payments to the beneficial owners is the responsibility of Direct and
Indirect Participants.

Except as provided herein, a beneficial owner in a Global Certificate will
not be entitled to receive physical delivery of shares of convertible preferred
stock. Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the convertible preferred stock, including elections
as to form of payment.

DTC may discontinue providing its services as securities depositary with
respect to the convertible preferred stock at any time by giving reasonable
notice to us. Under such circumstances, in the event that a successor securities
depositary is not obtained, certificates representing the shares of convertible
preferred stock will be printed and delivered. If we decide to discontinue use
of the system of book-entry transfers through DTC or a successor depositary,
certificates representing the shares of convertible preferred stock will be
printed and delivered.

The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for its accuracy.

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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

The following is a summary of certain material United States federal tax
considerations relevant to the purchase, ownership and disposition of our
convertible preferred stock and common stock. This summary is based on the
current provisions of the Internal Revenue Code of 1986, Treasury regulations
and judicial and administrative authority, all of which are subject to change,
possibly on a retroactive basis. This summary applies only to investors who hold
our convertible preferred stock or Class A Common Stock as capital assets,
within the meaning of section 1221 of the Internal Revenue Code, and does not
discuss the tax consequences to special classes of investors, such as dealers in
securities or currencies, financial institutions, tax-exempt entities, life
insurance companies, investors holding our convertible preferred stock or common
stock as a part of a hedging, short sale or conversion transaction or a
straddle, investors whose functional currency is not the United States dollar,
persons who hold our convertible preferred stock or Class A Common Stock through
partnerships or other pass-through entities, or, except as specifically noted,
certain United States expatriates. State, local and foreign tax consequences of
ownership of our convertible preferred stock and Class A Common Stock are not
summarized.

We have not requested, and do not intend to request, any rulings from the
Internal Revenue Service concerning the federal tax consequences of an
investment in our convertible preferred stock or Class A Common Stock. You are
advised to consult with your own tax advisor regarding the consequences of
acquiring, holding or disposing of our convertible preferred stock or Class A
Common Stock in light of current tax laws, your particular investment
circumstances, and the application of state, local and foreign tax laws.

When we refer in this summary to a "United States Holder," we mean a
beneficial owner of convertible preferred stock or Class A Common Stock that is:

- a citizen or resident of the United States for United States federal
income tax purposes;

- a corporation created or organized in the United States or under the laws
of the United States or of any political subdivision thereof;

- an estate whose income is includible in gross income for United States
federal income tax purposes regardless of its source; or

- a trust if a court within the United States is able to exercise primary
supervision of the administration of the trust and one or more United
States persons has the authority to control all substantial decisions of
the trust.

When we refer in this summary to a "Non-United States Holder," we mean a
beneficial owner of convertible preferred stock or Class A Common Stock that is
not a United States Holder.

UNITED STATES HOLDERS

Distributions. A distribution of cash on the convertible preferred stock
or Class A Common Stock will be treated as a dividend to the extent of our
current or accumulated earnings and profits attributable to the distribution as
determined under United States federal income tax principles. The amount of our
earnings and profits at any time will depend upon our future actions and
financial performance. If the amount of the distribution exceeds our current and

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accumulated earnings and profits attributable to the distribution, the
distribution will next be treated as a nontaxable return of capital and will be
applied against and reduce your adjusted tax basis in the convertible preferred
stock or Class A Common Stock, but not below zero. The reduction in tax basis
will increase the amount of any gain, or reduce the amount of any loss, which
you would otherwise realize on the sale or other taxable disposition of the
convertible preferred stock or Class A Common Stock. If the distribution exceeds
both our current and accumulated earnings and profits attributable to the
distribution and your adjusted tax basis in your convertible preferred stock or
Class A Common Stock, the excess will be treated as capital gain and will be
either long-term or short-term capital gain depending on your holding period for
the convertible preferred stock or Class A Common Stock.

Corporate investors in our convertible preferred stock or Class A Common
Stock generally should be eligible for the 70% dividends-received deduction with
respect to the portion of any distribution on the stock taxable as a dividend.
However, corporate investors should consider certain provisions that may limit
the availability of a dividend received deduction, including but not limited to
the holding period rules of section 246(c) of the Internal Revenue Code, the
rules of section 246A which reduce the dividends-received deduction on dividends
on certain debt-financed stock, and the rules in section 1059 of the Internal
Revenue Code that reduce the basis of stock (and may require recognition of
taxable gain) in respect of certain extraordinary dividends, as well as the
effect of the dividends-received deduction on the determination of alternative
minimum tax liability.

Optional Redemption for Cash. If we redeem our convertible preferred stock
for cash, the redemption will be taxable to you. The redemption generally will
be treated as a sale or exchange if you do not own, actually or constructively
within the meaning of section 318 of the Internal Revenue Code, any stock of
Emmis other than the redeemed convertible preferred stock. If you do own,
actually or constructively, other stock of Emmis, a cash redemption of your
convertible preferred stock may be taxable in accordance with the treatment
described above for distributions. Such treatment as a distribution will not
apply if the redemption (1) is "substantially disproportionate" with respect to
you under section 302(b)(2) of the Internal Revenue Code, or (2) is "not
essentially equivalent to a dividend" under section 302(b)(1) of the Internal
Revenue Code. A distribution to you will be "not essentially equivalent to a
dividend" if it results in a meaningful reduction in your stock interest in
Emmis, which should be the case if your proportionate ownership interest is
reduced (taking into account any actual ownership of Class A Common Stock and
any stock constructively owned), your relative stock interest in Emmis is
minimal, and you exercise no control over our business affairs.

If a cash redemption of your convertible preferred stock is treated as a
sale or exchange, it will result in capital gain or loss equal to the difference
between the amount of cash received and your adjusted tax basis in the
convertible preferred stock redeemed, except to the extent that the redemption
price includes unpaid dividends which we declare prior to the redemption. The
capital gain or loss will be long term if you have held the convertible
preferred stock for more than one year. Any cash you receive in discharge of
declared but unpaid dividends on the convertible preferred stock will be treated
as a distribution on the convertible preferred stock to the extent of the
declared but unpaid dividends, taxable in accordance with the treatment
described above for distributions.

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If the cash you receive on redemption of your convertible preferred stock
is taxed as a dividend, your tax basis (reduced for amounts, if any, treated as
return of capital) in the redeemed convertible preferred stock will be
transferred to any remaining other Emmis stock you own, subject, in the case of
a corporate taxpayer, to reduction or possible gain recognition under section
1059 of the Internal Revenue Code in an amount equal to the nontaxed portion of
such dividend. If you do not actually own any other Emmis stock, having a
remaining stock interest only constructively, you may lose the benefit of your
tax basis in the convertible preferred stock but the tax basis may be shifted to
the stock of the related person whose stock you constructively own.

Under certain circumstances, section 305(c) of the Internal Revenue Code
requires that any excess of the redemption price of preferred stock over its
issue price be treated as constructively distributed on a periodic basis prior
to actual receipt. The convertible preferred stock provides for certain
redemption premiums upon optional redemption. In addition, if a dividend on
convertible preferred stock is not declared and paid, it will accrue and become
payable upon the redemption or conversion of the convertible preferred stock.
The tax treatment of such an accrued dividend under section 305(c) is not
entirely clear. We intend to take the position that the existence of our
optional redemption rights or the accrual of a dividend on the convertible
preferred stock does not result in constructive distributions under section
305(c). The Internal Revenue Service might take a different position, however,
and, for example, treat the accrued dividends as constructive distributions as
they accrue even if no cash distributions are made.

Conversion. You generally will not recognize gain or loss on conversion of
shares of convertible preferred stock into our Class A Common Stock, except with
respect to any cash paid in lieu of fractional shares of Class A Common Stock.
However, you may recognize gain or dividend income to the extent that you
receive cash or Class A Common Stock in respect of dividends in arrears on the
convertible preferred stock at the time of conversion into Class A Common Stock.
If there is a Provisional Redemption, you will be entitled to receive an
additional cash payment representing the present value of the future dividends
that would have been payable on your convertible preferred stock ("additional
cash amount") when you convert your convertible preferred stock into our Class A
Common Stock. Your income tax consequences regarding receipt of the additional
cash amount are not entirely clear. The likely result would be to treat the
additional cash amount as an additional payment received in connection with the
conversion of your convertible preferred stock into Class A Common Stock and any
gain you realize on such conversion would be taxable to the extent of the
additional cash amount. In that case, the gain would be treated as a dividend or
capital gain according to the principles described under "Optional Redemption
for Cash." Your tax basis in the Class A Common Stock received upon conversion
of convertible preferred stock generally will be equal to your tax basis in the
converted preferred stock and the holding period of the Class A Common Stock
generally will include your holding period for the converted preferred stock.
However, the tax basis of any Class A Common Stock received on conversion which
is treated as a dividend will be equal to its fair market value on the date of
the distribution and the holding period of that Class A Common Stock will
commence on the day after its receipt.

You may be deemed to have received a constructive distribution of stock
taxable as a dividend if the conversion ratio of the convertible preferred stock
is adjusted to reflect a cash or

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property distribution on our Class A Common Stock or to prevent dilution in the
case of certain issuances of rights or warrants to purchase Class A Common Stock
at below market prices. Although an adjustment to the conversion price made
pursuant to a bona fide reasonable adjustment formula which has the effect of
preventing the dilution of your interest in Emmis generally will not be
considered to result in a constructive distribution of stock, certain of the
possible adjustments may trigger this rule. If a nonqualifying adjustment is
made, or if we fail to make an adjustment in certain cases, you might be deemed
to have received a taxable stock dividend. If so, the amount of the dividend to
be included in income would be the fair market value of the additional Class A
Common Stock to which you would be entitled by reason of the increase in your
proportionate equity interest in Emmis.

Sale or Other Taxable Disposition. If you sell or dispose of your
convertible preferred stock or Class A Common Stock in a taxable transaction
other than a redemption or conversion by us, you will recognize capital gain or
loss equal to the difference between the amount of cash and the fair market
value of property received and your tax basis in the convertible preferred stock
or Common Stock. The gain or loss will be long-term capital gain or loss if your
holding period for the stock exceeds one year. For corporate taxpayers,
long-term capital gains are taxed at the same rate as ordinary income. For
individual taxpayers, net capital gains -- the excess of the taxpayer's net
long-term capital gains over net short-term capital losses -- are subject to a
maximum tax rate of 20% if the stock is held for more than one year. The
deductibility of capital losses is restricted and generally may only be used to
reduce capital gains to the extent thereof.

NON-UNITED STATES HOLDERS

Distributions. Distributions received by you as a Non-United States Holder
in respect of the convertible preferred stock and distributions in respect of
Class A Common Stock, to the extent considered dividends for United States
federal income tax purposes, generally will be subject to withholding of United
States federal income tax at a 30% rate or such lower rate as may be specified
by an applicable income tax treaty, unless the dividend is effectively connected
with your conduct of a trade or business within the United States or, where a
tax treaty applies, is attributable to a United States permanent establishment
you maintain. If the dividend is effectively connected with your conduct of a
trade or business within the United States or, where a tax treaty applies, is
attributable to your United States permanent establishment, the dividend will be
subject to federal income tax on a net income basis at applicable graduated
individual or corporate rates and, provided an appropriate certification is met,
will be exempt from the 30% withholding tax.

In addition to the graduated rate described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a United
States trade or business or, where a tax treaty applies, is attributable to your
United States permanent establishment, may, under certain circumstances, be
subject to an additional "branch profits tax" at a 30% rate or at a lower rate
specified by an applicable income tax treaty.

For purposes of obtaining a reduced rate of withholding under an income tax
treaty, you will be required to provide certain information concerning your
country of residence and entitlement to tax treaty benefits. If you claim
exemption from withholding with respect to dividends

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effectively connected with your conduct of a business within the United States,
you will be required to provide an appropriate certification to Emmis or its
paying agent. If you are eligible for a reduced rate of United States federal
withholding tax you may obtain a refund of any excess withheld amounts by timely
filing an appropriate claim for refund.

If a distribution exceeds our current and accumulated earnings and profits
attributable to the distribution, it will be treated first as a return of your
tax basis in the stock to the extent of your basis and then as gain from the
sale of a capital asset which would be taxable as described below. Any
withholding tax on distributions in excess of our current and accumulated
earnings and profits is refundable to you upon the timely filing of an
appropriate claim for refund with the Internal Revenue Service.

Under currently applicable Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country, unless the payor has knowledge to the contrary, for purposes of
withholding discussed above, and, under the current interpretation of these
Treasury regulations, for purposes of determining the applicability of a tax
treaty rate. Under Treasury regulations currently scheduled to be effective with
respect to dividends paid after December 31, 2000, a Non-United States Holder of
Emmis stock who wishes to claim the benefit of an applicable treaty rate, and to
avoid backup withholding as discussed below, will be required to satisfy
applicable certification and other requirements.

Disposition of Convertible Preferred Stock or Class A Common
Stock. Generally, you will not be subject to United States federal income tax
on any gain recognized upon the sale or other disposition of convertible
preferred stock or Class A Common Stock. However, you will be subject to federal
income tax on the gain if:

(1) the gain is effectively connected with your United States trade or
business or, if a tax treaty applies, attributable to your United States
permanent establishment;

(2) you are an individual who is a former citizen of the United States
who lost such citizenship within the preceding ten-year period, or former
long-term resident of the United States who relinquished United States
residency on or after February 6, 1995, and the loss of citizenship or
permanent residency had as one of its principal purposes the avoidance of
United States tax; or

(3) you are a non-resident alien individual, are present in the United
States for 183 days or more days in the taxable year of disposition and
either (a) have a "tax home" in the United States for United States federal
income tax purposes or (b) the gain is attributable to an office or other
fixed place of business you maintain in the United States.

Redemption and Conversion of Convertible Preferred Stock. As a Non-United
States Holder, you generally will not recognize any gain or loss for United
States federal income tax purposes upon conversion of convertible preferred
stock into Class A Common Stock, except with respect to any cash paid in lieu of
fractional shares of Class A Common Stock, which would be subject to the rules
described under "Disposition of Convertible Preferred Stock or Common Stock."
However, you may recognize gain or dividend income to the extent that you
receive cash or Class A Common Stock in respect of dividends in arrears on the
convertible preferred stock at the time of conversion into Class A Common Stock
or you receive an additional cash amount.

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A redemption of convertible preferred stock for cash will be an event which
will constitute either a dividend to the extent of our current and accumulated
earnings and profits or a sale or exchange. See "United States
Holders -- Optional Redemption for Cash." To the extent the redemption is
treated as a dividend, the tax consequences are described in "Non-United States
Holders -- Distributions," and to the extent the redemption is treated as a sale
or exchange, the tax consequences are described in "Non-United States
Holders -- Disposition of Convertible Preferred Stock or Class A Common Stock."

Federal Estate Taxes. If you are an individual Non-United States Holder,
convertible preferred stock or Class A Common Stock you hold or are treated as
owning at the time of your death will be included in your United States gross
estate for United States federal estate tax purposes and may be subject to
United States federal estate tax, unless an applicable estate tax treaty
provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

We generally will be required to report to certain holders of our
convertible preferred stock or Class A Common Stock and to the Internal Revenue
Service the amount of any dividends paid to the holder in each calendar year and
the amounts of tax withheld, if any, with respect to such payments. Copies of
the information returns reporting such dividends and withholding may also be
made available to the tax authorities in the country in which a Non-United
States Holder resides under the provisions of an applicable income tax treaty.

Each holder of convertible preferred stock or Class A Common Stock, other
than an exempt holder such as a corporation, tax-exempt organization, qualified
pension or profit-sharing trust, individual retirement account, or a nonresident
alien individual who provides certification as to his or her status as a
nonresident will be required to provide, under penalties of perjury, a
certification setting forth the holder's name, address, correct federal taxpayer
identification number and a statement that the holder is not subject to backup
withholding. If a nonexempt holder fails to provide the required certification,
we will be required to withhold 31% of the amount otherwise payable to the
holder, and remit the withheld amount to the Internal Revenue Service as a
credit against the holder's federal income tax liability. You should consult
your own tax advisor regarding your qualification for exemption from backup
withholding and the procedure for obtaining any applicable exemption.

Payment of the proceeds of a sale of convertible preferred stock of common
stock by or through a United States office of a broker is subject to both backup
withholding and information reporting unless the beneficial owner certifies
under penalties of perjury that it is a Non-United States Holder or otherwise
establishes an exemption. In general, backup withholding and information
reporting will not apply to a payment of the proceeds of a sale of convertible
preferred stock or common stock by or through a foreign office of a broker. If,
however, such broker is, for United States federal income tax purposes, a United
States person, a "controlled foreign corporation" for U.S. federal tax purposes,
or a foreign person that derives 50% or more of its gross income for a certain
period from the conduct of a trade or business in the United States, or, for
taxable years beginning after December 31, 2000, a foreign partnership in which
one or more United States persons, in the aggregate, own more than 50% of the
income or capital interests in the partnership or if the partnership is engaged
in a trade or business in the

70
<PAGE> 74

United States, such payments will be subject to information reporting unless (1)
such broker has documentary evidence in its records that the beneficial owner is
a Non-United States Holder and certain other conditions are met, or (2) the
beneficial owner otherwise establishes an exemption.

Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against the holder's United States federal income tax
liability provided the required information is furnished to the Internal Revenue
Service.

THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION AND IS NOT TAX ADVICE.
ACCORDINGLY, EACH PROSPECTIVE HOLDER OF CONVERTIBLE PREFERRED STOCK OR CLASS A
COMMON STOCK SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF THE CONVERTIBLE PREFERRED STOCK AND COMMON STOCK,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FEDERAL INCOME TAX
LAWS, AND ANY RECENT OR PROSPECTIVE CHANGES IN APPLICABLE TAX LAWS.

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<PAGE> 75

DESCRIPTION OF CERTAIN INDEBTEDNESS

The following summary description of our material indebtedness is qualified
in its entirety by reference to the provisions of the various related
agreements, certain of which are on file with the Securities and Exchange
Commission and to which reference is hereby made.

CREDIT FACILITY

We amended and restated our senior credit facility with a syndicate of
banks and other financial institutions on July 16, 1998. The credit facility
provides availability of $650 million in loans, which could be increased to $900
million with the consent of the lenders. The credit facility provided for two
lending facilities, as follows:

- A $400 million senior secured revolving credit facility with a final
maturity date of August 31, 2006; and

- A $250 million senior secured amortizing term loan with a final maturity
date of February 28, 2007.

The credit facility provides for letters of credit to be made available to
us not to exceed $50 million. The aggregate amount of outstanding letters of
credit and amounts borrowed under the revolving credit facility cannot exceed
the revolving credit facility commitment.

All outstanding amounts under the credit facility bear interest, at our
option, at a rate equal to the Eurodollar Rate or an alternative base rate (as
such terms are defined in the credit facility) plus a margin. The margin over
the Eurodollar Rate or the alternative base rate varies from time to time,
depending on our ratio of debt to earnings before interest, taxes, depreciation
and amortization (EBITDA), as defined in the credit facility. Interest is due on
a calendar quarter basis under the alternative base rate and at least every
three months under the Eurodollar Rate.

The credit facility requires us to maintain interest rate protection
agreements through July 2001. The notional amount required varies based upon our
ratio of adjusted debt to EBITDA, as defined in the credit facility. The
notional amount of the agreements outstanding as of August 31, 1999 was $274
million. The agreements, which expire at various dates ranging from April 2000
to February 2001, establish ceilings of 6.5% to 8.0% on the London Interbank
Offered Rate ("LIBOR") interest rate.

The aggregate amount of the revolving portion of the credit facility
reduces quarterly beginning August 31, 2001. Amortization of the outstanding
principal amount under the term loan is payable in quarterly installments
beginning August 31, 2001.

Commencing with the fiscal year ending February 28, 2002, in addition to
the scheduled amortization/reduction under the credit facility, within 60 days
after the end of each fiscal year, the amount now available for borrowing under
the credit facility is permanently reduced by 50% of our excess cash flow if the
ratio of adjusted debt (as defined in the credit facility) to EBITDA exceeds 4.5
to 1. Excess cash flow is generally defined as EBITDA reduced by the sum of net
cash tax payments, capital expenditures, required debt service, increases in
working capital (net of cash or cash equivalents) and $5 million. The net
proceeds of any sale of certain assets must also be used to permanently reduce
borrowings under the credit facility. If the ratio

72
<PAGE> 76

of adjusted debt to EBITDA is less than 5.5 to 1 and certain other conditions
are met, we will be permitted in certain circumstances to reborrow the amount of
the net proceeds within nine months solely for the purpose of funding an
acquisition.

The credit facility contains various financial and operating covenants and
other restrictions with which we must comply, including, among others,
restrictions on additional indebtedness, engaging in businesses other than
broadcasting and publishing, paying cash dividends, redeeming or repurchasing
our capital stock and use of borrowings, as well as requirements to maintain
certain financial ratios. The credit facility also prohibits us, under certain
circumstances, from making acquisitions and disposing of certain assets without
prior consent of the lenders, and provides that an event of default will occur
if Jeffrey H. Smulyan ceases to maintain (1) a significant equity investment in
Emmis (as specified in the credit facility), (2) the ability to elect a majority
of our directors or (3) control of a majority of shareholder voting power.
Substantially all of our assets, including the stock of our subsidiaries, are
pledged to secure the credit facility.

8 1/8% SENIOR SUBORDINATED NOTES

We have outstanding $300.0 million aggregate principal amount of our 8 1/8%
Senior Subordinated Notes due 2009. The subordinated notes are general unsecured
obligations ranking junior in right of payment to all existing and future senior
debt, equivalent in right of payment to all our existing and future senior
subordinated indebtedness and senior in right of payment to all our existing and
future indebtedness expressly subordinated to the notes. The subordinated notes
were issued under an indenture dated as of February 16, 1999 between us and IBJ
Whitehall Bank and Trust Company, as trustee.

The subordinated notes will mature on March 15, 2009. Interest on the
subordinated notes is payable semi-annually on March 15 and September 15 of each
year, commencing on September 15, 1999. The subordinated notes are redeemable at
our option, in whole or in part, at any time on or after March 15, 2004, 2005,
2006 and 2007 at 104.063%, 102.708%, 101.354% and 100% of the principal amount
thereof, respectively, in each case plus accrued and unpaid interest to the date
of redemption. In addition, on or prior to March 15, 2002, we may redeem up to
35% of the original aggregate principal amount of the subordinated notes at a
redemption price of 108.125% of the principal amount thereof, plus accrued and
unpaid interest to the date of redemption, with the net cash proceeds of certain
public equity offerings or the sale of stock to one or more strategic investors,
provided that at least 65% of the original aggregate principal amount of the
subordinated notes remains outstanding immediately after such redemption. Upon
the occurrence of a "change of control" as defined in the subordinated notes
indenture, we will be required to make an offer to purchase all of the
subordinated notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase of
the subordinated notes upon a change of control. Our credit facility prohibits
us from repurchasing any subordinated notes upon a change of control unless we
have paid all amounts outstanding under the credit facility prior thereto.

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<PAGE> 77

The subordinated notes indenture contains certain financial covenants with
which we must comply relating to, among other things, the following matters:

(1) limitation on our payment of cash dividends, repurchase of capital
stock, payment of principal on subordinated indebtedness and making of
certain investments, unless after giving effect to each such payment,
repurchase or investment, certain operating cash flow coverage tests
are met, excluding certain permitted payments and investments;

(2) limitation on our and our subsidiaries' incurrence of additional
indebtedness, unless at the time of such incurrence, our ratio of debt
to EBITDA would be less than or equal to 7.0 to 1.0, excluding certain
permitted incurrences of debt;

(3) limitation on our and our subsidiaries' incurrence of liens, excluding
certain permitted liens;

(4) limitation on the ability of any of our subsidiaries to create or
otherwise cause to exist any encumbrance or restriction on the payment
of dividends or other distributions on its capital stock, payment of
indebtedness owed to us or any of our other subsidiaries, making of
investments in us or any other of our subsidiaries, or transfer of any
properties or assets to us or any of our other subsidiaries, excluding
permitted encumbrances and restrictions;

(5) limitation on certain mergers, consolidations and sales of assets by
us or our subsidiaries;

(6) limitation on certain transactions with our affiliates;

(7) limitation on the ability of any of our subsidiaries to guarantee or
otherwise become liable with respect to any of our indebtedness unless
such subsidiary provides for a guarantee of the subordinated notes on
the same terms as the guarantee of such indebtedness;

(8) limitation on certain sale and leaseback transactions by us or our
subsidiaries; and

(9) limitation on certain issuances and sales of capital stock of our
subsidiaries.

The events of default under the subordinated notes indenture include
various events of default customary for such type of agreement, including, among
others, the failure to pay principal and interest when due on the subordinated
notes, cross-defaults on other indebtedness for borrowed monies in excess of $5
million, which indebtedness would therefore include indebtedness outstanding
under the credit facility, certain judgments or orders for payment of money in
excess of $5 million, and certain events of bankruptcy, insolvency and
reorganization.

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<PAGE> 78

UNDERWRITING

Subject to the terms and conditions contained in an underwriting agreement
dated October 26, 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co.,
Deutsche Bank Securities Inc. and Morgan Stanley & Co. Incorporated (the
"Representatives"), have severally agreed to purchase from us the number of
shares of our convertible preferred stock set forth opposite their names below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 1,375,000
Goldman, Sachs & Co......................................... 625,000
Deutsche Bank Securities Inc................................ 250,000
Morgan Stanley & Co. Incorporated........................... 250,000
---------
Total.................................................. 2,500,000
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares included in this
offering are subject to approval of specific legal matters by their counsel and
to specific other conditions. Except for those shares covered by the
over-allotment option, the underwriters are obligated to purchase and accept
delivery of all the shares if they purchase any of the shares. The
over-allotment option is discussed below.

The underwriters propose to initially offer some of the shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the shares to some dealers at the public offering price
less a concession not in excess of $0.975 per share. The underwriters may allow,
and these dealers may reallow, a concession not in excess of $0.10 per share on
sales to some other dealers. After the initial offering of the shares to the
public, the underwriters may change the public offering price and these
concessions.

The following table shows the underwriting fees we will pay to the
underwriters in connection with this offering. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase
additional shares of our convertible preferred stock.

<TABLE>
<CAPTION>
PAID BY US
------------------------
NO FULL
EXERCISE EXERCISE
<S> <C> <C>
Per share................................... $ 1.625 $ 1.625
Total....................................... $4,062,500 $4,671,875
</TABLE>

We will pay the offering expenses, estimated to be $325,000.

We have granted the underwriters an option, exercisable for 30 days from
the date of the underwriting agreement, to purchase up to 375,000 additional
shares at the public offering price less the underwriting fees. The underwriters
may exercise this option solely to cover over-allotments, if any, made in
connection with this offering. To the extent that the underwriters exercise this
option, each underwriter will become obligated, subject to specific conditions,
to purchase a number of additional shares proportionate to that underwriter's
initial purchase commitment.
75
<PAGE> 79

We have agreed to indemnify the underwriters against some civil
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the underwriters may be required to make in respect
of any of those liabilities.

We and our executive officers and directors have agreed that, for a period
of 90 days from the date of this prospectus, we and they will not, subject to
some exceptions, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation (1) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of, directly or indirectly, any shares of the convertible preferred stock or
Class A Common Stock or any securities convertible into or exercisable or
exchangeable for the convertible preferred stock or Class A Common Stock; or (2)
enter into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of the convertible preferred
stock or Class A Common Stock (regardless of whether any of the transactions
described in clause (1) or (2) is to be settled by the delivery of the
convertible preferred stock or Class A Common Stock or other securities, in cash
or otherwise). In addition, for a 90 day period from the date of this prospectus
we have agreed not to file any registration statement with respect to the
registration of any shares of the convertible preferred stock or Class A Common
Stock or any securities convertible into or exercisable for common stock without
the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.

Donaldson, Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co.,
Deutsche Bank Securities Inc. and Morgan Stanley & Co. Incorporated have
performed investment banking and advisory services for us from time to time for
which they have received customary fees and reimbursement of expenses, including
serving in February 1999 as initial purchasers of our 8 1/8% Senior Subordinated
Notes due 2009. The Representatives may, from time to time, engage in
transactions with and perform services for us in the ordinary course of their
business.

Other than in the United States, no action has been taken by us, the
selling stockholder or the underwriters that would permit a public offering of
the shares of convertible preferred stock included in this offering in any
jurisdiction where action for that purpose is required. The shares included in
this offering may not be offered or sold, directly or indirectly, nor may this
prospectus or any other offering material or advertisement in connection with
the offer and sale of any of these shares be distributed or published in any
jurisdiction, except under circumstances that will result in compliance with the
applicable rules and regulations of that jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of that jurisdiction. Persons who receive this prospectus are
advised to inform themselves about and to observe any restrictions relating to
the offering of the common stock and the distribution of this prospectus. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
shares of convertible preferred stock included in this offering in any
jurisdiction where that would not be permitted or legal.

In connection with this offering, some underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
convertible preferred stock. Specifically, the underwriters may over-allot this
offering, creating a syndicate short position. In addition, the underwriters may
bid for and purchase shares of convertible preferred stock in the open market to
cover syndicate short positions or to stabilize the price of the convertible
preferred stock. These activities may stabilize or maintain the market price of
the convertible preferred stock

76
<PAGE> 80

above independent market levels. The underwriters are not required to engage in
these activities and may end any of these activities at any time.

As described under "Use of Proceeds," pending other uses, all or a portion
of the net proceeds of this offering may be used to partially repay amounts
outstanding on our credit facility. Several of the underwriters are creditors
under the credit facility. Because potentially more than 10% of the proceeds
from this offering, not including underwriting compensation, may be received by
such underwriters as lenders under the credit facility, this offering is being
conducted in accordance with Rule 2710(c)(8) of the Conduct Rules of the
National Association of Securities Dealers, which requires that the initial
public offering price be no higher than that recommended by a "qualified
independent underwriter." In accordance with this requirement, Donaldson, Lufkin
& Jenrette Securities Corporation has assumed the responsibilities of acting as
a qualified independent underwriter and recommended an initial public offering
price in compliance with the requirements of Rule 2720 of the Conduct Rules of
the NASD. In connection with this offering, Donaldson, Lufkin & Jenrette
Securities Corporation has performed due diligence investigations and reviewed
and participated in the preparation of this prospectus and the registration
statement of which this prospectus forms a part. As compensation for the
services of Donaldson, Lufkin & Jenrette Securities Corporation as a qualified
independent underwriter, we have agreed to pay Donaldson, Lufkin & Jenrette
Securities Corporation $5,000.

LEGAL MATTERS

Bose McKinney & Evans LLP, Indianapolis, Indiana, will pass upon the
legality of the convertible preferred stock offered by this prospectus for us.
Ronald E. Elberger, a partner in Bose McKinney & Evans LLP, is an officer of
Emmis Communications Corporation. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Latham & Watkins, New York,
New York.

EXPERTS

The audited consolidated financial statements and schedule of Emmis
Communications Corporation and Subsidiaries as of February 28, 1998 and 1999 and
for each of the three years in the period ended February 28, 1999, included in
this prospectus and elsewhere in the registration statement, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and included herein in reliance upon the authority
of said firm as experts in giving said reports.

The audited financial statements of Tribune New York Radio, Inc. as of
December 28, 1997 and for each of the two years in the period ended December 28,
1997 incorporated by reference in this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto and included herein in reliance upon the authority of said firm
as experts in giving said reports.

The audited combined financial statements of SF Broadcasting of Wisconsin,
Inc. and SF Multistations, Inc. and Subsidiaries as of December 29, 1996 and
December 28, 1997 and for each of the three years in the period ended December
28, 1997, incorporated by reference in this

77
<PAGE> 81

prospectus, have been audited by Ernst & Young LLP, independent auditors, as
indicated in their report with respect thereto incorporated by reference herein.

With respect to the unaudited interim financial information of Emmis
Communications Corporation and Subsidiaries for the quarters ended May 31, 1999
and 1998 and August 31, 1999 and 1998, included elsewhere in this prospectus,
and incorporated by reference, Arthur Andersen LLP, has applied limited
procedures in accordance with professional standards for a review of that
information. However, their separate report thereon states that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on that information should
be restricted in light of the limited nature of the review procedures applied.
In addition, the accountants are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of the registration statement prepared or certified by the accountants within
the meaning of Section 7 or 11 of the Act.

78
<PAGE> 82

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-3 with the SEC covering
the convertible preferred stock offered by this prospectus, and this prospectus
is part of our registration statement. For further information on Emmis and the
convertible preferred stock, you should refer to our registration statement and
its exhibits. This prospectus summarizes material provisions of contracts and
other documents to which we refer you. You should review the full text of these
documents because the prospectus may not contain all the information that you
may find important. We have included copies of these documents as exhibits to
our registration statement.

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York and Chicago. Please
call the SEC at 1-800-SEC-0330 for more information on the public reference
rooms and their copy charges. Our SEC filings are also available to the public
from the SEC's Web Site at http://www.sec.gov.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until
the sale of all the shares of convertible preferred stock to which this
prospectus relates or the offering is otherwise terminated.

- Our Annual Report on Form 10-K (file no. 0-23264) for the fiscal year
ended February 28, 1999.

- Our Quarterly Reports on Form 10-Q (file no. 0-23264) for the fiscal
quarters ended May 31, 1999 and August 31, 1999.

- Our Current Reports on Form 8-K (file no. 0-23264) filed March 15,
1999 and May 6, 1999, and an amendment on Form 8-K/A (file no.
0-23264) filed May 6, 1999.

- Our Current Reports on Form 8-K (file no. 0-23264) filed May 7, 1998
and December 2, 1998, and an amendment on Form 8-K/A (file no.
0-23264) filed September 29, 1998.

- The description of our Class A Common Stock contained in our
registration statement on Form 8-A (file no. 0-23264), as amended.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
Emmis Communications Corporation
One Emmis Plaza, 7th Floor
40 Monument Circle
Indianapolis, Indiana 46204
Telephone: (317) 266-0100

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<PAGE> 83

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
THREE YEARS ENDED FEBRUARY 28, 1999
Report of Independent Public Accountants.................... F-2
Consolidated Statements of Operations for the three-year
period ended
February 28, 1999......................................... F-3
Consolidated Balance Sheets, February 28, 1998 and February
28, 1999.................................................. F-4
Consolidated Statements of Changes in Shareholders' Equity
for the three-year period ended February 28, 1999......... F-6
Consolidated Statements of Cash Flows for the three year
period ended
February 28, 1999......................................... F-7
Notes to Consolidated Financial Statements.................. F-10
THREE AND SIX MONTHS ENDED AUGUST 31, 1999
Report of Independent Public Accountants.................... F-40
Condensed Consolidated Statements of Operations for the
three and six months ended
August 31, 1998 and 1999 (unaudited)...................... F-41
Condensed Consolidated Balance Sheets at February 28, 1999
and August 31, 1999 (unaudited)........................... F-42
Condensed Consolidated Statements of Cash Flows for the six
months ended
August 31, 1998 and 1999 (unaudited)...................... F-43
Notes to Condensed Consolidated Financial Statements........ F-44
</TABLE>

F-1
<PAGE> 84

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES:

We have audited the accompanying consolidated balance sheets of EMMIS
COMMUNICATIONS CORPORATION (an Indiana corporation) and Subsidiaries as of
February 28, 1999 and 1998, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the three
years in the period ended February 28, 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Emmis Communications
Corporation and Subsidiaries as of February 28, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended February 28, 1999 in conformity with generally accepted accounting
principles.

ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
April 30, 1999.

F-2
<PAGE> 85

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
--------------------------------
1997 1998 1999
<S> <C> <C> <C>
Gross Revenues.............................................. $134,102 $165,324 $274,056
Less Agency Commissions..................................... 20,382 24,741 41,220
-------- -------- --------
Net Revenues................................................ 113,720 140,583 232,836
Operating expenses........................................ 62,433 81,170 143,348
International business
Development expenses...................................... 1,164 999 1,477
Corporate expenses........................................ 5,929 6,846 10,427
Time brokerage fee........................................ -- 5,667 2,220
Depreciation and amortization............................. 5,481 7,536 28,314
Non-cash compensation..................................... 3,465 1,482 4,269
-------- -------- --------
Operating Income............................................ 35,248 36,883 42,781
-------- -------- --------
Other Income (Expense):
Interest expense.......................................... (9,633) (13,772) (35,650)
Loss on donation of radio station......................... -- (4,833) --
Other income, net......................................... 325 6 1,914
-------- -------- --------
Total other income (expense)............................ (9,308) (18,599) (33,736)
-------- -------- --------
Income before Income Taxes and extraordinary item........... 25,940 18,284 9,045
Provision for Income Taxes.................................. 10,500 7,200 6,200
-------- -------- --------
Income before extraordinary item............................ 15,440 11,084 2,845
Extraordinary item, net of tax.............................. -- -- 1,597
Net income.................................................. $ 15,440 $ 11,084 $ 1,248
======== ======== ========
Basic Earnings Per Share:
Income before Extraordinary Item............................ $1.41 $1.02 $ 0.20
Extraordinary Item, Net of Tax.............................. -- -- (0.11)
Net Income.................................................. $1.41 $1.02 $ 0.09
======== ======== ========
Diluted Earnings Per Share:
Income before extraordinary item............................ $1.37 $0.98 $ 0.19
Extraordinary item, net of tax.............................. -- -- (0.11)
Net income.................................................. $1.37 $0.98 $ 0.08
======== ======== ========
</TABLE>

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

F-3
<PAGE> 86

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
FEBRUARY 28,
------------------------
1998 1999
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 5,785 $ 6,117
Accounts receivable, net of allowance for doubtful
accounts of $1,346 and $1,698 at February 28, 1998 and
1999, respectively...................................... 32,120 51,479
Current portion of TV program rights...................... -- 3,646
Income tax refunds receivable............................. 4,968 --
Prepaid expenses and other................................ 8,279 9,840
-------- ----------
Total current assets.................................. 51,152 71,082
-------- ----------
PROPERTY AND EQUIPMENT:
Land and buildings........................................ 2,192 35,411
Leasehold improvements.................................... 8,188 8,351
Broadcasting equipment.................................... 18,800 63,943
Office equipment and automobiles.......................... 12,144 21,199
Construction in progress.................................. 13,091 3,418
-------- ----------
54,415 132,322
Less -- Accumulated depreciation and amortization........... 20,969 26,262
-------- ----------
Total property and equipment, net..................... 33,446 106,060
-------- ----------
INTANGIBLE ASSETS:
Broadcast licenses........................................ 195,400 711,928
Trademarks................................................ 1,022 756
Excess of cost over fair value of net assets of purchased
businesses.............................................. 53,297 123,614
Other intangibles......................................... 5,567 5,632
-------- ----------
255,286 841,930
Less -- Accumulated amortization............................ 20,728 39,623
-------- ----------
Total intangible assets, net.......................... 234,558 802,307
-------- ----------
OTHER ASSETS:
Deferred debt issuance costs and cost of interest rate cap
agreements, net of accumulated amortization of $692 and
$839 at February 28, 1998 and 1999, respectively........ 3,806 18,907
TV program rights, net of current portion................. -- 7,836
Investments............................................... 5,114 5,664
Deposits and other........................................ 5,312 2,975
-------- ----------
Total other assets, net............................... 14,232 35,382
-------- ----------
Total assets.......................................... $333,388 $1,014,831
======== ==========
</TABLE>

The accompanying notes to consolidated financial statements are
an integral part of these balance sheets.

F-4
<PAGE> 87
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
FEBRUARY 28,
----------------------
1998 1999
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of other long-term debt................ $ 1,499 $ 835
Current portion of TV program rights payable.............. -- 9,471
Accounts payable.......................................... 13,140 15,635
Collection of account receivable on behalf of SF
Broadcasting and Wabash Valley Broadcasting............. -- 9,016
Accrued salaries and commission........................... 2,893 4,545
Accrued interest.......................................... 2,421 6,223
Income tax payable........................................ -- 12,057
Deferred revenue.......................................... 7,985 7,238
Other..................................................... 1,579 4,813
-------- ----------
Total current liabilities............................. 29,517 69,833
-------- ----------
Credit Facility and Senior Subordinated Debt................ 215,000 577,000
TV Program Rights Payable, Net of Current Portion........... -- 25,161
Other Long-Term Debt, Net of Current Portion................ 14,923 18,805
Other Noncurrent Liabilities................................ 604 3,466
Minority Interest........................................... 1,875 --
Deferred Income Taxes....................................... 27,559 85,017
-------- ----------
Total liabilities..................................... 289,478 779,282
======== ==========
Commitments and Contingencies (Note 10)
Shareholders' Equity:
Class A common stock, $.01 par value; authorized
34,000,000 shares; issued and outstanding 8,430,660
shares and 13,190,207 shares at February 28, 1998 and
1999, respectively...................................... 84 132
Class B common stock, $.01 par value; authorized 6,000,000
shares; issued and outstanding 2,560,894 shares and
2,582,265 shares at February 28, 1998 and 1999,
respectively............................................ 26 26
Additional paid-in capital................................ 69,353 260,344
Accumulated deficit....................................... (25,553) (24,305)
Accumulated other comprehensive income.................... -- (648)
-------- ----------
Total shareholders' equity............................ 43,910 235,549
-------- ----------
Total liabilities and shareholders' equity............ $333,388 $1,014,831
======== ==========
</TABLE>

The accompanying notes to consolidated financial statements are
an integral part of these balance sheets.

F-5
<PAGE> 88

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE-YEAR PERIOD ENDED FEBRUARY 28, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
-------------------- -------------------- ADDITIONAL CUMULATIVE TOTAL
SHARES SHARES PAID-IN ACCUMULATED TRANSLATION SHAREHOLDERS
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL DEFICIT ADJUSTMENTS EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 29,
1996...................... 8,264,940 $ 83 2,606,332 $26 $ 65,852 $(52,077) $ -- $ 13,884
Issuance of Class A Common
Stock in exchange for
Class B Common Stock.... 31,862 -- (31,862) -- -- -- -- --
Exercise of stock options
and related income tax
benefits................ 92,415 1 -- -- 1,632 -- -- 1,633
Compensation related to
granting of stock and
stock options........... -- -- -- -- 2,715 -- -- 2,715
Issuance of Class A Common
Stock to profit sharing
plan.................... 21,739 -- -- -- 750 -- -- 750
Comprehensive Income:
Net income................ -- -- -- -- -- 15,440 -- 15,440
---------- ---- --------- --- -------- -------- ----- --------
Balance, February 28,
1997.................... 8,410,956 84 2,574,470 26 70,949 (36,637) -- 34,422
---------- ---- --------- --- -------- -------- ----- --------
Issuance of Class A Common
Stock in exchange for
Class B Common Stock.... 13,576 -- (13,576) -- -- -- -- --
Exercise of stock options
and related income tax
benefits................ 106,305 1 -- -- 2,966 -- -- 2,967
Compensation related to
granting of stock and
stock options........... -- -- -- -- 732 -- -- 732
Issuance of Class A Common
Stock to profit sharing
plan.................... 15,152 -- -- -- 750 -- -- 750
Issuance of Class A Common
Stock to employees and
officers and related
income tax benefits..... 79,115 1 -- -- 954 -- -- 955
Purchase of Class A Common
Stock................... (194,444) (2) -- -- (6,998) -- -- (7,000)
Comprehensive Income:
Net income................ -- -- -- -- -- 11,084 -- 11,084
---------- ---- --------- --- -------- -------- ----- --------
Balance, February 28,
1998.................... 8,430,660 84 2,560,894 26 69,353 (25,553) -- 43,910
---------- ---- --------- --- -------- -------- ----- --------
Issuance of Class A Common
Stock in exchange for
Class B Common Stock.... 7,629 -- (7,629) -- -- -- -- --
Exercise of stock options
and related income tax
benefits................ 124,678 2 29,000 -- 4,128 -- -- 4,130
Compensation related to
granting of stock and
stock options........... -- -- -- -- 3,269 -- -- 3,269
Issuance of Class A Common
Stock to profit sharing
plan.................... 21,592 -- -- -- 1,000 -- -- 1,000
Issuance of Class A Common
Stock to employees and
officers and related
income tax benefits..... 5,648 -- -- -- -- -- -- --
Equity offering, net of
costs incurred of
$10,606................. 4,600,000 46 -- -- 182,594 -- -- 182,640
Comprehensive Income:
Net income................ -- -- -- -- -- 1,248 --
Cumulative translation
adjustment.............. -- -- -- -- -- -- (648)
Total comprehensive
income.................. -- -- -- -- -- -- -- 600
---------- ---- --------- --- -------- -------- ----- --------
Balance, February 28,
1999.................... 13,190,207 $132 2,582,265 $26 $260,344 $(24,305) $(648) $235,549
========== ==== ========= === ======== ======== ===== ========
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE> 89

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------------
1997 1998 1999
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................................ $ 15,440 $ 11,084 $ 1,248
Adjustments to reconcile net income to net cash provided
by operating activities --
Extraordinary item...................................... -- -- 1,597
Depreciation and amortization of property and
equipment............................................. 1,639 2,580 9,705
Amortization of debt issuance costs and cost of interest
rate cap agreements................................... 1,071 2,183 839
Amortization of intangible assets....................... 3,842 4,956 18,609
Amortization of TV program rights....................... -- -- 3,005
Provision for bad debts................................. 726 802 1,745
Provision (benefit) for deferred income taxes........... 1,590 (524) 4,953
Compensation related to stock and stock options
granted............................................... 2,715 732 3,269
Contribution to profit sharing plan paid with common
stock................................................. 750 750 1,000
Loss on donation of radio station....................... -- 4,833 --
Cash paid for TV program rights......................... -- -- (1,469)
Other................................................... (195) 357 (1,143)
(Increase) decrease in certain current assets (net of
dispositions and acquisitions) --
Accounts receivable................................... (2,385) (8,389) (21,104)
Prepaid expenses and other current assets............. (3,041) (4,760) (727)
Increase (decrease) in certain current liabilities
(net of dispositions and acquisitions) --
Accounts payable...................................... 2,757 5,560 1,868
Accrued salaries and commissions...................... (1,999) 1,332 1,337
Accrued interest...................................... (146) 2,247 3,802
Deferred revenue...................................... 395 292 (747)
Other current liabilities............................. 26 116 4,486
(Increase) decrease in deposits and other assets...... (898) (1,832) 3,435
Increase (decrease) in other noncurrent liabilities... (925) 168 (587)
-------- -------- ---------
Net cash provided by operating activities.......... 21,362 22,487 35,121
======== ======== =========

</TABLE>

F-7
<PAGE> 90
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------------
1997 1998 1999
<S> <C> <C> <C>
INVESTING ACTIVITIES:
Acquisition of WXTM-FM, WALC-AM and WKKX-FM............... (6,600) (36,964) --
Acquisition of WTLC-FM and WTLC-AM........................ -- (15,336) --
Acquisition of Texas Monthly.............................. -- (37,389) --
Acquisition of Cincinnati Magazine........................ -- (1,979) --
Acquisition of Network Indiana and AgriAmerica............ -- (709) --
Acquisition of WQCD-FM.................................... -- -- (128,550)
Acquisition of SF Broadcasting............................ -- -- (287,293)
Acquisition of Wabash Valley Broadcasting................. -- -- (88,905)
Purchases of property and equipment....................... (7,559) (16,991) (37,383)
Initial payment for purchase of Hungarian broadcast
license................................................. -- (7,325) --
Other..................................................... 240 -- 661
-------- -------- ---------
Net cash used by investing activities.............. (13,919) (116,693) (541,470)
-------- -------- ---------
FINANCING ACTIVITIES:
Proceeds of credit facility and senior subordinated
notes................................................... 19,000 288,378 1,063,000
Payments on credit facility............................... (28,102) (183,928) (723,500)
Purchases of interest rate cap agreements and payment of
loan fees............................................... -- (4,291) (19,589)
Proceeds (purchase) of the Company's Class A
Common Stock, net of transaction costs.................. -- (7,000) 182,640
Proceeds from exercise of stock options and income tax
benefits of certain equity transactions................. 1,632 3,922 4,130
Other..................................................... -- 1,719 --
-------- -------- ---------
Net cash provided (used) by financing activities... (7,470) 98,800 506,681
-------- -------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (27) 4,594 332
CASH AND CASH EQUIVALENTS:
Beginning of year......................................... 1,218 1,191 5,785
-------- -------- ---------
End of year............................................... $ 1,191 $ 5,785 $ 6,117
======== ======== =========
SUPPLEMENTAL DISCLOSURES:
Cash paid for --
Interest................................................ $ 8,708 $ 9,655 $ 33,439
Income taxes............................................ 9,180 8,419 1,580
Non-cash investing and financing transactions --
Fair value of assets acquired by incurring debt......... 17 32 --
ACQUISITION OF WXTM-FM, WALC-AM AND WKKX-FM:
Fair value of assets acquired........................... -- $ 44,564 --
Cash paid............................................... -- 43,564 --
--------
Liabilities assumed..................................... -- $ 1,000 --
ACQUISITION OF TEXAS MONTHLY:
Fair value of assets acquired........................... -- $ 45,421 --
Cash paid............................................... -- 37,389 --
--------
Liabilities assumed..................................... -- $ 8,032 --
</TABLE>

F-8
<PAGE> 91
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
---------------------------------
1997 1998 1999
<S> <C> <C> <C>
ACQUISITION OF WQCD-FM:
Fair value of assets acquired........................... -- -- $ 201,347
Cash paid............................................... -- -- 128,550
---------
Liabilities assumed..................................... -- -- $ 72,797
ACQUISITION OF SF BROADCASTING:
Fair value of assets acquired........................... -- -- $ 346,952
Cash paid............................................... -- -- 287,293
---------
Liabilities assumed..................................... -- -- $ 59,659
ACQUISITION OF WABASH VALLEY BROADCASTING:
Fair value of assets acquired........................... -- -- $ 101,055
Cash paid............................................... -- -- 88,905
---------
Liabilities assumed..................................... -- -- $ 12,150
</TABLE>

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

F-9
<PAGE> 92

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. ORGANIZATION

Emmis Communications Corporation is a diversified media company with radio
broadcasting, television broadcasting and magazine publishing operations. The
thirteen FM radio stations and three AM radio stations Emmis Communications
Corporation owns in the United States serve the nation's three largest radio
markets of New York City, Los Angeles and Chicago, as well as St. Louis,
Indianapolis and Terre Haute, Indiana. The six television stations, which Emmis
Communications Corporation acquired in 1998, are located in New Orleans,
Louisiana, Mobile, Alabama, Green Bay, Wisconsin, Honolulu, Hawaii, Fort Myers,
Florida and Terre Haute, Indiana. Emmis Communications Corporation also
publishes Indianapolis Monthly, Texas Monthly, Cincinnati and Atlanta magazines,
has a 54% interest in a national radio station in Hungary (Slager Radio) and
engages in certain businesses ancillary to its business, such as broadcast tower
leasing and advertising and program consulting.

B. PRINCIPLES OF CONSOLIDATION

In fiscal 1999, Emmis Broadcasting Corporation changed its name to Emmis
Communications Corporation. The consolidated financial statements include the
accounts of Emmis Communications Corporation and its majority owned
Subsidiaries. Unless the content otherwise requires, references to Emmis or the
Company in these financial statements mean Emmis Communications Corporation and
its Subsidiaries. All significant intercompany balances and transactions have
been eliminated. Effective in the fourth quarter of fiscal 1999, Emmis began
recording 100% of Slager Radio's losses as the minority shareholders' investment
had been reduced to zero. When Slager Radio generates net income, Emmis will
recognize 100% of their net income to the extent that losses greater than Emmis'
54% interest have been previously recorded.

C. REVENUE RECOGNITION

Broadcasting revenue is recognized as advertisements are aired. Publication
revenue is recognized in the month of delivery.

D. TELEVISION PROGRAMMING

Emmis has agreements with distributors for the rights to television
programming over contract periods which generally run from one to five years.
Each contract is recorded as an asset and a liability at an amount equal to its
gross contractual commitment when the license period begins and the program is
available for its first showing. The portion of program contracts which become
payable within one year is reflected as a current liability in the accompanying
consolidated balance sheet.

The rights to program materials are reflected in the accompanying
consolidated balance sheet at the lower of unamortized cost or estimated net
realizable value. Estimated net realizable values are based upon management's
expectation of future advertising revenues, net of sales commissions, to be
generated by the program material. Amortization of program contract costs is
computed under either the straight-line method over the contract period or based
on usage, whichever yields the greater amortization for each program on a
monthly basis. Program contract costs, estimated by management to be amortized
in the succeeding year, are classified as current assets. Program contract
liabilities are typically paid on a scheduled basis and are not affected by
adjustments for amortization or estimated net realizable value. Certain program
contracts provide for the exchange of advertising air time in lieu of cash
payments for the rights to such programming. These contracts are recorded as the
programs are aired at the estimated fair value of the advertising air time given
in exchange for the program rights.

F-10
<PAGE> 93
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

E. INTERNATIONAL BUSINESS DEVELOPMENT EXPENSES

International business development expenses include the cost of the
Company's efforts to identify, investigate and develop international broadcast
investments or other international business opportunities.

F. NON-CASH COMPENSATION

Non-cash compensation includes compensation expense associated with stock
options granted, restricted common stock issued under employment agreements and
common stock contributed to the Company's Profit Sharing Plan. The Company has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." Pro forma
disclosure of net income and earnings per share under SFAS No. 123 is presented
in Note 9.

G. CASH AND CASH EQUIVALENTS

Emmis considers time deposits, money market fund shares, and all highly
liquid debt instruments with original maturities of three months or less to be
cash equivalents.

H. PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation and amortization
are generally computed by the straight-line method over the estimated useful
lives of the related assets which are 31.5 years for buildings, not more than 32
years for leasehold improvements, 5 to 7 years for broadcasting equipment,
office equipment and automobiles. Maintenance, repairs and minor renewals are
expensed; improvements are capitalized. Interest was capitalized in connection
with the construction of the Indianapolis office facility. The capitalized
interest was recorded as part of the building cost. In fiscal 1999 and 1998
approximately $1,591,000 and $312,000 of interest was capitalized, respectively.
No interest was capitalized in fiscal 1997. On a continuing basis, the Company
reviews the financial statement carrying value of property and equipment for
impairment. If events or changes in circumstances were to indicate that an asset
carrying value may not be recoverable, a write-down of the asset would be
recorded through a charge to operations.

I. INTANGIBLE ASSETS

Intangible assets are recorded at cost. Generally, broadcast licenses,
trademarks and the excess of cost over fair value of net assets of purchased
businesses are being amortized using the straight-line method over 40 years. The
cost of the broadcast license for Slager Radio (totaling approximately $20.8
million) is being amortized over the seven year initial term of the license. The
excess of cost over fair value of net assets resulting from the purchase of
Texas Monthly (approximately $32.4 million) is being amortized over 15 years.
Other intangibles are amortized using the straight-line method over varying
periods, not in excess of 10 years.

Subsequent to the acquisition of an intangible asset, Emmis evaluates
whether later events and circumstances indicate the remaining estimated useful
life of that asset may warrant revision or that the remaining carrying value of
such an asset may not be recoverable. When factors indicate that an intangible
asset should be evaluated for possible impairment, Emmis uses an estimate of the
related asset's undiscounted future cash flows over the remaining life of that
asset in measuring recoverability. If separately identifiable cash flows are not
available for an intangible asset (as would generally be the case for the excess
of cost over fair value of purchased businesses), Emmis evaluates recoverability
based on the expected undiscounted cash flows of the specific business to which
the asset relates. If such an analysis indicates that impairment has in fact
occurred, Emmis writes down the remaining net book value of the intangible asset
to its fair value. For this purpose, fair value is determined using quoted
market prices (if available), appraisals or appropriate valuation techniques.

F-11
<PAGE> 94
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

J. INVESTMENTS

Emmis has a 50% ownership interest in a partnership in which the sole asset
is land on which a transmission tower is located. The other owner has voting
control of the partnership. This investment of $5,114,000 is accounted for on
the equity method of accounting.

K. DEPOSITS AND OTHER ASSETS

Deposits and other assets include amounts due from officers, including
accrued interest, of $1,654,000 and $1,741,000 at February 28, 1998 and 1999,
respectively. Officer loans bear interest at the Company's average borrowing
rate of approximately 6.60% and 7.09% for the years ended February 28, 1998 and
1999, respectively.

L. DEFERRED REVENUE AND BARTER TRANSACTIONS

Deferred revenue includes deferred magazine subscription revenue and
deferred barter revenue. Barter transactions are recorded at the estimated fair
value of the product or service received. Broadcast revenue from barter
transactions is recognized when commercials are broadcast. The appropriate
expense or asset is recognized when merchandise or services are used or
received.

M. INCOME TAXES

Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes." The liability method measures the expected tax
impact of future taxable income or deductions resulting from differences in the
tax and financial reporting bases of assets and liabilities reflected in the
consolidated balance sheets and the expected tax impact of carryforwards for tax
purposes.

N. FOREIGN CURRENCY TRANSLATION

The functional currency of Slager Radio is the Hungarian forint. Slager
Radio's balance sheet has been translated from forints to the U.S. dollar using
the current exchange rate in effect at the balance sheet date. Slager Radio's
results of operations have been translated using an average exchange rate for
the period. The translation adjustment resulting from the conversion of Slager
Radio's financial statements was not significant for the year ended February 28,
1998 and was $648,000 for the year ended February 28,1999. This adjustment is
reflected in shareholders' equity in the accompanying balance sheet.

O. EARNINGS PER SHARE

Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share", requires dual presentation of basic and diluted earnings per share
("EPS") on the face of the income statement for all entities with complex
capital structures like the Company's. Basic EPS excludes dilution and is
computed by dividing net income available to common shareholders by the
weighted-average number of common shares outstanding for the period (10,942,996,
10,903,333 and 14,452,820 shares for the years ended February 28, 1997, 1998 and
1999, respectively). Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity. Weighted average common equivalent
shares outstanding for the period, considering the effect of employee stock
options, are 11,291,225, 11,361,881 and 14,848,171 for the years ended February
28, 1997, 1998 and 1999, respectively. For the years ended February 28, 1997,
1998 and 1999, the difference between the weighted-average shares outstanding
used to compute basic and diluted EPS is attributable to dilution caused by
stock options.

F-12
<PAGE> 95
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

P. ESTIMATES

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

Q. ACCOUNTING PRONOUNCEMENTS

As of March 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". This statement establishes new rules for the reporting
and display of comprehensive income and its components. The Company has
reported, in addition to net income, the components of other comprehensive
income including foreign currency translation adjustments, in its consolidated
statements of shareholders' equity. Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 130. The adoption of
this disclosure standard had no impact on the Company's net income or financial
position.

Effective February 28, 1999, the Company adopted SFAS No. 131, "Disclosure
about Segments of an Enterprise and Related Information" (See Note 12). This
pronouncement superseded SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", and establishes new standards for reporting information
about operating segments and related disclosures about products, geographic
areas, and major customers in annual and interim financial statements. The
adoption of SFAS No. 131 does not affect results of operations or financial
operation.

In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued, which establishes accounting and reporting
standards for derivative financial instruments and hedging activities. This
pronouncement, which is required to be adopted in fiscal years beginning after
June 15, 1999, will require, among other things, the Company to recognize all
derivatives as either assets or liabilities on the balance sheet at fair value.
Derivatives not qualifying as hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in its fair value will either be offset against the change in fair value
of the hedged assets, liabilities, or firm commitments through income or
recognized in other comprehensive income. Hedge ineffectiveness, the amount by
which the change in the value of a hedge does not exactly offset the change in
the value of the hedged item, will be immediately recognized in earnings.
Management has not yet determined what the effect of SFAS No. 133 will be on the
Company.

R. RECLASSIFICATIONS

Certain reclassifications have been made to the February 28, 1997 and 1998
financial statements to be consistent with the February 28, 1999 presentation.

2. COMMON STOCK

Emmis has authorized 34,000,000 shares of Class A Common Stock, par value
$.01 per share, and 6,000,000 shares of Class B Common Stock, par value $.01 per
share. The rights of these two classes are essentially identical except that
each share of Class B Common Stock has 10 votes with respect to substantially
all matters. Class B Common Stock is owned by the principal shareholder (Jeffrey
H. Smulyan). All shares of Class B Common Stock convert to Class A Common Stock
upon sale or other transfer to a party unaffiliated with the principal
shareholder. The financial statements presented reflect the establishment of the
two classes of stock.

In June 1997, Emmis acquired 194,444 shares of its common stock from Morgan
Stanley, Dean Witter, Discover and Co. at $36 per share. The aggregate purchase
price of $7.0 million is reflected as a decrease to paid in capital in the
accompanying financial statements and was financed through additional borrowings
under the Company's Credit Facility.

F-13
<PAGE> 96
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In June 1998, Emmis completed the sale of 4.6 million shares of its Class A
Common Stock at $42.00 per share resulting in total proceeds of $193.0 million.
Net proceeds from the offering were used to repay outstanding obligations under
the Credit Facility.

3. PREFERRED STOCK

Emmis has authorized 10,000,000 shares of preferred stock which may be
issued with such designations, preferences, limitations and relative rights as
Emmis' Board of Directors may authorize. As of February 28, 1998 and 1999, no
shares of preferred stock are issued and outstanding.

4. CREDIT FACILITY AND SENIOR SUBORDINATED DEBT

The Credit Facility and Senior Subordinated Debt was comprised of the
following at February 28, 1998 and 1999:

<TABLE>
<CAPTION>
1998 1999
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Credit Facility:
Revolving Credit Facility................................. $115,000 $ 27,000
Term Note................................................. 100,000 250,000
8 1/8% Senior Subordinated Notes Due 2009................... -- 300,000
-------- --------
Total debt.................................................. $215,000 $577,000
======== ========
</TABLE>

CREDIT FACILITY

On July 16, 1998 the Company entered into an amended and restated Credit
Facility for $750 million, which may be increased up to $1.0 billion. As a
result of the early payoff of the refinanced debt, the Company recorded an
extraordinary loss of approximately $1.6 million, net of taxes, related to
unamortized deferred debt issuance costs. The amended and restated Credit
Facility expires on August 31, 2006, except for the Term Note which matures on
February 28, 2007, and is comprised of (1) a $400 million revolving credit
facility which is subject to certain adjustments as defined in the Credit
Facility, (2) a $250 million term note and (3) a $100 million revolving
acquisition credit facility/term note.

The amended and restated Credit Facility provides for letters of credit to
be made available to the Company not to exceed $50 million. The aggregate amount
of outstanding letters of credit and amounts borrowed under the revolving credit
facility cannot exceed the revolving credit facility commitment. No letters of
credit were outstanding at February 28, 1999.

All outstanding amounts under the Credit Facility bear interest, at the
option of Emmis, at a rate equal to the Eurodollar Rate or an alternative base
rate (as defined in the Credit Facility) plus a margin. The margin over the
Eurodollar Rate or the alternative base rate varies, depending on Emmis' ratio
of debt to earnings before interest, taxes, depreciation and amortization
(EBITDA), as defined in the agreement. The weighted-average interest rate on
borrowings outstanding under the Credit Facility at February 28, 1998 and 1999
was approximately 6.72% and 7.69%, respectively. Interest is due on a calendar
quarter basis under the alternative base rate and at least every three months
under the Eurodollar Rate. The Credit Facility requires the Company to maintain
interest rate protection agreements through July 2001. The notional amount
required varies based upon Emmis' ratio of adjusted debt to EBITDA, as defined
in the Credit Facility. The notional amount of the agreements at February 28,
1999 totaled $274 million. The agreements, which expire at various dates ranging
from April 2000 to February 2001, establish various ceilings on the Credit
Facility's underlying base rate approximating a weighted average rate of 7.1% on
the three-month LIBOR interest rate. The cost of these agreements is being
amortized over the lives of the agreements and the amortization is included as a
component of interest expense.

F-14
<PAGE> 97
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The aggregate amount of the revolving credit facility reduces quarterly
beginning August 31, 2001. Amortization of the outstanding principal amount
under the term note and revolving acquisition Credit Facility/term note is
payable in quarterly installments beginning August 31, 2001. The annual
amortization and reduction schedules as of February 28, 1999, assuming the
entire $750 million Credit Facility was outstanding prior to the scheduled
amortization payments are as follows:

SCHEDULED AMORTIZATION/REDUCTION OF
CREDIT FACILITY AVAILABILITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
REVOLVING
ACQUISITION
YEAR ENDED REVOLVING CREDIT FACILITY/
FEBRUARY (29) 28 CREDIT FACILITY TERM NOTE TERM NOTE
- ---------------- AMORTIZATION AMORTIZATION AMORTIZATION TOTAL
<S> <C> <C> <C> <C>
2002........................ $ 40,000 $ 1,875 $ 10,000 $ 51,875
2003........................ 60,000 2,500 15,000 77,500
2004........................ 80,000 2,500 20,000 102,500
2005........................ 90,000 2,500 22,500 115,000
2006........................ 70,000 2,500 17,500 90,000
2007........................ 60,000 238,125 15,000 313,125
-------- -------- -------- --------
Total....................... $400,000 $250,000 $100,000 $750,000
======== ======== ======== ========
</TABLE>

Commencing with the fiscal year ending February 28, 2002, in addition to the
scheduled amortization/ reduction of the Credit Facility, within 60 days after
the end of each fiscal year, the Credit Facility is permanently reduced by 50%
of the Company's excess cash flow if the ratio of adjusted debt (as defined in
the Credit Facility) to EBITDA exceeds 4.5 to 1. Excess cash flow is generally
defined as EBITDA reduced by cash taxes, capital expenditures, required debt
service, increases in working capital (net of cash or cash equivalents), and
$5,000,000. The net proceeds from any sale of certain assets must also be used
to permanently reduce borrowings under the Credit Facility. If the ratio of
adjusted debt to EBITDA is less than 5.5 to 1 and certain other conditions are
met, the Company will be permitted in certain circumstances to reborrow the
amount of the net proceeds within nine months solely for the purpose of funding
an acquisition.

The Credit Facility contains various financial and operating covenants and
other restrictions with which Emmis must comply, including, among others,
restrictions on additional indebtedness, engaging in businesses other than
broadcasting and publishing, paying cash dividends, redeeming or repurchasing
capital stock of Emmis and use of borrowings, as well as requirements to
maintain certain financial ratios. The Company was in compliance with these
covenants at February 28, 1999. The Credit Facility also prohibits Emmis, under
certain circumstances, from making acquisitions and disposing of certain assets
without the prior consent of the lenders, and provides that an event of default
will occur if Jeffrey H. Smulyan ceases to maintain (i) a significant equity
investment in Emmis (as specified in the Credit Facility), (ii) the ability to
elect a majority of Emmis' directors or (iii) control of a majority of
shareholder voting power. Substantially all of Emmis' assets, including the
stock of Emmis' subsidiaries, are pledged to secure the Credit Facility.

SENIOR SUBORDINATED NOTES

On February 12, 1999, the Company issued $300 million of 8 1/8% Senior
Subordinated Notes. The Senior Subordinated Notes were sold at 100% of the face
amount. The proceeds were used to retire a $25 million promissory note and the
related $1.1 million accrued interest due to SF Broadcasting in connection with
the purchase of four television stations. The remainder of the proceeds was used
to reduce outstanding borrowings under the Credit Facility.

F-15
<PAGE> 98
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In March 1999, the Company filed an Exchange Offer Registration Statement with
the SEC to exchange the Senior Subordinated Notes for new Series B Notes (the
"Notes") registered under the Securities Act. The terms of the new Series B
Notes are identical to the terms of the Senior Subordinated Notes.

Prior to March 15, 2002, the Company may, at its option, use the net cash
proceeds of one or more Public Equity Offerings (as defined), to redeem up to
35% of the aggregate principal amount at a redemption price equal to 108.125%
plus accrued and unpaid interest, provided that at least $195.0 million of the
aggregate principal amount of the Notes originally issued remains outstanding
after such redemption. On or after March 15, 2004 and until March 14, 2007, the
Notes will be redeemable at the option of the Company in whole or in part at
prices ranging from 104.063% to 101.354% plus accrued and unpaid interest. On or
after March 15, 2007, the Notes may be redeemable at 100% plus accrued and
unpaid interest. Upon a Change of Control (as defined), the Company is required
to make an offer to purchase the Notes then outstanding at a purchase price
equal to 101% plus accrued and unpaid interest. Interest on the Notes is payable
semi-annually. The Notes have no sinking fund requirements and are due in full
on March 15, 2009.

The Notes are general unsecured obligations of the Company and expressly
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company. The Notes will rank pari passu with any future
Senior Subordinated Indebtedness (as defined) and senior to all Subordinated
Indebtedness (as defined) of the Company.

The indenture relating to the Notes contains covenants with respect to the
Company which include limitations of indebtedness, restricted payments,
transactions with affiliates, issuance and sale of capital stock of restricted
subsidiaries, sale/leaseback transactions and mergers, consolidations or sales
of substantially all of the Company's assets. The Company was in compliance with
these covenants at February 28, 1999.

5. OTHER LONG-TERM DEBT

Other long term debt was comprised of the following at February 28, 1998 and
1999:

<TABLE>
<CAPTION>
1998 1999
(DOLLARS)IN THOUSANDS
<S> <C> <C>
Hungary:
License Obligation........................................ $11,800 $13,428
Bonds Payable............................................. 2,996 2,877
Notes Payable............................................. 1,448 784
Other..................................................... 178 2,551
------- -------
Total Other Long-Term Debt.................................. 16,422 19,640
Less: Current Maturities 1,499 835
------- -------
Other Long Term Debt, Net of Current Maturities $14,923 $18,805
======= =======
</TABLE>

The License Obligation is payable to the Hungarian government in Hungarian
forints, by Emmis' Hungarian subsidiary in four equal annual installments
commencing November 2000. The License Obligation of $13.4 million as of February
28, 1999, is reflected net of an unamortized discount of $1.3 million. The
obligation is non-interest bearing, however, in accordance with the license
purchase agreement, a Hungarian cost of living adjustment is calculated annually
and is payable, concurrent with the principal payments, on the outstanding
obligation. the cost of living adjustment is estimated each reporting period and
is included in interest expense. Prevailing market interest rates in Hungary
exceed inflation by approximately 3%. Accordingly, the License Obligation has
been discounted at an imputed interest rate of approximately 3% to reflect the
obligation at its fair value.

The Bonds and Notes Payable are payable by Emmis' Hungarian subsidiary to
the minority shareholders of the subsidiary. The Bonds, payable in Hungarian
forints, are due on maturity at November 2004 and bear interest at the

F-16
<PAGE> 99
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Hungarian State Bill rate plus 3% (approximately 23.0% and 20.2% at February 28,
1998 and 1999, respectively). Interest is payable semi-annually. The Notes
Payable and accrued interest, payable in U.S. dollars, are due on demand and
bear interest at prime plus 2% (approximately 10.5% and 9.75% at February 28,
1998 and 1999, respectively).

6. TV PROGRAM RIGHTS PAYABLE

Future payments required under TV program rights payable as of February 28,
1999, are as follows (in thousands):

<TABLE>
<S> <C>
2000........................................................ $ 9,471
2001........................................................ 7,260
2002........................................................ 4,944
2003........................................................ 3,450
2004........................................................ 2,719
2005 and thereafter......................................... 6,788
-------
34,632
Less: Current Portion of TV Program Rights Payable.......... 9,471
-------
TV Program Rights Payable, Net of Current Portion........... $25,161
=======
</TABLE>

7. ACQUISITIONS

On March 31, 1997, Emmis completed its acquisition of substantially all of
the assets of radio stations WXTM-FM (formerly WKBQ-FM and WALC-FM), WALC-AM
(formerly WKBQ-AM) and WKKX-FM in St. Louis from Zimco, Inc. for approximately
$43.6 million in cash, plus an agreement to broadcast approximately $1.0 million
in trade spots for Zimco, Inc., over a period of years. Concurrent with the
signing of the asset purchase agreement, Emmis entered into a time brokerage
agreement which permitted Emmis to operate the acquired stations effective
December 1, 1996 through the date of closing. Operating results of these
stations are reflected in the consolidated statements of operations commencing
December 1, 1996. The purchase price was financed through additional bank
borrowings. The acquisition was accounted for as a purchase. In February 1998,
the Company donated WALC-AM to a church. The $4.8 million net book value of the
station at the time of donation was reflected as a loss on donation of radio
station in the accompanying consolidated statement of operations.

On October 1, 1997, the Company acquired the assets of Network Indiana and
AgriAmerica from Wabash Valley Broadcast Corporation for $.7 million in cash.
Emmis financed the acquisition through additional bank borrowings. The
acquisition was accounted for as a purchase.

On November 1, 1997, the Company completed its acquisition of substantially
all of the assets of WTLC-FM and AM in Indianapolis from Panache Broadcasting,
L.P. for approximately $15.3 million in cash. Emmis financed the acquisition
through additional bank borrowings. The acquisition was accounted for as a
purchase.

On November 1, 1997, the Company acquired substantially all of the net
assets of Cincinnati Magazine from CM Media, Inc. for approximately $2.0 million
in cash. Emmis financed the acquisition through additional bank borrowings. The
acquisition was accounted for as a purchase.

Emmis owns a 54% interest in a Hungarian subsidiary (Slager Radio Rt.) which
was formed in August 1997. In November 1997, Slager Radio acquired a radio
broadcasting license from the Hungarian government at a cost of approximately
$19.2 million. The broadcast license has an initial term of seven years and is
subject to renewal for an additional five years. Slager Radio began broadcasting
on February 16, 1998.

On February 1, 1998, the Company acquired all of the outstanding capital
stock of Mediatex Communications Corporation for approximately $37.4 million in
cash plus assumed liabilities of $8.0 million. Mediatex Communications

F-17
<PAGE> 100
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Corporation owns and operates Texas Monthly, a regional magazine. The
acquisition was accounted for as a purchase and was financed through additional
bank borrowings.

On June 5, 1998, the Company completed its acquisition of radio station
WQCD-FM in New York City (the "WQCD Acquisition") from Tribune New York Radio,
Inc. for a cash purchase price of $141.6 million (including transaction costs)
less approximately $13.0 million for cash purchase price adjustments relating to
taxes plus $20.0 million of net current tax liabilities, $52.5 million of
deferred tax liabilities and $0.3 million of assumed liabilities associated with
the acquisition. The acquisition was accounted for as a purchase and was
financed through additional bank borrowings under its Credit Facility. Effective
July 1, 1997 through the date of closing, the Company operated WQCD-FM under a
time brokerage agreement.

On July 16, 1998, the Company completed its acquisition of substantially all
of the assets of SF Broadcasting of Wisconsin, Inc. and SF Multistations, Inc.
and Subsidiaries (collectively the "SF Acquisition"), the seller, for a cash
purchase price of $287.3 million (including transaction costs), a $25 million
promissory note due to the former owner, plus assumed program rights payable and
other liabilities of approximately $34.7 million. The Company financed the
acquisition through a $25 million promissory note (due July 15, 1999, bearing
interest at 8%) and borrowings under the Credit Facility. The promissory note
was paid in full in February 1999. The SF Acquisition consists of four Fox
network affiliated television stations: WLUK-TV in Green Bay, Wisconsin, WVUE-TV
in New Orleans, Louisiana, WALA-TV in Mobile, Alabama, and KHON-TV in Honolulu,
Hawaii (including McHale Videofilm and satellite stations KAII-TV, Wailuka,
Hawaii, and KHAW-TV, Hilo, Hawaii).

Effective October 1, 1998, the Company completed its acquisition of
substantially all of the assets of Wabash Valley Broadcasting Corporation ("the
Wabash Acquisition"), the seller, for a cash purchase price of $88.9 million
(including transaction costs), plus assumed program rights payable and other
liabilities of approximately $12.2 million. The Company financed the acquisition
through borrowings under the Credit Facility. The Wabash Acquisition consists of
WFTX-TV, a Fox network affiliated television station in Ft. Myers, Florida,
WTHI-TV a CBS network affiliated television station in Terre Haute, Indiana,
WTHI-FM and AM and WWVR-FM, radio stations located in the Terre Haute, Indiana
area.

The appraisals used to allocate costs for the WQCD-FM Acquisition, the SF
Acquisition and the Wabash Acquisition have not been finalized.

8. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

A pro forma condensed consolidated statement of operations is presented
below for the years ended February 28, 1998 and 1999, assuming the acquisitions
of WXTM-FM, WKKX-FM, WTLC-FM and AM, Texas Monthly, and the WQCD Acquisition, SF
Acquisition and Wabash Acquisition all had occurred on the first day of the year
ended February 28, 1998. Pro forma results for the year ended February 28, 1998,
include pro forma adjustments for March and actual results for April through
February for the acquisition of WXTM-FM and WKKX-FM, pro forma results for March
through June and actual results for July through February for the operation of
WQCD-FM under the time brokerage agreement, pro forma results for March through
October and actual results for November through February for the acquisition of
WTLC-FM and AM, pro forma results for March through January and actual results
for February for the acquisition of Texas Monthly, pro forma results for March
through February for the SF Acquisition and Wabash Acquisition. Pro forma
results for Cincinnati Magazine, Network Indiana and AgriAmerica have been
excluded as they are not significant to the consolidated operating results of
the Company. Pro forma results for the year ended February 28, 1999, include
actual results for March through June 4, 1998 for the operation of WQCD-FM under
the time brokerage agreement and actual results from June 5, 1998 through
February 28, 1999 for the acquisition of WQCD-FM, pro forma results from March
through July 15, 1998 and actual results from July 16, 1998 through February 28,
1999 for the SF Acquisition, and pro forma results from March through September
and actual results from October through February for the Wabash Acquisition. Pro
forma interest expense, depreciation of property and equipment and amortization
expense related to the intangibles resulting from the allocation of the purchase
price for the above acquisitions and pro forma amortization of television
broadcast rights have been included

F-18
<PAGE> 101
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in the pro forma statements presented below. The appraisals used to allocate
costs for the WQCD-FM Acquisition, the SF Acquisition and the Wabash Acquisition
have not been finalized.

<TABLE>
<CAPTION>
PRO FORMA
----------------------------
1998 1999
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Net revenues................................................ $ 241,472 $ 263,696
=========== ===========
Broadcast/publishing cash flow............................ $ 83,520 $ 97,834
=========== ===========
Net income (loss)......................................... $ (4,626) $ (4,870)
=========== ===========
Basic net income (loss) per share......................... $ (0.30) $ (0.31)
=========== ===========
Diluted net income (loss) per share....................... $ (0.30) $ (0.31)
=========== ===========
Weighted average shares outstanding:
Basic................................................... 15,503,333 15,650,080
=========== ===========
Diluted................................................. 15,961,881 16,045,431
=========== ===========
</TABLE>

The pro forma condensed consolidated statement of operations presented above
does not purport to be indicative of the results that actually would have been
obtained if the indicated transactions had been effective at the beginning of
the year presented, and is not intended to be a projection of future results or
trends.

9. EMPLOYEE BENEFIT PLANS

A. 1986 STOCK INCENTIVE PLAN AND 1992 NONQUALIFIED STOCK OPTION PLAN

These stock plans provide for incentive stock options, nonqualified stock
options and stock appreciation rights equivalent to 1,112,500 shares of common
stock. The options and stock appreciation rights are generally exercisable six
months after the date of grant and expire not more than 10 years from the date
the options or rights are granted. Stock appreciation rights provide for the
issuance of stock or the payment of cash equal to the appreciation in market
value of the allocated shares from the date of grant to the date of exercise.
When rights are issued with options, exercise of either the option or the right
results in the surrender of the other. As of February 28, 1998 and 1999, there
were no stock appreciation rights outstanding nor were there any stock
appreciation rights issued with options outstanding. Certain stock options
awarded remain outstanding as of February 28, 1998 and 1999.

B. 1994 EQUITY INCENTIVE PLAN

Effective March 1, 1994, the shareholders of Emmis approved the 1994 Equity
Incentive Plan. Under this Plan, awards equivalent to 1,000,000 shares of common
stock may be granted. The awards, which have certain restrictions, may be for
incentive stock options, nonqualified stock options, shares of restricted stock,
stock appreciation rights, performance units or limited stock appreciation
rights. Under this Plan, all awards are granted with an exercise price equal to
the fair market value of the stock except for shares of restricted stock which
may be granted with an exercise price at amounts greater than or equal to the
par value of the underlying stock. No more than 500,000 shares of Class B Common
Stock are available for grant and issuance under this Plan. As of February 28,
1998 and 1999, the only awards granted under this Plan were for stock options
and restricted shares of stock. Certain stock options awarded remain outstanding
as of February 28, 1998 and 1999. The stock options under this Plan are
generally exercisable one year after the date of grant and expire not more than
10 years from the date of grant. The exercise price of these options are at the
fair market value of the stock on the grant date.

F-19
<PAGE> 102
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

C. 1995 EQUITY INCENTIVE PLAN

Effective March 1, 1995, the shareholders of Emmis approved the 1995 Equity
Incentive Plan. Under this Plan, awards equivalent to 650,000 shares of common
stock may be granted pursuant to employment agreements discussed in Note 10.

D. NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

Effective June 29, 1995, Emmis implemented a Non-Employee Director Stock
Option Plan. Under this Plan, each non-employee director, as of January 24,
1995, was granted an option to acquire 5,000 shares of the Company's Class A
Common Stock. Thereafter, upon election or appointment of any non-employee
director or upon a continuing director becoming a non-employee director, such
individual will also become eligible to receive a comparable option. In
addition, an equivalent option will be automatically granted on an annual basis
to each non-employee director. All awards are granted with an exercise price
equal to the fair market value of the stock on the date of grant. Under this
Plan, awards equivalent to 75,000 shares of Class A Common Stock are available
for grant at February 28, 1999.

E. 1997 EQUITY INCENTIVE PLAN

Effective March 1, 1997, the shareholders of Emmis approved the 1997 Equity
Incentive Plan. Under this plan, awards equivalent to 1,000,000 shares of common
stock may be granted. The awards, which have certain restrictions, may be for
incentive stock options, nonqualified stock options, shares of restricted stock,
stock appreciation rights or performance units. Under this Plan, all awards are
granted with an exercise price equal to the fair market value of the stock
except for shares of restricted stock which may be granted with an exercise
price at amounts greater than or equal to the par value of the underlying stock.
No more than 500,000 shares of Class B Common Stock are available for grant and
issuance under this Plan. As of February 28, 1998, there were no awards granted
under this Plan. During fiscal 1999, Emmis granted incentive and nonqualified
stock options and restricted stock under this Plan. The stock options under this
Plan are generally exercisable one year after the date of grant and expire not
more than 10 years from the date of grant.

F. OTHER DISCLOSURES RELATED TO STOCK OPTION AND EQUITY INCENTIVE PLANS

The Company has historically accounted for its Stock Option Plans in
accordance with APB Opinion No. 25 ("APB 25"), under which compensation expense
is recognized only to the extent the exercise price of the option is less than
the fair market value of the share of stock at the date of grant. During 1995,
the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS
123), which considers the stock options as compensation expense to the Company,
based on their fair value at the date of grant. Under this standard, the Company
has the option of accounting for employee stock option plans as it currently
does or under the new method. The Company has elected to continue to use the APB
25 method for accounting, but has adopted the disclosure requirements of SFAS
123. Accordingly, compensation expense reflected in non-cash compensation in the
consolidated statements of operations related to the plans summarized above was
$2,715,000, $732,000 and $3,269,000 for the years ended February 1997, 1998 and
1999, respectively. Had compensation expense related to these plans been
determined based on fair value at date of grant,

F-20
<PAGE> 103
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company's net income and earnings per share would have been reduced to the
pro forma amounts indicated below:

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28,
-----------------------------------------
1997 1998 1999
<S> <C> <C> <C>
Net Income:
As Reported............................................... $15,440,000 $11,084,000 $ 1,248,000
Pro Forma................................................. $11,545,000 $ 8,588,000 ($2,056,000)
Basic EPS:
As Reported............................................... $1.41 $1.02 $.09
Pro Forma................................................. $1.06 $.79 ($.14)
Diluted EPS:
As Reported............................................... $1.37 $.98 $.08
Pro Forma................................................. $1.02 $.76 ($.14)
</TABLE>

Because the fair value method of accounting has not been applied to options
granted prior to March 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years. The fair value of
each option granted is estimated on the date of grant using the Black-Scholes
option pricing model utilizing the following weighted average assumptions:

<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28,
--------------------------
1997 1998 1999
<S> <C> <C> <C>
Risk-Free Interest Rate:.................................... 6.39% 5.78% 5.21%
Expected Life (Years):...................................... 7.1 7.5 8.0
Expected Volatility:........................................ 41.56% 38.65% 42.12%
</TABLE>

Expected dividend yields were zero for fiscal 1997, 1998 and 1999.

A summary of the status of options at February 1997, 1998 and 1999 and the
related activity for the year is as follows:

<TABLE>
<CAPTION>
1997 1998 1999
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Year...... 893,888 $15.88 1,232,335 $23.42 1,340,630 $26.95
Granted............................... 439,862 35.54 225,200 44.06 586,500 33.14
Exercised............................. (92,415) 10.01 (106,305) 21.09 (145,362) 21.90
Expired and other..................... (9,000) 33.96 (10,600) 42.47 (10,000) 16.00
Outstanding at End of Year............ 1,232,335 23.42 1,340,630 26.95 1,771,768 29.25
Exercisable at End of Year............ 737,223 16.71 1,055,430 22.76 1,285,268 26.63
Available for Grant................... 1,385,150 2,671,350 2,074,850
</TABLE>

F-21
<PAGE> 104
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the years ended February 1997, 1998 and 1999 options were granted
with an exercise price equal to or less than fair market value of the stock on
the date of grant. A summary of the weighted average fair value and exercise
price of options granted during 1997, 1998 and 1999 is as follows:

<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
FAIR EXERCISE FAIR EXERCISE FAIR EXERCISE
PRICE VALUE PRICE VALUE PRICE VALUE
<S> <C> <C> <C> <C> <C> <C>
Options Granted With an Exercise
Price:
Equal to Fair Market Value of the
Stock on the Date of Grant.......... $24.46 $42.66 $22.85 $41.20 $20.74 $36.77
Less Than Fair Market Value of the
Stock on the Date of Grant.......... $24.30 $15.50 $ -- $ -- $37.23 $15.50
</TABLE>

During fiscal 1997 and 1999, 14,800 and 5,000 shares of nonvested stock were
granted at a weighted average grant date fair value of $37.20 and $44.75,
respectively, under employment agreements. No nonvested stock was granted during
fiscal 1998.

The following information relates to options outstanding and exercisable at
February 28, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------- ------------------------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER OF EXERCISE REMAINING NUMBER OF EXERCISE
PRICES OPTIONS PRICE CONTRACT LIFE OPTIONS PRICE
<S> <C> <C> <C> <C> <C>
$ 3.75 31,250 $ 3.75 3.2 years 31,250 $ 3.75
9.90-14.85 52,900 12.30 4.6 years 52,900 12.30
14.85-19.80 602,915 15.55 7.4 years 602,915 15.55
24.75-29.70 88,925 28.88 6.6 years 88,925 28.88
29.70-34.65 442,500 33.24 9.4 years 71,000 34.50
34.65-39.60 87,678 38.50 7.0 years 87,678 38.50
39.60-44.55 148,800 44.00 7.3 years 148,800 44.00
44.55-49.50 316,800 46.64 8.4 years 201,800 45.30
</TABLE>

In addition to the benefit plans noted above, Emmis has the following
employee benefit plans:

G. PROFIT SHARING PLAN

In December 1986, Emmis adopted a profit sharing plan that covers all
nonunion employees with one year of service. Contributions to the plan are at
the discretion of the Emmis Board of Directors. Contributions to the plan can be
made in the form of newly issued Emmis common stock or cash. Historically, all
contributions to the plan have been in the form of Emmis common stock.
Contributions reflected in non-cash compensation in the consolidated statements
of operations were $750,000 for the years ended February 1997 and 1998, and
$1,000,000 for the year ended February 1999.

H. 401(K) RETIREMENT SAVINGS PLAN

Emmis sponsors two Section 401(k) retirement savings plans. One covers
substantially all nonunion employees age 18 years and older who have at least
one year of service and the other covers substantially all union employees that
meet the same qualifications. The union plan became effective August 1, 1998.
Employees may make pretax

F-22
<PAGE> 105
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contributions to the plans up to 15% of their compensation, not to exceed the
annual limit prescribed by the Internal Revenue Service. Emmis may make
discretionary matching contributions to the plans in the form of shares of the
Company's Class A Common Stock. Effective March 1, 1996, Emmis began to match
50% of employee contributions up to $2,000. Emmis' contributions to the plans
totaled $273,000, $315,000 and $599,000 for the years ended February 1997, 1998
and 1999, respectively.

I. DEFINED CONTRIBUTION HEALTH AND RETIREMENT PLAN

Emmis contributes to a multi-employer defined contribution health and
retirement plan for employees who are members of a certain labor union. Amounts
charged to expense related to the multi-employer plan were approximately
$297,000, $342,000 and $344,000 for the years ended February 1997, 1998 and
1999, respectively.

J. EMPLOYEE STOCK PURCHASE PLAN

Effective March 1, 1995, the Company implemented an employee stock purchase
plan which permits employees to purchase, via payroll deduction, shares of the
Company's Class A Common Stock, at fair market value, up to an amount not to
exceed 10% of an employee's annual gross pay.

10. COMMITMENTS AND CONTINGENCIES

A. OPERATING LEASES

Emmis leases certain office space, tower space, equipment and automobiles
under operating leases expiring at various dates through August 2009. Some of
the lease agreements contain renewal options and annual rental escalation
clauses (generally tied to the Consumer Price Index or increases in the lessor's
operating costs), as well as provisions for payment of utilities and maintenance
costs.

The future minimum rental payments (exclusive of future escalation costs)
required by noncancelable operating leases which have remaining terms in excess
of one year as of February 28, 1999, are as follows:

<TABLE>
<CAPTION>
PAYABLE IN YEAR PAYMENTS
ENDING FEBRUARY (IN THOUSANDS)
<S> <C>
2000........................................................ $ 4,939
2001........................................................ 4,324
2002........................................................ 4,090
2003........................................................ 3,826
2004........................................................ 3,080
Thereafter.................................................. 13,852
-------
$34,111
=======
</TABLE>

Minimum payments have not been reduced by minimum sublease rentals of
approximately $592,000 due in the future under noncancelable subleases.

Rent expense totaled $3,025,000, $4,512,000 and $5,945,000 for the years
ended February 1997, 1998 and 1999, respectively. Rent expense for the year
ended February 1998 and 1999 is net of sublease income of approximately $86,000
and $148,000, respectively.

B. RADIO BROADCAST AGREEMENTS

Emmis has entered into agreements to broadcast certain syndicated programs
and sporting events. Future payments related to these radio broadcast rights are
summarized as follows: Year ended February 2000 -- $1,564,000,

F-23
<PAGE> 106
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2001 -- $1,345,000, 2002 -- $1,276,000, 2003 -- $761,000, 2004 -- $142,000, and
thereafter -- $48,000. Expense related to these broadcast rights totaled
$1,383,000, $1,400,000 and $1,492,000 for the years ended February 1997, 1998
and 1999, respectively.

C. LITIGATION

Emmis currently and from time to time is involved in litigation incidental
to the conduct of its business, but Emmis is not currently a party to any
lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on the financial position or results of operations of
Emmis.

D. EMPLOYMENT AGREEMENTS

The Company enters into employment agreements with certain officers and
employees. These agreements generally specify base salary, along with bonuses
and grants of stock and/or stock options based on certain criteria. Options to
purchase up to approximately 100,000 shares of the Company's Class A Common
Stock may be granted over the next three years under agreements in place as of
February 28, 1999. Additionally, the Company was negotiating several new
employment contracts at February 28, 1999 which were expected to be finalized
during fiscal 2000.

E. CONSTRUCTION OF OFFICE BUILDING

In connection with the acquisition of KHON-TV in Honolulu, Hawaii, in July
1998, Emmis acquired a commitment to complete the construction of new operating
facilities, including broadcast equipment, for the station. The project is
expected to be completed in the fall of 1999 for an estimated cost of
approximately $19.0 million of which $2.7 million has been incurred through
February 28, 1999.

11. INCOME TAXES

The provision for income taxes for the years ended February 1997, 1998 and
1999, consisted of the following:

<TABLE>
<CAPTION>
1997 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................... $ 7,535 $6,474 $1,247
State..................................................... 1,375 1,250 --
------- ------ ------
8,910 7,724 1,247
------- ------ ------
Deferred:
Federal................................................... 1,328 (759) 3,953
State..................................................... 262 235 1,000
------- ------ ------
1,590 (524) 4,953
------- ------ ------
Provision for income taxes.................................. $10,500 $7,200 $6,200
======= ====== ======
</TABLE>

F-24
<PAGE> 107
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The provision for income taxes for the years ended February 1997, 1998 and
1999, differs from that computed at the Federal statutory corporate tax rate as
follows:

<TABLE>
<CAPTION>
1997 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C>
Computed income taxes at 35%................................ $ 9,079 $6,399 $3,166
State income tax............................................ 1,064 965 650
Foreign losses.............................................. -- -- 1,334
Nondeductible goodwill...................................... -- -- 1,324
Other....................................................... 357 (164) (274)
------- ------ ------
Net provision for income taxes.............................. $10,500 $7,200 $6,200
======= ====== ======
</TABLE>

The components of deferred tax assets and deferred tax liabilities at
February 28, 1998 and 1999, are as follows:

<TABLE>
<CAPTION>
1998 1999
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Capital loss carryforwards................................ $ 2,914 $ 439
Net operating loss carryforwards.......................... 2,587 2,142
Compensation relating to stock options.................... 2,243 3,336
Other..................................................... 2,739 2,219
Valuation allowance....................................... (2,914) (1,056)
-------- --------
Total deferred tax assets............................... 7,569 7,080
-------- --------
Deferred tax liabilities:
Intangible assets......................................... (33,166) (88,071)
Other..................................................... (1,962) (4,026)
-------- --------
Total deferred tax liabilities.......................... (35,128) (92,097)
-------- --------
Net deferred tax liability.............................. $(27,559) $(85,017)
======== ========
</TABLE>

A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. A valuation allowance
has been provided for 100% of the capital loss carryforwards available as of
February 28, 1998 and 1999, since these loss carryforwards can only be utilized
to offset future capital gains with expiration of approximately $730,000 in
2000, and $368,000 in 2002. The expiration of net operating loss carryforwards
approximate $692,000 in 2000, $1,486,000 in 2003, $2,623,000 in 2004, and
$2,133,000 thereafter.

12. SEGMENT INFORMATION

The Company's operations are aligned into three business segments: Radio,
Television and Publishing. These business segments are consistent with the
Company's management of these businesses and its financial reporting structure.

The Radio segment includes all 17 of the company's radio stations. The Radio
segment derives its revenue from the sale of commercial broadcast inventory. The
Television segment consists of six television stations that derive revenue from
the sale of commercial broadcast inventory. The Company's Publishing segment
consists of four publishing entities which derive revenue from subscriptions and
the sale of print advertising inventory.

The category "Corporate and Other" represents the results of insignificant
operations and income and expense not allocated to reportable segments.

F-25
<PAGE> 108
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's segments operate primarily in the United States with one radio
station located in Hungary. Total revenues for the year-ended February 28, 1999
were $3.3 million and total assets as of February 28, 1998 and 1999 were $27.2
million and $20.4 million, respectively, related to the Hungarian radio station.
Total revenues for this station were not material for the year ended February
28, 1998. The accounting policies as described in the summary of significant
accounting policies are applied consistently across segments.

The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management believes
that BCF and PCF are useful because they provide a meaningful comparison of
operating performance between companies in the industry and serve as an
indicator of the market value of a group of stations or publishing entities. BCF
and PCF are generally recognized by the broadcast and publishing industries as a
measure of performance and are used by analysts who report on the performance of
broadcasting and publishing groups. BCF and PCF do not take into account Emmis'
debt service requirements and other commitments and, accordingly, BCF and PCF
are not necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses. BCF and PCF are not
a measure of liquidity or of performance in accordance with generally accepted
accounting principles, and should be viewed as a supplement to and not a
substitute for our results of operations presented on the basis of generally
accepted accounting principles.

<TABLE>
<CAPTION>
CORPORATE
RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
YEAR ENDED FEBRUARY 28, 1999 (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues............................. $ 155,028 $ 39,623 $ 36,476 $ 1,709 $ 232,836
Operating expenses....................... 84,907 26,130 31,491 820 143,348
---------- ---------- ---------- ---------- ----------
Broadcast/publishing cash flow........... 70,121 13,493 4,985 889 89,488
International business
Development expenses................... -- -- -- 1,477 1,477
Corporate expenses....................... -- -- -- 10,427 10,427
Time brokerage fee....................... 2,220 -- -- -- 2,220
Depreciation and amortization............ 13,990 8,352 4,813 1,159 28,314
Non-cash compensation.................... -- -- -- 4,269 4,269
Operating income......................... 53,911 5,141 172 (16,443) 42,781
---------- ---------- ---------- ---------- ----------
Total assets......................... $ 460,065 $ 439,279 $ 44,171 $ 71,316 $1,014,831
========== ========== ========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
CORPORATE
RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
YEAR ENDED FEBRUARY 28, 1998 (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues............................. $ 125,855 -- $ 13,586 $ 1,142 $ 140,583
Operating expenses....................... 67,646 -- 12,600 924 81,170
---------- ---------- ---------- ---------- ----------
Broadcast/publishing cash flow........... 58,209 -- 986 218 59,413
International business
Development expenses................... -- -- -- 999 999
Corporate expenses....................... -- -- -- 6,846 6,846
Time brokerage fee....................... 5,667 -- -- -- 5,667
Depreciation and amortization............ 7,034 -- 294 208 7,536
Non-cash compensation.................... -- -- -- 1,482 1,482
Operating income......................... 45,508 -- 692 (9,317) 36,883
---------- ---------- ---------- ---------- ----------
Total assets......................... $ 255,541 $ -- $ 50,086 $ 27,761 $ 333,388
========== ========== ========== ========== ==========
</TABLE>

F-26
<PAGE> 109
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
CORPORATE
AND
RADIO TELEVISION PUBLISHING OTHER CONSOLIDATED
YEAR ENDED FEBRUARY 28, 1997 (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues............................... $103,292 $ -- $ 9,493 $ 935 $ 113,720
Operating expenses......................... 52,839 -- 8,957 637 62,433
-------- -------- ------- -------- ----------
Broadcast/publishing cash flow............. 50,453 -- 536 298 51,287
International business
Development expenses..................... -- -- -- 1,164 1,164
Corporate expenses......................... -- -- -- 5,929 5,929
Time brokerage fee......................... -- -- -- -- --
Depreciation and amortization.............. 5,098 -- 158 225 5,481
Non-cash compensation...................... -- -- -- 3,465 3,465
Operating income........................... 45,355 -- 378 (10,485) 35,248
-------- -------- ------- -------- ----------
Total assets........................... $168,730 $ -- $ 3,652 $ 17,334 $ 189,716
======== ======== ======= ======== ==========
</TABLE>

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments of Emmis is estimated below based on
the methods and assumptions discussed therein.

A. CASH AND CASH EQUIVALENTS

The carrying amounts approximate fair value because of the short maturity of
these instruments.

B. LONG-TERM DEBT

Based upon borrowing rates currently available to the Company for debt with
similar terms and the same remaining maturities, the fair value of long-term
debt approximated the carrying value at February 28, 1999.

C. INTEREST RATE CAP AGREEMENTS

The unamortized cost of interest rate cap agreements included in the
February 28, 1999 consolidated balance sheet totals $231,000. The fair value of
interest rate caps is estimated by obtaining quotations from brokers and
approximates $166,000 at February 28, 1999.

D. LETTER OF CREDIT

Fees paid for the Company's $50 million letter of credit approximate fair
value based on fees currently charged for similar arrangements.

14. RELATED PARTY TRANSACTIONS

Two officers of Emmis are partners in a law firm which provides legal
services to Emmis. Legal fees paid to this law firm were approximately $296,000,
$512,000 and $868,000 for the years ended February 1997, 1998 and 1999,
respectively.

15. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND SUBSIDIARY NON-
GUARANTOR

F-27
<PAGE> 110
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Guarantors"). One of Emmis' subsidiaries does not guarantee the Senior
Subordinated Notes (the "Non-Guarantor Subsidiary"). The claims of creditors of
the Non-Guarantor Subsidiary have priority over the rights of Emmis to receive
dividends or distributions from such subsidiary.

Presented below is condensed consolidating financial information for Emmis,
the Subsidiary Guarantors and the Non-Guarantor Subsidiary as of February 28,
1999 and 1998 and for each of the three years in the period ended February 28,
1999.

The equity method has been used by Emmis with respect to investments in
subsidiaries. Separate financial statements for Subsidiary Guarantors are not
presented based on management's determination that they do not provide
additional information that is material to investors.

F-28
<PAGE> 111

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF FEBRUARY 28, 1999
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents............ $ 2,286 $ 3,146 $ 685 $ -- $ 6,117
Accounts receivable, net............. -- 50,436 1,043 -- 51,479
Current portion of TV program
rights............................. -- 3,646 -- -- 3,646
Income tax refunds receivable........ -- -- -- -- --
Prepaid expenses and other........... 5,720 4,048 72 -- 9,840
-------- -------- -------- --------- ----------
Total current assets............. 8,006 61,276 1,800 -- 71,082
Property and equipment, net............ 33,769 71,342 949 -- 106,060
Intangible assets, net................. 151 785,219 16,937 -- 802,307
Investment in affiliates............... 856,701 -- -- (856,701) --
Other assets, net...................... 31,866 7,648 702 (4,834) 35,382
-------- -------- -------- --------- ----------
Total assets..................... $930,493 $925,485 $ 20,388 $(861,535) $1,014,831
======== ======== ======== ========= ==========
Current Liabilities
Current maturities of other long-term
debt............................... $ 34 $ 16 $ 2,239 $ (1,454) $ 835
Current portion of TV program rights
payable............................ -- 9,471 -- -- 9,471
Accounts payable..................... 7,527 7,739 369 -- 15,635
Collection of accounts receivable on
behalf of SF Broadcasting and
Wabash Valley Broadcasting......... -- 9,016 -- -- 9,016
Accrued salaries and commissions..... 1,262 2,719 564 -- 4,545
Accrued interest..................... 6,222 1 -- -- 6,223
Income taxes payable................. 11,790 267 -- -- 12,057
Deferred revenue..................... -- 7,238 -- -- 7,238
Other................................ 146 4,667 -- -- 4,813
-------- -------- -------- --------- ----------
Total current liabilities........ 26,981 41,134 3,172 (1,454) 69,833
Credit Facility and Senior Subordinated
Debt................................. 577,000 -- -- -- 577,000
TV program rights payable, net of
current portion...................... -- 25,161 -- -- 25,161
Other long-term debt, net of current
portion.............................. 2,543 (45) 19,687 (3,380) 18,805
Other noncurrent liabilities........... (4) 3,470 -- -- 3,466
Minority interest...................... -- -- -- -- --
Deferred income taxes.................. 87,776 (2,759) -- -- 85,017
-------- -------- -------- --------- ----------
Total liabilities................ 694,296 66,961 22,859 (4,834) 779,282
Shareholders' Equity
Class A common stock................. 132 -- -- -- 132
Class B common stock................. 26 -- -- -- 26
Additional paid-in capital........... 260,344 -- 4,297 (4,297) 260,344
Subsidiary investment................ -- 637,223 -- (637,223) --
Retained earnings (accumulated
deficit)........................... (24,305) 221,301 (6,120) (215,181) (24,305)
Accumulated other comprehensive
income............................. -- -- (648) -- (648)
Total shareholders' equity....... 236,197 858,524 (2,471) (856,701) 235,549
-------- -------- -------- --------- ----------
Total liabilities and
shareholders' equity.......... $930,493 $925,485 $ 20,388 $(861,535) $1,014,831
======== ======== ======== ========= ==========
</TABLE>

F-29
<PAGE> 112

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1999
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net revenues........................... $ 1,709 $227,873 $ 3,254 $ -- $ 232,836
Operating expenses................... 820 138,581 3,947 -- 143,348
International business development
expenses........................... -- 1,477 -- -- 1,477
Corporate expenses................... 10,427 -- -- -- 10,427
Time brokerage agreement fee......... -- 2,220 -- -- 2,220
Depreciation and amortization........ 1,159 24,336 2,819 -- 28,314
Non-cash compensation................ 3,600 669 -- -- 4,269
-------- -------- -------- --------- ----------
Operating income....................... (14,297) 60,590 (3,512) -- 42,781
-------- -------- -------- --------- ----------
Other income (Expense)
Interest expense..................... (33,667) (102) (3,171) 1,290 (35,650)
Other income (expense), net.......... 74,865 (73,957) 421 585 1,914
-------- -------- -------- --------- ----------
Total other income (expense)........... 41,198 (74,059) (2,750) 1,875 (33,736)
-------- -------- -------- --------- ----------
Income (loss) before income taxes...... 26,901 (13,469) (6,262) 1,875 9,045
Provision (benefit) for income taxes... 9,719 (3,377) (142) -- 6,200
-------- -------- -------- --------- ----------
17,182 (10,092) (6,120) 1,875 2,845
Extraordinary item, net of tax......... (1,597) -- -- -- (1,597)
Equity in earnings (loss) of
subsidiaries......................... (14,337) -- -- 14,337 --
-------- -------- -------- --------- ----------
Net income (loss)...................... $ 1,248 $(10,092) $ (6,120) $ 16,212 $ 1,248
======== ======== ======== ========= ==========
</TABLE>

F-30
<PAGE> 113

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED FEBRUARY 28, 1999
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
PARENT
COMPANY SUBSIDIARY SUBSIDIARY
ONLY GUARANTORS NON-GUARANTOR ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income................................ $ 1,248 $ (10,092) $(6,120) $ 16,212 $ 1,248
Adjustments to reconcile net income to
net cash provided (used) by operating
activities --
Extraordinary item...................... 1,597 -- -- -- 1,597
Depreciation and amortization of
property and equipment................ 779 6,886 2,040 -- 9,705
Amortization of debt issuance costs and
cost of interest rate cap
agreements............................ 839 -- -- -- 839
Amortization of intangible assets....... 380 17,450 779 -- 18,609
Amortization of TV program rights....... -- 3,005 -- -- 3,005
Provision for bad debts................. -- 1,745 -- -- 1,745
Provision (benefit) for deferred income
taxes................................. 4,953 -- -- -- 4,953
Noncash compensation.................... 3,600 669 -- -- 4,269
Cash paid for TV program rights......... -- (1,469) -- -- (1,469)
Equity in earnings of subsidiaries...... 14,337 -- -- (14,337) --
Intercompany............................ (522,788) 521,699 2,543 (1,454) --
Other................................... 103 629 -- (1,875) (1,143)
(Increase) decrease in certain assets
(net of dispositions and acquisitions)
--
Accounts receivable................... 345 (21,835) 386 -- (21,104)
Prepaid expenses and other current
assets............................. (4,725) 4,070 (72) -- (727)
Increase (decrease) in certain current
liabilities (net of dispositions and
acquisitions) --
Accounts payable...................... 4,146 (2,057) (1,675) 1,454 1,868
Accrued salaries and commissions...... 236 537 564 -- 1,337
Accrued interest...................... 3,801 1 -- -- 3,802
Deferred revenue...................... -- (747) -- -- (747)
Other current liabilities............. (2,625) 6,320 791 -- 4,486
(Increase) decrease in deposits and
other assets.......................... 9,516 (6,408) 327 -- 3,435
Increase (decrease) in other noncurrent
liabilities........................... 596 248 (1,431) -- (587)
---------- --------- ------- -------- ----------
Net cash provided (used) by operating
activities......................... (483,662) 520,651 (1,868) -- 35,121
---------- --------- ------- -------- ----------
</TABLE>

F-31
<PAGE> 114
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED FEBRUARY 28, 1999
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
PARENT
COMPANY SUBSIDIARY SUBSIDIARY
ONLY GUARANTORS NON-GUARANTOR ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Investing Activities:
Acquisition of WQCD-FM.................... -- (128,550) -- -- (128,550)
Acquisition of SF Broadcasting............ -- (287,293) -- -- (287,293)
Acquisition of Wabash Valley
Broadcasting............................ -- (88,905) -- -- (88,905)
Purchases of property and equipment....... (21,363) (13,654) (2,366) -- (37,383)
Other..................................... 7 654 -- -- 661
---------- --------- ------- -------- ----------
Net cash used in investing
activities......................... (21,356) (517,748) (2,366) -- (541,470)
---------- --------- ------- -------- ----------
Financing Activities:
Proceeds of credit facility and senior
subordinated notes...................... 1,063,000 -- -- -- 1,063,000
Payments on credit facility............... (723,500) -- -- -- (723,500)
Purchase of interest rate cap agreements
and payment of loan fees................ (19,589) -- -- -- (19,589)
Proceeds of the Company's Class A common
stock, net of transaction costs......... 182,640 -- -- -- 182,640
Proceeds from exercise of stock options
and income tax benefits of certain
equity transactions..................... 4,130 -- -- -- 4,130
Other..................................... -- -- -- -- --
---------- --------- ------- -------- ----------
Net cash provided by financing
activities......................... 506,681 -- -- -- 506,681
---------- --------- ------- -------- ----------
Effect of exchange rates on cash............ -- -- -- -- --
Increase (decrease) in cash and cash
equivalents............................... 1,663 2,903 (4,234) -- 332
Cash and cash equivalents
Beginning of year......................... 623 243 4,919 -- 5,785
---------- --------- ------- -------- ----------
End of year............................... $ 2,286 $ 3,146 $ 685 $ -- $ 6,117
========== ========= ======= ======== ==========
</TABLE>

F-32
<PAGE> 115

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
FOR THE YEAR ENDED FEBRUARY 28, 1999
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents.................. $ 623 $ 243 $ 4,919 $ -- $ 5,785
Accounts receivable, net................... 345 30,346 1,429 -- 32,120
Income tax refunds receivable.............. 4,968 -- -- -- 4,968
Prepaid expenses and other................. 995 7,284 -- -- 8,279
-------- -------- ------- --------- --------
Total current assets......................... 6,931 37,873 6,348 -- 51,152
Property and equipment, net.................. 13,295 19,528 623 -- 33,446
Intangible assets, net....................... 529 214,797 19,232 -- 234,558
Investment in affiliates..................... 257,816 -- -- (257,816) --
Other assets, net............................ 17,892 1,593 1,029 (6,282) 14,232
-------- -------- ------- --------- --------
Total assets................................. $296,463 $273,791 $27,232 $(264,098) $333,388
======== ======== ======= ========= ========
Current Liabilities
Current maturities of other long-term
debt..................................... $ 34 $ 17 $ 1,448 $ -- $ 1,499
Accounts payable........................... 3,381 9,169 590 -- 13,140
Accrued salaries and commissions........... 1,026 1,867 -- -- 2,893
Accrued interest........................... 2,421 -- -- -- 2,421
Deferred revenue........................... -- 7,985 -- -- 7,985
Other current liabilities.................. 1,189 390 -- -- 1,579
-------- -------- ------- --------- --------
Total current liabilities.................... 8,051 19,428 2,038 -- 29,517
Credit facility and senior subordinated
debt....................................... 215,000 -- -- -- 215,000
Other long-term debt, net of current
portion.................................... 59 28 21,118 (6,282) 14,923
Other noncurrent liabilities................. 1,884 595 -- (1,875) 604
Minority interest............................ -- -- -- 1,875 1,875
Deferred income taxes........................ 27,559 -- -- -- 27,559
-------- -------- ------- --------- --------
Total liabilities............................ 252,553 20,051 23,156 (6,282) 289,478
Shareholders' Equity
Class A common stock....................... 84 -- -- -- 84
Class B common stock....................... 26 -- -- -- 26
Additional paid-in capital................. 69,353 -- 4,076 (4,076) 69,353
Subsidiary investment...................... -- 22,347 -- (22,347) --
Retained earnings/accumulated deficit...... (25,553) 231,393 -- (231,393) (25,553)
-------- -------- ------- --------- --------
Total shareholders' equity................... 43,910 253,740 4,076 (257,816) 43,910
-------- -------- ------- --------- --------
Total liabilities and shareholders' equity... $296,463 $273,791 $27,232 $(264,098) $333,388
======== ======== ======= ========= ========
</TABLE>

F-33
<PAGE> 116

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1999
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C>
Net revenues................................. $ 1,142 $139,441 $ -- $140,583
Operating expenses......................... 924 80,246 -- 81,170
International business development
expenses................................. -- 999 -- 999
Corporate expenses......................... 6,846 -- -- 6,846
Time brokerage agreement fee............... -- 5,667 -- 5,667
Depreciation and amortization.............. 171 7,365 -- 7,536
Noncash compensation....................... 818 664 -- 1,482
-------- -------- -------- --------
Operating income............................. (7,617) 44,500 -- 36,883
-------- -------- -------- --------
Other income (expense)
Interest expense........................... (13,766) (6) -- (13,772)
Loss on donation of radio station.......... (4,833) -- -- (4,833)
Other income (expense), net................ 15 (9) -- 6
-------- -------- -------- --------
Total other income (expense)................. (18,584) (15) -- (18,599)
-------- -------- -------- --------
Income (loss) before income taxes............ (26,201) 44,485 -- 18,284
Provision for income taxes................... (10,480) 17,680 -- 7,200
-------- -------- -------- --------
(15,721) 26,805 -- 11,084
Equity in earnings (loss) of subsidiaries.... 26,805 -- (26,805) --
-------- -------- -------- --------
Net income (loss)............................ $11,084 $ 26,805 $(26,805) $ 11,084
======== ======== ======== ========
</TABLE>

F-34
<PAGE> 117

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED FEBRUARY 28, 1998
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
PARENT
COMPANY SUBSIDIARY SUBSIDIARY
ONLY GUARANTORS NON-GUARANTOR ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss)................. $ 11,084 $ 26,805 $ -- $(26,805) $ 11,084
Adjustments to reconcile net
income to net cash provided
(used) by operating
activities --
Depreciation and amortization of
property and equipment........ 155 2,425 -- -- 2,580
Amortization of debt issuance
costs and cost of interest
rate cap agreements........... 2,183 -- -- -- 2,183
Amortization of intangible
assets........................ 16 4,940 -- -- 4,956
Provision for bad debts......... 20 782 -- -- 802
Equity in earnings of
subsidiaries.................. (26,805) -- -- 26,805 --
Provision (benefit) for deferred
income taxes.................. (121) (403) -- -- (524)
Noncash compensation............ 818 664 -- -- 1,482
Loss on donation of radio
station....................... 4,833 -- -- -- 4,833
Other........................... 357 -- -- -- 357
Intercompany.................... (75,327) 68,642 8,560 (1,875) --
(Increase) decrease in certain
assets (net of dispositions
and acquisitions) --
Accounts receivable........ 797 (7,757) (1,429) -- (8,389)
Prepaid expenses and other
current assets........... (5,234) 474 -- -- (4,760)
Increase (decrease) in certain
current liabilities (net of
dispositions and
acquisitions) --
Accounts payable........... 1,021 4,058 481 -- 5,560
Accrued salaries and
commissions.............. 779 553 -- -- 1,332
Accrued interest........... 2,247 -- -- -- 2,247
Deferred revenue........... -- 292 -- -- 292
Other current
liabilities.............. 1,084 (968) -- -- 116
(Increase) decrease in deposits
and other assets.............. (951) (6,136) (1,027) 6,282 (1,832)
Increase (decrease) in other
noncurrent liabilities........ (28) 196 -- -- 168
--------- -------- ------- -------- ---------
Net cash provided (used in)
operating activities..... (83,072) 94,567 6,585 4,407 22,487
--------- -------- ------- -------- ---------
</TABLE>

F-35
<PAGE> 118
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS -- (CONTINUED)
FOR THE YEAR ENDED FEBRUARY 28, 1998
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
PARENT
COMPANY SUBSIDIARY SUBSIDIARY
ONLY GUARANTORS NON-GUARANTOR ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Investing Activities:
Acquisition of WXTM-FM, WALC-AM
and WKKX-FM..................... -- (36,964) -- -- (36,964)
Acquisition of WTLC-FM and
WTLC-AM......................... -- (15,336) -- -- (15,336)
Acquisition of Texas Monthly...... -- (37,389) -- -- (37,389)
Acquisition of Cincinnati
Magazine........................ -- (1,979) -- -- (1,979)
Acquisition of Network Indiana and
AgriAmerica..................... -- (709) -- -- (709)
Purchases of property and
equipment....................... (13,349) (3,019) (623) -- (16,991)
Initial payment for purchase of
Hungarian broadcast license..... -- -- (7,325) -- (7,325)
--------- -------- ------- -------- ---------
Net cash used in investing
activities.................... (13,349) (95,396) (7,948) -- (116,693)
--------- -------- ------- -------- ---------
Financing Activities:
Proceeds of credit facility....... 288,378 -- 6,282 (6,282) 288,378
Payments on credit facility....... (183,928) -- -- -- (183,928)
Payment on loan fees.............. (4,291) -- -- -- (4,291)
Purchase of Company's Class A
common stock.................... (7,000) -- -- -- (7,000)
Proceeds from exercise of stock
options and income tax benefits
of certain equity
transactions.................... 3,922 -- -- -- 3,922
Other............................. (156) -- -- 1,875 1,719
--------- -------- ------- -------- ---------
Net cash provided (used) by
financing activities....... 96,925 -- 6,282 (4,407) 98,800
--------- -------- ------- -------- ---------
Increase (decrease) in cash and cash
equivalents....................... 504 (829) 4,919 -- 4,594
Cash and cash equivalents
Beginning of year................. 119 1,072 -- -- 1,191
--------- -------- ------- -------- ---------
End of year....................... $ 623 $ 243 $ 4,919 $ -- $ 5,785
========= ======== ======= ======== =========
</TABLE>

F-36
<PAGE> 119

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1997
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C>
Net revenues....................................... $ 935 $112,785 $ -- $113,720
Operating expenses............................... 638 61,795 -- 62,433
International business development expenses...... -- 1,164 -- 1,164
Corporate expenses............................... 5,929 -- -- 5,929
Depreciation and amortization.................... 179 5,302 -- 5,481
Non-cash compensation............................ 2,702 763 -- 3,465
-------- -------- -------- --------
Operating income................................... (8,513) 43,761 -- 35,248
-------- -------- -------- --------
Other income (expense)
Interest expense................................. (9,573) (60) -- (9,633)
Other income (expense), net...................... 351 (26) -- 325
-------- -------- -------- --------
Total other income (expense)....................... (9,222) (86) -- (9,308)
-------- -------- -------- --------
Income before income taxes......................... (17,735) 43,675 -- 25,940
Provision (benefit) for income taxes............... (7,094) 17,594 -- 10,500
-------- -------- -------- --------
(10,641) 26,081 -- 15,440
Equity in earnings of subsidiaries................. 26,081 -- (26,081) --
-------- -------- -------- --------
Net income (loss).................................. $15,440 $ 26,081 $(26,081) $ 15,440
======== ======== ======== ========
</TABLE>

F-37
<PAGE> 120

<TABLE>
<CAPTION>
PARENT
COMPANY SUBSIDIARY
ONLY GUARANTORS ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
Operating Activities:
Net income......................................... $15,440 $ 26,081 $(26,081) $ 15,440
Adjustments to reconcile net income to net cash
provided by operating activities --
Depreciation and amortization of property and
equipment...................................... 161 1,478 -- 1,639
Amortization of debt issuance costs and cost of
interest rate cap agreements................... 1,071 -- -- 1,071
Amortization of intangible assets................ 18 3,824 -- 3,842
Provision of bad debts........................... -- 726 -- 726
Equity in earnings of subsidiaries............... (26,081) -- 26,081 --
Provision (benefit) for deferred income taxes.... -- 1,590 -- 1,590
Non cash compensation............................ 2,702 763 -- 3,465
Other............................................ (195) -- -- (195)
Intercompany..................................... 21,582 (21,582) -- --
(Increase) decrease in certain current assets
(net of dispositions and acquisitions) --
Accounts receivable.............................. 615 (3,000) -- (2,385)
Prepaid expenses and other current assets........ (517) (2,524) -- (3,041)
Increase (decrease) in certain current
liabilities (net of dispositions and
acquisitions) --
Accounts payable................................. 2,020 737 -- 2,757
Accrued salaries and commissions................. (532) (1,467) -- (1,999)
Accrued interest................................. (146) -- -- (146)
Deferred revenue................................. -- 395 -- 395
Other current liabilities........................ (57) 83 -- 26
(Increase) decrease in deposits and other
assets......................................... (1,353) 455 -- (898)
Increase (decrease) in other noncurrent
liabilities.................................... -- (925) -- (925)
Net cash provided by operating activities...... 14,728 6,634 -- 21,362
Investing Activities:
Acquisition of WXTM-FM, WALC-AM and WKKX-FM...... (6,600) -- -- (6,600)
Purchases of property and equipment.............. (1,102) (6,457) -- (7,559)
Other............................................ 240 -- -- 240
-------- -------- -------- --------
Net cash used in investing activities.......... (7,462) (6,457) -- (13,919)
-------- -------- -------- --------
Financing Activities:
Proceeds of credit facility...................... 19,000 -- -- 19,000
Payments on credit facility...................... (28,102) -- -- (28,102)
Proceeds from exercise of stock options and
income tax benefits of certain equity
transactions................................... 1,632 -- -- 1,632
-------- -------- -------- --------
Net cash used in financing activities.......... (7,470) -- -- (7,470)
-------- -------- -------- --------
Increase (Decrease) in cash and cash equivalents... (204) 177 -- (27)
Cash and cash equivalents
Beginning of year................................ 323 895 -- 1,218
-------- -------- -------- --------
End of year...................................... $ 119 $ 1,072 $ -- $ 1,191
======== ======== ======== ========
</TABLE>

F-38
<PAGE> 121
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. SUBSEQUENT EVENT -- ACQUISITION

On April 1, 1999, the Company acquired substantially all the assets of
Country Sampler, Inc. for approximately $19.0 million in cash, $2.0 million
payable under contract with the principal shareholder through April 2003 and
assumed liabilities of approximately $3.4 million (the "Country Sampler
Acquisition"). The acquisition was accounted for as a purchase and was financed
through additional bank borrowings.

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------- FULL
MAY 31 AUG. 31 NOV. 30 FEB. 28 YEAR
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Year ended February 28, 1998:
Net revenues........................................ $31,330 $37,008 $39,809 $32,436 $140,583
Operating income.................................... 8,091 12,002 10,160 6,630 36,883
Net income (loss)................................... 3,368 4,672 4,079 (1,035) 11,084
Basic net income per share.......................... $ 0.31 $ 0.43 $ 0.38 $ (0.10) $ 1.02
Diluted net income per share........................ $ 0.30 $ 0.41 $ 0.36 $ (0.10) $ 0.98
Year ended February 28, 1999:
Net revenues........................................ $44,619 $57,874 $71,639 $58,704 $232,836
Operating income.................................... 8,173 14,807 18,085 1,716 42,781
Income before extraordinary item.................... 1,788 4,161 3,012 (6,116) 2,845
Net income (loss)................................... 1,788 2,564 3,012 (6,116) 1,248
Basic earnings per share:
Income before extraordinary item.................... $ 0.16 $ 0.27 $ 0.19 $ (0.39) $ 0.20
Net Income.......................................... $ 0.16 $ 0.17 $ 0.19 $ (0.39) $ 0.09
Diluted earnings per share:
Income before extraordinary item.................... $ 0.16 $ 0.26 $ 0.19 $ (0.39) $ 0.19
Net income.......................................... $ 0.16 $ 0.16 $ 0.19 $ (0.39) $ 0.08
</TABLE>

F-39
<PAGE> 122

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Emmis Communications Corporation and Subsidiaries:

We have reviewed the accompanying condensed consolidated balance sheet of
Emmis Communications Corporation (an Indiana corporation) and Subsidiaries as of
August 31, 1999, and the related condensed consolidated statements of operations
for the three-month and six-month periods ended August 31, 1999 and 1998 and the
condensed consolidated statements of cash flows for the six-month periods ended
August 31, 1999 and 1998. These financial statements are the responsibility of
the Company's management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Emmis Communications Corporation
and Subsidiaries as of February 28, 1999 (not presented separately herein), and,
in our report dated April 30, 1999, we expressed an unqualified opinion on that
statement. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of February 28, 1999 is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.

ARTHUR
ANDERSEN LLP
Indianapolis, Indiana,
September 21, 1999.

F-40
<PAGE> 123

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED AUGUST 31, ENDED AUGUST 31,
---------------------- ----------------------
1998 1999 1998 1999
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Gross Revenues...................................... $ 67,873 $ 95,233 $ 120,721 $ 180,154
Less: Agency Commissions............................ 9,999 13,704 18,228 26,273
--------- --------- --------- ---------
Net Revenues........................................ 57,874 81,529 102,493 153,881
Operating expenses.................................. 33,063 47,659 60,858 93,122
International business development expenses......... 354 367 561 747
Corporate expenses.................................. 1,969 3,478 3,926 6,684
Time brokerage fees................................. 95 -- 2,220 --
Depreciation and amortization....................... 6,505 10,336 9,912 20,045
Non-cash compensation............................... 1,081 1,648 2,036 2,293
--------- --------- --------- ---------
Operating Income.................................... 14,807 18,041 22,980 30,990
--------- --------- --------- ---------
Other Income (Expense):
Interest expense.................................. (7,121) (13,936) (12,629) (27,165)
Minority interest................................. 868 466 1,875 1,525
Other income (expense), net....................... 811 (55) 1,123 (293)
--------- --------- --------- ---------
Total other income (expense)........................ (5,442) (13,525) (9,631) (25,933)
--------- --------- --------- ---------
Income Before Income Taxes and Extraordinary Item... 9,365 4,516 13,349 5,057
Provision for Income Taxes.......................... 5,204 3,300 7,400 3,600
--------- --------- --------- ---------
Net Income Before Extraordinary Item................ 4,161 1,216 5,949 1,457
--------- --------- --------- ---------
Extraordinary Item, Net of Tax...................... 1,597 -- 1,597 --
--------- --------- --------- ---------
Net Income.......................................... $ 2,564 $ 1,216 $ 4,352 $ 1,457
========= ========= ========= =========
Basic net income per share........................ $ .17 $ .08 $ .33 $ .09
========= ========= ========= =========
Diluted net income per share...................... $ .16 $ .07 $ .32 $ .09
========= ========= ========= =========
Weighted average common shares outstanding:
Basic........................................... 15,512,702 15,929,428 13,255,592 15,856,467
Diluted......................................... 15,888,107 16,438,098 13,662,310 16,305,944
</TABLE>

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

F-41
<PAGE> 124

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
FEBRUARY 28, AUGUST 31,
1999 1999
------------ ------------
(NOTE 1) (UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 6,117 $ 3,061
Accounts receivable, net.................................. 51,479 62,952
Deferred barter costs..................................... 3,128 6,862
Prepaid expenses and other................................ 10,358 16,627
---------- ----------
Total current assets.................................... 71,082 89,502
Property and equipment, net............................... 106,060 117,375
Intangible assets, net.................................... 802,307 820,789
Other assets, net......................................... 35,382 52,035
---------- ----------
Total assets............................................ $1,014,831 $1,079,701
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of other long-term debt................... $ 835 $ 835
Accounts payable.......................................... 15,635 19,731
Accrued salaries and commissions.......................... 4,545 4,730
Accrued interest.......................................... 6,223 18,033
Deferred revenue.......................................... 7,238 14,614
Current portion of TV program rights payable.............. 9,471 9,564
Income tax payable........................................ 12,057 7,130
Other..................................................... 13,829 2,557
---------- ----------
Total current liabilities............................... 69,833 77,194
Credit Facility and Senior Subordinated Notes............... 577,000 619,000
TV Program Rights Payable, Net of Current Portion........... 25,161 20,686
Other Long-Term Debt, Net of Current Portion................ 18,805 17,588
Other Noncurrent Liabilities................................ 3,466 5,339
Deferred Income Taxes....................................... 85,017 94,845
---------- ----------
Total liabilities....................................... 779,282 834,652
========== ==========
COMMITMENTS AND CONTINGENCIES
Shareholders' Equity:
Class A common stock, $.01 par value; authorized
34,000,000 shares; issued and outstanding 13,190,207
shares at February 28, 1999 and 13,371,821 shares at
August 31, 1999......................................... 132 134
Class B common stock, $.01 par value; authorized 6,000,000
shares; issued and outstanding 2,582,265 shares at
February 28, 1999 and 2,622,125 shares at August 31,
1999.................................................... 26 26
Additional paid-in capital................................ 260,344 269,241
Accumulated deficit....................................... (24,305) (22,848)
Accumulated other comprehensive loss...................... (648) (1,504)
---------- ----------
Total shareholders' equity.................................. 235,549 245,049
---------- ----------
Total liabilities and shareholders' equity.............. $1,014,831 $1,079,701
========== ==========
</TABLE>

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

F-42
<PAGE> 125

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
AUGUST 31,
---------------------
1998 1999
(UNAUDITED)
<S> <C> <C>
Cash Flows from operating Activities:
Net income................................................ $ 4,352 $ 1,457
Adjustments to reconcile net income to net cash provided
by operating activities --
Extraordinary item...................................... 1,597 --
Depreciation and amortization........................... 11,164 23,730
Provision for bad debts................................. 153 955
Provision for deferred income taxes..................... 2,017 5,570
Gain on sale of property and equipment.................. (533) --
Non-cash compensation................................... 2,036 2,293
Other................................................... (2,686) (876)
Changes in assets and liabilities --
Accounts receivable..................................... (15,510) (10,247)
Deferred barter costs................................... (1,105) (3,734)
Prepaid expenses and other current assets............... 1,249 (6,046)
Other assets............................................ 2,466 (141)
Accounts payable and accrued liabilities................ (2,698) 15,331
Deferred revenue........................................ (1,159) 3,507
Other liabilities....................................... 10,336 (25,667)
--------- --------
Net cash provided by operating activities............... 11,679 6,132
--------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment....................... (16,503) (20,831)
Proceeds from sale of property and equipment.............. 607 --
Deposits on acquisitions and other........................ (9,000) (17,500)
Acquisition of WQCD-FM.................................... (128,449) --
Acquisition of SF Broadcasting............................ (287,293) --
Acquisition of Country Sampler............................ -- (18,454)
--------- --------
Net cash used in investing activities................. (440,638) (56,785)
--------- --------
Cash Flows from Financing Activities:
Payments on long-term debt................................ (396,525) (48,500)
Proceeds from long-term debt.............................. 655,652 90,500
Proceeds from issuance of Class A
common stock, net of transaction costs.................. 182,640 --
Purchase of interest rate cap agreements and other debt
related costs........................................... (8,912) --
Proceeds from exercise of stock options................. 3,081 5,597
--------- --------
Net cash provided by financing activities............. 435,936 47,597
--------- --------
Increase (decrease) in cash and cash
equivalents............................................... 6,977 (3,056)
Cash and cash equivalents:
Beginning of period....................................... 5,785 6,117
--------- --------
End of period............................................. $ 12,762 $ 3,061
========= ========
Supplemental disclosures:
Cash paid for --
Interest................................................ $ 10,971 $ 12,642
Income taxes............................................ 286 5,181
Acquisition of WQCD-FM:
Fair value of assets acquired............................. $ 203,813
Cash paid................................................. 128,449
---------
Liabilities assumed....................................... $ 75,364
=========
Acquisition of SF Broadcasting:
Fair value of asset acquired.............................. $ 338,790
Cash paid................................................. 287,293
Note payable.............................................. 25,000
---------
Liabilities assumed....................................... $ 26,497
=========
Acquisition of Country Sampler:
Fair value of assets acquired............................. $ 25,608
Cash paid............................................... 18,454
--------
Liabilities assumed..................................... $ 7,154
========
</TABLE>

The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
F-43
<PAGE> 126

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
(UNAUDITED)

NOTE 1. GENERAL

Pursuant to the rules and regulations of the Securities and Exchange
Commission, the condensed consolidated interim financial statements included
herein have been prepared, without audit, by Emmis Communications Corporation
and Subsidiaries ("Emmis" or the "Company"). As permitted under the applicable
rules and regulations of the Securities and Exchange Commission, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations; however, Emmis
believes that the disclosures are adequate to make the information presented not
misleading. The condensed consolidated financial statements included herein
should be read in conjunction with the consolidated financial statements and the
notes thereto included elsewhere in this prospectus. On an interim basis, the
Company defers major advertising campaigns for which future benefits can be
demonstrated. These costs are amortized over the shorter of the estimated period
benefited or the remainder of the fiscal year.

In the opinion of the registrant, the accompanying condensed consolidated
interim financial statements contain all material adjustments (consisting only
of normal recurring adjustments), necessary to present fairly the consolidated
financial position of Emmis at August 31, 1999 and the results of its operations
for the three and six months ended August 31, 1998 and 1999 and its cash flows
for the six months ended August 31, 1998 and 1999.

The Company's results are subject to seasonal fluctuations. Therefore,
results shown on an interim basis are not necessarily indicative of results for
a full year.

NOTE 2. SIGNIFICANT EVENTS

COUNTRY SAMPLER ACQUISITION

On April 1, 1999, the Company completed its acquisition of substantially all
of the assets of Country Sampler, Inc.( the "Country Sampler Acquisition") for
approximately $21.0 million plus assumed liabilities of approximately $4.7
million. The purchase price was payable $18.5 million in cash at closing, which
was financed through additional borrowings under the Credit Facility, $2.0
million payable under a contract with the principal shareholder through April
2003, and $.5 million payable by October 1999. The acquisition was accounted for
as a purchase. In the preliminary purchase price allocation the excess of the
purchase price over the estimated fair value of identifiable assets was $17.7
million and is being amortized over 15 years.

WKCF-TV: ORLANDO, FL

Effective June 3, 1999, the Company entered into a definitive agreement to
purchase substantially all of the assets of television station WKCF in Orlando,
Florida, for approximately $191.5 million in cash payable at closing, including
an escrow deposit of $12.5 million made in June 1999. This acquisition will be
accounted for as a purchase and will be financed through additional debt or
equity securities, depending on market conditions and other factors. Emmis
expects to close on this acquisition in its fiscal quarter ending November 30,
1999.

WKCF is an affiliate of the WB Television Network. As part of this
transaction, the Company has entered into an agreement with the WB Television
Network, which (among other things) extends the existing network affiliation
agreement through December 2009.

ST. LOUIS ACQUISITION

In June 1999, the Company entered into an agreement with a former executive
of Sinclair Broadcasting Group, Inc. ("Sinclair") to purchase the right to
acquire the assets of certain broadcast properties in St. Louis, Missouri (the
"St. Louis Acquisition"). The right allows the Company to purchase, at fair
market value, six radio stations (five FM and one AM) and one ABC affiliated
television station from Sinclair.

Under FCC regulations, Emmis can own no more than five FM and three AM
stations in the St. Louis market. As Emmis already owns three FM stations in the
St. Louis market, concurrent with the consummation of the St.

F-44
<PAGE> 127
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Louis Acquisition, Emmis must divest three FM stations. Management intends to
divest the stations with the three weakest transmitting signals.

The Company and Sinclair are currently in the process of determining the
purchase price and other material terms of the acquisition in accordance with
the option agreement. In addition, the acquisition will be subject to approval
by both the Federal Communication Commission and the Department of Justice. The
St. Louis Acquisition will be accounted for as a purchase and will be financed
through additional debt or equity securities, depending on market conditions and
other factors.

OTHER

At August 31, 1999, five of the Company's six television stations were Fox
affiliates. In July 1999, the Fox Network entered into an agreement with its
affiliates which requires the affiliates to buy prime time spots from the
network. The Company's agreement with the Fox Network commenced on July 15, 1999
and terminates on June 30, 2002. As a result of this agreement, the Company
expects its broadcast cash flow will decrease by approximately $.6 million
annually.

On July 17, 1999, in accordance with the Company's Credit Facility, total
borrowing capacity under the Credit Facility decreased $100.0 million to $650.0
million.

NOTE 3. PRO FORMA ACQUISITIONS

Unaudited pro forma summary information is presented below for the three and
six months ended August 31, 1998 and 1999, assuming the June 1998 WQCD
Acquisition, the July 1998 SF Acquisition, the October 1998 Wabash Acquisition,
the April 1999 Country Sampler Acquisition, and the use of proceeds from the
June 1998 Equity Offering, the July 1998 Credit Facility, and the February 1999
Senior Subordinated Notes Offering all had occurred on the first day of the pro
forma periods presented below.

Preparation of the pro forma summary information was based upon assumptions
deemed appropriate by the Company. The pro forma summary information presented
below is not necessarily indicative of the results that actually would have
occurred if the transactions indicated above had been consummated at the
beginning of the periods presented, and is not intended to be a projection of
future results.

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED AUGUST 31, ENDED AUGUST 31,
-------------------------- -----------------------
1998 1999 1998 1999
(PRO FORMA) (HISTORICAL) (PRO FORMA)
<S> <C> <C> <C> <C>
Net revenues...................................... $ 71,617 $ 81,529 $ 138,918 $ 155,865
========== ========== ========== ==========
Broadcast/publishing cash flow.................... $ 27,117 $ 33,870 $ 49,930 $ 61,336
========== ========== ========== ==========
Net Income........................................ $ 580 $ 1,216 $ 19 $ 1,527
========== ========== ========== ==========
Basic net income.................................. $ 0.04 $ 0.08 $ -- $ 0.10
========== ========== ========== ==========
Diluted net income................................ $ 0.04 $ 0.07 $ -- $ 0.09
========== ========== ========== ==========
Weighted average shares outstanding:
Basic........................................... 15,662,702 15,929,428 15,630,592 15,856,467
========== ========== ========== ==========
Diluted......................................... 16,038,107 16,438,098 16,037,310 16,305,944
========== ========== ========== ==========
</TABLE>

NOTE 4. BASIC AND DILUTED NET INCOME PER SHARE

Basic net income per share is computed by dividing net income available to
common shareholders by the weighted-average number of common shares outstanding
for the period. Diluted net income per share reflects the
F-45
<PAGE> 128
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted. Potentially dilutive securities at
August 31, 1998 and 1999 consisted solely of stock options. Thus, for the three
and six months ended August 31, 1998 and 1999, the difference between the
weighted-average shares outstanding used to compute basic and diluted EPS is
attributable to dilution caused by stock options.

NOTE 5. COMPREHENSIVE INCOME

Comprehensive income was comprised of the following for the three and six
months ended August 31, 1998 and 1999 (dollars in thousands):

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
AUGUST 31, AUGUST 31,
---------------- ----------------
1998 1999 1998 1999
<S> <C> <C> <C> <C>
Net income.................................................. $2,564 $1,216 $4,352 $1,457
Translation adjustment.................................... (475) 119 (646) (856)
------ ------ ------ ------
Total comprehensive income.................................. $2,089 $1,335 $3,706 $ 601
====== ====== ====== ======
</TABLE>

NOTE 6. SEGMENT INFORMATION

The Radio and Television segments derive revenue from the sale of commercial
broadcast inventory. The Publishing segment derives revenue from subscriptions
and the sale of print advertising inventory.

Corporate and Other represents the results of insignificant operations and
income and expense not allocated to reportable segments.

The Company's segments operate primarily in the United States with one radio
station located in Hungary. Total revenues of this radio station for the three
and six months ended August 31, 1999 were $2.1 million and $3.2 million,
respectively. Revenues during the three and six months ended August 31, 1998
were $0.6 million and $0.7 million, respectively. This station's total assets as
of August 31, 1998 and 1999 were $23.1 million and $19.5 million, respectively.

BCF and PCF are not a measure of liquidity or of performance in accordance
with generally accepted accounting principles, and should be viewed as a
supplement to and not a substitute for our results of operations presented on
the basis of generally accepted accounting principles. Moreover, BCF and PCF are
not standardized measures and may be calculated in a number of ways. Emmis
defines BCF and PCF as revenues net of agency commissions and operating
expenses. The primary source of broadcast advertising revenues is the sale of
advertising time to local and national advertisers. Publishing entities derive
revenue from subscriptions and sale of print advertising inventory. The most
significant broadcast operating expenses are employee salaries and commissions,
costs associated with programming,

F-46
<PAGE> 129
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

advertising and promotion, and station general and administrative costs.
Significant publishing operating expenses are employee salaries and commissions,
costs associated with producing a magazine, and general and administrative
costs.

The accounting policies as described in the summary of significant
accounting policies included elsewhere in this prospectus are applied
consistently across segments.

<TABLE>
<CAPTION>
THREE MONTHS ENDED CORPORATE
AUGUST 31, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues.............. $ 50,777 $ 16,992 $13,293 $ 467 $ 81,529
Operating expenses........ 23,731 11,731 11,871 326 47,659
-------- -------- ------- -------- ----------
Broadcast/publishing cash
flow.................... 27,046 5,261 1,422 141 33,870
International business
development expenses -- -- -- 367 367
Corporate expenses........ -- -- -- 3,478 3,478
Depreciation and
amortization............ 4,118 3,605 1,749 864 10,336
Non-cash compensation..... -- -- -- 1,648 1,648
-------- -------- ------- -------- ----------
Operating income.......... $ 22,928 $ 1,656 $ (327) $ (6,216) $ 18,041
======== ======== ======= ======== ==========
Total assets.............. $468,079 $454,088 $68,327 $ 89,207 $1,079,701
======== ======== ======= ======== ==========
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED CORPORATE
AUGUST 31, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues.............. $ 92,742 $ 35,046 $25,210 $ 883 $ 153,881
Operating expenses........ 46,766 23,737 21,973 646 93,122
-------- -------- ------- -------- ----------
Broadcast/publishing cash
flow.................... 45,976 11,309 3,237 237 60,759
International business
development expenses.... -- -- -- 747 747
Corporate expenses........ -- -- -- 6,684 6,684
Depreciation and
amortization............ 8,129 6,985 3,263 1,668 20,045
Non-cash compensation..... -- -- -- 2,293 2,293
-------- -------- ------- -------- ----------
Operating income.......... $ 37,847 $ 4,324 $ (26) $(11,155) $ 30,990
======== ======== ======= ======== ==========
Total assets.............. $468,079 $454,088 $68,327 $ 89,207 $1,079,701
======== ======== ======= ======== ==========
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED CORPORATE
AUGUST 31, 1998 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues......................... $ 42,328 $ 5,796 $ 9,418 $ 332 $ 57,874
Operating expenses................... 20,807 3,846 8,198 212 33,063
-------- -------- ------- -------- ----------
Broadcast/publishing cash flow....... 21,521 1,950 1,220 120 24,811
International business development
expenses........................... -- -- -- 354 354
Corporate expenses................... -- -- -- 1,969 1,969
Time brokerage fee................... 95 -- -- -- 95
Depreciation and amortization 3,579 1,332 1,555 39 6,505
Non-cash compensation................ -- -- -- 1,081 1,081
-------- -------- ------- -------- ----------
Operating income (loss).............. $ 17,847 $ 618 $ (335) $ (3,323) $ 14,807
======== ======== ======= ======== ==========
Total assets......................... $450,848 $345,949 $45,731 $ 68,299 $ 910,827
======== ======== ======= ======== ==========
</TABLE>

F-47
<PAGE> 130
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED CORPORATE
AUGUST 31, 1998 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues......................... $ 77,757 $ 5,796 $18,258 $ 682 $ 102,493
Operating expenses................... 40,875 3,846 15,698 439 60,858
-------- -------- ------- -------- ----------
Broadcast/publishing cash flow....... 36,882 1,950 2,560 243 41,635
International business development
expenses........................... -- -- -- 561 561
Corporate expenses................... -- -- -- 3,926 3,926
Time brokerage fee................... 2,220 -- -- -- 2,220
Depreciation and amortization........ 5,955 1,332 2,560 65 9,912
Non-cash compensation................ -- -- -- 2,036 2,036
-------- -------- ------- -------- ----------
Operating income (loss).............. $ 28,707 $ 618 $ -- $ (6,345) $ 22,980
======== ======== ======= ======== ==========
Total assets......................... $450,848 $345,949 $45,731 $ 68,299 $ 910,827
======== ======== ======= ======== ==========
</TABLE>

NOTE 7. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND SUBSIDIARY
NON-GUARANTOR

Emmis conducts a significant portion of its business through subsidiaries.
The Senior Subordinated Notes are fully and unconditionally guaranteed, jointly
and severally, by certain direct and indirect subsidiaries (the "Subsidiary
Guarantors"). One of Emmis' subsidiaries does not guarantee the Senior
Subordinated Notes (the "Subsidiary Non-Guarantor"). The claims of creditors of
the Subsidiary Non-Guarantor have priority over the rights of Emmis to receive
dividends or distributions from such subsidiary.

Presented below is condensed consolidating financial information for the
Parent Company Only, the Subsidiary Guarantors and the Subsidiary Non-Guarantor
as of February 28, 1999 and August 31, 1999 and for the three and six months
ended August 31, 1998 and 1999.

F-48
<PAGE> 131

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF AUGUST 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents.............. $ -- $ 2,516 $ 545 $ -- $ 3,061
Accounts receivable, net............... -- 61,751 1,201 -- 62,952
Deferred barter costs.................. -- 6,862 -- -- 6,862
Prepaid expenses and other............. 3,420 10,974 2,233 -- 16,627
-------- -------- ------- --------- ----------
Total current assets................. 3,420 82,103 3,979 -- 89,502
Property and equipment, net.............. 39,137 77,431 807 -- 117,375
Intangible assets, net................... 461 806,865 13,463 -- 820,789
Investment in affiliates................. 903,744 -- -- (903,744) --
Other assets, net........................ 48,313 7,032 1,205 (4,515) 52,035
-------- -------- ------- --------- ----------
Total assets......................... $995,075 $973,431 $19,454 $(908,259) $1,079,701
======== ======== ======= ========= ==========
Current Liabilities:
Current portion of other long-term
debt................................. $ 34 $ 17 $ 2,237 $ (1,453) $ 835
Accounts payable....................... 6,691 12,589 451 -- 19,731
Accrued salaries and commissions....... 141 4,589 -- -- 4,730
Accrued interest....................... 18,033 -- -- -- 18,033
Deferred revenue....................... -- 14,614 -- -- 14,614
Current portion of TV program
rights payable....................... -- 9,564 -- -- 9,564
Income taxes payable................... 6,953 177 -- -- 7,130
Other.................................. 324 1,315 918 -- 2,557
-------- -------- ------- --------- ----------
Total current liabilities............ 32,176 42,865 3,606 (1,453) 77,194
Credit Facility and Senior Subordinated
Notes.................................. 619,000 -- -- -- 619,000
TV Program Rights Payable, Net of Current
Portion................................ -- 20,686 -- -- 20,686
Other Long-Term Debt, Net of Current
Portion................................ 43 791 19,816 (3,062) 17,588
Other Noncurrent Liabilities............. 2,496 2,843 -- -- 5,339
Deferred Income Taxes.................... 94,807 38 -- -- 94,845
-------- -------- ------- --------- ----------
Total liabilities.................... 748,522 67,223 23,422 (4,515) 834,652
-------- -------- ------- --------- ----------
Shareholders' Equity
Class A common stock................... 134 -- -- -- 134
Class B common stock................... 26 -- -- -- 26
Additional paid-in capital............. 269,241 -- 4,393 (4,393) 269,241
Subsidiary investment.................. -- 658,143 2,388 (660,531) --
Retained earnings / (accumulated
deficit)............................. (22,848) 248,065 (9,245) (238,820) (22,848)
Accumulated other comprehensive loss... -- -- (1,504) -- (1,504)
-------- -------- ------- --------- ----------
Total shareholders' equity........... 246,553 906,208 (3,968) (903,744) 245,049
-------- -------- ------- --------- ----------
Total liabilities and shareholders'
equity............................. $995,075 $973,431 $19,454 $(908,259) $1,079,701
======== ======== ======= ========= ==========
</TABLE>

F-49
<PAGE> 132

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF FEBRUARY 28, 1999
(NOTE 1, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents............... $ 2,286 $ 3,146 $ 685 $ -- $ 6,117
Accounts receivable, net................ -- 50,436 1,043 -- 51,479
Deferred barter costs................... -- 3,128 -- -- 3,128
Prepaid expenses and other.............. 5,720 4,566 72 -- 10,358
-------- -------- ------- --------- ----------
Total current assets.................. 8,006 61,276 1,800 -- 71,082
Property and equipment, net............... 33,769 71,342 949 -- 106,060
Intangible assets, net.................... 151 785,219 16,937 -- 802,307
Investment in affiliates.................. 856,701 -- -- (856,701) --
Other assets, net......................... 31,866 7,648 702 (4,834) 35,382
-------- -------- ------- --------- ----------
Total assets.......................... $930,493 $925,485 $20,388 $(861,535) $1,014,831
======== ======== ======= ========= ==========
Current Liabilities:
Current portion of other long-term
debt.................................. $ 34 $ 16 $ 2,239 $ (1,454) $ 835
Accounts payable........................ 7,527 7,739 369 -- 15,635
Accrued salaries and commissions........ 1,262 2,719 564 -- 4,545
Accrued interest........................ 6,222 1 -- -- 6,223
Deferred revenue........................ -- 7,238 -- -- 7,238
Current portion of TV program
rights payable........................ -- 9,471 -- -- 9,471
Income taxes payable.................... 11,790 267 -- -- 12,057
Other................................... 146 13,683 -- -- 13,829
-------- -------- ------- --------- ----------
Total current liabilities............. 26,981 41,134 3,172 (1,454) 69,833
Credit Facility and Senior Subordinated
Notes................................... 577,000 -- -- -- 577,000
TV Program Rights Payable, Net of Current
Portion................................. -- 25,161 -- -- 25,161
Other Long-Term Debt, Net of
Current Portion......................... 2,543 (45) 19,687 (3,380) 18,805
Other Noncurrent Liabilities.............. (4) 3,470 -- -- 3,466
Deferred Income Taxes..................... 87,776 (2,759) -- -- 85,017
-------- -------- ------- --------- ----------
Total liabilities..................... 694,296 66,961 22,859 (4,834) 779,282
-------- -------- ------- --------- ----------
Shareholders' Equity
Class A common stock.................... 132 -- -- -- 132
Class B common stock.................... 26 -- -- -- 26
Additional paid-in capital.............. 260,344 -- 4,297 (4,297) 260,344
Subsidiary investment................... -- 637,223 -- (637,223) --
Retained earnings/(accumulated
deficit).............................. (24,305) 221,301 (6,120) (215,181) (24,305)
Accumulated other comprehensive loss...... -- -- (648) -- (648)
-------- -------- ------- --------- ----------
Total shareholders' equity.............. 236,197 858,524 (2,471) (856,701) 235,549
-------- -------- ------- --------- ----------
Total liabilities and shareholders'
equity................................ $930,493 $925,485 $20,388 $(861,535) $1,014,831
======== ======== ======= ========= ==========
</TABLE>

F-50
<PAGE> 133

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net Revenues.............................. $ 467 $ 78,981 $ 2,081 $ -- $ 81,529
Operating expenses........................ 326 45,824 1,509 -- 47,659
International business development
expenses................................ -- 367 -- -- 367
Corporate expenses........................ 3,478 -- -- -- 3,478
Depreciation and amortization............. 864 8,772 700 -- 10,336
Non-cash compensation..................... 1,236 412 -- -- 1,648
-------- -------- ------- -------- --------
Operating Income.......................... (5,437) 23,606 (128) -- 18,041
-------- -------- ------- -------- --------
Other Income (Expense)
Interest expense........................ (13,627) 124 (626) 193 (13,936)
Other income (expense), net............. (1) 208 (69) 273 411
-------- -------- ------- -------- --------
Total other income (expense).............. (13,628) 332 (695) 466 (13,525)
-------- -------- ------- -------- --------
Income (Loss) Before Income Taxes......... (19,065) 23,938 (823) 466 4,516
Provision (Benefit) for Income Taxes...... (5,610) 8,857 53 -- 3,300
-------- -------- ------- -------- --------
(13,455) 15,081 (876) 466 1,216
Equity in Earnings (Loss) of
Subsidiaries............................ 14,671 -- -- (14,671) --
-------- -------- ------- -------- --------
Net Income (Loss)......................... $ 1,216 $ 15,081 $ (876) $(14,205) $ 1,216
======== ======== ======= ======== ========
</TABLE>

F-51
<PAGE> 134

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net Revenues............................. $ 883 $149,824 $ 3,174 $ -- $153,881
Operating expenses....................... 646 89,783 2,693 -- 93,122
International business development
expenses............................... -- 747 -- -- 747
Corporate expenses....................... 6,684 -- -- -- 6,684
Depreciation and amortization............ 1,668 16,927 1,450 -- 20,045
Non-cash compensation.................... 1,720 573 -- -- 2,293
-------- -------- ------- -------- --------
Operating Income......................... (9,835) 41,794 (969) -- 30,990
-------- -------- ------- -------- --------
Other Income (expense)
Interest expense....................... (26,007) 265 (1,806) 383 (27,165)
Other income (expense), net............ 16 424 (350) 1,142 1,232
-------- -------- ------- -------- --------
Total other income (expense)............. (25,991) 689 (2,156) 1,525 (25,933)
-------- -------- ------- -------- --------
Income (loss) before income taxes........ (35,826) 42,483 (3,125) 1,525 5,057
Provision (benefit) for income taxes..... (12,119) 15,719 -- -- 3,600
-------- -------- ------- -------- --------
(23,707) 26,764 (3,125) 1,525 1,457
Equity in earnings (loss) of
subsidiaries........................... 25,164 -- -- (25,164) --
-------- -------- ------- -------- --------
Net Income (loss)........................ $ 1,457 $ 26,764 $(3,125) $(23,639) $ 1,457
======== ======== ======= ======== ========
</TABLE>

F-52
<PAGE> 135

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net Revenues............................. $ 332 $ 56,901 $ 641 $ -- $ 57,874
Operating expenses....................... 212 31,521 1,330 -- 33,063
International business development
expenses............................... -- 354 -- -- 354
Corporate expenses....................... 1,969 -- -- -- 1,969
Time brokerage fees...................... -- 95 -- -- 95
Depreciation and amortization............ 37 5,628 840 -- 6,505
Non-cash compensation.................... 913 168 -- -- 1,081
-------- -------- ------- -------- --------
Operating Income......................... (2,799) 19,135 (1,529) -- 14,807
-------- -------- ------- -------- --------
Other Income (expense)
Interest expense....................... (6,487) -- (914) 280 (7,121)
Other income (expense), net............ 455 438 198 588 1,679
-------- -------- ------- -------- --------
Total other income (expense)............. (6,032) 438 (716) 868 (5,442)
-------- -------- ------- -------- --------
Income (loss) before income taxes and
extraordinary item..................... (8,831) 19,573 (2,245) 868 9,365
Provision (benefit) for income taxes..... (2,091) 7,242 53 -- 5,204
-------- -------- ------- -------- --------
Net income before extraordinary item..... (6,740) 12,331 (2,298) 868 4,161
-------- -------- ------- -------- --------
Extraordinary item, net of tax........... (1,597) -- -- -- (1,597)
Equity in earnings (loss) of
subsidiaries........................... 10,901 -- -- (10,901) --
-------- -------- ------- -------- --------
Net Income (loss)........................ $ 2,564 $ 12,331 $(2,298) $(10,033) $ 2,564
======== ======== ======= ======== ========
</TABLE>

F-53
<PAGE> 136

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net Revenues............................. $ 682 $101,135 $ 676 $ -- $102,493
Operating expenses....................... 439 58,552 1,867 -- 60,858
International business development
expenses............................... -- 561 -- -- 561
Corporate expenses....................... 3,926 -- -- -- 3,926
Time brokerage fees...................... -- 2,220 -- -- 2,220
Depreciation and amortization............ 65 8,571 1,276 -- 9,912
Non-cash compensation.................... 1,629 407 -- -- 2,036
-------- -------- ------- -------- --------
Operating Income......................... (5,377) 30,824 (2,467) -- 22,980
-------- -------- ------- -------- --------
Other Income (expense)
Interest expense....................... (11,270) (6) (1,913) 560 (12,629)
Other income (expense), net............ 473 1,264 (54) 1,315 2,998
-------- -------- ------- -------- --------
Total other income (expense)............. (10,797) 1,258 (1,967) 1,875 (9,631)
-------- -------- ------- -------- --------
Income (loss) before income taxes and
extraordinary item..................... (16,174) 32,082 (4,434) 1,875 13,349
Provision (benefit) for income taxes..... (4,470) 11,870 -- -- 7,400
-------- -------- ------- -------- --------
Net income before extraordinary item..... (11,704) 20,212 (4,434) 1,875 5,949
-------- -------- ------- -------- --------
extraordinary item, net of tax........... (1,597) -- -- -- (1,597)
Equity in earnings (loss) of
subsidiaries........................... 17,653 -- -- (17,653) --
-------- -------- ------- -------- --------
Net Income (loss)........................ $ 4,352 $ 20,212 $(4,434) $(15,778) $ 4,352
======== ======== ======= ======== ========
</TABLE>

F-54
<PAGE> 137

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 1999
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)...................... $ 1,457 $ 26,764 $(3,125) $(23,639) $ 1,457
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities --
Depreciation and amortization........ 2,845 19,435 1,450 -- 23,730
Provision for bad debts.............. -- 955 -- -- 955
Provision for deferred income
taxes.............................. 5,570 -- -- -- 5,570
Non-cash compensation................ 1,720 573 -- -- 2,293
Equity in earnings of subsidiaries... (25,164) -- -- 25,164 --
Other................................ 1,505 -- (856) (1,525) (876)
Changes in assets and liabilities --
Accounts receivable.................. -- (10,089) (158) -- (10,247)
Deferred barter costs................ -- (3,734) -- -- (3,734)
Prepaid expenses and other current
assets............................. 2,300 (6,185) (2,161) -- (6,046)
Other assets......................... (1,649) 2,011 (503) -- (141)
Accounts payable and accrued
liabilities........................ 9,854 5,959 (482) -- 15,331
Deferred revenue..................... -- 3,507 -- -- 3,507
Other liabilities.................... (4,659) (22,055) 1,047 -- (25,667)
-------- -------- ------- -------- --------
Net cash provided (used) by
operating activities............ (6,221) 17,141 (4,788) -- 6,132
-------- -------- ------- -------- --------
Cash Flows from Investing Activities:
Purchases of property and equipment.... (7,007) (13,167) (657) -- (20,831)
Deposits on acquisitions and other..... (17,500) -- -- -- (17,500)
Acquisition of Country Sampler......... -- (18,454) -- -- (18,454)
-------- -------- ------- -------- --------
Net cash used in investing
activities...................... (24,507) (31,621) (657) -- (56,785)
-------- -------- ------- -------- --------
Cash Flows from Financing Activities:
Payments on long-term debt............. (48,500) -- -- -- (48,500)
Proceeds from long-term debt........... 90,500 -- -- -- 90,500
Intercompany transactions.............. (19,155) 13,850 5,305 -- --
Proceeds from exercise of stock
options.............................. 5,597 -- -- -- 5,597
-------- -------- ------- -------- --------
Net cash provided by financing
activities...................... 28,442 13,850 5,305 -- 47,597
-------- -------- ------- -------- --------
Decrease in cash and cash equivalents.... (2,286) (630) (140) -- (3,056)
Cash and cash equivalents:
Beginning of period...................... 2,286 3,146 685 -- 6,117
-------- -------- ------- -------- --------
End of period............................ $ -- $ 2,516 $ 545 $ -- $ 3,061
======== ======== ======= ======== ========
</TABLE>

F-55
<PAGE> 138

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED AUGUST 31, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)...................... $ 4,352 $ 20,212 $(4,434) $(15,778) $ 4,352
Adjustments to reconcile net income
(loss) to net cash provided (used) by
operating activities
Extraordinary item................... 1,597 -- -- -- 1,597
Depreciation and amortization........ 669 9,219 1,276 -- 11,164
Provision for bad debts.............. -- 153 -- -- 153
Provision for deferred income
taxes.............................. 2,017 -- -- -- 2,017
Gain on Sale of property and
equipment.......................... -- (533) -- -- (533)
Non-cash compensation................ 1,629 407 -- -- 2,036
Equity in earnings of subsidiaries... (17,653) -- -- 17,653 --
Other................................ -- -- (811) (1,875) (2,686)
Changes in assets and liabilities -
Accounts receivable.................. 345 (16,791) 936 -- (15,510)
Deferred barter costs................ -- (1,105) -- -- (1,105)
Prepaid expenses and other current
assets............................. (3,143) 4,585 (193) -- 1,249
Other assets......................... (289) 2,446 309 -- 2,466
Accounts payable and accrued
liabilities........................ (3,336) 871 (233) -- (2,698)
Deferred revenue..................... -- (1,159) -- -- (1,159)
Other liabilities.................... 7,834 1,624 878 -- 10,336
--------- -------- ------- -------- ----------
Net cash provided (used) by
operating activities............ (5,978) 19,929 (2,272) -- 11,679
--------- -------- ------- -------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment.... (13,217) (2,818) (468) -- (16,503)
Deposit on acquisition................. (9,000) -- -- -- (9,000)
Acquisition of WQCD-FM................. -- (128,449) -- -- (128,449)
Acquisition of SF Broadcasting......... -- (287,293) -- -- (287,293)
Other.................................. -- 607 -- -- 607
--------- -------- ------- -------- ----------
Net cash used by investing
activities...................... (22,217) (417,953) (468) -- (440,638)
--------- -------- ------- -------- ----------
Cash Flows From Financing Activities:
Payments on long-term debt............. (396,525) -- -- -- (396,525)
Proceeds from long-term debt........... 655,652 -- -- -- 655,652
Purchase of interest rate cap
agreements and other debt related
costs................................ (8,912) -- -- -- (8,912)
Proceeds from issuance of Class A
Common Stock, net of transaction
costs................................ 182,640 -- -- -- 182,640
Proceeds from exercise of stock
options.............................. 3,081 -- -- -- 3,081
Intercompany........................... (401,564) 400,661 903 -- --
--------- -------- ------- -------- ----------
Net cash provided by financing
activities...................... 34,372 400,661 903 -- 435,936
--------- -------- ------- -------- ----------
Increase (decrease) in cash and cash
equivalents............................ 6,177 2,637 (1,837) -- 6,977
Cash and cash equivalents:
Beginning of period.................... 623 243 4,919 -- 5,785
--------- -------- ------- -------- ----------
End of period.......................... $ 6,800 $ 2,880 $ 3,082 $ -- $ 12,762
========= ======== ======= ======== ==========
</TABLE>

F-56
<PAGE> 139
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8. SUBSEQUENT EVENTS

In September 1999, the Company entered into employment agreements with two
executives that extend through February 28, 2001. The agreements specify base
salary and maximum annual cash bonuses as well as provide for stock and stock
option grants based on certain criteria.

On October 25, 1999, the Company entered into an agreement with Liberty
Media Corporation for Liberty to purchase 2.7 million shares of the Company's
Class A Common Stock for approximately $150 million. Liberty will become the
Company's second largest shareholder behind Chairman and CEO, Jeffrey Smulyan,
assuming full exercise of his outstanding options. Closing of the transaction is
subject to certain conditions. The Company intends to use the proceeds of this
investment to more aggressively pursue attractive opportunities to acquire radio
broadcasting properties in the top 20 markets in the United States.

NOTE 9. RECLASSIFICATIONS

Certain reclassifications have been made to the August 31, 1998 and February
28, 1999 financial statements to be consistent with the August 31, 1999
presentation.

F-57
<PAGE> 140

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OCTOBER 26, 1999

LOGO
EMMIS COMMUNICATIONS CORPORATION
2,500,000 SHARES
6.25% SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK

------------------------------
PROSPECTUS
------------------------------

DONALDSON, LUFKIN & JENRETTE

Book Running Manager

GOLDMAN, SACHS & CO.

Co-Lead Manager

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

DEUTSCHE BANC ALEX. BROWN
MORGAN STANLEY DEAN WITTER

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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE YOU
WRITTEN INFORMATION OTHER THAN THIS PROSPECTUS OR TO MAKE REPRESENTATIONS AS TO
MATTERS NOT STATED IN THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED
INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL THOSE SECURITIES OR OUR
SOLICITATION OF YOUR OFFER TO BUY THE SECURITIES IN ANY JURISDICTION WHERE THAT
WOULD NOT BE PERMITTED OR LEGAL. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY
SALES MADE HEREUNDER AFTER THE DATE OF THIS PROSPECTUS SHALL CREATE AN
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THE AFFAIRS OF THE COMPANY
HAVE NOT CHANGED SINCE THE DATE HEREOF.
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