CHANCELLOR MEDIA CORP/, 10-K, 1999-03-31

CHANCELLOR MEDIA CORP/
10-K, 1999-03-31
RADIO BROADCASTING STATIONS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

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COMMISSION FILE NO. 333-32259
COMMISSION FILE NO. 0-21570 CHANCELLOR MEDIA CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
CORPORATION (Exact Name of Registrant as (Exact Name of Registrant as Specified in
Specified in its Charter) its Charter)

DELAWARE (State or other jurisdiction of DELAWARE (State or other jurisdiction of
incorporation or organization) incorporation or organization)

75-2247099 (I.R.S. Employer Identification 75-2451687 (I.R.S. Employer Identification
Number) Number)
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1845 WOODALL RODGERS FREEWAY, SUITE 1300, DALLAS, TEXAS 75201
(Address of principal executive office, including zip code)

(214) 922-8700
(Registrants' telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Chancellor Media Corporation: NONE
Chancellor Media Corporation of Los Angeles: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Chancellor Media Corporation: COMMON STOCK, $0.01 PAR VALUE
Chancellor Media Corporation of Los Angeles: NONE
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Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]

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

The aggregate market value of the voting and non-voting common equity held
by non-affiliates of Chancellor Media Corporation as of March 26, 1999, was
approximately $5,518,217,961. Solely for purposes of the preceding calculation,
outstanding shares of Common Stock held by executive officers and directors of
Chancellor Media Corporation have been treated as held by affiliates of
Chancellor Media Corporation. The aggregate market value of the voting and
non-voting common equity held by non-affiliates of Chancellor Media Corporation
of Los Angeles as of March 26, 1999 was zero. As of March 26, 1999, 143,060,582
shares of Common Stock of Chancellor Media Corporation were outstanding and
1,040 shares of Common Stock of Chancellor Media Corporation of Los Angeles were
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates by reference certain information
contained in the definitive proxy statement of Chancellor Media Corporation for
its 1999 Annual Meeting of Stockholders.
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TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 23
Item 3. Legal Proceedings........................................... 23
Item 4. Submission of Matters to a Vote of Security Holders......... 24
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 27
Item 6. Selected Consolidated Financial Data........................ 28
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 32
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 39
Item 8. Financial Statements and Supplementary Data................. 39
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 39
PART III
Item 10. Directors and Executive Officers of the Registrants......... 40
Item 11. Executive Compensation...................................... 40
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 40
Item 13. Certain Relationships and Related Transactions.............. 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 41
Signatures.................................................. 51
</TABLE>

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PART I

ITEM 1. BUSINESS

GENERAL

Chancellor Media Corporation ("Chancellor Media" and, together with
Chancellor Media Corporation of Los Angeles ("CMCLA"), an indirect, wholly-owned
subsidiary of Chancellor Media, and their respective subsidiaries, the
"Company") is a diversified media company with operations in radio broadcasting,
outdoor advertising and media representation.

RADIO BROADCASTING -- CHANCELLOR RADIO GROUP

At March 1, 1999, the Company's station portfolio consisted of 125 radio
stations (92 FM and 33 AM) concentrated in the top 30 markets in the United
States and in Puerto Rico, including 13 radio stations operated under time
brokerage agreements. The Company owns superduopolies (clusters of four or five
FM stations) in 11 of the nation's 15 largest radio markets -- New York, Los
Angeles, Chicago, San Francisco, Philadelphia, Detroit, Dallas/Ft. Worth,
Washington, D.C., Houston, Puerto Rico and Phoenix and in five other large
markets -- Minneapolis-St. Paul, Pittsburgh, Denver, Cleveland and Orlando.

The Company also operates a national radio network, The AMFM Radio
Networks, which broadcasts advertising and syndicated programming shows to a
national audience of approximately 66 million listeners in the United States
(including 39 million listeners from the Company's portfolio of stations). The
AMFM Radio Networks syndicated programming shows include, among others, American
Top 40 with Casey Kasem, Rockline, The Dave Koz Show, The Bob and Tom Morning
Show and special events such as the Kentucky Derby.

On August 26, 1998, the Company and Capstar Broadcasting Corporation
("Capstar") entered into an agreement to merge in a stock-for-stock transaction
(the "Capstar Merger"). Upon consummation of the Capstar Merger, the Company
will be the largest radio broadcasting company in the United States and will own
and operate approximately 465 radio stations serving 105 markets and will
increase its number of superduopolies to 45. Although there can be no assurance,
the Company expects that the Capstar Merger will be consummated in the second
quarter or early third quarter of 1999.

The Company's portfolio of radio stations is geographically diversified and
employs a wide variety of programming formats, including adult contemporary,
contemporary hit radio, urban, jazz, country, oldies, news/talk, rock and
sports. Each of the Company's stations targets a specific demographic audience
within a market, with the majority of the stations appealing primarily to 18 to
34 or 25 to 54 year old men and/or women, the demographic groups most sought
after by advertisers. Management believes that, because of the size and
diversity of its station portfolio, the Company is not unduly reliant on the
performance of any one station or market. Management also believes that the
diversity of its portfolio of radio stations helps to insulate the Company from
downturns in specific markets and changes in musical tastes.

OUTDOOR ADVERTISING -- CHANCELLOR OUTDOOR GROUP

The Company is the fifth largest outdoor advertising company in the United
States. As of March 1, 1999, the Company owned over 42,500 billboards and
outdoor displays in 38 states in the United States. The Company entered the
outdoor advertising business with the acquisition of Martin Media L.P., Martin &
MacFarlane, Inc. and certain affiliated companies ("Martin") in July 1998 and
further expanded its outdoor presence with the acquisition of the outdoor
advertising division of Whiteco Industries, Inc. ("Whiteco") in December 1998
and other outdoor acquisitions that complement the Company's existing outdoor
and radio markets.

MEDIA REPRESENTATION

The Company entered into the media representation business with the
acquisition of Katz Media Group, Inc. ("Katz") on October 28, 1997. Katz is a
full-service media representation firm that sells national spot

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advertising time for its clients in the radio and television industries
throughout the United States. Katz is retained on an exclusive basis by radio
and television stations in over 200 designated market areas throughout the
United States, including at least one radio or television station in each of the
50 largest designated market areas. Katz is the exclusive representation firm
for over 2,200 radio stations, including radio stations owned and operated by
the Company, Jacor Communications, Inc., CBS Radio, Inc., Capstar, Cox Radio,
Inc. and Heftel Broadcasting Corporation, among others. Katz is also the
exclusive representation firm for over 365 television stations, including
television stations owned and operated by Paramount Communications, Inc., Hearst
Argyle Television, Inc., The E.W. Scripps Company, Clear Channel Communications,
Inc., Allbritton Communications Company and Sinclair Broadcast Group, Inc.,
among others.

See Note 14 to the Consolidated Financial Statements included elsewhere in
this Form 10-K for additional information on the Company's operating segments.

COMPANY STRATEGY

The Company's overall strategy is to create a leading diversified media
company with a significant overlapping presence in radio and outdoor advertising
markets. In this regard, the Company has built a diversified portfolio of media
assets which enables the Company to deliver more options and greater value to
its advertising clients. The Company believes the diversified media platform
creates significant growth opportunities and synergies through cross selling,
cross promotion and cost savings in markets where radio and outdoor advertising
operations overlap. The Company plans on leveraging the extensive operating
experience of its senior management team to continue to enhance revenue and cash
flow growth.

Radio Broadcast Strategy. The Company's senior management team, led by
James E. de Castro, President and Chief Executive Officer of Chancellor Radio
and Outdoor Group and Kenneth J. O'Keefe, Chief Operating Officer of Chancellor
Radio Group, has extensive experience in acquiring and operating radio station
groups. The Company's business strategy is to assemble and operate radio station
clusters in order to maximize the broadcast cash flow generated in each market.

The Company seeks to capitalize on the revenue growth and expense savings
opportunities through the successful integration of station cluster groups.
Management believes that radio station clusters can attract increased revenues
in a market by delivering larger combined audiences to advertisers and by
engaging in joint marketing and promotional activities. In addition, management
expects to realize expense savings through the consolidation of facilities and
through the economies of scale created in areas such as national representation
commissions, employee benefits, insurance premiums and other operating costs.

The Company also seeks to maximize station operating performance through
intense market research, innovative programming and unique marketing campaigns
to establish strong listener loyalty and ensure steady long-term audience share
ratings. Management believes its ratings growth in many of its markets is driven
by the Company's ability to attract talented people and to continue delivering
quality programming to its listeners.

The Company also seeks to leverage its radio expertise and platform and
enhance revenue and cash flow growth through the continued expansion of its
national radio network, The AMFM Radio Networks, as well as through the newly
formed Chancellor Marketing Group, which provides full service sales promotion
and marketing programs for Fortune 100 companies.

Outdoor Advertising Strategy. The Chancellor Outdoor Group is led by James
E. de Castro, President and Chief Executive Officer of Chancellor Radio and
Outdoor Group and James A. McLaughlin, Chief Operating Officer of Chancellor
Outdoor Group. Mr. McLaughlin is an outdoor advertising industry veteran with
over 25 years of experience. The outdoor business strategy is to develop one of
the top outdoor advertising companies in the Unites States through the
successful consolidation and integration of Martin, acquired in July 1998, and
Whiteco, acquired in December 1998, and through additional acquisitions that
complement the Company's existing outdoor and radio markets.

The Company's strategy is to generate significant revenue growth and cost
savings through the consolidation of certain sales management, leasing
management, marketing, and accounting and administra-

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tive support functions. Additionally, the Company will focus on strengthening
its operating results by increasing market penetration, maximizing rates and
occupancy levels in each of its markets and capitalizing on technological
advances such as computer vinyl technology to enhance the attractiveness and
flexibility of the outdoor medium while reducing costs. The Company also seeks
to realize incremental benefits in markets where outdoor and radio operations
overlap by introducing radio advertisers to outdoor advertising which provides
an additional low cost medium to advertisers with local marketing needs.

Media Representation Strategy. The Company's overall strategy for its media
representation business is to create a leading national representation firm
serving all types of electronic media. The Company believes it can continue to
generate revenue and cash flow growth in the media representation business by
expanding its market share and improving its national sales effort. Management
will seek to increase market share by developing new clients, expanding
operations in existing and new markets and acquiring representation contracts of
its competitors. The Company will continue to provide the highest level of
quality service to its clients by offering comprehensive advertisement, planning
and placement services, as well as a broad range of value added benefits,
including marketing, research, consulting and programming advisory services. The
Company will also have the ability to expand its level of service to advertisers
through the growth of its unwired network of radio and television stations which
provides advertisers with greater flexibility and the ability to target specific
demographic groups or markets.

Management believes its newly acquired outdoor advertising portfolio
combined with the strength of its broad radio platform, national radio network
and media representation business will solidify the Company's position as a
leading diversified media company with the ability to effectively respond to
customers' needs through a variety of advertising solutions and mediums.

RECENT DEVELOPMENTS

Review of Strategic Alternatives

On January 20, 1999, the Company announced that its Board of Directors
engaged the investment banking firm of BT Alex. Brown Incorporated as financial
advisor for the purpose of assisting management and the Board of Directors of
Chancellor Media in developing, reviewing and structuring a range of strategic
alternatives intended to maximize stockholder value. On February 11, 1999, the
Company announced that it had added additional advisors Morgan Stanley Dean
Witter, Hicks, Muse, Tate & Furst Incorporated, Goldman, Sachs & Co., Greenhill
& Co., LLC and Chase Securities Inc. to assist in exploring these alternatives,
which included the potential sale, merger or consolidation of the entire company
or some of its operating assets.

On March 15, 1999, Chancellor Media announced that it had completed the
review of strategic alternatives and announced the following series of steps to
better position the Company strategically, operationally and financially:

LIN Merger Termination. On July 7, 1998, the Company entered into a merger
agreement with the indirect parent of LIN Television Corporation ("LIN") to
acquire LIN in a stock for stock transaction (the "LIN Merger"). On March 15,
1999, the Boards of Directors of the Company and LIN agreed to terminate the LIN
Merger agreement. Additionally, the Company's Board of Directors approved the
negotiation of the assignment of the Company's agreements to acquire Petry Media
Corporation, a leading television representation firm, and Pegasus Broadcasting
of San Juan, L.L.C., a television broadcasting company that owns a television
station in Puerto Rico, to LIN Television Corporation. The assignment of the
agreements relating to the purchase of Petry Media Corporation and Pegasus
Broadcasting are subject to negotiation of definitive documentation, third-party
approval and various other conditions, including governmental approvals, and,
accordingly, there can be no assurance that such transactions will be completed
by the Company.

Executive Management Realignment. On March 15, 1999, the Company announced
the following executive management changes:

- the appointments of Thomas O. Hicks as Chief Executive Officer of the
Company, of James E. de Castro as President and Chief Executive Officer
of a newly created Chancellor Radio and Outdoor

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Group and of R. Steven Hicks, currently President and Chief Executive
Officer of Capstar, as President and Chief Executive Officer of the newly
created Chancellor Media Services Group;

- the creation of an Office of the Chairman of the Company's Board of
Directors, in which Mr. de Castro and Mr. Steven Hicks will join the
Company's Chairman, Mr. Thomas Hicks, as Vice Chairmen;

- the resignation of Jeffrey A. Marcus as the Company's President and Chief
Executive Officer effective March 15, 1999;

- the appointments of Kenneth J. O'Keefe as Chief Operating Officer of
Chancellor Radio Group and James A. McLaughlin as President and Chief
Operating Officer of Chancellor Outdoor Group;

- the appointment of D. Geoffrey Armstrong, currently Chief Operating
Officer of Capstar, as acting Chief Financial Officer, replacing Thomas
P. McMillin, who also resigned from his executive positions with the
Company effective March 15, 1999;

- the resignation of Eric C. Neuman as the Company's Senior Vice
President -- Strategic Development effective March 15, 1999;

- the appointment of William S. Banowsky, Jr., currently Executive Vice
President and General Counsel of Capstar, as the Company's General
Counsel, replacing Richard A. B. Gleiner, who also resigned from his
executive positions with the Company effective March 15, 1999.

The Company is expected to record a significant non-recurring charge in the
first quarter of 1999 in connection with the termination of the LIN Merger and,
if completed, assignment of the Petry Media Corporation and Pegasus Broadcasting
purchase agreements to LIN and the executive management realignment discussed
above.

Transactions Completed Since January 1, 1998

The Company has completed the following radio broadcasting and outdoor
advertising transactions from January 1, 1998 through March 1, 1999:

Radio Broadcasting -- 1998 and 1999 Completed Transactions

The Company completed the following radio broadcasting transactions from
January 1, 1998 through March 1, 1999:

- the acquisition of 11 radio stations (ten FM and one AM) for
approximately $175.7 million in cash;

- the exchange of five radio stations (four FM and one AM) and
approximately $153.3 million in cash for four FM radio stations;

- the acquisition of various national radio network syndicated programming
shows and related programming libraries, including American Top Forty
with Casey Kasem, for approximately $28.2 million in cash; and

- the 1999 acquisition of six radio stations (four FM and two AM) in
Cleveland for approximately $279.1 million in cash and the February 1999
time brokerage agreement to operate an additional AM radio station in
Cleveland.

Outdoor Advertising -- 1998 and 1999 Completed Transactions

The Company completed the acquisition of approximately 37,900 outdoor
advertising billboards and display faces for approximately $1.7 billion during
1998. As of March 1, 1999, the Company completed the acquisition of an
additional 4,600 outdoor advertising billboards and display faces for
approximately $44.5 million in 1999.

See Note 2 to the Consolidated Financial Statements included elsewhere in
this Form 10-K for additional information regarding the transactions discussed
above.

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Pending Transactions

The following transactions are referred to collectively as the "Pending
Transactions."

On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in
Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and
WDVE-FM in Pittsburgh (collectively, "the Capstar/SFX Stations") for an
aggregate purchase price of approximately $637.5 million in a series of
purchases and exchanges over a period of three years (the "Capstar/SFX
Transaction"). The Capstar/SFX Stations were acquired by Capstar as part of
Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998, the Company
exchanged WAPE-FM and WFYV-FM in Jacksonville, valued for purposes of the
Capstar/SFX Transaction at $53.0 million, plus $90.3 million in cash to Capstar
in return for KODA-FM in Houston (the "Houston Exchange") and began programming
the remaining ten Capstar/SFX Stations under time brokerage agreements. The
purchase price for the remaining ten Capstar/SFX Stations will be approximately
$494.3 million. The Company is currently assessing whether the terms of the
Capstar/SFX Transaction will be modified upon the consummation of the Capstar
Merger.

On August 14, 1998, the Company entered into an agreement to sell WMVP-AM
in Chicago to ABC, Inc. for $21.0 million in cash. The Company entered into a
time brokerage agreement to sell substantially all of the broadcast time of
WMVP-AM effective September 10, 1998. Although there can be no assurance, the
Company expects that the disposition of WMVP-AM will be consummated in the
second quarter of 1999.

On August 26, 1998, the Company and Capstar entered into an agreement to
merge in a stock-for-stock transaction that will create the nation's largest
radio broadcasting entity. Pursuant to this agreement, as it is currently
expected to be amended, the Company will acquire Capstar in a merger of Capstar
into a wholly-owned subsidiary of Chancellor Media. Each share of Chancellor
Media common stock will remain outstanding and unaffected by the merger. Each
share of Capstar common stock will entitle the holder thereof to 0.4955 of a
share of common stock of Chancellor Media. Upon consummation of its pending
transactions, Capstar will own and operate or program approximately 340 radio
stations serving 81 mid-sized markets nationwide. The Capstar Merger is subject
to stockholder approval of both the Company and Capstar. Although there can be
no assurance, the Company expects that the Capstar Merger will be consummated in
the second quarter or early third quarter of 1999.

On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90.0 million
in cash. The Company began operating KKFR-FM and KFYI-AM under a time brokerage
agreement effective November 5, 1998. Although there can be no assurance, the
Company expects that the Phoenix acquisition will be consummated in the second
quarter of 1999.

Consummation of each of the transactions discussed above is subject to
various conditions, including, in most cases, approval from the Federal
Communications Commission ("FCC") and the expiration or early termination of any
waiting period required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). The Company believes that such conditions
will be satisfied in the ordinary course, but there can be no assurance that
this will be the case.

1998 Financing Transactions

On March 13, 1998, the Company completed an offering of 21,850,000 shares
of its Common Stock for net proceeds of approximately $994.6 million. The net
proceeds were used to reduce bank borrowings under the revolving credit portion
of the Company's senior credit facility and the excess proceeds were initially
invested in short-term investment grade securities. The Company subsequently
used the excess proceeds for general corporate purposes, including the financing
of certain acquisitions and exchanges.

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CMCLA exchanged the shares of 12% Preferred Stock for 12% Debentures (the "12%
Exchange"). In connection with the 12% Preferred Stock Consent Solicitation and
12% Exchange, CMCLA incurred approximately $0.3 million in transaction costs
which were recorded as deferred debt issuance costs.

On June 10, 1998, CMCLA completed a cash tender offer (the "12% Debentures
Tender Offer") for all of its 12% Debentures for an aggregate repurchase cost of
$262.5 million which included (i) the principal amount of the 12% Debentures of
$211.8 million, (ii) premiums on the repurchase of the 12% Debentures of $47.8
million, (iii) accrued and unpaid interest on the 12% Debentures from May 13,
1998 through June 10, 1998 of $2.0 million and (iv) estimated transaction costs
of $0.9 million. In connection with the 12% Debentures Tender Offer, CMCLA
recorded an extraordinary charge of $31.9 million (net of a tax benefit of $17.2
million) consisting of the premiums, estimated transaction costs and the
write-off of the unamortized balance of deferred debt issuance costs.

On July 20, 1998, CMCLA completed a consent solicitation (the "12 1/4%
Preferred Stock Consent Solicitation") to modify certain timing restrictions on
its ability to exchange all shares of its 12 1/4% Preferred Stock for its
12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures").
Consenting holders of 12 1/4% Preferred Stock received payments of $0.05 per
share of 12 1/4% Preferred Stock. On July 23, 1998, CMCLA exchanged the shares
of 12 1/4% Preferred Stock for 12 1/4% Debentures (the "12 1/4% Exchange"). In
connection with the 12 1/4% Preferred Stock Consent Solicitation and 12 1/4%
Exchange, CMCLA incurred approximately $0.2 million in transaction costs which
were recorded as deferred debt issuance costs.

On August 19, 1998, CMCLA completed a cash tender offer (the "12 1/4%
Debentures Tender Offer") for all of its 12 1/4% Debentures for an aggregate
repurchase cost of $143.8 million which included (i) the principal amount of the
12 1/4% Debentures of $119.4 million, (ii) premiums on the repurchase of the
12 1/4% Debentures of $22.7 million, (iii) accrued and unpaid interest on the
12 1/4% Debentures from July 23, 1998 through August 19, 1998 of $1.1 million
and (iv) estimated transaction costs of $0.6 million. In connection with the
12 1/4% Debentures Tender Offer, CMCLA recorded an extraordinary charge of $15.2
million (net of a tax benefit of $8.2 million) consisting of the premiums,
estimated transaction costs and the write-off of the unamortized balance of
deferred debt issuance costs.

On September 30, 1998, CMCLA issued $750.0 million aggregate principal
amount of 9% Senior Subordinated Notes due 2008 (the "9% Notes") for estimated
net proceeds of $730.0 million in a private placement and subsequently
registered the 9% Notes on December 10, 1998. Interest on the 9% Notes is
payable semiannually, commencing on April 1, 1999.

On November 17, 1998, CMCLA issued $750.0 million aggregate principal
amount of 8% Senior Notes due 2008 (the "8% Senior Notes") for estimated net
proceeds of $730.0 million in a private placement. Interest on the 8% Senior
Notes is payable semiannually, commencing on May 1, 1999.

RADIO BROADCASTING

The primary source of the Company's radio revenues is the sale of
broadcasting time for local, regional and national advertising. Approximately
69% of the Company's gross radio revenues was generated from the sale of local
advertising in 1996 and 1997, and approximately 66% of the Company's gross radio
revenues was generated from the sale of local advertising in 1998. The Company
believes that radio is one of the most efficient, cost-effective means for
advertisers to reach specific demographic groups. The advertising rates charged
by the Company's radio stations are based primarily on (i) a station's ability
to attract audiences in the demographic groups targeted by its advertisers (as
measured principally by quarterly Arbitron rating surveys that quantify the
number of listeners tuned to the station at various times) and (ii) the supply
of and demand for radio advertising time. Advertising rates generally are the
highest during morning and evening drive-time hours.

Depending on the format of a particular station, there are predetermined
numbers of advertisements that are broadcast each hour. The Company determines
the number of advertisements broadcast hourly that can maximize available
revenue dollars without jeopardizing listening levels. Although the number of
advertise-

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ments broadcast during a given time period may vary, the total number of
advertisements broadcast on a particular station generally does not vary
significantly from year to year.

A station's sales staff generates most of its local and regional
advertising sales. To generate national advertising sales, the Company engages
an advertising representative for each of its stations that specializes in
national sales and is compensated on a commission-only basis. Most advertising
contracts are short-term and generally run only for a few weeks.

The following table sets forth selected information with respect to the
portfolio of radio stations that are owned and/or operated by the Company as of
March 1, 1999.

<TABLE>
<CAPTION>
STATION RANKING
MSA AUDIENCE TARGET IN TARGET
MARKET(1) RANK(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
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New York, NY......... 1 WLTW-FM 5.9 Soft Adult Persons
Contemporary 25-54 1
WHTZ-FM 4.5 Contemporary Hit Radio Persons
18-34 3
WKTU-FM 4.0 Rhythmic Contemporary Persons
Hits 25-54 6
WAXQ-FM 1.7 Classic Rock Persons
25-54 15
WTJM-FM (formerly 1.7 Jamming Oldies Persons
WBIX-FM) 25-54 16
Los Angeles, CA...... 2 KKBT-FM 3.8 Urban Contemporary Women 18-34 3
KCMG-FM 2.8 Jamming Oldies Women 25-54 7
KYSR-FM 2.5 Modern Adult Women 25-54 8
Contemporary
KBIG-FM 2.4 Adult Contemporary Persons
25-54 14
KLAC-AM 2.3 Adult Standards/Sports Persons
35-64 18
Chicago, IL.......... 3 WGCI-FM 6.4 Urban Contemporary Persons
18-34 1
WNUA-FM 4.2 Smooth Jazz Persons
25-54 3
WVAZ-FM 4.0 Adult Urban Persons
Contemporary 25-54 2
WLIT-FM 3.5 Soft Adult Persons
Contemporary 25-54 11
WUBT-FM 2.4 Jamming Oldies Persons
25-54 14
WGCI-AM 1.3 Gospel Persons
25-54 23
WMVP-AM+ 0.4 Sports/Talk, Comedy Men 25-54 24
San Francisco, CA.... 4 KYLD-FM 3.9 Contemporary Hit Persons
Radio/Dance 18-34 1
KMEL-FM 3.6 Contemporary Hits Persons
18-34 2
KKSF-FM 3.6 Smooth Jazz Persons
25-54 4
KISQ-FM 3.4 Hit Base R&B Adult Persons
Contemporary 25-54 3
KIOI-FM(5) 2.9 Adult Contemporary Women 25-54 4
KABL-AM 2.4 Adult Standards Persons
35-64 14
KNEW-AM(5) 0.2 Adult Contemporary Women 25-54 40
Philadelphia, PA..... 5 WDAS-FM 5.9 Urban Contemporary Persons
25-54 1
WUSL-FM 5.3 Urban Contemporary Women 18-34 2
WJJZ-FM 4.2 Smooth Jazz Persons
35-54 5
WIOQ-FM 4.1 Contemporary Hit Radio Persons
18-34 6
WYXR-FM 3.1 Hot Adult Contemporary Women 18-49 4
WDAS-AM 1.2 Gospel N/A N/A
</TABLE>

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<TABLE>
<CAPTION>
STATION RANKING
MSA AUDIENCE TARGET IN TARGET
MARKET(1) RANK(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
--------- ------- ------------------ ----------- ---------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Detroit, MI.......... 6 WNIC-FM 8.0 Adult Contemporary Women 25-54 1
WJLB-FM 6.8 Urban Contemporary Persons
18-34 1
WMXD-FM 4.5 Adult Urban Persons
Contemporary 25-54 4
WWWW-FM 3.6 Country Women 25-54 9
WKQI-FM 3.5 Hot Adult Contemporary Women 25-54 4
WDFN-AM 1.6 Sports Men 25-49 4
WYUR-AM 0.1 Nostalgic Persons
35-64 29
Dallas, TX........... 7 KHKS-FM 7.3 Top 40 Women 18-34 1
KZPS-FM 3.8 Classic Rock Persons
25-54 5
KDGE-FM 2.7 Alternative Rock Persons
18-34 8
KSKY-AM N/A Southern Gospel N/A N/A
Music/Religious
KTXQ-FM** 3.6 Jamming Oldies Persons
25-54 4
KBFB-FM** 2.0 Soft Rock Persons
25-54 17
Boston, MA........... 8 WJMN-FM 6.3 Contemporary Hits Persons
Radio/Rhythmic 18-34 2
WXKS-FM 5.0 Contemporary Hit Women 25-34 1
Radio/Top 40
WXKS-AM 1.6 Bloomberg News/ Music Persons
Memory 35-64 20
Washington, D.C. .... 9 WASH-FM 4.7 Adult Contemporary Women 25-54 4
WMZQ-FM 4.5 Country Persons
25-54 8
WBIG-FM 4.4 Oldies Persons
25-54 6
WWDC-FM 3.5 Album Oriented Rock Persons
18-34 4
WGAY-FM 3.2 Adult Contemporary Persons
35-64 9
WTEM-AM 1.3 Sports/Talk Men 18-49 14
WWDC-AM 0.7 Music of Your Life Persons 55+ 9
WWRC-AM 0.4 Talk Persons
35-64 31
Houston, TX.......... 10 KODA-FM 6.4 Adult Contemporary Persons
25-54 1
KTRH-AM 4.5 News/Info/Sports Persons
35-54 5
KLOL-FM 3.8 Rock Men 18-34 1
KLDE-FM 3.4 Oldies Persons
25-54 10
KKBQ-FM 3.3 Country Persons
25-54 13
KBME-AM 1.9 Popular Standards Persons
35-64 20
KKRW-FM**(6) 3.2 Classic Rock Persons
25-54 8
KQUE-AM**(6) N/A Classic Rock Persons
25-54 N/A
Miami/Ft. Lauderdale,
FL................. 11 WEDR-FM 8.0 Urban Contemporary Persons
25-54 1
WVCG-AM N/A Brokered(7) N/A N/A
Atlanta, GA.......... 12 WFOX-FM 3.7 Oldies Persons
25-54 10
Puerto Rico.......... 13 WZNT-FM N/A Oldies/Classic Music Men 18-49 N/A
WOYE-FM N/A Top 40 Persons
12-24 N/A
WCOM-FM N/A Top 40 Persons
12-24 N/A
WOQI-FM N/A Top 40 Persons
12-24 N/A
WCTA-FM N/A Oldies/Classic Music Men 18-49 N/A
WIOA-FM N/A Continuous Favorite Women 18-49 N/A
Ballads/Today's Hits
WIOB-FM N/A Continuous Favorite Women 18-49 N/A
Ballads/Today's Hits
WIOC-FM N/A Continuous Favorite Women 18-49 N/A
Ballads/Today's Hits
</TABLE>

10
<PAGE> 11

<TABLE>
<CAPTION>
STATION RANKING
MSA AUDIENCE TARGET IN TARGET
MARKET(1) RANK(2) STATION SHARE(%)(3) STATION FORMAT DEMOGRAPHICS DEMOGRAPHICS(4)
--------- ------- ------------------ ----------- ---------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Phoenix, AZ.......... 15 KMLE-FM 5.9 Country Persons
25-54 2
KOOL-FM 4.3 Oldies Persons
25-54 4
KYOT-FM 4.1 Contemporary Jazz Persons
25-54 8
KZON-FM 3.6 Alternative Rock Persons
18-34 5
KOY-AM 3.6 Adult Standards Persons
35-64 14
KISO-AM 1.1 Country Persons
35-54 25
KKFR-FM* 5.7 Urban Contemporary Hit Persons
Radio 18-34 1
KFYI-AM* 5.3 News/Talk Persons
25-54 10
San Diego, CA........ 16 KYXY-FM** 5.6 Soft Adult Women 25-54 2
Contemporary
KPLN-FM** 2.6 Classic Rock Men 25-54 8
Nassau/Suffolk, NY
(Long Island)(8)... 17 WALK-FM 5.8 Adult Contemporary Persons
25-54 2
WALK-AM N/A Adult Contemporary Persons
35-64 N/A
Minneapolis/St. Paul,
MN................. 18 KEEY-FM 8.1 Country Persons
25-54 2
KDWB-FM 8.0 Contemporary Hit Radio Women 18-49 1
KQQL-FM 4.1 Oldies Persons
25-54 8
KTCZ-FM 3.5 Adult Oriented Rock Persons
25-54 9
KFAN-AM(9) 2.7 Sports/Talk Men 25-54 4
WRQC-FM 2.1 Active Rock Men 18-34 7
KFXN-AM(9) 0.6 Sports/Talk Men 25-54 17
Pittsburgh, PA....... 21 WWSW-FM(10) 4.4 Oldies Person 25-54 5
WWSW-AM(10) 0.3 Oldies Persons
25-54 25
WDVE-FM** 7.3 Rock Persons
25-54 1
WXDX-FM** 5.6 Alternative Rock Persons
18-34 2
WJJJ-FM** 3.8 Smooth Jazz Persons
25-54 12
WDRV-FM (formerly
WVTY-FM)** 3.5 Hot Adult Women 25-54 4
Contemporary(11)
Denver, CO........... 23 KXKL-FM 4.8 Oldies Persons
25-54 5
KALC-FM 4.5 Hot Adult Contemporary Persons
18-34 3
KIMN-FM 3.5 Hot Adult Persons
Contemporary(11) 25-54 11
KXPK-FM 2.4 Adult Modern Rock Persons
18-49 13
KVOD-FM 2.3 Classical Persons
25-54 17
KRRF-AM 0.7 Talk Men 25-54 21
Cleveland, OH........ 24 WZAK-FM 8.7 Urban Contemporary Women 25-54 1
WDOK-FM 7.0 Soft Adult Women 25-54 1
Contemporary
WZJM-FM 5.8 Contemporary Hit Radio Women 18-34 3
WQAL-FM 5.0 Hot Adult Contemporary Persons
25-54 8
WRMR-AM 4.8 Adult Standard Persons
35-64 14
WJMO-AM 2.6 Oldies Persons
25-54 12
WKNR-AM** 2.1 All Sports Men 25-54 8
Cincinnati, OH....... 26 WUBE-FM(12) 8.0 Country Persons
25-54 2
WYGY-FM(12) 2.2 Young Country Persons
18-34 9
WBOB-AM 1.0 Sports/Talk Men 18-49 12
WUBE-AM N/A Sports/Talk Men 25-49 N/A
</TABLE>

11
<PAGE> 12

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

<TABLE>
<C> <S>
N/A: Not available
+ Indicates station to be disposed of by Chancellor Media in a
pending transaction.
* Indicates station to be acquired by Chancellor Media in a
pending transaction and currently operated pursuant to a
time brokerage agreement.
** Indicates station currently owned by Capstar and operated by
Chancellor Media pursuant to a time brokerage agreement.
(1) Actual city of license may differ from metropolitan market
served in certain cases.
(2) Metropolitan Statistical Area ("MSA") rank obtained from BIA
Research-Master Access Pro, Version 2.5 Radio Analysis
Database (current as of February 24, 1999), based upon 1998
gross revenue for the indicated markets.
(3) Information derived from The Arbitron Company, Fall 1998,
Local Market Reports in the specified markets for listeners
age 12 and over, Monday to Sunday, 6:00 a.m. to Midnight.
Copyright, The Arbitron Company.
(4) Information derived from The Arbitron Company, Fall 1998,
Local Market Reports in the specified markets for the Target
Demographics specified for listening Monday to Sunday, 6:00
a.m. to Midnight. Copyright, The Arbitron Company.
(5) Programming provided to KNEW-AM via simulcast of programming
broadcast on KIOI-FM.
(6) Programming provided to KQUE-AM via simulcast of programming
broadcast on KKRW-FM.
(7) The Company sells airtime on WVCG-AM to third parties for
broadcast of specialty programming on a variety of topics.
(8) Nassau/Suffolk (Long Island) may be considered part of the
greater New York market, although it is reported separately
as a matter of convention.
(9) KFAN-AM and KFXN-AM are sold in combination.
(10) Programming provided to WWSW-AM via simulcast of programming
broadcast on WWSW-FM.
(11) The format of the station was changed subsequent to December
31, 1998. The station ranking in target demographics for
Fall 1998 is based on the previous station format.
(12) WUBE-FM and WYGY-FM are sold in combination.
</TABLE>

OUTDOOR ADVERTISING

Outdoor advertising revenue is derived from contracts with advertisers for
the rental of outdoor advertising space generally covering periods of one month
up to five years. Advertising rates are based on a particular display's
exposure, or number of "impressions" delivered, in relation to the demographics
of the particular market and/or its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent auditing companies.

The size and geographic diversity of the Company's markets allow it to
attract national advertisers by providing the opportunity to package displays in
several of its markets in a single contract allowing a national

12
<PAGE> 13

advertiser to simplify its purchasing process and simultaneously present its
message in several markets. National advertisers generally seek wide exposure in
major markets and therefore tend to make larger purchases.

Billboards are generally mounted on advertising structures owned by the
Company and are located on land that is either owned or leased by the Company or
on which it has acquired a permanent easement. Bus shelters are usually
constructed, owned and maintained by the outdoor service provider under
revenue-sharing arrangements with a municipality or transit authority.

The Company operates the following types of outdoor advertising billboards
and displays:

- Bulletins generally are 14 feet high by 48 feet wide or 20 feet high by
60 feet wide and consist of panels on which advertising copy is
displayed. Bulletin advertising copy is either printed with computer-
generated graphics on a single sheet of vinyl that is "wrapped" around an
outdoor advertising structure, or is hand painted and attached to the
structure. Bulletins also include "wallscapes" that are painted on vinyl
surfaces or directly on the sides of buildings, typically four stories or
less. Because of their greater impact and higher cost, bulletins are
usually located on major highways and freeways. In addition, wallscapes
are located on major freeways, commuter and tourist routes and in
downtown business districts.

- Thirty-sheet posters are generally 12 feet high by 25 feet wide.
Advertising copy for 30-sheet posters consists of lithographed or
silk-screened paper sheets supplied by the advertiser that are pasted and
applied like wallpaper to the face of the display. Thirty-sheet posters
are typically concentrated on major traffic arteries.

- Eight-sheet posters are usually six feet high by 12 feet wide. Displays
are prepared and mounted in the same manner as 30-sheet posters. Most
8-sheet posters, because of their smaller size, are concentrated on city
streets targeting pedestrian traffic.

- Transit displays are lithographed or silk-screened paper sheets located
on bus and commuter train exteriors, commuter rail terminals, interior
train cars, bus shelters and subway platforms.

- Street furniture displays are back illuminated, typically two square
meter, display faces located on bus and tram shelters, newsstands,
bicycle racks, information kiosks, recycling bins and automatic public
toilets.

13
<PAGE> 14

The Company owns over 42,500 billboards and outdoor displays in 38 states
which are served by divisional sales offices. The following table sets forth the
outdoor advertising sales offices and the total outdoor advertising displays by
each sales office as of March 1, 1999:

<TABLE>
<CAPTION>
TOTAL DISPLAYS+
---------------
<S> <C>
Northern Region:
Chicago, IL.................................. 2,905
Pittsburgh, PA............................... 3,761
Providence, RI............................... 726
Harrisburg, PA............................... 1,297
Milwaukee, WI................................ 1,174
Hartford, CT................................. 414
Scranton, PA................................. 998
Albany, NY................................... 678
Washington D.C............................... 594
------
Total................................ 12,547
======
Southeastern Region:
Ocala, FL.................................... 2,874
Terre Haute, IN.............................. 1,726
Columbus, OH................................. 1,299
Rocky Mt., NC................................ 1,616
Atlanta, GA.................................. 860
Cincinnati, OH............................... 811
Evansville, IN............................... 1,081
------
Total................................ 10,267
======
Southwestern Region:
Dallas, TX................................... 1,744
St. Joseph, MO............................... 2,892
Tyler, TX.................................... 1,739
Amarillo, TX................................. 1,053
Topeka, KS................................... 1,058
Lubbock, TX.................................. 680
Midland, TX.................................. 706
Abilene, TX.................................. 434
San Angelo, TX............................... 250
------
Total................................ 10,556
======
Western Region:
Las Vegas, NV................................ 972
Bakersfield, CA.............................. 1,584
Lancaster, CA................................ 873
San Bernardino, CA........................... 357
San Diego, CA................................ 273
Laughlin, AZ................................. 356
Yuma, AZ..................................... 222
------
Total................................ 4,637
======
Shelters/Street Furniture:
Las Vegas, NV................................ 2,296
Denver, CO................................... 1,375
New Orleans, LA.............................. 588
Providence, RI............................... 288
------
Total................................ 4,547
======
Grand Total.......................... 42,554
======
</TABLE>

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

+ In connection with its outdoor acquisitions, the Company and the DOJ entered
into consent decrees whereby the Company has agreed to divest approximately
466 display faces in certain of the markets described in these tables.

14
<PAGE> 15

MEDIA REPRESENTATION

The Company's Katz media representation operations generate revenues
primarily through contractual commissions realized through the sale of national
spot advertising air time. National spot advertising air time is commercial air
time sold to advertisers on behalf of radio and television stations and cable
systems located outside the local markets of those stations and systems. Katz
represents its media clients pursuant to media representation contracts. Media
representation contracts typically have terms of up to ten years in initial
length. In connection with the substantial consolidation that has occurred in
the broadcast industry in recent years and the development of large client
station groups, the frequency of representation contract "buyouts" has
increased. These buyouts occur because station groups have tended to negotiate
exclusive, long-term representation contracts with a single media representation
firm covering all of the station group's stations, including stations acquired
after the date of the initial representation contract. In the event that one of
the station group's stations is sold to an owner represented by a different
firm, representation contracts are frequently bought out by the successor
representation firm. Katz generally amortizes the cost of acquiring new
representation contracts associated with a buyout over the expected benefit
period, and recognizes the gain on the disposition of representation contracts
on the effective date of the buyout agreement.

COMPETITION

The Company's radio and outdoor advertising businesses are highly
competitive. The Company competes in each of its markets with other radio
stations and outdoor advertising companies, as well as a wide variety of other
media, including broadcast and cable television and newspapers, magazines and
other print media, such as direct mail.

The success of each of the Company's stations is dependent, to a
significant degree, upon its audience ratings and share of the overall
advertising revenue within its market. The Company's radio stations compete for
listeners and advertising revenues directly with other radio stations, as well
as with other media, within their respective markets. Radio stations compete for
listeners primarily on the basis of program content and by hiring on-air talent
that appeals to a particular demographic group. By building a strong listener
base comprised of a specific demographic group in each of its markets, the
Company is able to attract advertisers who seek to reach those listeners. The
Company also competes with other broadcasting operators for acquisition
opportunities, and prices for radio stations in major markets have increased
significantly in recent periods. To the extent that the rapid pace of
consolidation in the radio broadcasting industry continues, certain competitors
may emerge with larger portfolios of major market radio stations, greater
ability to deliver large audiences to advertisers and more access to capital
resources than does the Company. The audience ratings and market share for the
Company are and will be subject to change and any adverse change in a particular
market could have a material adverse effect on the revenue of its stations
located in that market. There can be no assurance that any one of the Company's
stations will be able to maintain or increase its current audience ratings or
advertising revenue market share.

The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems, direct broadcast satellite
("DBS") systems, the Internet, personal communications services and other
digital audio broadcasting formats to local and national audiences. In addition,
the FCC has auctioned spectrum for a new satellite-delivered Digital Audio Radio
Service ("DARS"). These actions may result in the introduction of several new
national or regional satellite radio services with sound quality equivalent to
compact discs. Another possible competitor to traditional radio is In-Band
On-Channel(TM) ("IBOC") digital radio. IBOC could provide multi-channel,
multi-format digital radio services in the same band width currently occupied by
traditional AM and FM radio services. The Company cannot predict at this time
the effect, if any, that any such new technologies may have on the radio
broadcasting industry.

The outdoor advertising industry is highly fragmented, and consists of
several large companies operating nationally or regionally as well as hundreds
of smaller companies operating in one or limited local markets. The Company
competes for advertisers primarily on the basis of location, price, availability
and service. The

15
<PAGE> 16

Company believes that implementation of its strategy together with its current
market position enables it to compete effectively with the other media within
its markets.

The media representation business is also highly competitive, both in terms
of competition to gain client stations and to sell air time to advertisers. Katz
competes not only with other independent and network media representatives but
also with direct national advertising. The Company's only significant competitor
in the national spot radio representative industry is Interep National Radio
Sales, Inc., a national firm dedicated solely to the representation of radio
stations. Katz also competes on behalf of its clients for advertising dollars
with other media such as newspapers and magazines, outdoor advertising, transit
advertising, direct response advertising, yellow page directories and point of
sale advertising.

EMPLOYEES

The Company has approximately 5,700 full-time employees and approximately
1,000 part-time employees. Approximately 365 employees are represented by
unions. The Company believes that it has good relations with its employees and
these unions.

The Company employs several high-profile on-air personalities who have
large, loyal audiences in their respective markets. The Company believes that
its relationships with its on-air talent are valuable, and it generally enters
into employment agreements with these individuals.

REGULATION OF RADIO BROADCASTING AND OUTDOOR ADVERTISING

Radio Broadcasting

Introduction. The radio broadcasting industry is subject to extensive and
changing regulation over, among other things, program content, technical
operations and business and employment practices.

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

The Communications Act prohibits the assignment or transfer of control of
an FCC license without the prior consent of the FCC. In determining whether to
grant requests for consent to such assignments or transfers, and in determining
whether to grant or renew a radio broadcast license, the FCC considers a number
of factors pertaining to the licensee (and proposed licensee), including:
limitations on alien ownership and on the common ownership of television
broadcast, radio broadcast and daily newspaper properties, the "character" of
the licensee (and proposed licensee) and those persons or entities that have
"attributable" interests in such licensees and proposed licensees, and
compliance with the Anti-Drug Abuse Act of 1988.

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

Failure to observe these or other FCC rules and policies may result in the
imposition of various sanctions, including admonishment, monetary forfeitures,
the grant of "short" (less than the maximum eight-year term) renewal terms or,
for particularly egregious violations, the denial of a license renewal
application, the revocation of FCC licenses, or the denial of FCC consent to
acquire additional broadcast properties.

License Renewal. Radio broadcast licenses are granted for maximum terms of
up to eight years. They may be renewed through an application to the FCC, and,
in certain instances, licensees are entitled to renewal expectancies. During
certain periods when a renewal application is pending, competing applicants may
file for

16
<PAGE> 17

the radio frequency being used by the renewal applicant, although the FCC is
prohibited from considering such competing applications if the existing license
has satisfied certain obligations. Petitions to deny license renewals can be
filed by interested parties, including members of the public. If a substantial
and material question of fact concerning a renewal application is raised by the
FCC or other interested parties, or if for any reason the FCC cannot determine
that the grant of the renewal application would serve the public interest,
convenience and necessity, the FCC will hold an evidentiary hearing on the
application. If as a result of an evidentiary hearing the FCC determines that
the licensee has failed to meet certain requirements and that no mitigating
factors justify the imposition of a lesser sanction, then the FCC may deny a
license renewal application. Only after a license renewal application is denied
will the FCC accept and consider competing applications for the vacated
frequency. Historically, FCC licenses have generally been renewed. The Company
has no reason to believe that its licenses will not be renewed in the ordinary
course, although there can be no assurance to that effect. The non-renewal of
the Company's licenses could have a material adverse effect on the Company.

The following table sets forth the date of acquisition by the Company of
the radio stations that are owned and/or operated by the Company as of March 1,
1999, the frequency of each such station, and the date of expiration of such
station's main FCC broadcast license:

17
<PAGE> 18

<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
- ------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
WDFN-AM............... Detroit, MI 1/97 1130 kHz 10/04
WYUR-AM............... Detroit, MI 5/95 1310 kHz 10/04
KHKS-FM............... Dallas, TX 12/97 106.1 MHz 8/05
KZPS-FM............... Dallas, TX 10/97 92.5 MHz 8/05
KDGE-FM............... Dallas, TX 10/97 94.5 MHz 8/05
KSKY-AM............... Dallas, TX 5/95 660 kHz 8/05
KTXQ-FM].............. Dallas, TX Pending 102.1 MHz 8/05
KBFB-FM].............. Dallas, TX Pending 97.9 MHz 8/05
WJMN-FM............... Boston, MA 1/96 94.5 MHz 4/06
WXKS-FM............... Boston, MA 1/96 107.9 MHz 4/06
WXKS-AM............... Boston, MA 1/96 1430 kHz 4/06
WASH-FM............... Washington, D.C. 11/92 97.1 MHz 10/03
WMZQ-FM............... Washington, D.C. 7/97 98.7 MHz 10/03
WBIG-FM............... Washington, D.C. 9/97 100.3 MHz 10/03
WWDC-FM............... Washington, D.C. 6/98 101.1 MHz 10/03
WGAY-FM............... Washington, D.C. 11/96 99.5 MHz 10/03
WTEM-AM(2)............ Washington, D.C. 4/97 980 kHz(2) 10/03
WWDC-AM............... Washington, D.C. 6/98 1260 kHz 10/03
WWRC-AM(2)............ Washington, D.C. 9/97 570 kHz(2) 10/03
KODA-FM............... Houston, TX 5/98 99.1 MHz 8/05
KTRH-AM............... Houston, TX 6/93 740 kHz 8/05
KLOL-FM............... Houston, TX 6/93 101.1 MHz 8/97*
KLDE-FM............... Houston, TX 4/98 94.5 MHz 8/05
KKBQ-FM............... Houston, TX 12/97 92.9 MHz 8/05
KBME-AM............... Houston, TX 12/97 790 kHz 8/05
KKRW-FM].............. Houston, TX Pending 93.7 MHz 8/05
KQUE-AM].............. Houston, TX Pending 1230 kHz 8/05
WEDR-FM............... Miami/Ft. Lauderdale, FL 10/96 99.1 MHz 2/04
WVCG-AM............... Miami/Ft. Lauderdale, FL 7/83 1080 kHz 2/04
WFOX-FM............... Atlanta, GA 9/97 97.1 MHz 4/04
WZNT-FM............... Puerto Rico 10/98 93.7 MHz 2/04
WOYE-FM............... Puerto Rico 10/98 94.1 MHz 2/04
WCOM-FM............... Puerto Rico 10/98 94.7 MHz 2/04
WOQI-FM............... Puerto Rico 10/98 93.3 MHz 2/04
WCTA-FM............... Puerto Rico 10/98 95.1 MHz 2/04
WIOA-FM............... Puerto Rico 10/98 99.9 MHz 2/04
WIOB-FM............... Puerto Rico 10/98 97.5 MHz 2/04
WIOC-FM............... Puerto Rico 10/98 105.1 MHz 2/04
KMLE-FM............... Phoenix, AZ 9/97 107.9 MHz 10/05
KOOL-FM............... Phoenix, AZ 9/97 94.5 MHz 10/05
KYOT-FM............... Phoenix, AZ 9/97 95.5 MHz 10/05
KZON-FM............... Phoenix, AZ 9/97 101.5 MHz 10/05
KOY-AM................ Phoenix, AZ 9/97 550 kHz 10/05
KISO-AM............... Phoenix, AZ 9/97 1230 kHz 10/05
KKFR-FM].............. Phoenix, AZ Pending 92.3 MHz 10/05
KFYI-AM].............. Phoenix, AZ Pending 910 kHz 10/05
KYXY-FM].............. San Diego, CA Pending 96.5 MHz 12/05
KPLN-FM].............. San Diego, CA Pending 103.7 MHz 12/97*
WALK-FM............... Nassau/Suffolk (Long Island), NY 9/97 97.5 MHz 6/06
WALK-AM............... Nassau/Suffolk (Long Island), NY 9/97 1370 kHz 6/06
KEEY-FM............... Minneapolis/St. Paul, MN 9/97 102.1 MHz 4/05
KDWB-FM............... Minneapolis/St. Paul, MN 9/97 101.3 MHz 4/05
KQQL-FM............... Minneapolis/St. Paul, MN 9/97 107.9 MHz 4/05
</TABLE>

18
<PAGE> 19

<TABLE>
<CAPTION>
DATE OF EXPIRATION DATE
STATION MARKET(1) ACQUISITION FREQUENCY OF FCC LICENSE
- ------- --------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
KTCZ-FM............... Minneapolis/St. Paul, MN 9/97 97.1 MHz 4/05
KFAN-AM............... Minneapolis/St. Paul, MN 9/97 1130 kHz 4/05
WRQC-FM............... Minneapolis/St. Paul, MN 9/97 100.3 MHz 4/05
KFXN-AM............... Minneapolis/St. Paul, MN 9/97 690 kHz 4/05
WWSW-FM............... Pittsburgh, PA 9/97 94.5 MHz 8/06
WWSW-AM............... Pittsburgh, PA 9/97 970 kHz 8/06
WDVE-FM].............. Pittsburgh, PA Pending 102.5 MHz 8/98*
WXDX-FM].............. Pittsburgh, PA Pending 105.9 MHz 8/98*
WJJJ-FM].............. Pittsburgh, PA Pending 104.7 MHz 8/06
WDRV-FM].............. Pittsburgh, PA Pending 96.1 MHz 8/06
KXKL-FM............... Denver, CO 9/97 105.1 MHz 4/05
KALC-FM............... Denver, CO 9/97 105.9 MHz 4/05
KIMN-FM............... Denver, CO 9/97 100.3 MHz 4/05
KXPK-FM............... Denver, CO 1/98 96.5 MHz 4/05
KVOD-FM............... Denver, CO 9/97 92.5 MHz 4/05
KRRF-AM............... Denver, CO 9/97 1280 kHz 4/05
WZAK-FM............... Cleveland, OH 1/99 93.1 MHz 10/04
WDOK-FM............... Cleveland, OH 1/99 102.1 MHz 10/04
WZJM-FM............... Cleveland, OH 1/99 92.3 MHz 10/04
WQAL-FM............... Cleveland, OH 1/99 104.1 MHz 10/04
WRMR-AM............... Cleveland, OH 1/99 850 kHz 10/04
WJMO-AM............... Cleveland, OH 1/99 1490 kHz 10/04
WKNR-AM].............. Cleveland, OH Pending 1220 kHz 10/04
WUBE-FM............... Cincinnati, OH 9/97 105.1 MHz 10/04
WYGY-FM............... Cincinnati, OH 9/97 96.5 MHz 10/04
WBOB-AM............... Cincinnati, OH 9/97 1160 kHz 8/04
WUBE-AM............... Cincinnati, OH 9/97 1230 kHz 10/04
KFBK-AM............... Sacramento, CA 9/97 1530 kHz 12/05
KGBY-FM............... Sacramento, CA 9/97 92.5 MHz 12/05
KHYL-FM............... Sacramento, CA 9/97 101.1 MHz 12/05
KSTE-AM............... Sacramento, CA 9/97 650 kHz 12/05
KGGI-FM............... Riverside/San Bernardino, CA 9/97 99.1 MHz 12/05
KKDD-AM............... Riverside/San Bernardino, CA 9/97 1290 kHz 12/05
WXXL-FM............... Orlando, FL 9/97 106.7 MHz 2/04
WJHM-FM............... Orlando, FL 9/97 101.9 MHz 2/04
WOMX-FM............... Orlando, FL 9/97 105.1 MHz 2/04
WOCL-FM............... Orlando, FL 9/97 105.9 MHz 2/04
</TABLE>

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

* Indicates pending renewal application.

+ Indicates station to be disposed of in a pending transaction.

] Indicates station to be acquired in a pending transaction.

(1) Actual city of license may differ from metropolitan market served in certain
cases.

(2) On March 9, 1998, the Company exchanged the call signs and formats of
WWRC-AM and WTEM-AM such that beginning on such date the call sign and
format of WWRC-AM were used on the 570 kHz frequency and the call sign and
format of WTEM-AM were used on the 980 kHz frequency.

Ownership. The Communications Act and the FCC rules impose specific limits
on the number of commercial radio stations an entity can own in a single market.
These rules preclude Chancellor Media from acquiring certain stations it might
otherwise seek to acquire. The rules also effectively prevent Chancellor

19
<PAGE> 20

Media from selling stations in a market to a buyer that has reached its
ownership limit in the market. The ownership rules are as follows:

- in markets with 45 or more commercial radio stations, ownership is
limited to eight commercial stations, no more than five of which can be
either AM or FM;

- in markets with 30 to 44 commercial radio stations, ownership is limited
to seven commercial stations, no more than four of which can be either AM
or FM;

- in markets with 15 to 29 commercial radio stations, ownership is limited
to six commercial stations, no more than four of which can be either AM
or FM; and

- in markets with 14 or fewer commercial radio stations, ownership is
limited to five commercial stations or no more than 50% of the market's
total, whichever is lower, and no more than three of which can be either
AM or FM.

Under the FCC's ownership attribution rules, interests held by Chancellor
Media officers, directors and certain voting stockholders in broadcast stations
not owned by Chancellor Media must be counted as if they were owned by
Chancellor Media for purposes of applying the FCC's multiple ownership rules.
Four of Chancellor Media's directors (Thomas O. Hicks, R. Steven Hicks, Lawrence
D. Stuart, Jr., and Michael J. Levitt) are directors of Capstar and Thomas O.
Hicks is the controlling stockholder of Capstar, which presently owns or
proposes to acquire approximately 340 radio stations serving 81 mid-sized
markets throughout the United States and which Chancellor Media has agreed to
acquire in a merger transaction. Because Chancellor Media and Capstar have
common directors and a common attributable stockholder, in markets where both
companies own radio stations (e.g., Dallas) those stations are currently deemed
to be commonly owned for purposes of applying the local radio ownership limits.
Similarly, because Capstar and LIN have a common attributable stockholder (Mr.
Hicks) and common directors (Messrs. Hicks, Stuart and Levitt), and because
Capstar operates radio stations in certain markets where LIN operates television
stations, those operations require an FCC waiver of the rule that normally
prohibits the same owner from owning a television station and a radio station in
the same market (the "one-to-a-market" rule).

To date, all required one-to-a-market waivers in regard to LIN and Capstar
overlap have been obtained. The FCC is considering changes to its
one-to-a-market rule and waiver policy and to its ownership attribution rules.
It is possible, but not at all certain, that revised regulations could require
Chancellor Media to divest its interests in some stations in order to comply
with a more restrictive limit on radio-television cross-ownership in the same
market. In general, there can be no assurance that the FCC's existing rules or
any newly adopted rules will not have a negative effect on Chancellor Media's
future acquisition strategy or on its business, financial condition and results
of operations.

Finally, the FCC has issued public notices evidencing concern about radio
station acquisitions that would give the acquiring party an excessive share of
the radio advertising revenues in a given market or would otherwise result in
excessive concentration of ownership. It is not clear how the FCC will proceed
in this area or how any policy it may adopt will interact with the review of
similar issues by the DOJ and the FTC.

Programming and Operation. The Communications Act requires broadcasters to
serve the "public interest." The FCC has gradually relaxed or eliminated many of
the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. A licensee continues to be required, however, to present
programming that is responsive to community problems, needs and interests and to
maintain certain records demonstrating such responsiveness. Complaints from
listeners concerning a station's programming often will be considered by the FCC
when it evaluates the licensee's renewal application, but such complaints may be
filed and considered at any time. Stations also must pay regulatory and
application fees and follow various rules promulgated under the Communications
Act that regulate, among other things, political advertising, sponsorship
identifications and technical operations, including limits on human exposure to
radio frequency radiation. The broadcast of obscene and indecent material and
the advertisement of contests and lotteries are regulated by FCC rules, as well
as by state and other federal laws. In addition, the FCC traditionally has
required licensees to develop and

20
<PAGE> 21

implement programs and procedures designed to promote equal employment
opportunities. The U.S. Court of Appeals for the District of Columbia recently
invalidated the FCC's equal employment rules. The FCC has initiated a proceeding
to adopt new equal employment rules to replace the ones that were invalidated by
the Court of Appeals.

Time Brokerage Agreements. Over the past several years, a number of radio
stations, including certain of the Company's stations, have entered into what
commonly are referred to as "Time Brokerage Agreements," or "TBAs" (certain
types of these agreements also are known as "Local Marketing Agreements," or
"LMAs"). These agreements may take various forms. Separately-owned and licensed
stations may agree to function cooperatively in terms of programming,
advertising sales, and other matters, subject to the licensee of each station
maintaining independent control over the programming and other operations of its
own station and compliance with the requirements of antitrust laws. One typical
type of TBA is a programming agreement between two separately-owned radio
stations that serve a common service area, whereby the licensee of one station
programs substantial portions of the broadcast day on the other licensee's
station (subject to ultimate editorial and other controls being exercised by the
latter licensee), and sells advertising time during those program segments. The
FCC staff has held that such agreements do not violate the Communications Act as
long as the licensee of the station that is being substantially programmed by
another entity maintains complete responsibility for, and control over,
operations of its broadcast station and otherwise ensures compliance with
applicable FCC rules and policies. As of March 1, 1999, 13 stations are being
operated by the Company under TBAs and one of the Company's stations is being
operated by a third party under a TBA.

A station that brokers more than 15% of the broadcast time, on a weekly
basis, on another station in the same market will be considered to have an
attributable ownership interest in the brokered station for purposes of the
FCC's ownership rules, discussed above. As a result, a broadcast station may not
enter into a TBA that allows it to program more than 15% of the broadcast time,
on a weekly basis, of another local station that it could not own under the
FCC's local multiple ownership rules. FCC rules also prohibit a broadcast
licensee from simulcasting more than 25% of its programming on another station
in the same broadcast service (i.e., AM-AM or FM-FM) where the two stations
serve substantially the same geographic area, whether the licensee owns the
stations or owns and programs the other through a TBA arrangement.

Proposed Changes. The FCC is considering various proposals to modify its
broadcast "attribution" rules. Among the proposals are (i) raising the basic
benchmark for attributing ownership from 5% to 10% of the licensee's voting
stock, (ii) raising the attribution benchmark for certain institutional
investors from 10% to 20%, (iii) attributing certain minority stockholdings in
corporations with a single majority stockholder; and (iv) attributing certain
LMAs, TBAs, Joint Sales Agreements, debt or non-voting stock interests that have
heretofore been non-attributable. The FCC is also considering changes to its
multiple ownership rules to encourage minority ownership of radio and television
broadcast stations.

The FCC has under consideration, and may in the future consider and adopt,
new laws, regulations and policies regarding a wide variety of matters that
could, directly or indirectly, affect the operation, ownership and financial
performance of the Company's radio broadcast stations, result in the loss of
audience share and advertising revenues for the Company's radio broadcast
stations, and affect the ability of the Company to acquire additional radio
broadcast stations or finance such acquisitions. Such matters include: changes
to the license renewal process; the FCC's equal employment opportunity rules and
other matters relating to minority and female involvement in the broadcasting
industry; proposals to change rules relating to political broadcasting;
technical and frequency allocation matters; AM stereo broadcasting; proposals to
permit expanded use of FM translator stations; proposals to restrict or prohibit
the advertising of beer, wine and other alcoholic beverages on radio; changes in
the FCC's cross-interest, multiple ownership and cross-ownership policies;
changes to broadcast technical requirements; proposals to allow telephone
companies to deliver audio and video programming to the home through existing
phone lines; proposals to limit the tax deductibility of advertising expenses by
advertisers; proposals to auction to the highest bidder the right to use the
radio broadcast spectrum, instead of granting FCC licenses and subsequent
license renewals; and proposals to reinstate the "Fairness Doctrine" which
requires a station to present coverage of opposing views in certain
circumstances. It is also possible that Congress may enact additional
legislation that could have a material

21
<PAGE> 22

impact on the operation, ownership and financial performance of the Company's
radio stations over and above the already substantial impact of the 1996 Act.

The FCC has taken initial steps to authorize the use of a new technology,
DARS, to deliver audio programming by satellite. See "-- Competition." The FCC
is also considering various proposals for terrestrial DARS. DARS may provide a
medium for the delivery of multiple new audio programming formats to local and
national audiences. It is not known at this time whether this technology also
may be used in the future by existing radio broadcast stations either on
existing or alternate broadcasting frequencies.

The FCC currently is considering authorizing the use of In-Band
On-Channel(TM) ("IBOC") technology for FM radio stations. IBOC technology would
permit an FM station to transmit radio programming in both analog and digital
formats, or in digital only formats, using the bandwidth that the radio station
is currently licensed to use. It is unclear what regulations the FCC will adopt
regarding IBOC technology and what effect such regulations would have on the
Company's business or the operations of its radio stations.

The FCC is considering a proposal to authorize the operation of low power
radio and "microradio" within the existing FM band. Low power radio and
microradio would operate at power levels below that of full power FM radio
stations, such as those owned by the Company. The FCC has proposed that low
power radio and microradio stations not be subject to the same level of
regulation regarding interference to which full power radio stations are
subject. The Company cannot predict the outcome of this FCC proceeding or what
effect, including interference effect, that low power radio and microradio would
have on the operations of the Company's radio stations or on its ability to
engage in digital transmission of its radio programming.

The Company cannot predict what other matters might be considered in the
future, nor can it judge in advance what impact, if any, the implementation of
any of these proposals or changes might have on its business.

Federal Antitrust Laws. The United States Federal Trade Commission (the
"FTC")and the Antitrust Division of the United States Department of Justice (the
"DOJ"), evaluate transactions requiring a pre-acquisition filing under the HSR
Act to determine whether those transactions should be challenged under the
federal antitrust laws. These agencies (particularly the DOJ) recently have been
increasingly active in their review of radio station acquisitions where an
operator proposes to acquire new stations in its existing markets.

As part of its increased scrutiny of radio station acquisitions, the DOJ
has stated publicly that it believes that TBAs and other similar agreements
customarily entered into in connection with radio station transfers prior to the
expiration of the waiting period under the HSR Act could violate the HSR Act.
Since then, the DOJ has stated publicly that it will apply its new policy
prohibiting TBAs in connection with purchase agreements until the expiration or
termination of the HSR waiting period on a prospective basis.

The DOJ has stated publicly that it has established certain revenue and
audience share concentration benchmarks with respect to radio station
acquisitions, above which a transaction may receive additional antitrust
scrutiny. However, to date, the DOJ has also investigated transactions that do
not meet or exceed these benchmarks, and has cleared transactions that do exceed
these benchmarks. Although the Company does not believe that its acquisition
strategy as a whole will be adversely affected in any material respect by
antitrust review (including review under the HSR Act) or by additional
divestitures that the Company may have to make as a result of antitrust review,
there can be no assurance that this will be the case.

Outdoor Advertising

Outdoor advertising displays are subject to regulation at the federal,
state and local levels. These regulations, in some cases, limit the height,
size, location and operation of billboards and, in limited circumstances,
regulate the content of the advertising copy displayed on the billboards. Some
governmental regulations prohibit the construction of new billboards or the
replacement, relocation, enlargement or upgrading of existing structures. Some
cities have adopted amortization ordinances under which, after the expiration of
a certain period of time, billboards must be removed at the owner's expense and
without the payment of consideration. Ordinances requiring the removal of
billboards without compensation, whether

22
<PAGE> 23

through amortization or otherwise, are being challenged in various state and
federal courts with conflicting results.

In addition, the major U.S. tobacco companies that are defendants in
numerous class action suits throughout the country recently reached an
out-of-court settlement with 46 states that includes a ban on outdoor
advertising of tobacco products. The settlement agreement was finalized on
November 23, 1998, but must be ratified by the courts in each of the 46 states
participating in the settlement. In addition to the mass settlement, the tobacco
industry previously had come to terms with the remaining four states
individually. The terms of the individual settlements also included bans on
outdoor advertising of tobacco products. The ban on outdoor advertising of
tobacco products is not expected to have a material impact on the Company.

In addition to the settlement agreements, state and local governments are
also regulating the outdoor advertising of alcohol and tobacco products. For
example, several states and cities have laws restricting tobacco billboard
advertising near schools and other locations frequented by children. Some cities
have proposed even broader restrictions, including complete bans on outdoor
tobacco advertising on billboards, kiosks, and private business window displays.
It is possible that state and local governments may propose or pass similar
ordinances to limit outdoor advertising of alcohol and other products or
services in the future.

The effect of these regulations, potential legislation and settlement
agreements on Chancellor Media's business and operations could be material. The
elimination of billboard advertising by the tobacco industry may cause a
reduction in Chancellor Media's direct revenues from advertisers and may
simultaneously increase the available space on the existing inventory of
billboards in the outdoor advertising industry. This industry-wide increase in
space may in turn result in a lowering of outdoor advertising rates in outdoor
advertising markets or limit the ability of industry participants to increase
rates for some period of time.

ITEM 2. PROPERTIES

The Company's corporate headquarters is located in Dallas, Texas. The types
of properties required to support each of the Company's radio stations, outdoor
advertising operations and media representation business include offices,
studios, transmitter sites, antenna sites and production facilities.

A radio station's studio is generally housed with its office in a downtown
or business district. A radio station's transmitter sites and antenna sites
generally are located in a manner that provides maximum market coverage. The
outdoor advertising business operates out of approximately 32 separate locations
throughout the United States. The media representation business operates out of
54 separate locations throughout the United States.

The offices and studios of the Company's corporate headquarters, radio
stations, outdoor advertising business and media representation business are
located in leased or owned facilities. These leases generally have expiration
dates that range from one to thirteen years. The Company either owns or leases
its transmitter and antenna sites. These leases generally have expiration dates
that range from one to thirty years. The Company does not anticipate any
difficulties in renewing those leases that expire within the next several years
or in leasing other space, if required. The Company owns substantially all of
the studio and other equipment used in its radio broadcasting business.

The Company leases the majority of the land occupied by its outdoor
advertising structures. The leases expire at various dates, generally during the
next ten years, and have varying options to renew and cancel. There is no
significant concentration of outdoor advertising structures under any one lease
or subject to negotiation with any one landlord.

No one property is material to the Company's overall operations. The
Company believes that its properties are in good condition and suitable for its
operations.

ITEM 3. LEGAL PROCEEDINGS

23
<PAGE> 24

Tate & Furst Incorporated ("Hicks Muse"), LIN Television and some of the
Company's directors. The plaintiff alleges that, among other things, (1) Hicks
Muse allegedly caused the Company to pay too high of a price for LIN because
Hicks Muse had allegedly paid too high of a price when it acquired LIN; and (2)
the transaction therefore allegedly constitutes a breach of fiduciary duty and a
waste of corporate assets by Hicks Muse, which is alleged to control the
Company, and the directors of the Company named as defendants. The plaintiff
seeks to enjoin consummation or rescission of the transaction, compensatory
damages, an order requiring that the directors named as defendants "carry out
their fiduciary duties," and attorneys' fees and other costs. Plaintiff,
defendants and the Company had reached a tentative settlement of this lawsuit.
However, as a result of the decision by the Boards of Directors of the Company
and LIN to terminate the LIN Merger, the settlement will not proceed as planned.

In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of the
Company and are similarly situated. The defendants in the case are named as
Chancellor Media, Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James E. de
Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J.
Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The plaintiff
alleges breach of fiduciary duties, gross mismanagement, gross negligence or
recklessness, and other matters relating to the defendants' actions in
connection with the proposed Capstar merger. The plaintiff seeks to certify the
complaint as a class action, enjoin consummation of the Capstar merger, order
defendants to account to plaintiff and other alleged class members for damages,
and award attorneys' fees and other costs. The Company believes that the lawsuit
is without merit and intends to vigorously defend the action.

On July 10, 1998, the Company entered into an agreement to acquire a 50%
economic interest in Grupo Radio Centro, S.A. de C.V., an owner and operator of
radio stations in Mexico, for approximately $120.5 million in cash and $116.5
million in Chancellor Media common stock. On October 15, 1998, the Company
announced that it had provided notice to Grupo Radio that it was terminating the
acquisition agreement in accordance with its terms. The Company has received
notice from Grupo Radio requesting arbitration under the terms of the
acquisition agreement of allegations that Chancellor Media wrongfully terminated
that agreement, and the parties have commenced the arbitration process. The
Company believes that it had a proper basis for terminating the agreement in
accordance with its terms and intends to contest these allegations vigorously.

The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is also vigorously contesting
all of these matters and believes that the ultimate resolution of these matters
and those mentioned above will not have a material adverse effect on its
consolidated financial position or results of operations.

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

No matters were submitted to a vote of security holders during the fourth
quarter of 1998.

24
<PAGE> 25

EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of Chancellor Media and CMCLA are:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas O. Hicks........................ 53 Chairman of the Board and Chief
Executive Officer
James E. de Castro..................... 46 Vice Chairman -- President and Chief
Executive Officer of Chancellor Radio
and Outdoor Group
R. Steven Hicks........................ 49 Vice Chairman -- President and Chief
Executive Officer of Chancellor Media
Services Group
D. Geoffrey Armstrong.................. 41 Executive Vice President and Chief
Financial Officer
Kenneth J. O'Keefe..................... 44 Executive Vice President and Chief
Operating Officer of Chancellor Radio
Group
James A. McLaughlin.................... 49 President and Chief Operating Officer
of Chancellor Outdoor Group
William S. Banowsky, Jr................ 37 Executive Vice President and General
Counsel
</TABLE>

THOMAS O. HICKS

Mr. Hicks was elected Chairman of the Board of Chancellor Media in
September 1997 and elected Chief Executive Officer in March 1999. He had been
Chairman of the Board of Chancellor Broadcasting Company and Chancellor Radio
Broadcasting Company prior to that time since April 1996. Mr. Hicks is Chairman
of the Board and Chief Executive Officer of Hicks Muse, a private investment
firm located in Dallas, St. Louis, New York, Mexico City and London specializing
in strategic investments, leveraged acquisitions and recapitalizations. From
1984 to May 1989, Mr. Hicks was Co-Chairman of the Board and Co-Chief Executive
Officer of Hicks & Haas, Incorporated, a Dallas based private investment firm.
Mr. Hicks serves as a director of Capstar, LIN Holdings Corp., LIN Television
Corporation, Sybron International Corporation, Inc., Cooperative Computing,
Inc., International Home Foods, Triton Energy, D.A.C. Vision Inc. and Olympus
Real Estate Corporation.

JAMES E. DE CASTRO

Mr. de Castro was elected Vice Chairman of the Company and President and
Chief Executive Officer of the Chancellor Radio and Outdoor Group in March 1999.
Prior thereto, Mr. de Castro served as Chief Operating Officer of Chancellor
Media from September 22, 1997 to August 19, 1998, and from August 19, 1998 to
March 15, 1999, Mr. de Castro served as President of the Chancellor Radio Group.
From September 5, 1997 to September 22, 1997, Mr. de Castro served as Co-Chief
Operating Officer of Chancellor Media. Mr. de Castro was elected Co-Chief
Operating Officer and a director of Chancellor Media in September 1997. Mr. de
Castro was previously President of Evergreen Media Corporation since 1993 and
Chief Operating Officer and a director of Evergreen Media Corporation since
1989. From 1987 to 1988, Mr. de Castro held various positions with H&G
Communications, Inc. and predecessor entities. From 1981 to 1989, Mr. de Castro
was general manager of radio stations WLUP-FM and WLUP-AM (now known as WMVP-AM)
in Chicago, and from 1989 to 1992, Mr. de Castro was general manager of radio
station KKBT-FM in Los Angeles.

25
<PAGE> 26

R. STEVEN HICKS

Mr. Hicks was elected Vice Chairman of the Company and President and Chief
Executive Officer of the Chancellor Media Services Group in March 1999 and has
served as President, Chief Executive Officer and a director of Capstar since
June 1997. Mr. Hicks has also served as Chairman of the Board of Capstar from
June to September 1997. Mr. Hicks founded Capstar Broadcasting in October 1996.
Prior to joining Capstar Broadcasting, Mr. Hicks acted as Chairman of the Board
and Chief Executive Officer of GulfStar Communications, Inc. from January 1987
to July 1997 and as President and Chief Executive Officer of SFX Broadcasting,
Inc. ("SFX") from November 1993 to May 1996. Mr. Hicks is a 31-year veteran of
the radio broadcasting industry, including 18 years as a station owner.

D. GEOFFREY ARMSTRONG

Mr. Armstrong was elected Executive Vice President and Chief Financial
Officer of the Company in March 1999. Mr. Armstrong served as Executive Vice
President and Chief Operating Officer of Capstar from July 1998 to March 1999
and has served as a director of Capstar since July 1998. Mr. Armstrong has also
served as a director of SFX Entertainment since September 1998. Mr. Armstrong
served as the Chief Operating Officer and an Executive Vice President of SFX
from November 1996 to May 1998 and served as a director of SFX from 1993 to
1998. Mr. Armstrong became the Chief Operating Officer of SFX in June 1996 and
the Chief Financial Officer, Executive Vice President and Treasurer of SFX in
April 1995. Mr. Armstrong was Vice President, Chief Financial Officer and
Treasurer of SFX from 1992 until March 1995. He served as Executive Vice
President and Chief Financial Officer of Capstar, a predecessor of SFX and
unrelated to Capstar Broadcasting, since 1989. From 1988 to 1989, Mr. Armstrong
was the Chief Executive Officer of Sterling Communications Corporation.

KENNETH J. O'KEEFE

Mr. O'Keefe was appointed Chief Operating Officer of the Chancellor Radio
Group in March 1999 and has served as Executive Vice President of Chancellor
Media since September 1997. Mr. O'Keefe had been an Executive Vice President of
Evergreen Media Corporation since February of 1996 and served as a director of
Evergreen from May of 1996 until September 1997. Prior to joining Evergreen in
1996, Mr. O'Keefe was a director, Chief Financial Officer and Executive Vice
President of Pyramid Communications, Inc. from March 1994 until Evergreen's
acquisition of Pyramid Communications, Inc. on January 17, 1996. Mr. O'Keefe
served in various capacities with Pyramid Communications, Inc. or predecessor
entities during the five-year period prior to his joining Evergreen in 1996.

JAMES A. MCLAUGHLIN

Mr. McLaughlin was appointed Chief Operating Officer of the Chancellor
Outdoor Group in March 1999 and became the President of the Chancellor Outdoor
Group in August 1998. Mr. McLaughlin most recently served as Chief Executive
Officer of privately-held Triumph Outdoor Holdings, LLC. Prior to forming
Triumph, Mr. McLaughlin served as President and Chief Executive Officer of POA
Acquisition Corporation, the successor to Peterson Outdoor Advertising. Prior to
joining POA, Mr. McLaughlin was the Managing Partner of Turner Outdoor
Advertising which was purchased from Ted Turner in 1983. Mr. McLaughlin began
his outdoor advertising career in 1974 with Creative Displays, holding various
management positions as the company grew to become the fourth largest outdoor
advertising company in the United States.

WILLIAM S. BANOWSKY, JR.

Mr. Banowsky was elected Executive Vice President and General Counsel of
the Company in March 1999 and has served as Executive Vice President, General
Counsel and Secretary of Capstar since June 1997. Mr. Banowsky joined Capstar
Broadcasting in January 1997. Mr. Banowsky was an attorney with Snell, Banowsky
& Trent, P.C., Dallas, Texas, for six years before joining Capstar Broadcasting.
Prior to that time, he was an attorney for Johnson & Gibbs, P.C., Dallas, Texas,
for four years.

There are no family relationships between any of the executive officers of
the Company, except that Thomas O. Hicks is the brother of R. Steven Hicks.

26
<PAGE> 27

PART II

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

Neither Chancellor Media nor CMCLA sold equity securities during 1998 other
than pursuant to transactions that were registered under the Securities Act of
1933, as amended.

Shares of Chancellor Media's common stock, par value $.01 per share, have
been quoted on The Nasdaq Stock Market under the symbol AMFM since the
consummation of the merger with Chancellor Broadcasting Company on September 5,
1997. From the consummation of the initial public offering of Chancellor Media's
Common Stock in May 1993 to September 4, 1997, shares of the Class A Common
Stock, par value $.01 per share, of Chancellor Media (then known as Evergreen
Media Corporation) were quoted on The Nasdaq Stock Market under the symbol EVGM.
The following table sets forth, for the calendar quarters indicated, the high
and low closing sales prices of Chancellor Media's common stock on The Nasdaq
Stock Market, as reported in published financial sources.

<TABLE>
<CAPTION>
YEAR HIGH(1) LOW(1)
---- ------- ------
<S> <C> <C>
1997:
First Quarter............................................. $17.00 $11.88
Second Quarter............................................ 22.31 14.31
Third Quarter............................................. 27.50 20.63
Fourth Quarter............................................ 37.31 25.81
1998:
First Quarter............................................. $49.13 $32.69
Second Quarter............................................ 51.00 40.19
Third Quarter............................................. 57.25 24.13
Fourth Quarter............................................ 47.88 23.94
</TABLE>

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

(1) The closing sale prices have been adjusted retroactively for the two-for-one
stock split of the Company's Common Stock, effected in the form of a stock
dividend, paid on January 12, 1998 .

There is no established public trading market for the common stock of
CMCLA. All of the issued and outstanding common stock of CMCLA is owned,
directly or indirectly, by Chancellor Media. As of March 1, 1999, there were
approximately 250 holders of record of Chancellor Media's common stock (which
number does not include the number of stockholders whose shares are held of
record by a broker or clearing agency but does include each such brokerage house
or clearing agency as one record holder).

Chancellor Media has not declared or paid any cash dividends on its common
stock since its inception and does not currently anticipate paying any cash
dividends on its common stock in the foreseeable future. Chancellor Media
intends to retain future earnings for use in its business. Furthermore, since
Chancellor Media is a holding company, the only way it can pay dividends in the
future is by indirectly receiving funds from CMCLA, currently Chancellor Media's
principal operating subsidiary. CMCLA is currently subject to restrictions under
the terms of its senior credit facility and the indentures governing its senior
subordinated notes that limit the amount of cash dividends that may be paid to
Chancellor Media. In addition, no dividends may be paid on Chancellor Media's
common stock if dividends are in arrears with respect to its $3.00 Convertible
Exchangeable Preferred Stock or 7% Convertible Preferred Stock.

27
<PAGE> 28

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated historical financial data presented below have
been derived from the annual audited consolidated financial statements of
Chancellor Media and CMCLA for, and as of the end of, each of the years in the
five-year period ended December 31, 1998. The consolidated historical financial
results of Chancellor Media and CMCLA are not comparable from year to year
because of the various acquisitions and dispositions by Chancellor Media and
CMCLA during the periods covered. This data should be read in conjunction with
the consolidated financial statements of Chancellor Media and CMCLA and with the
related notes thereto and with "Management's Discussion and Analysis of
Financial Conditions and Results of Operations" set forth in Part II -- Item 7
herein.

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1994 1995 1996 1997 1998
-------- --------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Gross revenues............................. $125,478 $ 186,365 $ 337,405 $ 663,804 $ 1,440,357
Net revenues............................... 109,516 162,931 293,850 582,078 1,273,856
Operating expenses excluding depreciation
and amortization......................... 68,852 97,674 174,344 316,248 682,061
Depreciation and amortization.............. 30,596 47,005 93,749 185,982 446,338
Corporate general and administrative
expense.................................. 2,672 4,475 7,797 21,442 36,722
Executive severance charge(1).............. -- -- -- -- 63,661
-------- --------- ---------- ----------- -----------
Operating income........................... 7,396 13,777 17,960 58,406 45,074
Interest expense........................... 13,809 19,199 37,527 85,017 217,136
Gain on disposition of assets.............. (6,991) -- -- (18,380) (123,845)
Gain on disposition of representation
contracts................................ -- -- -- -- (32,198)
Other (income) expense, net................ 539 236 (477) (1,539) (18,871)
-------- --------- ---------- ----------- -----------
Income (loss) before income taxes and
extraordinary item....................... 39 (5,658) (19,090) (6,692) 2,852
Income tax expense (benefit)............... -- 192 (2,896) 7,802 33,751
Dividends on preferred stock of
subsidiary(2)............................ -- -- -- 12,901 17,601
-------- --------- ---------- ----------- -----------
Income (loss) before extraordinary item.... 39 (5,850) (16,194) (27,395) (48,500)
Extraordinary loss, net of tax
benefit(3)............................... 3,585 -- -- 4,350 47,089
-------- --------- ---------- ----------- -----------
Net loss................................... (3,546) (5,850) (16,194) (31,745) (95,589)
Preferred stock dividends(4)............... 4,830 4,830 3,820 12,165 25,670
-------- --------- ---------- ----------- -----------
Net loss attributable to common
stockholders............................. $ (8,376) $ (10,680) $ (20,014) $ (43,910) $ (121,259)
======== ========= ========== =========== ===========
Basic and diluted loss per common share
before extraordinary item................ $ (.19) $ (.26) $ (.33) $ (.41) $ (.54)
======== ========= ========== =========== ===========
Basic and diluted loss per common share.... $ (.32) $ (.26) $ (.33) $ (.46) $ (.88)
======== ========= ========== =========== ===========
Weighted average common shares
outstanding(5)........................... 26,004 41,442 60,414 95,636 137,979
CONSOLIDATED BALANCE SHEET DATA AT YEAR-END:
Working capital............................ $ 15,952 $ 30,556 $ 41,421 $ 112,724 $ 188,193
Intangible assets (net of accumulated
amortization)............................ 233,494 458,787 853,643 4,404,443 5,056,047
Total assets............................... 297,990 552,347 1,020,959 4,968,875 7,227,907
Long-term debt (including current
portion)(6).............................. 174,000 201,000 358,000 2,573,000 4,096,000
Redeemable preferred stock................. -- -- -- 331,208 --
Stockholders' equity....................... 112,353 304,577 549,411 1,480,207 2,391,830
OTHER FINANCIAL DATA:
EBITDA, before non-cash and non-recurring
charges(7)............................... $ 37,992 $ 60,782 $ 111,709 $ 244,388 $ 555,073
CASH FLOWS RELATED TO:
Operating activities....................... $ 19,880 $ 39,693 $ 47,481 $ 139,514 $ 267,631
Investing activities....................... (32,928) (192,112) (461,938) (1,423,009) (2,291,169)
Financing activities....................... 11,683 154,633 414,087 1,297,019 2,019,210
</TABLE>

See accompanying notes to Selected Consolidated Financial Data

28
<PAGE> 29

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA

(1) Consists of a one-time charge related to the resignation of Scott K.
Ginsburg as President and Chief Executive Officer of the Company and Matthew
E. Devine as Senior Vice President and Chief Financial Officer of the
Company and new employment agreements entered into with certain members of
executive management.

(2) For 1997, represents preferred stock dividends on the 12% Preferred Stock
and the 12 1/4% Preferred Stock for the period September 5, 1997 to December
31, 1997. For 1998, represents preferred stock dividends on the 12%
Preferred Stock for the period from January 1, 1998 through May 13, 1998 and
on the 12 1/4% Preferred Stock for the period from January 1, 1998 through
July 23, 1998. Such preferred stock was issued by CMCLA on September 5, 1997
in exchange for the substantially identical securities of Chancellor Radio
Broadcasting Company, which was merged into CMCLA.

(3) Extraordinary losses consist of charges incurred in connection with various
refinancings. These charges are reported net of the related tax benefit.

(4) For the years ended December 31, 1994, 1995 and 1996, represents preferred
stock dividends on the Company's formerly outstanding convertible preferred
stock. For the years ended December 31, 1997 and 1998, represents preferred
stock dividends on the $3.00 Convertible Exchangeable Preferred Stock
(issued on June 16, 1997) and preferred stock dividends on the 7%
Convertible Preferred Stock (issued on September 5, 1997).

(5) Gives effect to the two-for-one common stock split effected in the form of a
stock dividend paid on January 12, 1998 and to the three-for-two common
stock split effected in the form of a stock dividend paid on August 26,
1996, retroactively adjusted for all periods presented.

(6) The current portion of the Company's long-term debt was $4,000, $4,000,
$26,500, $0 and $0 at December 31, 1994, 1995, 1996, 1997 and 1998,
respectively.

(7) EBITDA, before non-cash and non-recurring charges consists of operating
income or loss excluding depreciation and amortization and non-cash and
non-recurring charges. Although EBITDA, before non-cash and non-recurring
charges is not calculated in accordance with generally accepted accounting
principles, Chancellor Media believes that EBITDA, before non-cash and
non-recurring charges is widely used by analysts, investors and others in
the broadcast industry as a measure of operating performance. In addition,
EBITDA, before non-cash and non-recurring charges is one of the financial
measures by which certain covenants under Chancellor Media's indentures
governing its long-term indebtedness are calculated. Nevertheless, this
measure should not be considered in isolation or as a substitute for
operating income, cash flows from operating activities or any other measure
for determining Chancellor Media's operating performance or liquidity that
is calculated in accordance with generally accepted accounting principles.
EBITDA, before non-cash and non-recurring charges does not take into account
Chancellor Media's debt service requirements and other commitments and,
accordingly, EBITDA, before non-cash and non-recurring charges is not
necessarily indicative of amounts that may be available for reinvestment in
Chancellor Media's business or other discretionary uses. In addition,
Chancellor Media's calculation of EBITDA, before non-cash and non-recurring
charges is not necessarily comparable to similarly titled measures reported
by other companies.

29
<PAGE> 30

CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1994 1995 1996 1997 1998
-------- --------- ---------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Gross revenues...................... $125,478 $ 186,365 $ 337,405 $ 663,804 $ 1,440,357
Net revenues........................ 109,516 162,931 293,850 582,078 1,273,856
Operating expenses excluding
depreciation and amortization.... 68,852 97,674 174,344 316,248 682,061
Depreciation and amortization....... 30,596 47,005 93,749 185,982 446,338
Corporate general and administrative
expense.......................... 2,672 4,475 7,797 21,442 36,722
Executive severance charge(1)....... -- -- -- -- 63,661
-------- --------- ---------- ----------- -----------
Operating income.................... 7,396 13,777 17,960 58,406 45,074
Interest expense.................... 13,809 19,199 37,527 85,017 217,136
Gain on disposition of assets....... (6,991) -- -- (18,380) (123,845)
Gain on disposition of
representation contracts......... -- -- -- -- (32,198)
Other (income) expense, net......... 539 236 (477) (1,539) (18,871)
-------- --------- ---------- ----------- -----------
Income (loss) before income taxes
and extraordinary item........... 39 (5,658) (19,090) (6,692) 2,852
Income tax expense (benefit)........ -- 192 (2,896) 7,802 33,751
-------- --------- ---------- ----------- -----------
Income (loss) before extraordinary
item............................. 39 (5,850) (16,194) (14,494) (30,899)
Extraordinary loss, net of tax
benefit(2)....................... 3,585 -- -- 4,350 47,089
-------- --------- ---------- ----------- -----------
Net loss............................ (3,546) (5,850) (16,194) (18,844) (77,988)
Preferred stock dividends(3)........ -- -- -- 12,901 17,601
-------- --------- ---------- ----------- -----------
Net loss attributable to common
stock............................ $ (3,546) $ (5,850) $ (16,194) $ (31,745) $ (95,589)
======== ========= ========== =========== ===========
CONSOLIDATED BALANCE SHEET DATA AT
YEAR-END:
Working capital..................... $ 15,952 $ 30,556 $ 41,421 $ 112,724 $ 188,193
Intangible assets (net of
accumulated amortization)........ 233,494 458,787 853,643 4,404,443 5,056,047
Total assets........................ 297,990 552,347 1,020,959 4,968,875 7,227,907
Long-term debt (including current
portion)(4)...................... 174,000 201,000 358,000 2,573,000 4,096,000
Redeemable preferred stock.......... -- -- -- 331,208 --
Stockholder's equity................ 112,353 304,577 549,411 1,480,207 2,391,830
OTHER FINANCIAL DATA:
EBITDA, before non-cash and non-
recurring charges(5)............. $ 37,992 $ 60,782 $ 111,709 $ 244,388 $ 555,073
CASH FLOWS RELATED TO:
Operating activities................ $ 19,880 $ 39,693 $ 47,481 $ 139,514 $ 267,631
Investing activities................ (32,928) (192,112) (461,938) (1,423,009) (2,291,169)
Financing activities................ 11,683 154,633 414,087 1,297,019 2,019,210
</TABLE>

See accompanying notes to Selected Consolidated Financial Data

30
<PAGE> 31

CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA

(2) Extraordinary losses consist of charges incurred in connection with various
refinancings. These charges are reported net of the related tax benefit.

(3) For 1997, represents preferred stock dividends on the 12% Preferred Stock
and the 12 1/4% Preferred Stock for the period September 5, 1997 to December
31, 1997. For 1998, represents preferred stock dividends on the 12%
Preferred Stock for the period from January 1, 1998 through May 13, 1998 and
on the 12 1/4% Preferred Stock for the period from January 1, 1998 through
July 23, 1998. Such preferred stock was issued by CMCLA on September 5, 1997
in exchange for the substantially identical securities of Chancellor Radio
Broadcasting Company, which was merged into CMCLA.

(4) The current portion of the Company's long-term debt was $4,000, $4,000,
$26,500, $0 and $0 at December 31, 1994, 1995, 1996, 1997 and 1998,
respectively.

(5) EBITDA, before non-cash and non-recurring charges consists of operating
income or loss excluding depreciation and amortization and non-cash and
non-recurring charges. Although EBITDA, before non-cash and non-recurring
charges is not calculated in accordance with generally accepted accounting
principles, CMCLA believes that EBITDA, before non-cash and non-recurring
charges is widely used by analysts, investors and others in the broadcast
industry as a measure of operating performance. In addition, EBITDA, before
non-cash and non-recurring charges is one of the financial measures by which
certain covenants under CMCLA's indentures governing its long-term
indebtedness are calculated. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, cash flows
from operating activities or any other measure for determining CMCLA's
operating performance or liquidity that is calculated in accordance with
generally accepted accounting principles. EBITDA, before non-cash and
non-recurring charges does not take into account CMCLA's debt service
requirements and other commitments and, accordingly, EBITDA, before non-cash
and non-recurring charges is not necessarily indicative of amounts that may
be available for reinvestment in CMCLA's business or other discretionary
uses. In addition, CMCLA's calculation of EBITDA, before non-cash and
non-recurring charges is not necessarily comparable to similarly titled
measures reported by other companies.

31
<PAGE> 32

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

REVIEW OF STRATEGIC ALTERNATIVES

Executive Management Realignment. On March 15, 1999, the Company announced
the following executive management changes:

- the appointments of Thomas O. Hicks as Chief Executive Officer of the
Company, of James E. de Castro as President and Chief Executive Officer
of a newly created Chancellor Radio and Outdoor Group and of R. Steven
Hicks, currently President and Chief Executive Officer of Capstar, as
President and Chief Executive Officer of the newly created Chancellor
Media Services Group;

- the creation of an Office of the Chairman of the Company's Board of
Directors, in which Mr. de Castro and Mr. Steven Hicks will join the
Company's Chairman, Mr. Thomas Hicks, as Vice Chairmen;

- the resignation of Jeffrey A. Marcus as the Company's President and Chief
Executive Officer effective March 15, 1999;

- the appointments of Kenneth J. O'Keefe as Chief Operating Officer of
Chancellor Radio Group and James A. McLaughlin as President and Chief
Operating Officer of Chancellor Outdoor Group;

- the resignation of Eric C. Neuman as the Company's Senior Vice
President -- Strategic Development effective March 15, 1999;

32
<PAGE> 33

GENERAL

Since 1995, the Company has engaged in an acquisition strategy
concentrating on expanding its presence in the nation's largest radio markets.
The Company's portfolio of radio stations that it owned and/or operated as of
December 31, 1996, 1997 and 1998 follows:

<TABLE>
<CAPTION>
MSA
MARKET RANK(1) 1996 1997 1998
- ------ ------- ---- ---- ----
<S> <C> <C> <C> <C>
New York...................................... 1 1 4 5
Los Angeles................................... 2 1 5 5
Chicago....................................... 3 7 7 7
San Francisco................................. 4 5 7 7
Philadelphia.................................. 5 2 6 6
Detroit....................................... 6 5 7 7
Dallas/Ft. Worth.............................. 7 1 4 6
Boston........................................ 8 3 3 3
Washington, D.C. ............................. 9 3 8 8
Houston....................................... 10 2 4 8
Miami/Ft. Lauderdale.......................... 11 2 2 2
Atlanta....................................... 12 -- 1 1
Puerto Rico................................... 13 -- -- 8
Phoenix....................................... 15 -- 6 8
San Diego..................................... 16 -- -- 2
Nassau/Suffolk (Long Island).................. 17 -- 2 2
Minneapolis/St. Paul.......................... 18 -- 7 7
Pittsburgh.................................... 21 -- 2 6
Denver........................................ 23 -- 5 6
Cleveland..................................... 24 -- -- 1
Cincinnati.................................... 26 -- 4 4
Sacramento.................................... 28 -- 4 4
Riverside/San Bernardino...................... 29 -- 2 2
Charlotte..................................... 37 6 -- --
Orlando....................................... 39 -- 4 4
Jacksonville.................................. 52 -- 2 --
-- -- ---
Total............................... 38 96 119
== == ===
</TABLE>

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

(1) Metropolitan Statistical Area ("MSA") rank obtained from BIA Research-Master
Access Pro, Version 2.5 Radio Analysis Database (current as of February 24,
1999), based upon 1998 gross revenue for the indicated markets.

The Company will significantly increase its radio broadcasting presence
upon consummation of the Capstar Merger, which is expected to be completed in
the second or third quarter of 1999. The Capstar Merger will increase the
Company's portfolio to approximately 465 radio stations serving 105 markets,
thereby creating the nation's largest radio broadcasting company.

The Company entered the media representation business with the acquisition
of Katz in October 1997, and further broadened its media presence by entering
the outdoor advertising business with the acquisition of Martin in July 1998 and
Whiteco in December 1998.

The Company's results of operations from period to period have not
historically been comparable because of the impact of the various acquisitions
and dispositions that the Company has completed. For a discussion of the various
transactions completed and agreements entered into since January 1, 1996 as part
of the Company's acquisition strategy, see Note 2 to the Consolidated Financial
Statements included elsewhere in this Form 10-K.

33
<PAGE> 34

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Net revenues for the year ended December 31, 1998 increased 118.8% to $1.3
billion compared to $582.1 million for the year ended December 31, 1997.
Operating expenses excluding depreciation and amortization for 1998 increased
115.7% to $682.1 million compared to $316.2 million in 1997. The increase in net
revenues and operating expenses was primarily attributable to the net impact of
the various acquisitions and dispositions discussed elsewhere herein, in
addition to the overall net operational improvements realized by the Company.

Depreciation and amortization for 1998 increased 140.0% to $446.3 million
compared to $186.0 million in 1997. The increase is primarily due to the impact
of the acquisitions completed during 1998.

Corporate general and administrative expenses for 1998 increased 71.3% to
$36.7 million compared to $21.4 million in 1997. The increase is due to the
growth of the Company, and related increase in properties and staff, primarily
due to recent acquisitions.

The executive severance charge of $63.7 million for 1998 includes one-time
charges incurred in connection with the resignation of Scott K. Ginsburg as
President and Chief Executive Officer of the Company and Matthew E. Devine as
Senior Vice President and Chief Financial Officer and new employment agreements
entered into with certain members of executive management.

As a result of the above factors, operating income for 1998 decreased 22.8%
to $45.1 million compared to $58.4 million in 1997.

Interest expense for 1998 increased 155.4% to $217.1 million compared to
$85.0 million in 1997. The net increase in interest expense was primarily due to
(i) additional bank borrowings under the senior credit facility required to
finance the various acquisitions discussed elsewhere herein offset by repayment
of borrowings from the net proceeds of the March 13, 1998 offering of 21,850,000
shares of common stock; (ii) the assumption of the 9 3/8% Senior Subordinated
Notes due 2004 (the "9 3/8% Notes") and 8 3/4% Senior Subordinated Notes due
2007 (the "8 3/4% Notes") upon consummation of the merger with Chancellor
Broadcasting Company on September 5, 1997; (iii) the assumption of 10 1/2%
Senior Subordinated Notes due 2007 (the "10 1/2% Notes") upon consummation of
the acquisition of Katz on October 28, 1997; (iv) the issuance of the 8 1/8%
Senior Subordinated Notes due 2007 (the "8 1/8% Notes") by CMCLA on December 22,
1997; (v) the issuance of the 9% Senior Subordinated Notes due 2008 by CMCLA on
September 30, 1998; and (vi) the issuance of the 8% Senior Notes due 2008 by
CMCLA on November 17, 1998.

The Company recorded a gain on disposition of assets of $123.8 million in
1998 related to the exchange of WTOP-AM and WGMS-FM in Washington and KZLA-FM in
Los Angeles plus $63.0 million in cash for WTJM-FM in New York, KLDE-FM in
Houston and KBIG-FM in Los Angeles. The Company recorded a gain on disposition
of assets of $18.4 million in 1997 related to the dispositions of WNKS-FM in
Charlotte ($3.5 million), WPNT-FM in Chicago ($0.5 million), WEJM-FM in Chicago
($9.3 million), WEJM-AM in Chicago ($3.4 million) and the FCC authorizations and
certain transmission equipment previously used in the operation of KYLD-FM in
San Francisco ($1.7 million).

The Company recorded a gain on disposition of representation contracts of
$32.2 million in 1998 related to its media representation operations. A buyout
agreement is typically entered into for the purchase of representation contracts
by a successor representation firm. The purchase price paid by the successor
representation firm is based upon the historic commission income projected over
the remaining contract period, including the evergreen or notice period, plus
two months. The gain represents the sales proceeds received from a successor
representation firm for the buyout of an existing media representation contract,
net of any remaining deferred costs associated with obtaining the original
representation contract. While the consolidation of the radio broadcasting
industry has resulted in an increase in buyout activity, the impact on future
periods cannot be predicted.

34
<PAGE> 35

The provision for income tax expense of $33.8 million for the year ended
December 31, 1998 is comprised of current federal and state income taxes of $5.0
million and a deferred federal income tax expense of $28.8 million.

The Company recorded an extraordinary charge of $47.1 million, net of a tax
benefit of $25.4 million, consisting of the premiums, estimated transaction
costs and the write-off of the unamortized balance of deferred debt issuance
costs in connection with the tender offer for the 12% Subordinated Exchange
Debentures due 2009 and the tender offer for the 12 1/4% Subordinated Exchange
Debentures due 2008. The Company recorded an extraordinary charge of $4.4
million, net of a tax benefit of $2.3 million, in 1997, consisting of the
write-off of the unamortized balance of deferred debt issuance costs related to
the amendment and restatement of the Company's senior credit facility on April
25, 1997.

Dividends on preferred stock of subsidiary increased $4.7 million to $17.6
million in 1998 compared to $12.9 million in 1997. The preferred stock of
subsidiaries consisted of (i) CMCLA's 12% Exchangeable Preferred Stock (the "12%
Preferred Stock") which was issued in September 1997 as part of the merger with
Chancellor Broadcasting Company and was subsequently exchanged in May 1998 for
CMCLA's 12% Debentures and (ii) CMCLA's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") which was issued in
September 1997 as part of the merger with Chancellor Broadcasting Company and
was subsequently exchanged in July 1998 for CMCLA's 12 1/4% Debentures.

Dividends on Chancellor Media's preferred stock were $25.7 million in 1998
compared to $12.2 million in 1997. The increase is due to the issuance of the
Chancellor Media $3.00 convertible exchangeable preferred stock in June 1997 and
the issuance of the Chancellor Media 7% convertible preferred stock in September
1997 as part of the merger with Chancellor Broadcasting Company.

As a result of the above factors, the Company incurred a $121.3 million net
loss attributable to common stockholders in 1998 compared to a $43.9 million net
loss in 1997.

The basic and diluted net loss per common share in 1998 was $0.88 compared
to a $0.46 basic and diluted loss per common share in 1997.

See Note 14 to the Consolidated Financial Statements included elsewhere in
this Form 10-K for additional information on the Company's business segments.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Net revenues for the year ended December 31, 1997 increased 98.1% to $582.1
million compared to $293.9 million for the year ended December 31, 1996.
Operating expenses excluding depreciation and amortization for 1997 increased
81.4% to $316.2 million compared to $174.3 million in 1996. The increase in net
revenues and operating expenses was primarily attributable to the net impact of
the various acquisitions and dispositions discussed elsewhere herein, in
addition to the overall net operational improvements realized by the Company.

Depreciation and amortization for 1997 increased 98.4% to $186.0 million
compared to $93.7 million in 1996. The increase is primarily due to the impact
of the Viacom Acquisition and the merger with Chancellor Broadcasting Company,
as well as other acquisitions completed during 1997.

Corporate general and administrative expenses for 1997 increased 175.0% to
$21.4 million compared to $7.8 million in 1996. The increase is due to the
growth of the Company, and related increase in properties and staff, primarily
due to recent acquisitions.

As a result of the above factors, operating income for 1997 increased
225.2% to $58.4 million compared to $18.0 million in 1996.

Interest expense for 1997 increased 126.6% to $85.0 million compared to
$37.5 million in 1996. The net increase in interest expense was primarily due to
(i) additional bank borrowings under the senior credit facility required to
finance the various acquisitions discussed elsewhere offset by repayment of
borrowings from the net proceeds of the Company's various radio station
dispositions; (ii) the assumption of the 9 3/8% Notes and

35
<PAGE> 36

the 8 3/4% Notes upon consummation of the merger with Chancellor Broadcasting
Company on September 5, 1997; and (iii) the assumption of the 10 1/2% Notes upon
consummation of the acquisition of Katz on October 28, 1997.

The Company recorded a gain on disposition of assets of $18.4 million in
1997 related to the dispositions of WNKS-FM in Charlotte ($3.5 million), WPNT-FM
in Chicago ($0.5 million), WEJM-FM in Chicago ($9.3 million), WEJM-AM in Chicago
($3.4 million) and the FCC authorizations and certain transmission equipment
previously used in the operation of KYLD-FM in San Francisco ($1.7 million).

The provision for income tax expense of $7.8 million for the year ended
December 31, 1997 is comprised of current federal and state income taxes of $6.8
million and $4.8 million, respectively, and a deferred federal income tax
benefit of $3.8 million.

The Company recorded an extraordinary charge of $4.4 million (net of a tax
benefit of $2.3 million) in 1997, consisting of the write-off of the unamortized
balance of deferred debt issuance costs related to the amendment and restatement
of the Company's senior credit facility on April 25, 1997.

Dividends on preferred stock of subsidiary were $12.9 million in 1997,
representing dividends on CMCLA's 12% Preferred Stock and 12 1/4% Preferred
Stock issued in September 1997 as part of the merger with Chancellor
Broadcasting Company.

Dividends on Chancellor Media's preferred stock were $12.2 million in 1997
compared to $3.8 million in 1996. The increase in dividends is due to the
issuance of Chancellor Media's $3.00 Convertible Preferred Stock in June 1997
and the issuance of Chancellor Media's 7% Convertible Preferred Stock in
September 1997 as part of the merger with Chancellor Broadcasting Company,
offset by the conversion of a total of 1,608,297 shares of Chancellor Media's
formerly outstanding convertible exchangeable preferred stock into a total of
10,051,832 shares of Chancellor Media's Common Stock and the redemption of the
remaining 1,703 shares of formerly outstanding convertible exchangeable
preferred stock during 1996.

As a result of the above factors, the Company incurred a $43.9 million net
loss attributable to common stockholders in 1997 compared to a $20.0 million net
loss in 1996.

The basic and diluted net loss per common share in 1997 was $0.46 compared
to a $0.33 basic and diluted loss per common share in 1996.

LIQUIDITY AND CAPITAL RESOURCES

Overview. The Company historically has generated sufficient cash flow from
operations to finance its existing operational requirements and debt service
requirements, and the Company anticipates that this will continue to be the
case. Operating activities provided net cash of $267.6 million in 1998, $139.5
million in 1997 and $47.5 million in 1996. The Company historically has used the
proceeds of bank debt and private and public debt and equity offerings,
supplemented by cash flow from operations not required to fund operational
requirements and debt service, to fund implementation of the Company's
acquisition strategy.

The total cash financing required to consummate the Pending Transactions is
expected to be up to $434.3 million. The Company expects to receive $21.0
million in cash from the completion of the disposition of WMVP-AM in Chicago.
Accordingly, the Company will require up to at least $413.3 million in
additional financing to consummate the Pending Transactions. Although there can
be no assurance, the Company expects that $90.0 million of such amount will be
required to be borrowed during the second quarter of 1999 for the acquisition of
Phoenix. The remaining $344.3 million may be required to be borrowed for the
Capstar/ SFX Transaction over the three year period in which the Capstar/SFX
Stations will be acquired. As the result of the Company's pending merger with
Capstar, however, the Company is currently evaluating the treatment of the
Capstar/SFX Transaction assuming the Capstar merger is completed. Accordingly,
it is unclear when such amounts would be required to be borrowed by the Company,
if at all. Depending on the timing of the consummation of the Pending
Transactions and the status of the Capstar merger, the Company may need to
obtain additional financing.

36
<PAGE> 37

The Company believes that amounts available under the senior credit
facility will be used to finance the remaining Pending Transactions as well as
future acquisitions. The senior credit facility currently provides for a total
commitment of $2.5 billion, consisting of a $1.6 billion revolving credit
facility and a $900.0 million term loan facility. At March 1, 1999, the Company
had drawn $999.0 million of the revolving credit facility and $900.0 million of
the term loan facility. Other potential sources of financing for the Pending
Transactions and future acquisitions include cash flow from operations,
additional debt or equity financings, the sale of non-core assets or a
combination of those sources.

In addition to debt service requirements under the senior credit facility,
the Company is required to pay interest on CMCLA's senior notes and senior
subordinated notes. Interest payment requirements on these notes are $214.9
million per year. Cash dividend requirements of the Company on Chancellor
Media's $3.00 convertible exchangeable preferred stock and 7% convertible
preferred stock are $25.7 million per year. Because the Company is a holding
company with no significant assets other than the common stock of Chancellor
Mezzanine Holdings Corporation, the Company will rely solely on dividends from
Chancellor Mezzanine Holdings Corporation, which in turn is expected to
distribute dividends paid to it by CMCLA and other subsidiaries to the Company,
to permit the Company to pay cash dividends on the $3.00 convertible
exchangeable preferred stock and the 7% convertible preferred stock. The senior
credit facility and the indentures governing the senior notes and senior
subordinated notes limit, but do not prohibit, CMCLA from paying such dividends
to Chancellor Mezzanine Holdings Corporation.

For additional information regarding the senior credit facility, the notes,
the redeemable preferred stock and the preferred stock see Notes 7, 8 and 9,
respectively, to the Consolidated Financial Statements included elsewhere in
this Annual Report on Form 10-K.

FORWARD LOOKING STATEMENTS

Certain statements used in the preceding and following discussion and
elsewhere in this Annual Report on Form 10-K are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements about the financial condition, prospects, operations and
business of the Company are generally accompanied by words such as "believes,"
"expects," "plans," "anticipates," "intends," "likely," "estimates," or similar
expressions. These forward-looking statements are subject to risks,
uncertainties and other factors, some of which are beyond the control of the
Company, that could cause actual results to differ materially from those
forecast or anticipated in such forward-looking statements.

These risks, uncertainties and other factors include, but are not limited
to: the potential negative consequences of the substantial indebtedness of the
Company; the restrictions imposed on the Company and its subsidiaries by the
agreements governing its debt instruments; the competitive nature of the radio
broadcasting, outdoor advertising and media representation businesses; the
potential adverse effects on licenses and ownership of regulation of the radio
broadcasting industry; the difficulty of integrating substantial acquisitions
and entering new lines of business; the potential loss of outdoor advertising
space due to the regulation of outdoor advertising; the potential loss of
advertisers due to tobacco and alcohol industry regulation; and the control of
the Company by affiliates of Hicks, Muse, Tate & Furst Incorporated and
potential conflicts of interest relating thereto.

Because such forward-looking statements are subject to risks and
uncertainties, readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's view only as of the date
of this Annual Report on Form 10-K. The Company undertakes no obligation to
update such statements or publicly release the result of any revisions to these
forward-looking statements which it may make to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated or
unforeseen events.

RECENTLY-ISSUED ACCOUNTING PRINCIPLE

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement

37
<PAGE> 38

establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. Management does not anticipate that
this Statement will have a material impact on the Company's consolidated
financial statements.

YEAR 2000 ISSUE

The Year 2000 ("Y2K") issue is whether the Company's computer systems will
properly recognize date sensitive information when the year changes to 2000, or
"00." Systems that do not properly recognize such information could generate
erroneous data or cause a system to fail.

The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Y2K issue and has developed
an implementation plan. The Company uses purchased software programs for
corporate financial reporting, radio broadcasting operations and media
representation operations. The companies providing these software programs are
Y2K compliant, and the Company has received Y2K compliance certificates from
these software vendors. The Company uses proprietary software programs for its
outdoor advertising operations and is in the process of reviewing various
modifications and replacement plans. The Company estimates that approximately 30
percent of the outdoor systems' Y2K remediation has been completed as of March
1, 1999. The remaining remediation efforts are expected to be completed by the
end of the third quarter of 1999. The Company's Y2K implementation plan also
includes ensuring that its computer hardware and other equipment with embedded
chips or processors are Y2K compliant.

Costs associated with ensuring that the Company's existing systems are Y2K
compliant and replacing certain existing systems are currently expected to be
approximately $3.7 million, of which $0.8 million has been incurred through
March 1, 1999. These costs, in conjunction with investments the Company is
making in information systems and technology, are expected to reduce the risks
associated with Y2K issues. Future costs are to be funded through the Company's
operating cash flow.

In addition, the Company reviews the computer systems of companies it
intends to acquire in order to assess whether the systems are Y2K compliant. To
the extent the systems are not Y2K compliant, the Company will develop an
implementation plan to ensure the systems are Y2K compliant or will convert the
systems to the Company's computer systems which are Y2K compliant. The Company
continues its comprehensive review of the computer systems related to the
pending merger with Capstar, expected to be consummated in the second quarter or
early third quarter of 1999. The Company is in the process of reviewing various
modifications and replacement plans related to the pending merger with Capstar.
The costs associated with such efforts may be material. There is no guarantee
that the systems of companies to be acquired by the Company in the future will
be timely converted and would not have an adverse effect on the operations of
the Company.

The ability of third parties with whom the Company transacts business to
adequately address their Y2K issues is outside of the Company's control.
Therefore, there can be no assurance that the failure of such third parties to
adequately address their Y2K issues will not have a material adverse effect on
the Company's business, financial condition, cash flows and results of
operations. The Company has begun development of contingency plans intended to
mitigate any possible disruption in business that may result from certain of the
Company's systems or the systems of third parties that are not Y2K compliant.

The Y2K cost estimates are subject to change based on further analysis, and
any change in the costs may be material. As solutions are implemented and new
issues are recognized, the focus of the Company's efforts and costs to address
the Y2K issue may be adjusted. Furthermore, the Company cannot guarantee that
there will be no Y2K issues in spite of these efforts and if such modifications
and replacements are not made, or are not completed in time, the Y2K issue could
have a material impact on the Company's operations.

38
<PAGE> 39

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK MANAGEMENT

The Company's exposure to market risk associated with changes in interest
rates relates primarily to its debt obligations. The Company manages its
interest rate risk through a combination of fixed and floating rate debt and
swap agreements.

The following table presents descriptions of the financial instruments and
derivative instruments that are held by the Company at December 31, 1998 which
are sensitive to interest rate fluctuation. For the outstanding debt, the table
presents required principal cash flows by maturity date and the related average
interest rate. For the interest rate swaps and collars, the table presents the
notional amounts and expected interest rates that exist by contractual dates,
and the notional amount is used to calculate the contractual payments to be
exchanged under the contract. The variable rates are estimated based on implied
forward rates in the yield curve at the reporting date. See Note 12 to the
Consolidated Financial Statements included elsewhere in this Form 10-K for the
methods and assumptions used to estimate the fair value of the financial
instruments shown below.

<TABLE>
<CAPTION>
FAIR VALUE
1999 2000 2001 2002 2003 THEREAFTER TOTAL OF LIABILITY
-------- -------- -------- -------- -------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt (U.S.
$).................... $ -- $ -- $ -- $ -- $ -- $2,500,000 $2,500,000 $2,565,750
Average interest rate... -- -- -- -- -- 8.60% 8.60%
Variable rate debt (U.S.
$).................... $ -- $ 67,500 $157,500 $180,000 $316,000 $ 875,000 $1,596,000 $1,596,000
Average interest
rate................ -- 6.87% 6.93% 6.99% 7.04% 7.09% 6.98%
Interest rate swaps
(variable to fixed)
Notional amount....... $910,000 $450,000 $300,000 $ -- $ -- $ -- $1,660,000 $ 11,345
Average pay rate...... 6.12% 5.82% 5.13% -- -- -- 5.86%
Average receive
rate................ 5.00% 5.02% 5.46% -- -- -- 5.09%
Interest rate collars
Notional amount....... $ -- $150,000 $ -- $ -- $ -- $ -- $ 150,000 $ 1,454
Average pay rate...... -- 5.50% -- -- -- -- 5.50%
Average receive
rate................ -- 5.16% -- -- -- -- 5.16%
</TABLE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by this Item is included beginning on Page F-1
of this Annual Report on Form 10-K.

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

KPMG LLP ("KPMG") has previously served as the auditors for Chancellor
Media, CMCLA and their respective subsidiaries and has previously advised
Chancellor Media, CMCLA and their respective subsidiaries on federal, state and
local tax matters. After an evaluation by management of services provided by
other independent accounting firms, Chancellor Media and CMCLA dismissed KPMG as
their independent accountants on September 23, 1997, and engaged
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as the new independent
accountants for Chancellor Media, CMCLA and their respective subsidiaries as of
such date. The decision to dismiss KPMG was approved by the Board of Directors
of Chancellor Media and CMCLA.

KPMG's reports on the financial statements of Chancellor Media, CMCLA and
their respective subsidiaries for 1996 and 1995 did not contain an adverse
opinion or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During the two most recent
fiscal years of Chancellor Media, CMCLA and their respective subsidiaries and
the subsequent interim period preceding the dismissal, there were no
disagreements with KPMG on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of KPMG, would have caused
KPMG to make reference to the subject matter of the

39
<PAGE> 40

disagreements in connection with its report. In addition, during the two most
recent fiscal years of Chancellor Media, CMCLA and their respective subsidiaries
and the subsequent interim period preceding the dismissal, there were no events
of the type requiring disclosure under Item 304(a)(1)(v) of Regulation S-K.

During 1996 and 1995 and the subsequent interim period preceding the
dismissal of KPMG, Chancellor Media, CMCLA and their respective subsidiaries did
not consult with PricewaterhouseCoopers regarding (i) the application of
accounting principles to a specified transaction (either completed or proposed),
(ii) the type of audit opinion that might be rendered on the financial
statements of Chancellor Media, CMCLA and their respective subsidiaries or (iii)
any matter that was the subject of a "disagreement" or a "reportable event" (as
each term is defined in Item 304(a)(2)(ii) of Regulation S-K). However,
PricewaterhouseCoopers previously served as the independent accountants for
Chancellor and CRBC. In connection with the Chancellor Merger, Chancellor Media
and CMCLA discussed with PricewaterhouseCoopers various financial statement
issues related to its historical association with Chancellor and CRBC, and also
discussed the various filings submitted by Chancellor Media, CMCLA, Chancellor
and CRBC to the Securities and Exchange Commission in respect of the Chancellor
Merger, which filings included or incorporated by reference the financial
statements of Chancellor Media, CMCLA, Chancellor and CRBC.

Chancellor Media and CMCLA previously provided KPMG with a copy of the
disclosures they made with respect to the change in accountants in connection
with the Current Report on Form 8-K, dated September 23, 1997 and filed
September 29, 1997, of Chancellor Media and CMCLA. KPMG furnished Chancellor
Media and CMCLA with a letter addressed to the Commission stating that it agreed
with the statements made by Chancellor Media and CMCLA in such Current Report,
except that it was not in a position to agree or disagree with the stated
reasons for changing principal auditors, or with the statement that the change
was approved by the board of directors, or with the statements made in the third
paragraph of Item 4 of the Current Report on Form 8-K. A copy of KPMG's letter
is incorporated as Exhibit 16.1 herein by reference to the Current Report on
Form 8-K, dated September 23, 1997 and filed September 29, 1997, of Chancellor
Media and CMCLA.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS

Information required by this item is incorporated herein by reference from
the Company's definitive proxy statement for its 1999 Annual Meeting of
Stockholders. Information regarding the executive officers is included in Part I
of this report under the caption "Executive Officers of the Registrant."

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is incorporated herein by reference from
the Company's definitive proxy statement for its 1999 Annual Meeting of
Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this item is incorporated herein by reference from
the Company's definitive proxy statement for its 1999 Annual Meeting of
Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this item is incorporated herein by reference from
the Company's definitive proxy statement for its 1999 Annual Meeting of
Stockholders.

40
<PAGE> 41

PART IV

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

(a) 1. Financial Statements.

2. Financial Statement Schedules.

The financial statements and financial statement schedules listed
in the index to the Consolidated Financial Statements of Chancellor
Media and CMCLA that appear on Page F-1 of this Report on Form 10-K are
filed as part of this Report.

3. Exhibits.

The exhibits to this Report on Form 10-K are listed under item
14(c) below.

(b) Reports on Form 8-K.

Current Report on Form 8-K, dated December 1, 1998 and filed December
15, 1998, as amended on Form 8-K/A filed December 16, 1998, to announce the
acquisition of the outdoor advertising division of Whiteco Industries, Inc.

41
<PAGE> 42

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., and Evergreen Media Corporation of Los Angeles (See
table of contents for list of omitted schedules).
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles
and Evergreen Media Corporation of Chicago.
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM) (See
table of contents for list of omitted exhibits and
schedules).
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (See table of
contents for list of omitted schedules).
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19,1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund 11, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
</TABLE>

42
<PAGE> 43

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/ WBAV-FM/ WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and
Evergreen Media Corporation of Carolinaland, dated as of
December 5, 1996 (See table of contents for list of
omitted schedules).
2.34(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.36(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see
table of contents for list of omitted schedules and
exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen
Media Corporation of Los Angeles, dated as of February
19, 1997, amended and restated as of July 31, 1997.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA
and Capstar Broadcasting Corporation.
2.44(yy) -- Amendment No. 1, dated May 19, 1998, to Letter Agreement
dated February 20, 1998, between CMCLA and Capstar
Broadcasting Corporation.
2.45(yy) -- Unit and Stock Purchase Agreement by and among CMCLA,
Martin Media, L.P., Martin & MacFarlane, Inc., Nevada
Outdoor Systems, Inc., MW Sign Corp. and certain sellers
named therein, dated as of June 19, 1998 (see table of
contents for list of omitted schedules and exhibits).
2.46(yy) -- Agreement and Plan of Merger between Chancellor Media
Corporation and Ranger Equity Holdings Corporation dated
as of July 7, 1998.
2.47(yy) -- Asset Purchase Agreement: dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
</TABLE>

43
<PAGE> 44

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners LP., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.51(yy) -- Stock Purchase and Merger Agreement, dated July 9, 1998,
by and among Chancellor Media Corporation, Chancellor
Mexico LLC, Grupo Radio Centro, S.A. De C.V., and the
Selling Shareholders.
2.52(ddd) -- Agreement and Plan of Merger among Chancellor Media
Corporation, Capstar Broadcasting Corporation and CBC
Acquisition Company, Inc., dated as of August 26, 1998.
2.53(zz) -- Asset Purchase Agreement, dated August 30, 1998, by and
among Chancellor Media Corporation of Los Angeles,
Whiteco Industries Inc. and Metro Management Associates.
3.1C(ss) -- Amended and Restated Certificate of Incorporation of
Chancellor Media Corporation.
3.2B(ss) -- Amended and Restated Bylaws of Chancellor Media.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles).
3.3A(qq) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25, 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary Guaranty and
Subsidiary Pledge Agreement (see table of contents for
list of omitted schedules and exhibits).
4.11(z) -- First Amendment to Second Amended and Restated Loan
Agreement, dated June 26, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.16(bb) -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
</TABLE>

44
<PAGE> 45

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of CMCLA.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of CMCLA.
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of
CMCLA.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of CMCLA.
4.25(qq) -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.26(hh) -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.27(qq) -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.28(qq) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.29(qq) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.30(qq) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
4.34(uu) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
4.35(uu) -- Second Supplement Indenture, dated as of October 28,
1997, to the Amended and Restated Indenture dated October
28, 1997 governing the 10 1/2% Senior Subordinated Notes
due 2007 of CMCLA.
4.36(uu) -- Third Amendment to Second Amended and Restated Loan
Agreement, dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.38(vv) -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of CMCLA.
4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan
Agreement, dated May 1, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.40(yy) -- Sixth Amendment to Second Amended and Restated Loan
Agreement, dated July 31, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
</TABLE>

45
<PAGE> 46

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.41(zz) -- Indenture, dated as of September 30, 1998, governing the
9% Senior Subordinated Notes due 2008 of CMCLA.
4.42(aaa) -- Seventh Amendment to Second Amended and Restated Loan
Agreement, dated November 9, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.43(zz) -- Indenture, dated as of November 17, 1998, governing the
8% Notes due 2008 of CMCLA.
10.23(xx)+ -- Amended and Restated Chancellor Media Corporation Stock
Option Plan for Non-employee Directors.
10.26(n)+ -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.28(o)+ -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30(qq)+ -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31(qq)+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
10.32(qq)+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
10.33(qq)+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
10.34(qq)+ -- Second Amendment to Employment Agreement dated September
4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Kenneth J.
O'Keefe.
10.35(ii)+ -- Employment Agreement dated February 14, 1996 by and among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company and Steven Dinetz.
10.36(jj)+ -- Chancellor Broadcasting Company 1996 Stock Award Plan.
10.37(kk)+ -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
10.38(ll)+ -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Steven Dinetz.
10.39(mm)+ -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neuman.
10.40(nn)+ -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Marvin Dinetz.
10.41(oo)+ -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
10.44(vv)+ -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
10.45(vv)+ -- Employment Agreement dated April 29, 1998 by and among
Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Jeffrey A. Marcus.
10.46(yy)+ -- Chancellor Media Corporation 1998 Stock Option Plan.
10.47(yy)+ -- Voting Agreement, among Chancellor Media Corporation and
Ranger Equity Partners, L.P. dated as of July 7, 1998.
</TABLE>

46
<PAGE> 47

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.48(zz)+ -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James E. de Castro.
10.49(zz)+ -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Matthew E. Devine.
10.50(zz)+ -- Employment Agreement, dated as of June 1, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Eric C. Neuman.
10.51(zz)+ -- Employment Agreement, dated as of August 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James A. McLaughlin, Jr.
10.52(bbb)+ -- Agreement, dated as of January 6, 1999, among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles, Matthew E. Devine and Vicki Devine.
10.53(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Jeffrey A. Marcus.
10.54(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and James E. de Castro.
10.55(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Eric C. Neuman.
10.56(ccc)+ -- Employment Agreement, dated as of October 1, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Thomas P. McMillin.
10.57(ccc)+ -- Amendment No. 1 to Employment Agreement, dated as of
January 6, 1999, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Thomas P. McMillin.
10.58(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and James A. McLaughlin, Jr.
10.59*+ -- Agreement, dated as of March 15, 1999, between Jeffrey A.
Marcus, Nancy Cain Marcus, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.60*+ -- Agreement, dated as of March 15, 1999, between Eric C.
Neuman, Elizabeth M. Neuman, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.61*+ -- Agreement, dated as of March 15, 1999, between Thomas P.
McMillin, Brigette McMillin, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
16.1(pp) -- Letter from KPMG LLP to the Securities and Exchange
Commission dated September 29, 1997.
21.1(ccc) -- Subsidiaries of Chancellor Media Corporation.
</TABLE>

47
<PAGE> 48

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
21.2* -- Subsidiaries of Chancellor Media Corporation of Los
Angeles.
23.1* -- Consent of PricewaterhouseCoopers LLP.
23.2* -- Consent of KPMG LLP.
27.1* -- Financial Data Schedule of Chancellor Media Corporation.
27.2* -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>

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

* Filed herewith.

+ Compensatory plan or arrangement.

(a) Incorporated by reference to the identically numbered exhibit to the
Registration Statement on Form S-1, as amended (Reg. No. 33-60036), of
Evergreen Media Corporation ("Evergreen").

(f) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-4, as amended (Reg. No.
33-89838).

(h) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 14, 1995.

(i) Incorporated by reference to the identically numbered exhibit to
Evergreens Current Report on Form 8-K dated January 17, 1996.

(j) Incorporated by reference to the identically numbered exhibit to
Evergreens Quarterly Report on Form 10-Q for the quarterly period ending
June 30, 1995.

(k) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-1, as amended (Reg. No.
33-69752).

(n) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1995.

(o) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ending
March 31, 1996.

(p) Incorporated by reference to the identically numbered exhibit to
Evergreen's Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996.

(q) Incorporated by reference to the identically numbered exhibit to
Evergreen's Registration Statement on Form S-3, as amended (Reg. No.
333-12453).

(r) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated February 16, 1997 and filed
March 9, 1997.

(s) Incorporated by reference to the identically numbered exhibit to
Evergreen's Annual Report on Form 10-K for the fiscal year ended December
31, 1996.

(t) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated April 1, 1997 and filed May
9, 1997.

(y) Incorporated by reference to the identically numbered exhibit of
Evergreen's Registration Statement on Form S-4, filed August 1, 1997.

(z) Incorporated by reference to the identically numbered exhibit to
Evergreen's Current Report on Form 8-K dated July 7, 1997 and filed July
31, 1997.

(aa) Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.

(bb) Incorporated by reference to Exhibit 4.5 to the Annual Report on Form 10-K
of Chancellor Broadcasting Company, Chancellor Radio Broadcasting Company
and Chancellor Broadcasting Licensee Company for the fiscal year ended
December 31, 1995.

(cc) Incorporated by reference to Exhibit 4.6 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company, as filed on February 29, 1996.

48
<PAGE> 49

(dd) Incorporated by reference to Exhibit 4.7 to the Current Report on Form 8-K
of Chancellor Radio Broadcasting Company, as filed on February 6, 1997.

(ee) Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K
of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company as filed on July 17, 1997.

(ff) Incorporated by reference to the identically-numbered exhibit to the
Registration Statement on Form S-4 (Reg. No. 333-32259), dated July 29,
1997, as amended, of Evergreen Media Corporation of Los Angeles ("EMCLA").

(gg) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Evergreen and EMCLA for the quarterly
period ending June 30, 1997.

(hh) Incorporated by reference to Exhibit 4.8 to the Quarterly Report on Form
10-Q of Chancellor Broadcasting Company and Chancellor Radio Broadcasting
Company for the quarterly period ending March 31, 1997.

(ii) Incorporated by reference to Exhibit 10.6 to Chancellor Broadcasting
Company's Registration Statement on Form S-1 (Reg. No. 333-02782) filed
February 9, 1996.

(jj) Incorporated by reference to Exhibit 4.22 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.

(kk) Incorporated by reference to Exhibit 4.23 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.

(ll) Incorporated by reference to Exhibit 4.24 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.

(mm) Incorporated by reference to Exhibit 4.25 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.

(nn) Incorporated by reference to Exhibit 4.26 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.

(oo) Incorporated by reference to Exhibit 4.27 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-35039), dated September
5, 1997.

(pp) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
September 23, 1997 and filed as of September 29, 1997.

(qq) Incorporated by reference to the identically numbered exhibit to the
CMCLA's Registration Statement on Form S-4 (Reg. No. 333-36451), dated
September 26, 1997, as amended.

(ss) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
February 23, 1998 and filed as of February 27, 1998.

(tt) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor Media and the CMCLA for the
fiscal year ended December 31, 1997.

(uu) Incorporated by reference to the identically numbered exhibit to the
Annual Report on Form 10-K of Chancellor and CMCLA for the fiscal year
ended December 31, 1997.

(vv) Incorporated by reference to the identically numbered exhibit to CMCLA's
Registration Statement on Form S-4 (Reg. No. 333-50739), dated April 22,
1998, as amended.

(ww) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ending March 31, 1998.

(xx) Incorporated by reference to Exhibit 4.41 to Chancellor Media's
Registration Statement on Form S-8 (Reg. No. 333-53179), dated May 20,
1998.

(yy) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ending June 30, 1998.

(zz) Incorporated by reference to Exhibit 4.41 to CMCLA's Registration
Statement on Form S-4 (Reg. No. 333-66971), initially filed November 9,
1998, as amended.

49
<PAGE> 50

(aaa) Incorporated by reference to Exhibit 4.42 to the Quarterly Report on Form
10-Q of Chancellor Media and CMCLA for the quarterly period ending
September 30, 1998.

(bbb) Incorporated by reference to the identically numbered exhibit to the
Current Report on Form 8-K of Chancellor Media and CMCLA, dated as of
January 7, 1999 and filed as of January 7, 1999.

(ccc) Incorporated by reference to the identically numbered exhibit to
Chancellor Media's Registration Statement on Form S-4 (Reg. No.
333-72481), dated as of February 17, 1999, as amended.

(ddd) Incorporated by reference to the identically numbered exhibit to the
Quarterly Report on Form 10-Q of Chancellor Media and CMCLA for the
quarterly period ending September 30, 1998.

50
<PAGE> 51

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 30TH DAY OF
MARCH, 1999.

CHANCELLOR MEDIA CORPORATION
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES

By /s/ JAMES E. DE CASTRO
-----------------------------------
James E. de Castro
Vice Chairman and President
and Chief Executive Officer of
Chancellor Radio and Outdoor Group

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ THOMAS O. HICKS Chairman of the Board and March 25, 1999
- ----------------------------------------------------- Chief Executive Officer
Thomas O. Hicks (Principal Executive
Officer)

/s/ JAMES E. DE CASTRO Vice Chairman and President March 26, 1999
- ----------------------------------------------------- and Chief Executive
James E. de Castro Officer of Chancellor
Radio and Outdoor Group

/s/ R. STEVEN HICKS Vice Chairman and President March 25, 1999
- ----------------------------------------------------- and Chief Executive
R. Steven Hicks Officer of Chancellor
Media Services Group

/s/ ANDREA ARCHER HULCY Vice President, Controller March 30, 1999
- ----------------------------------------------------- (Principal Accounting
Andrea Archer Hulcy Officer)

/s/ OMAR A. CHOUCAIR Vice President, Finance March 30, 1999
- ----------------------------------------------------- (Principal Financial
Omar A. Choucair Officer)

/s/ STEVEN DINETZ Director March 28, 1999
- -----------------------------------------------------
Steven Dinetz

/s/ THOMAS J. HODSON Director March 26, 1999
- -----------------------------------------------------
Thomas J. Hodson

/s/ VERNON E. JORDAN, JR. Director March 29, 1999
- -----------------------------------------------------
Vernon E. Jordan, Jr.
</TABLE>

51
<PAGE> 52

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ MICHAEL J. LEVITT Director March 29, 1999
- -----------------------------------------------------
Michael J. Levitt

/s/ PERRY J. LEWIS Director March 25, 1999
- -----------------------------------------------------
Perry J. Lewis

/s/ JEFFREY A. MARCUS Director March 29, 1999
- -----------------------------------------------------
Jeffrey A. Marcus

/s/ JOHN H. MASSEY Director March 25, 1999
- -----------------------------------------------------
John H. Massey

/s/ LAWRENCE D. STUART, JR. Director March 25, 1999
- -----------------------------------------------------
Lawrence D. Stuart, Jr.

/s/ J. OTIS WINTERS Director March 29, 1999
- -----------------------------------------------------
J. Otis Winters
</TABLE>

52
<PAGE> 53

INDEX TO FINANCIAL STATEMENTS

(ITEM 14(a)1) AND ITEM 14(a)2)

<TABLE>
<S> <C>
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES
Report of Independent Accountants......................... F-2
Independent Auditors' Report.............................. F-3
Consolidated Balance Sheets as of December 31, 1997 and
1998................................................... F-4
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997................................ F-5
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, 1997 and 1998........... F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997
and 1998............................................... F-7
Notes to Consolidated Financial Statements................ F-8
Parent Company Condensed Balance Sheets as of December 31,
1997 and 1998.......................................... F-38
Parent Company Condensed Statements of Operations for the
years ended December 31, 1996, 1997 and 1998........... F-39
Parent Company Condensed Statements of Cash Flows for the
years ended December 31, 1996, 1997 and 1998........... F-40
Notes to Parent Company Condensed Financial Statements.... F-41
Schedule II -- Valuation and Qualifying Accounts.......... F-42
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES
Report of Independent Accountants......................... F-43
Independent Auditors' Report.............................. F-44
Consolidated Balance Sheets as of December 31, 1997 and
1998................................................... F-45
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997
and 1998............................................... F-46
Consolidated Statements of Stockholder's Equity for the
years ended December 31, 1996, 1997 and 1998........... F-47
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997
and 1998............................................... F-48
Notes to Consolidated Financial Statements................ F-49
Schedule II -- Valuation and Qualifying Accounts.......... F-77
</TABLE>

F-1
<PAGE> 54

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Shareholders of
Chancellor Media Corporation:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page F-1 present fairly, in all
material respects, the financial position of Chancellor Media Corporation and
subsidiaries at December 31, 1997 and 1998, and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
February 10, 1999, except as to Note 16,
which is as of March 15, 1999

F-2
<PAGE> 55

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Chancellor Media Corporation:

We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Chancellor Media Corporation (formerly
Evergreen Media Corporation) and subsidiaries for the year ended December 31,
1996. In connection with our audit of the consolidated financial statements, we
have also audited the financial statement schedules for the year ended December
31, 1996. These consolidated financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedules based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Chancellor Media Corporation and subsidiaries for the year ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

KPMG LLP

Dallas, Texas
January 31, 1997

F-3
<PAGE> 56

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)

ASSETS

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses (note 6)............ $ 178,415 $ 236,618
Long-term debt (note 7)..................................... 2,573,000 4,096,000
Deferred tax liabilities (note 10).......................... 361,640 453,134
Other liabilities........................................... 44,405 50,325
---------- ----------
Total liabilities................................. 3,157,460 4,836,077
---------- ----------
Commitments and contingencies (notes 2, 7 and 11)
Redeemable preferred stock (note 8):
Redeemable senior cumulative exchangeable preferred stock
of subsidiary, par value $.01 per share; 1,000,000
shares authorized, issued and outstanding in 1997;
liquidation preference of $121,274..................... 119,445 --
Redeemable cumulative exchangeable preferred stock of
subsidiary, par value $.01 per share; 3,600,000 shares
authorized and 2,117,629 shares issued and outstanding
in 1997; liquidation preference of $223,519............ 211,763 --
Stockholders' equity (note 9):
Preferred stock, $.01 par value. 2,200,000 shares of 7%
convertible preferred stock authorized, issued and
outstanding............................................ 110,000 110,000
Preferred stock, $.01 par value. 6,000,000 shares
authorized; 5,990,000 shares of $3.00 convertible
exchangeable preferred stock issued and outstanding.... 299,500 299,500
Common stock, $.01 par value. Authorized 200,000,000
shares; issued and outstanding 119,921,814 shares in
1997 and 142,847,674 shares in 1998.................... 1,199 1,428
Paid-in capital........................................... 1,226,930 2,259,583
Accumulated deficit....................................... (157,422) (278,681)
---------- ----------
Total stockholders' equity........................ 1,480,207 2,391,830
---------- ----------
$4,968,875 $7,227,907
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE> 57

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ----------
<S> <C> <C> <C>
Gross revenues.............................................. $337,405 $663,804 $1,440,357
Less agency commissions................................... 43,555 81,726 166,501
-------- -------- ----------
Net revenues........................................... 293,850 582,078 1,273,856
-------- -------- ----------
Operating expenses:
Operating expenses, excluding depreciation and
amortization........................................... 174,344 316,248 682,061
Depreciation and amortization............................. 93,749 185,982 446,338
Corporate general and administrative...................... 7,797 21,442 36,722
Executive severance charge (note 13)...................... -- -- 63,661
-------- -------- ----------
Operating expenses..................................... 275,890 523,672 1,228,782
-------- -------- ----------
Operating income....................................... 17,960 58,406 45,074
-------- -------- ----------
Other (income) expense:
Interest expense.......................................... 37,527 85,017 217,136
Interest income........................................... (477) (1,922) (15,650)
Gain on disposition of assets (note 2).................... -- (18,380) (123,845)
Gain on disposition of representation contracts........... -- -- (32,198)
Other (income) expense, net............................... -- 383 (3,221)
-------- -------- ----------
Other (income) expense, net............................ 37,050 65,098 42,222
-------- -------- ----------
Income (loss) before income taxes and extraordinary
item................................................. (19,090) (6,692) 2,852
Income tax expense (benefit) (note 10)...................... (2,896) 7,802 33,751
Dividends on preferred stock of subsidiary (note 8)......... -- 12,901 17,601
-------- -------- ----------
Loss before extraordinary item............................ (16,194) (27,395) (48,500)
Extraordinary loss, net of income tax benefit (notes 7 and
8)........................................................ -- 4,350 47,089
-------- -------- ----------
Net loss.......................................... (16,194) (31,745) (95,589)
Preferred stock dividends (note 9(a))....................... 3,820 12,165 25,670
-------- -------- ----------
Net loss attributable to common stockholders.............. $(20,014) $(43,910) $ (121,259)
======== ======== ==========
Basic and diluted loss per common share (notes 1(m) and 9):
Before extraordinary item................................. $ (.33) $ (.41) $ (.54)
Extraordinary item........................................ -- (.05) (.34)
-------- -------- ----------
Net loss.......................................... $ (.33) $ (.46) $ (.88)
======== ======== ==========
Weighted average common shares outstanding.................. 60,414 95,636 137,979
======== ======== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE> 58

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK
--------------------- -------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
---------- -------- ----------- ------ ---------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995...... 1,610,000 $ 80,500 49,859,058 $ 499 6,232,132 $62 $ 317,014 $ (93,498)
Issuance of Common Stock in
public offering (note 9(b)).... -- -- 18,000,000 180 -- -- 264,056 --
Conversion of 1993 Preferred
Stock (note 9(a)).............. (1,608,297) (80,415) 10,051,832 100 -- -- 80,315 --
Redemption of 1993 Preferred
Stock (note 9(a)).............. (1,703) (85) -- -- -- -- (5) --
Exercise of common stock options
(note 9(d)).................... -- -- 166,806 2 -- -- 700 --
Convertible preferred stock
dividends (note 9(a)).......... -- -- -- -- -- -- -- (3,820)
Net loss......................... -- -- -- -- -- -- -- (16,194)
---------- -------- ----------- ------ ---------- --- ---------- ---------
Balances at December 31, 1996...... -- -- 78,077,696 781 6,232,132 62 662,080 (113,512)
Issuance of $3.00 Convertible
Preferred Stock (note 9(a)).... 5,990,000 299,500 -- -- -- -- (11,692) --
Issuance of Common Stock in
merger (note 9(b))............. -- -- 34,617,460 346 -- -- 536,225 --
Issuance of common stock options
in merger (note 9(d)).......... -- -- -- -- -- -- 34,977 --
Issuance of 7% Preferred Stock in
merger (note 9(a))............. 2,200,000 110,000 -- -- -- -- -- --
Conversion of Class B Common
Stock (note 9(b)).............. -- -- 6,232,132 62 (6,232,132) (62) -- --
Exercise of common stock options
(note 9(d)).................... -- -- 994,526 10 -- -- 5,340 --
Convertible preferred stock
dividends (note 9(a)).......... -- -- -- -- -- -- -- (12,165)
Net loss......................... -- -- -- -- -- -- -- (31,745)
---------- -------- ----------- ------ ---------- --- ---------- ---------
Balances at December 31, 1997...... 8,190,000 409,500 119,921,814 1,199 -- -- 1,226,930 (157,422)
Issuance of Common Stock (note
9(b)).......................... -- -- 21,850,000 219 -- -- 994,423 --
Exercise of common stock options
(note 9(c)).................... -- -- 1,075,860 10 -- -- 22,230 --
Stock option compensation (note
9(c)).......................... -- -- -- -- -- -- 16,000 --
Convertible preferred stock
dividends (note 9(a)).......... -- -- -- -- -- -- -- (25,670)
Net loss......................... -- -- -- -- -- -- -- (95,589)
---------- -------- ----------- ------ ---------- --- ---------- ---------
Balances at December 31, 1998...... 8,190,000 $409,500 142,847,674 $1,428 -- $-- $2,259,583 $(278,681)
========== ======== =========== ====== ========== === ========== =========

TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balances at December 31, 1995...... $ 304,577
Issuance of Common Stock in
public offering (note 9(b)).... 264,236
Conversion of 1993 Preferred
Stock (note 9(a)).............. --
Redemption of 1993 Preferred
Stock (note 9(a)).............. (90)
Exercise of common stock options
(note 9(d)).................... 702
Convertible preferred stock
dividends (note 9(a)).......... (3,820)
Net loss......................... (16,194)
----------
Balances at December 31, 1996...... 549,411
Issuance of $3.00 Convertible
Preferred Stock (note 9(a)).... 287,808
Issuance of Common Stock in
merger (note 9(b))............. 536,571
Issuance of common stock options
in merger (note 9(d)).......... 34,977
Issuance of 7% Preferred Stock in
merger (note 9(a))............. 110,000
Conversion of Class B Common
Stock (note 9(b)).............. --
Exercise of common stock options
(note 9(d)).................... 5,350
Convertible preferred stock
dividends (note 9(a)).......... (12,165)
Net loss......................... (31,745)
----------
Balances at December 31, 1997...... 1,480,207
Issuance of Common Stock (note
9(b)).......................... 994,642
Exercise of common stock options
(note 9(c)).................... 22,240
Stock option compensation (note
9(c)).......................... 16,000
Convertible preferred stock
dividends (note 9(a)).......... (25,670)
Net loss......................... (95,589)
----------
Balances at December 31, 1998...... $2,391,830
==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-6
<PAGE> 59

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (16,194) $ (31,745) $ (95,589)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation........................................ 7,707 14,918 47,027
Amortization of goodwill, intangible assets and
other
assets........................................... 86,042 171,064 399,311
Executive severance................................. -- -- 16,000
Provision for doubtful accounts..................... 2,179 5,174 5,684
Deferred income tax expense (benefit)............... (4,353) (3,829) 28,718
Gain on sale of representation contracts............ -- -- (32,198)
Gain on disposition of assets....................... -- (18,380) (123,845)
Dividends on preferred stock of subsidiary.......... 12,901 17,601
Extraordinary loss, net of income tax benefit....... -- 4,350 47,089
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.............................. (28,146) (29,977) (89,392)
Other current assets............................. (2,804) 733 (7,964)
Accounts payable and accrued expenses............ 3,991 20,004 58,027
Other assets..................................... (354) (4,283) (6,461)
Other liabilities................................ (587) (1,416) 3,623
--------- ----------- -----------
Net cash provided by operating activities...... 47,481 139,514 267,631
--------- ----------- -----------
Cash flows from investing activities:
Acquisitions, net of cash acquired.................... (458,332) (1,631,505) (1,995,991)
Issuance of note receivable........................... -- -- (150,000)
Escrow deposits on pending acquisitions............... (17,000) (4,655) --
Proceeds from sale of assets.......................... 32,000 269,250 --
Payments made on purchases of representation
contracts........................................... -- (31,456) (32,410)
Payments for cost basis investments................... -- -- (30,000)
Payments received on sales of representation
contracts........................................... -- 9,296 26,500
Capital expenditures.................................. (6,543) (11,666) (43,461)
Other................................................. (12,063) (22,273) (65,807)
--------- ----------- -----------
Net cash used by investing activities.......... (461,938) (1,423,009) (2,291,169)
--------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.............. 447,750 2,945,250 3,596,000
Principal payments on long-term debt.................. (290,750) (1,901,250) (2,073,000)
Net proceeds from issuance of common stock, preferred
stock and warrants.................................. 264,938 293,158 1,003,784
Dividends on preferred stock.......................... (3,820) (14,572) (57,039)
Payments for debt issuance costs...................... (3,941) (25,567) (47,318)
Redemption of exchange debentures..................... -- -- (403,217)
Redemption of preferred stock......................... (90) -- --
--------- ----------- -----------
Net cash provided by financing activities...... 414,087 1,297,019 2,019,210
--------- ----------- -----------
Increase (decrease) in cash and cash equivalents........ (370) 13,524 (4,328)
Cash and cash equivalents at beginning of year.......... 3,430 3,060 16,584
--------- ----------- -----------
Cash and cash equivalents at end of year................ $ 3,060 $ 16,584 $ 12,256
========= =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-7
<PAGE> 60

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business

Chancellor Media Corporation (formerly known as Evergreen Media
Corporation) ("Chancellor Media") (together with its subsidiaries, the
"Company") is a diversified media company with operations in radio broadcasting,
outdoor advertising and media representation. As of December 31, 1998, the
Chancellor Radio Group portfolio (including 13 stations operated under time
brokerage agreements) consisted of 119 radio stations (89 FM and 30 AM)
concentrated in the top 30 markets in the United States and in Puerto Rico and a
national radio network, the AMFM Radio Networks, which broadcasts advertising
and syndicated programming shows to a national audience of approximately 66
million listeners in the United States (including approximately 39 million
listeners from the Company's portfolio of stations). As of December 31, 1998,
Chancellor Outdoor Group operated approximately 38,000 outdoor advertising
display faces in 37 states. The media representation business consists of Katz
Media Group, Inc. ("Katz"), a full-service media representation firm that sells
national spot advertising time for clients in the radio and television
industries throughout the United States and for the Company's portfolio of
stations.

(b) Principles of Consolidation

The consolidated financial statements include the accounts of Chancellor
Media and its subsidiaries, all of which are wholly owned. Significant
intercompany balances and transactions have been eliminated in consolidation.

The majority of the Company's outdoor advertising structures are located on
leased land. Land rent is typically paid in advance for periods ranging from one
to twelve months. Prepaid land leases are expensed ratably over the related
rental term.

(d) Property and Equipment

Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated useful
lives of the assets. Repair and maintenance costs are charged to expense as
incurred.

(e) Intangible Assets

Intangible assets consist primarily of broadcast licenses, goodwill and
other identifiable intangible assets. Intangible assets resulting from
acquisitions are valued based upon estimated fair values. The Company amortizes
such intangible assets using the straight-line method over estimated useful
lives ranging from one to 40 years. The Company continually evaluates the
propriety of the carrying amount of goodwill and other intangible assets and
related amortization periods to determine whether current events or
circumstances warrant adjustments to the carrying value and/or revised estimates
of amortization periods. These evaluations consist of the projection of
undiscounted cash flows over the remaining amortization periods of the related
intangible assets. The projections are based on historical trend lines of actual
results, adjusted for expected changes in operating results. To the extent such
projections indicate that undiscounted cash flows is not expected to be adequate
to recover the carrying amounts of the related intangible assets, such carrying
amounts are written down by charges to expense. At this time, the Company
believes that no impairment of goodwill or other intangible assets has occurred
and that no revisions to the amortization periods are warranted.

F-8
<PAGE> 61
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(f) Debt Issuance Costs

Costs related to the issuance of debt are capitalized and amortized over
the terms of the related debt. In 1996, 1997 and 1998, the Company recorded
amortization of debt issuance costs of $1,113, $1,337 and $3,768 respectively,
which amounts are included in depreciation and amortization expense.

(g) Barter Transactions

The Company trades commercial air time and outdoor advertising space for
goods and services used principally for promotional, sales and other business
activities. An asset and liability is recorded at the fair market value of the
goods or services received. Barter revenue is recorded and the liability
relieved when commercials are broadcast or outdoor advertising space is
utilized. Barter expense is recorded and the asset relieved when goods or
services are received or used. Barter amounts are not significant to the
Company's consolidated financial statements.

(h) Income Taxes

Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable earnings. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts more likely than not to
be realized. Income tax expense is the total of tax payable for the period and
the change during the period in deferred tax assets and liabilities which
impacted operations.

(i) Revenue Recognition

Radio broadcast revenue is derived from the sale of advertising time to
local and national advertisers and is recognized as advertisements are
broadcast. Outdoor advertising revenue is derived from contracts with
advertisers for the rental of outdoor advertising space and is recognized on an
accrual basis ratably over the terms of the contracts, which generally cover
periods of one month up to five years. Media representation revenue is derived
from commissions on sales of advertising time for radio and television stations
under representation contracts by the Company's media representation firm, Katz,
and is recognized as advertisements are broadcast.

Fees received or paid pursuant to time brokerage agreements are recognized
as gross revenues or amortized to expense, respectively, over the term of the
agreement.

(j) Representation Contracts

Representation contracts typically may be terminated by either party upon
written notice one year after receipt of such notice. In accordance with
industry practice, in lieu of termination, a buyout agreement is typically
entered into for the purchase of such contracts by the successor representation
firm. The purchase price paid by the successor representation firm is based upon
the historical commission income projected over the remaining contract period,
including the evergreen or notice period, plus two months.

Costs of obtaining representation contracts are deferred and amortized over
the related period of benefit. Amortization of costs of obtaining representation
contracts included in depreciation and amortization was $380 and $10,862 for the
years ended December 31, 1997 and 1998, respectively. Gains on the disposition
of representation contracts are recognized on the effective date of the buyout
agreement as a component of other (income) expense.

F-9
<PAGE> 62
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(k) Statements of Cash Flows

For purposes of the statements of cash flows, the Company considers
temporary cash investments purchased with original maturities of three months or
less to be cash equivalents.

The Company paid approximately $37,042, $84,610 and $191,674 for interest
in 1996, 1997 and 1998, respectively. Cash payments (refunds) for income taxes
were $733, $11,079 and ($79) for 1996, 1997 and 1998, respectively.

(l) Derivative Financial Instruments

The Company's derivative financial instruments are used to manage
well-defined interest rate risks related to interest on the Company's
outstanding debt and are not used for trading purposes.

As interest rates change under interest rate swap and collar agreements,
the differential to be paid or received is recognized as an adjustment to
interest expense. The Company's exposure to credit loss is minimal as its
interest rate swap agreements are with the participating banks under the
Company's senior credit facility.

(m) Basic and Diluted Loss Per Common Share

Basic and diluted loss per common share is based on the weighted average
shares of common stock outstanding during each year. Stock options, the $3.00
Convertible Exchangeable Preferred Stock and the 7% Convertible Preferred Stock
are not included in the calculation as their effect would be antidilutive.

On August 8, 1996, the Company declared a three-for-two stock split
effected in the form of a stock dividend payable on August 26, 1996 to
shareholders of record at the close of business on August 19, 1996. On December
18, 1997, the Company declared a two-for-one stock split effected in the form of
a stock dividend payable on January 12, 1998 to shareholders of record at the
close of business on December 29, 1997. All share and per share data (other than
authorized share data) has been adjusted to give effect to the stock dividends.

(n) Disclosure of Certain Significant Risks and Uncertainties

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.

In the opinion of management, credit risk with respect to trade receivables
is limited due to the large number of diversified customers and the geographic
diversification of the Company's customer base. The Company performs ongoing
credit evaluations of its customers and believes that adequate allowances for
any uncollectible trade receivables are maintained. At December 31, 1997 and
1998, no receivable from any customer exceeded 5% of stockholders' equity and no
customer accounted for more than 10% of net revenues in 1996, 1997 or 1998.

(o) Stock Option Plan

The Company accounts for its stock-based award plans in accordance with
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations, under which compensation expense is
recorded to the extent that the current market price of the underlying stock
exceeds the exercise price. Note 9(c) provides pro forma net income and pro
forma earnings per share disclosures as if the stock-based awards had been
accounted for using the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation.
F-10
<PAGE> 63
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(p) Recently Issued Accounting Principle

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This Statement
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No. 133 is effective for all fiscal quarters of all
fiscal years beginning after June 15, 1999. Management does not anticipate that
this Statement will have a material impact on the Company's consolidated
financial statements.

(q) Reclassifications

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

(2) ACQUISITIONS AND DISPOSITIONS

(a) Completed Transactions

On January 17, 1996, the Company acquired Pyramid Communications, Inc.
("Pyramid"), a radio broadcasting company with nine FM and three AM radio
stations in five radio markets (Chicago, Philadelphia, Boston, Charlotte and
Buffalo) (the "Pyramid Acquisition"). The Pyramid Acquisition was effected
through the merger of a wholly-owned subsidiary of the Company with and into
Pyramid, with Pyramid surviving the merger as a wholly-owned subsidiary of the
Company. The total purchase price, including closing costs, allocated to net
assets acquired was approximately $316,343 in cash.

On May 3, 1996, the Company acquired WKLB-FM in Boston from Fairbanks
Communications for $34,000 in cash plus various other direct acquisition costs.
On November 26, 1996, the Company exchanged WKLB-FM in Boston (now known as
WROR-FM) for WGAY-FM in Washington, D.C. The exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction. The Company had previously been operating WGAY-FM under a time
brokerage agreement and selling substantially all of the broadcast time of
WKLB-FM under a time brokerage agreement, in each case since June 17, 1996,
pending completion of the exchange.

On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo to
Mercury Radio for $19,500 in cash, and on August 1, 1996, the Company sold
WSJZ-FM in Buffalo to American Radio Systems for $12,500 in cash (collectively,
the "Buffalo Stations"). The assets of the Buffalo Stations were classified as
assets held for sale in the Pyramid Acquisition and no gain or loss was
recognized by the Company upon consummation of the sales. The combined net
income of the Buffalo stations of approximately $733 has been excluded from the
consolidated statement of operations for the year ended December 31, 1996. The
excess of the proceeds over the carrying amounts at the dates of sale
approximated $2,561 (including interest costs during the holding period of
approximately $1,169) and has been accounted for as an adjustment to the
original purchase price of the Pyramid Acquisition. The Company had previously
entered into time brokerage agreements (effective April 15, 1996 for WSJZ-FM and
April 25, 1996 for WHTT-FM and WHTT-AM) to sell substantially all of the
broadcast time of these stations pending completion of the sales.

On August 14, 1996, the Company acquired KYLD-FM in San Francisco from
Crescent Communications for $44,000 in cash plus various other direct
acquisition costs. The Company had previously been operating KYLD-FM under a
time brokerage agreement since May 1, 1996.

On October 18, 1996, the Company acquired WEDR-FM in Miami from affiliates
of the Rivers Group for $65,000 in cash plus various other direct acquisition
costs.

On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit
from affiliates of Chancellor Broadcasting Company ("CBC") for $30,000 in cash
plus various other direct acquisition costs. The Company had previously provided
certain sales and promotional functions to WWWW-FM and

F-11
<PAGE> 64
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently
operated the stations under a time brokerage agreement since April 1, 1996.

On January 31, 1997, the Company acquired KKSF-FM and KDFC-FM/AM in San
Francisco from affiliates of the Brown Organization for $115,000 in cash plus
various other direct acquisition costs. The Company had previously been
operating KKSF-FM and KDFC-FM/AM under a time brokerage agreement since November
1, 1996. On July 21, 1997, the Company sold KDFC-FM to Bonneville International
Corporation ("Bonneville") for $50,000 in cash. The assets of KDFC-FM were
classified as assets held for sale in connection with the purchase price
allocation of the acquisition of KKSF-FM and KDFC-FM/AM and no gain or loss was
recognized by the Company upon consummation of the sale. The combined net income
of KDFC-FM of approximately $934 has been excluded from the consolidated
statement of operations for the year ended December 31, 1997. The excess of the
proceeds over the carrying amount at the date of sale approximated $739
(including interest costs during the holding period of approximately $1,750) and
has been accounted for as an adjustment to the original purchase price of the
acquisition of KKSF-FM and KDFC-FM/AM.

On April 1, 1997, the Company acquired WJLB-FM and WMXD-FM in Detroit from
Secret Communications, L.P. ("Secret") for $168,000 in cash plus various other
direct acquisition costs. The Company had previously been operating WJLB-FM and
WMXD-FM under time brokerage agreements since September 1, 1996.

On April 3, 1997, the Company exchanged WQRS-FM in Detroit (which the
Company acquired on April 3, 1997 from Secret for $32,000 in cash plus various
other direct acquisition costs), to affiliates of Greater Media Radio, Inc. in
return for WWRC-AM in Washington, D.C. and $9,500 in cash. The exchange was
accounted for as a like-kind exchange and no gain or loss was recognized upon
consummation of the transaction. The net purchase price to the Company of
WWRC-AM was therefore $22,500. The Company had previously been operating WWRC-AM
under a time brokerage agreement since June 17, 1996.

On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia from
affiliates of Beasley FM Acquisition Corporation for $103,000 in cash plus
various other direct acquisition costs.

On May 15, 1997, the Company exchanged five of its six stations in
Charlotte, North Carolina (WPEG-FM, WBAV-FM/AM, WRFX-FM and WFNZ-AM) for two FM
stations in Philadelphia (WIOQ-FM and WUSL-FM) owned by EZ Communications, Inc.
("EZ") in Philadelphia (the "Charlotte Exchange"), and also sold the Company's
sixth radio station in Charlotte, WNKS-FM, to EZ for $10,000 in cash and
recognized a gain of $3,536. The Charlotte Exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction.

On May 30, 1997, the Company acquired WPNT-FM in Chicago from affiliates of
Century Broadcasting Company for $75,740 in cash (including $1,990 for the
purchase of the station's accounts receivable) plus various other direct
acquisition costs. On June 19, 1997, the Company sold WPNT-FM in Chicago to
Bonneville for $75,000 in cash and recognized a gain of $529.

On June 3, 1997, the Company sold WEJM-FM in Chicago to affiliates of
Crawford Broadcasting for $14,750 in cash and recognized a gain of $9,258.

On July 2, 1997, the Company acquired WLTW-FM and WAXQ-FM in New York and
WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom
International, Inc. ("Viacom") for approximately $612,388 in cash including
various other direct acquisition costs (the "Viacom Acquisition"). The Viacom
Acquisition was financed with (i) bank borrowings under the Senior Credit
Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the
Company on February 19, 1997 and (iii) $6,079 financed through working capital.
In June 1997, the Company issued 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock for net proceeds of $287,808 which were used to
repay

F-12
<PAGE> 65
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

borrowings under the Senior Credit Facility and subsequently were reborrowed on
July 2, 1997 as part of the financing of the Viacom Acquisition. On July 7,
1997, the Company sold WJZW-FM in Washington, D.C. to affiliates of Capital
Cities/ABC Radio for $68,000 in cash. The assets of WJZW-FM, as well as the
assets of WZHF-AM and WBZS-AM, which were sold on August 13, 1997, were
accounted for as assets held for sale in connection with the purchase price
allocation of the Viacom Acquisition and no gain or loss was recognized by the
Company upon consummation of the sales. The combined net income of WJZW-FM,
WZHF-AM and WBZS-AM of approximately $153 has been excluded from the
consolidated statement of operations for the year ended December 31, 1997. The
excess of the carrying amounts over the proceeds at the dates of sale
approximated $894 and has been accounted for as an adjustment to the original
purchase price of the Viacom Acquisition.

On July 7, 1997, the Company sold the Federal Communications Commission
("FCC") authorizations and certain transmission equipment previously used in the
operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation
("Susquehanna") for $44,000 in cash and recognized a gain of $1,726.
Simultaneously therewith, CBC sold the call letters "KSAN-FM" (which CBC
previously used in San Francisco) to Susquehanna. On July 7, 1997, the Company
and CBC entered into a time brokerage agreement to enable the Company to operate
KYLD-FM on the frequency previously assigned to KSAN-FM, and on July 7, 1997,
CBC changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation of the
Chancellor Merger (as defined herein), the Company changed the format of the new
KYLD-FM to the format previously operated on the old KYLD-FM.

On July 14, 1997, the Company completed the disposition of WLUP-FM in
Chicago to Bonneville for net proceeds of $80,000 which were held by a qualified
intermediary pending the completion of the deferred exchange of WLUP-FM for
KZPS-FM and KDGE-FM in Dallas. On October 7, 1997, the Company applied the net
proceeds from the disposition of WLUP-FM of $80,000 in cash, plus an additional
$3,500 and various other direct acquisition costs, in a deferred exchange of
WLUP-FM for KZPS-FM and KDGE-FM in Dallas. The exchange was accounted for as a
like-kind exchange and no gain or loss was recognized upon consummation of the
transaction. The Company had previously operated KZPS-FM and KDGE-FM under time
brokerage agreements effective August 1, 1997.

On July 21, 1997, the Company entered into a time brokerage agreement with
CBC whereby the Company began managing certain limited functions of CBC's
stations KISQ-FM (formerly KBGG-FM), KNEW-AM and KABL-FM in San Francisco
pending the consummation of the Chancellor Merger (as defined herein), which
occurred on September 5, 1997.

On August 13, 1997, the Company sold WBZS-AM and WZHF-AM in Washington,
D.C. (acquired as part of the Viacom Acquisition) for $13,000 and KDFC-AM in San
Francisco for $5,000 to affiliates of Douglas Broadcasting ("Douglas") for a
total sales price of $18,000 in the form of a note receivable. The note
receivable bears interest at 7 3/4%, with a balloon principal payment due four
years after closing. At closing, Douglas was required to post a $1,000 letter of
credit for the benefit of the Company that will remain outstanding until all
amounts due under the promissory note are paid.

On August 27, 1997, the Company sold WEJM-AM in Chicago to Douglas for
$7,500 in cash and recognized a gain of $3,331.

On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among CBC, Chancellor Radio
Broadcasting Company ("CRBC"), Evergreen Media Corporation ("Evergreen"),
Evergreen Mezzanine Holdings Corporation ("EMHC") and Evergreen Media
Corporation of Los Angeles ("EMCLA"), (i) CBC was merged (the "Parent Merger")
with and into EMHC, a direct, wholly-owned subsidiary of Evergreen, with EMHC
remaining as the surviving corporation and (ii) CRBC was merged (the "Subsidiary
Merger") with and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with

F-13
<PAGE> 66
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EMCLA remaining as the surviving corporation (collectively, the "Chancellor
Merger"). Upon consummation of the Parent Merger, the Company was renamed
Chancellor Media Corporation and EMHC was renamed Chancellor Mezzanine Holdings
Corporation ("CMHC"). Upon consummation of the Subsidiary Merger, EMCLA was
renamed Chancellor Media Corporation of Los Angeles ("CMCLA"). Consummation of
the Chancellor Merger added 52 radio stations (36 FM and 16 AM) to the Company's
portfolio of stations, including 13 stations in markets in which the Company
previously operated. The total purchase price allocated to net assets acquired
was approximately $1,998,383 which included (i) the conversion of each
outstanding share of CBC Common Stock into 0.9091 shares of the Company's Common
Stock, resulting in the issuance of 34,617,460 shares of the Company's Common
Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC of
$949,000 which included $549,000 of borrowings outstanding under the CRBC senior
credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due 2004
and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007 (iii) the
issuance of 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock in
exchange for CRBC's substantially identical securities with a fair value of
$215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of
1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative Exchangeable
Preferred Stock in exchange for CRBC's substantially identical securities with a
fair value of $120,217 including accrued and unpaid dividends of $772, (v) the
issuance of 2,200,000 shares of the Company's 7% Convertible Preferred Stock in
exchange for CBC's substantially identical securities with a fair value of
$111,048 including accrued and unpaid dividends of $1,048, (vi) the assumption
of stock options issued to CBC stock option holders with a fair value of $34,977
and (vii) estimated acquisition costs of $31,000.

On October 28, 1997, the Company acquired Katz, a full-service media
representation firm, in a tender offer transaction for a total purchase price of
approximately $379,101 (the "Katz Acquisition") which included (i) the
conversion of each outstanding share of Katz Common Stock into the right to
receive $11.00 in cash, resulting in total cash payments of $149,601, (ii) the
assumption of long-term debt of Katz and its subsidiaries of $222,000 which
included $122,000 of borrowings outstanding under the Katz senior credit
facility and $100,000 of 10 1/2% Senior Subordinated Notes due 2007 of Katz
Media Corporation (a subsidiary of Katz) and (iii) estimated acquisition costs
of $7,500.

On December 29, 1997, the Company acquired five radio stations from Pacific
and Southern Company, Inc., a subsidiary of Gannett Co., Inc., consisting of
WGCI-FM/AM in Chicago for $140,000, KKBQ-FM/AM in Houston for $110,000 and
KHKS-FM in Dallas for $90,000, for an aggregate purchase price of $340,000 in
cash plus various other direct acquisition costs.

On January 30, 1998, the Company acquired KXPK-FM in Denver from Ever Green
Wireless LLC for $26,000 in cash plus various other direct acquisition costs, of
which $1,655 was previously paid by the Company as escrow funds and are
classified as other assets at December 31, 1997. The Company had previously been
programming KXPK-FM under a time brokerage agreement since September 1, 1997.

On April 3, 1998, the Company exchanged WTOP-AM in Washington, KZLA-FM in
Los Angeles and WGMS-FM in Washington plus $63,000 in cash (including $3,000
previously paid by the Company as escrow funds and classified as other assets at
December 31, 1997) to Bonneville for WTJM-FM in New York, KLDE-FM in Houston and
KBIG-FM in Los Angeles and recognized a gain of $123,845. The Company had
previously operated KLDE-FM and KBIG-FM under time brokerage agreements since
October 1, 1997 and WTJM-FM since October 10, 1997, and had sold substantially
all of the broadcast time of WTOP-AM, KZLA-FM and WGMS-FM to Bonneville since
October 1, 1997.

On May 29, 1998, as part of the Capstar/SFX Transaction (defined below),
the Company exchanged WAPE-FM and WFYV-FM in Jacksonville (valued at $53,000)
for Capstar Broadcasting Corporation (together with its subsidiaries, "Capstar")
station KODA-FM in Houston (the "Houston Exchange"). As part of the transaction,
the Company also paid cash of $90,250 to the owners of KVET-AM, KVET-FM and
KASE-FM, who simultaneously transferred such stations to Capstar.
F-14
<PAGE> 67
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On June 1, 1998, the Company acquired WWDC-FM/AM in Washington, D.C. from
Capitol Broadcasting Company and its affiliates for $74,062 in cash (including
$2,062 for the purchase of the stations' accounts receivable) plus various other
direct acquisition costs.

On June 15, 1998, the Company's national radio network, The AMFM Radio
Networks, acquired the syndicated programming shows of Global Satellite Network
for $14,000 in cash plus various other direct acquisition costs. The syndicated
programming shows acquired include "Rockline", "Modern Rock Live", "Reelin' in
the Years" and the concert series "Live from the Pit".

On July 31, 1998, the Company acquired Martin Media L.P., Martin &
MacFarlane, Inc. and certain affiliated companies ("Martin") for a total
purchase price of $615,117 which consisted of $612,848 in cash including various
other direct acquisition costs and the assumption of notes payable of $2,270.
Martin is an outdoor advertising company with over 13,700 billboards and outdoor
displays in 12 states serving 23 markets. As part of the Martin transaction, the
Company acquired an asset purchase agreement with Kunz & Company and paid an
additional $6,000 in cash for a purchase option deposit previously paid by
Martin.

On August 28, 1998, the Company acquired various syndicated programming
shows of Casey Kasem and the related programming libraries for $7,150 in cash
and $7,000 in the form of a note payable due August 2000. The note is payable in
two equal annual installments of $3,500 each on August 28, 1999 and August 28,
2000.

On October 23, 1998, the Company acquired Primedia Broadcast Group, Inc.
and certain of its affiliates, which own and operate eight FM radio stations in
Puerto Rico, for a purchase price of $75,619 including various other direct
acquisition costs.

On November 13, 1998, the Company acquired approximately 1,000 billboards
and outdoor display faces from Kunz & Company for $40,264 in cash, of which
$6,000 was previously paid as a purchase option deposit in connection with the
Martin acquisition on July 31, 1998. The Company had previously been operating
these properties under a management agreement effective July 31, 1998.

On December 1, 1998, the Company acquired the assets and working capital of
the outdoor advertising division of Whiteco Industries, Inc. ("Whiteco"),
including approximately 22,500 billboards and outdoor displays in 34 states, for
$981,698 in cash including various other direct acquisition costs.

Between September and December 1998, the Company acquired approximately 670
additional billboards and outdoor displays in various markets for approximately
$23,582 in cash.

The acquisitions discussed above were accounted for as purchases, and are
subject to certain adjustments. Accordingly, the accompanying consolidated
financial statements include the results of operations of the acquired entities
accounted for as purchases from the dates of acquisition.

F-15
<PAGE> 68
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the net assets acquired follows:

<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Cash and cash equivalents......................... $ 1,011 $ 9,724 $ 7,826
Accounts receivable, net.......................... 13,618 129,907 31,223
Other current assets.............................. 1,125 27,596 16,098
Property and equipment............................ 11,519 118,371 1,238,365
Assets held for sale.............................. 32,000 131,000 --
Intangible assets................................. 465,824 3,823,746 1,133,062
Other assets...................................... -- 26,742 1,195
Accounts payable and accrued expenses............. (4,536) (100,422) (14,973)
Deferred tax liabilities.......................... (61,218) (279,371) (98,042)
Other liabilities................................. -- (39,681) (12)
-------- ---------- ----------
Total net assets acquired............... 459,343 3,847,612 2,314,742
Less:
Cash and cash equivalents acquired.............. 1,011 9,724 7,826
Prior year escrow payments...................... -- 17,000 4,655
Notes payable................................... -- -- 9,270
Long-term debt assumed.......................... -- 1,171,000 --
Redeemable preferred stock issued............... -- 335,787 --
Preferred stock issued.......................... -- 111,048 --
Common stock issued............................. -- 536,571 --
Stock options assumed........................... -- 34,977 --
Gain on exchange................................ -- -- 123,845
Assets transferred in exchange.................. -- -- 173,155
-------- ---------- ----------
Cash paid for acquisitions........................ $458,332 $1,631,505 $1,995,991
======== ========== ==========
</TABLE>

The pro forma consolidated condensed results of operations data for 1997
and 1998, as if the 1997 and 1998 acquisitions and dispositions discussed above,
the 1997 preferred stock offering described in note 9, the 8 1/8% Notes offering
described in note 7(f), the 9% Notes offering described in note 7(g), the 8%
Senior Notes offering described in note 7(b) and the amendment and restatement
of the Senior Credit Facility described in note 7(a) occurred at January 1,
1997, follow:

<TABLE>
<CAPTION>
UNAUDITED
-----------------------
1997 1998
---------- ----------
<S> <C> <C>
Net revenues................................................ $1,227,083 $1,460,968
Net loss.................................................... (200,485) (92,054)
Basic and diluted loss per common share..................... (1.67) (0.85)
</TABLE>

The pro forma results are not necessarily indicative of the financial
results which would have occurred if the transactions had been in effect for the
entire periods presented.

On January 21, 1999 and February 9, 1999, the Company acquired
approximately 4,500 outdoor display faces from Triumph Outdoor Holdings and
certain affiliated companies for $36,345 in cash including working capital and
various other direct acquisition costs and is subject to certain adjustments.

On January 28, 1999, the Company acquired Wincom Broadcasting Corporation
which owns WQAL-FM in Cleveland. The Company had previously been operating
WQAL-FM under a time brokerage agreement effective October 1, 1998. On February
2, 1999, the Company acquired five additional radio stations in Cleveland
including (i) WDOK-FM and WRMR-AM from Independent Group Limited

F-16
<PAGE> 69
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Partnership, (ii) WZAK-FM from Zapis Communications and (iii) Zebra Broadcasting
Corporation which owns WZJM-FM and WJMO-AM. The six Cleveland stations were
acquired for an aggregate purchase price of $282,970 in cash including working
capital and is subject to certain adjustments.

Subsequent to January 1, 1999, the Company acquired approximately 100
additional billboards and outdoor displays in various markets for approximately
$8,178 in cash.

(b) Pending Transactions

On February 20, 1998, the Company entered into an agreement to acquire from
Capstar KTXQ-FM and KBFB-FM in Dallas/Ft. Worth, KODA-FM, KKRW-FM and KQUE-AM in
Houston, KPLN-FM and KYXY-FM in San Diego and WDRV-FM, WJJJ-FM, WXDX-FM and
WDVE-FM in Pittsburgh (collectively, "the Capstar/SFX Stations") for an
aggregate purchase price of approximately $637,500 in a series of purchases and
exchanges over a period of three years (the "Capstar/SFX Transaction"). The
Capstar/ SFX Stations were acquired by Capstar as part of Capstar's acquisition
of SFX on May 29, 1998. On May 29, 1998, the Company completed the Houston
Exchange (defined above) and began programming the remaining ten Capstar/SFX
Stations under time brokerage agreements. The purchase price for the remaining
ten Capstar/SFX Stations will be approximately $494,250. The Company is
currently assessing whether the terms of the Capstar/SFX Transaction will be
modified upon the consummation of the Capstar Merger.

On August 14, 1998, the Company entered into an agreement to sell WMVP-AM
in Chicago to ABC, Inc. for $21,000 in cash. The Company entered into a time
brokerage agreement to sell substantially all of the broadcast time of WMVP-AM
effective September 10, 1998. Although there can be no assurance, the Company
expects that the disposition of WMVP-AM will be consummated in the second
quarter of 1999.

On August 26, 1998, the Company and Capstar entered into an agreement to
merge in a stock-for-stock transaction that will create the nation's largest
radio broadcasting entity (the "Capstar Merger"). Pursuant to this agreement, as
amended, the Company will acquire Capstar in a merger of Capstar into a
wholly-owned subsidiary of Chancellor Media. Each share of Chancellor Media
common stock will represent one share in the combined entity. Each share of
Capstar common stock will entitle the holder thereof to 0.4955 of a share of
common stock of Chancellor Media. Upon consummation of its pending transactions,
Capstar will own and operate or program approximately 340 radio stations serving
81 mid-sized markets nationwide. On February 1, 1999, the Company began
operating WKNR-AM in Cleveland, a station owned by Capstar, under a time
brokerage agreement. The Capstar Merger is subject to stockholder approval of
both the Company and Capstar. Although there can be no assurance, the Company
expects that the Capstar Merger will be consummated in the second quarter or
early third quarter of 1999.

On September 15, 1998, the Company entered into an agreement to acquire
KKFR-FM and KFYI-AM in Phoenix from The Broadcast Group, Inc. for $90,000 in
cash. The Company began operating KKFR-FM and KFYI-AM under a time brokerage
agreement effective November 5, 1998. Although there can be no assurance, the
Company expects that the Phoenix acquisition will be consummated in the second
quarter of 1999.

Consummation of each of the transactions discussed above is subject to
various conditions, including, in most cases, approval from the FCC and the
expiration or early termination of any waiting period required under the HSR
Act. The Company believes that such conditions will be satisfied in the ordinary
course, but there can be no assurance that this will be the case.

F-17
<PAGE> 70
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On April 13, 1998, the Company and Secret entered into a settlement
agreement regarding WFLN-FM in Philadelphia. Previously in August 1996, the
Company and Secret had entered into an agreement under which the Company would
acquire WFLN-FM from Secret for $37,750 in cash. In April 1997, the Company
entered into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash.
On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the
Company. The Company subsequently brought suit against Secret to enforce its
rights to acquire WFLN-FM. Pursuant to a court settlement entered in August 1997
and the settlement agreement between the Company and Secret entered on April 13,
1998, (i) Secret sold WFLN-FM directly to Greater Media for $37,750, (ii)
Greater Media deposited $4,050 (the difference between the Company's proposed
acquisition price for WFLN-FM from Secret and the Company's proposed sale price
for WFLN-FM to Greater Media) with the court and (iii) the Company received
$3,500 of such amount deposited by Greater Media with the court, plus applicable
interest (the "WFLN Settlement"), and Secret received the balance of $550, plus
applicable interest.

On May 29, 1998, Capstar sold KKPN-FM in Houston (acquired by Capstar as
part of Capstar's acquisition of SFX Broadcasting, Inc. ("SFX")) due to the
attributable ownership of Hicks Muse in both Capstar and the Company in order to
comply with the FCC's multiple ownership limits. In connection with Capstar's
sale of KKPN-FM, the Company received a commission from Capstar of $1,730.

(3) OTHER ASSETS

Other current assets consist of the following at December 31, 1997 and
1998:

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Prepaid expenses and other.................................. $18,348 $42,451
Representation contracts receivable......................... 16,463 17,458
------- -------
$34,811 $59,909
======= =======
</TABLE>

Other assets consist of the following at December 31, 1997 and 1998:

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Note receivable -- Capstar(a)............................... $ -- $150,000
Note receivable -- Douglas (note 2)......................... 18,000 18,000
Deferred debt issuance costs, less accumulated amortization
of $943 in 1997 and $4,711 in 1998........................ 24,624 66,959
Deferred costs on purchases of representation contracts,
less accumulated amortization of $380 in 1997 and $11,242
in 1998................................................... 35,411 56,719
Investments at cost(b)...................................... -- 30,000
Representation contracts receivable......................... 12,187 14,181
Escrow deposits (note 2).................................... 4,655 --
Other....................................................... 18,619 23,034
-------- --------
$113,496 $358,893
======== ========
</TABLE>

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

(a) On May 29, 1998, the Company provided a loan (the "Capstar Loan") to Capstar
in the principal amount of $150,000 as part of the Capstar/SFX Transaction.
The Capstar Loan bears interest at the rate of 12% per annum (subject to
increase in certain circumstances), and is secured by a senior pledge of
common stock of Capstar's direct subsidiary. A portion of the Capstar Loan
will be prepaid by Capstar in connection with the Company's acquisition of,
and the proceeds of such prepayment would be used by the Company as a
portion of the purchase price for, each Capstar/SFX Station. Hicks Muse,
which is a

F-18
<PAGE> 71
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

substantial shareholder of the Company, controls Capstar, and certain
officers and directors of the Company are directors and/or executive
officers of Capstar and/or Hicks Muse.

(b) On October 9, 1998, the Company acquired a non-voting interest in Z-Spanish
Media Corporation for $25,000 in cash, which is accounted for under the cost
method. Z-Spanish Media is the owner and operator of 22 Hispanic format
radio stations in California, Texas, Arizona and Illinois and provides
Hispanic format network programming to an additional 28 affiliated radio
stations. Also, on December 18, 1998, the Company acquired an interest in
USA Digital Radio for $5,000 in cash, which is accounted for under the cost
method. USA Digital Radio is a leading developer of In-Band On-Channel(TM)
AM and FM digital audio broadcasting technology, which is designed to allow
radio broadcasters to transmit both analog and digital signals
simultaneously using existing frequency spectrum allocations.

(4) PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1997 and
1998:

<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE 1997 1998
--------------------- -------- ----------
<S> <C> <C> <C>
Advertising structures....................... 15 years $ -- $1,178,751
Transmitter and studio equipment............. 3-20 years 90,493 96,515
Buildings and improvements................... 3-35 years 36,914 58,491
Land......................................... -- 23,122 46,062
Furniture and fixtures....................... 5-7 years 15,554 24,765
Construction in progress..................... -- -- 13,114
Vehicles..................................... 5-7 years 2,870 7,625
Other equipment.............................. Various 23,576 35,914
-------- ----------
192,529 1,461,237
Less accumulated depreciation................ 32,732 73,081
-------- ----------
$159,797 $1,388,156
======== ==========
</TABLE>

(5) INTANGIBLE ASSETS

Intangible assets consist of the following at December 31, 1997 and 1998:

<TABLE>
<CAPTION>
ESTIMATED USEFUL LIFE 1997 1998
--------------------- ---------- ----------
<S> <C> <C> <C>
Broadcast licenses......................... 15-40 years $3,593,384 $4,110,469
Goodwill................................... 15-40 years 631,739 1,086,083
Other...................................... 1-40 years 491,272 532,011
---------- ----------
4,716,395 5,728,563
Less accumulated amortization.............. 311,952 672,516
---------- ----------
$4,404,443 $5,056,047
========== ==========
</TABLE>

Other intangible assets include: (i) premium advertising revenue base (the
value of the higher radio advertising revenues in certain of the Company's
markets as compared to other markets of similar population); (ii) advertising
client base (the value of the well-established advertising base in place at the
time of acquisition of certain stations); (iii) talent contracts (the value of
employment contracts between certain stations and their key employees); (iv)
fixed asset delivery premium (the benefit expected from the Company's ability to
operate fully constructed and operational stations from the date of
acquisition), (v) premium audience growth pattern (the value of expected
above-average population growth in a given

F-19
<PAGE> 72
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

market) and (vi) the fair market value of media representation contracts
acquired in connection with the acquisition of Katz.

(6) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at December
31, 1997 and 1998:

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Accounts payable............................................ $ 78,990 $113,362
Accrued interest............................................ 18,130 43,221
Accrued payroll............................................. 34,274 36,858
Representation contracts payable............................ 21,680 24,859
Notes payable............................................... -- 4,198
Accrued dividends........................................... 16,120 2,353
Other accrued expenses...................................... 9,221 11,767
-------- --------
$178,415 $236,618
======== ========
</TABLE>

(7) LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1997 and 1998:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Senior Credit Facility(a)................................... $1,573,000 $1,596,000
8% Senior Notes(b).......................................... -- 750,000
9 3/8% Notes(c)............................................. 200,000 200,000
8 3/4% Notes(d)............................................. 200,000 200,000
10 1/2% Notes(e)............................................ 100,000 100,000
8 1/8% Notes(f)............................................. 500,000 500,000
9% Notes(g)................................................. -- 750,000
---------- ----------
Total long-term debt.............................. $2,573,000 $4,096,000
========== ==========
</TABLE>

(a) Senior Credit Facility

The Company's senior credit facility, as amended on November 9, 1998 (the
"Senior Credit Facility") provides for aggregate commitments under a revolving
loan facility and a term loan facility of $1,600,000 and $900,000, respectively.
In connection with the amendment and restatement of the Senior Credit Facility
on April 25, 1997, the Company wrote off the unamortized balance of deferred
debt issuance costs of $4,350 (net of a tax benefit of $2,343) as an
extraordinary charge in 1997.

Borrowings under the Senior Credit Facility bear interest at a rate which,
at the option of the Company, is based on the participating banks' prime rate or
Eurodollar rate, plus an incremental rate. Without giving effect to the interest
rate swap and cap agreements described below, the interest rate on the $900,000
outstanding under the term loan facility at December 31, 1998 was 7.31%, based
on Eurodollar rates, and the interest rate on the $680,000 and $16,000 of
advances outstanding under the revolving loan facility were 7.31% on a blended
basis and 8.5%, respectively, at December 31, 1998, based on the Eurodollar and
prime rates, respectively. The Company pays fees ranging from 0.25% to 0.375%
per annum on the aggregate unused portion of the loan commitment based upon the
leverage ratio for the most recent quarter end, in addition to an annual agent's
fee.

F-20
<PAGE> 73
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

principal amount of total debt outstanding has a fixed or capped rate. At
December 31, 1998, interest rate swap agreements covering a notional balance of
$1,810,000 were outstanding. These outstanding swap agreements mature from 1999
through 2002 and require the Company to pay fixed rates of 4.70% to 6.63% while
the counterparty pays a floating rate based on the three-month London Interbank
Borrowing Offered Rate ("LIBOR"). During the years ended December 31, 1996, 1997
and 1998, the Company recognized charges under its interest rate swap agreements
of $111, $2,913 and $5,134 respectively. The Company's exposure to credit loss
is minimal as its interest rate swap agreements are with the participating banks
under the senior credit facility.

The term loan facility is payable in quarterly installments commencing on
September 30, 2000 and ending June 30, 2005. The revolving loan facility
requires scheduled annual reductions of the commitment amount, payable in
quarterly installments commencing on September 30, 2000 and ending on June 30,
2005. The capital stock of the Company's subsidiaries is pledged to secure the
performance of the Company's obligations under the Senior Credit Facility, and
each of the Company's domestic subsidiaries have guaranteed those obligations.

(b) 8% Senior Notes

On November 17, 1998, the Company issued $750,000 aggregate principal
amount of 8% Senior Notes due 2008 (the "8% Senior Notes") for estimated net
proceeds of $730,000 in a private placement. Interest on the 8% Senior Notes is
payable semiannually, commencing on May 1, 1999. The 8% Senior Notes mature on
November 1, 2008 and are redeemable, in whole or in part, at the option of the
Company at a redemption price equal to 100% plus the Applicable Premium (as
defined in the indenture governing the 8% Senior Notes) plus accrued and unpaid
interest. In addition, on or prior to November 1, 2001, the Company may redeem
up to 25% of the original aggregate principal amount of the 8% Senior Notes at a
redemption price equal to 108% plus accrued and unpaid interest with the net
proceeds of one or more public equity offerings of Chancellor Media, CMHC or
CMCLA. Upon the occurrence of a change in control (as defined in the indenture
governing the 8% Senior Notes), the holders of the 8% Senior Notes have the
right to require the Company to repurchase all or any part of the 8% Senior
Notes at a purchase price equal to 101% plus accrued and unpaid interest.

Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company assumed CRBC's $200,000 aggregate principal amount of 9 3/8% Senior
Subordinated Notes due 2004 (the "9 3/8% Notes"). Interest on the 9 3/8% Notes
is payable semiannually, commencing on April 1, 1996. The 9 3/8% Notes mature on
October 1, 2004 and are redeemable, in whole or in part, at the option of the
Company on or after February 1, 2000, at redemption prices ranging from 104.688%
at February 1, 2000 and declining to 100% on or after February 1, 2003, plus in
each case accrued and unpaid interest. In addition, on or prior to January 31,
1999, the Company may redeem up to 25% of the original aggregate principal
amount of the 9 3/8% Notes at a redemption price of 107.031% plus accrued and
unpaid interest with the net proceeds of one or more public equity offerings of
CMHC or CMCLA. Upon the occurrence of a change in control (as defined in the
indenture governing the 9 3/8% Notes), the holders of the 9 3/8% Notes have the
right to require the Company to repurchase all or any part of the 9 3/8% Notes
at a purchase price equal to 101% plus accrued and unpaid interest.

(d) 8 3/4% Notes

F-21
<PAGE> 74
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

mature on June 15, 2007 and are redeemable, in whole or in part, at the option
of the Company on or after June 15, 2002, at redemption prices ranging from
104.375% at June 15, 2002 and declining to 100% on or after June 15, 2005, plus
in each case accrued and unpaid interest. In addition, prior to June 15, 2000,
the Company may redeem up to 25% of the original aggregate principal amount of
the 8 3/4% Notes at a redemption price of 108.75% plus accrued and unpaid
interest with the net proceeds of one or more public equity offerings of CMHC or
CMCLA. Upon the occurrence of a change in control (as defined in the indenture
governing the 8 3/4% Notes) on or prior to June 15, 2000, the 8 3/4% Notes may
be redeemed as a whole at the option of the Company at a redemption price of
100% plus the Applicable Premium (as defined in the indenture governing the
8 3/4% Notes) and accrued and unpaid interest. Upon the occurrence of a change
in control after June 15, 2000, the holders of the 8 3/4% Notes have the right
to require the Company to repurchase all or any part of the 8 3/4% Notes at a
purchase price equal to 101% plus accrued and unpaid interest.

(e) 10 1/2% Notes

Upon consummation of the Katz Acquisition, on October 28, 1997, the Company
assumed Katz Media Corporation's $100,000 aggregate principal amount of 10 1/2%
Senior Subordinated Notes due 2007 (the "10 1/2% Notes"). Interest on the
10 1/2% Notes is payable semiannually, commencing on July 15, 1997. The 10 1/2%
Notes mature on January 15, 2007 and are redeemable, in whole or in part, at the
option of the Company on or after January 15, 2002, at redemption prices ranging
from 105.25% at January 15, 2002 and declining to 100% on or after January 15,
2006, plus in each case accrued and unpaid interest. In addition, prior to
January 15, 2000, the Company may redeem up to 35% of the original aggregate
principal amount of the 10 1/2% Notes at a redemption price of 109.5% plus
accrued and unpaid interest with the net proceeds of one or more offerings of
equity interests of Chancellor Media, CMHC or CMCLA. Upon the occurrence of a
change in control (as defined in the indenture governing the 10 1/2% Notes), the
holders of the 10 1/2% Notes have the right to require the Company to repurchase
all or any part of the 10 1/2% Notes at a purchase price equal to 101% plus
accrued and unpaid interest.

(f) 8 1/8% Notes

On December 22, 1997, the Company issued $500,000 aggregate principal
amount of 8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes") for
estimated net proceeds of $485,000 in a private placement and subsequently
registered the 8 1/8% Notes on May 8, 1998. Interest on the 8 1/8% Notes is
payable semiannually, commencing on June 15, 1998. The 8 1/8% Notes mature on
December 15, 2007 and are redeemable, in whole or in part, at the option of the
Company on or after December 15, 2002, at redemption prices ranging from
104.063% at December 15, 2002 and declining to 100% on or after December 15,
2005, plus in each case accrued and unpaid interest. In addition, prior to
December 15, 2000, the Company may redeem up to 35% of the original aggregate
principal amount of the 8 1/8% Notes at a redemption price of 108.125% plus
accrued and unpaid interest with the net proceeds of one or more public equity
offerings of Chancellor Media, CMHC or CMCLA. Also, upon the occurrence of a
change in control (as defined in the indenture governing the 8 1/8% Notes), the
8 1/8% Notes may be redeemed as a whole at the option of the Company at a
redemption price of 100% plus the Applicable Premium (as defined in the
indenture governing the 8 1/8% Notes) and accrued and unpaid interest. Upon the
occurrence of a change in control after December 15, 2000, the holders of the
8 1/8% Notes have the right to require the Company to repurchase all or any part
of the 8 1/8% Notes at a purchase price equal to 101% plus accrued and unpaid
interest.

(g) 9% Notes

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

redeemable, in whole or in part, at the option of the Company on and after
October 1, 2003, at redemption prices ranging from 106.5% at October 1, 2003 and
declining to 100% on October 1, 2008, plus in each case accrued and unpaid
interest. In addition, on or prior to October 1, 2000, the Company may redeem up
to 25% of the original aggregate principal amount of the 9% Notes at a
redemption price of 109% plus accrued and unpaid interest with the net proceeds
of one or more public equity offerings of Chancellor Media, CMHC or CMCLA. Upon
the occurrence of a change in control (as defined in the indenture governing the
9% Notes), the 9% Notes may be redeemed, on or prior to October 1, 2000, as a
whole at the option of the Company at a redemption price of 100% plus the
Applicable Premium (as defined in the indenture governing the 9% Notes) and
accrued and unpaid interest. Upon the occurrence of a change in control after
October 1, 2000, the holders of the 9% Notes have the right to require the
Company to repurchase all or any part of the 9% Notes at a purchase price equal
to 101% plus accrued and unpaid interest.

(h) Other

The 8% Senior Notes are senior unsecured obligations of the Company and
rank equal in right of payment to the obligations of the Company under the
Senior Credit Facility and existing and all other indebtedness of the Company
not expressly subordinated to the 8% Senior Notes. However, because the 8%
Senior Notes are unsecured, the 8% Senior Notes are effectively subordinated in
right of payment to the Company's secured debt, including the Senior Credit
Facility. The 8% Senior Notes are fully and unconditionally guaranteed, on a
joint and several basis, by the Subsidiary Guarantors.

The Senior Credit Facility and the indentures governing the 8% Senior Notes
and the Subordinated Notes contain customary restrictive covenants, which, among
other things and with certain exceptions, limit the ability of the Company and
its subsidiaries to incur additional indebtedness and liens in connection
therewith, enter into certain transactions with affiliates, pay dividends,
consolidate, merge or effect certain asset sales, issue additional stock, effect
an asset swap and make acquisitions. The Company is required under the Senior
Credit Facility to maintain specified financial ratios, including leverage, cash
flow and debt service coverage ratios (as defined).

A summary of the future maturities of long-term debt at December 31, 1998
follows:

<TABLE>
<S> <C>
1999........................................................ $ --
2000........................................................ 67,500
2001........................................................ 157,500
2002........................................................ 180,000
2003........................................................ 316,000
Thereafter.................................................. 3,375,000
</TABLE>

(8) REDEEMABLE PREFERRED STOCK

(a) 12 1/4% Preferred Stock

Upon consummation of the Chancellor Merger on September 5, 1997, the
Company issued 1,000,000 shares of CMCLA's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") in exchange for
CRBC's substantially identical securities with a fair value of $120,217
including accrued and unpaid dividends of $772. The liquidation preference of
each share of

F-23
<PAGE> 76
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12 1/4% Preferred Stock was $119.445 plus accrued and unpaid dividends of $1,829
at December 31, 1997. The dividend rate on the 12 1/4% Preferred Stock was
12.25% per annum of the liquidation preference and was payable quarterly.

On July 20, 1998, CMCLA completed a consent solicitation (the "12 1/4%
Preferred Stock Consent Solicitation") to modify certain timing restrictions on
its ability to exchange all shares of its 12 1/4% Preferred Stock for its
12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4% Debentures").
Consenting holders of 12 1/4% Preferred Stock received payments of $0.05 per
share of 12 1/4% Preferred Stock. On July 23, 1998, CMCLA exchanged the shares
of 12 1/4% Preferred Stock for 12 1/4% Debentures (the "12 1/4% Exchange"). In
connection with the 12 1/4% Preferred Stock Consent Solicitation and 12 1/4%
Exchange, CMCLA incurred approximately $170 in transaction costs which were
recorded as deferred debt issuance costs.

On August 19, 1998, CMCLA completed a cash tender offer (the "12 1/4%
Debentures Tender Offer") for all of its 12 1/4% Debentures for an aggregate
repurchase cost of $143,836 which included (i) the principal amount of the
12 1/4% Debentures of $119,445, (ii) premiums on the repurchase of the 12 1/4%
Debentures of $22,683, (iii) accrued and unpaid interest on the 12 1/4%
Debentures from July 23, 1998 through August 19, 1998 of $1,138 and (iv)
estimated transaction costs of $570. In connection with the 12 1/4% Debentures
Tender Offer, CMCLA recorded an extraordinary charge of $15,224 (net of a tax
benefit of $8,199) consisting of the premiums, estimated transaction costs and
the write-off of the unamortized balance of deferred debt issuance costs.

(b) 12% Preferred Stock

Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company issued 2,117,629 shares of CMCLA's 12% Exchangeable Preferred Stock (the
"12% Preferred Stock") in exchange for CRBC's substantially identical securities
with a fair value of $215,570 including accrued and unpaid dividends of $3,807.
The liquidation preference of each share of 12% Preferred Stock was $100.00 plus
accrued and unpaid dividends of $11,756 at December 31, 1997. The dividend rate
on the 12% Preferred Stock was 12% per annum of the liquidation preference and
was payable semi-annually.

On May 8, 1998, CMCLA completed a consent solicitation (the "12% Preferred
Stock Consent Solicitation") to modify certain timing restrictions on its
ability to exchange all shares of its 12% Preferred Stock for its 12%
Subordinated Exchange Debentures due 2009 (the "12% Debentures"). Consenting
holders of 12% Preferred Stock received payments of $0.05 per share of 12%
Preferred Stock. On May 13, 1998, CMCLA exchanged the shares of 12% Preferred
Stock for 12% Debentures (the "12% Exchange"). In connection with the 12%
Preferred Stock Consent Solicitation and 12% Exchange, CMCLA incurred
approximately $270 in transaction costs which were recorded as deferred debt
issuance costs.

On June 10, 1998, CMCLA completed a cash tender offer (the "12% Debentures
Tender Offer") for all of its 12% Debentures for an aggregate repurchase cost of
$262,495 which included (i) the principal amount of the 12% Debentures of
$211,763, (ii) premiums on the repurchase of the 12% Debentures of $47,798,
(iii) accrued and unpaid interest on the 12% Debentures from May 13, 1998
through June 10, 1998 of $1,976 and (iv) estimated transaction costs of $958. In
connection with the 12% Debentures Tender Offer, CMCLA recorded an extraordinary
charge of $31,865 (net of a tax benefit of $17,158) consisting of the premiums,
estimated transaction costs and the write-off of the unamortized balance of
deferred debt issuance costs.

(9) STOCKHOLDERS' EQUITY

(a) Preferred Stock

(i) 1993 Convertible Preferred Stock

In October 1993, the Company issued 1,610,000 shares of $3.00 Convertible
Exchangeable Preferred Stock (the "1993 Convertible Preferred Stock") for net
proceeds of approximately $76,645. The Company
F-24
<PAGE> 77
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

converted 1,608,297 shares of the 1993 Convertible Preferred Stock into
10,051,832 shares of the Company's Common Stock and redeemed the remaining 1,703
shares of 1993 Convertible Preferred Stock at $52.70 per share in 1996 (the
"1996 Preferred Stock Conversion"). The 1993 Convertible Preferred Stock had a
liquidation preference of $50.00 per share plus accrued and unpaid dividends and
a dividend rate of $3.00 per share, payable quarterly.

(ii) $3.00 Convertible Exchangeable Preferred Stock

In June 1997, the Company issued 5,990,000 shares of Chancellor Media's
$3.00 Convertible Exchangeable Preferred Stock (the "$3.00 Convertible Preferred
Stock") for net proceeds of $287,808. The liquidation preference of each share
of Convertible Preferred Stock is $50.00 plus accrued and unpaid dividends of
$749 at December 31, 1997 and 1998. Dividends on the $3.00 Convertible Preferred
Stock are cumulative and payable quarterly commencing September 15, 1997 at a
rate per annum of $3.00 per share, when, as and if declared by the Board of
Directors of the Company. The $3.00 Convertible Preferred Stock is convertible
at the option of the holder at any time unless previously redeemed or exchanged,
into the Company's Common Stock, par value $.01 per share at a conversion price
of $25.00 per share, subject to adjustment in certain events. The $3.00
Convertible Preferred Stock is redeemable in whole or in part, at the option of
the Company, on or after June 16, 1999, at redemption prices ranging from 104.8%
and declining to 100% of the liquidation preference on or after June 15, 2007,
plus in each case accrued and unpaid dividends, provided that on or prior to
June 15, 2000, the closing price of the Common Stock has equaled or exceeded
150% of the conversion price for 20 out of any 30 consecutive trading days. The
$3.00 Convertible Preferred Stock is exchangeable, subject to certain
conditions, at the option of the Company, in whole but not in part, commencing
September 15, 2000, for 6% Convertible Subordinated Exchange Debentures due 2012
(the "6% Exchange Debentures") at a rate of $50.00 principal amount of 6%
Exchange Debentures for each share of $3.00 Convertible Preferred Stock. Upon
the occurrence of a change in control (as defined in the certificate of
designation governing the $3.00 Convertible Preferred Stock), holders will have
special conversion rights, subject to cash redemption by the Company. The $3.00
Convertible Preferred Stock is senior in liquidation preference to the Common
Stock of Chancellor Media and pari passu with the 7% Convertible Preferred
Stock.

(iii) 7% Convertible Preferred Stock

Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company issued 2,200,000 shares of Chancellor Media's 7% Convertible Preferred
Stock (the "7% Convertible Preferred Stock") in exchange for Chancellor's
substantially identical securities with a fair value of $111,048 including
accrued and unpaid dividends of $1,048. The liquidation preference of each share
of 7% Convertible Preferred Stock is $50.00 plus accrued and unpaid dividends of
$1,604 at December 31, 1997 and 1998. Dividends on the 7% Convertible Preferred
Stock are cumulative and payable quarterly, commencing July 15, 1997. The 7%
Convertible Preferred Stock is convertible at the option of the holder at any
time unless previously redeemed or exchanged, into the Company's Common Stock,
par value $.01 per share at a conversion price of $18.095 per share, subject to
adjustment in certain events. The 7% Convertible Preferred Stock is redeemable
in whole or in part, at the option of the Company, on or after January 15, 2000,
at redemption prices ranging from 104.9% at January 15, 2000 and declining to
100% of the liquidation preference on or after January 15, 2007, plus in each
case accrued and unpaid dividends. Upon the occurrence of a change in control
(as defined in the certificate of designation governing the 7% Convertible
Preferred Stock), the holders of the 7% Convertible Preferred Stock have the
right to require the Company to repurchase all or any part of the 7% Convertible
Preferred Stock at a price of 101% of the liquidation preference, plus accrued
and unpaid dividends. The 7% Convertible Preferred Stock is senior in
liquidation preference to the Common Stock of Chancellor Media and pari passu
with the $3.00 Convertible Preferred Stock.

F-25
<PAGE> 78
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(b) Common Stock

On October 17, 1996, the Company completed a secondary public offering of
18,000,000 shares of its Common Stock (the "1996 Offering"). The net proceeds to
the Company in connection with the 1996 Offering of approximately $264,236 were
used to reduce borrowings under the Company's prior senior credit facility.

On September 5, 1997, the Company issued 34,617,460 shares of Common Stock
at $15.50 per share in connection with the Chancellor Merger. In addition, upon
consummation of the Chancellor Merger, each share of the Company's formerly
outstanding Class A Common Stock and Class B Common Stock was reclassified,
changed and converted into one share of Common Stock.

On August 8, 1996, the Company declared a three-for-two stock split
effected in the form of a stock dividend payable on August 26, 1996 to
shareholders of record at the close of business on August 19, 1996. On December
18, 1997, the Company declared a two-for-one stock split effected in the form of
a stock dividend payable on January 12, 1998 to shareholders of record at the
close of business on December 29, 1997. All share and per share data (other than
authorized share data) contained in the accompanying consolidated financial
statements have been retroactively adjusted to give effect to the stock
dividend.

On March 13, 1998, the Company completed an offering of 21,850,000 shares
of its Common Stock for net proceeds of approximately $994,642. The net proceeds
were used to reduce bank borrowings under the revolving credit portion of the
Senior Credit Facility (as defined) and the excess proceeds were initially
invested in short-term investment grade securities. The Company subsequently
used the excess proceeds for general corporate purposes, including the financing
of certain acquisitions and exchanges.

The Company has established the 1992, 1993, 1995 and 1998 Key Employee
Stock Option Plans (the "Employee Option Plans") which provide for the issuance
of stock options to officers and other key employees of the Company and its
subsidiaries. The Employee Option Plans make available for issuance an aggregate
of 15,105,000 shares of Common Stock. Options issued under the Employee Option
Plans have varying vesting periods as provided in separate stock option
agreements and generally carry an expiration date of ten years subsequent to the
date of issuance. Options issued under the 1993, 1995 and 1998 Employee Option
Plans are required to have exercise prices equal to or in excess of the fair
market value of the Company's Common Stock on the date of issuance unless
approved by the Compensation Committee of the Company's Board of Directors.

In May 1995, the Company also established the Stock Option Plan for
Non-Employee Directors (the "Director Plan") which provides for the issuance of
stock options to non-employee directors of the Company. The Director Plan makes
available for issuance an aggregate of 900,000 shares of Common Stock. Options
issued under the Director Plan have exercise prices equal to the fair market
value of the Company's Common Stock on the date of issuance, vest over a three
year period and have an expiration date of ten years subsequent to the date of
issuance.

In connection with the BPI Acquisition, the Company assumed outstanding
options to purchase 310,276 shares of the Company's Common Stock (the "BPI
Options"). The BPI Options vested and became exercisable on May 12, 1996 and
have an expiration date of ten years subsequent to the original date of issuance
by BPI.

In connection with the Chancellor Merger, the Company assumed outstanding
options to purchase 3,526,112 shares of the Company's Common Stock (the
"Chancellor Options") with a fair value of $34,977. The Chancellor Options have
varying vesting periods as provided in separate stock option agreements and
generally carry an expiration date of ten years subsequent to the original date
of issuance by CBC.

F-26
<PAGE> 79
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The total options available for grant were 1,115,894 and 2,171,939 at
December 31, 1997 and 1998, respectively.

Following is a summary of activity in the employee option plans and
agreements discussed above for the years ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
1996 1997 1998
-------------------- -------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year..................... 2,579,748 $ 3.46 3,559,984 $ 5.97 8,826,696 $12.98
Granted.................... 1,174,500 11.56 2,773,590 22.89 7,392,000 39.28
Assumed in acquisitions.... -- -- 3,526,112 9.29 -- --
Exercised.................. (166,806) 4.27 (994,526) 5.43 (1,075,860) 9.55
Canceled................... (27,458) 4.96 (38,464) 19.46 (316,847) 20.82
--------- --------- ----------
Outstanding at end of
year..................... 3,559,984 $ 5.97 8,826,696 $12.98 14,825,989 $26.03
========= ========= ==========
Options exercisable at year
end...................... 1,935,484 5,687,960 10,211,090
========= ========= ==========
</TABLE>

The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------------
NUMBER NUMBER
OUTSTANDING AT WEIGHTED AVERAGE WEIGHTED EXERCISABLE AT WEIGHTED
RANGE OF DECEMBER 31, REMAINING AVERAGE DECEMBER 31, AVERAGE
EXERCISE PRICES 1998 CONTRACTUAL LIFE EXERCISE PRICE 1998 EXERCISE PRICE
--------------- -------------- ---------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
$0.01................ 645,000 3.6 years $ 0.01 645,000 $ 0.01
$4.13 to 6.17........ 1,850,688 5.5 years 4.60 1,850,688 4.60
$10.67 to 15.81...... 2,121,349 7.2 years 11.50 1,537,488 11.49
$17.05 to 24.13...... 3,459,002 8.6 years 22.26 2,639,914 22.16
$26.38 to 32.13...... 1,095,000 9.5 years 30.26 338,000 29.31
$37.31 to 48.38...... 5,654,950 9.4 years 42.96 3,200,000 41.96
---------- ----------
14,825,989 $26.03 10,211,090 $22.42
========== ==========
</TABLE>

The weighted-average fair value of options granted during 1996, 1997 and
1998 which have exercise prices equal to or in excess of the market value of the
Company's common stock on the date of issuance was $5.25, $10.25 and $17.50,
respectively. The weighted-average fair value of options granted during 1998
which have exercise prices less than the market value of the Company's common
stock on the date of issuance was $28.19.

The Company applies APB Opinion No. 25 in accounting for its Employee
Option Plans and, accordingly, no compensation cost is recognized in the
consolidated financial statements for stock options which have exercise prices
equal to or in excess of the market value of the Company's Common Stock on the
date of issuance. A charge for stock compensation expense of $16,000 is included
in executive severance charge for the year ended December 31, 1998 (see note
13). Had the Company determined compensation cost

F-27
<PAGE> 80
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

based on the fair value at the grant date for its stock options under SFAS No.
123, the Company's net loss would have been increased to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ---------
<S> <C> <C> <C>
Net loss:
As reported....................................... $(16,194) $(31,745) $ (95,589)
Pro forma......................................... (19,249) (44,639) (160,687)
Basic and diluted loss per common share:
As reported....................................... (.33) (.46) (.88)
Pro forma......................................... (.38) (.59) (1.35)
</TABLE>

Pro forma net loss reflects only options granted subsequent to December 31,
1994. Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net loss amounts
presented above.

The fair value for the stock options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1996, 1997 and 1998: expected stock volatility ranging from
39.9% to 44.5%; risk-free interest rates ranging from 4.8% to 6.0%; dividend
yields of 0%; and expected lives ranging from three to seven years.

(10) INCOME TAXES

Income tax expense (benefit) from continuing operations consists of the
following:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Current tax expense:
Federal............................................... $ 485 $ 6,840 $ --
State................................................. 972 4,791 5,033
------- ------- -------
Total current tax expense............................... 1,457 11,631 5,033
Deferred tax expense (benefit).......................... (4,353) (3,829) 28,718
------- ------- -------
Total income tax expense (benefit)...................... $(2,896) $ 7,802 $33,751
======= ======= =======
</TABLE>

During 1997 and 1998, the Company incurred extraordinary losses in
connection with various refinancings. The tax benefit related to the
extraordinary losses were approximately $2,343 and $25,357 for the years ended
December 31, 1997 and 1998, respectively. This tax benefit, which reduced
current taxes payable, is separately allocated to the extraordinary item. See
Note 7(a) and Note 8. During 1998, the Company reduced current taxes payable by
$13,098 due to a tax benefit received from the exercise of certain stock
options.

Total income tax expense (benefit) differed from the amount computed by
applying the U.S. federal statutory income tax rate of 35% to loss from
continuing operations for the years ended December 31, 1996, 1997 and 1998 as a
result of the following:

<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Computed "expected" tax expense (benefit)............... $(6,682) $(2,342) $ 998
Amortization of goodwill................................ 2,477 5,744 11,728
State income taxes, net of federal benefit.............. 632 2,533 4,919
Non-deductible executive compensation................... -- -- 13,221
Non-deductible meals and entertainment.................. 729 1,028 2,312
Other, net.............................................. (52) 839 573
------- ------- -------
$(2,896) $ 7,802 $33,751
======= ======= =======
</TABLE>

F-28
<PAGE> 81
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 and
1998 are presented below:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss and credit carryforwards............... $ 38,552 $ 76,755
Accrued executive compensation and stock options.......... 1,720 10,452
Differences in book and tax bases related to media
representation contracts............................... 39,908 27,233
Differences in book and tax bases of lease liabilities.... 4,727 4,727
Other..................................................... 3,147 1,754
--------- ---------
Total deferred tax assets......................... 88,054 120,921
--------- ---------
Deferred tax liabilities:
Property and equipment and intangibles, primarily related
to acquisitions........................................ (445,992) (567,221)
Other..................................................... (3,702) (6,834)
--------- ---------
Total deferred tax liabilities.................... (449,694) (574,055)
--------- ---------
Net deferred tax liability........................ $(361,640) $(453,134)
========= =========
</TABLE>

Deferred tax assets and liabilities are computed by applying the U.S.
federal and state income tax rate in effect to the gross amounts of temporary
differences and other tax attributes, such as net operating loss carryforwards.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. The Company expects the
deferred tax assets at December 31, 1998 to be realized as a result of the
reversal during the carryforward period of existing taxable temporary
differences giving rise to deferred tax liabilities and the generation of
taxable income in the carryforward period.

At December 31, 1998, the Company has net operating loss carryforwards
available to offset future taxable income of approximately $176,600, expiring
from 2001 to 2018 and has alternative minimum tax credit carryforwards of
approximately $4,700 that do not expire. Approximately $102,800 and $2,800 of
the net operating loss and tax credit carryforwards, respectively, at December
31, 1998 are subject to annual use limitations under tax rules governing changes
of ownership.

(11) COMMITMENTS AND CONTINGENCIES

The Company has long-term operating leases for office space, certain
broadcasting facilities and equipment and the majority of the land occupied by
its outdoor advertising structures. The leases expire at various dates,
generally during the next ten years, and have varying options to renew and
cancel. Rental expense for operating leases (excluding those with lease terms of
one month or less that were not renewed) was approximately $5,462, $10,913 and
$39,427 for 1996, 1997 and 1998, respectively. Future minimum lease

F-29
<PAGE> 82
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

payments under noncancelable operating leases (with initial or remaining lease
terms in excess of one year) as of December 31, 1998 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1999...................................................... $ 67,218
2000...................................................... 66,957
2001...................................................... 64,904
2002...................................................... 63,501
2003...................................................... 62,992
Thereafter................................................ 1,501,398
</TABLE>

In July 1998, a stockholder derivative action was commenced in the Delaware
Court of Chancery by a stockholder purporting to act on behalf of the Company.
The defendants in the case include Hicks, Muse, Tate & Furst Incorporated
("Hicks Muse"), LIN Television and some of Chancellor Media's directors. The
plaintiff alleges that, among other things, (1) Hicks Muse allegedly caused the
Company to pay too high of a price for LIN because Hicks Muse had allegedly paid
too high of a price when it acquired LIN; and (2) the transaction therefore
allegedly constitutes a breach of fiduciary duty and a waste of corporate assets
by Hicks Muse, which is alleged to control the Company, and the directors of the
Company named as defendants. The plaintiff seeks to enjoin consummation or
rescission of the transaction, compensatory damages, an order requiring that the
directors named as defendants "carry out their fiduciary duties," and attorneys'
fees and other costs. Plaintiff, defendants and the Company had reached a
tentative settlement of this lawsuit. However, as a result of the decision by
the Boards of Directors of the Company and LIN to terminate the LIN Merger, the
settlement will not proceed as planned.

In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
Chancellor Media and are similarly situated. The defendants in the case are
named as Chancellor Media, Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James
E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J.
Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The plaintiff
alleges breach of fiduciary duties, gross mismanagement, gross negligence or
recklessness, and other matters relating to the defendants' actions in
connection with the proposed Capstar merger. The plaintiff seeks to certify the
complaint as a class action, enjoin consummation of the Capstar merger, order
defendants to account to plaintiff and other alleged class members for damages,
and award attorneys' fees and other costs. The Company believes that the lawsuit
is without merit and intends to vigorously defend the action.

On July 10, 1998, the Company entered into an agreement to acquire a 50%
economic interest in Grupo Radio Centro, S.A. de C.V., an owner and operator of
radio stations in Mexico, for approximately $120,500 in cash and $116,500 in
Chancellor Media common stock. On October 15, 1998, the Company announced that
it had provided notice to Grupo Radio that it was terminating the acquisition
agreement in accordance with its terms. The Company has received notice from
Grupo Radio requesting arbitration under the terms of the acquisition agreement
of allegations that Chancellor Media wrongfully terminated that agreement, and
the parties have commenced the arbitration process. The Company believes that it
had a proper basis for terminating the agreement in accordance with its terms
and intends to contest these allegations vigorously.

F-30
<PAGE> 83
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company offers substantially all of its employees voluntary
participation in a 401(k) Plan. The Company may make discretionary contributions
to the plans; however, no such contributions were made by the Company during
1996, 1997 or 1998.

(12) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a) Interest Rate Risk Management

The Company enters into interest rate swaps and collars to diversify its
risk associated with interest rate fluctuations. Under interest rate swaps, the
Company agrees with other parties to exchange, at specified intervals, the
difference between fixed rate and floating rate interest amounts calculated by
reference to an agreed notional principal amount.

Under interest rate collars, the Company agrees with other parties to
exchange, at specified intervals and interest rate levels, the difference
between fixed rate and floating rate interest amounts calculated by reference to
an agreed notional principal amount. If the index rate is between the cap rate
and floor rate, the Company does not receive or make any payments.

(b) Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1997 and 1998. The fair
value of a financial instrument is defined as the amount at which the instrument
could be exchanged in a current transaction between willing parties.

<TABLE>
<CAPTION>
1997 1998
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Notes receivable.......................... $ 18,000 $ 18,000 $ 168,000 $ 182,600
Long-term debt -- Senior Credit
Facility................................ 1,573,000 1,573,000 1,596,000 1,596,000
Long-term debt -- 8% Senior Notes......... -- -- 750,000 761,250
Long-term debt -- 9 3/8% Notes............ 200,000 209,000 200,000 208,000
Long-term debt -- 8 3/4% Notes............ 200,000 205,000 200,000 204,000
Long-term debt -- 10 1/2% Notes........... 100,000 110,000 100,000 110,000
Long-term debt -- 8 1/8% Notes............ 500,000 500,000 500,000 495,000
Long-term debt -- 9% Notes................ -- -- 750,000 787,500
Interest rate swaps and collars
liability............................... -- 3,919 -- 12,799
Redeemable preferred stock -- 12 1/4%
Preferred Stock......................... 119,445 133,000 -- --
Redeemable preferred stock -- 12%
Preferred Stock......................... 211,763 239,821 -- --
Preferred stock -- $3.00 Convertible
Preferred Stock......................... 299,500 473,959 299,500 567,553
Preferred stock -- 7% Convertible
Preferred Stock......................... 110,000 237,875 110,000 285,626
</TABLE>

The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:

Cash and cash equivalents, accounts receivable and accounts
payable: The carrying amount of these assets and liabilities approximates
fair value because of the short maturity of these instruments.

Notes receivable: The fair value of notes receivable is estimated by
discounting the expected future cash flows at interest rates commensurate
with the creditworthiness of the third party.

F-31
<PAGE> 84
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Long-term debt: The fair values of the Company's 8% Senior Notes,
9 3/8% Notes, 8 3/4% Notes, 10 1/2% Notes, 8 1/8% Notes, and 9% Notes are
based on quoted market prices at December 31, 1997 and 1998. As amounts
outstanding under the Company's Senior Credit Facility agreements bear
interest at current market rates, their carrying amounts approximate fair
market value.

Interest rate swaps and collars: The fair value of the interest rate
swap and collar contracts is estimated by obtaining quotations from
brokers. The fair value is an estimate of the amounts that the Company
would (receive) pay at the reporting date if the contracts were transferred
to other parties or canceled by either party.

Redeemable preferred stock: The fair values of the Company's 12 1/4%
Preferred Stock and 12% Preferred Stock are based on December 31, 1997
quoted market prices.

Preferred stock: The fair values of the Company's $3.00 Convertible
Preferred Stock and 7% Convertible Preferred Stock are based on quoted
market prices at December 31, 1997 and 1998.

(13) RELATED PARTY AND OTHER TRANSACTIONS

As of December 31, 1998, Thomas O. Hicks and affiliates of Hicks Muse
beneficially owned an aggregate 16,944,371 shares of Common Stock of the
Company. Mr. Hicks is Chairman of the Board and a director of the Company.

The Company is subject to a financial monitoring and oversight agreement,
dated April 1, 1996, as amended on September 4, 1997, with Hicks, Muse & Co.
Partners, L.P. ("Hicks Muse Partners"), an affiliate of Hicks Muse. In
connection with the financial monitoring and oversight agreement, the Company
pays to Hicks Muse Partners an annual fee of not less than $1,000, subject to
increase or decrease (but not below $1,000), based upon changes in the consumer
price index. Hicks Muse Partners is also entitled to reimbursement for any
out-of-pocket expenses incurred in connection with rendering services under the
financial monitoring and oversight agreement. The financial monitoring and
oversight agreement provides that the agreement will terminate at the time as
Thomas O. Hicks and his affiliates collectively cease to beneficially own at
least two-thirds of the number of shares of Chancellor Media common stock
beneficially owned by them, collectively, at the effective time of the
Chancellor Merger. The Company paid Hicks Muse Partners $333 and $1,019 in 1997
and 1998, respectively, in connection with the financial monitoring and
oversight agreement which is included in corporate general and administrative
expense.

In connection with the consummation of the Chancellor Merger, a financial
advisory agreement among CBC, CRBC and HM2/Management Partners, L.P.
("HM2/Management"), an affiliate of Hicks Muse, was terminated. In consideration
thereof, in lieu of any payments required to be made under the financial
advisory agreement in respect of the transactions contemplated by the Chancellor
Merger, HM2/Management was paid a fee of $10,000 in cash upon consummation of
the Chancellor Merger in 1997 which was accounted for as a direct acquisition
cost. As part of the termination of the financial advisory agreement, the
Company paid Hicks Muse Partners $1,500 for financial advisory services in
connection with the acquisition of Katz in 1997 which was accounted for as a
direct acquisition cost.

Vernon E. Jordan, Jr., a director of the Company, also serves on the board
of directors of Bankers Trust Company and Bankers Trust Corporation. BT Alex.
Brown Incorporated, an affiliate of Bankers Trust Company and Bankers Trust
Corporation, was engaged by the Company in January 1999 as a financial advisor
to explore strategic alternatives in an effort to maximize shareholder value. In
addition, affiliates of Bankers Trust Company and Bankers Trust Corporation have
in the past provided a variety of commercial banking, investment banking and
financial advisory services to the Company, and expect to continue to provide
services to the Company in the future. Fees paid to BT Alex. Brown in 1998 were
approximately $10,275.

F-32
<PAGE> 85
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the Capstar/SFX Transaction, the Company (i) began
programming ten radio stations owned by Capstar under time brokerage agreements
effective May 29, 1998 and paid fees of $28,831 to Capstar related to these
agreements during 1998 and (ii) provided a loan to Capstar in the principal
amount of $150,000 (see note 3). Interest income on this note receivable was
$10,600 during 1998. The Company also began operating Capstar's WKNR-AM in
Cleveland under a time brokerage agreement effective February 1, 1999.

The Company recorded revenue of $365 for the period October 28, 1997 to
December 31, 1997 and $6,836 for the year ended December 31, 1998 for providing
media representation services to Capstar. The Company paid or accrued $11,157 in
1998 in connection with Capstar's participation in the Company's AMFM Radio
Networks and other transactions. The Company had a net receivable balance from
Capstar of $748 at December 31, 1997, and a net payable to Capstar of $162 at
December 31, 1998.

In October and November 1998, LIN purchased two airplanes and subsequently
entered into two lease agreements with respect to those airplanes with the
Company. The leases expire in October 1999 and 2003, respectively, and in 1998,
the Company paid approximately $415 to LIN under the leases.

On April 14, 1998, Scott K. Ginsburg resigned as President and Chief
Executive Officer of the Company, and on April 20, 1998, Mr. Ginsburg resigned
as director of the Company and from all appointments and positions with its
respective subsidiaries. On April 20, 1998, Mr. Ginsburg and the Company entered
into a separation and consulting agreement. Following Mr. Ginsburg's
resignation, the Company entered into new employment agreements with James E. de
Castro, the Company's Chief Operating Officer, and Matthew E. Devine, the
Company's Chief Financial Officer, each effective April 17, 1998. On April 29,
1998, Jeffrey A. Marcus was named President and Chief Executive Officer, and the
Company entered into an employment agreement with Mr. Marcus effective June 1,
1998. In connection with Mr. Ginsburg's resignation, the Company incurred a
one-time executive severance charge of $59,475 which consists of (i) a lump sum
severance payment of $20,000 to Mr. Ginsburg; (ii) compensation expense of
$16,000 related to the grant of 800,000 stock options to Mr. Ginsburg at an
exercise price of $23.25 per share, (iii) consulting fees of $12,500 to be paid
to Mr. Ginsburg over five years, (iv) one-time cash payments of $5,000 and
$2,000 to Mr. de Castro and Mr. Devine, respectively, (v) execution bonuses of
$1,000 each paid to Mr. de Castro, Mr. Devine and Mr. Marcus and (vi) other
costs incurred in connection with Mr. Ginsburg's resignation of $975.
Subsequently, Matthew E. Devine resigned as Senior Vice President and Chief
Financial Officer of the Company and from all appointments and positions with
its respective subsidiaries and entered into a termination agreement with the
Company. In connection with Mr. Devine's resignation, the Company incurred a
one-time executive severance charge of $4,186 which consists of (i) a one-time
cash payment of $2,000, (ii) bonus payments totaling $2,033 and (iii) other
costs of $153.

(14) SEGMENT DATA

The Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, effective January 1, 1998. This statement
supersedes SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise, replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS No. 131 also requires
disclosures about products and services, geographic areas, and major customers.
The adoption of SFAS No. 131 did not affect the results of operations or
financial position of the Company, but did affect the disclosure of segment
information. Certain information disclosed in the prior year has been restated
to conform to the provisions of SFAS No. 131. Intersegment revenue is included
in the segment totals for internal reporting. This intercompany revenue is
eliminated in consolidation. The accounting policies of the segments are the
same as those described in note 1.

F-33
<PAGE> 86
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company conducts business in three distinct operating segments
consisting of radio broadcasting, outdoor advertising and media representation.
Information about each of the operating segments follows:

(a) Chancellor Radio Group -- radio broadcasting

The Chancellor Radio Group portfolio consisted of 119 radio stations (89 FM
and 30 AM) concentrated in the top 30 markets in the United States and in Puerto
Rico at December 31, 1998, including 13 stations operated under time brokerage
agreements. As of December 31, 1998, the Chancellor Radio Group owned
superduopolies (clusters of four or five FM stations) in 11 of the nation's 15
largest radio markets - New York, Los Angeles, Chicago, San Francisco,
Philadelphia, Detroit, Dallas/Ft. Worth, Washington, D.C., Houston, Puerto Rico
and Phoenix and in four other large markets - Minneapolis-St. Paul, Pittsburgh,
Denver and Orlando. The Chancellor Radio Group also operates a national radio
network, the AMFM Radio Networks, which broadcasts advertising and syndicated
programming shows to a national audience of approximately 66 million listeners
in the United States (including approximately 39 million listeners from the
Company's portfolio of stations).

(b) Chancellor Outdoor Group -- outdoor advertising

The Chancellor Outdoor Group owned and operated approximately 38,000
outdoor advertising billboards and display faces in 37 states at December 31,
1998. The Company entered into the outdoor advertising business with the
acquisition of Martin on July 31, 1998 and further expanded its outdoor
advertising segment with the acquisition of Whiteco on December 1, 1998. The
Chancellor Outdoor Group segment data includes the results of operations of each
of the acquired entities from the date of acquisition.

The Company entered into the media representation business with the
acquisition of Katz on October 28, 1997. Katz is a full-service media
representation firm that sells national spot advertising time for its clients in
the radio, television and cable industries throughout the United States. Katz is
retained on an exclusive basis by radio stations, television stations and cable
television systems in over 200 designated market areas throughout the United
States, including at least one radio or television station in each of the 50
largest designated market areas. The media representation segment data includes
the results of operations of Katz from the date of acquisition.

F-34
<PAGE> 87
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Separate financial data for each of the Company's three business segments
is provided below. The Company evaluates the performance of its segments based
on the following:

<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- ----------
<S> <C> <C> <C>
Chancellor Radio Group -- radio broadcasting:
Net revenues.................................... $293,850 $ 548,856 $1,057,044
Operating expenses.............................. 174,344 297,085 551,037
Depreciation and amortization................... 83,765 168,597 376,833
Operating income................................ 32,493 75,450 122,188
Capital expenditures............................ 6,015 10,544 18,736
Identifiable assets............................. 875,768 4,265,038 4,649,127
Chancellor Outdoor Group -- outdoor advertising:
Net revenues.................................... -- -- 47,605
Operating expenses.............................. -- -- 23,505
Depreciation and amortization................... -- -- 25,986
Operating loss.................................. -- -- (3,871)
Capital expenditures............................ -- -- 5,344
Identifiable assets............................. -- -- 1,743,254
Katz -- media representation:
Net revenues.................................... -- 35,901 192,794
Operating expenses.............................. -- 21,842 131,106
Depreciation and amortization................... -- 4,210 29,630
Operating income................................ -- 8,399 25,299
Capital expenditures............................ -- 436 15,190
Identifiable assets............................. -- 495,951 528,238
</TABLE>

The segment financial data includes intersegment revenues and expenses
which must be excluded to reconcile to the Company's consolidated financial
statements. In addition, certain depreciation and amortization expenses,
corporate general and administrative expenses, executive severance expenses,
corporate capital expenditures and general corporate assets were not allocated
to business segments and must be included to reconcile to the Company's
consolidated financial statements. Reconciling financial data is provided below:

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- -------
<S> <C> <C> <C>
Intersegment net revenues............................. $ -- $ 2,679 $23,587
Intersegment operating expenses....................... -- 2,679 23,587
Unallocated depreciation and amortization............. 9,984 13,175 13,889
Unallocated corporate general and administrative
expenses............................................ 4,549 12,268 20,992
Unallocated executive severance....................... -- -- 63,661
Unallocated corporate capital expenditures............ 528 686 4,191
Unallocated general corporate assets.................. 145,191 207,886 307,288
</TABLE>

F-35
<PAGE> 88
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15) QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
1997:
Net revenues..................................... $ 81,897 $106,364 $145,022 $248,795
Operating income................................. 568 16,968 15,002 25,868
Income (loss) before extraordinary item.......... (6,011) 9,870 (6,000) (25,254)
Net income (loss) attributable to common
stockholders.................................. (6,011) 4,821 (11,049) (31,671)
Basic and diluted income (loss) per common share:
Before extraordinary item..................... (0.07) 0.11 (0.12) (0.27)
Net income (loss)............................. (0.07) 0.06 (0.12) (0.27)
1998:
Net revenues..................................... $233,557 $321,710 $343,829 $374,760
Operating income (loss).......................... (13,201) (18,072) 38,010 38,337
Income (loss) before extraordinary item.......... (68,571) 40,401 6,262 (26,592)
Net income (loss) attributable to common
stockholders.................................. (74,988) 2,118 (15,379) (33,010)
Basic and diluted income (loss) per common share:
Before extraordinary item..................... (0.60) 0.23 -- (0.23)
Net income (loss)............................. (0.60) 0.01 (0.11) (0.23)
</TABLE>

Basic and diluted loss per common share for the years ended December 31,
1997 and 1998 differs from the sum of basic and diluted loss per common share
for the quarters during the respective year due to the different periods used to
calculate weighted average shares outstanding.

(16) SUBSEQUENT EVENTS

On April 8, 1998, the Company entered into an agreement to acquire Petry
Media Corporation, an independent television representation firm, for
approximately $127,000 in cash and on September 3, 1998, the Company entered
into an agreement to acquire Pegasus Broadcasting of San Juan, L.L.C., a
television broadcasting company, for approximately $69,600 in cash. In
connection with the termination of the LIN merger, on March 15, 1999, the
Company's Board of Directors approved the negotiation of the assignment of the
Company's agreements to acquire Petry and Pegasus to LIN Television Corporation.
The assignment of these agreements is subject to negotiation of definitive
documentation, third-party approval and various other conditions, including
governmental approvals and, accordingly, there can be no assurance that such
agreements will be assigned by the Company at all.

Executive Management Realignment. On March 15, 1999, the Company announced
the following executive management changes:

F-36
<PAGE> 89
CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- the creation of an Office of the Chairman of the Company's Board of
Directors, in which Mr. de Castro and Mr. Steven Hicks will join the
Company's Chairman, Mr. Thomas Hicks, as Vice Chairmen;

- the resignation of Jeffrey A. Marcus as the Company's President and Chief
Executive Officer effective March 15, 1999;

- the appointments of Kenneth J. O'Keefe as Chief Operating Officer of
Chancellor Radio Group and James A. McLaughlin as President and Chief
Operating Officer of Chancellor Outdoor Group;

- the resignation of Eric C. Neuman as the Company's Senior Vice
President -- Strategic Development effective March 15, 1999;

The Company is expected to record a significant non-recurring charge in the
first quarter of 1999 in connection with the termination for the LIN Merger and,
if completed, assignment of the Petry Media Corporation and Pegasus Broadcasting
purchase agreements to LIN and the executive management realignment discussed
above.

See note 11 for the current status of certain litigation related to the LIN
Merger.

F-37
<PAGE> 90

SCHEDULE I

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED BALANCE SHEETS -- PARENT COMPANY
DECEMBER 31, 1997 AND 1998
(DOLLARS IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Investment in subsidiaries, at equity....................... $1,480,207 $2,391,830
========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities................................................. $ -- $ --
Stockholders' equity:
Preferred stock........................................... 409,500 409,500
Common stocks............................................. 1,199 1,428
Paid-in capital........................................... 1,226,930 2,259,583
Accumulated deficit....................................... (157,422) (278,681)
---------- ----------
Total stockholders' equity........................ 1,480,207 2,391,830
---------- ----------
Total liabilities and stockholders' equity........ $1,480,207 $2,391,830
========== ==========
</TABLE>

See accompanying notes to condensed financial statements.

F-38
<PAGE> 91

SCHEDULE I, CONT.

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED STATEMENTS OF OPERATIONS -- PARENT COMPANY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net loss -- equity in losses of unconsolidated
subsidiaries.............................................. $(16,194) $(31,745) $(95,589)
======== ======== ========
</TABLE>

See accompanying notes to condensed financial statements.

F-39
<PAGE> 92

SCHEDULE I, CONT.

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS -- PARENT COMPANY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................ $ (16,194) $ (31,745) $ (95,589)
Equity in undistributed losses of unconsolidated
subsidiaries......................................... 16,194 31,745 95,589
--------- --------- ----------
Net cash provided by operating activities....... -- -- --
--------- --------- ----------
Cash flows from investing activities -- investment in
subsidiaries............................................ (261,028) (282,244) (978,114)
--------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock, preferred stock
and warrants......................................... 264,938 293,158 1,003,784
Redemption of redeemable preferred stock................ (90) -- --
Dividends on preferred stock............................ (3,820) (10,914) (25,670)
Distributions from subsidiaries......................... -- -- --
--------- --------- ----------
Net cash provided by financing activities....... 261,028 282,244 978,114
--------- --------- ----------
Net change in cash and cash equivalents................... -- -- --
Cash and cash equivalents at beginning of year............ -- -- --
--------- --------- ----------
Cash and cash equivalents at end of year.................. $ -- $ -- $ --
========= ========= ==========
</TABLE>

See accompanying notes to condensed financial statements.

F-40
<PAGE> 93

SCHEDULE I, CONT.

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED FINANCIAL STATEMENTS -- PARENT COMPANY

(1) GENERAL

The accompanying condensed financial statements of Chancellor Media
Corporation (the "Company") should be read in conjunction with the consolidated
financial statements of the Company and its subsidiaries included in the
Company's Annual Report on Form 10-K.

(2) OBLIGATIONS, GUARANTEES AND COMMITMENTS

On November 6, 1992, the Company organized a new wholly-owned subsidiary to
which the Company transferred and assigned substantially all of its assets and
liabilities. The Company has guaranteed the obligations under a loan agreement
of this subsidiary (the "Senior Credit Facility"). Prior to such time the
Company was the debtor on such obligations. See note 7 to consolidated financial
statements of Chancellor Media Corporation and Subsidiaries regarding these
obligations.

(3) OTHER

See note 9 to consolidated financial statements of Chancellor Media
Corporation and Subsidiaries for a description of the preferred stock, common
stock and other equity securities of the Company.

F-41
<PAGE> 94

SCHEDULE II

CHANCELLOR MEDIA CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WRITEOFFS OF PERIOD
- ----------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1998............. $12,651 $5,684 $3,827(1) $6,582 $15,580
======= ====== ====== ====== =======
Year ended December 31, 1997............. $ 2,292 $5,174 $7,049(1) $1,864 $12,651
======= ====== ====== ====== =======
Year ended December 31, 1996............. $ 2,000 $2,179 $ 156(1) $2,043 $ 2,292
======= ====== ====== ====== =======
</TABLE>

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

(1) Additions result from the application of purchase accounting relating to the
Pyramid Acquisition in 1996, the Chancellor Merger, the Viacom Acquisition
and the Katz Acquisition in 1997 and the acquisitions of WWDC-FM/AM, Martin
Media, Primedia and the Outdoor Advertising Division of Whiteco in 1998.

F-42
<PAGE> 95

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Shareholder of
Chancellor Media Corporation of Los Angeles:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page F-1 present fairly, in all
material respects, the financial position of Chancellor Media Corporation of Los
Angeles and subsidiaries at December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

Dallas, Texas
February 10, 1999, except as to Note 16,
which is as of March 15, 1999

F-43
<PAGE> 96

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Chancellor Media Corporation of Los Angeles:

We have audited the accompanying consolidated statements of operations,
stockholder's equity and cash flows of Chancellor Media Corporation of Los
Angeles (formerly Evergreen Media Corporation of Los Angeles) and subsidiaries
for the year ended December 31, 1996. In connection with our audit of the
consolidated financial statements, we have also audited the financial statement
schedule for the year ended December 31, 1996. These consolidated financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Chancellor Media Corporation of Los Angeles and subsidiaries for the
year ended December 31, 1996 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.

KPMG LLP

Dallas, Texas
January 31, 1997

F-44
<PAGE> 97

CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 16,584 $ 12,256
Accounts receivable, less allowance for doubtful accounts
of $12,651 in 1997 and $15,580 in 1998................. 239,744 352,646
Other current assets (note 3)............................. 34,811 59,909
---------- ----------
Total current assets.............................. 291,139 424,811
Property and equipment, net (note 4)........................ 159,797 1,388,156
Intangible assets, net (note 5)............................. 4,404,443 5,056,047
Other assets, net (note 3).................................. 113,496 358,893
---------- ----------
$4,968,875 $7,227,907
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses (note 6)............ $ 178,415 $ 236,618
Long-term debt (note 7)..................................... 2,573,000 4,096,000
Deferred tax liabilities (note 10).......................... 361,640 453,134
Other liabilities........................................... 44,405 50,325
---------- ----------
Total liabilities................................. 3,157,460 4,836,077
---------- ----------
Commitments and contingencies (notes 2, 7 and 11)
Redeemable preferred stock (note 8):
Redeemable senior cumulative exchangeable preferred stock
of subsidiary, par value $.01 per share; 1,000,000
shares authorized, issued and outstanding in 1997;
liquidation preference of $121,274..................... 119,445 --
Redeemable cumulative exchangeable preferred stock of
subsidiary, par value $.01 per share; 3,600,000 shares
authorized and 2,117,629 shares issued and outstanding
in 1997; liquidation preference of $223,519............ 211,763 --
Stockholder's equity (note 9):
Common stock, $.01 par value. 1,040 shares authorized,
issued and outstanding................................. 1 1
Paid-in capital........................................... 1,637,628 2,670,510
Accumulated deficit....................................... (157,422) (278,681)
---------- ----------
Total stockholder's equity........................ 1,480,207 2,391,830
---------- ----------
$4,968,875 $7,227,907
========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-45
<PAGE> 98

CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- ----------
<S> <C> <C> <C>
Gross revenues.............................................. $337,405 $663,804 $1,440,357
Less agency commissions................................... 43,555 81,726 166,501
-------- -------- ----------
Net revenues........................................... 293,850 582,078 1,273,856
-------- -------- ----------
Operating expenses:
Operating expenses, excluding depreciation and
amortization........................................... 174,344 316,248 682,061
Depreciation and amortization............................. 93,749 185,982 446,338
Corporate general and administrative...................... 7,797 21,442 36,722
Executive severance charge (note 13)...................... -- -- 63,661
-------- -------- ----------
Operating expenses..................................... 275,890 523,672 1,228,782
-------- -------- ----------
Operating income....................................... 17,960 58,406 45,074
-------- -------- ----------
Other (income) expense:
Interest expense.......................................... 37,527 85,017 217,136
Interest income........................................... (477) (1,922) (15,650)
Gain on disposition of assets (note 2).................... -- (18,380) (123,845)
Gain on disposition of representation contracts........... -- -- (32,198)
Other (income) expense, net............................... -- 383 (3,221)
-------- -------- ----------
Other (income) expense, net............................ 37,050 65,098 42,222
-------- -------- ----------
Income (loss) before income taxes and extraordinary
item................................................. (19,090) (6,692) 2,852
Income tax expense (benefit) (note 10)...................... (2,896) 7,802 33,751
-------- -------- ----------
Loss before extraordinary item......................... (16,194) (14,494) (30,899)
Extraordinary loss, net of income tax benefit (notes 7 and
8)........................................................ -- 4,350 47,089
-------- -------- ----------
Net loss............................................... (16,194) (18,844) (77,988)
Preferred stock dividends (note 8).......................... -- 12,901 17,601
-------- -------- ----------
Net loss attributable to common stock............. $(16,194) $(31,745) $ (95,589)
======== ======== ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-46
<PAGE> 99

CHANCELLOR CORPORATION OF LOS ANGELES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- PAID-IN ACCUMULATED STOCKHOLDERS'
AMOUNT SHARES CAPITAL DEFICIT EQUITY
------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1995............ $1 1,000 $ 398,074 $ (93,498) $ 304,577
Net capital contributed by Parent........ -- -- 264,848 -- 264,848
Dividend to Parent....................... -- -- -- (3,820) (3,820)
Net loss................................. -- -- -- (16,194) (16,194)
-- ----- ---------- --------- ----------
Balances at December 31, 1996............ 1 1,000 662,922 (113,512) 549,411
Net capital contributed by Parent........ -- -- 974,706 -- 974,706
Dividend to Parent....................... -- -- -- (12,165) (12,165)
Issuance of common stock in connection
with the Katz Acquisition.............. -- 40 -- -- --
Net loss................................. -- -- -- (31,745) (31,745)
-- ----- ---------- --------- ----------
Balances at December 31, 1997............ 1 1,040 1,637,628 (157,422) 1,480,207
Net capital contributed by Parent........ -- -- 1,032,882 -- 1,032,882
Dividend to Parent....................... -- -- -- (25,670) (25,670)
Net loss................................. -- -- -- (95,589) (95,589)
----- ---------- --------- ----------
Balances at December 31, 1998............ $1 1,040 $2,670,510 $(278,681) $2,391,830
== ===== ========== ========= ==========
</TABLE>

See accompanying notes to consolidated financial statements.

F-47
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1997 1998
--------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................. $ (16,194) $ (18,844) $ (77,988)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation....................................... 7,707 14,918 47,027
Amortization of goodwill, intangible assets and
other assets..................................... 86,042 171,064 399,311
Executive severance................................ -- -- 16,000
Provision for doubtful accounts.................... 2,179 5,174 5,684
Deferred income tax expense (benefit).............. (4,353) (3,829) 28,718
Gain on sale of representation contracts........... -- -- (32,198)
Gain on disposition of assets...................... -- (18,380) (123,845)
Extraordinary loss, net of income tax benefit...... -- 4,350 47,089
Changes in certain assets and liabilities, net of
effects of acquisitions:
Accounts receivable.............................. (28,146) (29,977) (89,392)
Other current assets............................. (2,804) 733 (7,964)
Accounts payable and accrued expenses............ 3,991 20,004 58,027
Other assets..................................... (354) (4,283) (6,461)
Other liabilities................................ (587) (1,416) 3,623
--------- ----------- -----------
Net cash provided by operating activities..... 47,481 139,514 267,631
--------- ----------- -----------
Cash flows from investing activities:
Acquisitions, net of cash acquired.................... (458,332) (1,631,505) (1,995,991)
Issuance of note receivable........................... -- -- (150,000)
Escrow deposits on pending acquisitions............... (17,000) (4,655) --
Proceeds from sale of assets.......................... 32,000 269,250 --
Payments made on purchases of representation
contracts.......................................... -- (31,456) (32,410)
Payments for cost basis investments................... -- -- (30,000)
Payments received on sales of representation
contracts.......................................... -- 9,296 26,500
Capital expenditures.................................. (6,543) (11,666) (43,461)
Other................................................. (12,063) (22,273) (65,807)
--------- ----------- -----------
Net cash used by investing activities......... (461,938) (1,423,009) (2,291,169)
--------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.............. 447,750 2,945,250 3,596,000
Principal payments on long-term debt.................. (290,750) (1,901,250) (2,073,000)
Net proceeds from issuance of common stock, preferred
stock and warrants................................. 264,938 293,158 1,003,784
Dividends to parent................................... (3,820) (10,914) (25,670)
Dividends on preferred stock.......................... -- (3,658) (31,369)
Payments for debt issuance costs...................... (3,941) (25,567) (47,318)
Redemption of exchange debentures..................... -- -- (403,217)
Redemption of preferred stock......................... (90) -- --
--------- ----------- -----------
Net cash provided by financing activities..... 414,087 1,297,019 2,019,210
--------- ----------- -----------
Increase (decrease) in cash and cash equivalents........ (370) 13,524 (4,328)
Cash and cash equivalents at beginning of year.......... 3,430 3,060 16,584
--------- ----------- -----------
Cash and cash equivalents at end of year................ $ 3,060 $ 16,584 $ 12,256
========= =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-48
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Description of Business

Chancellor Media Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles) ("CMCLA"), a wholly-owned subsidiary of
Chancellor Media Corporation ("Chancellor Media"), (together with its
subsidiaries, the "Company") is a diversified media company with operations in
radio broadcasting, outdoor advertising and media representation. As of December
31, 1998, the Chancellor Radio Group portfolio (including 13 stations operated
under time brokerage agreements) consisted of 119 radio stations (89 FM and 30
AM) concentrated in the top 30 markets in the United States and in Puerto Rico
and a national radio network, the AMFM Radio Networks, which broadcasts
advertising and syndicated programming shows to a national audience of
approximately 66 million listeners in the United States (including approximately
39 million listeners from the Company's portfolio of stations). As of December
31, 1998, Chancellor Outdoor Group operated approximately 38,000 outdoor
advertising display faces in 37 states. The media representation business
consists of Katz Media Group, Inc. ("Katz"), a full-service media representation
firm that sells national spot advertising time for clients in the radio and
television industries throughout the United States and for the Company's
portfolio of stations.

(b) Principles of Consolidation

The consolidated financial statements include the accounts of CMCLA and its
subsidiaries, all of which are wholly owned. Significant intercompany balances
and transactions have been eliminated in consolidation.

(d) Property and Equipment

(e) Intangible Assets

F-49
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(f) Debt Issuance Costs

(g) Barter Transactions

(h) Income Taxes

(i) Revenue Recognition

Fees received or paid pursuant to time brokerage agreements are recognized
as gross revenues or amortized to expense, respectively, over the term of the
agreement.

(j) Representation Contracts

F-50
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(k) Statements of Cash Flows

For purposes of the statements of cash flows, the Company considers
temporary cash investments purchased with original maturities of three months or
less to be cash equivalents.

(l) Derivative Financial Instruments

The Company's derivative financial instruments are used to manage
well-defined interest rate risks related to interest on the Company's
outstanding debt and are not used for trading purposes.

(m) Omission of Per Share Information

Net loss per share is not presented as such information is not meaningful.
All of the issued and outstanding shares of the Company's common stock have been
owned, directly or indirectly, by Chancellor Media during the three-year period
ended December 31, 1998.

(n) Disclosure of Certain Significant Risks and Uncertainties

(o) Stock Option Plan

The Company does not have any stock compensation plans under which it
grants stock awards to employees. Chancellor Media grants stock options to the
Company's officers and other key employees on behalf the Company. Chancellor
Media accounts for its stock-based award plans in accordance with Accounting
Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, under which compensation expense is
recorded to the extent that the current market price of the underlying stock
exceeds the exercise price. Note 9(b) provides pro forma net income and pro
forma earnings per share disclosures as if the stock-based awards had been
accounted for using the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation.

F-51
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(p) Recently Issued Accounting Principle

(q) Reclassifications

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

(2) ACQUISITIONS AND DISPOSITIONS

(a) Completed Transactions

On October 18, 1996, the Company acquired WEDR-FM in Miami from affiliates
of the Rivers Group for $65,000 in cash plus various other direct acquisition
costs.

On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit
from affiliates of Chancellor Radio Broadcasting Company ("CRBC") for $30,000 in
cash plus various other direct acquisition costs. The Company had previously
provided certain sales and promotional functions to WWWW-FM and

F-52
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

WDFN-AM under a joint sales agreement since February 14, 1996 and subsequently
operated the stations under a time brokerage agreement since April 1, 1996.

On May 1, 1997, the Company acquired WDAS-FM/AM in Philadelphia from
affiliates of Beasley FM Acquisition Corporation for $103,000 in cash plus
various other direct acquisition costs.

On June 3, 1997, the Company sold WEJM-FM in Chicago to affiliates of
Crawford Broadcasting for $14,750 in cash and recognized a gain of $9,258.

On July 2, 1997, the Company acquired WLTW-FM and WAXQ-FM in New York and
WMZQ-FM, WJZW-FM, WZHF-AM and WBZS-AM in Washington, D.C. from Viacom
International, Inc. ("Viacom") for approximately $612,388 in cash including
various other direct acquisition costs (the "Viacom Acquisition"). The Viacom
Acquisition was financed with (i) bank borrowings under the Senior Credit
Facility (as defined) of $552,559; (ii) $53,750 in escrow funds paid by the
Company on February 19, 1997 and (iii) $6,079 financed through working capital.
In June 1997, Chancellor Media issued 5,990,000 shares of $3.00 Convertible
Exchangeable Preferred Stock for net proceeds of $287,808 which were contributed
to the

F-53
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company by Chancellor Media and used to repay borrowings under the Senior Credit
Facility and subsequently were reborrowed on July 2, 1997 as part of the
financing of the Viacom Acquisition. On July 7, 1997, the Company sold WJZW-FM
in Washington, D.C. to affiliates of Capital Cities/ABC Radio for $68,000 in
cash. The assets of WJZW-FM, as well as the assets of WZHF-AM and WBZS-AM, which
were sold on August 13, 1997, were accounted for as assets held for sale in
connection with the purchase price allocation of the Viacom Acquisition and no
gain or loss was recognized by the Company upon consummation of the sales. The
combined net income of WJZW-FM, WZHF-AM and WBZS-AM of approximately $153 has
been excluded from the consolidated statement of operations for the year ended
December 31, 1997. The excess of the carrying amounts over the proceeds at the
dates of sale approximated $894 and has been accounted for as an adjustment to
the original purchase price of the Viacom Acquisition.

On July 7, 1997, the Company sold the Federal Communications Commission
("FCC") authorizations and certain transmission equipment previously used in the
operation of KYLD-FM in San Francisco to Susquehanna Radio Corporation
("Susquehanna") for $44,000 in cash and recognized a gain of $1,726.
Simultaneously therewith, CRBC sold the call letters "KSAN-FM" (which CRBC
previously used in San Francisco) to Susquehanna. On July 7, 1997, the Company
and CRBC entered into a time brokerage agreement to enable the Company to
operate KYLD-FM on the frequency previously assigned to KSAN-FM, and on July 7,
1997, CRBC changed the call letters of KSAN-FM to KYLD-FM. Upon the consummation
of the Chancellor Merger (as defined herein), the Company changed the format of
the new KYLD-FM to the format previously operated on the old KYLD-FM.

On July 21, 1997, the Company entered into a time brokerage agreement with
CRBC whereby the Company began managing certain limited functions of CRBC's
stations KISQ (formerly KBGG-FM), KNEW-AM and KABL-FM in San Francisco pending
the consummation of the Chancellor Merger (as defined herein), which occurred on
September 5, 1997.

On August 27, 1997, the Company sold WEJM-AM in Chicago to Douglas for
$7,500 in cash and recognized a gain of $3,331.

On September 5, 1997, pursuant to an Amended and Restated Agreement and
Plan of Merger, dated as of February 19, 1997 and amended and restated on July
31, 1997 (the "Chancellor Merger Agreement"), among Chancellor Broadcasting
Company ("CBC"), CRBC, Evergreen Media Corporation ("Evergreen"), Evergreen
Mezzanine Holdings Corporation ("EMHC") and Evergreen Media Corporation of Los
Angeles ("EMCLA"), (i) CBC was merged (the "Parent Merger") with and into EMHC,
a direct, wholly-owned subsidiary of Evergreen, with EMHC remaining as the
surviving corporation and (ii) CRBC was merged (the "Subsidiary Merger") with
and into EMCLA, a direct, wholly-owned subsidiary of EMHC, with EMCLA

F-54
<PAGE> 107
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

remaining as the surviving corporation (collectively, the "Chancellor Merger").
Upon consummation of the Parent Merger, Evergreen was renamed Chancellor Media
Corporation and EMHC was renamed Chancellor Mezzanine Holdings Corporation
("CMHC"). Upon consummation of the Subsidiary Merger, the Company was renamed
Chancellor Media Corporation of Los Angeles. Consummation of the Chancellor
Merger added 52 radio stations (36 FM and 16 AM) to the Company's portfolio of
stations, including 13 stations in markets in which the Company previously
operated. The total purchase price allocated to net assets acquired was
approximately $1,998,383 which included (i) the conversion of each outstanding
share of CBC Common Stock into 0.9091 shares of Chancellor Media's Common Stock,
resulting in the issuance of 34,617,460 shares of Chancellor Media's Common
Stock at $15.50 per share, (ii) the assumption of long-term debt of CRBC of
$949,000 which included $549,000 of borrowings outstanding under the CRBC senior
credit facility, $200,000 of CRBC's 9 3/8% Senior Subordinated Notes due 2004
and $200,000 of CRBC's 8 3/4% Senior Subordinated Notes due 2007 (iii) the
issuance of 2,117,629 shares of the Company's 12% Exchangeable Preferred Stock
in exchange for CRBC's substantially identical securities with a fair value of
$215,570 including accrued and unpaid dividends of $3,807, (iv) the issuance of
1,000,000 shares of the Company's 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock in exchange for CRBC's substantially identical
securities with a fair value of $120,217 including accrued and unpaid dividends
of $772, (v) the issuance of 2,200,000 shares of Chancellor Media's 7%
Convertible Preferred Stock in exchange for CBC's substantially identical
securities with a fair value of $111,048 including accrued and unpaid dividends
of $1,048, (vi) the assumption of stock options issued to CBC stock option
holders with a fair value of $34,977 and (vii) estimated acquisition costs of
$31,000.

On May 29, 1998, as part of the Capstar/SFX Transaction (defined below),
the Company exchanged WAPE-FM and WFYV-FM in Jacksonville (valued at $53,000)
for Capstar Broadcasting Corporation (together with its subsidiaries, "Capstar")
station KODA-FM in Houston (the "Houston Exchange"). As part of the transaction,
the Company also paid cash of $90,250 to the owners of KVET-AM, KVET-FM and
KASE-FM, who simultaneously transferred such stations to Capstar.
F-55
<PAGE> 108
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Between September and December 1998, the Company acquired approximately 670
additional billboards and outdoor displays in various markets for approximately
$23,582 in cash.

F-56
<PAGE> 109
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the net assets acquired follows:

The pro forma consolidated condensed results of operations data for 1997
and 1998, as if the 1997 and 1998 acquisitions and dispositions discussed above,
the 8 1/8% Notes offering described in note 7(f), the 9% Notes offering
described in note 7(g), the 8% Senior Notes offering described in note 7(b) and
the amendment and restatement of the Senior Credit Facility described in note
7(a) occurred at January 1, 1997, follow:

The pro forma results are not necessarily indicative of the financial
results which would have occurred if the transactions had been in effect for the
entire periods presented.

F-57
<PAGE> 110
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

owns WZJM-FM and WJMO-AM. The six Cleveland stations were acquired for an
aggregate purchase price of $282,970 in cash including working capital and is
subject to certain adjustments.

Subsequent to January 1, 1999, the Company acquired approximately 100
additional billboards and outdoor displays in various markets for approximately
$8,178 in cash.

(b) Pending Transactions

On February 20, 1998, Chancellor Media, parent company of CMCLA, entered
into an agreement to acquire from Capstar KTXQ-FM and KBFB-FM in Dallas/Ft.
Worth, KODA-FM, KKRW-FM and KQUE-AM in Houston, KPLN-FM and KYXY-FM in San Diego
and WDRV-FM, WJJJ-FM, WXDX-FM and WDVE-FM in Pittsburgh (collectively, "the
Capstar/SFX Stations") for an aggregate purchase price of approximately $637,500
in a series of purchases and exchanges over a period of three years (the
"Capstar/SFX Transaction"). The Capstar/SFX Stations were acquired by Capstar as
part of Capstar's acquisition of SFX on May 29, 1998. On May 29, 1998,
Chancellor Media completed the Houston Exchange (defined above) and began
programming the remaining ten Capstar/SFX Stations under time brokerage
agreements. The purchase price for the remaining ten Capstar/SFX Stations will
be approximately $494,250. Chancellor Media is currently assessing whether the
terms of the Capstar/SFX Transaction will be modified upon the consummation of
the Capstar Merger.

On August 26, 1998, Chancellor Media and Capstar entered into an agreement
to merge in a stock-for-stock transaction that will create the nation's largest
radio broadcasting entity (the "Capstar Merger"). Pursuant to this agreement, as
amended, Chancellor Media will acquire Capstar in a merger of Capstar into a
wholly-owned subsidiary of Chancellor Media. Each share of Chancellor Media
common stock will represent one share in the combined entity. Each share of
Capstar common stock will entitle the holder thereof to 0.4955 of a share of
common stock of Chancellor Media. Upon consummation of its pending transactions,
Capstar will own and operate or program approximately 340 radio stations serving
81 mid-sized markets nationwide. On February 1, 1999, the Company began
operating WKNR-AM in Cleveland, a station owned by Capstar, under a time
brokerage agreement. The Capstar Merger is subject to stockholder approval of
both Chancellor Media and Capstar. Although there can be no assurance,
Chancellor Media expects that the Capstar Merger will be consummated in the
second quarter or early third quarter of 1999.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

entered into an agreement to sell WFLN-FM to Greater Media for $41,800 in cash.
On July 16, 1997, Secret purported to terminate the sale of WFLN-FM to the
Company. The Company subsequently brought suit against Secret to enforce its
rights to acquire WFLN-FM. Pursuant to a court settlement entered in August 1997
and the settlement agreement between the Company and Secret entered on April 13,
1998, (i) Secret sold WFLN-FM directly to Greater Media for $37,750, (ii)
Greater Media deposited $4,050 (the difference between the Company's proposed
acquisition price for WFLN-FM from Secret and the Company's proposed sale price
for WFLN-FM to Greater Media) with the court and (iii) the Company received
$3,500 of such amount deposited by Greater Media with the court, plus applicable
interest (the "WFLN Settlement"), and Secret received the balance of $550, plus
applicable interest.

(3) OTHER ASSETS

Other current assets consist of the following at December 31, 1997 and
1998:

Other assets consist of the following at December 31, 1997 and 1998:

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

(b) On October 9, 1998, the Company acquired a non-voting interest in Z-Spanish
Media Corporation for $25,000 in cash, which is accounted for under the cost
method. Z-Spanish Media is the owner and

F-59
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operator of 22 Hispanic format radio stations in California, Texas, Arizona
and Illinois and provides Hispanic format network programming to an
additional 28 affiliated radio stations. Also, on December 18, 1998, the
Company acquired an interest in USA Digital Radio for $5,000 in cash, which
is accounted for under the cost method. USA Digital Radio is a leading
developer of In-Band On-Channel(TM) AM and FM digital audio broadcasting
technology, which is designed to allow radio broadcasters to transmit both
analog and digital signals simultaneously using existing frequency spectrum
allocations.

(4) PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1997 and
1998:

(5) INTANGIBLE ASSETS

Intangible assets consist of the following at December 31, 1997 and 1998:

F-60
<PAGE> 113
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following at December
31, 1997 and 1998:

(7) LONG-TERM DEBT

Long-term debt consists of the following at December 31, 1997 and 1998:

(a) Senior Credit Facility

Pursuant to the Senior Credit Facility, the Company is required to enter
into interest hedging agreements that result in fixing or placing a cap on the
Company's floating rate debt so that no less than 50% of the principal amount of
total debt outstanding has a fixed or capped rate. At December 31, 1998,
interest rate swap agreements covering a notional balance of $1,810,000 were
outstanding. These outstanding swap agreements mature from 1999 through 2002 and
require the Company to pay fixed rates of 4.70% to 6.63%

F-61
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

while the counterparty pays a floating rate based on the three-month London
Interbank Borrowing Offered Rate ("LIBOR"). During the years ended December 31,
1996, 1997 and 1998, the Company recognized charges under its interest rate swap
agreements of $111, $2,913 and $5,134 respectively. The Company's exposure to
credit loss is minimal as its interest rate swap agreements are with the
participating banks under the senior credit facility.

(b) 8% Senior Notes

On November 17, 1998, the Company issued $750,000 aggregate principal
amount of 8% Senior Notes due 2008 (the "8% Senior Notes") for estimated net
proceeds of $730,000 in a private placement. Interest on the 8% Senior Notes is
payable semiannually, commencing on May 1, 1999. The 8% Senior Notes mature on
November 1, 2008 and are redeemable, in whole or in part, at the option of the
Company at a redemption price equal to 100% plus the Applicable Premium (as
defined in the indenture governing the 8% Senior Notes) plus accrued and unpaid
interest. In addition, on or prior to November 1, 2001, the Company may redeem
up to 25% of the original aggregate principal amount of the 8% Senior Notes at a
redemption price equal to 108% plus accrued and unpaid interest with the net
proceeds of one or more public equity offerings of Chancellor Media, CMHC or the
Company. Upon the occurrence of a change in control (as defined in the indenture
governing the 8% Senior Notes), the holders of the 8% Senior Notes have the
right to require the Company to repurchase all or any part of the 8% Senior
Notes at a purchase price equal to 101% plus accrued and unpaid interest.

Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company assumed CRBC's $200,000 aggregate principal amount of 9 3/8% Senior
Subordinated Notes due 2004 (the "9 3/8% Notes"). Interest on the 9 3/8% Notes
is payable semiannually, commencing on April 1, 1996. The 9 3/8% Notes mature on
October 1, 2004 and are redeemable, in whole or in part, at the option of the
Company on or after February 1, 2000, at redemption prices ranging from 104.688%
at February 1, 2000 and declining to 100% on or after February 1, 2003, plus in
each case accrued and unpaid interest. In addition, on or prior to January 31,
1999, the Company may redeem up to 25% of the original aggregate principal
amount of the 9 3/8% Notes at a redemption price of 107.031% plus accrued and
unpaid interest with the net proceeds of one or more public equity offerings of
CMHC or the Company. Upon the occurrence of a change in control (as defined in
the indenture governing the 9 3/8% Notes), the holders of the 9 3/8% Notes have
the right to require the Company to repurchase all or any part of the 9 3/8%
Notes at a purchase price equal to 101% plus accrued and unpaid interest.

(d) 8 3/4% Notes

Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company assumed CRBC's $200,000 aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2007 (the "8 3/4% Notes"). Interest on the 8 3/4% Notes
is payable semiannually, commencing on December 15, 1997. The 8 3/4% Notes
mature on June 15, 2007 and are redeemable, in whole or in part, at the option
of the Company on or after June 15, 2002, at redemption prices ranging from
104.375% at June 15, 2002 and declining to 100% on or after June 15, 2005, plus
in each case accrued and unpaid interest. In addition, prior to June 15, 2000,
the Company

F-62
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CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

may redeem up to 25% of the original aggregate principal amount of the 8 3/4%
Notes at a redemption price of 108.75% plus accrued and unpaid interest with the
net proceeds of one or more public equity offerings of CMHC or the Company. Upon
the occurrence of a change in control (as defined in the indenture governing the
8 3/4% Notes) on or prior to June 15, 2000, the 8 3/4% Notes may be redeemed as
a whole at the option of the Company at a redemption price of 100% plus the
Applicable Premium (as defined in the indenture governing the 8 3/4% Notes) and
accrued and unpaid interest. Upon the occurrence of a change in control after
June 15, 2000, the holders of the 8 3/4% Notes have the right to require the
Company to repurchase all or any part of the 8 3/4% Notes at a purchase price
equal to 101% plus accrued and unpaid interest.

(e) 10 1/2% Notes

Upon consummation of the Katz Acquisition, on October 28, 1997, the Company
assumed Katz Media Corporation's $100,000 aggregate principal amount of 10 1/2%
Senior Subordinated Notes due 2007 (the "10 1/2% Notes"). Interest on the
10 1/2% Notes is payable semiannually, commencing on July 15, 1997. The 10 1/2%
Notes mature on January 15, 2007 and are redeemable, in whole or in part, at the
option of the Company on or after January 15, 2002, at redemption prices ranging
from 105.25% at January 15, 2002 and declining to 100% on or after January 15,
2006, plus in each case accrued and unpaid interest. In addition, prior to
January 15, 2000, the Company may redeem up to 35% of the original aggregate
principal amount of the 10 1/2% Notes at a redemption price of 109.5% plus
accrued and unpaid interest with the net proceeds of one or more offerings of
equity interests of Chancellor Media, CMHC or the Company. Upon the occurrence
of a change in control (as defined in the indenture governing the 10 1/2%
Notes), the holders of the 10 1/2% Notes have the right to require the Company
to repurchase all or any part of the 10 1/2% Notes at a purchase price equal to
101% plus accrued and unpaid interest.

(f) 8 1/8% Notes

On December 22, 1997, the Company issued $500,000 aggregate principal
amount of 8 1/8% Senior Subordinated Notes due 2007 (the "8 1/8% Notes") for
estimated net proceeds of $485,000 in a private placement and subsequently
registered the 8 1/8% Notes on May 8, 1998. Interest on the 8 1/8% Notes is
payable semiannually, commencing on June 15, 1998. The 8 1/8% Notes mature on
December 15, 2007 and are redeemable, in whole or in part, at the option of the
Company on or after December 15, 2002, at redemption prices ranging from
104.063% at December 15, 2002 and declining to 100% on or after December 15,
2005, plus in each case accrued and unpaid interest. In addition, prior to
December 15, 2000, the Company may redeem up to 35% of the original aggregate
principal amount of the 8 1/8% Notes at a redemption price of 108.125% plus
accrued and unpaid interest with the net proceeds of one or more public equity
offerings of Chancellor Media, CMHC or the Company. Also, upon the occurrence of
a change in control (as defined in the indenture governing the 8 1/8% Notes),
the 8 1/8% Notes may be redeemed as a whole at the option of the Company at a
redemption price of 100% plus the Applicable Premium (as defined in the
indenture governing the 8 1/8% Notes) and accrued and unpaid interest. Upon the
occurrence of a change in control after December 15, 2000, the holders of the
8 1/8% Notes have the right to require the Company to repurchase all or any part
of the 8 1/8% Notes at a purchase price equal to 101% plus accrued and unpaid
interest.

(g) 9% Notes

On September 30, 1998, the Company issued $750,000 aggregate principal
amount of 9% Senior Subordinated Notes due 2008 (the "9% Notes") for estimated
net proceeds of $730,000 in a private placement and subsequently registered the
9% Notes on December 10, 1998. Interest on the 9% Notes is payable semiannually,
commencing on April 1, 1999. The 9% Notes mature on October 1, 2008 and are
redeemable, in whole or in part, at the option of the Company on and after
October 1, 2003, at redemption prices ranging from 106.5% at October 1, 2003 and
declining to 100% on October 1, 2008, plus in each case accrued and unpaid
interest. In addition, on or prior to October 1, 2000, the Company may redeem up
to 25%
F-63
<PAGE> 116
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the original aggregate principal amount of the 9% Notes at a redemption price
of 109% plus accrued and unpaid interest with the net proceeds of one or more
public equity offerings of Chancellor Media, CMHC or the Company. Upon the
occurrence of a change in control (as defined in the indenture governing the 9%
Notes), the 9% Notes may be redeemed, on or prior to October 1, 2000, as a whole
at the option of the Company at a redemption price of 100% plus the Applicable
Premium (as defined in the indenture governing the 9% Notes) and accrued and
unpaid interest. Upon the occurrence of a change in control after October 1,
2000, the holders of the 9% Notes have the right to require the Company to
repurchase all or any part of the 9% Notes at a purchase price equal to 101%
plus accrued and unpaid interest.

(h) Summarized Financial Information of Subsidiary Guarantors

The 9 3/8% Notes, the 8 3/4% Notes, the 10 1/2% Notes, the 8 1/8% Notes and
the 9% Notes (collectively, the "Subordinated Notes") are unsecured obligations
of the Company, subordinated in right of payment to all existing and any future
senior indebtedness of the Company. The 8% Senior Notes are unsecured
obligations of the Company, ranking equal in right of payment to all of the
Company's existing and future indebtedness that is not expressly subordinate in
right of payment, including indebtedness under the Senior Credit Facility. The
Subordinated Notes and 8% Senior Notes are fully and unconditionally guaranteed,
on a joint and several basis, by all of the Company's direct and indirect
subsidiaries other than certain inconsequential subsidiaries (the "Subsidiary
Guarantors"). The Subsidiary Guarantors are wholly-owned subsidiaries of the
Company. Summarized financial information of the Subsidiary Guarantors as of
December 31, 1998 and for the year ended December 31, 1998 is presented below.
Separate financial statements and other disclosures concerning the Subsidiary
Guarantors are not presented because management has determined that they are not
material to investors. There are no significant restrictions on distributions
from each of the Subsidiary Guarantors to the Company.

<TABLE>
<CAPTION>
1998
----------
<S> <C>
Current assets........................................... $ 376,217
Noncurrent assets........................................ 5,530,190
Current liabilities...................................... 133,872
Noncurrent liabilities................................... 5,744,413

Net revenues............................................. 1,118,527
Operating income......................................... 111,152
Net income............................................... 62,971
</TABLE>

(i) Other

A summary of the future maturities of long-term debt at December 31, 1998
follows:

F-64
<PAGE> 117
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8) REDEEMABLE PREFERRED STOCK

(a) 12 1/4% Preferred Stock

Upon consummation of the Chancellor Merger on September 5, 1997, the
Company issued 1,000,000 shares of 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock (the "12 1/4% Preferred Stock") in exchange for
CRBC's substantially identical securities with a fair value of $120,217
including accrued and unpaid dividends of $772. The liquidation preference of
each share of 12 1/4% Preferred Stock was $119.445 plus accrued and unpaid
dividends of $1,829 at December 31, 1997. The dividend rate on the 12 1/4%
Preferred Stock was 12.25% per annum of the liquidation preference and was
payable quarterly.

On July 20, 1998, the Company completed a consent solicitation (the
"12 1/4% Preferred Stock Consent Solicitation") to modify certain timing
restrictions on its ability to exchange all shares of its 12 1/4% Preferred
Stock for its 12 1/4% Subordinated Exchange Debentures due 2008 (the "12 1/4%
Debentures"). Consenting holders of 12 1/4% Preferred Stock received payments of
$0.05 per share of 12 1/4% Preferred Stock. On July 23, 1998, the Company
exchanged the shares of 12 1/4% Preferred Stock for 12 1/4% Debentures (the
"12 1/4% Exchange"). In connection with the 12 1/4% Preferred Stock Consent
Solicitation and 12 1/4% Exchange, the Company incurred approximately $170 in
transaction costs which were recorded as deferred debt issuance costs.

On August 19, 1998, the Company completed a cash tender offer (the "12 1/4%
Debentures Tender Offer") for all of its 12 1/4% Debentures for an aggregate
repurchase cost of $143,836 which included (i) the principal amount of the
12 1/4% Debentures of $119,445, (ii) premiums on the repurchase of the 12 1/4%
Debentures of $22,683, (iii) accrued and unpaid interest on the 12 1/4%
Debentures from July 23, 1998 through August 19, 1998 of $1,138 and (iv)
estimated transaction costs of $570. In connection with the 12 1/4% Debentures
Tender Offer, the Company recorded an extraordinary charge of $15,224 (net of a
tax benefit of $8,199) consisting of the premiums, estimated transaction costs
and the write-off of the unamortized balance of deferred debt issuance costs.

(b) 12% Preferred Stock

Upon consummation of the Chancellor Merger, on September 5, 1997, the
Company issued 2,117,629 shares of 12% Exchangeable Preferred Stock (the "12%
Preferred Stock") in exchange for CRBC's substantially identical securities with
a fair value of $215,570 including accrued and unpaid dividends of $3,807. The
liquidation preference of each share of 12% Preferred Stock was $100.00 plus
accrued and unpaid dividends of $11,756 at December 31, 1997. The dividend rate
on the 12% Preferred Stock was 12% per annum of the liquidation preference and
was payable semi-annually.

On May 8, 1998, the Company completed a consent solicitation (the "12%
Preferred Stock Consent Solicitation") to modify certain timing restrictions on
its ability to exchange all shares of its 12% Preferred Stock for its 12%
Subordinated Exchange Debentures due 2009 (the "12% Debentures"). Consenting
holders of 12% Preferred Stock received payments of $0.05 per share of 12%
Preferred Stock. On May 13, 1998, the Company exchanged the shares of 12%
Preferred Stock for 12% Debentures (the "12% Exchange"). In connection with the
12% Preferred Stock Consent Solicitation and 12% Exchange, the Company incurred
approximately $270 in transaction costs which were recorded as deferred debt
issuance costs.

On June 10, 1998, the Company completed a cash tender offer (the "12%
Debentures Tender Offer") for all of its 12% Debentures for an aggregate
repurchase cost of $262,495 which included (i) the principal amount of the 12%
Debentures of $211,763, (ii) premiums on the repurchase of the 12% Debentures of
$47,798, (iii) accrued and unpaid interest on the 12% Debentures from May 13,
1998 through June 10, 1998 of $1,976 and (iv) estimated transaction costs of
$958. In connection with the 12% Debentures Tender Offer, the Company recorded
an extraordinary charge of $31,865 (net of a tax benefit of $17,158) consisting
of the

F-65
<PAGE> 118
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

premiums, estimated transaction costs and the write-off of the unamortized
balance of deferred debt issuance costs.

(9) STOCKHOLDERS' EQUITY

(a) Chancellor Media Common Stock Issuance

On March 13, 1998, Chancellor Media completed an offering of 21,850,000
shares of its Common Stock for net proceeds of approximately $994,642. The net
proceeds were contributed to the Company by Chancellor Media and used to reduce
bank borrowings under the revolving credit portion of the Senior Credit Facility
(as defined) and the excess proceeds were initially invested in short-term
investment grade securities. The Company subsequently used the excess proceeds
for general corporate purposes, including the financing of certain acquisitions
and exchanges.

(b) Stock Options

Chancellor Media has established the 1992, 1993, 1995 and 1998 Key Employee
Stock Option Plans (the "Employee Option Plans") which provide for the issuance
of stock options to officers and other key employees of the Company and its
subsidiaries. The Employee Option Plans make available for issuance an aggregate
of 15,105,000 shares of Chancellor Media Common Stock. Options issued under the
Employee Option Plans have varying vesting periods as provided in separate stock
option agreements and generally carry an expiration date of ten years subsequent
to the date of issuance. Options issued under the 1993, 1995 and 1998 Employee
Option Plans are required to have exercise prices equal to or in excess of the
fair market value of Chancellor Media's Common Stock on the date of issuance
unless approved by the Compensation Committee of the Company's Board of
Directors.

In May 1995, Chancellor Media also established the Stock Option Plan for
Non-Employee Directors (the "Director Plan") which provides for the issuance of
stock options to non-employee directors of the Company. The Director Plan makes
available for issuance an aggregate of 900,000 shares of Chancellor Media Common
Stock. Options issued under the Director Plan have exercise prices equal to the
fair market value of Chancellor Media's Common Stock on the date of issuance,
vest over a three year period and have an expiration date of ten years
subsequent to the date of issuance.

In connection with the BPI Acquisition, Chancellor Media assumed
outstanding options to purchase 310,276 shares of Chancellor Media's Common
Stock (the "BPI Options"). The BPI Options vested and became exercisable on May
12, 1996 and have an expiration date of ten years subsequent to the original
date of issuance by BPI.

In connection with the Chancellor Merger, Chancellor Media assumed
outstanding options to purchase 3,526,112 shares of Chancellor Media's Common
Stock (the "Chancellor Options") with a fair value of $34,977. The Chancellor
Options have varying vesting periods as provided in separate stock option
agreements and generally carry an expiration date of ten years subsequent to the
original date of issuance by CBC.

The total options available for grant were 1,115,894 and 2,171,939 at
December 31, 1997 and 1998, respectively.

F-66
<PAGE> 119
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Following is a summary of activity in the employee option plans and
agreements discussed above for the years ended December 31, 1996, 1997 and 1998:

The following table summarizes information about stock options outstanding
at December 31, 1998:

Chancellor Media applies APB Opinion No. 25 in accounting for its Employee
Option Plans and, accordingly, no compensation cost is recognized in the
consolidated financial statements for stock options which have exercise prices
equal to or in excess of the market value of Chancellor Media's Common Stock on
the date of issuance. A charge for stock compensation expense of $16,000 is
included in executive severance charge for the year ended December 31, 1998 (see
note 13). Had Chancellor Media determined compensation cost based on the fair
value at the grant date for its stock options under SFAS No. 123, the Company's
net loss would have been increased to the pro forma amounts indicated below:

F-67
<PAGE> 120
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(10) INCOME TAXES

Income tax expense (benefit) from continuing operations consists of the
following:

F-68
<PAGE> 121
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1997 and
1998 are presented below:

(11) COMMITMENTS AND CONTINGENCIES

F-69
<PAGE> 122
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

payments under noncancelable operating leases (with initial or remaining lease
terms in excess of one year) as of December 31, 1998 are as follows:

In September 1998, a stockholder class action complaint was filed in the
Delaware Court of Chancery by a stockholder purporting to act individually and
on behalf of all other persons, other than defendants, who own securities of
Chancellor Media and are similarly situated. The defendants in the case are
named as Chancellor Media, Hicks Muse, Thomas O. Hicks, Jeffrey A. Marcus, James
E. de Castro, Eric C. Neuman, Lawrence D. Stuart, Jr., Steven Dinetz, Thomas J.
Hodson, Perry Lewis, John H. Massey and Vernon E. Jordan, Jr. The plaintiff
alleges breach of fiduciary duties, gross mismanagement, gross negligence or
recklessness, and other matters relating to the defendants' actions in
connection with the proposed Capstar merger. The plaintiff seeks to certify the
complaint as a class action, enjoin consummation of the Capstar merger, order
defendants to account to plaintiff and other alleged class members for damages,
and award attorneys' fees and other costs. The Company believes that the lawsuit
is without merit and intends to vigorously defend the action.

On July 10, 1998, the Company entered into an agreement to acquire a 50%
economic interest in Grupo Radio Centro, S.A. de C.V., an owner and operator of
radio stations in Mexico, for approximately $120,500 in cash and $116,500 in
Chancellor Media common stock. On October 15, 1998, the Company announced that
it had provided notice to Grupo Radio that it was terminating the acquisition
agreement in accordance with its terms. The Company has received notice from
Grupo Radio requesting arbitration under the terms of the acquisition agreement
of allegations that Chancellor Media wrongfully terminated that agreement, and
the parties have commenced the arbitration process. The Company believes that it
had a proper basis for terminating the agreement in accordance with its terms
and intends to contest these allegations vigorously.

F-70
<PAGE> 123
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12) FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a) Interest Rate Risk Management

(b) Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:

Cash and cash equivalents, accounts receivable and accounts
payable: The carrying amount of these assets and liabilities approximates
fair value because of the short maturity of these instruments.

Notes receivable: The fair value of notes receivable is estimated by
discounting the expected future cash flows at interest rates commensurate
with the creditworthiness of the third party.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Redeemable preferred stock: The fair values of the Company's 12 1/4%
Preferred Stock and 12% Preferred Stock are based on December 31, 1997
quoted market prices.

(13) RELATED PARTY AND OTHER TRANSACTIONS

As of December 31, 1998, Thomas O. Hicks and affiliates of Hicks Muse
beneficially owned an aggregate 16,944,371 shares of Common Stock of Chancellor
Media. Mr. Hicks is Chairman of the Board and a director of the Company.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company paid or accrued $11,157 in 1998 in connection with Capstar's
participation in the Company's AMFM Radio Networks and other transactions. The
Company had a net receivable balance from Capstar of $748 at December 31, 1997
and a net payable to Capstar of $162 at December 31, 1998.

(14) SEGMENT DATA

(a) Chancellor Radio Group -- radio broadcasting

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Houston, Puerto Rico and Phoenix and in four other large markets -
Minneapolis-St. Paul, Pittsburgh, Denver and Orlando. The Chancellor Radio Group
also operates a national radio network, the AMFM Radio Networks, which
broadcasts advertising and syndicated programming shows to a national audience
of approximately 66 million listeners in the United States (including
approximately 39 million listeners from the Company's portfolio of stations).

(b) Chancellor Outdoor Group -- outdoor advertising

Separate financial data for each of the Company's three business segments
is provided below. The Company evaluates the performance of its segments based
on the following:

F-74
<PAGE> 127
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(15) QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- -------- ------------ -----------
<S> <C> <C> <C> <C>
1997:
Net revenues..................................... $ 81,897 $106,364 $145,022 $248,795
Operating income................................. 568 16,968 15,002 25,868
Income (loss) before extraordinary item.......... (6,011) 9,870 (6,000) (25,254)
Net income (loss) attributable to common
stockholders.................................. (6,011) 4,821 (11,049) (31,671)
1998:
Net revenues..................................... $233,557 $321,710 $343,829 $374,760
Operating income (loss).......................... (13,201) (18,072) 38,010 38,337
Income (loss) before extraordinary item.......... (68,571) 40,401 6,262 (26,592)
Net income (loss) attributable to common
stockholders.................................. (74,988) 2,118 (15,379) (33,010)
</TABLE>

(16) SUBSEQUENT EVENTS

F-75
<PAGE> 128
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Executive Management Realignment. On March 15, 1999, the Company announced
the following executive management changes:

- the creation of an Office of the Chairman of the Company's Board of
Directors, in which Mr. de Castro and Mr. Steven Hicks will join the
Company's Chairman, Mr. Thomas Hicks, as Vice Chairmen;

- the resignation of Jeffrey A. Marcus as the Company's President and Chief
Executive Officer effective March 15, 1999;

- the appointments of Kenneth J. O'Keefe as Chief Operating Officer of
Chancellor Radio Group and James A. McLaughlin as President and Chief
Operating Officer of Chancellor Outdoor Group;

- the resignation of Eric C. Neuman as the Company's Senior Vice
President -- Strategic Development effective March 15, 1999;

See note 11 for the current status of certain litigation related to the LIN
Merger.

F-76
<PAGE> 129

SCHEDULE II

CHANCELLOR MEDIA CORPORATION OF LOS ANGELES AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(DOLLARS IN THOUSANDS)

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

F-77
<PAGE> 130

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.11(h) -- Agreement and Plan of Merger by and among Pyramid
Communications, Inc., Evergreen Media Corporation and
Evergreen Media/Pyramid Corporation dated as of July 14,
1995 (see table of contents for list of omitted exhibits
and schedules).
2.11A(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/ Pyramid Corporation dated September
7, 1995.
2.11B(i) -- Amendment to Plan and Agreement of Merger by and among
Pyramid Communications, Inc., Evergreen Media Corporation
and Evergreen Media/ Pyramid Corporation dated January
11, 1996.
2.12(j) -- Purchase Agreement between Fairbanks Communications, Inc.
and Evergreen Media Corporation dated October 12, 1995
(see table of contents for list of omitted exhibits and
schedules).
2.13(n) -- Option Agreement dated as of January 9, 1996 between
Chancellor Broadcasting Company and Evergreen Media
Corporation (including Form of Advertising Brokerage
Agreement and Form of Asset Purchase Agreement).
2.14(o) -- Asset Purchase Agreement dated April 4, 1996 between
American Radio Systems Corporation and Evergreen Media
Corporation of Buffalo (see table of contents for list of
omitted exhibits and schedules).
2.15(o) -- Asset Purchase Agreement dated April 11, 1996 between
Mercury Radio Communications, L.P. and Evergreen Media
Corporation of Los Angeles, Evergreen Media/Pyramid
Holdings Corporation, WHTT (AM) License Corp. and WHTT
(FM) License Corp. (see table of contents for list of
omitted exhibits and schedules).
2.16(o) -- Asset Purchase Agreement dated April 19, 1996 between
Crescent Communications L.P. and Evergreen Media
Corporation of Los Angeles (see table of contents for
list of omitted exhibits and schedules).
2.17(p) -- Asset Purchase Agreement dated June 13, 1996 between
Evergreen Media Corporation of Los Angeles and Greater
Washington Radio, Inc. (see table of contents for list of
omitted exhibits and schedules).
2.18(p) -- Asset Exchange Agreement dated June 13, 1996 among
Evergreen Media Corporation of Los Angeles, Evergreen
Media Corporation of the Bay State, WKLB License Corp.,
Greater Media Radio, Inc. and Greater Washington Radio,
Inc. (see table of contents for list of omitted exhibits
and schedules).
2.19(p) -- Purchase Agreement dated June 27, 1996 between WEDR,
Inc., and Evergreen Media Corporation of Los Angeles (See
table of contents for list of omitted schedules).
2.20(p) -- Time Brokerage Agreement dated July 10, 1996 by and
between Evergreen Media Corporation of Detroit, as
Licensee, and Kidstar Interactive Media Incorporated, as
Time Broker.
2.21(p) -- Asset Purchase Agreement dated July 15, 1996 by and among
Century Chicago Broadcasting L.P., Century Broadcasting
Corporation, Evergreen Media Corporation of Los Angeles
and Evergreen Media Corporation of Chicago.
2.22(p) -- Asset Purchase Agreement dated August 12, 1996 by and
among Chancellor Broadcasting Company, Shamrock
Broadcasting, Inc. and Evergreen Media Corporation of the
Great Lakes.
</TABLE>
<PAGE> 131

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.23(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (WQRS-FM) (See
table of contents for list of omitted exhibits and
schedules).
2.24(p) -- Asset Purchase Agreement dated as of August 12, 1996
between Secret Communications Limited Partnership and
Evergreen Media Corporation of Los Angeles (See table of
contents for list of omitted schedules).
2.25(q) -- Letter of intent dated August 27, 1996 between EZ
Communications, Inc. and Evergreen Media Corporation.
2.26(q) -- Asset Purchase Agreement dated September 19, 1996 between
Beasley-FM Acquisition Corp., WDAS License Limited
Partnership and Evergreen Media Corporation of Los
Angeles.
2.27(q) -- Asset Purchase Agreement dated September 19, 1996 between
The Brown Organization and Evergreen Media Corporation of
Los Angeles.
2.28(r) -- Stock Purchase Agreement by and between Viacom
International Inc. and Evergreen Media Corporation of Los
Angeles, dated February 16, 1997 (See table of contents
for omitted schedules and exhibits).
2.29(r) -- Agreement and Plan of Merger, by and among Evergreen
Media Corporation, Chancellor Broadcasting Company and
Chancellor Radio Broadcasting Company, dated as of
February 19,1997.
2.30(r) -- Stockholders Agreement, by and among Chancellor
Broadcasting Company, Evergreen Media Corporation, Scott
K. Ginsburg (individually and as custodian for certain
shares held by his children), HM2/Chancellor, L.P.,
Hicks, Muse, Tate & First Equity Fund 11, L.P., HM2/HMW,
L.P., The Chancellor Business Trust, HM2/HMD Sacramento
GP, L.P., Thomas O. Hicks, as Trustee of the William Cree
Hicks 1992 Irrevocable Trust, Thomas O. Hicks, as Trustee
of the Catherine Forgave Hicks 1993 Irrevocable Trust,
Thomas O. Hicks, as Trustee of the John Alexander Hicks
1984 Trust, Thomas O. Hicks, as Trustee of the Mack
Hardin Hicks 1984 Trust, Thomas O. Hicks, as Trustee of
Robert Bradley Hicks 1984 Trust, Thomas O. Hicks, as
Trustee of the Thomas O. Hicks, Jr. 1984 Trust, Thomas O.
Hicks and H. Rand Reynolds, as Trustees for the Muse
Children's GS Trust, and Thomas O. Hicks, dated as of
February 19, 1997.
2.31(r) -- Joint Purchase Agreement, by and among Chancellor Radio
Broadcasting Company, Chancellor Broadcasting Company,
Evergreen Media Corporation of Los Angeles, and Evergreen
Media Corporation, dated as of February 19, 1997.
2.32(s) -- Asset Exchange Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Philadelphia, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of Charlotte,
Evergreen Media Corporation of the East, Evergreen Media
Corporation of Carolinaland, WBAV/ WBAV-FM/ WPEG License
Corp. and WRFX License Corp., dated as of December 5,
1996 (See table of contents for list of omitted
schedules).
2.33(s) -- Asset Purchase Agreement, by and among EZ Communications,
Inc., Professional Broadcasting Incorporated, EZ
Charlotte, Inc., Evergreen Media Corporation of Los
Angeles, Evergreen Media Corporation of the East and
Evergreen Media Corporation of Carolinaland, dated as of
December 5, 1996 (See table of contents for list of
omitted schedules).
</TABLE>
<PAGE> 132

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.34(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: WGCI-AM and WGCI-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.35(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KKBQ-AM and KKBQ-FM), dated as of April
4, 1997 (see table of contents for list of omitted
schedules and exhibits).
2.36(t) -- Asset Purchase Agreement by and between Pacific and
Southern Company, Inc. and Evergreen Media Corporation of
Los Angeles (re: KHKS-FM), dated as of April 4, 1997 (see
table of contents for list of omitted schedules and
exhibits).
2.41(y) -- Amended and Restated Agreement and Plan of Merger among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company, Evergreen Media Corporation,
Evergreen Mezzanine Holdings Corporation and Evergreen
Media Corporation of Los Angeles, dated as of February
19, 1997, amended and restated as of July 31, 1997.
2.42(gg) -- Option Agreement, by and among Evergreen Media
Corporation, Chancellor Broadcasting Company, Bonneville
International Corporation and Bonneville Holding Company,
dated as of August 6, 1997.
2.43(ss) -- Letter Agreement, dated February 20, 1998, between CMCLA
and Capstar Broadcasting Corporation.
2.44(yy) -- Amendment No. 1, dated May 19, 1998, to Letter Agreement
dated February 20, 1998, between CMCLA and Capstar
Broadcasting Corporation.
2.45(yy) -- Unit and Stock Purchase Agreement by and among CMCLA,
Martin Media, L.P., Martin & MacFarlane, Inc., Nevada
Outdoor Systems, Inc., MW Sign Corp. and certain sellers
named therein, dated as of June 19, 1998 (see table of
contents for list of omitted schedules and exhibits).
2.46(yy) -- Agreement and Plan of Merger between Chancellor Media
Corporation and Ranger Equity Holdings Corporation dated
as of July 7, 1998.
2.47(yy) -- Asset Purchase Agreement: dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and
Independent Group Limited Partnership.
2.48(yy) -- Asset Purchase Agreement, dated August 11, 1998, between
Chancellor Media Corporation of Los Angeles and Zapis
Communications Corporation.
2.49(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, Young Ones,
Inc., Zebra Broadcasting Corporation and the Sellers
named therein.
2.50(yy) -- Stock Purchase Agreement, dated August 11, 1998, among
Chancellor Media Corporation of Los Angeles, ML Media
Partners LP., Wincom Broadcasting Corporation and WIN
Communications, Inc.
2.51(yy) -- Stock Purchase and Merger Agreement, dated July 9, 1998,
by and among Chancellor Media Corporation, Chancellor
Mexico LLC, Grupo Radio Centro, S.A. De C.V., and the
Selling Shareholders.
2.52(ddd) -- Agreement and Plan of Merger among Chancellor Media
Corporation, Capstar Broadcasting Corporation and CBC
Acquisition Company, Inc., dated as of August 26, 1998.
</TABLE>
<PAGE> 133

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
2.53(zz) -- Asset Purchase Agreement, dated August 30, 1998, by and
among Chancellor Media Corporation of Los Angeles,
Whiteco Industries Inc. and Metro Management Associates.
3.1C(ss) -- Amended and Restated Certificate of Incorporation of
Chancellor Media Corporation.
3.2B(ss) -- Amended and Restated Bylaws of Chancellor Media.
3.3(ff) -- Certificate of Incorporation of Chancellor Media
Corporation of Los Angeles (formerly known as Evergreen
Media Corporation of Los Angeles).
3.3A(qq) -- Amendment to Certificate of Incorporation of Chancellor
Media Corporation of Los Angeles.
3.4(ff) -- Bylaws of Chancellor Media Corporation of Los Angeles.
4.10(t) -- Second Amended and Restated Loan Agreement dated as of
April 25, 1997 among Evergreen Media Corporation of Los
Angeles, the financial institutions whose names appear as
Lenders on the signature pages thereof (the "Lenders"),
Toronto Dominion Securities, Inc., as Arranging Agent,
The Bank of New York and Bankers Trust Company, as
Co-Syndication Agents, NationsBank of Texas, N.A. and
Union Bank of California, as Co-Documentation Agents, and
Toronto Dominion (Texas), Inc., as Administrative Agent
for the Lenders, together with certain collateral
documents attached thereto as exhibits, including
Assignment of Partnership Interests, Assignment of Trust
Interests, Borrower's Pledge Agreement, Parent Company
Guaranty, Stock Pledge Agreement, Subsidiary Guaranty and
Subsidiary Pledge Agreement (see table of contents for
list of omitted schedules and exhibits).
4.11(z) -- First Amendment to Second Amended and Restated Loan
Agreement, dated June 26, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.15(aa) -- Indenture, dated as of February 14, 1996, governing the
9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.16(bb) -- First Supplemental Indenture, dated as of February 14,
1996, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.17(cc) -- Indenture, dated as of February 26, 1996, governing the
12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.18(dd) -- Indenture, dated as of January 23, 1997, governing the
12% Subordinated Exchange Debentures due 2009 of CMCLA.
4.19(ee) -- Indenture, dated as of June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.21(ff) -- Specimen of the 12 1/4% Series A Senior Cumulative
Exchangeable Preferred Stock Certificate of CMCLA.
4.22(ff) -- Specimen of the 12% Exchangeable Preferred Stock
Certificate of CMCLA.
4.23(ff) -- Form of Certificate of Designation for the 12 1/4% Series
A Senior Cumulative Exchangeable Preferred Stock of
CMCLA.
4.24(ff) -- Form of Certificate of Designation for the 12%
Exchangeable Preferred Stock of CMCLA.
</TABLE>
<PAGE> 134

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
4.25(qq) -- Second Amendment to Second Amended and Restated Loan
Agreement, dated August 7, 1997, among Evergreen Media
Corporation of Los Angeles, the Lenders, the Agents and
the Administrative Agent.
4.26(hh) -- Second Supplemental Indenture, dated as of April 15,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.27(qq) -- Third Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 14, 1996, governing
the 9 3/8% Senior Subordinated Notes due 2004 of CMCLA.
4.28(qq) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated June 24, 1997, governing the
8 3/4% Senior Subordinated Notes due 2007 of CMCLA.
4.29(qq) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated February 26, 1997, governing
the 12 1/4% Subordinated Exchange Debentures due 2008 of
CMCLA.
4.30(qq) -- First Supplemental Indenture, dated as of September 5,
1997, to the Indenture dated January 23, 1997, governing
the 12% Subordinated Exchange Debentures due 2009 of
CMCLA.
4.34(uu) -- Amended and Restated Indenture, dated as of October 28,
1997, governing the 10 1/2% Senior Subordinated Notes due
2007 of CMCLA.
4.35(uu) -- Second Supplement Indenture, dated as of October 28,
1997, to the Amended and Restated Indenture dated October
28, 1997 governing the 10 1/2% Senior Subordinated Notes
due 2007 of CMCLA.
4.36(uu) -- Third Amendment to Second Amended and Restated Loan
Agreement, dated October 28, 1997, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.37(uu) -- Fourth Amendment to Second Amended and Restated Loan
Agreement, dated February 10, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.38(vv) -- Indenture, dated as of December 22, 1997, governing the
8 1/8% Senior Subordinated Notes due 2007 of CMCLA.
4.39(ww) -- Fifth Amendment to Second Amended and Restated Loan
Agreement, dated May 1, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.40(yy) -- Sixth Amendment to Second Amended and Restated Loan
Agreement, dated July 31, 1998, among CMCLA, the Lenders,
the Agents and the Administrative Agent.
4.41(zz) -- Indenture, dated as of September 30, 1998, governing the
9% Senior Subordinated Notes due 2008 of CMCLA.
4.42(aaa) -- Seventh Amendment to Second Amended and Restated Loan
Agreement, dated November 9, 1998, among CMCLA, the
Lenders, the Agents and the Administrative Agent.
4.43(zz) -- Indenture, dated as of November 17, 1998, governing the
8% Notes due 2008 of CMCLA.
10.23(xx)+ -- Amended and Restated Chancellor Media Corporation Stock
Option Plan for Non-employee Directors.
</TABLE>
<PAGE> 135

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.26(n)+ -- Employment Agreement dated February 9, 1996 by and
between Evergreen Media Corporation and Kenneth J.
O'Keefe.
10.28(o)+ -- 1995 Stock Option Plan for executive officers and key
employees of Evergreen Media Corporation.
10.30(qq)+ -- First Amendment to Employment Agreement dated March 1,
1997 by and between Evergreen Media Corporation and
Kenneth J. O'Keefe.
10.31(qq)+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Scott K. Ginsburg.
10.32(qq)+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and James de Castro.
10.33(qq)+ -- Employment Agreement dated September 4, 1997 by and among
Evergreen Media Corporation, Evergreen Media Corporation
of Los Angeles and Matthew E. Devine.
10.34(qq)+ -- Second Amendment to Employment Agreement dated September
4, 1997 by and among Evergreen Media Corporation,
Evergreen Media Corporation of Los Angeles and Kenneth J.
O'Keefe.
10.35(ii)+ -- Employment Agreement dated February 14, 1996 by and among
Chancellor Broadcasting Company, Chancellor Radio
Broadcasting Company and Steven Dinetz.
10.36(jj)+ -- Chancellor Broadcasting Company 1996 Stock Award Plan.
10.37(kk)+ -- Chancellor Holdings Corp. 1994 Director Stock Option
Plan.
10.38(ll)+ -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Steven Dinetz.
10.39(mm)+ -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Eric W. Neuman.
10.40(nn)+ -- Stock Option Grant Letter dated September 30, 1995 from
Chancellor Corporation to Marvin Dinetz.
10.41(oo)+ -- Stock Option Grant Letter dated February 14, 1997 from
Chancellor Broadcasting Company to Carl M. Hirsch.
10.44(vv)+ -- Agreement dated April 20, 1998 by and among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles and Scott K. Ginsburg.
10.45(vv)+ -- Employment Agreement dated April 29, 1998 by and among
Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Jeffrey A. Marcus.
10.46(yy)+ -- Chancellor Media Corporation 1998 Stock Option Plan.
10.47(yy)+ -- Voting Agreement, among Chancellor Media Corporation and
Ranger Equity Partners, L.P. dated as of July 7, 1998.
10.48(zz)+ -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James E. de Castro.
10.49(zz)+ -- Employment Agreement, dated as of May 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Matthew E. Devine.
10.50(zz)+ -- Employment Agreement, dated as of June 1, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Eric C. Neuman.
</TABLE>
<PAGE> 136

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.51(zz)+ -- Employment Agreement, dated as of August 18, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and James A. McLaughlin, Jr.
10.52(bbb)+ -- Agreement, dated as of January 6, 1999, among Chancellor
Media Corporation, Chancellor Media Corporation of Los
Angeles, Matthew E. Devine and Vicki Devine.
10.53(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Jeffrey A. Marcus.
10.54(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and James E. de Castro.
10.55(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Eric C. Neuman.
10.56(ccc)+ -- Employment Agreement, dated as of October 1, 1998, by and
among Chancellor Media Corporation, Chancellor Media
Corporation of Los Angeles and Thomas P. McMillin.
10.57(ccc)+ -- Amendment No. 1 to Employment Agreement, dated as of
January 6, 1999, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and Thomas P. McMillin.
10.58(ccc)+ -- Amended and Restated Employment Agreement, dated as of
October 1, 1998, by and among Chancellor Media
Corporation, Chancellor Media Corporation of Los Angeles
and James A. McLaughlin, Jr.
10.59*+ -- Agreement, dated as of March 15, 1999, between Jeffrey A.
Marcus, Nancy Cain Marcus, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.60*+ -- Agreement, dated as of March 15, 1999, between Eric C.
Neuman, Elizabeth M. Neuman, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
10.61*+ -- Agreement, dated as of March 15, 1999, between Thomas P.
McMillin, Brigette McMillin, Chancellor Media Corporation
and Chancellor Media Corporation of Los Angeles.
16.1(pp) -- Letter from KPMG LLP to the Securities and Exchange
Commission dated September 29, 1997.
21.1(ccc) -- Subsidiaries of Chancellor Media Corporation.
21.2* -- Subsidiaries of Chancellor Media Corporation of Los
Angeles.
23.1* -- Consent of PricewaterhouseCoopers LLP.
23.2* -- Consent of KPMG LLP.
27.1* -- Financial Data Schedule of Chancellor Media Corporation.
27.2* -- Financial Data Schedule of Chancellor Media Corporation
of Los Angeles.
</TABLE>

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

* Filed herewith.

+ Compensatory plan or arrangement.

(a) Incorporated by reference to the identically numbered exhibit to the
Registration Statement on Form S-1, as amended (Reg. No. 33-60036), of
Evergreen Media Corporation ("Evergreen").
<PAGE> 137