## LETTER TO OUR SHAREHOLDERS 

What a difference a year makes. When I wrote to you a year ago, our nation was struggling to overcome one of the worst recessions since the Great Depression. A year later, the economy is in recovery, advertising spending is on the upswing, and our Company enjoyed over an 18% net broadcast revenue growth rate in 2010; growth which came from multiple fronts. While this is all good news, we are still not back to our pre-recession advertising revenue levels, leading us to believe that our core business can grow even in the upcoming 2011 non-election year. True, the strength in our key advertising categories and the improving economy are reasons we are optimistic about our long term prospects, but we are equally enthusiastic about potential benefits to be realized by pairing our "one- to-many" consumer reach with new technological opportunities and alternate uses of our broadcast spectrum. 

But first, let me review our 2010 financial performance and the positive improvements we are experiencing. I am pleased to report that in 2010, our net broadcast revenues grew 18.2%, for an increase of $100.8 million as compared to 2009. Included in that performance was $42.0 million of political campaign and issue advertising; a record- setting year for us, representing a 2% increase over the 2008 presidential election year and a 34.9% increase over 2006. We believe the Congressional change of control, the emergence of the Tea Party and increasing citizen activism will result in political advertising being a growth category for us for years to come. Current third party estimates call for 2012 political ad spending to increase 8% over 2010's levels. Growth in advertising by the auto sector was another category where we enjoyed meaningful returns, up 36.9% in 2010. While auto as a percent of our total times sales increased from 15.2% in 2009 to 17.9% in 2010, it is still well below the 21% pre-recession contribution levels. Current forecasts are for U.S. new vehicle sales to increase nearly 12% in 2011 to approximately 12.9 million units sold, which we expect to result in increased advertising by the auto manufacturers and local dealer groups. 

On the expense side, we continue to manage our costs using the same discipline that you have come to expect from us over the years. The revenue growth coupled with moderate expense growth helped drive our EBITDA 1 in 2010 to the highest level it has been in the past 10 years, based on our current portfolio of stations. In other words, you would need to look back to the year 2000 to find EBITDA higher than the $276.1 million we reported in 2010. As compared to 2009, this was a 45.1% increase, representing a margin of 36.0%, as compared to 29.0% in 2009. 

Looking ahead to 2011, there are two significant cash flow changes we expect. First, we are estimating a decline in our programming cash payments by approximately $21 million due to a shift to more first-run and barter 

syndicated shows. Adding to expenses, however, will be higher network programming licensing fees. While some may view these license fees as a negative to the business, we believe they may actually benefit broadcasters in multiple ways. First, it is our expectation that the money paid by the affiliates to the networks will be invested in higher quality programming that will further drive ratings and ultimately grow revenues. More importantly, the sharing of the retransmission revenue stream between the networks and its affiliates underscores the value of the programming that each brings to the multi-video program distributors ("MVPDs") such as cable, satellite and telephone video providers. It is estimated that the MVPDs spend approximately $30 billion a year to acquire programming. Broadcast programming, which consists of highly popular network prime-time and sports programming, affiliate local news and syndicated product, receives less than 10% of these programming expenditures even though broadcast television represents approximately 40% to 50% of the viewing audience. We believe that having the networks' and the affiliates' interests aligned in terms of retransmission consent compensation will help the industry to move to our goal of achieving equilibrium with regard to the programming payments made by the MVPDs. 

The network/affiliate relationship is one based in mutual benefit. The network brings premier programming to the local affiliate and the affiliate uses its local presence to help promote and clear the network's shows, in turn making the product more valuable to both parties. This model has a long tradition of success, which is why we believe the networks are recommitting to their affiliates. In the past year, we have extended our affiliation agreements with the FOX Network (20 stations) and the ABC Network (9 stations), and are in discussions for an extension with the CW Network (10 stations). We have also extended our programming service arrangement with MyNetworkTV (16 stations). 

The increases in retransmission revenues, political advertising, and the core business contributed not only to our top-line performance, but to our free cash flow generation$^{2}$. In 2010, we generated $160.4 million of free cash, of which $34.6 million was returned to our shareholders in the form of a $0.43 per share special dividend, representing an approximate 5.3% dividend yield when declared. As you may recall, Sinclair had been a regularly paying dividend company prior to the recession. Given the confidence in our future cash flow and growth prospects, our Board of Directors reinstated our dividend policy in 2011 and declared a $0.12 quarterly dividend per share, representing annualized shareholder distributions of almost $40 million. 

The strength of our performance was evident not only in our peak EBITDA and free cash flow, but in our balance sheet as well. Last year, we continued our focus of refinancing our near term debt maturities and reducing our leverage. We successfully issued $250 million in 8.375% 8-year notes which were used to redeem our 8.0% senior subordinated notes due 2012. We also applied $58 million of our free cash to tender for a portion of our 6.0% convertible bonds and prepaid $60 million of our bank debt. As a result, our next meaningful debt maturity does not occur until 2016. In total, we reduced debt, net of cash on hand, by $93 million during 2010 and reported our lowest total net leverage in the past 15 years. We are pleased to report that our equity performance was just as notable. In 2010, investors once again took note of our Company's improving financial performance and lower risk profile. In response, our stock increased 103% for the year. Coupled with the 5.3% dividend yield, we generated a 108.3% total return for shareholders, as compared to the 

