
<PAGE>
 
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
 
                                   FORM 10-K
 
             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
 
                        COMMISSION FILE NUMBER 0-215-70
 
                               ----------------
 
                          EVERGREEN MEDIA CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
               DELAWARE                              75-2247099
                                        (I.R.S. EMPLOYER IDENTIFICATION NO.)
    (STATE OR OTHER JURISDICTION OF
    INCORPORATION OR ORGANIZATION)
 
        433 EAST LAS COLINAS BOULEVARD, SUITE 1130, IRVING, TEXAS 75039
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE)
 
                                (972) 869-9020
             (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
                                     None
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
 
                     Class A Common Stock, $.01 par value
 
                               ----------------
 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the last 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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
 
  The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 1997, was approximately $1,168,715,160. Solely for
purposes of the preceding calculation, outstanding shares of Class A Common
Stock held by executive officers and directors of the Company have been
treated as held by affiliates of the Company. As of March 1, 1997, 39,102,735
shares of Class A Common Stock, and 3,114,066 shares of Class B Common Stock
were issued and outstanding.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
  None.
 
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<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
  Evergreen Media Corporation (the "Company") owns and operates radio stations
across the United States, including stations in 11 of the nation's 12 largest
radio markets (Los Angeles, New York, Chicago, San Francisco, Dallas,
Philadelphia, Houston, Washington, D.C., Boston, Detroit and Miami). At March
1, 1997, after giving effect to announced transactions in the industry and as
measured by gross revenues, the Company is the largest pure play radio
broadcasting company and the operator of the nation's second largest radio
broadcasting group.
 
  At March 1, 1997, without giving effect to any of the pending acquisitions
or dispositions discussed below, the Company's portfolio of stations consisted
of 39 radio stations (27 FM and 12 AM) in 12 markets. The portfolio is
diversified in terms of format, target demographics, geographic location and
phase of development. Because of the size and geographic breadth of its
portfolio, the Company believes that it is not unduly reliant on the
performance of any one station or market. The Company 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.
 
  The Company has recently announced two significant transactions, each of
which is currently pending. On February 16, 1997, the Company entered into an
agreement (the "Viacom Stock Purchase Agreement") to acquire from Viacom
International, Inc. ("Viacom") all of the issued and outstanding capital stock
of certain subsidiaries of Viacom for an aggregate purchase price of
approximately $1.075 billion in cash (the "Viacom Acquisition"). The
subsidiaries of Viacom that will be purchased will own and operate at the
consummation of the Viacom Stock Purchase Agreement the assets used in the
operation of ten radio stations (8 FM and 2 AM) in five major markets (the
"Viacom Stations"). On February 19, 1997, the Company entered into an
agreement (the "Chancellor Merger Agreement") pursuant to which Chancellor
Broadcasting Company ("Chancellor") and Chancellor Radio Broadcasting Company
("CRBC"), a subsidiary of Chancellor, each will be merged in a stock-for-stock
merger with and into the Company, with the Company remaining as the surviving
corporation (the "Chancellor Merger"). After giving effect to Chancellor's
pending transactions to acquire or dispose of stations, at March 1, 1997
Chancellor would have owned and operated the assets used in the operation of
51 radio stations (34 FM and 17 AM) in fourteen markets (the "Chancellor
Stations"). In addition to the Viacom Stock Purchase Agreement and the
Chancellor Merger Agreement, the Company has entered into binding contracts to
purchase an additional seven radio stations for $414.5 million in cash and has
agreed in three separate transactions to swap or sell a total of nine stations
(including one of the stations that the Company has agreed to acquire) in
exchange for three other stations and $41.75 million in cash (collectively,
the "Other Pending Transactions").
 
  Under currently applicable rules of the Federal Communications Commission
(the "FCC"), the Company, like other radio broadcasters, may not own or
control more than eight stations, of which no more than five may be AM or FM,
in a single large market. In total, the Company will be required to dispose of
nine stations in six markets in order to comply with the FCC's multiple
ownership rules (the "Required Additional Dispositions") in connection with
the consummation of the Viacom Stock Purchase Agreement, the Chancellor Merger
Agreement and the Other Pending Transactions. See "--Developments Since
January 1, 1996 --Required Additional Dispositions."
 
  There can be no assurance that the Viacom Stock Purchase Agreement, the
Chancellor Merger Agreement or any of the Other Pending Transactions will be
consummated.
 
COMPANY STRATEGY
 
  The Company's strategy historically has been to acquire and operate radio
stations in the nation's largest radio markets, focusing particularly on
markets where the Company has the opportunity to develop superduopolies, or
clusters of as many as five FM radio stations. The Company believes that its
presence in major markets provides significant advantages, including
strengthening the Company's reputation among advertisers
<PAGE>
 
and advertising agencies as well as increasing the Company's ability to
attract highly skilled management employees and popular on-air talent.
 
  Assuming consummation of the Viacom Acquisition, the Chancellor Merger, the
Other Pending Transactions and the Required Additional Dispositions, the
Company will have assembled superduopolies of at least three FM stations in
six of the nation's top ten markets, including superduopolies of five FM radio
stations in four of the nation's top ten radio markets. The Company expects to
continue to pursue acquisition opportunities that would create additional
superduopolies in top ten markets, and the Company may also pursue
opportunities to expand the Company's presence in major markets not included
within the top ten. In this regard, consummation of the Chancellor Merger will
establish a Company presence in eight major markets in which the Company has
not operated prior to the Chancellor Merger that fall within the nation's top
thirty radio markets.
 
  Operations. The Company uses a variety of techniques to maximize the
performance of its radio stations. These techniques are typically tailored to
fit the requirements of a particular market, but the Company's general
operational objective is to heighten a station's recognition in its market.
Depending on the market, the Company may employ one or more of a variety of
methods, including: developing new programming that responds to the needs of
the local market, hiring dynamic on-air personalities for key morning and
afternoon "drive" times, and engaging in creative promotional efforts designed
to create listener loyalty. The Company generally seeks to "institutionalize"
its stations by hiring popular on-air talent and by using promotional tie-ins
with local community events. In implementing its operating strategy, the
Company emphasizes the use of an aggressive sales force, prudent promotional
spending and strict cost controls at each of its stations.
 
  Each of the Company's stations is managed by a team of experienced
broadcasters who understand the musical tastes, demographics and competitive
opportunities of the particular market. The Company decentralizes station
operations and holds local management accountable for performance. Consistent
with this approach, local management develops an annual operating budget in
conjunction with corporate management. A general manager of a station receives
additional compensation if his or her station meets or exceeds the operating
targets established through the budget process. Likewise, a station's general
sales manager receives a bonus for surpassing revenue targets, and its program
director is rewarded for improving ratings in the targeted listening audience.
 
  Corporate management oversees and controls station spending and is
responsible for long-range planning, establishing company policies, and
allocating resources. The Company has implemented local sales reporting
systems at each of its stations to provide local and corporate management with
timely information about station operations. Corporate management imposes
strict financial reporting requirements and budget limitations.
 
  The Company believes that retaining managers and key employees is important
and prides itself on its low employee turnover. This low turnover results in
part from the Company's emphasis on finding experienced, self-motivated
managers who are rewarded for performance and on maintaining a comfortable,
creative work environment. The Company believes that this entrepreneurial
approach has made it a highly desirable employer in the radio broadcasting
industry and has significantly enhanced the Company's ability to attract
skilled employees, management and on-air talent.
 
  Acquisitions. The Company's strategy is to acquire and operate radio
stations in the nation's largest radio markets, focusing particularly on
markets where the Company has the opportunity to assemble superduopolies of as
many as five FM radio stations. In evaluating potential acquisition candidates
in its target markets, the Company seeks to identify underperforming radio
stations or groups of stations that have strong broadcast signals. The Company
typically analyzes whether the broadcasting signal of a target station is
strong enough to ensure satisfactory market penetration, and uses programming
and demographic research to determine whether the target station appeals, or
can be made to appeal, to market segments that are both sought by advertisers
and not well-served by other stations in the market. After acquiring a
station, the Company seeks to improve broadcast cash flow (station operating
income excluding depreciation and amortization) by such means as adjusting the
station's programming, improving marketing, increasing its net revenues,
reducing its operating expenses or combining its operations with an existing
station operated by the Company in the same market.
 
                                       2
<PAGE>
 
  The Company intends to continue to actively pursue opportunities for
expansion, including opportunities that have been created by the
Telecommunications Act of 1996 (the "1996 Act"), which, among other things (i)
has increased significantly the number of radio stations that a single entity
may own and operate in a single market and, (ii) has eliminated the ceiling on
the number of stations that a single entity may own and operate on a national
basis. See "--Regulation of Radio Broadcast Stations--Ownership Matters." The
passage of the 1996 Act has significantly facilitated the acquisition of
groups of radio stations in single transactions such as the Viacom Acquisition
and the Chancellor Merger, and the Company typically analyzes such
transactions in terms of the number and attractiveness of the major markets
that they may allow the Company to penetrate. The new opportunity to own as
many as eight stations in a market (depending on the market's size) created by
the 1996 Act may allow certain synergies to be achieved. For example, owners
of multiple stations may be able to increase their revenues by delivering
larger, combined audiences to advertisers and by engaging in joint promotional
efforts. In addition, owners of multiple stations may be able to reduce
operating expenses by combining studios and offices.
 
  Any future acquisitions are subject to the Communications Act of 1934 (as
amended by the 1996 Act and otherwise, the "Communications Act"), the rules of
the FCC and, under certain circumstances, the consent of the Company's
lenders. See "--Regulation of Radio Broadcast Stations--Ownership Matters" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" set forth in Part II--Item 7
herein. The Company anticipates that it would fund any such future
acquisitions through funds generated from operations, additional borrowings
under the Senior Credit Facility (as defined below), possible dispositions of
certain stations, additional debt or equity financing, or a combination of
those methods. There can be no assurance, however, that any such funds or
financing will be available. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" set forth in Part II--Item 7 elsewhere herein.
 
DEVELOPMENTS SINCE JANUARY 1, 1996
 
  Since January 1, 1996, the Company has completed the acquisition of 21 radio
stations for $604.3 million, completed the disposition of three radio stations
for $32.0 million, and completed the exchange of WKLB-FM in Boston for WGAY-FM
in Washington, D.C. The Company has entered into the Viacom Stock Purchase
Agreement, under which the Company will acquire ten radio stations for
approximately $1.075 billion. The Company has entered into the Chancellor
Merger Agreement, under which the Company will acquire 51 radio stations
(after giving effect to Chancellor's pending transactions at March 1, 1997 to
acquire or dispose of stations. In addition, the Company has entered into
binding contracts to purchase an additional seven radio stations for $414.5
million and has agreed in three separate transactions to swap or sell a total
of nine stations (including one of the stations that the Company has agreed to
acquire) in exchange for three other stations and $41.75 million. There can be
no assurance that the Viacom Stock Purchase Agreement, the Chancellor Merger
Agreement or the Other Pending Transactions will be consummated. Completion of
the Viacom Stock Purchase Agreement, Chancellor Merger and the Other Pending
Transactions require the Company to effect the Required Additional
Dispositions in order to comply with the FCC's multiple ownership rules. The
Required Additional Dispositions consist of the sale of nine stations in six
markets, as discussed below.
 
 Transactions Completed Since January 1, 1996
 
  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 $316.3 million in cash.
 
  On May 3, 1996, the Company acquired WKLB-FM in Boston for $34.0 million 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 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.
 
                                       3
<PAGE>
 
  On July 19, 1996, the Company sold WHTT-FM and WHTT-AM in Buffalo for $19.5
million in cash, and on August 1, 1996, the Company sold WSJZ-FM in Buffalo
for $12.5 million 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 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 for $44.0
million 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. The KYLD-FM acquisition created an FM superduopoly consisting of
three FM stations for the Company in the San Francisco market.
 
  On October 18, 1996, the Company acquired WEDR-FM in Miami for $65.0 million
in cash plus various other direct acquisition costs.
 
  On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit for
$30.0 million in cash plus various other direct acquisition costs. The Company
had previously provided certain sales and promotional functions to WWWW-FM and
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.
The acquisition of WWWW-FM created an FM superduopoly of three FM stations for
the Company in the Detroit market.
 
  On January 31, 1997, the Company acquired KKSF-FM, KDFC-FM and KDFC-AM in
San Francisco for $115.0 million in cash plus various other direct acquisition
costs. The Company had previously been operating KKSF-FM and KDFC-FM under a
time brokerage agreement since November 1, 1996.
 
  The following table sets forth certain information regarding the Company's
actual portfolio and markets at March 1, 1997, without giving effect to any of
the pending acquisitions or dispositions discussed below:
 
<TABLE>
<CAPTION>
                                                           NO. OF STATIONS
                                      RANKING OF STATION'S ------------------
MARKET                                MARKET BY REVENUE(1)   AM         FM
------                                -------------------- -------    -------
<S>                                   <C>                  <C>        <C>
Los Angeles..........................           1              --           1
New York.............................           2              --           1
Chicago..............................           3                2(2)       5(2)
San Francisco........................           4                1          5
Dallas/Ft. Worth.....................           5                1        --
Philadelphia.........................           6              --           2
Houston..............................           7                1          1
Washington, D.C......................           8                1          2
Boston...............................           9                1          2
Detroit..............................          11                2          3
Miami/Fort Lauderdale................          12                1          1
Charlotte............................          27                2(3)       4(3)
                                                           -------    -------
  Total..............................                           12         27
</TABLE>
--------
(1) Ranking of the principal radio market served by the Company's station(s)
    among all U.S. radio markets by 1996 gross radio broadcasting revenue as
    reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(2) Includes WEJM-FM, a station which, on March 13, 1997, the Company
    transferred to a trust through which the Company retains the economic
    interest in the station, but no control, pending sale of the station by
    the trust to a third party. Also includes WEJM-AM, a station which, on
    March 19, 1997, the Company agreed to sell for $7.5 million. See "--
    Developments Since January 1, 1996--Other Pending Transactions."
(3) The Company has agreed to dispose of all six Charlotte stations pursuant
    to existing contracts. See""--Developments Since January 1, 1996--Other
    Pending Transactions."
 
                                       4
<PAGE>
 
 Viacom Acquisition
 
  On February 16, 1997, Evergreen Media Corporation of Los Angeles ("EMCLA"),
a direct wholly-owned subsidiary of the Company, entered into the Viacom Stock
Purchase Agreement. Under the Viacom Stock Purchase Agreement, EMCLA agreed to
acquire from Viacom all of the issued and outstanding capital stock of the
Viacom Subsidiaries for an aggregate purchase price of $1.075 billion in cash,
subject to certain adjustments as set forth in the Viacom Stock Purchase
Agreement. The Viacom Subsidiaries will own and operate at the consummation of
the Viacom Stock Purchase Agreement the assets used in the operation of the
following radio broadcast stations: (i) WAXQ(FM), New York, New York; (ii)
WLTW(FM), New York, New York; (iii) KYSR(FM), Los Angeles, California; (iv)
KIBB(FM), Los Angeles, California; (v) WMZQ-FM, Washington, D.C.; (vi)
WZHF(AM), Arlington, Virginia; (vii) WJZW(FM), Woodbridge, Virginia; (viii)
WBZS(AM), Alexandria, Virginia; (ix) WLIT(FM), Chicago, Illinois; and (x)
WDRQ(FM), Detroit, Michigan.
 
  Consummation of the Viacom Stock Purchase Agreement is subject to (i)
consent of the FCC; (ii) expiration or early termination of the waiting period
required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and (iii) satisfaction of certain other closing
conditions, each as more fully described in the Viacom Stock Purchase
Agreement. No assurance can be given that the Viacom Stock Purchase Agreement
will be consummated. Subject to the satisfaction of such conditions, the
Company anticipates that the Viacom Stock Purchase Agreement will be
consummated in the second quarter of 1997. If the Viacom Acquisition is
consummated prior to the consummation of the Chancellor Merger, certain
aspects of the Viacom Acquisition will be governed by the Joint Purchase
Agreement (the "Joint Purchase Agreement"), dated February 19, 1997, among the
Company, EMCLA, Chancellor and CRBC, as described below.
 
  The following table sets forth certain information regarding the Viacom
Stations:
 
<TABLE>
<CAPTION>
                                                                       NO. OF
                                                                      STATIONS
                                                 RANKING OF STATION'S ---------
   MARKET                                        MARKET BY REVENUE(1)  AM   FM
   ------                                        -------------------- ---- ----
   <S>                                           <C>                  <C>  <C>
   Los Angeles..................................           1           --     2
   New York.....................................           2           --     2
   Chicago......................................           3           --     1
   Washington, D. C.............................           8             2    2
   Detroit......................................          11           --     1
                                                                      ---- ----
     Total......................................                         2    8
</TABLE>
--------
(1) Ranking of the principal radio market served by the Viacom's Stations
    among all U.S. radio markets by 1996 gross radio broadcasting revenue as
    reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
 
 Chancellor Merger
 
  On February 19, 1997, the Company entered into the Chancellor Merger
Agreement with Chancellor and CRBC. Pursuant to the terms of the Chancellor
Merger Agreement, Chancellor and CRBC will be merged with and into the Company
in a stock-for-stock merger, with the Company remaining as the surviving
corporation. Upon the consummation of the Chancellor Merger Agreement (the
"Effective Time"), the surviving corporation will be re-named Chancellor Media
Corporation (as such, the "Surviving Corporation"). At the Effective Time, (i)
each share of Chancellor's Class A Common Stock, par value $.01 per share, and
Class B Common Stock, par value $.01 per share, will be converted into 0.9091
shares of Common Stock of the Surviving Corporation, (ii) each share of the
Company's Class A Common Stock, par value $.0l per share, and Class B Common
Stock, par value $.0l per share, will be converted into one share of Common
Stock of the Surviving Corporation, (iii) each share of Chancellor's 7%
Convertible Preferred Stock, par value $.0l per share, will be converted into
one share of Preferred Stock of the Surviving Corporation with substantially
identical powers, preferences and relative rights, (iv) each share of CRBC's
12.25% Series A Senior Cumulative Exchangeable Preferred Stock, par value $.0l
per share, will be converted into one share of preferred stock of the
Surviving Corporation with
 
                                       5
<PAGE>
 
substantially identical powers, preferences and relative rights, and (v) each
share of CRBC's 12% Exchangeable Preferred Stock, par value $.0l per share,
will be converted into one share of Preferred Stock of the Surviving
Corporation with substantially identical powers, preferences and relative
rights. All shares of Common Stock of the Surviving Corporation will be
entitled to one vote per share on all matters that holders of such stock are
entitled to vote. Additionally, at the Effective Time, all indebtedness of
Chancellor, CRBC and the Company will either be assumed or refinanced by the
Surviving Corporation.
 
  On February 19, 1997, CRBC, Chancellor, EMCLA and the Company entered into a
Joint Purchase Agreement (the "Joint Purchase Agreement"). The Joint Purchase
Agreement governs certain aspects of the acquisition of the Viacom
Subsidiaries as between CRBC, Chancellor, EMCLA and the Company. Pursuant to
the Joint Purchase Agreement, each of the Company and Chancellor are required
to pay one-half of certain costs due under the Viacom Stock Purchase
Agreement, including those amounts owed as deposits. On February 19, 1997,
each of the Company and Chancellor paid $53.75 million to Viacom to satisfy
the obligation of the Company under the Viacom Stock Purchase Agreement to pay
a deposit of 10% of the purchase price, which deposit is non-refundable except
under certain limited circumstances. If the consummation of the Viacom Stock
Purchase Agreement occurs prior to the consummation of the Chancellor Merger
Agreement, (i) EMCLA will be required to purchase the Viacom Subsidiaries that
own and operate radio stations WAXQ(FM), New York, New York, WLTW(FM), New
York, New York, WMZQ(FM), Washington, D.C., WZHF(AM), Arlington, Virginia,
WJZW(FM), Woodbridge, Virginia and WBZS(AM) Alexandria, Virginia, for an
aggregate purchase price of approximately $595.0 million and (ii) CRBC will be
required to purchase the Viacom Subsidiaries that own and operate radio
stations KYSR(FM), Los Angeles, California, KIBB(FM), Los Angeles, California,
WLIT(FM), Chicago, Illinois and WDRQ(FM), Detroit, Michigan, for an aggregate
purchase price of approximately $480.0 million. If the Viacom Stock Purchase
Agreement is consummated after the consummation of the Chancellor Merger
Agreement, the Surviving Corporation will be required to purchase all of the
Viacom Subsidiaries.
 
  The Company anticipates that the Viacom Stock Purchase Agreement and the
refinancing of the indebtedness of the Company and Chancellor required in
connection with the transactions contemplated by the Chancellor Merger
Agreement will be financed through additional bank borrowings or additional
public or private debt or equity financing. In connection with these
transactions, the Company is actively engaged in negotiations with certain of
the lenders party to the Company's senior credit facility (the "Senior Credit
Facility") regarding the establishment of a new, expanded credit facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" set forth in Part II--Item 7
herein. Toronto Dominion (Texas), Inc. acts as administrative agent for the
lenders that are parties to the Senior Credit Facility.
 
                                       6
<PAGE>
 
  The following table sets forth certain information regarding the Chancellor
Stations (after giving effect to transactions of Chancellor to acquire or
dispose of stations pending at March 1, 1997):
 
<TABLE>
<CAPTION>
                                                               NO. OF STATIONS
                                          RANKING OF STATION'S ---------------
       MARKET                             MARKET BY REVENUE(1)   AM      FM
       ------                             -------------------- ------- -------
      <S>                                 <C>                  <C>     <C>
      Los Angeles........................           1                1       1
      New York...........................           2              --        1
      San Francisco......................           4                2       2
      Washington, D.C....................           8                1       2
      Atlanta............................          10              --        1
      Denver.............................          15                1       4
      Minneapolis-St. Paul...............          16                2       5
      Phoenix............................          17                2       4
      Cincinnati.........................          20                2       2
      Pittsburgh.........................          24                1       1
      Sacramento.........................          25                2       2
      Orlando............................          26              --        4
      Long Island........................          44                2       4
      Riverside-San Bernardino...........          64                1       1
                                                               ------- -------
        Total............................                           17      34
</TABLE>
--------
(1) Ranking of the principal radio market served by the Chancellor Stations
    among all U.S. radio markets by 1996 gross radio broadcasting revenue as
    reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
 
 Other Pending Transactions
 
  On June 13, 1996, the Company entered into an agreement to acquire WWRC-AM
in Washington, D.C. for $22.5 million in cash. The Company has subsequently
agreed with the owner of WWRC-AM to exchange WQRS-FM in Detroit (which, as
discussed below, the Company has agreed to acquire in a separate purchase for
$32.0 million in cash) in return for WWRC-AM and $9.5 million in cash. The
Company has been operating WWRC-AM under a time brokerage agreement since June
17, 1996.
 
  On July 15, 1996, the Company entered into an agreement to acquire WPNT-FM
in Chicago for $73.75 million in cash.
 
  On August 12, 1996, the Company entered into an agreement to acquire WMXD-FM
and WJLB-FM in Detroit for $168.0 million in cash and WFLN-FM in Philadelphia
for $37.75 million in cash. The Company also entered into an agreement to
operate WMXD-FM, WJLB-FM and WFLN-FM under time brokerage agreements effective
September 1, 1996. The Company also entered into a separate agreement on
August 12, 1996 to acquire WQRS-FM in Detroit for $32.0 million in cash. As
discussed above, the Company will immediately swap WQRS-FM at closing in
return for WWRC-AM in Washington, D.C. and $9.5 million in cash.
 
  On September 4, 1996, the Company entered into a binding letter of intent to
swap five of its six stations in the Charlotte, N.C. market (WPEG-FM, WBAV-FM,
WBAV-AM, WRFX-FM and WFNZ-AM), which were acquired as part of the BPI
Acquisition (as defined below) and the Pyramid Acquisition, for WIOQ-FM and
WUSL-FM in Philadelphia. As part of this transaction, the Company has also
agreed to sell its sixth radio station in Charlotte, WNKS-FM, for $10.0
million in cash. On December 5, 1996, the Company entered into definitive
agreements regarding these stations.
 
  On September 19, 1996, the Company entered into an agreement to acquire
WDAS-FM and WDAS-AM in Philadelphia for $103.0 million in cash.
 
                                       7
<PAGE>
 
  On February 18, 1997, the Company entered into an agreement to sell WEJM-FM
in Chicago for $14.75 million in cash. On March 13, 1997, the Company
transferred WEJM-FM to an independent operating trust (the "WEJM Trust")
pending consummation of this sale. The WEJM Trust permits the Company to
retain its economic interest in WEJM-FM, but no control. The transfer of WEJM-
FM to the WEJM Trust will allow the Company to maintain compliance with the
FCC's multiple ownership limits in Chicago upon consummation of the
acquisition of WPNT-FM in Chicago. On March 19, 1997, the Company entered into
an agreement to sell WEJM-AM in Chicago for $7.5 million in cash.
 
  Consummation of each Other Pending Transaction is subject to various
conditions, including 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.
 
  The following table sets forth certain information regarding stations that
the Company would acquire assuming consummation of all Other Pending
Transactions of the Company pending at March 1, 1997:
 
<TABLE>
<CAPTION>
                                                                     NO. OF
                                                                    STATIONS
                                               RANKING OF STATION'S ---------
     MARKET                                    MARKET BY REVENUE(1)  AM   FM
     ------                                    -------------------- ---- ----
   <S>                                         <C>                  <C>  <C>
   Chicago....................................           3            --    1
   Philadelphia...............................           6             1    4
   Washington, D. C...........................           8             1   --
   Detroit....................................          11            --    2(2)
                                                                    ---- ----
     Total....................................                         2    7
                                                                    ==== ====
</TABLE>
--------
(1) Ranking of the principal radio market served by the station(s) among all
    U.S. radio markets by 1996 gross radio broadcasting revenue as reported by
    James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(2) Does not include one station in Detroit that the Company has agreed to
    acquire and then immediately exchange for another station in Washington,
    D.C.
 
 Required Additional Dispositions
 
  Completion of the Other Pending Transactions would result in the Company's
ownership of six FM stations in the Philadelphia market, or one station in
excess of the maximum number of FM stations under common ownership permitted
by the FCC's multiple ownership rules. Therefore, the Company will be required
to divest one FM station in Philadelphia in order to comply with such rules.
Accordingly, the Company filed on October 10, 1996 an application with the FCC
to transfer WFLN-FM to an independent operating trust (the "WFLN Trust")
through which the Company would retain its economic interest in WFLN-FM, but
no control, pending sale of the station by the trust. The Company reserves the
right to sell WFLN-FM or any of its other Philadelphia FM stations to an
unrelated third party prior to (and instead of) transferring WFLN-FM to the
WFLN Trust.
 
  Furthermore, the Company will also be required to divest certain of its
stations that it will acquire pursuant to the Viacom Acquisition and the
Chancellor Merger, or other stations, in the Chicago, Detroit, Washington,
D.C., San Francisco and Sacramento markets, in order to comply with the FCC's
multiple ownership limits. As a result of the Viacom Acquisition, the Company
will be required to dispose of one FM station in each of the Chicago and
Detroit markets. As a result of the Chancellor Merger, the Company will be
required to dispose of one FM and two AM stations in the Washington, D.C.
market, two FM stations in the San Francisco market and one AM station in the
Sacramento market.
 
  The stations in the Chicago, Detroit, Washington, D.C., San Francisco and
Sacramento markets that the Company will be required to dispose of have not
yet been identified, and could include one or more stations
 
                                       8
<PAGE>
 
currently in the Company's portfolio or one or more of the stations to be
acquired in the Chancellor Merger, the Viacom Acquisition or any of the Other
Pending Transactions in the relevant markets. Although discussions with third
parties with respect to certain dispositions are underway, there has been no
binding agreement reached with respect to any such dispositions. The inability
of the Company to effect one or more of the Required Additional Dispositions
could have a material adverse effect on the Company's ability to consummate
the Chancellor Merger, the Viacom Acquisition or one or more of the Other
Pending Transactions. Furthermore, it is not clear if the FCC would permit the
Company to complete any acquisition that would cause the Company to exceed the
FCC's multiple ownership limits in a market unless an executed purchase
agreement were in effect or a transfer of one or more stations to a qualified
trust were permitted.
 
  The Required Additional Dispositions reflect the number of stations that
must be disposed by the Company in order to comply with the FCC's multiple
ownership limits upon consummation of the Chancellor Merger, the Viacom
Acquisition and the Other Pending Transactions. The Company may also be
required to dispose of one or more of its stations as a result of federal or
state antitrust laws. See "--Regulation of Radio Broadcasting Industry--
Federal Antitrust Laws."
 
  The following table summarizes the markets and number of stations where the
Company will be required to effect the Required Additional Dispositions in
order to comply with the FCC's multiple ownership limits, assuming
consummation of all Other Pending Transactions, the Viacom Acquisition and the
Chancellor Merger:
 
<TABLE>
<CAPTION>
                                                                 NO. OF STATIONS
                                            RANKING OF STATION'S ---------------
     MARKET                                 MARKET BY REVENUE(1)   AM      FM
     ------                                 -------------------- ------- -------
   <S>                                      <C>                  <C>     <C>
   Chicago.................................           3               --       1
   San Francisco...........................           4               --       2
   Philadelphia............................           6               --       1
   Washington, D. C........................           8                2       1
   Detroit.................................          11               --       1
   Sacramento..............................          25                1      --
                                                                 ------- -------
     Total.................................                            3       6
                                                                 ======= =======
</TABLE>
--------
(1) Ranking of the principal radio market served by the station(s) among all
    U.S. radio markets by 1996 gross radio broadcasting revenue as reported by
    James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
 
BROADCAST PROPERTIES
 
  The following table sets forth selected information with respect to the
portfolio of radio stations owned by the Company at March 1, 1997, without
giving effect to announced acquisitions and dispositions.
 
<TABLE>
<CAPTION>
                                                                                                  TOTAL NUMBER
                                                                                                   OF STATIONS
                           RANKING OF                                                                RANKED
                            STATION'S                                            STATION RANKING    IN TARGET
                             MARKET                                   TARGET        IN TARGET    DEMOGRAPHICS IN
MARKET(1)        STATION  BY REVENUE(4) STATION FORMAT             DEMOGRAPHICS  DEMOGRAPHICS(6)    MARKET(6)
---------        -------  ------------- --------------             ------------- --------------- ---------------
<S>              <C>      <C>           <C>                        <C>           <C>             <C>
Los Angeles, CA  KKBT-FM         1      Urban Contemporary         Women 18-34           2              48
New York, NY     WKTU-FM         2      Rhythmic Contemporary Hits Persons 25-54         2              44
Chicago, IL      WLUP-FM         3      Adult Rock                 Persons 25-44         9              42
Chicago, IL      WMVP-AM         3      Personality / Sports       Men 25-54            21              42
Chicago, IL      WRCX-FM         3      Mainstream Rock            Men 18-34             1              42
Chicago, IL      WVAZ-FM         3      Black Adult                Women 25-54           2              42
Chicago, IL      WEJM-FM+        3      Hip Hop                    Persons 18-34         7              42
Chicago, IL      WEJM-AM+        3      Hip Hop                    Persons 18-34        37              42
Chicago, IL      WNUA-FM         3      Contemporary Jazz          Persons 25-54         6              42
</TABLE>
 
                                       9
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                                         TOTAL NUMBER
                                                                                                          OF STATIONS
                                     RANKING OF                                                             RANKED
                                      STATION'S                                         STATION RANKING    IN TARGET
                                       MARKET                                TARGET        IN TARGET    DEMOGRAPHICS IN
MARKET                    STATION   BY REVENUE(4) STATION FORMAT          DEMOGRAPHICS  DEMOGRAPHICS(6)    MARKET(6)
------                    -------   ------------- --------------          ------------- --------------- ---------------
<S>                      <C>        <C>           <C>                     <C>           <C>             <C>
San Francisco, CA        KIOI-FM           4      Adult Contemporary      Women 25-54           2              52
San Francisco, CA        KMEL-FM           4      Contemporary Hits       Persons 18-34         2              51
San Francisco, CA        KYLD-FM           4      Contemporary Hits       Persons 18-34         1              51
San Francisco, CA        KKSF-FM           4      Contemporary Jazz       Persons 25-54         6              52
San Francisco, CA        KDFC-FM           4      Classical               Persons 35-64         9              52
San Francisco, CA        KDFC-AM(2)        4      Classical               Persons 35-64        N/M             52
Dallas, TX               KSKY-AM           5      Inspirational                N/M             N/M            N/M
Philadelphia, PA         WYXR-FM           6      Adult Contemporary      Women 18-49           4              33
Philadelphia, PA         WJJZ-FM           6      Contemporary Jazz       Persons 35-54         4              33
Houston, TX              KTRH-AM           7      News/Sports             Men 25-54             4              33
Houston, TX              KLOL-FM           7      Album Rock              Men 18-34             2              32
Washington, D.C.         WTOP-AM           8      News/Sports             Men 25-54            10              35
Washington, D.C.         WASH-FM           8      Adult Contemporary      Women 25-54           3              34
Washington, D.C.         WGAY-FM           8      Adult Contemporary      Persons 35-64         9              35
Boston, MA               WJMN-FM           9      Contemporary Hits       Women 18-24           1              25
Boston, MA               WXKS-FM           9      Contemporary Hits       Women 25-34           1              29
Boston, MA               WXKS-AM           9      Nostalgia               Women 45-54          12              32
Detroit, MI              WKQI-FM          11      Adult Contemporary      Women 25-54           4              29
Detroit, MI              WNIC-FM          11      Adult Contemporary      Women 25-54           1              29
Detroit, MI              WDOZ-AM(3)       11      Adult Contemporary      Women 25-54          N/M             29
Detroit, MI              WWWW-FM          11      Country                 Women 25-54           8              29
Detroit, MI              WDFN-AM          11      Sports/Talk             Men 25-49             9              29
Miami-Ft Lauderdale, FL  WVCG-AM          12      Brokered(5)                  N/M             N/M            N/M
Miami-Ft Lauderdale, FL  WEDR-FM          12      Urban Contemporary      Persons 25-54         2              37
Charlotte, NC            WPEG-FM+         27      Urban Contemporary      Persons 18-34         1              21
Charlotte, NC            WBAV-AM+         27      Urban Adult             Persons 25-54        16              27
Charlotte, NC            WBAV-FM+         27      Black Contemporary Hits Persons 25-54         9              27
Charlotte, NC            WNKS-FM+         27      Contemporary Hits       Persons 18-34         3              21
Charlotte, NC            WRFX-FM+         27      Classic Rock            Men 18-49             1              24
Charlotte, NC            WFNZ-AM+         27      Sports                  Men 18-49            17              24
</TABLE>
--------
 +  Indicates station to be disposed in an Other Pending Transaction.
(1) Actual city of license may differ from metropolitan market served in
    certain cases.
(2) The Company has historically brokered KDFC-AM to third parties.
(3) The Company has historically brokered WDOZ-AM to third parties.
(4) Ranking of principal radio market served by the station among all U.S.
    radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
    as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(5) The Company sells airtime on this station to third parties for broadcast
    of specialty programming on a variety of topics.
(6) Information derived from The Arbitron Company, Fall 1996, Los Angeles, New
    York, Chicago, San Francisco, Philadelphia, Houston, Washington, D.C.,
    Boston, Detroit, Miami and Charlotte Local Market Reports for the Target
    Demographics specified for listening Monday to Sunday, 6:00 a.m. to
    Midnight. Copyright, The Arbitron Company.
N/M: Not meaningful
 
                                      10
<PAGE>
 
  The following table sets forth selected information with respect to the
Viacom Stations at March 1, 1997.
 
<TABLE>
<CAPTION>
                                                                                                      TOTAL NUMBER
                                                                                                      OF STATIONS
                                                                                                         RANKED
                             RANKING OF                                              STATION RANKING   IN TARGET
                          STATION'S MARKET                                TARTET        IN TARGET     DEMOGRAPHICS
MARKET(1)         STATION  BY REVENUE(2)   STATION FORMAT              DEMOGRAPHICS  DEMOGRAPHICS (3)  MARKET(3)
---------         ------- ---------------- --------------              ------------- ---------------- ------------
<S>               <C>     <C>              <C>                         <C>           <C>              <C>
Los Angeles, CA   KYSR-FM         1        Hot Adult Contemporary      Persons 25-54        13             49
Los Angeles, CA   KIBB-FM         1        Rhythmic Adult Contemporary Persons 25-54        25             49
New York, NY      WLTW-FM         2        Soft Adult Contemporary     Persons 25-54         1             44
New York, NY      WAXQ-FM         2        Classic Rock                Persons 25-54        11             44
Chicago, IL       WLIT-FM         3        Soft Adult Contemporary     Persons 25-54         5             42
Washington, D.C.  WMZQ-FM         8        Country                     Persons 25-54         2             35
Washington, D.C.  WJZW-FM         8        Smooth Jazz                 Persons 25-54         9             35
Washington, D.C.  WBZS-AM         8        Business News               N/M                 N/M            N/M
Washington, D.C.  WZHF-AM         8        Health and Fitness          N/M                 N/M            N/M
Detroit, MI       WDRQ-FM        11        Rhythmic Hit Radio          Persons 18-34         6             28
</TABLE>
--------
(1) Actual city of license may differ from metropolitan market served in
    certain cases.
(2) Ranking of principal radio market served by the station among all U.S.
    radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
    as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(3) Information derived from The Arbitron Company, Fall 1996, Los Angeles, New
    York, Chicago, Washington, D.C., and Detroit Local Market Reports for the
    Target Demographics specified for listening Monday to Sunday, 6:00 a.m. to
    Midnight. Copyright, The Arbitron Company.
N/M: Not meaningful
 
  The following table sets forth selected information with respect to the
Chancellor Stations at March 1, 1997, assuming the consummation of
Chancellor's pending transactions to acquire or dispose of stations as of such
date.
 
<TABLE>
<CAPTION>
                                                                                                     TOTAL NUMBER
                                                                                                     OF STATIONS
                                 RANKING OF                                         STATION RANKING   IN TARGET
                              STATION'S MARKET                           TARGET        IN TARGET     DEMOGRAPHICS
MARKET(1)          STATION     BY REVENUE(8)   STATION FORMAT         DEMOGRAPHICS  DEMOGRAPHICS (9)  MARKET(9)
---------          -------    ---------------- --------------         ------------- ---------------- ------------
<S>                <C>        <C>              <C>                    <C>           <C>              <C>
Los Angeles, CA    KLAC-AM            1        Adult Standards/Sports Persons 35-64        17             49
Los Angeles, CA    KZLA-FM            1        Country                Persons 25-54        12             49
New York, NY       WHTZ-FM            2        Contemporary Hit Radio Persons 18-34         7             43
San Francisco, CA  KNEW-AM            4        Country/Sports         Persons 25-54        32             52
San Francisco, CA  KSAN-FM            4        Country                Persons 25-54        19             52
San Francisco, CA  KABL-AM            4        Adult Standards        Persons 35-64        16             52
San Francisco, CA  KBGG-FM            4        70's Oldies            Persons 25-54        10             52
Washington, D.C.   WBIG-FM            8        Oldies                 Persons 25-54         8             35
Washington, D.C.   WGMS-FM            8        Classical              Persons 35-64         8             35
Washington, D.C.   WTEM-AM            8        Sports/Talk            Men 18-49            19             35
Atlanta, GA        WFOX-FM           10        Oldies                 Persons 25-54         9             25
Denver, CO         KRRF-AM          15         Talk                   Men 25-54            25             31
Denver, CO         KXKL-FM           15        Oldies                 Persons 25-54         8             31
Denver, CO         KVOD-FM           15        Classical              Persons 25-54        17             31
Denver, CO         KIMN-FM           15        70's Oldies            Persons 25-54        11             31
Denver, CO         KALC-FM           15        Hot Adult Contemporary Persons 18-34         2             31
Minneapolis-
 St. Paul, MN      KTCZ-FM           16        Progressive Album Rock Men 25-49             6             23
Minneapolis-
 St. Paul, MN      KTCJ-AM(3)        16        Progressive Album Rock Men 25-49            19             23
Minneapolis-
 St. Paul, MN      KDWB-FM           16        Contemporary Hit Radio Persons 18-34         2             23
Minneapolis-
 St. Paul, MN      KFAN-AM           16        Sports                 Men 18-49             7             23
Minneapolis-
 St. Paul, MN      KEEY-FM           16        Country                Persons 25-54         6             23
</TABLE>
 
                                      11
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                                          TOTAL NUMBER
                                                                                                          OF STATIONS
                                    RANKING OF                                           STATION RANKING   IN TARGET
                                 STATION'S MARKET                             TARGET        IN TARGET     DEMOGRAPHICS
MARKET(1)            STATION      BY REVENUE(8)   STATION FORMAT           DEMOGRAPHICS  DEMOGRAPHICS (9)  MARKET(9)
---------            -------     ---------------- --------------           ------------- ---------------- ------------
<S>                  <C>         <C>              <C>                      <C>           <C>              <C>
Minneapolis-
 St. Paul, MN        KQQL-FM            16        Oldies                   Persons 25-54         4             23
Minneapolis-
 St. Paul, MN        WBOB-FM            16        Young Country            Persons 18-49         9             23
Phoenix, AZ          KMLE-FM            17        Country                  Persons 25-54         2             36
Phoenix, AZ          KISO-AM            17        Urban Adult Contemporary Persons 25-54        27             36
Phoenix, AZ          KOOL-FM            17        Oldies                   Persons 25-54         1             36
Phoenix, AZ          KOY-AM             17        Adult Standards          Persons 35-64         9             36
Phoenix, AZ          KYOT-FM            17        Contemporary Jazz        Persons 25-54        11             36
Phoenix, AZ          KZON-FM            17        Alternative Rock         Persons 18-34         6             36
Cincinnati, OH       WUBE-FM(4)         20        Country                  Persons 25-54         1             26
Cincinnati, OH       WUBE-AM            20        Nostalgia                Persons 35-64       N/M            N/M
Cincinnati, OH       WYGY-FM(4)         20        Young Country            Men 18-34             6             26
Cincinnati, OH       WKYN-AM            20        Sports/Talk              Men 18-49            16             26
Pittsburgh, PA       WWSW-AM(5)         24        Oldies                   Persons 25-54        24             29
Pittsburgh, PA       WWSW-FM            24        Oldies                   Persons 25-54         3             29
Sacramento, CA       KGBY-FM            25        Adult Contemporary       Women 25-54           1             32
Sacramento, CA       KHYL-FM            25        Oldies                   Persons 25-54         9             32
Sacramento, CA       KFBK-AM            25        News/Talk                Persons 25-54         1             32
Sacramento, CA       KSTE-AM(6)         25        Talk                     Persons 25-54        14             32
Orlando, FL          WOCL-FM            26        Oldies                   Persons 25-54         5             25
Orlando, FL          WOMX-FM            26        Adult Contemporary       Persons 25-54         6             25
Orlando, FL          WJHM-FM            26        Urban Contemporary       Persons 18-34         4             25
Orlando, FL          WXXL-FM            26        Contemporary Hit Radio   Persons 18-34         1             25
Long Island, NY(2)   WALK-FM            44        Adult Contemporary       Persons 25-54         1             40
Long Island, NY(2)   WALK-AM            44        Adult Contemporary       Persons 35-64       N/M            N/M
Long Island, NY(2)   WBAB-FM(7)+        44        Album Rock               Men 25-49             3             40
Long Island, NY(2)   WBLI-FM(7)+        44        Adult Contemporary       Women 25-54           5             40
Long Island, NY(2)   WHFM-FM(7)+        44        Album Rock               Men 25-49            38             40
Long Island, NY(2)   WGBB-AM(7)+        44        News/Talk                Persons 25-54       N/M            N/M
Riverside-
 San Bernardino, CA  KGGI-FM            64        Contemporary Hit Radio   Persons 18-34         2             51
Riverside-
 San Bernardino, CA  KMEN-AM            64        Oldies                   Men 25-54            34             51
</TABLE>
--------
 +  Includes station to be acquired by Chancellor pursuant to a transaction
    pending as of March 1, 1997.
(1) Actual city of license may differ from metropolitan market served in
    certain cases.
(2) Long Island may also be considered part of the greater New York market,
    although it is reported separately as a matter of convention.
(3) Programming provided to KTCJ-AM via simulcast of programming broadcast on
    KTCZ-FM.
(4) WUBE-FM and WYGY-FM are sold in combination.
(5) Programming provided to WWSW-AM via simulcast of programming broadcast on
    WWSW-FM.
(6) Chancellor currently manages certain limited functions of station KSTE-AM
    in Sacramento, California pursuant to a time brokerage agreement. On July
    31, 1996, Chancellor entered into an agreement with American Radio Systems
    Corporation ("ARS") under which Chancellor has agreed to exchange its West
    Palm Beach, Florida stations for ARS' station KSTE-AM in Sacramento,
    California, plus $33.0 million in cash.
(7) Chancellor currently manages certain limited functions of stations, WBAB-
    FM, WBLI-FM, WHFM-FM and WGBB-AM in Long Island, New York, pursuant to a
    time brokerage agreement. On July 1, 1996, Chancellor entered into an
    agreement with SFX Broadcasting ("SFX") under which Chancellor would
    exchange WAPE-FM and WFYV-FM, two Jacksonville, Florida stations, and
    $11.0 million in cash for SFX's three FM stations and one AM station in
    Long Island, New York.
(8) Ranking of principal radio market served by the station among all U.S.
    radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
    as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
 
                                      12
<PAGE>
 
(9) Information derived from The Arbitron Company, Fall 1996, Los Angeles, New
    York, San Francisco, Washington, D.C., Atlanta, Denver, Minneapolis-St.
    Paul, Phoenix, Cincinnati, Pittsburgh, Sacramento, Orlando, Long Island
    and Riverside-San Bernardino Local Market Reports for the Target
    Demographics specified for listening Monday to Sunday, 6:00 a.m. to
    Midnight. Copyright, The Arbitron Company.
N/M: Not meaningful.
 
  The following table sets forth selected information with respect to the
stations to be acquired by the Company assuming consummation of the Other
Pending Transactions.
 
<TABLE>
<CAPTION>
                                                                                                          TOTAL NUMBER
                                                                                                          OF STATIONS
                                RANKING OF                                               STATION RANKING     RANKED
                             STATION'S MARKET                                 TARGET        IN TARGET      IN TARGET
MARKET(1)         STATION(2)  BY REVENUE(3)   STATION FORMAT               DEMOGRAPHICS  DEMOGRAPHICS (4)  MARKET(4)
---------         ---------- ---------------- --------------               ------------- ---------------- ------------
<S>               <C>        <C>              <C>                          <C>           <C>              <C>
Chicago, IL        WPNT-FM         3          Adult Contemporary           Women 25-54           8             42
Philadelphia, PA   WUSL-FM         6          Urban Contemporary           Women 18-34           1             31
Philadelphia, PA   WIOQ-FM         6          Contemporary Hit Radio/Dance Women 18-34           2             31
Philadelphia, PA   WFLN-FM         6          Classical                    Persons 35-64        11             33
Philadelphia, PA   WDAS-FM         6          Urban Contemporary           Persons 25-54         1             33
Philadelphia, PA   WDAS-AM         6          Gospel                       N/M                 N/M            N/M
Washington, D.C.   WWRC-AM         8          News/Talk                    Persons 35-64        21             35
Detroit, MI        WJLB-FM         11         Urban Contemporary           Persons 18-34         1             28
Detroit, MI        WMXD-FM         11         Black Adult                  Persons 25-54         7             29
</TABLE>
--------
(1) Actual city of license may differ from metropolitan market served in
    certain cases.
(2) Does not include information for WQRS-FM in Detroit, which the Company has
    agreed to acquire and then immediately exchange for WWRC-AM. See "--
    Developments Since January 1, 1996--Other Pending Transactions."
(3) Ranking of principal radio market served by the station among all U.S.
    radio broadcast markets by aggregate 1996 gross radio broadcasting revenue
    as reported by James H. Duncan, Duncan's Radio Market Guide (1997 ed.).
(4) Information derived from The Arbitron Company, Fall 1996, Chicago,
    Philadelphia, Washington, D.C. and Detroit Local Market Reporting for the
    Target Demographics specified for listening Monday to Sunday, 6:00 a.m. to
    Midnight. Copyright, The Arbitron Company.
N/M: Not meaningful
 
ADVERTISING
 
  The primary source of the Company's revenues is the sale of broadcasting
time for local, regional and national advertising. Approximately 69% of the
Company's gross revenues was generated from the sale of local advertising in
1995 and 1996. 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
advertisements 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
 
                                      13
<PAGE>
 
national sales and is compensated on a commission-only basis. Most advertising
contracts are short-term and generally run only for a few weeks.
 
COMPETITION
 
  The radio broadcasting industry is a highly competitive business. 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. Other media,
including broadcast television, cable television, newspapers, magazines,
direct mail coupons and billboard advertising also compete with the Company's
stations for advertising revenues. The Company also competes with other
broadcasting operators for acquisition opportunities, and prices have
increased significantly in recent periods. As the pace of consolidation in the
radio broadcasting industry accelerates, certain competitors are emerging
which may have 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 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 and other digital audio broadcasting formats to
local and national audiences. In addition, the FCC has allocated spectrum to
and currently is preparing the service rules 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. The
Company cannot predict at this time the effect, if any, that any such new
technologies may have on the radio broadcasting industry.
 
EMPLOYEES
 
  As of December 31, 1996, the Company had approximately 1,382 full-time
employees and 396 part-time employees. Certain employees at the Company's
stations in Los Angeles, Chicago, and Washington, D.C. (approximately 180
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. During 1996, the Company
executed employment agreements with Scott K. Ginsburg (the Company's Chairman
and Chief Executive Officer) and Kenneth J. O'Keefe (the Company's Executive
Vice President--Operations). To date in 1997, the Company has entered into a
Memorandum of Agreement with Scott K. Ginsburg regarding his employment by the
Surviving Corporation following consummation of the Chancellor Merger. See
"Executive Compensation--Employment Agreements" set forth in Part III--Item 11
herein.
 
REGULATION OF RADIO BROADCASTING INDUSTRY
 
  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. The
Communications Act prohibits the assignment of an FCC license, and the
transfer of control of an FCC licensee, 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
 
                                      14
<PAGE>
 
of factors pertaining to the licensee (and proposed licensee), including:
limitations on alien ownership and 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, and compliance with the Anti-Drug Abuse Act of 1988.
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 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 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.
The FCC is required to hold hearings on a renewal application in certain
circumstances.
 
  The following table sets forth the date of acquisition by the Company (or
one of its predecessor entities) of the radio stations actually owned by the
Company as of March 1, 1997, without giving effect to any pending acquisitions
or dispositions, the frequency of each such station, and the date of
expiration of such station's main FCC broadcast license:
 
<TABLE>
<CAPTION>
                                       DATE OF                     EXPIRATION DATE
   STATION     MARKET(1)             ACQUISITION     FREQUENCY     OF FCC LICENSE
   -------     ---------             -----------     ---------     ---------------
   <S>         <C>                   <C>             <C>           <C>
   KKBT-FM     Los Angeles, CA           5/89         92.3 MHz          12/97
   WKTU-FM     New York, NY              5/95        103.5 MHz           6/98
   WLUP-FM     Chicago, IL               6/88         97.9 MHz          12/03
   WMVP-AM     Chicago, IL               5/84         1000 kHz          12/03
   WRCX-FM     Chicago, IL              12/93        103.5 MHz          12/96*
   WVAZ-FM     Chicago, IL               5/95        102.7 MHz          12/03
   WEJM-FM+    Chicago, IL               5/95        106.3 MHz          12/03
   WEJM-AM+    Chicago, IL               5/95          950 kHz          12/03
   WNUA-FM     Chicago, IL               1/96         95.5 MHz          12/03
   KIOI-FM     San Francisco, CA         4/94        101.3 MHz          12/97
   KMEL-FM     San Francisco, CA        11/92        106.1 MHz          12/97
   KYLD-FM     San Francisco, CA         8/96        107.7 MHz          12/97
   KKSF-FM     San Francisco, CA         1/97        103.7 MHz          12/97
   KDFC-FM     San Francisco, CA         1/97        102.1 MHz          12/97
   KDFC-AM     San Francisco, CA         1/97         1220 kHz          12/97
   KSKY-AM     Dallas, TX                5/95          660 kHz           8/97
   WYXR-FM     Philadelphia, PA          1/96        104.5 MHz           8/98
   WJJZ-FM     Philadelphia, PA          1/96        106.1 MHz           8/98
</TABLE>
 
                                      15
<PAGE>
 
<TABLE>
<CAPTION>
                                        DATE OF                 EXPIRATION DATE
STATION    MARKET(1)                  ACQUISITION   FREQUENCY   OF FCC LICENSE
-------    ---------                  -----------   ---------   ---------------
<S>        <C>                        <C>           <C>         <C>
KTRH-AM    Houston, TX                    6/93        740 kHz         8/97
KLOL-FM    Houston, TX                    6/93      101.1 MHz         8/97
WTOP-AM    Washington, DC                11/92       1500 kHz        10/02
WASH-FM    Washington, DC                11/92       97.1 MHz        10/02
WGAY-FM    Washington, DC                11/96       99.5 MHz        10/02
WJMN-FM    Boston, MA                     1/96       94.5 MHz         4/98
WXKS-FM    Boston, MA                     1/96      107.9 MHz         4/98
WXKS-AM    Boston, MA                     1/96       1430 kHz         4/98
WKQI-FM    Detroit, MI                    5/95       95.5 MHz        10/03
WNIC-FM    Detroit, MI                    5/95      100.3 MHz        10/03
WDOZ-AM    Detroit, MI                    5/95       1310 kHz        10/03
WWWW-FM    Detroit, MI                    1/97      106.7 MHz        10/03
WDFN-AM    Detroit, MI                    1/97       1130 kHz        10/03
WVCG-AM    Miami-FT. Lauderdale, FL       7/83       1080 kHz         2/03
WEDR-FM    Miami-FT. Lauderdale, FL      10/96       99.1 MHz         2/03
WPEG-FM+   Charlotte, NC                  5/95       97.9 MHz        12/02
WBAV-AM+   Charlotte, NC                  5/95       1600 kHz        12/02
WBAV-FM+   Charlotte, NC                  5/95      101.9 MHz        12/02
WNKS-FM+   Charlotte, NC                  1/96       95.1 MHz        12/02
WRFX-FM+   Charlotte, NC                  1/96       99.7 MHz        12/02
WFNZ-AM+   Charlotte, NC                  1/96        610 kHz        12/02
</TABLE>
--------
 + Indicates station to be disposed in an Other Pending Transaction.
 * Indicates pending renewal application.
(1) Actual city of license may differ from metropolitan market served in
    certain cases.
 
  The following table sets forth the frequency of each Viacom Station, and the
date of expiration of such station's main FCC broadcast license:
 
<TABLE>
<CAPTION>
                                                                           EXPIRATION DATE
   STATION          MARKET(1)                      FREQUENCY               OF FCC LICENSE
   -------          ---------                      ---------               ---------------
   <S>              <C>                            <C>                     <C>
   KYSR-FM          Los Angeles, CA                 98.7 MHz                    12/97
   KIBB-FM          Los Angeles, CA                100.3 MHz                    12/97
   WLTW-FM          New York, NY                   106.7 MHz                     6/98
   WAXQ-FM          New York, NY                   104.3 MHz                     6/98
   WLIT-FM          Chicago, IL                     93.9 MHz                    12/03
   WMZQ-FM          Washington, D.C.                98.7 MHz                    10/02
   WJZW-FM          Washington, D.C.               105.9 MHz                    10/02
   WBZS-AM          Washington, D.C.                 730 kHz                    10/02
   WZHF-AM          Washington, D.C.                1390 kHz                    10/02
   WDRQ-FM          Detroit, MI                     93.1 MHz                    10/03
</TABLE>
--------
(1)Actual city of license may differ from metropolitan market served in
certain cases.
 
                                      16
<PAGE>
 
  The following table sets forth the frequency of each Chancellor Station
(after giving effect to Chancellor's pending transactions to acquire or
dispose of stations at March 1, 1997), and the date of expiration of such
station's main FCC broadcast license:
 
<TABLE>
<CAPTION>
                                                                   EXPIRATION DATE
   STATION      MARKET(1)                          FREQUENCY       OF FCC LICENSE
   -------      ---------                          ---------       ---------------
   <S>          <C>                                <C>             <C>
   KLAC-AM      Los Angeles, CA                      570 kHz            12/97
   KZLA-FM      Los Angeles, CA                     93.9 MHz            12/97
   WHTZ-FM      New York, NY                       100.3 MHz            06/98
   KNEW-AM      San Francisco, CA                    910 kHz            12/97
   KSAN-FM      San Francisco, CA                   94.9 MHz            12/97
   KABL-AM      San Francisco, CA                    960 kHz            12/97
   KBGG-FM      San Francisco, CA                   98.1 MHz            12/97
   WBIG-FM      Washington, D.C.                   100.3 MHz            10/03
   WGMS-FM      Washington, D.C.                   103.5 MHz            10/03
   WTEM-AM      Washington, D.C.                     570 kHz            10/03
   WFOX-FM      Atlanta, GA                         97.1 MHz            04/03
   KRRF-AM      Denver, CO                          1280 kHz            04/97
   KXKL-FM      Denver, CO                         105.1 MHz            04/97
   KVOD-FM      Denver, CO                          92.5 MHz            04/97
   KIMN-FM      Denver, CO                         100.3 MHz            04/97
   KALC-FM      Denver, CO                         105.9 MHz            04/97
   KTCZ-FM      Minneapolis-St. Paul, MN            97.1 MHz            04/97
   KTCJ-AM      Minneapolis-St. Paul, MN             690 kHz            04/97
   KDWB-FM      Minneapolis-St. Paul, MN           101.3 MHz            04/97
   KFAN-AM      Minneapolis-St. Paul, MN            1130 kHz            04/97
   KEEY-FM      Minneapolis-St. Paul, MN           102.1 MHz            04/97
   KQQL-FM      Minneapolis-St. Paul, MN           107.9 MHz            04/97
   WBOB-FM      Minneapolis-St. Paul, MN           100.3 MHz            04/97
   KMLE-FM      Phoenix, AZ                        107.9 MHz            10/97
   KISO-AM      Phoenix, AZ                         1230 kHz            10/97
   KOOL-FM      Phoenix, AZ                         94.5 MHz            10/97
   KOY-AM       Phoenix, AZ                          550 kHz            10/97
   KYOT-FM      Phoenix, AZ                         95.5 MHz            10/97
   KZON-FM      Phoenix, AZ                        101.5 MHz            10/97
   WUBE-FM      Cincinnati, OH                     105.1 MHz            10/03
   WUBE-AM      Cincinnati, OH                      1230 kHz            10/03
   WYGY-FM      Cincinnati, OH                      96.5 MHz            10/03
   WKYN-AM      Cincinnati, OH                      1160 kHz            10/03
   WWSW-AM      Pittsburgh, PA                       970 kHz            08/98
   WWSW-FM      Pittsburgh, PA                      94.5 MHz            08/98
   KGBY-FM      Sacramento, CA                      92.5 MHz            12/97
   KHYL-FM      Sacramento, CA                     101.1 MHz            12/97
   KFBK-AM      Sacramento, CA                      1530 kHz            12/97
   KSTE-AM      Sacramento, CA                       650 kHz            12/97
   WOCL-FM      Orlando, FL                        105.9 MHz            02/03
   WOMX-FM      Orlando, FL                        105.1 MHz            02/03
   WJHM-FM      Orlando, FL                        101.9 MHz            02/03
   WXXL-FM      Orlando, FL                        106.7 MHz            02/03
   WALK-FM      Long Island, NY                     97.5 MHz            06/98
   WALK-AM      Long Island, NY                     1370 kHz            06/98
   WBAB-FM+     Long Island, NY                    102.3 MHz            06/98
   WBLI-FM+     Long Island, NY                    106.1 MHz            06/98
   WHFM-FM+     Long Island, NY                     95.3 MHz            06/98
   WGBB-AM+     Long Island, NY                     1240 kHz            06/98
   KGGI-FM      Riverside-San Bernardino, CA        99.1 MHz            12/97
   KMEN-AM      Riverside-San-Bernardino, CA        1290 kHz            12/97
</TABLE>
--------
+  Includes station to be acquired by Chancellor pursuant to a contract
   pending as of March 1, 1997.
(1) Actual city of license may differ from metropolitan market served in
    certain cases.
 
                                      17
<PAGE>
 
  The following table sets forth the frequency of each station to be acquired
by the Company pursuant to an Other Pending Transaction, and the date of
expiration of such station's main FCC broadcast license:
 
<TABLE>
<CAPTION>
                                                                         EXPIRATION DATE
   STATION(1)         MARKET(2)                    FREQUENCY             OF FCC LICENSE
   ----------         ---------                    ---------             ---------------
   <S>                <C>                          <C>                   <C>
   WPNT-FM            Chicago, IL                  100.3 MHz                  12/03
   WUSL-FM            Philadelphia, PA              98.9 MHz                  08/98
   WIOQ-FM            Philadelphia, PA             102.1 MHz                  08/98
   WFLN-FM            Philadelphia, PA              95.7 MHz                  08/98
   WDAS-FM            Philadelphia, PA             105.3 MHz                  08/98
   WDAS-AM            Philadelphia, PA              1480 kHz                  08/98
   WWRC-AM            Washington, D.C.               980 kHz                  10/02
   WJLB-FM            Detroit, MI                   97.9 MHz                  10/03
   WMXD-FM            Detroit, MI                   92.3 MHz                  10/03
</TABLE>
--------
(1) Does not include information for WQRS-FM in Detroit, which the Company has
    agreed to acquire and then immediately exchange for WWRC-AM. See "--
    Developments Since January 1, 1996--Other Pending Transactions."
(2) Actual city of license may differ from metropolitan market served in
    certain cases.
 
  Ownership Matters. Under the Communications Act, a broadcast license may not
be granted to or held by any corporation that has more than one-fifth of its
capital stock owned or voted by aliens or their representatives, by foreign
governments or their representatives, or by non-U.S. corporations. Under the
Communications Act, a broadcast license also may not be granted to or held by
any corporation that is controlled, directly or indirectly, by any other
corporation more than one-fourth of whose capital stock is owned or voted by
aliens or their representatives, by foreign governments or their
representatives, or by non-U.S. corporations, if the FCC finds that the public
interest will be served by the refusal or revocation of such license. The
Company has been advised that the FCC staff has interpreted this provision of
the Communications Act to require an affirmative public interest finding
before a broadcast license may be granted to or held by any such corporation
and that the FCC has made such an affirmative finding only in limited
circumstances. These restrictions apply in modified form to other forms of
business organizations, including partnerships. The Company, which serves as a
holding company for its direct and indirect radio station subsidiaries,
therefore may be restricted from having more than one-fourth of its stock
owned or voted by aliens, foreign governments or non-U.S. corporations. The
Certificate of Incorporation of the Company contains prohibitions on alien
ownership and control that are intended to facilitate compliance with the
provisions of the Communications Act applicable to alien ownership. The
Company believes that in light of current levels of alien ownership of the
Company's capital stock, the foregoing restrictions are not likely to have a
material impact on the Company.
 
  The Communications Act and FCC rules also generally prohibit the common
ownership, operation or control of a radio broadcast station and a television
broadcast station serving the same local market, and of a radio broadcast
station and a daily newspaper serving the same local market. Under these
"cross-ownership" rules, absent waivers, the Company would not be permitted to
acquire any daily newspaper or television broadcast station (other than low-
power television) in a local market where it then owned any radio broadcast
station. In October 1996, the Commission issued a Notice of Inquiry to explore
possible changes in the newspaper/broadcast cross-ownership waiver policy with
respect to newspaper/radio combinations, including the possibility of adopting
a waiver policy based on market size or on the number of independently owned
media in a market.
 
  The 1996 Act eliminated national ownership caps on ownership of AM and FM
radio stations. Prior to the 1996 Act, radio groups were limited to ownership
of 20 FM stations and 20 AM stations on a national basis. Additionally, the
1996 Act increased local ownership limits. Prior to the 1996 Act, a single
owner was limited to owning two FMs and two AMs in a single large radio market
with common ownership of three stations, including two in the same service,
permitted in smaller markets. After the 1996 Act, local ownership limits were
increased as follows: in markets with 45 or more stations, ownership is
limited to eight stations, no more than five of which
 
                                      18
<PAGE>
 
can be FMs or AMs; in markets with 30-44 stations, ownership is limited to
seven stations, no more than four of which can be FMs or AMs; in markets with
15-29 stations, ownership is limited to six stations, no more than four of
which can be FMs or AMs; and in markets with 14 or fewer stations, ownership
is limited to no more than 50% of the market's total and no more than three
AMs or FMs.
 
  Because of these multiple ownership rules and the cross-interest policy
described below, a purchaser of the Company's Class A Common Stock who
acquires an attributable interest in the Company may violate the FCC's rules
if it also has an "attributable" interest in other television or radio
stations, or in daily newspapers, depending on the number and location of
those radio or television stations or daily newspapers. Such a purchaser also
may be restricted in the companies in which it may invest, to the extent that
those investments give rise to an attributable interest. If an attributable
stockholder of the Company violates any of these ownership rules, the Company
may be unable to obtain from the FCC one or more authorizations needed to
conduct its radio station business and may be unable to obtain FCC consents
for certain future acquisitions.
 
  The FCC generally applies its television/radio/newspaper cross-ownership
rules, and its broadcast multiple ownership rules, by considering the
"attributable," or cognizable, interests held by a person or entity. A person
or entity can have an interest in a radio station, television station or daily
newspaper by being an officer, director, partner or stockholder of a company
that owns that station or newspaper. Whether that interest is cognizable under
the FCC's ownership rules is determined by the FCC's attribution rules. If an
interest is attributable, the FCC treats the person or entity who holds that
interest as the "owner" of the radio station, television station or daily
newspaper in question, and therefore subject to the FCC's ownership rules.
 
  In the case of corporations, the interest of officers, directors and persons
or entities that directly or indirectly have the right to vote 5% or more of
the corporation's voting stock (or 10% or more of such stock in the case of
insurance companies, investment companies, bank trust departments and certain
other "passive investors" that hold such stock for investment purposes only)
are generally attributed with ownership of whatever radio stations, television
stations, and daily newspapers the corporation owns. Likewise, the interest of
an officer or a director of a corporate parent (as well as the corporate
parent) is generally attributed with ownership of whatever the subsidiary
owns.
 
  In the case of a partnership, the interest of a general partner is
attributable, as is the interest of any limited partner who is "materially
involved" in the media-related activities of the partnership. Debt
instruments, non-voting stock, options and warrants for voting stock that have
not yet been exercised, limited partnership interests where the limited
partner is not "materially involved" in the media-related activities of the
partnership, and minority voting stock interests in corporations where there
is a single holder of more than 50% of the outstanding voting stock, generally
do not subject their holders to attribution.
 
  The FCC has issued a Notice of Proposed Rulemaking (the "NPRM") that
contemplates tightening attribution standards where parties have multiple
nonattributable interests in and relationships with stations that would be
prohibited by the FCC's cross-interest rules, if the interests/relationships
were attributable. The NPRM contemplates that this change in attribution will
apply only to persons holding debt or equity interests that exceed certain
benchmarks.
 
  In addition, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest
in a broadcast station or daily newspaper from having a "meaningful" non-
attributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, voting stock, and
limited partnership interests) and significant employment positions. This
policy may limit the permissible investments that an equity investor in the
Company may make or hold. If the FCC determines that a stockholder of the
Company has violated this cross-interest policy, the Company may be unable to
obtain from the FCC one or more authorizations needed to conduct its radio
station business and may be unable to obtain FCC consents for certain future
acquisitions.
 
  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
 
                                      19
<PAGE>
 
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 follow various FCC rules that
regulate, among other things, political advertising, sponsorship
identification, and technical operations (including limits on radio frequency
radiation). In addition, licensees must develop and implement programs
designed to promote equal employment opportunities. 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.
 
  Time Brokerage Agreements. Over the past three 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,
1997, four of the stations to be acquired in the Other Pending Transactions
are being operated by the Company under TBAs.
 
  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) limiting the applicability of the single
majority shareholder rule (discussed above) to treat as attributable large
stock interests coupled with other debt or securities and (iv) treating non-
voting stock as attributable in certain circumstances. 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
 
                                      20
<PAGE>
 
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 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. 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 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 and the
Antitrust Division of the United States Department of Justice (the "DOJ"),
evaluate transactions requiring a pre-acquisition filing under the Hart-Scott-
Rodino Antitrust Improvement Act of 1976, as amended (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. In
connection with the Company's acquisitions of WWWW-FM and WDFN-AM (which have
been completed), and the Company's proposed acquisition of WJLB-FM and WMXD-FM
in Detroit, the DOJ issued second requests to the Company seeking the
production of documents and other information. The Company complied with the
second requests, and the DOJ ultimately cleared the transactions. The DOJ also
issued second requests to the Company for documents and information with
regard to the transfer of the Company's Charlotte, North Carolina stations in
exchange for WIOQ-FM and WUSL-FM in Philadelphia. On March 5, 1997, the DOJ
terminated the waiting period and cleared the acquisition by the Company of
WIOQ-FM and WUSL-FM. On March 14, 1997, the DOJ terminated the waiting period
and cleared the disposition by the Company of its North Carolina stations.
 
  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. Given this uncertainty, the Company cannot predict
whether it will be required by the DOJ or the FTC to dispose of certain
stations to be acquired as a result of the Chancellor Merger, the Viacom
Acquisition and the Other Pending Transactions in addition to the Required
Additional Dispositions that the Company will effect in order to comply with
the FCC's multiple ownership limits. Although the Company does not believe
that its acquisition strategy as a whole will be adversely affected in any
material respect by review under the HSR Act or by additional divestitures
that the Company may have to make as a result of the HSR Act, there can be no
assurance that this will be the case.
 
ITEM 2. PROPERTIES
 
  The Company's corporate headquarters is in Irving, Texas. The types of
properties required to support each of the Company's radio stations include
offices, studios, transmitter sites and antenna sites. A station's studio is
 
                                      21
<PAGE>
 
generally housed with its office in a downtown or business district. A
station's transmitter sites and antenna sites generally are located in a
manner that provides maximum market coverage.
 
  The studios and offices of the Company's stations and its corporate
headquarters are located in leased or owned facilities. The terms of these
leases expire in one to ten years. The Company either owns or leases its
transmitter and antenna sites. These leases have expiration dates that range
from one to eight 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.
 
  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. The Company owns substantially all of the equipment used in its
radio broadcasting business.
 
ITEM 3. LEGAL PROCEEDINGS
 
  In August 1993, the Company terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and
One Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant
to which programming featuring radio personality Howard Stern was broadcast on
radio station WLUP- AM (now WMVP-AM) in Chicago. The Claimants allege that
termination of the agreement was wrongful and have sued the Company in the
Supreme Court of the State of New York, County of New York (the "Court"). The
agreement required payments to the Claimants in the amount of $2.6 million
plus five percent of advertising revenues generated by the programming over
the three-year term of the agreement. A total of approximately $680,000 was
paid to the Claimants pursuant to the agreement prior to termination.
Claimants' complaint alleged claims for breach of contract, indemnification,
breach of fiduciary duty and fraud. Plaintiffs' aggregate prayer for relief
totaled $45.0 million. On July 12, 1994, the Court granted the Company's
motion to dismiss Plaintiffs' claims for fraud and breach of fiduciary duty.
On June 6, 1995, the Court denied the Plaintiff's motion for summary judgment
on their contract and indemnification claims and this order has been affirmed
on appeal. On May 17, 1996, after the close of discovery, the Company filed a
motion for summary judgment, seeking the dismissal of the remaining claims in
the original complaint. On July 1, 1996, Plaintiffs moved for leave to amend
their complaint in order to add claims for breach of the covenant of good
faith and fair dealing, tortious interference with business advantage and
prima facia tort. In the proposed amended complaint, Plaintiffs seek
compensatory and punitive damages in excess of $25.0 million. On March 13,
1997, the Court denied the Company's motion for summary judgment, allowed
Plaintiffs' request to amend the complaint to add a claim for breach of the
covenant of good faith and fair dealing and denied Plaintiffs' request to
amend the complaint to add claims for tortious interference with business
advantage and prima facia tort. The Company believes that it acted within its
rights in terminating the agreement.
 
  The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution 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 1996.
 
                                      22
<PAGE>
 
                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
  The Company did not sell equity securities during 1996 other than pursuant
to transactions that were registered under the Securities Act of 1933, as
amended.
 
  Shares of the Company's Class A Common Stock, par value $.01 per share, have
been quoted on The Nasdaq Stock Market under the symbol EVGM since the
consummation of the initial public offering of the Company's Class A Common
Stock in May 1993. The following table sets forth, for the calendar quarters
indicated, the high and low closing sales prices of the Class A Common Stock
on The Nasdaq Stock Market, as reported in published financial sources.
 
<TABLE>
<CAPTION>
      YEAR                                                        HIGH(1) LOW(1)
      ----                                                        ------  ------
      <S>                                                         <C>     <C>
      1995:
      First Quarter.............................................. 12.00    9.33
      Second Quarter............................................. 18.00   10.67
      Third Quarter.............................................. 23.75   17.17
      Fourth Quarter............................................. 21.33   15.92
      1996:
      First Quarter.............................................. 24.50   16.83
      Second Quarter............................................. 29.50   21.83
      Third Quarter.............................................. 33.25   25.74
      Fourth Quarter............................................. 32.25   23.50
</TABLE>
 
--------
(1) All information set forth herein has been adjusted to reflect a three-for-
    two split of the Company's Common Stock, effected in the form of a stock
    dividend, paid on August 26, 1996 to stockholders of record at the close
    of business on August 19,1996 (the "Stock Split").
 
  There is no public trading market for the Company's Class B Common Stock,
$.01 per share.
 
  As of March 1, 1997, there were 127 holders of record of the Class A 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). The Company was
informed by the underwriters in its initial public offering that such
underwriters expected that subsequent to such offering there would be a
sufficient number of beneficial owners of the Company's Class A Common Stock
to comply with the minimum shareholder maintenance standards set by The Nasdaq
Stock Market. The Company knows of no reason why this would not continue to be
true as of the date hereof. As of March 1, 1997, there was one holder of the
Class B Common Stock.
 
  The Company 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. The Company intends
to retain future earnings for use in its business. The Company is currently
subject to restrictions under terms of the Senior Credit Facility that limit
the amount of cash dividends that may be paid on its Common Stock. The Company
may pay cash dividends on its Common Stock in the future only if certain
financial tests set forth in the Senior Credit Facility are met.
 
                                      23
<PAGE>
 
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 the
Company for, and as of the end of, each of the years in the five-year period
ended December 31, 1996. The consolidated historical financial results of the
Company are not comparable from year to year because of the acquisition and
disposition of various radio stations by the Company during the periods
covered. This data should be read in conjunction with the consolidated
financial statements of the Company 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.
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
<TABLE>
<CAPTION>
                                     YEAR ENDED DECEMBER 31,
                          -------------------------------------------------------
                            1992      1993         1994      1995         1996
                          --------  --------     --------  --------    ----------
                          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                       <C>       <C>          <C>       <C>         <C>
CONSOLIDATED STATEMENT
 OF OPERATIONS DATA:
Gross revenues..........  $ 61,935  $106,813     $125,478  $186,365    $  337,405
Net revenues ...........    53,969    93,504      109,516   162,931       293,850
Station operating
 expenses excluding
 depreciation and
 amortization...........    34,968    60,656       68,852    97,674       174,344
Depreciation and
 amortization...........    11,596    33,524       30,596    47,005        93,749
Corporate general and
 administrative
 expense................     1,717     2,378        2,672     4,475         7,797
Other nonrecurring
 costs(1)...............       --      7,002          --        --            --
                          --------  --------     --------  --------    ----------
Operating income
 (loss).................     5,688   (10,056)       7,396    13,777        17,960
Interest expense........    10,112    13,878       13,809    19,199        37,527
Other (income) expense,
 net....................       565    (3,185)      (6,452)      236          (477)
                          --------  --------     --------  --------    ----------
Income (loss) before
 income taxes and
 extraordinary item.....    (4,989)  (20,749)          39    (5,658)      (19,090)
Income tax expense
 (benefit) .............       --        --           --        192        (2,896)
                          --------  --------     --------  --------    ----------
Income (loss) before
 extraordinary item.....    (4,989)  (20,749)          39    (5,850)      (16,194)
Extraordinary loss on
 early extinguishment of
 debt(2)................     1,798       --         3,585       --            --
                          --------  --------     --------  --------    ----------
Net loss................    (6,787)  (20,749)      (3,546)   (5,850)      (16,194)
Preferred stock
 dividends..............       741     4,756        4,830     4,830         3,820
Accretion of redeemable
 preferred stock to
 mandatory redemption
 value, including
 $17,506 in 1993
 relating to early
 redemption.............       276    18,823(3)       --        --            --
                          --------  --------     --------  --------    ----------
Net loss attributable to
 common stockholders....  $ (7,804) $(44,328)    $ (8,376) $(10,680)   $  (20,014)
                          ========  ========     ========  ========    ==========
Loss per common share
 before extraordinary
 item...................  $   (.74)    (4.48)(3)     (.37)     (.52)         (.66)
                          ========  ========     ========  ========    ==========
Net loss per common
 share..................      (.96)    (4.48)(3)     (.64)     (.52)         (.66)
                          ========  ========     ========  ========    ==========
Weighted average common
 shares outstanding.....     8,153     9,890 (4)   13,002    20,721        30,207
<CAPTION>
                                 FOR THE YEAR ENDED DECEMBER 31,
                          -------------------------------------------------------
                            1992      1993         1994      1995         1996
                          --------  --------     --------  --------    ----------
<S>                       <C>       <C>          <C>       <C>         <C>
CONSOLIDATED BALANCE
 SHEET DATA AT YEAR-END:
Working capital.........  $ 13,456  $  7,873     $ 15,952  $ 30,556    $   41,421
Intangible assets (net
 of accumulated
 amortization)..........   181,022   212,517      233,494   458,787       853,643
Total assets............   234,852   283,505      297,990   552,347     1,020,959
Long-term debt
 (including current
 portion)...............   165,000   152,000      174,000   201,000(5)    358,000(5)
Redeemable preferred
 stock, including
 accreted dividends.....    40,106       --           --        --            --
Common stock, subject to
 repurchase(6)..........    17,000       --           --        --            --
Stockholders' equity ...     2,905   120,968      112,353   304,577       549,411
Other Financial Data:
Broadcast cash flow(7)..    19,001    32,848       40,664    65,257       119,506
</TABLE>
 
        See accompanying notes to Selected Consolidated Financial Data
 
                                      24
<PAGE>
 
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
 
(1) Consists of a non-cash charge resulting from the grant of employee stock
    options prior to the Company's initial public offering.
 
(2) In connection with its debt refinancings in 1992 and 1994, the Company
    wrote off the unamortized balance of deferred debt issuance costs of
    $1,798 and $3,585, respectively, as an extraordinary charge.
 
(3) Due to the early redemption of the Company's Series A and Junior
    Exchangeable Redeemable Preferred Stock in October 1993, a one-time
    accretion charge of approximately $17,506 was incurred which increased
    loss per common share for 1993 by $2.66.
 
(4) Subsequent to the Company's initial public offering, the calculation of
    weighted average common shares outstanding excludes common stock issuable
    upon the exercise of outstanding warrants and options due to their anti-
    dilutive effect on loss per common share.
 
(5) The current portion of the Company's long-term debt was $4,000 and $26,500
    at December 31, 1995 and 1996, respectively.
 
(6) Represents shares of common stock which included a repurchase right. This
    repurchase right terminated in connection with the Company's initial
    public offering.
 
(7) Data on station operating income excluding depreciation and amortization,
    corporate general and administrative expenses, and other non-recurring
    costs (commonly referred to as broadcast cash flow), although not
    calculated in accordance with generally accepted accounting principles, is
    widely used in the broadcast industry as a measure of a company's
    operating performance. 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 the Company's
    operating performance or liquidity that is calculated in accordance with
    generally accepted accounting principles.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS
 
GENERAL
 
  Since the Company's acquisition in May of 1995 of Broadcasting Partners,
Inc. ("BPI"), an eleven-station radio broadcasting group holding eight
stations in the nation's ten largest radio markets (the "BPI Acquisition"),
the Company has engaged in an acquisition strategy concentrating on expanding
the Company's presence in the nation's largest radio markets. Implementation
of this acquisition strategy has been significantly accelerated in 1996 and to
date in 1997 due to passage of the 1996 Act and the associated relaxation of
national and local ownership limits. See "Business--Regulation of Radio
Broadcasting--Ownership Matters" set forth in Part I--Item 1 herein. For a
discussion of the various transactions completed and agreements entered since
January 1, 1996 as part of the Company's acquisition strategy, see "Business--
Developments Since January 1, 1996" set forth in Part I--Item 1 herein. Upon
consummation of the Viacom Acquisition, the Chancellor Merger (assuming the
completion of Chancellor's pending transactions at March 1, 1997) and the
Other Pending Transactions, the Company will have assembled superduopolies of
at least three FM stations in six of the nation's top ten radio markets
including superduopolies of five FM stations in four of the nation's top ten
radio markets. The Company expects to continue to pursue acquisition
opportunities that would create additional superduopolies in top ten radio
markets and the Company may also pursue opportunities to expand the Company's
presence in major markets not included within the top ten. In this regard,
consummation of the Chancellor Merger will establish a Company presence in
eight major markets in which the Company has not operated prior to the
Chancellor Merger within the nation's top thirty radio markets.
 
  In the following analysis, management discusses the broadcast cash flow of
its radio station group. The performance of a radio station group is
customarily measured by its ability to generate broadcast cash flow. The two
components of broadcast cash flow are gross revenues (net of agency
commissions) and operating expenses (excluding depreciation and amortization
and corporate general and administrative expense). The primary source of
revenues is the sale of broadcasting time for advertising. The Company's most
significant operating expenses
 
                                      25
<PAGE>
 
for purposes of the computation of broadcast cash flow are employee salaries
and commissions, programming expenses, and advertising and promotion expenses.
The Company strives to control these expenses by working closely with local
station management. The Company's revenues vary throughout the year. As is
typical in the radio broadcasting industry, the Company's first calendar
quarter generally produces the lowest revenues, and the fourth quarter
generally produces the highest revenues.
 
  Data on broadcast cash flow, although not calculated in accordance with
generally accepted accounting principles, is widely used in the broadcast
industry as a measure of a company's operating performance. 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 the Company's operating performance or liquidity that is
calculated in accordance with generally accepted accounting principles.
Broadcast cash flow does not take into account the Company's debt service
requirements and other commitments and, accordingly, broadcast cash flow is
not necessarily indicative of amounts that may be available for dividends,
reinvestment in the Company's business or other discretionary uses.
 
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
 
  The Company's results of operations for the year ended December 31, 1996 are
not comparable to the results of operations for the year ended December 31,
1995 due to the impact of the various station acquisitions, dispositions and
time brokerage agreements discussed in "Business--Developments Since January
1, 1996" set forth in Part I--Item 1 herein and in Note 2 to the Consolidated
Financial Statements included elsewhere in this Form 10-K.
 
  Net revenues for the year ended December 31, 1996 increased 80.4% to $293.9
million compared to $162.9 million for the year ended December 31, 1995.
Station operating expenses excluding depreciation and amortization for 1996
increased 78.5% to $174.3 million compared to $97.7 million in 1995. Station
operating income excluding depreciation and amortization and corporate general
and administrative expense (broadcast cash flow) for 1996 increased 83.1% or
$54.2 million to $119.5 million compared to $65.3 million in 1995. The
increase in net revenues, station operating expenses, and broadcast cash flow
was primarily attributable to the impact of the various station acquisitions
and dispositions discussed elsewhere herein, in addition to the overall net
operational improvements realized by the Company's radio stations.
 
  Depreciation and amortization for 1996 increased 99.4% to $93.7 million
compared to $47.0 million in 1995. The increase represents additional
depreciation and amortization expenses due to the impact of recent
acquisitions, offset by decreases due to certain intangibles which became
fully amortized in 1995 and 1996.
 
  Corporate general and administrative expenses for 1996 increased 74.2% to
$7.8 million compared to $4.5 million in 1995. 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 1996 increased 30.4%
to $18.0 million compared to $13.8 million in 1995.
 
  Interest expense for 1996 increased 95.4% to $37.5 million compared to $19.2
million in 1995. The net increase in interest expense was primarily due to
additional bank borrowings required to finance the Pyramid acquisition as well
as the other station acquisitions discussed above, offset by repayment of
borrowings under the revolving credit portion of the Senior Credit Facility
from the net proceeds of approximately $264.2 million from the Company's
public offering of Class A Common Stock in October 1996, and an overall
decrease in the Company's borrowing rates.
 
  The provision for income tax expense for the year ended December 31, 1996 is
comprised of current federal and state taxes of $.5 million and $1.0 million,
respectively, and a deferred federal income tax benefit of $4.4 million. The
Company from time to time seeks to defer recognition of taxable gains upon the
disposition of radio
 
                                      26
<PAGE>
 
properties by structuring dispositions as like-kind exchanges under Section
1031 of the Internal Revenue Code of 1986, as amended, under appropriate
circumstances.
 
  Dividends on preferred stock decreased $1.0 million to $3.8 million in 1996
compared to $4.8 million in 1995. The decrease in preferred stock dividends is
due to the conversion of a total of 1,608,297 shares of the Company's
Convertible Exchangeable Preferred Stock into a total of 5,025,916 shares of
the Company's Class A Common Stock and the redemption of the remaining 1,703
shares of Convertible Exchangeable Preferred Stock during 1996.
 
  As a result of the above factors, the Company incurred a $20.0 million net
loss attributable to common stockholders in 1996 compared to a $10.7 million
net loss in 1995.
 
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
 
  The Company's results of operations for the year ended December 31, 1995 are
not comparable to the results of operations for the year ended December 31,
1994 due to the impact of the BPI Acquisition. The BPI Acquisition resulted in
the addition of seven FM and four AM radio stations, eight of which are in the
nation's ten largest radio markets.
 
  Net revenues for the year ended December 31, 1995 increased 48.8% to $162.9
million compared to $109.5 million for the year ended December 31, 1994.
Station operating expenses excluding depreciation and amortization for 1995
increased 41.9% to $97.7 million compared to $68.9 million in 1994. Station
operating income excluding depreciation and amortization (broadcast cash flow)
for 1995 increased 60.5% or $24.6 million to $65.3 million compared to $40.7
million in 1994. The increase in net revenues, station operating expenses, and
broadcast cash flow was attributable to the overall net operational
improvements realized by the Company's radio stations, in addition to the
impact of the consolidation of the results of operations of BPI since the
consummation of the BPI Acquisition on May 12, 1995.
 
  Depreciation and amortization for 1995 increased 53.6% to $47.0 million
compared to $30.6 million in 1994. The net increase represents additional
depreciation and amortization expenses due to the impact of the BPI
Acquisition on May 12, 1995, offset by decreases due to certain intangible
assets which became fully amortized in 1995 and 1994.
 
  Corporate general and administrative expenses for 1995 increased 67.5% to
$4.5 million compared to $2.7 million in 1994. The increase is due to the
growth of the Company primarily related to the BPI Acquisition.
 
  As a result of the above factors, operating income for 1995 increased 86.3%
to $13.8 million compared to $7.4 million in 1994.
 
  Interest expense for 1995 increased 39.0% to $19.2 million compared to $13.8
million in 1994. The net increase in interest expense was due to additional
bank borrowings of approximately $186.0 million required to finance the BPI
Acquisition in May 1995, offset by the application of net proceeds of
approximately $132.7 million from the Company's public offering of Class A
Common Stock in July 1995 and overall decline in the Company's borrowing
rates. The net proceeds from the public offering were used to repay borrowings
under the revolving credit portion of the Senior Credit Facility, which
borrowings had been incurred to finance the BPI Acquisition.
 
  Other income (expense) comprised of interest income, gain on disposition of
assets and other expense, net was a $.2 million charge in 1995 compared to
$6.5 million in income in 1994. Other income (expense) for the year ended
December 31, 1994 includes a gain of approximately $7.3 million on the
disposition of WAPE-FM and WFYV-FM in Jacksonville, Florida, which closed in
April 1994.
 
  The provision for income tax expense for the year ended December 31, 1995 is
comprised of current federal and state taxes of $.3 million and $.4 million,
respectively, and a deferred federal income tax benefit of $.5 million.
 
                                      27
<PAGE>
 
  In connection with the Senior Credit Facility debt restructuring on November
29, 1994, the Company recorded an extraordinary charge of $3.6 million,
consisting of a write-off of the unamortized balance of deferred debt issuance
costs related to the debt retirement.
 
  Dividends on preferred stock were $4.8 million in 1995 and 1994.
 
  As a result of the above factors, the Company incurred a $10.7 million net
loss attributable to common stockholders in 1995 compared to an $8.4 million
net loss in 1994.
 
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. The Company historically has used the proceeds of bank debt and public
equity offerings, supplemented by cash flow from operations not required to
fund operational requirements and debt service, to fund implementation of its
acquisition strategy.
 
  On October 17, 1996, the Company completed a secondary public offering of
9,000,000 shares of its Class A Common Stock at a public offering price of
$30.625 per share. The net proceeds of approximately $265.0 million received
by the Company were used to reduce borrowings under the New Revolving Loan (as
defined below) portion of the Senior Credit Facility.
 
  The total cash financing required to consummate the Other Pending
Transactions is expected to be $414.5 million. Of this amount, approximately
$5.5 million has already been advanced by the Company in the form of escrow
deposits or other upfront payments. In addition, the Company expects to
receive $41.75 million in cash from the sale of WNKS-FM, WEJM-FM and WEJM-AM
and the exchange of WQRS-FM for WWRC-AM. Accordingly, the Company will require
approximately $367.25 million in additional financing to consummate the Other
Pending Transactions. Additionally, the Company will require significant
capital resources to consummate the Viacom Acquisition and the Chancellor
Merger and to assume or refinance existing debt and preferred stock of
Chancellor and its subsidiaries. It is likely that some portion of the
Company's capital requirements will be funded from the proceeds of one or more
of the Required Additional Dispositions that will be required to be made in
order to effect the various pending transactions while remaining in compliance
with the FCC's multiple ownership rules. However, the Company is unable to
predict what level of proceeds may be received, given that certain required
dispositions may be effected through exchanges for other assets and that the
Company has not yet reached binding contracts regarding any of the Required
Additional Dispositions.
 
  The Company is actively engaged in negotiations with certain of the lenders
party to the Senior Credit Facility regarding the establishment of a new,
expanded credit facility (the "Financing Transaction") that would (i) replace
the Senior Credit Facility, (ii) provide the Company with additional borrowing
capacity and (iii) partially fund the financing requirements of the Viacom
Acquisition, the Chancellor Merger, and the Other Pending Transactions as well
as other potential acquisitions. The Company is also exploring the possibility
of supplementing the Financing Transaction through various other public or
private sources of debt or equity capital. There can be no assurance that the
Company will be successful in consummating the Financing Transaction, or that
alternative sources of funding will be available on acceptable terms.
 
  The Senior Credit Facility. In connection with the Pyramid Acquisition, the
Company amended and restated its Senior Credit Facility. Under the amended
agreement, dated January 17, 1996, a $150.0 million Term Loan and a $200.0
million Revolving Loan remained in place, and the Company also established an
additional revolving facility of up to $275.0 million (the "New Revolving
Loan"). At December 31, 1996, the Company had drawn $150.0 million of the Term
Loan, $190.0 million of the Revolving Loan, and $8.0 million of the New
Revolving Loan. At March 1, 1997, after the consummation of the acquisitions
of WWWW-FM and WDFN-AM in Detroit and KKSF-FM and KDFC-FM/AM in San Francisco
on January 31, 1997, the Company had drawn $150.0 million of the Term Loan,
$185.0 million of the Revolving Loan, and $196.0 million of the New Revolving
Loan. The Company's ability to make additional borrowings under the New
Revolving Loan is subject to compliance with certain financial ratios and
other conditions set forth in the Senior Credit Facility.
 
                                      28
<PAGE>
 
Substantially all of the assets of the Company and its subsidiaries are
pledged to secure performance of the Company's obligations under the Senior
Credit Facility.
 
  For additional information regarding the Senior Credit Facility, see Note 6
to the Consolidated Financial Statements included elsewhere in this Form 10-K.
 
FORWARD LOOKING STATEMENTS
 
  When used in the preceding and following discussion, the words "expects,"
"anticipates" and similar expressions are intended to identify forward looking
statements. Such statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from those expressed in
any of the forward looking statements. Such risks and uncertainties include,
but are not limited to, industry-wide market factors and regulatory
developments affecting the Company's operations and the acquisitions and
dispositions of broadcast properties described elsewhere herein.
 
RECENTLY--ISSUED ACCOUNTING PRINCIPLES
 
  In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Transfers of Financial Assets and
Extinguishments of Liabilities" ("SFAS No. 125"). SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of financial
assets and extinguishments of liabilities. The provisions of SFAS No. 125 are
generally effective for transactions occurring after December 31, 1996. The
adoption of SFAS No. 125 is not expected to have a material impact on the
Company's financial statements.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
  The information called for by this Item is included on Pages F-1 through F-
26 of this Report on Form 10-K.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
  None.
 
                                      29
<PAGE>
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  The directors and executive officers of the Company are listed below:
 
Scott K. Ginsburg Chairman of the      Mr. Ginsburg has been Chairman of the
Board and Chief Executive Officer      Board of the Company since 1990. He
Director since 1988 Member of the      has been Chief Executive Officer and a
Executive and Nominating Committees    director of the Company since 1988.
of the Board of Directors Age: 44      Mr. Ginsburg was President of the
                                       Company from 1988 to 1993 and held
                                       various positions with H&G
                                       Communications, Inc. from 1987 to
                                       1988. Mr. Ginsburg entered the radio
                                       broadcasting business in 1983.
 
James E. de Castro President and       Mr. de Castro has been President of
Chief Operating Officer Director       the Company since 1993 and Chief
since 1989 Member of the Executive     Operating Officer and a director since
Committee of the Board of Directors    1989. From 1987 to 1988, Mr. de Castro
Age: 44                                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.
 
Matthew E. Devine Executive Vice       Mr. Devine has been an Executive Vice
President, Chief Financial Officer     President of the Company since 1993,
 and Treasurer Director since 1989     Chief Financial Officer and Treasurer
Member of the Executive Committee of   of the Company since 1988 and a
the Board of Directors Age: 48         director since 1989.
 
 
Kenneth J. O'Keefe Executive Vice      Mr. O'Keefe has been an Executive Vice
President--Operations Director since   President of the Company since
1996 Age: 42                           February of 1996 and a director since
                                       May of 1996. Prior to joining the
                                       Company in 1996, Mr. O'Keefe was a
                                       director, Chief Financial Officer and
                                       Executive Vice President of Pyramid
                                       Communications, Inc. from March 1994
                                       until the Company'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 the Company in
                                       1996.
 
Joseph M. Sitrick Director since       Mr. Sitrick has been a director of the
1988 Member of the Audit and           Company since 1988. Mr. Sitrick is a  
CompensationCommittees of the Board    Vice President with Blackburn &       
of Directors Age: 75                   Company, Incorporated, a media        
                                       brokerage firm, which he joined in    
                                       1958.                                  
                                       

                                      30
<PAGE>
 
Thomas J. Hodson Director since 1992   In 1994, Mr. Hodson became President
Member of the Audit, Nominating and    of Columbia Falls Aluminum Company. He
Compensation Committees of the Board   had been a Vice President of Stephens,
of Directors Age: 53                   Inc. from 1986 through 1993. Mr.
                                       Hodson has been a director of the
                                       Company since 1992.
 
Perry Lewis Director since 1995        Mr. Lewis was the Chairman of
Member of the Nominating and           Broadcasting Partners, Inc. ("BPI")
Compensation Committees of the Board   from its inception in 1988 until its
of Directors Age: 59                   merger with the Company in 1995 and
                                       was Chief Executive Officer of BPI
                                       from 1993 to 1995. Mr. Lewis has been
                                       a director of the Company since the
                                       Company acquired BPI in 1995. Mr.
                                       Lewis is a founder of Morgan, Lewis,
                                       Githens & Ahn ("MLG&A"), an investment
                                       banking and leveraged buyout firm
                                       which was established in 1982. Mr.
                                       Lewis serves as a director of Aon
                                       Corporation, Quaker Fabric
                                       Corporation, ITI Technologies, Inc.
                                       and Stuart Entertainment, Inc.
 
Eric L. Bernthal Director since 1996   Mr. Bernthal has been a director of
Age: 50                                the Company since 1996. Mr. Bernthal
                                       has been a partner with the law firm
                                       of Latham & Watkins, Washington, D.C.,
                                       regular legal counsel to the Company,
                                       since 1986.
 
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
 
  Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Class A Common Stock or the Company's $3.00
Convertible Exchangeable Preferred Stock to file with the Securities and
Exchange Commission (the "S.E.C.") initial reports of ownership and reports of
changes in ownership of any equity securities of the Company. As discussed
elsewhere herein, all of the Company's issued and outstanding $3.00
Convertible Exchangeable Preferred Stock was redeemed or converted during
1996. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II - Item 7 contained elsewhere herein. To the
Company's knowledge, for the period from January 1, 1996 through March 1,
1997, all Section 16(a) filing requirements applicable to its executive
officers, directors and holders of more than 10% of the Class A Common Stock
or the $3.00 Convertible Exchangeable Preferred Stock were satisfied, except
that (i) directors Joseph M. Sitrick, Thomas J. Hodson and Perry J. Lewis each
filed late a Form 5 for the year ended December 31, 1995 in connection with
the grant of stock options under the Company's Non-Employee Director Stock
Option Plan and (ii) Putnam Investments, Inc. has not filed a Form 3 in
connection with its acquisition of the Company's Class A Common Stock.
 
ITEM 11. EXECUTIVE COMPENSATION
 
COMPENSATION OF DIRECTORS
 
  Directors who are also officers of the Company receive no additional
compensation for their services as directors. Effective for the 1997 fiscal
year, directors who are not officers will receive (i) a fee of $12,000 per
annum, (ii) a $1,000 fee for attendance at meetings or, if applicable, a $500
fee for attendance at meetings by telephone, (iii) a $500 fee for attendance
at a committee meeting held on the same day as a regularly scheduled meeting
and (iv) a $750 fee for attendance at a committee meeting held on a day other
than a regularly scheduled meeting day. Directors are also reimbursed for
travel expenses and other out-of-pocket costs incurred in connection with such
meetings. Additionally, all non-employee directors in office on the day of the
Company's Annual Meeting are entitled to an award of options to purchase 7,500
shares of Class A Common Stock at an exercise price equal to the fair market
value of such shares on the date of grant.
 
 
                                      31
<PAGE>
 
COMPENSATION OF EXECUTIVE OFFICERS
 
  Summary Compensation. The following table sets forth all compensation,
including bonuses, stock option awards and other payments, paid or accrued by
the Company for the three fiscal years ending December 31, 1996, to the
Company's Chief Executive Officer and each of the Company's other executive
officers serving in such capacity at the end of the last completed fiscal year
whose total annual salary and bonus exceeded $100,000 during the fiscal year
ended December 31, 1996.
 
                          SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                    LONG TERM
                                     ANNUAL COMPENSATION           COMPENSATION
                              ------------------------------------ ------------
                                                        OTHER                   SECURITIES
        NAME AND                                       ANNUAL       RESTRICTED  UNDERLYING   LTIP    ALL OTHER
   PRINCIPAL POSITION    YEAR  SALARY      BONUS   COMPENSATION(1) STOCK AWARDS OPTIONS (2) PAYOUTS COMPENSATION
   ------------------    ---- --------    -------- --------------- ------------ ----------- ------- ------------
<S>                      <C>  <C>         <C>      <C>             <C>          <C>         <C>     <C>
Scott K. Ginsburg....... 1996 $750,000    $956,000       --            --         187,500     --      $ 9,776(3)
 Chairman of the Board   1995  650,000         --        --            --             --      --        7,663(3)
 and Chief Executive     1994  574,000      50,000       --            --             --               11,020(3)
 Officer
James E. de Castro...... 1996 $750,000    $704,000       --            --          37,500     --        2,455(3)
 President and Chief     1995  650,000     125,000       --            --         150,000     --        2,455(3)
 Operating Officer       1994  500,000      50,000       --            --          75,000     --       27,455(4)
Matthew E. Devine....... 1996 $300,000    $352,000       --            --          18,750     --          --
 Executive Vice          1995  275,000      63,000       --            --          75,000     --          --
 President, Chief        1994  194,000      25,000       --            --          75,000     --          --
 Financial Officer and
 Treasurer
Kenneth J. O'Keefe...... 1996 $250,000(5) $210,000       --            --         150,000     --          --
 Executive Vice          1995      --          --        --            --             --      --          --
 President Operations    1994      --          --        --            --             --      --          --
</TABLE>
--------
(1) The aggregate annual amount of perequisites and other personal benefits,
    securities or property does not exceed $50,000 or 10% of the total of the
    annual salary and bonus for the named officer.
(2) Gives effect to the Stock Split.
(3) Payment of term life insurance policy.
(4) Includes payment of a term life insurance policy and payments to Mr. de
    Castro as compensation to offset increased costs and other expenses
    associated with Mr. de Castro's temporary relocation to Los Angeles,
    California, undertaken at the request of the Company. These amounts were
    $2,455 and $25,000, respectively.
(5) Represents compensation for the period beginning March 1, 1996, when Mr.
    O'Keefe joined the Company.
 
  Option Grants in Last Fiscal Year. The following table sets forth
information regarding options to purchase Class A Common Stock granted by the
Company to its Chief Executive Officer and the other executive officers named
in the Summary Compensation Table during the 1996 fiscal year.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                  INDIVIDUAL GRANTS               GRANT DATE VALUE
                         ------------------------------------ ------------------------
                         NUMBER OF
                         SECURITIES  % OF TOTAL
                         UNDERLYING   OPTIONS
                          OPTIONS    GRANTED TO  EXERCISE OR              GRANT DATE
                          GRANTED   EMPLOYEES IN  BASE PRICE  EXPIRATION PRESENT VALUE
NAME                     (#)(1)(2)  FISCAL YEAR  ($/SHARE)(2)    DATE        $(5)
----                     ---------- ------------ ------------ ---------- -------------
<S>                      <C>        <C>          <C>          <C>        <C>
Scott K. Ginsburg.......  150,000       25.5%     $21.33(3)    12/31/05    1,792,500
                           37,500        6.4%      24.50(4)    12/31/05      478,125
James E. de Castro......   37,500        6.4%      24.50(4)    12/31/04      436,875
Matthew E. Devine.......   18,750        3.2%      24.50(4)    12/31/04      218,438
Kenneth J. O'Keefe......  150,000       25.5%      21.33(3)    03/01/06    1,545,000
</TABLE>
 
                                      32
<PAGE>
 
--------
(1) Represents options to purchase shares of Class A Common Stock granted
    under the Company's 1995 Stock Option Plan for Executive Officers and Key
    Employees (the "1995 Stock Option Plan"). The options awarded to Mr.
    Ginsburg are exercisable in whole or part beginning on January 1, 2001,
    and expire on December 31, 2005. The options awarded to Mr. de Castro and
    Mr. Devine are exercisable in whole or part beginning January 1, 2000, and
    expire on December 31, 2004. The options awarded to Mr. O'Keefe are
    exercisable in whole or part beginning February 28, 1999, and expire on
    March 1, 2006. The Compensation Committee under certain circumstances has
    the discretion to accelerate the exercisability of the options in
    connection with the occurrence of a change in control of the Company. The
    options may expire earlier upon the occurrence of certain merger or
    consolidation transactions involving the Company. The Company is not
    required to issue and deliver any certificate for shares of Class A Common
    Stock purchased upon exercise of the option or any portion thereof prior
    to fulfillment of certain conditions, including the completion of
    registration or qualification of such shares of Class A Common Stock under
    federal or state securities laws and the payment to the Company of all
    amounts required to be withheld upon exercise of the options under any
    federal, state or local tax law. The holder of an option has no rights or
    privileges of a stockholder in respect of any shares of Class A Common
    Stock purchasable upon exercise of the options unless and until
    certificates representing such shares shall have been issued by the
    Company to such holder. Once exercisable, the options are exercisable by
    the holder or, upon the death of such holder, by his personal
    representatives or by any person empowered to do so under such holder's
    will or under the applicable laws of descent and distribution. The options
    are not transferable except by will or by the applicable laws of descent
    and distribution.
(2) Gives effect to the Stock Split.
(3) Represents the estimated fair value of Class A Common Stock on December
    29, 1995, the last trading day before December 31, 1995, the date of
    grant.
(4) Represents the estimated fair value of Class A Common Stock on December
    30, 1996, the last trading day before December 31, 1996, the date of the
    grant.
(5) The present value of each grant is estimated on the date of grant using
    the Black-Scholes option pricing model with the following weighted average
    assumptions: dividend yield of 0% for all years; expected volatility of
    44.5%; risk-free interest rate of 6.0% and expected life of seven years.
 
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END VALUES
 
  The following table sets forth information concerning option exercises in
the year ended December 31, 1996 by the Company's Chief Executive Officer and
the other executive officers named in the Summary Compensation Table, and the
value of each such executive officer's unexercised options at December 31,
1996.
 
<TABLE>
<CAPTION>
                                                      NUMBER OF
                                                SECURITIES UNDERLYING     VALUE OF UNEXERCISED
                           SHARES                UNEXERCISED OPTIONS      IN-THE-MONEY OPTIONS
                         ACQUIRED ON  VALUE   AT FISCAL YEAR-END (#)(1) AT FISCAL YEAR-END ($)(2)
                          EXERCISE   REALIZED ------------------------- -------------------------
                           (#)(1)      ($)    EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
                         ----------- -------- ----------- ------------- ----------- -------------
<S>                      <C>         <C>      <C>         <C>           <C>         <C>
Scott K. Ginsburg.......      --         --         --       187,500           --      475,500
James E. de Castro......   15,000    418,050    547,500      187,500    12,608,775     475,500
Matthew E. Devine.......      --         --     150,000       93,750     2,874,000     237,750
Kenneth J. O'Keefe......      --         --         --       150,000           --      475,500
</TABLE>
--------
(1) Gives effect to the Stock Split.
(2) Based upon a per share price for Class A Common Stock of $24.50. This
    price represents the closing price for the Class A Common Stock on the
    NASDAQ National Market System on December 30, 1996.
 
EMPLOYMENT AGREEMENTS
 
  On November 27, 1995, the Company entered into a new employment agreement
with Mr. de Castro that has a term through December 31, 1999 and provides for
an annual base salary beginning at $650,000 in 1995 and increasing
incrementally to $900,000 in 1999. In addition, the agreement provides for Mr.
de Castro to receive an annual incentive bonus based upon a percentage of the
amount by which the Company exceeds certain annual performance targets as
defined in the agreement. The agreement also provides that Mr. de Castro is
eligible for certain options to purchase Class A Common Stock. Upon execution
of the agreement, Mr. de Castro
 
                                      33
<PAGE>
 
was awarded options to purchase 150,000 shares of Class A Common Stock (after
giving effect to the Stock Split). Mr. de Castro is eligible to receive over
the term of the agreement options to purchase up to an additional 150,000
shares of Class A Common Stock (after giving effect to the Stock Split),
subject to continued employment and satisfaction of other conditions. The
agreement terminates upon the death of Mr. de Castro and may be terminated by
the Company upon the disability of Mr. de Castro, for or without "cause" or
upon a "change in control" of the Company (as defined in the agreement). The
agreement may be terminated by Mr. de Castro in the event of a change in
control of the Company, in which event Mr. de Castro is entitled to receive
(i) an accelerated grant of all options to which he otherwise would have been
entitled over the term of the agreement, (ii) immediate payment of the base
salary which he otherwise would have earned over the term of the agreement,
(iii) a pro-rated annual incentive bonus and (iv) $1,250,000. During the term
of the agreement, Mr. de Castro is prohibited from engaging in certain
activities competitive with the business of the Company. However, with the
approval of the Company, Mr. de Castro may engage in activities not directly
competitive with the business of the Company as long as such activities do not
unreasonably interfere with Mr. de Castro's employment obligations.
 
  On November 28, 1995, the Company entered into a new employment agreement
with Mr. Devine that has a term through December 31, 1999 and provides for an
annual base salary beginning at $275,000 in 1995 and increasing incrementally
to $375,000 in 1999. In addition, the agreement provides for Mr. Devine to
receive an annual incentive bonus based upon a percentage of the amount by
which the Company exceeds certain annual performance targets as defined in the
agreement. The agreement also provides that Mr. Devine is eligible for certain
options to purchase Class A Common Stock. Upon execution of the agreement, Mr.
Devine was awarded options to purchase 75,000 shares of Class A Common Stock
(after giving effect to the Stock Split). Mr. Devine is eligible to receive
over the term of the agreement options to purchase up to an additional 75,000
shares of Class A Common Stock (after giving effect to the Stock Split),
subject to continued employment and satisfaction of other conditions. The
agreement terminates upon the death of Mr. Devine and may be terminated by the
Company upon the disability of Mr. Devine, for or without "cause" or upon a
"change in control" of the Company (as defined in the agreement). The
agreement may be terminated by Mr. Devine in the event of a change in control
of the Company, in which event Mr. Devine is entitled to receive (i) an
accelerated grant of all options to which he otherwise would have been
entitled over the term of the agreement, (ii) immediate payment of the base
salary which he otherwise would have earned over the term of the agreement,
(iii) a pro-rated annual incentive bonus and (iv) $750,000. During the term of
the agreement, Mr. Devine is prohibited from engaging in certain activities
competitive with the business of the Company. However, with the approval of
the Company, Mr. Devine may engage in activities not directly competitive with
the business of the Company as long as such activities do not unreasonably
interfere with Mr. Devine's employment obligations.
 
  In February of 1996, the Company entered into an employment agreement with
Mr. O'Keefe that has a term through February 28, 1999 and provides for an
annual base salary beginning at $300,000 in 1996 and increasing incrementally
to $350,000 in 1998. Mr. O'Keefe was nominated for election to the Board of
Directors pursuant to the terms of his employment agreement. In addition, the
agreement provides for Mr. O'Keefe to receive an annual incentive bonus based
upon a percentage of the amount by which the Company exceeds certain annual
performance targets as defined in the agreement. The agreement also provides
that Mr. O'Keefe is eligible for certain options to purchase Class A Common
Stock. Pursuant to the agreement, Mr. O'Keefe was awarded options to purchase
150,000 shares of Class A Common Stock (after giving effect to the Stock
Split). The stock options vest and become exercisable subject to Mr. O'Keefe's
continued employment by the Company through February 28, 1999. However, Mr.
O'Keefe may be eligible to exercise the options on a pro rata basis in the
event he is terminated prior to February 28, 1999 upon certain events
specified in his employment agreement, including Mr. O'Keefe's death or
disability, a change in control of the Company, termination without cause and
a material breach of the employment agreement by the Company leading to the
resignation of Mr. O'Keefe. The agreement terminates upon the death of Mr.
O'Keefe and may be terminated by the Company upon the disability of Mr.
O'Keefe or for or without "cause" (as defined in the agreement). During the
term of the agreement, Mr. O'Keefe is prohibited from engaging in certain
activities competitive with the business of the Company. However, with the
approval of the Company, Mr. O'Keefe may engage in activities not directly
competitive with the business of the Company as long as such activities do not
materially interfere with Mr. O'Keefe's
 
                                      34
<PAGE>
 
employment obligations. On January 29, 1997, the Compensation Committee of the
Board of Directors of the Company authorized the negotiation, execution and
delivery of an amended employment agreement for Mr. O'Keefe in order to make
certain provisions of Mr. O'Keefe's employment agreement comparable to those
of Mr. de Castro and Mr. Devine. As of March 1, 1997, no such amended
employment agreement has been entered into.
 
  On April 15, 1996, the Company entered into a new employment agreement with
Mr. Ginsburg, Chairman of the Board and Chief Executive Officer of the Company
that has a term that extends through December 31, 2000 and provides for an
initial annual base salary of $750,000 in 1996 which increases incrementally
each year to $950,000 in 2000. In addition, the agreement provides for Mr.
Ginsburg to receive an annual incentive bonus based upon a percentage of the
amount by which the Company exceeds certain annual performance targets which
are defined in the agreement. The agreement also provides that Mr. Ginsburg is
eligible to receive options to purchase Class A Common Stock. Upon execution
of the Agreement, Mr. Ginsburg was awarded an option to purchase 150,000
shares of Class A Common Stock at an exercise price of $21.33 per share
(representing the last sale price of the Class A Common Stock on the Nasdaq
National Market on December 29, 1995) (after giving effect to the Stock
Split). Mr. Ginsburg is eligible to receive, over the term of the agreement,
options to purchase up to an additional 187,500 shares of Class A Common Stock
(after giving effect to the Stock Split), subject to continued employment and
satisfaction of other conditions specified in the agreement. Upon execution of
the agreement, Mr. Ginsburg also received a one time bonus in the amount of
$1,000,000 in consideration of his extraordinary services to the Company
including the Company's strong operating performance, broadcast properties
acquisition program and Mr. Ginsburg's other activities on behalf of the
Company. Under the agreement, the Company also agreed to make to Mr. Ginsburg
a ten-year unsecured loan in the amount of $3,500,000 bearing interest at a
fixed rate equal to the applicable Federal long-term rate in effect on the
date on which the loan is made. The terms of the loan will require Mr.
Ginsburg to repay principal of the loan in five equal annual installments,
commencing on the sixth anniversary of the date on which the loan is made. As
of March 1, 1997, Mr. Ginsburg has borrowed approximately $824,000 under the
loan. The agreement may be terminated by Mr. Ginsburg in the event of a
"change in control" of the Company, in which event Mr. Ginsburg is entitled to
receive (i) an accelerated grant of all options to which he otherwise would
have been entitled over the term of the agreement, (ii) immediate payment of
the base salary which he otherwise would have earned over the term of the
agreement and (iii) a pro-rated annual incentive bonus. The agreement may be
terminated by the Company upon the permanent disability of Mr. Ginsburg, in
which event, Mr. Ginsburg shall receive (i) base salary for one year (payable
in installments) from the date of termination at the level in effect on the
date of termination and (ii) a pro-rated annual incentive bonus. The agreement
may also be terminated by the Company for or without cause, provided that, in
the event such termination is without cause, Mr. Ginsburg shall receive (i)
grants of options on the same schedule and under the same terms as if such
termination had occurred on December 31, 2000, (ii) base salary, payable in
installments through December 31, 2000, in the amounts to which Mr. Ginsburg
would have been entitled if such termination had occurred on December 31,
2000, and (iii) a pro-rated annual incentive bonus. The agreement terminates
upon the death of Mr. Ginsburg, in which event, Mr. Ginsburg's estate or legal
representative shall receive the amounts that would have been payable to
Mr. Ginsburg in the event of termination for reason of his permanent
disability (set forth above). During the term of this agreement, Mr. Ginsburg
is prohibited from engaging in certain activities competitive with the
business of the Company.
 
  On February 19, 1997, the Company entered into a memorandum of agreement
(the "Memorandum") with Mr. Ginsburg in connection with the Company's entering
into the Chancellor Merger Agreement. The Memorandum was entered in connection
with the execution of the Merger Agreement, because the Company and Chancellor
concluded that it was desirable to extend Mr. Ginsburg's term of employment
with the Company in order to provide for continuity and stability of
management of the Company following consummation of the Chancellor Merger. The
Memorandum is intended to be replaced by a definitive employment contract
prior to consummation of the Chancellor Merger; should the Chancellor Merger
not be consummated, the employment agreement contemplated by the Memorandum
will not be entered into. The Memorandum provides that the term of Mr.
Ginsburg's employment with the Company will be extended through the fifth
annual anniversary of the
 
                                      35
<PAGE>
 
consummation of the Chancellor Merger, which Mr. Ginsburg may extend for an
additional five years, and provides for an initial base salary of $1,000,000
in the first year following the consummation of the Chancellor Merger, to be
increased each year by a percentage equal to the percentage change in the
consumer price index during the preceding year. In addition, the Memorandum
provides for an annual bonus of up to $3,000,000 based upon a percentage of
the amount by which the Company exceeds certain annual performance targets
which are defined in the Memorandum. The Memorandum also provides that
Mr. Ginsburg is eligible to receive options to purchase 100,000 shares per
year of the Company's common stock. The Memorandum provides that if Mr.
Ginsburg's employment is terminated prior to the fifth annual anniversary of
the consummation of the Chancellor Merger, except termination for "cause" or
termination by Mr. Ginsburg for other than "good reason," Mr. Ginsburg will
receive on such termination date options to purchase the number of shares of
Common Stock that is equal to 500,000 minus the number of shares of Common
Stock subject to options received by Mr. Ginsburg pursuant to the Memorandum
(or any definitive agreement executed by Mr. Ginsburg and Evergreen) prior to
such date. The Memorandum provides that all options granted to Mr. Ginsburg
will be exercisable for ten years from the date of grant of the option, at a
price equal to the market price for the Company's Common Stock on the date of
grant of the option. The Memorandum provides that, in the event of termination
of Mr. Ginsburg's employment following the Chancellor Merger, except
termination for "cause" or termination by Mr. Ginsburg for other than "good
reason," Mr. Ginsburg will be entitled to a one-time cash payment in an amount
(after payment by the Company of any excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended) equal to $20,000,000. The
Memorandum provides that Mr. Ginsburg will have registration rights with
respect to all Common Stock owned by Mr. Ginsburg upon the consummation of the
Chancellor Merger and any such stock acquired thereafter. The Memorandum
provides that the Company, Chancellor and Mr. Ginsburg will work together in
good faith to prepare and execute a definitive employment agreement containing
the terms of the Memorandum, including definitions of "cause" and "good
reason," at or prior to consummation of the Chancellor Merger. As of March 1,
1997, a definitive employment agreement had not been executed.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
 
  From January 1, 1996 through December 31, 1996, the Compensation Committee
of the Board consisted of Messrs. Sitrick, Lewis and Hodson.
 
                                      36
<PAGE>
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  The following table lists information concerning the beneficial ownership of
the Company's Common Stock on March 1, 1997 by (i) each person known to the
Company to own beneficially more than 5% of any class of the Common Stock,
(ii) each director and executive officer of the Company and (iii) all
directors and executive officers as a group.
 
<TABLE>
<CAPTION>
                           CLASS A COMMON STOCK       CLASS B COMMON STOCK    PERCENT OF
                          -------------------------- ----------------------- TOTAL VOTING
                                          PERCENT                 PERCENT      POWER AS
NAME OF STOCKHOLDER       SHARES (1)    OF CLASS (1) SHARES (1) OF CLASS (1) ADJUSTED (1)
-------------------       ----------    ------------ ---------- ------------ ------------
<S>                       <C>           <C>          <C>        <C>          <C>
Scott K.
 Ginsburg (2)(3)........        --           --      3,114,066     100.0%        44.3%
James E de Castro (2)...    497,500(4)       1.3%          --        --           *
Matthew E. Devine (2)...    150,000(4)        *            --        --           *
Joseph M. Sitrick (5)...     99,289(6)        *            --        --           *
Perry J. Lewis (7)......     59,274(8)        *            --        --           *
Thomas J. Hodson (9)....      7,500(4)        *            --        --           --
Kenneth J.
 O'Keefe (10)...........      2,000           *            --        --           --
Eric L. Bernthal (11)...      2,500(4)        *            --        --           --
J. & W. Seligman & Co.,
 Incorporated (12)......  2,655,449          6.8%          --        --           3.8%
FMR Corp. (13)..........  2,581,012          6.6%          --        --           3.7%
American Century
 Companies (14).........  2,102,500          5.4%          --        --           3.0%
Putnam Investments,
 Inc. (15)..............  5,159,251         13.2%          --        --           7.3%
The Equitable Companies,
 Incorporated (16)......  3,769,800          9.6%          --        --           5.4%
All directors and
 executive officers as a
 group
 (8 persons)............    818,063          2.1%    3,114,066     100.0%        45.5%
</TABLE>
--------
  * Less than one percent (1%).
 (1) The information as to beneficial ownership is based on statements
     furnished to the Company by the beneficial owners. As used in this table,
     "beneficial ownership" means the sole or shared power to vote, or direct
     the voting of a security, or the sole or shared investment power with
     respect to a security (i.e., the power to dispose of, or direct the
     disposition of). A person is deemed as of any date to have "beneficial
     ownership" of any security that such person has the right to acquire
     within 60 days after such date. "Beneficial ownership" does not include
     the number of shares of Class A Common Stock issuable upon conversion of
     shares of Class B Common Stock, although shares of Class B Common Stock
     are freely convertible into shares of Class A Common Stock. For purposes
     of computing the percentage of outstanding shares held by each person
     named above, any security that such person has the right to acquire
     within 60 days of the date of calculation is deemed to be outstanding,
     but is not deemed to be outstanding for purposes of computing the
     percentage ownership of any other person.
 (2) The address of Mr. Ginsburg, Mr. Devine and Mr. de Castro is Evergreen
     Media Corporation, 433 E. Las Colinas Boulevard, Irving, Texas 75039.
 (3) The 3,114,066 shares of Class B Common Stock held by Mr. Ginsburg
     includes 5,800 shares of Class B Common Stock held by Mr. Ginsburg as
     custodian for his children.
 (4) Consists of outstanding options to purchase Class A Common Stock awarded
     pursuant to the Company's various stock option plans.
 (5) The address of Mr. Sitrick is Blackburn & Company, Incorporated, 201 N.
     Union Street, Suite 340, Alexandria, Virginia, 22314.
 (6) Includes 91,789 shares of Class A Common Stock owned by Mr. Sitrick and
     7,500 options to purchase Class A Common Stock awarded pursuant to the
     Company's Non-Employee Director Stock Option Plan.
 (7) The address of Mr. Lewis is MLGAL Partners, L.P., Two Greenwich Plaza,
     Greenwich, Connecticut, 06830.
 
                                      37
<PAGE>
 
 (8) Includes 51,774 shares of Class A Common Stock owned by Mr. Lewis and
     7,500 options to purchase Class A Common Stock awarded pursuant to the
     Company's Non-Employee Director Stock Option Plan.
 (9) The address of Mr. Hodson is Columbia Falls Aluminum Company, 12115
     Hinson Road, Little Rock, Arkansas, 72212.
(10) The address of Mr. O'Keefe is Evergreen Media Corporation, 99 Revere
     Beach Parkway, Medford, Massachusetts, 02155.
(11) The address of Mr. Bernthal is Latham & Watkins, 1001 Pennsylvania
     Avenue, N.W., Washington, D.C., 20004.
(12) The address of J. & W. Seligman & Co., Incorporated is 100 Park Avenue,
     New York, New York, 10017. Share ownership for J. &W. Seligman & Co.,
     Incorporated is based on the Schedule 13D filed by such person with the
     Securities and Exchange Commission on February 12, 1997.
(13) The address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts,
     02109. Share ownership for FMR Corp. is based on the Schedule 13G filed
     by such person with the Securities and Exchange Commission on February
     11, 1997.
(14) The address of American Century Companies is 4500 Main Street, P.O. Box
     418210, Kansas City, Missouri, 64141-9210. Share ownership for American
     Century Companies, Inc. is based on the Schedule 13G filed by such person
     with the Securities and Exchange Commission on February 5, 1997.
(15) The address of Putnam Investments, Inc. is One Post Office Square,
     Boston, Massachusetts, 02109. Share ownership for Putnam Investments,
     Inc. is based on the Schedule 13G, Amendment No. 1, filed by such person
     with the Securities and Exchange Commission on January 29, 1997.
(16) The address of The Equitable Companies, Incorporated is 787 Seventh
     Avenue, New York, New York 10019. Share ownership for The Equitable
     Companies, Incorporated is based on the Schedule 13G, Amendment No. 1,
     filed by such person with the Securities and Exchange Commission on
     January 10, 1997.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
CERTAIN RELATIONSHIPS AND TRANSACTIONS
 
  Mr. Sitrick, who serves on the Board of Directors, is a Vice President with
Blackburn & Company, Incorporated. Blackburn & Company, Incorporated has from
time to time rendered brokerage services to the Company in connection with the
purchase and sale of radio stations for which it has been paid customary
compensation, and Blackburn & Company, Incorporated expects to continue to
render such services for the future.
 
  Mr. Bernthal, who serves on the Board of Directors, is a partner in the law
firm of Latham & Watkins, regular legal counsel to the Company.
 
  Under the terms of the Company's employment agreement with Mr. Ginsburg,
dated April 15, 1996, the Company has agreed to make to Mr. Ginsburg, a ten-
year unsecured loan. For a discussion of the terms of the loan, see "Executive
Compensation--Employment Agreements" set forth in Part III--Item 11 herein. As
of the date hereof, the loan has not been made.
 
                                      38
<PAGE>
 
                                    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 the Company 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.
 
    1. Form 8-K/A dated October 18, 1996, reporting consummation of
       acquisition of assets from WEDR, Inc.
 
    2. Form 8-K, dated February 16, 1997, reporting certain events related
       to the execution of the Viacom Stock Purchase Agreement (attached as
       Exhibit 2.28 hereto) and the execution of the Chancellor Merger
       Agreement (attached as Exhibit 2.29 hereto).
 
<TABLE>
<CAPTION>
       EXHIBIT NO. DESCRIPTION OF EXHIBIT
   (c) ----------- ----------------------
   <C> <C>         <S>
        (f) 2.9    Plan of Reorganization and Merger by and between Evergreen
                   Media Corporation and Broadcasting Partners, Inc., dated as
                   of January 31, 1995, as amended, including the Form of
                   Registration Rights Agreement among MLGA Fund I, L.P., MLGA
                   Fund II, L.P., MLGA/BPI Partners I, L.P., MLGAL Partners,
                   Limited Partnership and Evergreen Media Corporation (see
                   table of contents for a list of omitted schedules).
        (g) 2.9A   Agreement dated as of January 31, 1995 among Evergreen Media
                   Corporation, Broadcasting Partners, Inc., the holders of the
                   shares of capital stock of Broadcasting Partners, Inc. and
                   Scott K. Ginsburg, holder of shares of capital stock of
                   Evergreen Media Corporation.
        (f) 2.10   Plan and Agreement of Merger among Evergreen Media Partners
                   Corporation, Evergreen Media Corporation and Broadcasting
                   Partners, Inc., dated as of April 12, 1995.
        (h) 2.11   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).
        (i) 2.11A  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.
        (i) 2.11B  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.
        (j) 2.12   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).
        (n) 2.13   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).
        (o) 2.14   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).
</TABLE>
 
 
                                      39
<PAGE>
 
<TABLE>
<CAPTION>
       EXHIBIT NO. DESCRIPTION OF EXHIBIT
       ----------- ----------------------
   <C> <C>         <S>
        (o) 2.15   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).
        (o) 2.16   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).
        (p) 2.17   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).
        (p) 2.18   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).
        (p) 2.19   Purchase Agreement dated June 27, 1996 between WEDR, Inc.,
                   Seller and Evergreen Media Corporation of Los Angeles,
                   Buyer. (See table of contents for list of omitted schedules)
        (p) 2.20   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.
        (p) 2.21   Asset Purchase Agreement dated July 15, 1996 by and among
                   Century Chicago Broadcasting L.P., an Illinois limited
                   partnership, ("Seller"), Century Broadcasting Corporation, a
                   Delaware Corporation ("Century"), Evergreen Media
                   Corporation of Los Angeles, a Delaware Corporation
                   ("Parent"), and Evergreen Media Corporation of Chicago, a
                   Delaware Corporation ("Buyer").
        (p) 2.22   Asset Purchase Agreement dated August 12, 1996 by and among
                   Chancellor Broadcasting Company, Shamrock Broadcasting, Inc.
                   and Evergreen Media Corporation of the Great Lakes.
        (p) 2.23   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)
        (p) 2.24   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)
        (q) 2.25   Letter of intent dated August 27, 1996 between EZ
                   Communications, Inc. and Evergreen Media Corporation.
        (q) 2.26   Asset Purchase Agreement dated September 19, 1996 between
                   Beasley-FM Acquisition Corp., WDAS License Limited
                   Partnership and Evergreen Media Corporation of Los Angeles.
        (q) 2.27   Asset Purchase Agreement dated September 19, 1996 between
                   The Brown Organization and Evergreen Media Corporation of
                   Los Angeles.
        (r) 2.28   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).
        (r) 2.29   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.
</TABLE>
 
 
                                       40
<PAGE>
 
<TABLE>
<CAPTION>
       EXHIBIT NO. DESCRIPTION OF EXHIBIT
       ----------- ----------------------
   <C> <C>         <S>
        (r) 2.30   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 II, 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.
        (r) 2.31   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   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   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).
        (a) 3.1A   Restated Certificate of Incorporation of Evergreen Media
                   Corporation, dated November 6, 1992.
        (k) 3.1B   Certificate of Amendment of Restated Certificate of
                   Incorporation of Evergreen Media Corporation.
        (a) 3.2    Restated Bylaws of Evergreen Media Corporation.
        (a) 4.1    Specimen Class A Common Stock certificate.
        (i) 4.8    Amended and Restated Loan Agreement dated as of January 17,
                   1996 among Evergreen Media Corporation of Los Angeles, the
                   financial institutions whose names appear as Lenders on the
                   signature pages thereof (the "Lenders"), The Toronto
                   Dominion Bank, The Bank of New York and NationsBank of
                   Texas, N.A., as Arranging Agents, The Bank of New York, as
                   Syndication Agent, NationsBank of Texas, N.A., as
                   Documentation Agent, 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, Borrower's Pledge
                   Agreement, Parent Company Guarantee, Security Agreement,
                   Stock Pledge Agreement, Subsidiary Guarantee, Subsidiary
                   Pledge Agreement and Subsidiary Security Agreement.
        (o) 4.8A   First Amendment to Loan Agreement, dated May 8, 1996,
                   between the Company, the Banks, the Co-Agents and the Agent.
        (i) 4.9    Amended and Restated Note Purchase Agreement dated as of
                   January 17, 1996 among Evergreen Media Corporation of Los
                   Angeles and Teachers Insurance and Annuity Association of
                   America.
</TABLE>
 
 
                                       41
<PAGE>
 
<TABLE>
<CAPTION>
       EXHIBIT NO. DESCRIPTION OF EXHIBIT
       ----------- ----------------------
   <C> <C>         <S>
         (f)10.23  Evergreen Media Corporation Stock Option Plan for Non-
                   employee Directors.
        +(n)10.24  Employment Agreement dated November 28, 1995 by and between
                   Evergreen Media Corporation and Matthew E. Devine.
        +(n)10.25  Employment Agreement dated November 28, 1995 by and between
                   Evergreen Media Corporation and James de Castro.
        +(n)10.26  Employment Agreement dated February 9, 1996 by and between
                   Evergreen Media Corporation and Kenneth J. O'Keefe.
        +(o)10.27  Employment Agreement dated April 15, 1996 by and between
                   Evergreen Media Corporation and Scott K. Ginsburg, as
                   amended.
        +(o)10.28  1995 Stock Option Plan for executive officers and key
                   employees of Evergreen Media Corporation.
          +*10.29  Memorandum of Agreement, dated February 19, 1997, between
                   Evergreen Media Corporation and Scott K. Ginsburg, as agreed
                   and acknowledged by Chancellor Broadcasting Company and
                   Chancellor Radio Broadcasting Company.
           *21.1   Subsidiaries of Evergreen Media Corporation.
           *23.1   Consent of KPMG Peat Marwick LLP.
        *27        Financial Data Schedule
</TABLE>
--------
*  Filed herewith.
+Management contract or compensatory arrangement.
(a) Incorporated by reference to the identically numbered exhibit to the
    Company's Registration Statement on Form S-1, as amended (Reg. No. 33-
    60036).
(f) Incorporated by reference to the identically numbered exhibit to the
    Company's Registration Statement on Form S-4, as amended (Reg. No. 33-
    89838).
(g) Incorporated by reference to Exhibit No. 4.8 to the Company's Registration
    Statement on Form S-4, as amended (Reg. No. 33-89838).
(h) Incorporated by reference to the identically numbered exhibit to the
    Company's Report on Form 8-K dated July 14, 1995.
(i) Incorporated by reference to the identically numbered exhibit to the
    Company's Report on Form 8-K dated January 17, 1996.
(j) Incorporated by reference to the identically numbered exhibit to the
    Company's Report on Form 10-Q for the quarterly period ending September
    30, 1995.
(k) Incorporated by reference to the identically numbered exhibit to the
    Company's Registration Statement on Form S-1, as amended (Reg. No. 33-
    69752).
(n) Incorporated by reference to the identically numbered exhibit to the
    Company's Report on Form 10-K for the fiscal year ended December 31, 1995.
(o) Incorporated by reference to the identically numbered exhibit to the
    Company's report on Form 10-Q for the quarterly period ending March 31,
    1996.
(p) Incorporated by reference to the identically numbered exhibit to the
    Company's report on Form 10-Q for the quarterly period ended June 30,
    1996.
(q) Incorporated by reference to the identically numbered exhibit to the
    Company's Registration Statement on Form S-3, as amended (Reg. No. 333-
    12453).
(r) Incorporated by reference to the identically numbered exhibit to the
    Company's Report on Form 8-K dated February 16, 1997.
 
                                      42
<PAGE>
 
                                  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 28TH DAY
OF MARCH, 1997.
 
                                          Evergreen Media Corporation
 
                                                   /s/ Scott K. Ginsburg
                                          By __________________________________
                                             SCOTT K. GINSBURG CHAIRMAN OF THE
                                             BOARD AND CHIEF EXECUTIVE OFFICER
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
 
              SIGNATURE                           TITLE                DATE
 
        /s/ Scott K. Ginsburg          Chairman of the Board      March 28, 1997
_____________________________________   and Chief Executive        
          SCOTT K. GINSBURG             Officer
 
         /s/ James de Castro           Director, President and    March 28, 1997
_____________________________________   Chief Operating Officer    
           JAMES DE CASTRO
 
        /s/ Matthew E. Devine          Director, Executive Vice   March 28, 1997
_____________________________________   President, Chief           
          MATTHEW E. DEVINE             Financial Officer and
                                        Treasurer
 
       /s/ Kenneth J. O'Keefe          Director, Executive Vice   March 28, 1997
_____________________________________   President                  
         KENNETH J. O'KEEFE
 
           /s/ Perry Lewis             Director                   March 28, 1997
_____________________________________                              
             PERRY LEWIS
 
        /s/ Thomas J. Hodson           Director                   March 28, 1997
_____________________________________                              
          THOMAS J. HODSON
 
        /s/ Joseph M. Sitrick          Director                   March 28, 1997
_____________________________________                              
          JOSEPH M. SITRICK
 
        /s/ Eric L. Bernthal           Director                   March 28, 1997
_____________________________________                              
          ERIC L. BERNTHAL
 
                                      43
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT
 
The Board of Directors Evergreen Media Corporation:
 
  We have audited the accompanying consolidated balance sheets of Evergreen
Media Corporation and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Evergreen
Media Corporation and subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period 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 Peat Marwick LLP
 
Dallas, Texas
January 31, 1997, except for note 2(c),
  which is as of February 19, 1997
 
                                      F-1
<PAGE>
 
                  EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                           DECEMBER 31, 1995 AND 1996
                 (DOLLARS IN THOUSANDS, EXCEPT FOR SHARE DATA)
 
<TABLE>
<CAPTION>
                                                            1995       1996
                                                          --------  ----------
<S>                                                       <C>       <C>
                         ASSETS
Current assets:
  Cash and cash equivalents.............................. $  3,430  $    3,060
  Accounts receivable, less allowance for doubtful
   accounts of $2,000 in 1995 and $2,292 in 1996.........   45,413      85,159
  Prepaid expenses and other.............................    2,146       6,352
                                                          --------  ----------
    Total current assets.................................   50,989      94,571
Property and equipment, net (note 3).....................   37,839      48,193
Intangible assets, net (note 4)..........................  458,787     853,643
Other assets, net........................................    4,732      24,552
                                                          --------  ----------
                                                          $552,347  $1,020,959
                                                          ========  ==========
          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses (note 5)......... $ 15,892  $   26,366
  Current portion of long-term debt (note 6).............    4,000      26,500
  Other current liabilities..............................      541         284
                                                          --------  ----------
    Total current liabilities............................   20,433      53,150
Long-term debt, excluding current portion (note 6).......  197,000     331,500
Deferred tax liabilities (note 8)........................   29,233      86,098
Other liabilities........................................    1,104         800
                                                          --------  ----------
    Total liabilities....................................  247,770     471,548
                                                          --------  ----------
Stockholders' equity (notes 2 and 7):
  Preferred stock. Authorized 6,000,000 shares in 1995;
   issued 1,610,000 shares of $3 Convertible Exchangeable
   Preferred Stock in 1995...............................   80,500         --
  Class A common stock, $.01 par value. Authorized
   75,000,000 shares; issued 24,929,529 shares in 1995
   and 39,038,848 shares in 1996.........................      249         390
  Class B common stock, $.01 par value. Authorized
   4,500,000 shares; issued 3,116,066 shares in 1995 and
   1996..................................................       31          31
  Paid-in capital........................................  317,295     662,502
  Accumulated deficit....................................  (93,498)   (113,512)
                                                          --------  ----------
    Total stockholders' equity...........................  304,577     549,411
                                                          --------  ----------
Commitments and contingencies (notes 2, 6 and 10)........ $552,347  $1,020,959
                                                          ========  ==========
</TABLE>
 
          See accompanying notes to consolidated financial statements
 
                                      F-2
<PAGE>
 
                  EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                   (IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                   1994      1995       1996
                                                 --------  ---------  ---------
<S>                                              <C>       <C>        <C>
Gross revenues.................................  $125,478   $186,365   $337,405
  Less agency commissions......................    15,962     23,434     43,555
                                                 --------  ---------  ---------
    Net revenues...............................   109,516    162,931    293,850
                                                 --------  ---------  ---------
Operating expenses:
  Station operating expenses excluding
   depreciation and amortization...............    68,852     97,674    174,344
  Depreciation and amortization................    30,596     47,005     93,749
  Corporate general and administrative.........     2,672      4,475      7,797
                                                 --------  ---------  ---------
    Operating expenses.........................   102,120    149,154    275,890
                                                 --------  ---------  ---------
    Operating income...........................     7,396     13,777     17,960
                                                 --------  ---------  ---------
Nonoperating income (expenses):
  Interest expense.............................   (13,809)   (19,199)   (37,527)
  Interest income..............................        91         55        477
  Gain on disposition of assets (note 2).......     6,991        --         --
  Other expense, net...........................      (630)      (291)       --
                                                 --------  ---------  ---------
    Nonoperating expenses, net.................    (7,357)   (19,435)   (37,050)
                                                 --------  ---------  ---------
    Income (loss) before income taxes and
     extraordinary item........................        39     (5,658)   (19,090)
Income tax expense (benefit) (note 8)..........       --         192     (2,896)
                                                 --------  ---------  ---------
    Income (loss) before extraordinary item....        39     (5,850)   (16,194)
Extraordinary item--loss on extinguishment of
 debt (note 6).................................    (3,585)       --         --
                                                 --------  ---------  ---------
    Net loss...................................    (3,546)    (5,850)   (16,194)
Preferred stock dividends (note 7(a))..........    (4,830)    (4,830)    (3,820)
                                                 --------  ---------  ---------
    Net loss attributable to common stockhold-
     ers.......................................  $ (8,376) $ (10,680) $ (20,014)
                                                 ========  =========  =========
Loss per common share (notes 1(k), 6 and 7(a)):
  Before extraordinary item....................  $   (.37) $    (.52) $    (.66)
  Extraordinary item...........................      (.27)       --         --
                                                 --------  ---------  ---------
    Net loss...................................  $   (.64) $    (.52) $    (.66)
                                                 ========  =========  =========
Weighted average common shares outstanding.....    13,002     20,721     30,207
                                                 ========  =========  =========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-3
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
                 YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                            (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                      CONVERTIBLE            CLASS A          CLASS B
                    PREFERRED STOCK       COMMON STOCK      COMMON STOCK                                         TOTAL
                  --------------------  ----------------- -----------------  WARRANTS   PAID-IN  ACCUMULATED STOCKHOLDERS'
                    SHARES     AMOUNT     SHARES   AMOUNT  SHARES    AMOUNT (NOTE 8(C)) CAPITAL    DEFICIT      EQUITY
                  ----------  --------  ---------- ------ ---------  ------ ----------- -------  ----------- -------------
<S>               <C>         <C>       <C>        <C>    <C>        <C>    <C>         <C>      <C>         <C>
Balances at
December 31,
1993............   1,610,000  $ 80,500   9,758,759 $  98  3,168,941   $ 31     12,488   102,293    (74,442)     120,968
Conversion of
common stock
(note 7(b)).....         --        --       20,625   --     (20,625)   --         --        --         --           --
Issuance costs
for convertible
preferred stock
(note 7(a)).....         --        --          --    --         --     --         --       (240)       --          (240)
Exercise of
common stock
options (note
7(d))...........         --        --      180,000     2        --     --         --         (1)       --             1
Convertible
preferred stock
dividends (note
7(a))...........         --        --                --         --     --         --        --      (4,830)      (4,830)
Net loss........         --        --          --    --         --     --         --        --      (3,546)      (3,546)
                  ----------  --------  ---------- -----  ---------   ----    -------   -------   --------      -------
Balances at
December 31,
1994............   1,610,000    80,500   9,959,384   100  3,148,316     31     12,488   102,052    (82,818)     112,353
Issuance of
Class A common
stock in
acquisition
(note 2(b)).....         --        --    5,611,009    56        --     --         --     70,082        --        70,138
Issuance of
Class A common
stock in public
offering (note
7(b))...........         --        --    7,350,000    73        --     --         --    132,648        --       132,721
Exercise of
common stock
warrants (note
7(c))...........         --        --    1,951,386    20        --     --     (12,488)   12,481        --            13
Conversion of
Class B common
stock to Class A
common stock
(note 7(b)).....         --        --       32,250   --     (32,250)   --         --        --         --           --
Exercise of
common stock
options (note
7(d))...........         --        --       25,500   --         --     --         --         32        --            32
Convertible
preferred stock
dividends (note
7(a))...........         --        --          --    --         --     --         --        --      (4,830)      (4,830)
Net loss........         --        --          --    --         --     --         --        --      (5,850)      (5,850)
                  ----------  --------  ---------- -----  ---------   ----    -------   -------   --------      -------
Balances at
December 31,
1995............   1,610,000    80,500  24,929,529   249  3,116,066     31        --    317,295    (93,498)     304,577
Issuance of
Class A common
stock in public
offering (note
7(b))...........         --        --    9,000,000    90        --     --         --    264,146        --       264,236
Conversion of
preferred stock
(note 7(a)).....  (1,608,297)  (80,415)  5,025,916    50        --     --         --     80,365        --           --
Redemption of
preferred stock
(note 7(a)).....      (1,703)      (85)        --    --         --     --         --         (5)       --           (90)
Exercise of
common stock
options (note
7(d))...........         --        --       83,403     1        --     --         --        701        --           702
Convertible
preferred stock
dividends (note
7(a))...........         --        --          --    --         --     --         --        --      (3,820)      (3,820)
Net loss........         --        --          --    --         --     --         --        --     (16,194)     (16,194)
                  ----------  --------  ---------- -----  ---------   ----    -------   -------   --------      -------
Balances at
December 31,
1996............         --        --   39,038,848 $ 390  3,116,066   $ 31        --    662,502   (113,512)     549,411
                  ==========  ========  ========== =====  =========   ====    =======   =======   ========      =======
</TABLE>
 
         See accompanying notes to consolidated financial statements.
 
                                      F-4
<PAGE>
 
                  EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
 
<TABLE>
<CAPTION>
                                                  1994      1995       1996
                                                --------  ---------  ---------
                                                       (IN THOUSANDS)
<S>                                             <C>       <C>        <C>
Cash flows from operating activities:
 Net loss...................................... $ (3,546) $  (5,850) $ (16,194)
 Adjustments to reconcile net loss to net cash
  provided by operating activities:
  Depreciation.................................    4,528      5,508      7,707
  Amortization of goodwill, intangible assets
   and other assets............................   26,068     41,497     86,042
  Provision for doubtful accounts..............      754        904      2,179
  Deferred income tax benefit..................      --        (479)    (4,353)
  Gain on disposition of assets................  (6,991)        --         --
  Loss on extinguishment of debt...............    3,585        --         --
  Changes in certain assets and liabilities,
   net of effects of acquisitions:
   Accounts receivable.........................   (5,051)    (6,628)   (28,146)
   Prepaid expenses and other current assets...       84        724     (2,804)
   Accounts payable and accrued expenses.......    1,194      4,405      4,560
   Other assets................................     (724)      (184)      (354)
   Other liabilities...........................      (21)       490       (587)
                                                --------  ---------  ---------
    Net cash provided by operating activities..   19,880     40,387     48,050
                                                --------  ---------  ---------
Cash flows from investing activities:
  Acquisitions, net of cash acquired...........  (44,921)  (188,004)  (457,764)
  Escrow deposits on pending acquisitions......      --         --     (17,000)
  Proceeds from sale of assets.................   19,101        --      32,000
  Capital expenditures.........................   (5,227)    (2,642)    (6,543)
  Other........................................   (1,881)    (1,466)   (12,631)
                                                --------  ---------  ---------
    Net cash used by investing activities......  (32,928)  (192,112)  (461,938)
                                                --------  ---------  ---------
Cash flows from financing activities:
  Proceeds from issuance of long-term debt.....   36,000    186,000    447,750
  Principal payments on long-term debt.........  (14,000)  (159,000)  (290,750)
  Payments on other long-term liabilities......     (645)      (694)      (569)
  Proceeds (costs) from issuance of common
   stock, preferred stock and warrants.........     (240)   132,766    264,938
  Dividends on preferred stock.................   (4,830)    (4,830)    (3,820)
  Payments for debt issuance costs.............   (4,602)      (303)    (3,941)
  Redemption of preferred stock................      --         --         (90)
                                                --------  ---------  ---------
    Net cash provided by financing activities..   11,683    153,939    413,518
                                                --------  ---------  ---------
Increase (decrease) in cash and cash
 equivalents...................................   (1,365)     2,214       (370)
Cash and cash equivalents at beginning of
 year..........................................    2,581      1,216      3,430
                                                --------  ---------  ---------
Cash and cash equivalents at end of year....... $  1,216  $   3,430  $   3,060
                                                ========  =========  =========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                      F-5
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 (a) Description of Business
 
  Evergreen Media Corporation ("Evergreen") and its subsidiaries own and
operate commercial radio stations in various geographical regions across the
United States, primarily in the top ten radio revenue markets.
 
 (b) Principles of Consolidation
 
  The consolidated financial statements include the accounts of Evergreen
Media Corporation and its subsidiaries (collectively, the "Company") all of
which are wholly owned. Significant intercompany balances and transactions
have been eliminated in consolidation.
 
 (c) 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 when
incurred.
 
 (d) Intangible Assets
 
  Intangible assets consist primarily of broadcast licenses, goodwill and
other identifiable intangible assets. The Company amortizes such intangible
assets using the straight-line method over estimated useful lives ranging from
1 to 40 years. The Company continually evaluates the propriety of the carrying
amount of goodwill and other intangible assets as well as the amortization
period to determine whether current events or circumstances warrant
adjustments to the carrying value and/or revised estimates of useful lives.
This evaluation consists of the projection of undiscounted operating income
before depreciation, amortization, nonrecurring charges and interest for each
of the Company's radio stations over the remaining amortization periods of the
related intangible assets. The projections are based on a historical trend
line of actual results since the acquisitions of the respective stations
adjusted for expected changes in operating results. To the extent such
projections indicate that undiscounted operating income 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 significant impairment of goodwill and other
intangible assets has occurred and that no reduction of the estimated useful
lives is warranted.
 
 (e) Debt Issuance Costs
 
  The costs related to the issuance of debt are capitalized and amortized to
expense over the lives of the related debt. During the years ended December
31, 1994, 1995 and 1996, the Company recognized amortization of debt issuance
costs of $712,000, $631,000 and $1,113,000, respectively, which amounts are
included in amortization expense in the accompanying consolidated statements
of operations.
 
 (f) Barter Transactions
 
  The Company trades commercial air time 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 and 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.
 
                                      F-6
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
 
 (g) 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 amount 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.
 
 (h) Revenue Recognition
 
  Revenue is derived primarily from the sale of commercial announcements to
local and national advertisers. Revenue is recognized as commercials are
broadcast.
 
  Fees received or paid pursuant to various time brokerage agreements are
recognized as gross revenues or amortized to expense, respectively, over the
term of the agreement using the straight-line method.
 
 (i)  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 $12,852,000, $19,134,000 and $37,042,000 for
interest in 1994, 1995 and 1996, respectively. The Company paid approximately
$733,000 for income taxes in 1996.
 
 (j) Derivative Financial Instruments
 
  The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to
manage well-defined interest rate risks related to interest on the Company's
outstanding debt.
 
  As interest rates change under interest rate swap and cap agreements, the
differential to be paid or received is recognized as an adjustment to interest
expense. The Company is not exposed to credit loss as its interest rate swap
agreements are with the participating banks under the Company's senior credit
facility.
 
 (k) Loss Per Common Share
 
  Loss per common share for 1994, 1995 and 1996 is calculated based on the
weighted average shares of common stock outstanding during each year. Options
and warrants 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. 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.
 
 (l) 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
 
                                      F-7
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
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, 1995 and
1996, no receivable from any customer exceeded 5% of stockholders' equity and
no customer accounted for more than 10% of net revenues in 1994, 1995 or 1996.
 
 (m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
 
  The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
on January 1, 1996. This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell. The adoption of this Statement did not have a
material impact on the Company's financial position, results of operations, or
liquidity.
 
 (n) Stock Option Plan
 
  Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123,
Accounting for Stock-Based Compensation, which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro forma
net income and pro forma earnings per share disclosures for employee stock
option grants made in 1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to continue
to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosures of SFAS No. 123.
 
 (o) 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
 
  In April 1994, the Company acquired radio station KIOI-FM in San Francisco,
California for cash consideration of approximately $44,921,000. This
acquisition was funded with proceeds received from the sale of stations WAPE-
FM and WFYV-FM in Jacksonville (which sale closed in April 1994) and
additional
 
                                      F-8
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
borrowings under the Company's senior credit facility. The Company received
proceeds of $19,500,000 less closing costs from the sale of WAPE- FM and WFYV-
FM and recognized a gain of $7,328,000 on such sale.
 
  In May 1995, the Company acquired Broadcasting Partners, Inc. ("BPI"), a
publicly traded radio broadcasting company with seven FM and four AM radio
stations, eight of which are in the nation's ten largest radio markets (the
"BPI Acquisition"). The BPI Acquisition was effected through the merger of a
wholly-owned subsidiary of the Company with and into BPI, with BPI surviving
the merger as a wholly-owned subsidiary of the Company. The BPI Acquisition
included the conversion of each outstanding share of BPI common stock into the
right to receive $12.00 in cash and .69 shares of the Company's Class A Common
Stock, resulting in total cash payments of $94,813,000 and the issuance of
5,611,009 shares of the Company's Class A Common Stock valued at $12.50 per
share. In addition, the Company retired existing BPI debt of $81,926,000 and
incurred various other direct acquisition costs. The total purchase price,
including closing costs, allocated to net assets acquired was approximately
$258,634,000.
 
  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 $316,343,000 in cash.
 
  On May 3, 1996, the Company acquired WKLB-FM in Boston for $34,000,000 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 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 for
$19,500,000 in cash and on August 1, 1996, the Company sold WSJZ-FM in Buffalo
for $12,500,000 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 $733,000 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 $2,561,000
(including interest costs during the holding period of approximately
$1,169,000) 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 for
$44,000,000 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 for $65,000,000
in cash plus various other direct acquisition costs.
 
  On January 31, 1997, the Company acquired WWWW-FM and WDFN-AM in Detroit for
$30,000,000 in cash plus various other direct acquisition costs. The Company
had previously provided certain sales and
 
                                      F-9
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
promotional functions to WWWW-FM and 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, KDFC-FM and KDFC-AM in
San Francisco for $115,000,000 in cash plus various other direct acquisitions
costs. The Company had previously been operating KKSF-FM and KDFC-FM under a
time brokerage agreement since November 1, 1996.
 
  The acquisitions discussed above were accounted for as purchases.
Accordingly, the accompanying consolidated financial statements include the
results of operations of the acquired entities from the dates of acquisition.
 
  A summary of the net assets acquired follows:
 
<TABLE>
<CAPTION>
                                                  1994      1995      1996
                                                 -------  --------  --------
   <S>                                           <C>      <C>       <C>
   Working capital, including cash of $492 in
    1995 and $1,011 in 1996..................... $   (79) $ 12,012  $ 11,218
   Property and equipment.......................   1,762    11,684    11,519
   Assets held for sale (note 2)................     --        --     32,000
   Intangible assets............................  43,238   264,650   465,824
   Deferred tax liability.......................     --    (29,712)  (61,218)
                                                 -------  --------  --------
                                                 $44,921  $258,634  $459,343
                                                 =======  ========  ========
</TABLE>
 
  The consolidated condensed pro forma results of operations data for 1995 and
1996, as if the 1995 and 1996 acquisitions and dispositions and the 1995
Offering, 1996 Offering and preferred stock conversion and redemption
described in note 7 occurred at January 1, 1995, follow:
 
<TABLE>
<CAPTION>
                                                                 UNAUDITED
                                                             ------------------
                                                               1995      1996
                                                             --------  --------
<S>                                                          <C>       <C>
Net revenues................................................ $263,569  $306,388
Operating income (loss).....................................   (1,540)   15,531
Net loss....................................................  (21,471)   (8,030)
Net loss per common share...................................    (0.51)    (0.19)
</TABLE>
 
 (b) Pending transactions
 
  On June 13, 1996, the Company entered into an agreement to acquire WWRC-AM
in Washington, D.C. for $22,500,000 in cash. The Company has subsequently
agreed with the owner of WWRC-AM to exchange WQRS-FM in Detroit (which, as
discussed below, the Company has agreed to acquire in a separate purchase for
$32,000,000 in cash) in return for WWRC-AM and $9,500,000 in cash. The Company
has been operating WWRC-AM under a time brokerage agreement since June 17,
1996.
 
  On July 15, 1996, the Company entered into an agreement to acquire WPNT-FM
in Chicago for $73,750,000 in cash.
 
  On August 12, 1996, the Company entered into an agreement to acquire WMXD-FM
and WJLB-FM in Detroit for $168,000,000 in cash and WFLN-FM in Philadelphia
for $37,750,000 in cash. The Company also entered into an agreement to operate
WMXD-FM, WJLB-FM and WFLN-FM under time brokerage agreements
 
                                     F-10
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
effective September 1, 1996. The Company also entered into a separate
agreement on August 12, 1996 to acquire WQRS-FM in Detroit for $32,000,000 in
cash. As discussed above, the Company will immediately swap WQRS-FM at closing
in return for WWRC-AM in Washington and $9,500,000 in cash.
 
  On September 4, 1996, the Company entered into a binding letter of intent to
swap five of its six stations in the Charlotte, N.C. market (WPEG-FM, WBAV-FM,
WBAV-AM, WRFX-FM and WFNZ-AM), which were acquired as part of the BPI
Acquisition and the Pyramid Acquisition, for WIOQ-FM and WUSL-FM in
Philadelphia. As part of this transaction, the Company has also agreed to sell
its sixth radio station in Charlotte, WNKS-FM, for $10,000,000 in cash. On
December 5, 1996, the Company entered into definitive agreements regarding
these stations.
 
  On September 19, 1996, the Company entered into an agreement to acquire
WDAS-FM and WDAS-AM in Philadelphia for $103,000,000 in cash.
 
  Consummation of each Pending Transaction is subject to various conditions,
including approval from the FCC and the expiration or early termination 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.
 
  Completion of the above pending transactions would result in the Company's
ownership of six FM stations in the Chicago and Philadelphia markets, or one
station in each market in excess of the maximum number of FM stations under
common ownership permitted by the Telecommunications Act of 1996 (the "1996
Act"). Therefore, the Company will be required to divest one FM station in
each market in order to comply with the 1996 Act.
 
  Escrow funds of $17,000,000 paid by the Company in connection with the
completed transactions subsequent to year end and the pending transactions
have been classified as other assets at December 31, 1996 in the accompanying
consolidated balance sheet.
 
 (c) Chancellor Broadcasting Merger and Viacom Acquisition
 
  On February 16, 1997, the Company entered into a stock purchase agreement
with Viacom International, Inc. ("Viacom") whereby the Company agreed to
acquire all of the issued and outstanding capital stock of certain
subsidiaries of Viacom ("Viacom Subsidiaries") for an aggregate purchase price
of $1,075,000,000 in cash. The Viacom Subsidiaries own and operate ten radio
stations in five major markets.
 
  On February 19, 1997, the Company entered into an agreement to merge with
Chancellor Broadcasting Company ("Chancellor") and Chancellor Radio
Broadcasting Company, in a stock-for-stock transaction with the Company
remaining as the surviving corporation.
 
  On February 19, 1997, the Company and Chancellor entered into a joint
purchase agreement whereby in the event that consummation of the Company's
stock purchase agreement with Viacom occurs prior to consummation of the
transaction with Chancellor, Chancellor will be required to purchase the
Viacom Subsidiaries that own and operate four of the ten stations for
$480,000,000 and the Company will purchase the Viacom Subsidiaries that own
and operate the remaining six stations for $595,000,000. In the event
consummation of the stock purchase agreement with Viacom occurs after the
consummation of the transaction with Chancellor, the surviving corporation
will acquire the stock of the Viacom Subsidiaries.
 
  Completion of the Chancellor Merger and the Viacom Acquisition would result
in the Company's ownership of a number of stations in the Chicago, San
Francisco, Washington, D.C., Detroit and Sacramento
 
                                     F-11
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
markets in excess of the maximum number of stations under common ownership
permitted by the 1996 Act. Therefore, the Company will be required to divest
the following stations in order to comply with the 1996 Act: (i) one FM
station in the Chicago market; (ii) two FM stations in the San Francisco
market; (iii) one FM station and two AM stations in the Washington, D.C.
market; (iv) one FM station in the Detroit market; and (v) one AM station in
the Sacramento market.
 
(3) PROPERTY AND EQUIPMENT
 
  Property and equipment consists of the following at December 31, 1995 and
1996:
 
<TABLE>
<CAPTION>
                                     ESTIMATED USEFUL LIFE   1995      1996
                                     --------------------- -------- ----------
   <S>                               <C>                   <C>      <C>
   Broadcast and other equipment....      3-15 years       $ 36,428 $   47,937
   Buildings and improvements.......      3-20 years          8,570     11,735
   Furniture and fixtures...........      5- 7 years          6,429      8,392
   Land.............................          --              6,524      7,379
                                                           -------- ----------
                                                             57,951     75,443
   Less accumulated depreciation....                         20,112     27,250
                                                           -------- ----------
                                                           $ 37,839 $   48,193
                                                           ======== ==========
 
(4) INTANGIBLE ASSETS
 
  Intangible assets consist of the following at December 31, 1995 and 1996:
 
<CAPTION>
                                     ESTIMATED USEFUL LIFE   1995      1996
                                     --------------------- -------- ----------
   <S>                               <C>                   <C>      <C>
   Broadcast licenses...............      15-40            $187,024 $  498,766
   Goodwill.........................      15-40              70,317    131,775
   Other intangibles................       1-40             291,203    397,062
                                                           -------- ----------
                                                            548,544  1,027,603
   Less accumulated amortization....                         89,757    173,960
                                                           -------- ----------
                                                           $458,787 $  853,643
                                                           ======== ==========
</TABLE>
 
  In addition to broadcast licenses and goodwill, categories of 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), and (v) premium audience growth pattern (the value of expected
above-average population growth in a given market).
 
                                     F-12
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
 
(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
  Accounts payable and accrued expenses consist of the following at December
31, 1995 and 1996:
 
<TABLE>
<CAPTION>
                                                                 1995     1996
                                                               -------- --------
   <S>                                                         <C>      <C>
   Accounts payable........................................... $ 11,081 $ 20,311
   Accrued payroll............................................    1,816    4,413
   Accrued interest...........................................    1,304    1,642
   Accrued dividends..........................................    1,020      --
   Accrued income taxes.......................................      671      --
                                                               -------- --------
                                                               $ 15,892 $ 26,366
                                                               ======== ========
</TABLE>
 
(6) LONG-TERM DEBT
 
  Long-term debt consists of the following at December 31, 1995 and 1996:
 
<TABLE>
<CAPTION>
                                                                 1995     1996
                                                               -------- --------
   <S>                                                         <C>      <C>
   Senior Credit Facility (a)................................. $187,000 $348,000
   Senior Notes (b)...........................................   14,000   10,000
                                                               -------- --------
     Total long-term debt.....................................  201,000  358,000
   Less current portion.......................................    4,000   26,500
                                                               -------- --------
                                                               $197,000 $331,500
                                                               ======== ========
</TABLE>
 
 (a) Senior Credit Facility
 
  On November 6, 1992, the Company entered into a variable rate loan agreement
with a group of banks providing for a $115,000,000 term loan and a revolving
loan of up to $55,000,000. On November 28, 1994, amounts outstanding under
this agreement were retired with borrowings under a new senior credit facility
(the "Senior Credit Facility") which provided for a $150,000,000 term loan
("Term Loan") and a revolving loan of up to $200,000,000 ("Revolving Loan").
In connection with this debt restructuring, the Company wrote off the
unamortized balance of deferred debt issuance costs of $3,585,000 as an
extraordinary charge.
 
  In connection with the Pyramid Acquisition, the Company amended and restated
the Senior Credit Facility. Under the amended agreement, dated January 17,
1996, the $150,000,000 Term Loan and $200,000,000 Revolving Loan remained in
place, and the Company also established an additional revolving facility of up
to $275,000,000 (the "New Revolving Loan").
 
  Borrowings under the Senior Credit Facility bear interest at a rate based,
at the option of the Company, 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 in the following paragraph,
the interest rate on the $150,000,000 outstanding under the Term Loan at
December 31, 1996 was 7.03% on a blended basis, based on Eurodollar rates, and
the interest rates on $185,000,000 and $5,000,000 of advances outstanding
under the Revolving Loan were 7.17% and 8.625% at December 31, 1996, based on
the Eurodollar and prime rates, respectively. The interest rate on the
$8,000,000 outstanding under the New Revolving Loan at December 31, 1996 was
7.13% on a blended basis, based on Eurodollar rates. The Company pays fees of
1/2% per annum on the aggregate unused portion of the loan commitment, in
addition to an annual agent's fee.
 
  As required by the terms of the Senior Credit Facility, the Company has
entered into interest rate swap agreements with certain of the participating
banks under the Senior Credit Facility. These swap agreements have
 
                                     F-13
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
the effect of reducing the impact of changes in interest rates on the
Company's floating rate debt under the Senior Credit Facility. At December 31,
1996, interest rate swap agreements covering a notional balance of
$425,000,000 were outstanding. These outstanding swap agreements mature from
1997 through 1999 and require the Company to pay fixed rates of 4.96%-6.38%
plus an incremental rate while the counterparty pays a floating rate based on
the six-month London Interbank Borrowing Offered Rate ("LIBOR"). In addition
to these swap agreements, in connection with the BPI Acquisition the Company
assumed interest rate cap agreements. The outstanding interest rate cap
agreement at December 31, 1996 covers a notional balance of $10,000,000 and
provides for a fixed rate of 8.0% and matures during 1997. During the years
ended December 31, 1995 and 1996, the Company recognized charges (income)
under its interest rate swap and cap agreements of $(275,000) and $110,584,
respectively. Because the interest rate swap and cap agreements are with banks
that are lenders under the Senior Credit Facility, the Company is not exposed
to credit loss.
 
  The Term Loan is payable in quarterly installments beginning March 31, 1997
and ending June 30, 2002, while availability under the Revolving Loan reduces
quarterly commencing March 31, 1997 and ending June 30, 2002. Availability
under the New Revolving Loan reduces quarterly beginning March 31, 1998 and
ending December 31, 2002.
 
 (b) Senior Notes
 
  The Company issued $20,000,000 of senior notes (the "Senior Notes") in 1989.
The Senior Notes bear interest at 11.59% per annum payable quarterly and
principal is payable in equal quarterly installments of $1,000,000 through May
1999.
 
 (c) Other
 
  The Senior Credit Facility and the Senior Notes each contain certain
financial and operational covenants and other restrictions with which the
Company must comply, including, among others, limitations on capital
expenditures, corporate overhead and the incurrence of additional
indebtedness, restrictions on the use of borrowings, paying cash dividends and
redeeming or repurchasing the Company's capital stock, and requirements to
maintain certain financial ratios, including cash flow and debt service
coverage (as defined). The Senior Credit Facility also separately restricts
the Company from making certain acquisitions without the prior consent of the
lenders. If the Company increases its leverage beyond certain specified levels
in order to effect an acquisition, the Senior Notes require that the Company
prepay all principal and accrued interest thereunder, together with a "make
whole" premium equal to the amount of unearned interest, based on current
market rates, through the original maturity date.
 
  Substantially all of the Company's assets are pledged as security for the
Senior Credit Facility and Senior Notes under the loan agreements. The
obligations of the Company under the Senior Credit Facility and Senior Notes
rank pari passu.
 
  A summary of the future maturities of long-term debt follows:
 
<TABLE>
     <S>                                                                 <C>
     1997............................................................... $26,500
     1998...............................................................  76,500
     1999...............................................................  63,250
     2000...............................................................  70,000
     2001...............................................................  72,500
     Thereafter.........................................................  49,250
</TABLE>
 
                                     F-14
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
 
(7) STOCKHOLDERS' EQUITY
 
 (a) Redeemable and Convertible Preferred Stocks
 
  In October 1993, the Company issued 1,610,000 shares of $3 Convertible
Exchangeable Preferred Stock (the "Convertible Preferred Stock") for net
proceeds of approximately $76,645,000. The liquidation preference of each
share of Convertible Preferred Stock is $50 plus accrued and unpaid dividends.
Annual dividends of $3 per share are cumulative and payable quarterly when, as
and if declared by the Board of Directors of the Company.
 
  The Company converted 1,608,297 shares of the Convertible Preferred Stock
into 5,025,916 shares of the Company's Class A Common Stock and redeemed the
remaining 1,703 shares of Convertible Preferred Stock at $52.70 per share in
1996.
 
 (b) Common Stock
 
  The rights of holders of Class A Common Stock and Class B Common Stock are
identical except for voting and conversion rights.
 
  Holders of shares of common stock vote as a single class on all matters
submitted to a vote of the stockholders, with each share of Class A Common
Stock entitled to one vote and each share of Class B Common Stock entitled to
ten votes, except for (i) certain amendments to the Certificate of
Incorporation of the Company, (ii) proposed "going private" transactions
between the Company and the controlling shareholder and (iii) as otherwise
provided by law.
 
  Each share of Class B Common Stock is convertible at the option of the
holder into one share of Class A Common Stock at any time. The Class B Common
Stock will convert automatically into Class A Common Stock, and thereby lose
its special voting rights, if such Class B Common Stock is sold or otherwise
transferred to any person or entity other than certain specified affiliates of
the current holder. During 1995, the holder of the outstanding shares of Class
B Common Stock disposed of 32,250 shares of such stock, thereby causing the
shares sold to be converted to Class A Common Stock.
 
  In May 1995, the Company issued 5,611,009 shares of Class A Common Stock in
connection with the BPI Acquisition.
 
  In July 1995, the Company completed a secondary public offering of 8,287,500
shares of its Class A Common Stock (the "1995 Offering"). The Company issued
and sold 7,350,000 shares in the offering, while 937,500 shares were issued
and sold in connection with the exercise of certain warrants. Furthermore,
1,013,886 shares were issued in the offering in connection with the exercise
of the remaining warrants outstanding pursuant to the over-allotment option.
The net proceeds to the Company in connection with the offering of
approximately $132,721,000 were used to reduce borrowings under the revolving
credit portion of the Senior Credit Facility.
 
  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. 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 October 17, 1996, the Company completed a secondary public offering of
9,000,000 shares of its Class A Common Stock (the "1996 Offering"). The net
proceeds of approximately $264,236,000 were used to reduce borrowings under
the New Revolving Loan portion of the Senior Credit Facility.
 
                                     F-15
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
 
 (c) Common Stock Purchase Warrants
 
  In November 1992, the Company issued certain warrants which, immediately
prior to the consummation of the common stock offering in July 1995, entitled
holders to purchase an aggregate of 1,300,924 shares of Class A Common Stock
at $.01 per share. These warrants were assigned a value at date of issuance of
$12,488,000. Such warrants were exercised in connection with the common stock
offering in July 1995.
 
 (d) Stock Options
 
  The Company has established the 1992, 1993 and 1995 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 1,957,500 shares of Class A 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 and 1995
Employee Option Plans are required to have exercise prices equal to or in
excess of the fair market value of the Company's Class A Common Stock on the
date of issuance.
 
  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 225,000 shares of Class A Common
Stock. Options issued under the Director Plan have exercise prices equal to
the fair market value of the Company's Class A 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 94,000 shares of BPI common stock held by BPI employees.
Options to purchase approximately 87,000 shares of the Company's Class A
Common Stock vested and became exercisable on May 12, 1996.
 
  The Company applies APB Opinion No. 25 in accounting for its Employee Option
Plans and, accordingly, no compensation cost has been recognized for its stock
options in the consolidated financial statements. Had the Company 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:
 
<TABLE>
<CAPTION>
                                                               1995      1996
                                                              -------  --------
   <S>                                                        <C>      <C>
   Net loss:
     As reported............................................. $(5,850) $(16,194)
     Pro forma...............................................  (8,787)  (20,969)
   Loss per common share:
     As reported.............................................    (.52)     (.66)
     Pro forma...............................................    (.66)     (.82)
</TABLE>
 
  Pro forma net loss reflects only options granted in 1995 and 1996.
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 because compensation cost is reflected over the options'
vesting period of one year and compensation cost for options granted during
1994 is not considered.
 
                                     F-16
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
 
  The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1995 and 1996: dividend yield of 0% for all
years; expected volatility of 44.5%; risk-free interest rate of 6.0% and
expected lives ranging from three to seven years.
 
  Following is a summary of activity in the employee option plans and
agreements discussed above for the years ended December 31, 1994, 1995 and
1996:
 
<TABLE>
<CAPTION>
                                1994                1995                1996
                          ------------------ ------------------- -------------------
                                    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................   877,500   $ 0.01    978,000   $ 3.10  1,289,874   $ 6.91
Granted.................   280,500    10.67    413,138    16.17    587,250    23.12
Exercised...............  (180,000)    0.01    (25,500)    1.29    (83,403)    8.54
Canceled................       --       --     (75,764)    8.59    (13,729)    9.91
                          --------   ------  ---------   ------  ---------   ------
Outstanding at end of
 year...................   978,000   $ 3.10  1,289,874   $ 6.91  1,779,992   $11.93
                          ========   ======  =========   ======  =========   ======
Options exercisable at
 year end...............   697,500             945,000             967,742
                          ========           =========           =========
Weighted average fair
 value of options
 granted during the
 year...................                                 $ 8.54              $ 9.76
                                                         ======              ======
</TABLE>
 
  The following table summarizes information about stock options outstanding
at December 31, 1996:
 
<TABLE>
<CAPTION>
                         OPTIONS OUTSTANDING          OPTIONS EXERCISABLE
                  ---------------------------------- ----------------------
                     NUMBER      WEIGHTED               NUMBER
                   OUTSTANDING    AVERAGE   WEIGHTED  EXERCISABLE  WEIGHTED
RANGE OF               AT        REMAINING  AVERAGE       AT       AVERAGE
EXERCISE          DECEMBER 31,  CONTRACTUAL EXERCISE DECEMBER 31,  EXERCISE
PRICES                1996         LIFE      PRICE       1996       PRICE
--------          ------------- ----------- -------- ------------- --------
<S>               <C>           <C>         <C>      <C>           <C>
$ 0.01                660,000    6.3 years   $ 0.01     660,000     $ 0.01
$ 9.69 to 12.33       307,742    7.9 years    10.49     307,742      10.49
$ 21.33 to 26.75      812,250    8.8 years    22.49         --         --
                    ---------                ------     -------     ------
                    1,779,992                $11.93     967,742     $ 3.29
                    =========                ======     =======     ======
</TABLE>
 
                                     F-17
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
 
(8) INCOME TAXES
 
  Income tax expense attributed to loss from continuing operations consists
of:
 
<TABLE>
<CAPTION>
                                                                1995    1996
                                                                -----  -------
   <S>                                                          <C>    <C>
   Current tax expense:
     Federal................................................... $ 246  $   485
     State.....................................................   425      972
                                                                -----  -------
   Total current tax expense...................................   671    1,457
   Deferred federal benefit....................................  (479)  (4,353)
                                                                -----  -------
   Total income tax expense (benefit).......................... $ 192  $(2,896)
                                                                =====  =======
</TABLE>
 
  The Company did not incur significant tax expense during the years ended
December 31, 1994 as its operations did not generate taxable income.
 
  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, 1994, 1995 and 1996 as
a result of the following:
 
<TABLE>
<CAPTION>
                                                     1994     1995     1996
                                                    -------  -------  -------
<S>                                                 <C>      <C>      <C>
Computed "expected" tax benefit.................... $(1,172) $(1,980) $(6,682)
Amortization of goodwill...........................     355      788    2,477
Net operating loss carryforwards for which no tax
 benefit was recognized............................     760      923      --
State income taxes, net of federal benefit.........     --       276      632
Other, net.........................................      57      185      677
                                                    -------  -------  -------
                                                    $   --   $   192   (2,896)
                                                    =======  =======  =======
</TABLE>
 
  The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995 and
1996 are presented below:
 
<TABLE>
<CAPTION>
                                                             1995      1996
                                                           --------  ---------
<S>                                                        <C>       <C>
Deferred tax assets:
  Net operating loss carryforwards........................ $ 18,748  $  13,519
  Accrued compensation primarily relating to stock
   options................................................    1,787      1,687
  Other...................................................      649      1,215
                                                           --------  ---------
    Total deferred tax assets.............................   21,184     16,421
                                                           --------  ---------
Deferred tax liabilities:
  Property and equipment and intangibles, primarily re-
   sulting from difference in bases from BPI and Pyramid
   Acquisitions...........................................  (49,884)  (101,761)
  Other...................................................     (533)      (758)
                                                           --------  ---------
    Total deferred tax liabilities........................  (50,417)  (102,519)
                                                           --------  ---------
    Net deferred tax liability............................ $(29,233) $ (86,098)
                                                           ========  =========
</TABLE>
 
 
                                     F-18
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
  Deferred tax assets and liabilities are computed by applying the U.S.
federal income tax rate in effect to the gross amounts of temporary
differences and other tax attributes, such as net operating loss
carryforwards. As a result of the application of purchase accounting to the
BPI Acquisition in May 1995, the Company recognized deferred tax assets of
$15,380,000, which had not been recognized by the Company in previous periods.
Recognition of these assets effectively reduced goodwill resulting from the
acquisitions by a corresponding amount.
 
  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, 1996 to be realized as
a result of the reversal during the carryforward period of existing taxable
temporary differences giving rise to deferred tax liabilities, the generation
of taxable income in the carryforward period and the disposition of one or
more of its stations.
 
  At December 31, 1996, the Company has net operating loss carryforwards
available to offset future taxable income of approximately $38,600,000 which
begin to expire in 2004. Approximately $29,700,000 of such net operating loss
carryforwards are subject to annual use limitations of up to $2,800,000 per
year.
 
(9) OPERATING LEASES
 
  The Company has noncancelable operating leases, primarily for office space.
These leases generally contain renewal options for periods ranging from one to
ten years and require the Company to pay all executory costs such as
maintenance and insurance. Rental expense for operating leases (excluding
those with lease terms of one month or less that were not renewed) was
approximately $2,193,000, $3,073,000 and $5,462,000 during 1994, 1995 and
1996, respectively.
 
  Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31,
1996 are as follows:
 
<TABLE>
     <S>                                                                  <C>
     Year ending December 31:
       1997.............................................................. $4,658
       1998..............................................................  4,001
       1999..............................................................  4,015
       2000..............................................................  3,625
       2001..............................................................  3,559
</TABLE>
 
(10) COMMITMENTS AND CONTINGENCIES
 
  In August 1993, the Company terminated an agreement with Sagittarius
Broadcasting Company (an affiliate of Infinity Broadcasting Corporation) and
One Twelve, Inc. (collectively, the "Claimants" or the "Plaintiffs") pursuant
to which programming featuring radio personality Howard Stern was broadcast on
radio station WLUP-AM (now WMVP-AM) in Chicago. The Claimants allege that
termination of the agreement was wrongful and have sued the Company in the
Supreme Court of the State of New York, County of New York (the "Court"). The
agreement required payments to the Claimants in the amount of $2,600,000 plus
five percent of advertising revenues generated by the programming over the
three-year term of the agreement. A total of approximately
 
                                     F-19
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
$680,000 was paid to the Claimants pursuant to the agreement prior to
termination. Claimants' original complaint alleged claims for breach of
contract, indemnification, breach of fiduciary duty and fraud. Plaintiffs'
aggregate prayer for relief in the original complaint totaled $45,000,000. On
July 12, 1994, the Court granted the Company's motion to dismiss Plaintiffs'
claims for fraud and breach of fiduciary duty. On June 6, 1995, the Court
denied the Plaintiff's motion for summary judgment on their contract and
indemnification claims and this order has been affirmed on appeal. On May 17,
1996, after the close of discovery, the Company filed a motion for summary
judgment, seeking the dismissal of the remaining claims in the original
complaint. On July 1, 1996, Plaintiffs moved for leave to amend their
complaint in order to add claims for breach of the covenant of good faith and
fair dealing, tortious interference with business advantage and prima facia
punitive damages in excess of $25,000,000. On March 13, 1997, the Court denied
the Company's motion for summary judgment, allowed Plaintiffs' request to
amend the complaint to add a claim for breach of the covenant of good faith
and fair dealing, and denied Plaintiffs' request to amend the complaint to add
claims for tortious interference with business advantage and prima facia tort.
The Company believes that it acted within its rights in terminating the
agreement.
 
  The Company is also involved in various other claims and lawsuits which are
generally incidental to its business. The Company is vigorously contesting all
such matters and believes that their ultimate resolution will not have a
material adverse effect on its consolidated financial position, results of
operations or cash flows.
 
  The Company offers substantially all of its employees voluntary
participation in a 401(k) Plan. The Company may make discretionary
contributions to the plan; however, no such contributions were made by the
Company during 1994, 1995 or 1996.
 
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
 
  The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments for which the estimated fair value of
the instrument differs significantly from its carrying amounts at December 31,
1995 and 1996. 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>
                                              1995                1996
                                        ------------------  ------------------
                                        CARRYING    FAIR    CARRYING    FAIR
                                         AMOUNT    VALUE     AMOUNT    VALUE
                                        --------  --------  --------  --------
   <S>                                  <C>       <C>       <C>       <C>
   Interest rate swaps................. $    --   $    272  $    --   $   (199)
   Long-term debt--Senior Notes........  (14,000)  (15,443)  (10,000)  (10,572)
</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.
 
    Interest rate swaps: The fair value of the interest rate swap and cap
  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 the broker. The carrying amounts of receivables (payables)
  under interest rate swaps and caps are included in accrued expenses in the
  accompanying consolidated balance sheets.
 
    Long-term debt: The fair values of the Company's Senior Notes are based
  on discounted cash flows under the Senior Notes using interest rates
  currently available to the Company for similar debt issues. As amounts
  outstanding under the Company's Senior Credit Facility agreements bear
  interest at current market rates, their carrying amounts approximate fair
  market value.
 
                                     F-20
<PAGE>
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
          (TABLES IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA)
 
 
(12) QUARTERLY FINANCIAL DATA (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                   QUARTER ENDED
                                     -------------------------------------------
                                     MARCH 31  JUNE 30  SEPTEMBER 30 DECEMBER 31
                                     --------  -------  ------------ -----------
<S>                                  <C>       <C>      <C>          <C>
1995:
  Net revenues...................... $ 25,413  $41,992    $47,772      $47,754
  Operating income..................      919    6,613      1,812        4,433
  Net loss..........................   (4,118)    (759)    (3,559)      (2,244)
  Net loss per share................     (.31)    (.05)      (.14)        (.08)
1996:
  Net revenues...................... $ 53,371  $72,991    $78,768      $88,720
  Operating income (loss)...........   (8,223)   7,062      9,351        9,770
  Net income (loss).................  (15,481)  (3,429)    (1,997)         893
  Net income (loss) per share.......    (0.55)   (0.12)     (0.07)        0.02
</TABLE>
 
  Operating income (loss) is defined as net revenues less station operating
expenses, corporate general and administrative expenses, depreciation and
amortization and other nonrecurring costs.
 
  Net loss per share for the years ended December 31, 1995 and 1996 differs
from the sum of net loss per share for the quarters during the respective year
due to the different periods used to calculate weighted average shares
outstanding.
 
                                     F-21
<PAGE>
 
                                                                      SCHEDULE I
 
                  EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
                    CONDENSED BALANCE SHEETS--PARENT COMPANY
 
                           DECEMBER 31, 1995 AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               1995      1996
                                                             --------  --------
<S>                                                          <C>       <C>
                           ASSETS
Investment in subsidiaries, at equity....................... $305,597  $549,411
                                                             ========  ========
            LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $  1,020  $    --
Stockholders' equity:
  Preferred stock...........................................   80,500       --
  Common stocks.............................................      280       421
  Paid-in capital...........................................  317,295   662,502
  Accumulated deficit.......................................  (93,498) (113,512)
                                                             --------  --------
    Total stockholders' equity..............................  304,577   549,411
                                                             --------  --------
    Total liabilities and stockholders' equity.............. $305,597  $549,411
                                                             ========  ========
</TABLE>
 
 
           See accompanying notes to condensed financial statements.
 
                                      F-22
<PAGE>
 
                                                               SCHEDULE I, CONT.
 
                  EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
               CONDENSED STATEMENTS OF OPERATIONS--PARENT COMPANY
 
                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                    1994     1995      1996
                                                   -------  -------  --------
<S>                                                <C>      <C>      <C>
Net loss--equity in losses of unconsolidated
 subsidiaries..................................... $(3,546) $(5,850) $(16,194)
                                                   =======  =======  ========
</TABLE>
 
 
 
           See accompanying notes to condensed financial statements.
 
                                      F-23
<PAGE>
 
                                                               SCHEDULE I, CONT.
 
                  EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
               CONDENSED STATEMENTS OF CASH FLOWS--PARENT COMPANY
 
                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                   1994      1995       1996
                                                  -------  ---------  ---------
<S>                                               <C>      <C>        <C>
Cash flows from operating activities:
  Net loss......................................  $(3,546) $  (5,850) $ (16,194)
  Equity in undistributed losses of
   unconsolidated subsidiaries..................    3,546      5,850     16,194
                                                  -------  ---------  ---------
    Net cash provided by operating activities...      --         --         --
                                                  -------  ---------  ---------
Cash flows from investing activities--investment
 in subsidiaries................................      --    (127,936)  (261,028)
                                                  -------  ---------  ---------
Cash flows from financing activities:
  Proceeds from issuance of common stock,
   preferred stock and warrants.................     (240)   132,766    264,938
  Redemption of redeemable preferred stock......      --         --         (90)
  Dividends on preferred stock..................   (4,830)    (4,830)    (3,820)
  Distributions from subsidiaries...............    5,070        --         --
                                                  -------  ---------  ---------
    Net cash provided by financing activities...      --     127,936    261,028
                                                  -------  ---------  ---------
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-24
<PAGE>
 
                                                              SCHEDULE I, CONT.
 
                 EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
            NOTES TO PARENT COMPANY CONDENSED FINANCIAL STATEMENTS
 
(1) GENERAL
 
  The accompanying condensed financial statements of Evergreen 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 senior credit
facility and senior note agreement of this subsidiary. Such obligations
prohibit the subsidiary from making loans or transfers or paying dividends to
the Company without the consent of the lenders subject to certain provisions
in the Senior Credit Facility. Prior to such time the Company was the debtor
on such obligations. See note 7 to consolidated financial statements regarding
these obligations.
 
(3) OTHER
 
  See note 7 to consolidated financial statements for a description of the
preferred stock, common stock and other equity securities of the Company.
 
                                     F-25
<PAGE>
 
                                                                     SCHEDULE II
 
                  EVERGREEN MEDIA CORPORATION AND SUBSIDIARIES
 
                       VALUATION AND QUALIFYING ACCOUNTS
 
                  YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
                             (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, 1996.............  $ 2,000     2,179         156(1)    2,043     2,292
                          =======     =====     =======       =====    ======
  Year ended December
   31, 1995.............  $   835       904       1,644(1)    1,383     2,000
                          =======     =====     =======       =====    ======
  Year ended December
   31, 1994.............  $   734       754         --          653       835
                          =======     =====     =======       =====    ======
Deferred tax asset
 valuation allowance:
  Year ended December
   31, 1996.............  $   --        --          --          --        --
                          =======     =====     =======       =====    ======
  Year ended December
   31, 1995.............  $14,458       --      (14,458)(1)     --        --
                          =======     =====     =======       =====    ======
  Year ended December
   31, 1994.............  $13,979       --          479         --     14,458
                          =======     =====     =======       =====    ======
</TABLE>
--------
(1) Additions (deductions) result from the application of purchase accounting
    relating to the BPI Acquisition in 1995 and the Pyramid Acquisition in
    1996.
 
                                      F-26
