Hearst Argyle Television, Inc.

Yesterday, today and tomorrow, the success of our endeavors is determined by the work of our talented employees in news and content development, in marketing and sales, in engineering and production, and in administration. We are proud that our company is recognized as a "destination" employer for television professionals. The achievements, recognition and awards that came our way in 2006 are a testament to the extraordinary work that´s done everyday at Hearst-Argyle stations.

In the past year, WBAL-TV, Baltimore, captured a prestigious du Pont-Columbia Award for Investigative Journalism. KMBC-TV, Kansas City; WISN-TV, Milwaukee; and KOCO-TV, Oklahoma City, tied for the number-one ranking among all ABC affiliates nationwide in the November Nielsen ratings – an unprecedented performance that´s indicative of how strong localism, news leadership, and popular entertainment programs enable broad-based market ratings leadership. These, and many more of the Hearst-Argyle stations, are perennially cited as among the best in America, including WCVB-TV (ABC), Boston; WMUR-TV (ABC), Manchester; WGAL-TV (NBC), Lancaster/Harrisburg; KCCI-TV (CBS), Des Moines; and KCRA-TV (NBC), Sacramento.

Of particular note is the recognition our company and stations have achieved for excellence in political journalism. In an unprecedented fourth consecutive year, Hearst-Argyle Television was the recipient of the Walter Cronkite Award from the University of Southern California´s Annenberg School for Communication. And three of our stations: WBAL-TV, Baltimore; WGAL-TV, Lancaster; and WESH-TV, Orlando, were individual recipients of Cronkite Awards, as well. The success we´ve enjoyed in generating significant political revenues during each election cycle is the byproduct of the outstanding work by our journalists who provide comprehensive and compelling coverage of their local political stories.

The election campaign for 2008 is already under way and we are again committed to making the local election stories a centerpiece of our stations´ local news service. It is apparent that political spending will be at record-high levels beginning in late 2007, and carrying forward throughout 2008. We expect that our stations – so well positioned as local news leaders and so associated with political reporting – will benefit significantly in the 2008 election cycle. Of particular note is the important role played by WMUR-TV, Manchester, New Hampshire; and KCCI-TV, Des Moines, Iowa. Both of these stations serve states that are highly influential in the determination of presidential nominees. The engagement, experience and credibility of our stations´ journalists benefit not only our local viewers, but also help illuminate the stories of the candidates and the issues for national audiences as well.

Importantly, in 2006 we continued to make progress on one of our key strategic priorities: expanding locally in our largest markets. We identified a strategically compelling television investment opportunity in 2006, acquiring WKCF-TV, the CW affiliate in Orlando, for $217.5 million, to create a powerful duopoly in an attractive growth market with WESH-TV, our NBC affiliate serving Orlando and Daytona Beach. We now operate television duopolies in Boston (WCVB-TV and WMUR-TV), Orlando (WESH-TV and WKCF-TV), Sacramento (KCRA-TV and KQCA-TV), and Kansas City (KMBC-TV and KCWE-TV), four of our six largest markets. And in Baltimore, the WBAL-TV, WBAL-AM and WIYY-FM trio of stations enjoys extraordinary success and dominance in a very competitive market environment.

The pace of change in the media space, and in the television business in particular, continues to accelerate. Companies and managements are being challenged to identify new strategies for growth, while continuing to harvest the opportunities inherent in traditional businesses that will drive returns and fund future initiatives.

As distribution opportunities expand, providing us with more ubiquitous ways to stay in touch with our audiences, so too do our business opportunities. We have been increasingly effective in our ability to monetize the popularity of our content via the process of retransmission consent negotiations with program distributors, such as direct-broadcast satellite operators, cable system operators, and the telecommunications companies who are accelerating build-out of digital fiber-optic television services.

The next generation of television is unfolding before our eyes. Today our local station brands continue to resonate everyday with local viewers – on-air, as always, but also on-line. The essence of the local television service our stations provide – engaged, local journalism and a personal connection with our communities – is now an on-demand product. Our news and entertainment programs typically attract high leadership ratings, and our local websites now reach millions of users everyday in pursuit of timely, in-depth news, weather, local sports, entertainment and community content.

We are aggressively advancing our efforts in digital media, focusing on video broadband initiatives, television multicasting products, and mobile distribution of our proprietary content, and we have reorganized our management structure to encourage and support growth objectives. Our 38% equity interest in Internet Broadcasting is highly strategic for us. We foresee continued growth and development from IB that will benefit our stations and enhance the value of that company for its shareholders.

In 2006, Hearst-Argyle´s network of local websites served 1.3 billion page views and 38 million video streams to an average of four million monthly unique visitors. And we provided our growing list of advertisers with an exciting and impactful marketing vehicle, fully complementary to our television advertising platforms.

We continue to see significant opportunity in the development of our Internet information products and our new digital multicast television products, which benefit from the extraordinary brand equity our stations have cultivated over many decades. The High Definition production of our award-winning program "Chronicle" and our newscasts at WCVB-TV, Boston, and KCRA-TV, Sacramento; the enhanced video capability of our local websites; and our recently launched digital weather channels are all examples of the ways Hearst-Argyle stations are leading the next generation of television.

Our company is fortunate indeed to have such a committed group of employees, working so hard to compete and achieve success at each of our stations. We offer our appreciation and thanks to all of our talented colleagues. And thanks as well to our Board of Directors for their encouragement, support and guidance. A company-wide commitment to the highest standards of integrity, good governance, and full compliance in respect to all of our social, legal and financial and regulatory responsibilities is a cornerstone of our company culture, and most certainly contributes to our success and leadership in the television industry.

And we offer a special word of thanks to the men and women of our New Orleans station, WDSU-TV, who have worked valiantly to rebuild the station in the wake of Hurricane Katrina, in impressive fashion. As a result of these efforts, and those of people throughout New Orleans, WDSU-TV helped lead efforts of recovery and rebirth in 2006. We commemorated Katrina´s first anniversary on all our stations last fall with a pair of documentaries, "Seven Days That Changed New Orleans," recounting the week of Katrina as experienced by the people of WDSU-TV, and "Song for New Orleans," celebrating the city´s musical rebirth. More on these specials can be found on our homepage, www.hearstargyle.com

We believe our company is among the best positioned and best capitalized companies in the television station business. Our brands are strong. Our content is typically among the most – if not the most – popular in a given market, and we have the advantage of scale in very attractive communities around the country. We have talented local management, sound financial fundamentals, including an investment grade balance sheet. Most importantly, we have a vision of – and a running start on – the digital media opportunities that will be growth drivers for us in the years ahead.