METROMEDIA INTERNATIONAL GROUP INC, 10-Q, 1998-08-13

METROMEDIA INTERNATIONAL GROUP INC
10-Q, 1998-08-13
MOTION PICTURE & VIDEO TAPE PRODUCTION

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q
(MARK ONE)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE PERIOD ENDED JUNE 30, 1998

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISION FILE NUMBER 1-5706

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

METROMEDIA INTERNATIONAL GROUP, INC.
(Exact name of registrant, as specified in its charter)

<TABLE>
<CAPTION>
DELAWARE 58-0971455
<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>

ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NJ 07073-2137
(Address and zip code of principal executive offices)
(201) 531-8000
(Registrant's telephone number, including area code)

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

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 PAST 90 DAYS. YES /X/ NO / /

THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF AUGUST 7, 1998 WAS
69,067,676.

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<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

INDEX TO
QUARTERLY REPORT ON FORM 10-Q

PART I--FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

Consolidated Condensed Statements of Operations............................................................ 2

Consolidated Condensed Balance Sheets...................................................................... 3

Consolidated Condensed Statements of Cash Flows............................................................ 4

Consolidated Condensed Statement of Stockholders' Equity................................................... 5

Notes to Consolidated Condensed Financial Statements....................................................... 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 23

Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................... 44

PART II--OTHER INFORMATION

Item 1. Legal Proceedings.................................................................................. 45

Item 3. Defaults upon Senior Securities.................................................................... 47

Item 4. Submission of Matters to a Vote of Security Holders................................................ 47

Item 6. Exhibits and Reports on Form 8-K................................................................... 48

Signature.................................................................................................. 49
</TABLE>

1
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- -----------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1997 1998
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues......................................................... $ 74,239 $ 52,000 $ 134,458 $ 110,975
Cost and expenses:
Cost of sales and operating expenses........................... 49,116 31,487 86,433 69,482
Selling, general and administrative............................ 42,965 33,334 77,598 60,619
Depreciation and amortization.................................. 5,127 4,238 10,442 8,097
---------- ---------- ----------- ----------
Operating loss................................................... (22,969) (17,059) (40,015) (27,223)
Interest expense................................................. 4,557 6,456 9,560 12,048
Interest income.................................................. 6,079 2,094 11,126 4,801
---------- ---------- ----------- ----------
Interest income (expense), net................................. 1,522 (4,362) 1,566 (7,247)
Loss before income tax expense, equity in investees, minority
interest, discontinued operations and extraordinary item....... (21,447) (21,421) (38,449) (34,470)
Income tax expense............................................... (143) (215) (630) (313)
Equity in losses of Joint Ventures............................... (4,045) (587) (11,558) (2,185)
Equity in losses and writedown of investment in RDM Sports Group,
Inc............................................................ -- (25,122) -- (25,122)
Minority interest................................................ 3,446 1,387 5,485 2,627
---------- ---------- ----------- ----------
Loss from continuing operations.................................. (22,189) (45,958) (45,152) (59,463)
Discontinued operations:
Gain on sale of Landmark Theatre Group......................... 5,267 -- 5,267 --
Loss from discontinued operations.............................. -- (25,914) -- (34,667)
---------- ---------- ----------- ----------
Loss before extraordinary item................................... (16,922) (71,872) (39,885) (94,130)
Extraordinary item:
Equity in early extinguishment of debt of RDM Sports Group,
Inc.......................................................... -- (1,094) -- (1,094)
---------- ---------- ----------- ----------
Net loss......................................................... (16,922) (72,966) (39,885) (95,224)
Cumulative convertible preferred stock dividend requirement...... (3,752) -- (7,504) --
---------- ---------- ----------- ----------
Net loss attributable to common stockholders..................... $ (20,674) $ (72,966) $ (47,389) $ (95,224)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Weighted average number of common shares--Basic.................. 69,046 66,186 68,810 66,171
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Loss per common share--Basic:
Continuing operations.......................................... $ (0.38) $ (0.69) $ (0.77) $ (0.90)
Discontinued operations........................................ $ 0.08 $ (0.39) $ 0.08 $ (0.52)
Extraordinary item............................................. $ -- $ (0.02) $ -- $ (0.02)
Net loss....................................................... $ (0.30) $ (1.10) $ (0.69) $ (1.44)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>

See accompanying notes to consolidated condensed financial statements

2
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents.......................................................... $ 202,938 $ 129,661
Short-term investments............................................................. 3,069 100,000
Accounts receivable:
Snapper, net..................................................................... 28,484 26,494
Other, net....................................................................... 7,590 5,190
Inventories........................................................................ 71,375 96,436
Other assets....................................................................... 5,289 4,021
------------ ------------
Total current assets........................................................... 318,745 361,802
Investments in and advances to Joint Ventures:
Eastern Europe and the Republics of the Former Soviet Union........................ 94,272 86,442
China.............................................................................. 59,714 45,851
Net assets of discontinued operations:
Landmark Theatre Group............................................................. -- 48,531
Property, plant and equipment, net of accumulated depreciation....................... 47,714 44,010
Intangible assets, less accumulated amortization..................................... 201,355 200,120
Other assets......................................................................... 4,320 2,516
------------ ------------
Total assets................................................................... $ 726,120 $ 789,272
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable................................................................... $ 26,476 $ 30,036
Accrued expenses................................................................... 72,330 73,349
Current portion of long-term debt.................................................. 60,962 21,478
------------ ------------
Total current liabilities...................................................... 159,768 124,863
Long-term debt....................................................................... 1,604 57,938
Other long-term liabilities.......................................................... 8,727 8,225
------------ ------------
Total liabilities.............................................................. 170,099 191,026
------------ ------------
Minority interest.................................................................... 37,346 37,564
Commitments and contingencies
Stockholders' equity:
7 1/4% Cumulative Convertible Preferred Stock...................................... 207,000 207,000
Common Stock, $1.00 par value, authorized 400,000,000 shares, issued and
outstanding 69,067,676 and 68,390,800 shares at June 30, 1998 and December 31,
1997, respectively............................................................... 69,068 68,391
Paid-in surplus.................................................................... 1,012,603 1,007,272
Accumulated deficit................................................................ (766,004) (718,615)
Accumulated other comprehensive loss............................................... (3,992) (3,366)
------------ ------------
Total stockholders' equity..................................................... 518,675 560,682
------------ ------------
Total liabilities and stockholders' equity..................................... $ 726,120 $ 789,272
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to consolidated condensed financial statements.

3
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------
JUNE 30, JUNE 30,
1998 1997
----------- ----------
<S> <C> <C>
Operating activities:
Net loss............................................................................... $ (39,885) $ (95,224)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of Landmark Theatre Group............................................... (5,267) --
Loss from discontinued operations.................................................... -- 34,667
Equity in losses and writedown of investment in RDM Sports Group, Inc................ -- 25,122
Equity in loss on early extinguishment of debt of RDM Sports Group, Inc.............. -- 1,094
Equity in losses of Joint Ventures................................................... 11,558 2,185
Depreciation and amortization........................................................ 10,442 8,097
Minority interest.................................................................... (5,485) (2,627)
Other................................................................................ 664 2,515
Changes in operating assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable........................................... (3,510) 3,320
(Increase) decrease in inventories................................................... 25,086 (27,003)
(Increase) decrease in other assets.................................................. (2,707) 847
Increase (decrease) in accounts payable and accrued expenses......................... (9,888) 6,751
Other operating activities, net...................................................... (349) (113)
----------- ----------
Cash used in operating activities.................................................. (19,341) (40,369)
----------- ----------
Investing activities:
Investments in and advances to Joint Ventures........................................ (34,632) (20,634)
Distributions from Joint Ventures.................................................... 3,550 2,994
Purchase of short-term investments................................................... (3,069) --
Proceeds from sale of short-term investments......................................... 100,000 --
Purchase of additional equity in subsidiaries........................................ (4,262) (3,320)
Business acquisitions................................................................ (2,611) (4,750)
Net proceeds from sale of Landmark Theatre Group..................................... 57,298 --
Additions to property, plant and equipment........................................... (5,278) (7,617)
Other investing activities, net...................................................... 629 (8,945)
----------- ----------
Cash provided by (used in) investing activities.................................... 111,625 (42,272)
----------- ----------
Financing activities:
Proceeds from issuance of long-term debt............................................. -- 19,564
Payments on notes and subordinated debt.............................................. (16,850) (16,791)
Preferred stock dividends paid....................................................... (7,504) --
Proceeds from issuance of common stock related to incentive plans.................... 5,347 797
Due from discontinued operations..................................................... -- (67)
----------- ----------
Cash provided by (used in) financing activities.................................... (19,007) 3,503
----------- ----------
Net increase (decrease) in cash and cash equivalents................................. 73,277 (79,138)
Cash and cash equivalents at beginning of period..................................... 129,661 89,400
----------- ----------
Cash and cash equivalents at end of period........................................... $ 202,938 $ 10,262
----------- ----------
----------- ----------
</TABLE>

See accompanying notes to consolidated condensed financial statements.

4
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
7 1/4% CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ACCUMULATED
------------------- ------------------- OTHER
NUMBER OF NUMBER OF PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT SURPLUS DEFICIT INCOME (LOSS) TOTAL
--------- -------- ---------- ------- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31,
1997...................... 4,140,000 $207,000 68,390,800 $68,391 $1,007,272 $(718,615) $(3,366) $560,682
Issuance of stock and stock
options related to
incentive plans........... -- -- 676,876 677 5,331 -- -- 6,008
Dividends on 7 1/4%
cumulative convertible
preferred stock........... -- -- -- -- -- (7,504) -- (7,504)
Other comprehensive loss.... -- -- -- -- -- -- (626) (626)
Net loss.................... -- -- -- -- -- (39,885) -- (39,885)
--------- -------- ---------- ------- ---------- ----------- ------------- --------
Balances, June 30, 1998..... 4,140,000 $207,000 69,067,676 $69,068 $1,012,603 $(766,004) $(3,992) $518,675
--------- -------- ---------- ------- ---------- ----------- ------------- --------
--------- -------- ---------- ------- ---------- ----------- ------------- --------
</TABLE>

See accompanying notes to consolidated condensed financial statements.

5
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND LIQUIDITY

BASIS OF PRESENTATION

The accompanying interim consolidated condensed financial statements include the
accounts of Metromedia International Group, Inc. ("MMG" or the "Company") and
its wholly-owned subsidiaries, Metromedia International Telecommunications, Inc.
("MITI" or the "Communications Group"), and Snapper Inc. ("Snapper"). All
significant intercompany transactions and accounts have been eliminated.

The Company completed the sale of Landmark Theatre Group ("Landmark") on April
16, 1998 (see note 4). Accordingly, Landmark has been recorded as a
discontinuance of a business segment, and the consolidated condensed balance
sheet at December 31, 1997 reflects the net assets of the discontinued segment.
In addition, the consolidated condensed statements of operations reflect
Landmark's results of operations for the three and six months ended June 30,
1997 as a discontinued operation.

In addition, on July 10, 1997, the Company completed the sale of substantially
all of its entertainment assets ( the "Entertainment Group Sale") (see note 4).
The Entertainment Group Sale was recorded as a discontinuance of a business
segment, and accordingly, the consolidated condensed statements of operations
for the three and six months ended June 30, 1997 reflect the results of
operations of the Entertainment Group as a discontinued operation.

Investments in other companies, including those of the Communications Group's
joint ventures ("Joint Ventures") that are not majority owned, or in which the
Company does not have control but exercises significant influence, are accounted
for using the equity method. The Company reflects its net investments, including
loans and accrued interest, in Joint Ventures under the caption "Investments in
and advances to Joint Ventures." The Company accounts for its equity in earnings
(losses) of the Joint Ventures on a three month lag.

The accompanying interim consolidated condensed financial statements have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission (the "Commission"). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the consolidated
financial statements and related footnotes included in the Company's Annual
Report on Form 10-K (the "1997 Form 10-K"). In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company as of June 30, 1998, the
results of its operations and its cash flows for the three and six month periods
ended June 30, 1998 and 1997 have been included. The results of operations for
the interim period are not necessarily indicative of the results which may be
realized for the full year.

LIQUIDITY

MMG is a holding company, and accordingly, does not generate cash flows. The
Communications Group is dependent on MMG for significant capital infusions to
fund its operations, its commitments to make capital contributions and loans to
its Joint Ventures and any acquisitions. Such funding requirements are based on
the anticipated funding needs of its Joint Ventures and certain acquisitions
committed to by the Company. Future capital requirements of the Communications
Group, including future acquisitions, will depend on the available funding from
the Company or alternative sources of financing and on the ability of the
Communications Group's Joint Ventures to generate positive cash flows. In
addition, Snapper is

6
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

1. BASIS OF PRESENTATION AND LIQUIDITY (continued)
restricted under covenants contained in its credit agreement from making
dividend payments or advances to MMG.

In the near term, the Company intends to satisfy its working capital
requirements and capital commitments with available cash on hand. However, the
Communications Group's businesses in the aggregate are capital intensive and
require the investment of significant amounts of capital in order to construct
and develop operational systems and market its services. As a result, the
Company will require additional financing in order to satisfy its on-going
working capital, acquisition and expansion requirements and to achieve its
long-term business strategies. Such additional capital may be provided through
the public or private sale of equity or debt securities of the Company or by
separate equity or debt financings by the Communications Group or certain
companies of the Communications Group. No assurance can be given that additional
financing will be available, to the Company on acceptable terms, if at all. If
adequate additional funds are not available, the Company may be required to
curtail significantly its long-term business objectives and the Company's
results from operations may be materially and adversely affected.

Management believes that its long-term liquidity needs will be satisfied through
a combination of the Company's successful implementation and execution of its
growth strategy to become a global communications and media company and through
the Communications Group's Joint Ventures achieving positive operating results
and cash flows through revenue and subscriber growth and through control of
operating expenses.

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION

The Communications Group records its investments in other companies and Joint
Ventures which are less than majority-owned, or which the Company does not
control but in which it exercises significant influence, at cost, net of its
equity in earnings or losses. Advances to the Joint Ventures under the line of
credit agreements between the Company or one of its subsidiaries and the Joint
Ventures are reflected based on the amounts recoverable under the credit
agreement, plus accrued interest.

Advances are made to Joint Ventures in the form of cash, for working capital
purposes and for payment of expenses or capital expenditures, or in the form of
equipment purchased on behalf of the Joint Ventures. Interest rates charged to
the Joint Ventures range from the prime rate to the prime rate plus 6%. The
credit agreements generally provide for the payment of principal and interest
from 90% of the Joint Ventures' available cash flow, as defined, prior to any
substantial distributions of dividends to the Joint Venture partners. The
Communications Group has entered into charter fund and credit agreements with
its Joint Ventures to provide up to $155.3 million in funding of which $24.8
million in funding obligations remain at June 30, 1998. The Communications
Group's funding commitments are contingent on its approval of the Joint
Ventures' business plans.

7
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
At June 30, 1998 and December 31, 1997, the Communications Group's
unconsolidated investments in Joint Ventures in Eastern Europe and the republics
of the former Soviet Union, at cost, net of adjustments for its equity in
earnings or losses, were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR YEAR
OWNERSHIP VENTURE OPERATIONS
1998 1997 % FORMED COMMENCED
--------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Name
CABLE TELEVISION
Kosmos TV, Moscow, Russia (1)............................ $ 355 $ (123) 50% 1991 1992
Baltcom TV, Riga, Latvia................................. 5,096 6,093 50% 1991 1992
Ayety TV, Tbilisi, Georgia............................... 3,100 3,732 49% 1991 1993
Kamalak TV, Tashkent, Uzbekistan......................... 2,960 2,824 50% 1992 1993
Sun TV, Chisinau, Moldova................................ 4,851 4,671 50% 1993 1994
Cosmos TV, Minsk, Belarus................................ 2,734 2,135 50% 1993 1996
Alma TV, Almaty, Kazakstan............................... 4,282 2,597 50% 1994 1995
Teleplus, St. Petersburg, Russia (2)..................... 1,330 1,093 45% 1996 1998
TV-21, Riga, Latvia...................................... 459 458 48% 1996 1997
--------- ---------
25,167 23,480
--------- ---------
PAGING
Baltcom Plus, Riga, Latvia............................... 980 1,232 50% 1994 1995
Paging One, Tbilisi, Georgia............................. 1,036 1,037 45% 1993 1994
Raduga Poisk, Nizhny Novgorod, Russia.................... 615 549 45% 1993 1994
PT Page, St. Petersburg, Russia.......................... 932 1,006 40% 1994 1995
Paging Ajara, Batumi, Georgia............................ 307 277 35% 1996 1997
Kazpage, Kazakstan (3)................................... 977 864 26-41% 1996 1997
Kamalak Paging, Tashkent, Uzbekistan..................... 2,541 2,243 50% 1992 1993
Alma Page, Almaty, Kazakstan............................. 653 1,936 50% 1994 1995
Mobile Telecom, Moscow, Russia (6)....................... 7,500 -- 50%
--------- ---------
15,541 9,144
--------- ---------
RADIO BROADCASTING
Eldoradio,St. Petersburg, Russia (4)..................... -- 971 75% 1993 1995
Radio Nika, Socci, Russia................................ 333 337 51% 1995 1995
AS Trio LSL, Tallinn, Estonia............................ 1,903 1,593 49% 1997 1997
--------- ---------
2,236 2,901
--------- ---------
INTERNATIONAL TOLL CALLING
Telecom Georgia, Tbilisi, Georgia........................ 5,114 6,080 30% 1994 1994
--------- ---------
CELLULAR TELECOMMUNICATIONS
Baltcom GSM, Latvia...................................... 10,879 11,996 21% 1996 1997
Magticom, Tbilisi, Georgia............................... 10,937 6,951 34% 1996 1997
--------- ---------
21,816 18,947
--------- ---------
</TABLE>

8
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)

<TABLE>
<CAPTION>
YEAR YEAR
OWNERSHIP VENTURE OPERATIONS
1998 1997 % FORMED COMMENCED
--------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
TRUNKED MOBILE RADIO
Trunked mobile radio ventures............................ 2,171 5,390
--------- ---------
PRE-OPERATIONAL (5)
Telephony related ventures and equipment................. 9,003 9,003
Other.................................................... 13,224 11,497
--------- ---------
22,227 20,500
--------- ---------
TOTAL.................................................... $ 94,272 $ 86,442
--------- ---------
--------- ---------
</TABLE>

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

(1) The Communications Group has a continuing obligation to fund Kosmos TV under
its credit agreement.

(2) Included in Pre-operational at December 31, 1997.

(3) Kazpage is comprised of a service entity and 10 paging Joint Ventures. The
Company's interest in the paging Joint Ventures ranges from 26% to 41% and
its interest in the service entity is 51%

(4) In November 1997, the Communications Group purchased an additional interest
in Eldoradio, increasing its ownership to 75%.

(5) At June 30, 1998 and December 31, 1997 amounts for entities whose venture
agreements are not yet finalized and amounts expended for equipment for
future wireless local loop projects are included in Pre-operational Joint
Ventures.

(6) In January 1998, the Communications Group signed a definitive agreement to
purchase 50% of Mobile Telecom. The purchase closed during June 1998 at a
price of $7.5 million plus two future contingent payments of $2.5 million
each, to be adjusted up or down based on performance of the business.
Simultaneously with the purchase of Mobile Telecom, the Company purchased a
50% interest in a paging distribution company for $500,000.

9
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
Summarized combined financial information of Joint Ventures accounted for on a
three-month lag under the equity method that have commenced operations as of the
dates indicated are as follows (in thousands):

COMBINED INFORMATION OF UNCONSOLIDATED JOINT VENTURES

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Assets:
Current assets....................................................................... $ 32,013 $ 30,563
Investments in wireless systems and equipment........................................ 97,750 84,875
Other assets......................................................................... 7,463 9,758
---------- ------------
Total assets....................................................................... $ 137,226 $ 125,196
---------- ------------
---------- ------------
Liabilities and Joint Ventures' Deficit:
Current liabilities.................................................................. $ 31,803 $ 28,280
Amount payable under MITI credit facility............................................ 57,355 50,692
Other long-term liabilities.......................................................... 67,983 49,232
---------- ------------
157,141 128,204
Joint Ventures' deficit.............................................................. (19,915) (3,008)
---------- ------------
Total liabilities and Joint Ventures' deficit...................................... $ 137,226 $ 125,196
---------- ------------
---------- ------------
</TABLE>

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
---------------------
<S> <C> <C>
1998 1997
---------- ---------
Revenue................................................................................. $ 46,102 $ 31,847
Expenses:
Cost of service....................................................................... 14,248 5,916
Selling, general and administrative................................................... 24,858 14,367
Depreciation and amortization......................................................... 12,418 5,432
Other................................................................................. 22 --
---------- ---------
Total expenses...................................................................... 51,546 25,715
---------- ---------
Operating income (loss)................................................................. (5,444) 6,132
Interest expense........................................................................ (5,748) (2,470)
Other loss.............................................................................. (1,524) (1,282)
Foreign currency transactions........................................................... (1,671) 1,061
---------- ---------
Net income (loss)....................................................................... $ (14,387) $ 3,441
---------- ---------
---------- ---------
</TABLE>

Financial information for Joint Ventures which are not yet operational is not
included in the above summary.

10
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
The following tables represent summary financial information for all operating
entities being grouped as indicated as of and for the six months ended June 30,
1998 and 1997 (in thousands, except subscribers):

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
---------------------------------------------------------------------------------------------------
TRUNKED
CABLE RADIO CELLULAR INTERNATIONAL MOBILE
TELEVISION PAGING BROADCASTING TELECOMMUNICATIONS TOLL CALLING RADIO TOTAL
---------- ------- ------------- ------------------- -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues................. $15,629 $ 8,982 $ 9,664 $ 8,850 $13,624 $ 4,980 $ 61,729
Depreciation and
amortization........... 6,155 1,493 681 4,724 915 961 14,929
Operating income (loss)
before taxes........... (3,370) (5,032) (6) (4,641) 3,112 (1,784) (11,721)
Interest income.......... 13 14 165 2 14 29 237
Interest expense......... 2,499 1,012 268 2,983 231 217 7,210
Net income (loss)........ (6,229) (7,678) (1,310) (8,065) 1,884 (2,079) (23,477)

Assets................... 43,085 17,496 21,613 62,345 25,549 17,297 187,385
Capital expenditures..... 5,182 408 392 22,263 1,643 2,166 32,054
Contributions to Joint
Ventures (2)........... 8,211 15,337 2,821 7,346 -- 3,442 37,157
Subscribers.............. 269,017 73,399 n/a 36,381 n/a 15,954 394,751

CONSOLIDATED SUBSIDIARIES
AND JOINT VENTURES
Revenues................. $ 1,576 $ 2,157 $ 8,694 $ -- $ -- $ 3,200 $ 15,627(1)
Depreciation and
amortization........... 666 774 590 -- -- 481 2,511
Operating income (loss)
before taxes........... (1,084) (5,151) 144 -- -- (186) (6,277)(1)
Interest income.......... 11 12 165 -- -- 29 217
Interest expense......... 454 639 263 -- -- 106 1,462
Net loss................. (1,441) (6,137) (1,148) -- -- (364) (9,090)(1)

Assets................... 8,537 8,413 20,674 -- -- 12,535 50,159
Capital expenditures..... 55 318 355 -- -- -- 728

UNCONSOLIDATED JOINT
VENTURES
Revenues................. $14,053 $ 6,825 $ 970 $ 8,850 $13,624 $ 1,780 $ 46,102
Depreciation and
amortization........... 5,489 719 91 4,724 915 480 12,418
Operating income (loss)
before taxes........... (2,286) 119 (150) (4,641) 3,112 (1,598) (5,444)
Interest income.......... 2 2 -- 2 14 -- 20
Interest expense......... 2,045 373 5 2,983 231 111 5,748
Net income (loss)........ (4,788) (1,541) (162) (8,065) 1,884 (1,715) (14,387)

Assets................... 34,548 9,083 939 62,345 25,549 4,762 137,226
Capital expenditures..... 5,127 90 37 22,263 1,643 2,166 31,326
Net investment in Joint
Ventures............... 25,167 15,541 2,236 21,816 5,114 2,171 72,045
Equity in income (losses)
of unconsolidated
investees.............. (4,261) (1,633) (84) (4,042) 565 (644) (10,099)
</TABLE>

11
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
---------------------------------------------------------------------------------------------------
TRUNKED
CABLE RADIO CELLULAR INTERNATIONAL MOBILE
TELEVISION PAGING BROADCASTING TELECOMMUNICATIONS TOLL CALLING RADIO TOTAL
---------- ------- ------------- ------------------- -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues................. $10,530 $ 6,170 $ 6,627 $ 108 $15,009 $ 1,771 $ 40,215
Depreciation and
amortization........... 4,126 764 147 180 523 424 6,164
Operating income (loss)
before taxes........... (1,047) (2,095) 1,378 (1,448) 9,689 (1,804) 4,673
Interest income.......... 2 3 38 -- 8 -- 51
Interest expense......... 1,758 516 259 160 102 208 3,003
Net income (loss)........ (3,299) (3,403) 761 (2,182) 11,142 (2,096) 923

Assets................... 36,098 15,373 5,467 18,102 22,617 10,851 108,508
Capital expenditures..... 4,563 1,878 290 -- 5,696 -- 12,427
Contributions to Joint
Ventures (2)........... 14,047 2,822 1,482 6,220 -- 2,575 27,146
Subscribers.............. 147,671 53,416 n/a 2,150 n/a 10,659 213,896

CONSOLIDATED SUBSIDIARIES
AND JOINT VENTURES
Revenues................. $ 1,079 $ 1,459 $ 5,830 $ -- $ -- $ -- $ 8,368(1)
Depreciation and
amortization........... 263 346 123 -- -- -- 732
Operating income (loss)
before taxes........... (687) (2,072) 1,300 -- -- -- (1,459)(1)
Interest income.......... -- -- 38 -- -- -- 38
Interest expense......... 206 121 206 -- -- -- 533
Net income (loss)........ (761) (2,457) 700 -- -- -- (2,518)(1)

Assets................... 6,616 5,073 4,591 -- -- -- 16,280
Capital expenditures..... 1,097 658 163 -- -- -- 1,918

UNCONSOLIDATED JOINT
VENTURES
Revenues................. $ 9,451 $ 4,711 $ 797 $ 108 $15,009 $ 1,771 $ 31,847
Depreciation and
amortization........... 3,863 418 24 180 523 424 5,432
Operating income (loss)
before taxes........... (360) (23) 78 (1,448) 9,689 (1,804) 6,132
Interest income.......... 2 3 -- -- 8 -- 13
Interest expense......... 1,552 395 53 160 102 208 2,470
Net income (loss)........ (2,538) (946) 61 (2,182) 11,142 (2,096) 3,441

Assets................... 29,482 10,300 876 18,102 22,617 10,851 92,228
Capital expenditures..... 3,466 1,220 127 -- 5,696 -- 10,509
Net investment in Joint
Ventures............... 28,199 10,483 865 12,748 5,836 2,905 61,036
Equity in income (losses)
of unconsolidated
investees.............. (3,284) (1,003) 80 (513) 3,343 (808) (2,185)
</TABLE>

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

(1) Does not reflect the Communications Group's and Protocall's headquarters'
revenue and selling, general and administrative expenses for the six months
ended June 30, 1998 and 1997, respectively.

(2) In the six months ended June 30, 1998 and June 30, 1997, the Communications
Group made investments of $4,419,000 and $2,586,000 in Fixed Telephony,
respectively.

In July 1998 the Communications Group sold its share of Protocall Ventures
Limited. As part of the transaction, Protocall Ventures Limited repaid the
outstanding amount of its debt to the Communications Group. The Company expects
to record a gain on the sale.

In August 1998, the Communications Group acquired a 76% interest in
Omni-Metromedia Caspian, Ltd., a company that owns 50% of a joint venture in
Azerbaijan, Caspian American Telecommunications, LLC ("CAT"). CAT has been
licensed by the Ministry of Communications of Azerbaijan to provide high speed
wireless local loop services and digital switching throughout Azerbaijan.
Omni-Metromedia has committed to provide up to $40.5 million in loans to CAT for
the funding of equipment acquisition and operational expenses in accordance with
CAT's business plans.

12
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA

At June 30, 1998 and December 31, 1997 the Company's investments, through its
majority owned subsidiary Metromedia China Corporation, in the Joint Ventures in
China, at cost, net of adjustments for its equity in earnings or losses, were as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR YEAR
VENTURE OPERATIONS
NAME 1998 1997 OWNERSHIP % FORMED COMMENCED
- ----------------------------------------------- --------- --------- ----------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>

Sichuan Tai Li Feng
Telecommunications Co., Ltd.
("Sichuan JV")............................... $ 17,309 $ 10,946 92% 1996 Pre-Operational

Chongqing Tai Le Feng
Telecommunications Co., Ltd.
("Chongqing JV")............................. 13,185 7,425 92% 1997 Pre-Operational

Ningbo Ya Mei
Telecommunications Co., Ltd.
("Ningbo JV")................................ 29,220 27,480 70% 1996 1997
--------- ---------

$ 59,714 $ 45,851
--------- ---------
--------- ---------
</TABLE>

The Joint Ventures participate in project cooperation contracts with China
United Telecommunications Incorporated ("China Unicom") that entitle the Joint
Ventures to certain percentages of the projects' distributable cash flows. The
Joint Ventures amortize the contributions to these cooperation contracts over
the cooperation periods of benefit (15 to 25 years).

(A) SICHUAN JV

On May 21, 1996, Asia American Telecommunications, Inc. ("AAT"), a majority
owned subsidiary of the Company, entered into a Joint Venture Agreement with
China Huangeng Technology Development Corp. ("CHTD") for the purpose of
establishing Sichuan Tai Li Feng Telecommunications Co., Ltd. ("Sichuan JV").
Also on May 21, 1996, Sichuan JV entered into a Network Systems Cooperation
Contract (the "STLF Contract") with China Unicom. The STLF Contract provides for
the establishment of a network of 50,000 local telephone lines in the Sichuan
Province (the "Sichuan Network"), approximately 540 kilometers of secondary
class fiber optical lines between Chengdu and Chongqing cities. This initial
phase has a contractual term of twenty-five years. Subsequent phases are
projected to expand the Sichuan Network to more than 1,000,000 lines of local
telephone network and expand the intra-provincial long distance toll lines.

Under the STLF Contract, China Unicom will be responsible for the construction
and operation of the Sichuan Network, while Sichuan JV will provide financing
and consulting services for the project. Distributable Cash Flows, as defined in
the STLF Contract, are to be distributed 22% to China Unicom and 78% to Sichuan
JV for a twenty-five year period. Sichuan JV holds title to all assets
constructed, except for gateway switches and long distance transmission
facilities. On the tenth anniversary of completion of the Sichuan Network's
initial phase, the assets will transfer from Sichuan JV to China Unicom. The
Joint Venture considers the costs of these fixed assets to be part of its
contribution to the STLF Contract.

13
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (continued)
The total amount to be invested in Sichuan JV is $29.5 million with equity
contributions from its shareholders amounting to $12.0 million. AAT has made
capital contributions to Sichuan JV of $11.4 million, representing 95% of the
Sichuan JV's equity. CHTD is required to contribute $600,000, representing 5% of
the Sichuan JV's equity. The remaining investment will be in the form of $17.5
million of loans from AAT and Northern Telecom Communications ("Nortel"), the
manufacturer of the equipment for construction of the network. As of June 30,
1998, AAT had long-term loans to Sichuan JV in the amount of $6.7 million. These
loans bear interest at 10.0% per annum. Ownership in the Sichuan JV is 92% by
AAT and 8% by CHTD.

AAT also has a consulting contract with CHTD for assistance with operations in
China. Under the contract, the Company is obligated to pay an annual fee of RMB
$15.0 million (U.S.$1.8 million at June 30, 1998 exchange rates).

(B) CHONGQING JV

In May 1997, China established the city of Chongqing as a separate municipal
government from the Province of Sichuan. On September 9, 1997, AAT entered into
a Joint Venture Agreement with CHTD for the purpose of establishing Chongqing
Tai Le Feng Telecommunication Co., Ltd. ("Chongqing JV"). Sichuan JV and
Chongqing JV entered into an agreement whereby the Chongqing JV assumed the
rights and obligations of the Sichuan JV under the STLF contract as it relates
to the financing and consulting services for the Sichuan Network that is
constructed by China Unicom within the City of Chongqing.

The total amount to be invested in Chongqing JV is $29.5 million with equity
contributions from its shareholders amounting to $14.8 million. AAT is required
to make capital contributions of $14.1 million representing 95% of the Chonqing
JV's equity. CHTD is required to contribute $740,000 representing 5% of the
Chongqing JV's equity. The remaining investment in Chongqing JV will be in the
form of $14.7 million of loans from AAT and Nortel, the manufacturer of the
equipment for construction of the network. Ownership in the Chongqing JV is 92%
by AAT and 8% by CHTD.

AAT entered into a Joint Venture Agreement with Ningbo United Telecommunications
Investment Co., Ltd. ("NUT") on September 17, 1996 for the purpose of
establishing Ningbo Ya Mei Telecommunications Co., Ltd. ("Ningbo JV"). Ningbo JV
is engaged in the development of a GSM telecommunications project in the City of
Ningbo, Zhejiang Province, for China Unicom. This project entailed construction
of a mobile communications network with a capacity for 50,000 subscribers. China
Unicom is the operator of the network, and Ningbo JV provides financing and
consulting services to China Unicom.

NUT assigned Ningbo JV the rights and obligations received by NUT under a
Network System Cooperation Contract (the "NUT Contract") with China Unicom,
including the right to expand the project to a capacity of 50,000 subscribers.
NUT has also agreed to assign the rights of first refusal on additional
telecommunications projects to Ningbo JV in the event such rights are granted to
NUT by China Unicom. Distributable Cash Flows, as defined in the NUT Contract
are to be distributed 27% to China Unicom and 73% to Ningbo JV for a 15 year
period for each phase. Under the NUT Contract, Ningbo JV will own 70% of all
assets constructed. Ningbo JV's ownership of these assets will transfer to China
Unicom as Ningbo JV's project investment is returned. The Ningbo JV considers
the cost of these assets to be part of its contribution to the NUT Contract.

14
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (continued)
Under the terms of the Ningbo JV, AAT provided $8.3 million of capital
contributions, representing 70% of Ningbo JV's equity. NUT provided $3.6 million
of capital contributions to Ningbo JV, representing 30% of Ningbo JV's equity.
Ningbo JV arranged loans with AAT, manufacturers of the equipment for the
project and banks in the amount of $17.8 million.

As of June 30, 1998, AAT had long-term loans to Ningbo JV in the amount of $20.1
million. A substantial portion of these loans was incurred to refinance previous
loans from manufacturers. These loans bear interest at 10% per annum.

On March 26, 1998 Ningbo JV and China Unicom signed a cooperation agreement for
Phase 1 re-expansion of the network (the "Cooperation Agreement"). The
re-expansion includes 35 new base stations (for a total of 100 base stations)
and 25,000 new subscribers (for a total capacity of 75,000 subscribers). The
feasibility study for the expansion was completed at March 6, 1998 and forecasts
a total budget of approximately $17.0 million.

A second Ningbo Joint Venture, Ningbo Ya Lian Telecommunications Co., Ltd.
("Ningbo JV II"), has been established. The rights of Ningbo JV relating to the
Phase I Re-expansion under the Cooperation Agreement have been assigned to
Ningbo JV II pursuant to an Amendment Agreement dated July 8, 1998.

The following table represents summary financial information for the Joint
Ventures and their related projects in China as of and for the six months ended
June 30, 1998 (in thousands, except subscribers):

<TABLE>
<CAPTION>
NINGBO SICHUAN CHONGQING
JV JV JV TOTAL
------ ------- --------- ------
<S> <C> <C> <C> <C>
Revenues.......................................... $1,395 $ -- $ 27 $1,422
Depreciation and amortization..................... 1,171 18 90 1,279
Operating income (loss)........................... 131 (321) (418) (608)
Interest income (expense), net.................... (1,142) 11 6 (1,125)
Net loss.......................................... (1,011) (310) (412) (1,733)
Assets............................................ 35,231 18,370 14,540 68,141
Net investment in project......................... 32,498 11,029 5,816 49,343
AAT equity in loss of Joint Ventures.............. (790) (287) (382) (1,459)
Subscribers....................................... 26,242 -- -- 26,242
</TABLE>

Ningbo JV records revenue from the Ningbo China Unicom GSM project based on
amounts of revenues and profits reported to it by China Unicom through March 31,
1998.

4. DISCONTINUED OPERATIONS

SALE OF LANDMARK THEATRE GROUP

On April 16, 1998, the Company sold to Silver Cinemas, Inc. (the "Landmark
Sale") all of the assets of Landmark, except cash, for an aggregate cash
purchase price of approximately $62.5 million and the assumption of certain
Landmark liabilities. The Landmark Sale has been recorded as a discontinuance of
a business segment in the accompanying consolidated financial statements.

15
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

4. DISCONTINUED OPERATIONS (continued)
The gain on the Landmark sale reflected in the consolidated condensed statement
of operations for the three and six months ended June 30, 1998, is as follows:

<TABLE>
<S> <C>
Net proceeds................................................ $57,298
Net assets of Landmark at November 12, 1997................. (48,531)
Income taxes................................................ (3,500)
-------
Gain on Landmark Sale..................................... $ 5,267
-------
-------
</TABLE>

The net assets of Landmark at December 31, 1997 and November 12, 1997, the date
the Company adopted a plan to dispose of Landmark, were as follows (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 12,
1997 1997
------------ ------------
<S> <C> <C>
Current assets.................................... $ 793 $ 906
Non-current assets................................ 57,183 57,523
Current liabilities............................... (6,286) (4,738)
Non-current liabilities........................... (4,922) (5,160)
------------ ------------
Net assets...................................... $46,768 $48,531
------------ ------------
------------ ------------
</TABLE>

Landmark's revenues and income (loss) from operations for the three and six
months ended June 30, 1997, were $11.8 million and $28.8 million, respectively
and ($651,000) and $699,000, respectively. Loss from operations for the three
months ended June 30, 1997 includes income taxes of $10,000.

THE ENTERTAINMENT GROUP SALE

On July 10, 1997, the Company completed the sale of substantially all of its
entertainment assets (the "Entertainment Group"). The Entertainment Group's
revenues and loss from operations for the three and six months ended June 30,
1997 were $34.7 million and $62.3 million, respectively, and $25.3 million and
$35.4 million, respectively. Loss from operations for the three and six months
ended June 30, 1997 includes income taxes of $200,000 and $400,000,
respectively.

5. EARNINGS PER SHARE OF COMMON STOCK

Statement of Financial Standards No. 128 ("SFAS 128"), "Earnings per Share,"
specifies the computation, presentation and disclosure requirements for earning
per share ("EPS"). All prior period EPS data has been restated to conform with
SFAS 128. SFAS 128 replaces the presentation of primary and fully diluted EPS
with basic and diluted EPS.

Basic EPS excludes all dilutive securities. It is based upon the weighted
average number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that would occur if securities to issue common
stock were exercised or converted into common stock. In calculating diluted EPS,
no potential shares of common stock are to be included in the computation when a
loss from continuing operations available to common stockholders exists. For the
three and six months ended June 30, 1998 and 1997 the Company had losses from
continuing operations.

16
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

5. EARNINGS PER SHARE OF COMMON STOCK (continued)
The Company had at June 30, 1998 and 1997, potentially dilutive shares of common
stock of 19,072,000 and 10,120,000, respectively.

6. INVESTMENT IN RDM

In connection with the acquisition of The Actava Group, RDM Sports Group, Inc.
("RDM") was classified as an asset held for sale and the Company excluded its
equity in earnings and losses of RDM from its results of operations. At November
1, 1995, the Company recorded its investment in RDM to reflect the anticipated
proceeds from its sale. During 1996, the Company reduced the carrying value of
its investment in RDM to its then estimated net realizable value of $31.2
million.

On April 1, 1997, for financial statement reporting purposes, the Company no
longer qualified to treat its investment in RDM as a discontinued operation.
Since April 1, 1997, the Company recorded in its results of operations in 1997,
a reduction in the carrying value of its investment in RDM of $18.0 million and
its share of the expected net loss of RDM of $8.2 million.

On June 20, 1997, RDM entered into a $100.0 million revolving and term credit
facility (the "RDM Credit Facility"). The RDM Credit Facility was guaranteed by
a letter of credit in the amount of $15.0 million in favor of the lenders
thereunder ( the "Lenders"), which was obtained for the account of Metromedia
Company, and could not be drawn until five days after a payment default and
fifteen days after Non-Payment Default (as defined under the RDM Credit
Facility). In consideration of providing the letter of credit, Metromedia
Company was granted warrants to purchase 3 million shares of RDM Common Stock
(approximately 5% of RDM) ("RDM Warrants") at an exercise price of $.50 per
share. The RDM Warrants have a ten year term and are exercisable beginning
September 19, 1997. In accordance with the terms of the agreement entered into
in connection with the RDM Credit Facility, Metromedia Company offered the
Company the opportunity to substitute its letter of credit for Metromedia
Company's letter of credit and to receive the RDM Warrants. On July 10, 1997,
the Company's Board of Directors elected to substitute its letter of credit for
Metromedia Company's letter of credit and the RDM Warrants were assigned to the
Company.

On August 22, 1997, RDM announced that it had failed to make the August 15, 1997
interest payment due on its subordinated debentures and that it had no present
ability to make such a payment. As a result of the foregoing, on August 22,
1997, the Lenders declared an Event of Default, as defined under the RDM Credit
Facility, and accelerated all amounts outstanding under such facility. On August
28, 1997, an involuntary bankruptcy petition was filed against a subsidiary of
RDM in Federal bankruptcy court in Montgomery, Alabama. RDM and certain of its
affiliates each subsequently filed voluntary petitions for relief under chapter
11 of the Bankruptcy Code. Since the commencement of their respective chapter 11
cases, RDM and its affiliates have proceeded with the liquidation of their
assets and properties and discontinued ongoing business operations. The Company
does not currently anticipate that it will receive any distributions on account
of its RDM common stock or the RDM Warrants. The Company recorded in its results
of operations in 1997 a further reduction in the carrying value of RDM of $4.9
million and a loss of $15.0 million on the letter of credit.

After the commencement of RDM's and its affiliates' chapter 11 cases, the
Lenders drew upon the entire amount of the letter of credit. Consequently, the
Company will become subrogated to the Lenders' secured claims against the
Company in an amount equal to the drawing under the letter of credit following
payment in full of the Lenders. The Company intends to vigorously pursue its
subrogation claims in the

17
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

6. INVESTMENT IN RDM (continued)
chapter 11 cases. However, it is uncertain what recovery the Company will obtain
in respect of such subrogation claims.

On February 18, 1998, the Office of the United States Trustee filed a motion to
appoint a chapter 11 trustee in the United States Bankruptcy Court for the
Northern Division of Georgia. RDM and its affiliates subsequently filed a motion
to convert the chapter 11 cases to cases under chapter 7 of the Bankruptcy Code.
On February 19, 1998, the bankruptcy court granted the United States Trustee's
motion and ordered that a chapter 11 trustee be appointed. On February 25, 1998,
each of the Company's designees on RDM's Board of Directors submitted a letter
of resignation.

7. LONG-TERM DEBT

As of June 30, 1998, Snapper was not in compliance with certain financial
covenants under the Snapper Credit Agreement. The Company and AmSouth amended
the Snapper Credit Agreement to provide for a reduction of the line of credit
from $55.0 million to $51.0 million as of August 13, 1998. As part of the
amendment to the Snapper Credit Agreement, AmSouth waived the covenant defaults
as of June 30, 1998, however, based on the Company's expectations with complying
with the financial covenants contained in the Snapper Credit Agreement, the
Snapper Revolver has been classified as a current liability at June 30, 1998 in
the accompanying consolidated condensed balance sheet.

18
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

8. BUSINESS SEGMENT DATA

The business activities of the Company consist of two business segments and are
set forth as of and for the six months ended June 30, 1998 and 1997 in the
following table (in thousands):

<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
COMMUNICATIONS GROUP CONSOLIDATED:
Revenues.................................................... $ 16,629 $ 9,152
Depreciation and amortization............................... (6,716) (4,287)
Operating loss.............................................. (34,002) (23,260)
Equity in losses of Joint Ventures.......................... (11,558) (2,185)
Minority interest........................................... 3,467 2,627
Loss before income tax expense.............................. (36,744) (19,615)

Assets at June 30, 1998 and December 31, 1997............... 378,568 346,437
Capital expenditures........................................ $ 3,428 $ 4,372
-------- --------
-------- --------
SNAPPER:
Revenues.................................................... $117,829 $101,823
Depreciation and amortization............................... (3,722) (3,804)
Operating loss.............................................. (3,118) (1,460)
Loss before income tax expense.............................. (12,323) (5,740)

Assets at June 30, 1998 and December 31, 1997............... 146,731 167,858
Capital expenditures........................................ $ 1,850 $ 3,245
-------- --------
-------- --------
OTHER:
Revenues.................................................... $ -- $ --
Depreciation and amortization............................... (4) (6)
Operating loss.............................................. (2,895) (2,503)
Income (loss) before income tax expense..................... 4,545 (33,795)

Assets at June 30, 1998 and December 31, 1997, including
discontinued operations and eliminations.................. $200,821 $274,977
-------- --------
-------- --------
CONSOLIDATED:
Revenues.................................................... $134,458 $110,975
Depreciation and amortization............................... (10,442) (8,097)
Operating loss.............................................. (40,015) (27,223)
Equity in losses of Joint Ventures.......................... (11,558) (2,185)
Minority Interest........................................... 5,485 2,627
Loss before income tax expense.............................. (44,522) (59,150)

Assets at June 30, 1998 and December 31, 1997............... 726,120 789,272
Capital expenditures........................................ $ 5,278 $ 7,617
-------- --------
-------- --------
</TABLE>

The revenues and assets by the Communications Group's lines of business are
disclosed in notes 2 and 3.

19
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

9. OTHER CONSOLIDATED CONDENSED FINANCIAL STATEMENT INFORMATION

ACCOUNTS RECEIVABLE

The total allowance for doubtful accounts at June 30, 1998 and December 31, 1997
was $2.1 million and $2.6 million, respectively.

INVENTORIES

Lawn and garden equipment inventories and pager inventories are stated at the
lower of cost or market. Lawn and garden equipment inventories are valued
utilizing the last-in, first-out (LIFO) method. Pager inventories are calculated
on the weighted-average method.

Inventories consist of the following as of June 30, 1998 and December 31, 1997
(in thousands):

<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Lawn and garden equipment:
Raw materials........................................... $ 8,723 $11,031
Finished goods.......................................... 62,369 84,523
------- -------
71,092 95,554
Less: LIFO reserve...................................... 1,306 1,306
------- -------
69,786 94,248
------- -------
Telecommunications:
Pagers.................................................. 613 1,083
Telephony............................................... 607 425
Cable................................................... 369 680
------- -------
1,589 2,188
------- -------
$71,375 $96,436
------- -------
------- -------
</TABLE>

STOCK OPTION PLANS

For the six months ended June 30, 1998, the Company has granted stock options
and stock appreciation rights under the 1996 Metromedia International Group,
Inc. Incentive Stock Plan, which has resulted in compensation expense of
approximately $661,000 included in selling, general and administrative expenses.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest expense includes amortization of debt discount of $697,000 and $1.4
million for the three and six months ended June 30, 1997, respectively.

10. ACCOUNTING PRONOUNCEMENTS

In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities", was issued. SFAS
133 established accounting and reporting standards for derivative instruments
and for hedging activities. SFAS 133 requires that an entity recognize all
derivatives as either assets or liabilities and measure those instruments at
fair value. The accounting for the gain or loss due to changes in fair value of
the derivative instrument depends on whether the derivative instrument qualifies
as a hedge. SFAS 133 is effective for all fiscal quarters of fiscal

20
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

10. ACCOUNTING PRONOUNCEMENTS (continued)
years beginning after June 15, 1999. SFAS 133 can not be applied retroactively
to financial statements of prior periods. The Company anticipates that the
adoption of SFAS 133 will not have a material impact on the Company's
consolidated financial position and results of operations.

11. CONTINGENCIES

RISKS ASSOCIATED WITH THE COMMUNICATIONS GROUP'S INVESTMENTS

The ability of the Communications Group and its Joint Ventures to establish
profitable operations is subject to, among other things, significant political,
economic and social risks inherent in doing business in Eastern Europe, the
republics of the former Soviet Union and China. These include potential risks
arising out of government policies, economic conditions, imposition of taxes or
other similar charges by government bodies, foreign exchange fluctuations and
controls, civil disturbances, deprivation or unenforceablility of contractual
rights, and taking of property without fair compensation.

The Company may also be materially and adversely affected by laws restricting
foreign investment in the field of communications. Certain countries have
extensive restrictions on foreign investment in the communications field and the
Communications Group attempts to structure its prospective projects in order to
comply with such laws. However, there can be no assurance that such legal and
regulatory restrictions will not increase in the future or, as currently
promulgated, will not be interpreted in a manner giving rise to tighter
restrictions, and thus may have a material adverse effect on the Company's
prospective projects in the country. The Russian Federation has periodically
proposed legislation that would limit the ownership percentage that foreign
companies can have in communications businesses. While such proposed legislation
has not been enacted, it is possible that such legislation could be enacted in
Russia and that other countries in Eastern Europe and the republics of the
former Soviet Union may enact similar legislation which could have a material
adverse effect on the business operations, financial condition or prospects of
the Company. Such legislation could be similar to United States Federal law
which limits foreign ownership in entities owning broadcasting licenses.
Similarly, Chinese law and regulation prohibit foreign companies or joint
ventures in which they participate from providing telephony service to customers
in China and generally limit the role that foreign companies or their joint
ventures may play in the telecommunications industry. As a result, the
Communications Group affiliate that has invested in China structures its
transactions so that the applicable joint venture is a provider of telephony
equipment and technical support services as opposed to a direct provider of such
services. In addition, there is no way of predicting whether additional foreign
ownership limitations will be enacted in any of the Communications Group's
markets, or whether any such law, if enacted, will force the Communications
Group to reduce or restructure its ownership interest in any of the ventures in
which the Communications Group currently has an ownership interest. If foreign
ownership limitations are enacted in any of the Communications Group's markets
and the Communications

Group is required to reduce or restructure its ownership interests in any
ventures, it is unclear how such reduction or restructuring would be
implemented, or what impact such reduction or restructuring would have on the
Communications Group.

21
<PAGE>
METRODMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

11. CONTINGENCIES (continued)
dollar accounts to service their U.S. dollar denominated credit lines, thereby
reducing foreign currency risk. As the Communications Group and its Joint
Ventures expand their operations and become more dependent on local currency
based transactions, the Communications Group expects that its foreign currency
exposure will increase. The Communications Group does not hedge against foreign
exchange rate risks at the current time and, therefore, could be subject in the
future to any declines in exchange rates between the time a Joint Venture
receives its funds in local currencies and the time it distributes such funds in
U.S. dollars to the Communications Group.

The licenses pursuant to which the Communications Group's businesses operate are
issued for limited periods. Certain of these licenses expire over the next
several years. One of the licenses held by the Communications Group has expired,
although the Communications Group has been permitted to continue operations
while the reissuance is pending. The Communications Group has applied for a
renewal and expects a new license to be issued. Three other licenses held or
used by the Communications Group will expire during 1998, including the license
for Radio Juventus, the Company's radio operation in Hungary. The failure of
such licenses to be renewed may have a material adverse effect on the Company's
results of operations. Additionally, certain of the licenses pursuant to which
the Communications Group's businesses operate contain network build-out
milestone clauses. The failure to satisfy such milestones could result in the
loss of such licenses which may have a material adverse effect on the
Communications Group.

In the case of the licenses other than Radio Juventus, the Company's Joint
Ventures will apply for renewals of their licenses. While there can be no
assurance that these three licenses will be renewed, based on past experience,
the Communications Group expects to obtain such renewals. In the case of Radio
Juventus, the Communications Group plans to cause the venture to participate in
a competitive tender for a regional broadcasting license to cover Budapest and
certain other areas in Hungary. The Company believes that Radio Juventus'
prospects for winning such tender, which will be determined by the strength of
its bid in the tender, in comparison to the bids of other participants in the
tender, are good, although there can be no assurance that Radio Juventus will
win the tender.

LITIGATION

The Company is involved in various legal and regulatory proceedings. While the
results of any legal or regulatory proceeding contain an element of uncertainty,
management believes that the outcome of any known, pending or threatened legal
proceedings will not have a material effect on the Company's consolidated
financial position and results of operations.

22
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following discussion should be read in conjunction with the Company's
consolidated condensed financial statements and related notes thereto.

Metromedia International Group, Inc. ("MMG or the "Company") is a global
communications and media company engaged in the development and operation of a
variety of communications businesses, including cable television, AM/FM radio
broadcasting, paging, cellular telecommunications, international toll calling,
fixed telephony and trunked mobile radio, in Eastern Europe, the republics of
the former Soviet Union (the "FSU") and the People's Republic of China ("China")
and other selected emerging markets, through its Communications Group (the
"Communications Group").

The Communications Group's investments in communications businesses are made in
two primary geographic areas: Eastern Europe and the FSU, and China. In Eastern
Europe and the FSU, the Communications Group generally owns 50% or more of the
operating Joint Ventures ("Joint Ventures") in which it invests. Currently,
legal restrictions in China prohibit foreign participation in the operations or
ownership in the telecommunications sector. The Communications Group's existing
China Joint Ventures invest in network construction and development of telephony
networks for China United Telecommunications Incorporated ("China Unicom"). The
completed networks are operated by China Unicom. The China Joint Ventures
receive payments from China Unicom based upon distributable cash flow generated
by the networks, for a cooperation period of 15-25 years for each expansion
phase financed and developed. These payments are in return for the Joint Venture
providing financing, technical advice, consulting and other services.
Hereinafter, all references to the Communications Group's Joint Ventures relate
to the operating Joint Ventures in Eastern Europe and the FSU and Communications
Group's Joint Ventures in China. Statistical data regarding subscribers,
population, etc. for the Joint Ventures in China relate to the telephony
networks of China Unicom.

Investments in other companies, including the Communications Group's Joint
Ventures which are not majority owned, or in which the Company does not have
control but exercises significant influence, are accounted for using the equity
method. The Company reflects its net investments in Joint Ventures under the
caption "Investments in and advances to Joint Ventures." The Company accounts
for its equity in earnings (losses) of the Joint Ventures in Eastern Europe and
the FSU and the telephony networks of China Unicom on a three month lag.

The Company also owns Snapper, Inc. ("Snapper"), which is a wholly-owned
subsidiary. Snapper manufacturers Snapper-Registered Trademark- brand
premium-priced power lawnmowers, lawn tractors, garden tillers, snowthrowers and
related parts and accessories. In addition, on April 16, 1998 the Company
completed the sale of Landmark Theatre Group ("Landmark") and on July 10, 1997
the Company sold substantially all of its entertainment assets (the
"Entertainment Group Sale"). Each transaction was recorded as a discontinuance
of a business segment. See note 4 to the Notes to Consolidated Condensed
Financial Statements.

The Company owns approximately 39% of the outstanding common stock of RDM Sports
Group, Inc. ("RDM"). On August 29, 1997, RDM and certain of its affiliates filed
a voluntary bankruptcy petition under chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Northern District of Georgia (the
"Bankruptcy Court"). On February 18, 1998 the Office of the United States
Trustee filed a motion to appoint a chapter 11 trustee. RDM and its affiliates
subsequently filed a motion to convert the chapter 11 cases to cases under
chapter 7 of the Bankruptcy Code. On February 19, 1998, the Bankruptcy Court
granted the United States Trustee's motion and ordered that a chapter 11 trustee
be appointed. The Bankruptcy Court also ordered that the chapter 11 cases not
convert to cases under chapter 7 of the Bankruptcy Code. On February 25, 1998,
each of the Company's designees on RDM's Board of Directors submitted a letter
of resignation. The chapter 11 trustee is in the process of selling all of RDM's
assets to

23
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
satisfy its obligations to its creditors and the Company believes that it will
not be entitled to receive any distributions in respect of its equity interest
in RDM.

Certain statements set forth below under this caption constitute
"Forward-Looking Statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). See "Special Note
Regarding Forward-Looking Statements" on page 43.

COMMUNICATIONS GROUP

The Company, through the Communications Group, is the owner of various interests
in Joint Ventures that are currently in operation or planning to commence
operations in Eastern Europe, the FSU, China and other selected emerging
markets.

The Communications Group's Joint Ventures currently offer cable television,
AM/FM radio broadcasting, paging, cellular telecommunications, international
toll calling, fixed telephony and trunked mobile radio. The Communications
Group's Joint Ventures' partners are often governmental agencies or ministries.

The Company's financial statements consolidate the accounts and results of
operations of 18 of the Communications Group's 47 operating Joint Ventures at
June 30, 1998. Investments in other companies and Joint Ventures which are not
majority owned, or which the Communications Group does not control, but over
which the Communications Group exercises significant influence, have been
accounted for using the equity method. Investments of the Communications Group
or its consolidated subsidiaries over which significant influence is not
exercised are carried under the cost method. See notes 2 and 3 to the "Notes to
Consolidated Condensed Financial Statements," of the Company for these Joint
Ventures and their summary financial information.

The following table summarizes the Communications Group's Joint Ventures and
subsidiaries at June 30, 1998, as well as the amounts contributed, amounts
loaned net of repayments and total amounts invested in such Joint Ventures and
subsidiaries at June 30, 1998 (in thousands):

24
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)

<TABLE>
<CAPTION>
AMOUNT
CONTRIBUTED AMOUNT LOANED TOTAL
TO TO INVESTMENT
JOINT JOINT IN JOINT
COMPANY VENTURE/ VENTURE/ VENTURE/
JOINT VENTURE (1) OWNERSHIP % SUBSIDIARY SUBSIDIARY SUBSIDIARY (8)
- ---------------------------------------------------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
PAGING
Baltcom Paging (Tallinn, Estonia) (2)............... 85% 3,715 2,447 6,162
CNM (Romania) (2)................................... 54% 490 6,098 6,588
Paging One Services (Austria) (2)................... 100% 1,036 9,220 10,256
Baltcom Plus (Riga, Latvia)......................... 50% 250 3,088 3,338
Paging One (Tbilisi, Georgia)....................... 45% 250 1,455 1,705
Raduga Poisk (Nizhny Novgorod, Russia).............. 45% 330 40 370
PT Page (St. Petersburg, Russia).................... 40% 1,100 25 1,125
Kazpage (Kazakstan) (9)............................. 26-41% 521 753 1,274
Kamalak Paging (Tashkent, Samarkand, Bukhara and
Andijan, Uzbekistan).............................. 50% 435 2,019 2,454
Alma Page (Almaty and Ust-Kamenogorsk, Kazakstan)... 50% -- 1,857 1,857
Paging Ajara (Batumi, Georgia)...................... 35% 43 264 307
Mobile Telecom (Russia) (11)........................ 50% 7,500 -- 7,500
----------- ------------- --------------
15,670 27,266 42,936
----------- ------------- --------------
RADIO BROADCASTING
Radio Juventus (Budapest, Hungary) (2).............. 100% 8,107 -- 8,107
SAC (Moscow, Russia) (2)............................ 83% 631 2,454 3,085
Radio Skonto (Riga, Latvia) (2)..................... 55% 302 266 568
Radio One (Prague, Czech Republic) (2).............. 80% 627 254 881
NewsTalk Radio (Berlin, Germany) (2)................ 70% 2,758 2,931 5,689
Radio Vladivostok, (Vladivostok, Russia) (2)........ 51% 260 41 301
Country Radio (Prague, Czech Republic) (2).......... 85% 2,040 -- 2,040
Radio Georgia (Tbilisi, Georgia) (2)................ 51% 255 198 453
Eldoradio (formerly Radio Katusha)(St. Petersburg,
Russia) (2) (5)................................... 75% 464 794 1,258
Radio Nika (Socci, Russia).......................... 51% 260 65 325
AS Trio LSL (Tallinn, Estonia) (5).................. 49% 1,536 402 1,938
----------- ------------- --------------
17,240 7,405 24,645
----------- ------------- --------------
INTERNATIONAL TOLL CALLING
Telecom Georgia (Tbilisi, Georgia).................. 30% 2,554 -- 2,554
----------- ------------- --------------
TRUNKED MOBILE RADIO
Protocall Ventures, Ltd. (2) (3).................... 56% $ 2,550 $ 13,734 $ 16,284
Spectrum (Kazakstan) (10)........................... 21% 30 1,163 1,193
----------- ------------- --------------
2,580 14,897 17,477
----------- ------------- --------------
</TABLE>

25
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)

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

(1) Each parenthetical notes the area of operations for each operational Joint
Venture or the area for which each pre-operational Joint Venture is
licensed.

(2) Results of operations are consolidated with the Company's financial
statements.

(3) The Communications Group owns its trunked mobile radio ventures through
Protocall Ventures Limited, in which it has a 56% ownership interest.
Through Protocall, the Communications Group owns interests in (i) Belgium
Trunking (50%), which provides services in Brussels and Flanders, Belgium,
(ii) Radiomovel Telecommunicacoes (36%), which provides services in
Portugal, (iii) Teletrunk Spain (17-48% depending on the joint venture),
which provides services through four Joint Ventures in Madrid, Valencia,
Aragon and Catalonia, Spain and (iv) Spectrum (21%), which operates in
Almaty and Aryran, Kazakstan. A portion of the Communications Group's
interest in Spectrum is held directly. In July 1998 the Communications Group
sold its share of Protocall Ventures Limited. As part of the transaction,
Protocall Ventures Limited repaid its outstanding debt to the Communications
Group. The Communications Group retained Protocall Ventures Limited's
interest in Spectrum. The Communications Group expects to record a gain on
the sale.

(4) Pre-operational systems as of June 30, 1998.

(5) Eldoradio includes two radio stations operating in St. Petersburg, Russia
and AS Trio LSL includes four radio stations operating in various cities
throughout Estonia. In April 1998, AS Trio LSL acquired 100% of B-3, which
operates a radio station in Estonia, for $315,000.

(6) Ningbo Ya Mei Communications is participating in the build-out of an
operational GSM system in Ningbo City, China, and providing financing
technical assistance and consulting services to the systems operator.

26
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
(7) Sichuan Tai Li Feng Telecommunications, Co. and Chongqing Tai Le Feng
Telecommunication, Co. are pre-operational Joint Ventures that are
participating in the construction and development of a local telephone
network in the Sichuan Province and the City of Chongqing, China.

(8) Total investment does not include any incurred losses.

(9) Kazpage is comprised of a service entity and 10 paging Joint Ventures that
provide services in Kazakstan. The Company's interest in the Joint Ventures
ranges from 26% to 41% and its interest in the service entity is 51%.
Amounts described as loaned in the above table represent loans to the
service entity which in turn funds the Joint Ventures.

(10) In April 1998, Spectrum and its shareholders, including the Communications
Group, completed a transaction pursuant to which the European Bank for
Reconstruction and Development ("EBRD") and the Fund New Europe ("FNE")
purchased 30% and 3%, respectively, of the shares of Spectrum in return for
making equity contributions to Spectrum of $181,800 and $18,200,
respectively. In connection with such investment, the EBRD has agreed to
make a loan of up to $2.0 million to Spectrum. In addition, the EBRD and FNE
were provided the right to put their shares back to Spectrum at a price
equal to four times earnings before interest, tax and depreciation for the
year preceding the put, multiplied by a fraction, the numerator of which is
the number of shares held by either the EBRD or FNE and the denominator of
which is all issued shares. The put may be exercised at any time starting 6
years after the date of the transaction. As part of the Company's sale of
Protocall Ventures Limited, in July 1998, the Company increased its
ownership interest in Spectrum to 33%.

(11) The Company's purchase of Mobile Telecom closed during June 1998. The
Company purchased its 50% interest in Mobile Telecom for $7.0 million plus
two additional earnout payments to be made on either February 14, 1999 and
February 14, 2000, or on February 14, 2000 and February 14, 2001, as may be
determined by the seller. Each of the two earnout payments is to be equal to
$2.5 million, adjusted up or down based upon performance compared to certain
financial targets. Simultaneously with the purchase of Mobile Telecom, the
Company purchased 50% of a pager distribution company for $500,000. These
investments will be accounted for under the equity method and the Joint
Venture's results of operations will be included with the Company's
financial statement disclosures in the quarter ended September 30, 1998.

(12) In August 1998, the Communications Group acquired a 76% interest in
Omni-Metromedia Caspian, Ltd., a company that owns 50% of a joint venture in
Azerbaijan, Caspian American Telecommunications, LLC ("CAT"). CAT has been
licensed by the Ministry of Communications of Azerbaijan to provide high
speed wireless local loop services and digital switching throughout
Azerbaijan. Omni-Metromedia has committed to provide up to $40.5 million in
loans to CAT for the funding of equipment acquisition and operational
expenses in accordance with CAT's business plans.

SNAPPER

Snapper manufacturers Snapper-Registered Trademark- brand premium-priced power
lawnmowers, lawn tractors, garden tillers, snowthrowers and related parts and
accessories. The lawnmowers include rear-engine riding mowers, front-engine
riding mowers or lawn tractors, and self-propelled and push-type walk-behind
mowers. Snapper also manufactures a line of commercial lawn and turf equipment
under the Snapper brand. Snapper provides lawn and garden products through
distribution channels to domestic and foreign retail markets.

27
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)

The following table sets forth the operating results for the three and six
months ended June 30, 1998 and 1997 of the Company's Communications Group and
lawn and garden products segments.

SEGMENT INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS TABLE
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
COMMUNICATIONS GROUP--CONSOLIDATED:
Revenues................................................ $ 7,667 $ 3,977 $ 16,629 $ 9,152
Cost of sales and operating expenses.................... (1,348) (797) (2,916) (1,346)
Selling, general and administrative..................... (20,485) (15,670) (40,999) (26,779)
Depreciation and amortization........................... (3,216) (2,338) (6,716) (4,287)
------------- ------------- ----------- -----------
Operating loss........................................ (17,382) (14,828) (34,002) (23,260)
Equity in losses of Joint Ventures...................... (4,045) (587) (11,558) (2,185)
Minority interest....................................... 3,446 1,387 5,485 2,627
------------- ------------- ----------- -----------
(17,981) (14,028) (40,075) (22,818)
SNAPPER:
Revenues................................................ 66,572 48,023 117,829 101,823
Cost of sales and operating expenses.................... (47,768) (30,690) (83,517) (68,136)
Selling, general and administrative..................... (20,878) (16,388) (33,708) (31,343)
Depreciation and amortization........................... (1,908) (1,897) (3,722) (3,804)
------------- ------------- ----------- -----------
Operating loss........................................ (3,982) (952) (3,118) (1,460)
CORPORATE HEADQUARTERS AND ELIMINATIONS:
Revenues................................................ -- -- -- --
Cost of sales and operating expenses.................... -- -- -- --
Selling, general and administrative..................... (1,602) (1,276) (2,891) (2,497)
Depreciation and amortization........................... (3) (3) (4) (6)
------------- ------------- ----------- -----------
Operating loss........................................ (1,605) (1,279) (2,895) (2,503)
CONSOLIDATED--CONTINUING OPERATIONS:
Revenues................................................ 74,239 52,000 134,458 110,975
Cost of sales and operating expenses.................... (49,116) (31,487) (86,433) (69,482)
Selling, general and administrative..................... (42,965) (33,334) (77,598) (60,619)
Depreciation and amortization........................... (5,127) (4,238) (10,442) (8,097)
------------- ------------- ----------- -----------
Operating loss........................................ (22,969) (17,059) (40,015) (27,223)
Interest expense.......................................... (4,557) (6,456) (9,560) (12,048)
Interest income........................................... 6,079 2,094 11,126 4,801
Income tax expense........................................ (143) (215) (630) (313)
Equity in losses of Joint Ventures........................ (4,045) (587) (11,558) (2,185)
Equity in losses of and writedown of investment in RDM
Sports Group, Inc....................................... -- (25,122) -- (25,122)
Minority interest......................................... 3,446 1,387 5,485 2,627
Discontinued operations................................... 5,267 (25,914) 5,267 (34,667)
Extraordinary item........................................ -- (1,094) -- (1,094)
------------- ------------- ----------- -----------
Net loss.................................................. $ (16,922) $ (72,966) $ (39,885) $ (95,224)
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>

28
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
MMG CONSOLIDATED--RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.

Net loss decreased to $16.9 million for the three months ended June 30, 1998,
from $73.0 million for the three months ended June 30, 1997. The net loss for
1998 includes a gain from discontinued operations from the sale of the Landmark
Theatre Group of $5.3 million. The net loss for 1997 includes losses from
discontinued operations relating to the Entertainment Group and the Landmark
Theatre Group of $25.9 million, a writedown of $18.0 million of the Company's
investment in RDM Sports Group, Inc. ("RDM"), equity in losses of RDM of $7.2
million and an extraordinary loss relating to the early extinguishment of debt
by RDM of $1.1 million.

Operating loss increased to $23.0 million for the three months ended June 30,
1998, from $17.1 million for the three months ended June 30, 1997. The increase
in operating loss reflects an increase in operating losses at Snapper and
increases in selling, general and administrative costs by the Communications
Group in supporting the continued expansion of operations in Eastern Europe, the
FSU and China.

Interest expense decreased $1.9 million to $4.6 million for the three months
ended June 30, 1998. The decrease in interest expense was due to the repayment
of debt at corporate headquarters in March and August 1997, partially offset by
an increase in borrowings at Snapper.

Interest income increased $4.0 million to $6.1 million for the three months
ended June 30, 1998, principally from funds invested at corporate headquarters
due to cash from the Preferred Stock offering in September 1997.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.

Net loss decreased to $39.9 million for the six months ended June 30, 1998, from
$95.2 million for the six months ended June 30, 1997. The net loss for 1998
includes a gain from discontinued operations from the sale of the Landmark
Theatre Group of $5.3 million. The net loss for 1997 includes losses from
discontinued operations relating to the Entertainment Group and the Landmark
Theatre Group of $34.7 million, a writedown of $18.0 million of the Company's
investment in RDM, equity in losses of RDM of $7.2 million and an extraordinary
loss relating to the early extinguishment of debt by RDM of $1.1 million.

Operating loss increased to $40.0 million for the six months ended June 30,
1998, from $27.2 million for the six months ended June 30, 1997. The increase in
operating loss reflects an increase in operating losses at Snapper, six months
of operations in 1998 as compared to four months of operations in 1997 for the
Communications Group's Joint Ventures in China and an increase in selling,
general and administrative costs by the Communications Group in supporting the
continued expansion of operations in Eastern Europe and the FSU.

Interest expense decreased $2.5 million to $9.6 million for the six months ended
June 30, 1998. The decrease in interest expense was due to the repayment of debt
at corporate headquarters in March and August 1997, partially offset by an
increase in borrowings at Snapper.

Interest income increased $6.3 million to $11.1 million, principally from funds
invested at corporate headquarters due to the cash from the Preferred Stock
offering in September 1997.

29
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
THE COMMUNICATIONS GROUP--RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.

REVENUES

Revenues increased to $7.7 million for the three months ended June 30, 1998 from
$4.0 million for the three months ended June 30, 1997. The growth in revenue of
the consolidated Joint Ventures has resulted primarily from trunked mobile radio
operations in Portugal and Spain, the increase in radio operations in Russia,
the increase in cable operations in Romania, and the increase in paging
operations in Austria. Trunked mobile radio operations were first consolidated
upon the purchase of an additional interest in operations in Portugal during the
fourth quarter of 1997 and increased through the purchase of an additional
interest in operations in Spain during the first quarter of 1998. The revenue
from trunked mobile radio operations was $1.4 million in the three months ended
June 30, 1998. Revenues from radio broadcasting operations in Russia increased
to $1.8 million from $729,000 for the three months ended June 30, 1998 and 1997,
respectively. Revenues from cable television operations in Romania increased to
$702,000 from $198,000 for the three months ended June 30, 1998 and 1997,
respectively. Revenues from paging operations in Austria increased by $273,000
from the second quarter of 1997 to the second quarter of 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased by $4.8 million or 31%
for the three months ended June 30, 1998 as compared to the three months ended
June 30, 1997. The increase relates to additional expenses associated with the
increase in the number of Joint Ventures and the need for the Communications
Group to support and assist the operations of the Joint Ventures. In addition,
increased staffing has been necessary at the radio broadcasting stations, cable
television operations and paging operations.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization expense increased to $3.2 million from $2.3
million. The increase is primarily the result of the increased number of
consolidated joint ventures with depreciable fixed assets.

EQUITY IN LOSSES OF JOINT VENTURES

The Communications Group accounts for the majority of its Joint Ventures under
the equity method of accounting since it generally does not exercise control.
Under the equity method of accounting, the Communications Group reflects the
cost of its investments, adjusted for its share of the income or losses of the
Joint Ventures, on its balance sheet and reflects generally only its
proportionate share of income or losses of the Joint Ventures in its statement
of operations. The losses recorded in the second quarter of 1998 and 1997
represent the Communications Group's equity in the losses of the Joint Ventures
in Eastern Europe, the FSU and telephony networks in China for the three months
ended March 31, 1998 and 1997, respectively. Equity in the losses of the Joint
Ventures by the Communications Group are generally reflected according to the
level of ownership of the Joint Venture by the Communications Group until such
Joint Venture's contributed capital has been fully depleted. Subsequently, the
Communications Group recognizes the full amount of losses generated by the Joint
Venture since the Communications Group is generally the sole funding source of
the Joint Ventures.

30
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
EASTERN EUROPE AND THE REPUBLIC OF THE FORMER SOVIET UNION

Revenues generated by unconsolidated Joint Ventures were $23.0 million in the
second quarter of 1998, compared to $17.5 million in the second quarter of 1997.
The Communications Group recognized equity in losses of its Joint Ventures of
approximately $3.4 million in the second quarter of 1998, compared to $587,000
in the second quarter of 1997.

The increase in equity in the losses of the Joint Ventures of $2.8 million from
the three months ended June 30, 1997 to the three months ended June 30, 1998, is
primarily attributable to (i) the commencement of operations of the
Communications Group's Georgian GSM venture which increased the loss by $1.6
million, (ii) decreased equity income of the international toll calling venture
in Georgia of $1.7 million, and (iii) partially offset by $371,000 decreased
loss from paging operations in Kazakstan.

CHINA

Equity in losses of the Communications Group's Joint Ventures in China, amounted
to $626,000 in the second quarter of 1998. The loss is attributable principally
to the Communications Group's Ningbo JV, which commenced operations in May 1997.

MINORITY INTEREST

Losses allocable to minority interests increased to $3.4 million in the second
quarter of 1998 from $1.4 million in the second quarter of 1997.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.

REVENUES

Revenues increased to $16.6 million for the six months ended June 30, 1998 from
$9.2 million for the six months ended June 30, 1997. The growth in revenue of
the consolidated Joint Ventures has resulted primarily from trunked mobile radio
operations in Portugal and Spain, the increase in radio operations in Russia,
the increase in cable operations in Romania, and the increase in paging
operations in Austria. Trunked mobile radio operations were first consolidated
upon the purchase of an additional interest in operations in Portugal during the
fourth quarter of 1997 and increased through the purchase of an additional
interest in operations in Spain during the first quarter of 1998. The revenue
from trunked mobile radio operations was $3.2 million in the first six months of
1998. Revenues from radio broadcasting operations in Russia increased to $3.6
million from $1.4 million for the six months ended June 30, 1998 and 1997,
respectively. Revenues from cable television operations in Romania increased to
$1.3 million from $230,000 for the six months ended June 30, 1998 and 1997,
respectively. Revenues from paging operations in Austria increased by $450,000
from the first half of 1997 to the first half of 1998.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased by $14.2 million or 53%
for the six months ended June 30, 1998 as compared to the six months ended June
30, 1997. The increase relates to additional expenses associated with the
increase in the number of Joint Ventures and the need for the Communications
Group to support and assist the operations of the Joint Ventures. In addition,
increased staffing has been necessary at the radio broadcasting stations, cable
television operations and paging operations.

31
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization expense increased to $6.7 million from $4.3
million. The increase is primarily the result of the increased number of
consolidated joint ventures with depreciable fixed assets.

EQUITY IN LOSSES OF JOINT VENTURES

The Communications Group accounts for the majority of its Joint Ventures under
the equity method of accounting since it generally does not exercise control.
Under the equity method of accounting, the Communications Group reflects the
cost of its investments, adjusted for its share of the income or losses of the
Joint Ventures, on its balance sheet and reflects generally only its
proportionate share of income or losses of the Joint Ventures in its statement
of operations. The losses recorded in the first half of 1998 and 1997 represent
the Communications Group's equity in the losses of the Joint Ventures in Eastern
Europe and the FSU and telephony networks in China for the six months ended
March 31, 1998 and 1997, respectively. Equity in the losses of the Joint
Ventures by the Communications Group are generally reflected according to the
level of ownership of the Joint Venture by the Communications Group until such
Joint Venture's contributed capital has been fully depleted. Subsequently, the
Communications Group recognizes the full amount of losses generated by the Joint
Venture since the Communications Group is generally the sole funding source of
the Joint Ventures.

EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION

Revenues generated by unconsolidated Joint Ventures were $46.1 million in the
first six months of 1998, compared to $31.8 million in the first six months of
1997. The Communications Group recognized equity in losses of its Joint Ventures
of approximately $10.1 million in the first half of 1998, compared to $2.2
million in the first half of 1997.

The increase in equity in the losses of the Joint Ventures of $7.9 million from
the six months ended June 30, 1997 to the six months ended June 30, 1998 is
primarily attributable to (i) the commencement of operations of the
Communications Group's Georgian GSM venture which increased the loss by $3.0
million, (ii) decreased equity income of the international toll calling venture
in Georgia of $2.8 million, (iii) increased losses of $908,000 from the cable
operation in Moscow, (iv) increased losses of $670,000 from the cable operations
in Georgia, and (v) increased losses of $563,000 from the GSM venture in Latvia.

CHINA

Equity in losses of the Communications Group's Joint Ventures in China, amounted
to $1.5 million in 1998. The loss is attributable principally to the
Communications Group's Ningbo JV, which commenced operations in May 1997.

MINORITY INTEREST

Losses allocable to minority interests increased to $5.5 million in the first
half of 1998 from $2.6 million in the first half of 1997.

32
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.

ANALYSIS OF COMBINED RESULTS OF OPERATIONS

EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION

The Company is providing as supplemental information the following analysis of
combined revenues and operating income (loss) for its consolidated and
unconsolidated Joint Ventures in Eastern Europe and the FSU. The Company
believes that an analysis of combined operating results provides a meaningful
presentation of the performance of its investments. Such combined operating
results are provided as a supplement, and not as a substitute, for the
consolidated financial statements set forth elsewhere herein. Note 2 to the
Consolidated Condensed Financial Statements provides a listing of the Company's
ownership percentages in each of its unconsolidated Joint Ventures.

Total revenues for the Communications Group's cable television, paging, radio
broadcasting, cellular telecommunications, international toll calling and
trunked mobile radio businesses were $61.7 million and $40.2 million in the
first six months of 1998 and 1997, respectively. The percentage increase in
revenues was 53%. Combined operating income (loss) for all of the Communication
Group's businesses were ($11.7) million and $4.7 million in the first six months
of 1998 and 1997, respectively.

Cable television revenues were $15.6 million and $10.5 million in the first half
of 1998 and 1997, respectively, an increase of 49%. Total subscribers increased
from 147,671 at June 30, 1997 to 269,017 at June 30, 1998. Combined operating
losses for cable television were $3.4 million and $1.0 million in the first six
months of 1998 and 1997, respectively. Included in operating losses in the first
half of 1998 and 1997 were depreciation and amortization charges of $6.2 million
and $4.1 million, respectively. The increase in these charges is attributable to
the amortization of goodwill in connection with acquisitions in Moldova and
Romania.

Subscriber growth and revenue increases from cable television were the result of
the expansion of the Communications Group's strategy to increase the customer
base by wiring buildings in advance and targeting for a lower priced, broader
based program package, coupled with acquisitions of systems in Moldova and
Romania. The increase in operating loss in the first six months of 1998 as
compared to the first six months of 1997 was primarily attributable to operating
losses at Joint Ventures that recently became operational in St. Petersburg and
Romania, as well as additional marketing and programming costs incurred at
operations in Moscow and Latvia, respectively. In addition, the Communications
Group's operations in Georgia and Latvia have experienced increased competition
which has adversely affected operating results in the first half of 1998. The
Communications Group is intentionally slowing the growth in its Belarus Joint
Venture as a result of new regulations instituted by various governmental
ministries which may adversely affect the operations of the Joint Venture.

Paging revenues were $9.0 million in the first six months of 1998 and $6.2
million in the first six months of 1997. This represents an increase of 45%.
Total subscribers increased from 53,416 at June 30, 1997 to 73,399 at June 30,
1998. Combined operating losses for paging were $5.0 million and $2.1 in the
first half of 1998 and the first half of 1997, respectively. Included in
operating losses in the first six months of 1998 and 1997 were depreciation and
amortization charges of $1.5 million and $764,000, respectively.

During the first six months of 1998, revenue growth was primarily attributable
to increases of approximately $1.4 million, $589,000, $450,000, and $402,000 at
paging operations in Kazakstan, Nizhny Novgorod, Russia, Vienna, Austria, and
St. Petersburg, Russia, respectively. The operating loss in the first half of
1998 was primarily comprised of operating losses of $2.9 million, $1.4 million,
and $749,000 at

33
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
paging operations in Austria, Romania, and Estonia, respectively. These losses
were partially due to increased marketing, advertising, technical and
distribution expenses incurred to introduce Calling Party Pays service. Calling
Party Pays service is designed to reach a younger demographic group providing a
significantly larger potential subscriber base. The joint venture receives a fee
from the local telephone operator for each call made to the pager.

Radio broadcasting revenues were $9.7 million in the first six months of 1998
and $6.6 million in the first six months of 1997, an increase of 45%. Combined
operating income from radio broadcasting was at break-even and $1.4 million in
the first half of 1998 and the first half of 1997, respectively. Included in
operating income in the first half of 1998 and 1997 were depreciation and
amortization charges of $681,000 and $147,000, respectively.

The revenue growth is due to increases in the number of advertising spots sold
and increases in the price of the advertising spots. The ability to sell
additional spots at a higher rate is dependent on an increase in audience
ratings. The Company has increased its audience share through the use of market
research to determine programming formats and marketing strategies, including
employing U.S. trained sales managers.

For the six months ended June 30, 1998, operating income includes a loss of $2.1
million attributable to increased programming and other expenses associated with
the News Talk format at the radio station in Berlin, which was acquired during
the third quarter of 1997. Although the operating results for the first half of
1998 were adversely affected by the operating loss of the Communications Group's
radio station in Berlin, the operating results of its other radio stations
generally improved. The News Talk format has more start-up costs than
traditional music radio stations, however, the Communications Group expects to
achieve its targeted rate of return through its future operation of the radio
station.

Telephony revenues were $27.5 million in the first half of 1998 and $16.9
million in the first half of 1997. This represents an increase of 63%. Total
subscribers increased from 12,809 in the first six months of 1997 to 52,335 in
the first six months of 1998. International toll calling revenues were $13.6
million in the first half of 1998 compared to $15.0 million in the first half of
1997. Trunked mobile radio revenues were $5.0 million and $1.8 million in the
first six months of 1998 and the first six months of 1997, respectively.
Cellular telecommunications revenues were $8.9 million in the first half of 1998
versus $108,000 in the first half of 1997.

Combined operating income (loss) for telephony was ($3.3) million and $6.4
million in the first half of 1998 and in the first half of 1997, respectively.
Included in operating income (loss) in the first six months of 1998 and of 1997
were depreciation and amortization charges of $6.6 million and $1.1 million,
respectively. Operating income from international toll calling operations was
$3.1 million and $9.7 million in the first half of 1998 and in the first half of
1997, respectively. Trunked mobile radio's operating losses were $1.8 million in
both the first six months of 1998 and 1997, and the operating losses for
cellular telecommunications were $4.6 million and $1.4 million in the first half
of 1998 and 1997, respectively.

International toll calling revenue is generated at the joint venture in Tblisi,
Georgia, which handles all international calls inbound to and outbound from the
Republic of Georgia. Although minutes of use increased during the first half of
1998 as compared to the first half of 1997, revenue and operating income in the
first half of 1998 decreased due to the change in the incoming and outgoing mix
in telephone traffic and the contractual reductions in termination accounting
rates in its international settlement agreements for traffic with its overseas
carriers. In addition, payments made to local carriers for call terminations
increased during 1998. Operating income in the first six months of 1997 included
the impact of favorable settlements, of approximately $2.0 million, with
international carriers for costs related to 1996 call

34
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
revenues. Increased trunked mobile radio revenue was primarily due to an
increase of approximately $1.4 million realized at the Portugal operations. The
operating loss for cellular telecommunications reflects the operating results of
its operations in Latvia and Georgia, which commenced operations in April 1997
and September 1997, respectively. The Communications Group expects these
start-up operations to incur losses for the near term.

FOREIGN CURRENCY

The Communications Group's strategy is to minimize its foreign currency risk. To
the extent possible, in countries that have experienced high rates of inflation,
the Communications Group bills and collects all revenues in U.S. dollars or an
equivalent local currency amount adjusted on a monthly basis for exchange rate
fluctuations. The Communications Group's Joint Ventures are generally permitted
to maintain U.S. dollar accounts to service their U.S. dollar denominated credit
lines, thereby reducing foreign currency risk. As the Communications Group and
its Joint Ventures expand their operations and become more dependent on local
currency based transactions, the Communications Group expects that its foreign
currency exposure will increase. The Communications Group does not hedge against
foreign exchange rate risks at the current time and therefore could be subject
in the future to any declines in exchange rates between the time a Joint Venture
receives its funds in local currencies and the time it distributes such funds in
U.S. dollars to the Communications Group.

SNAPPER--RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997.

REVENUES

Snapper's second quarter sales in 1998 were $66.6 million compared to $48.0
million in 1997. Sales of lawn and garden equipment contributed to the majority
of the revenues during both periods. Sales were lower in 1997 due to
unseasonably cool weather during April and May, as well as $6.3 million of sales
reductions during 1997 due to repurchases of certain distributor inventory.

Gross profit in the second quarter of 1998 was $18.8 million compared to $17.3
million in 1997. The lower gross profit in 1997 was caused by lower sales noted
above. The lower gross profit margin in 1998 was due to sales of older equipment
during the quarter at special pricing to help eliminate older inventory acquired
in the distributor inventory repurchases during 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $20.9 million in 1998,
compared to $16.4 million in 1997. The 1998 period expenses were higher due to
$3.1 million of advertising, which in 1997 was principally incurred in the third
quarter. In addition, the 1998 shipping and distribution expense for the period
was up $1.3 million due to increased sales as well as additional distribution
facilities in Nevada and Georgia that were not reflected in the 1997 period
expenses.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization charges were $1.9 million in 1998 and 1997.
Depreciation and amortization reflects the depreciation of Snapper's property,
plant and equipment as well as the amortization of the goodwill associated with
the acquisition of Snapper.

35
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
OPERATING LOSS

In 1998, Snapper had an operating loss of $4.0 million, compared to an operating
loss of $1.0 million during 1997. The 1998 operating loss was the result of
higher advertising and distribution costs as noted above, as well as selling
principally older equipment repurchases at lower profit margins. The 1997
operating loss was principally the result of unseasonably cool weather during
the first two months of the period and the repurchase of finished goods from
distributors during the period.

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.

REVENUES

For the six months ending June 30, 1998, Snapper's sales were $117.8 million,
compared to $101.8 million for the same period in 1997. Sales of lawn and garden
equipment contributed to the majority of the revenues during both periods. Sales
were lower in 1997 due to unseasonably cool weather during April and May, as
well as $6.3 million of sales reductions in 1997 due to repurchases of certain
distributor inventory.

Gross profit during the period were $34.3 million and $33.7 million for 1998 and
1997, respectively. The 1998 period gross profit percentage was lower due to
sales of older equipment at discounted pricing to eliminate older inventory
acquired in the distributor inventory repurchases during 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the six months ended June 30,
1998 and 1997 were $33.7 and $31.3 million, respectively. The 1998 advertising
and distribution expenses were higher than in 1997 due to timing of the
advertising costs as discussed above and higher sales in 1998. In addition to
normal selling, general and administrative expenses, the 1997 period expenses
reflect inventory repurchase expenditures related to two large distributorship
repurchases during the second quarter.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization charges for the period were $3.7 million and $3.8
million for 1998 and 1997, respectively. Depreciation and amortization reflects
the depreciation of Snapper's property, plant and equipment as well as the
amortization of the goodwill associated with the acquisition of Snapper.

OPERATING LOSS

Snapper had an operating loss of $3.1 million in 1998 and $1.5 million in 1997.
The 1998 operating loss was the result of higher advertising and distribution
costs as noted above as well as sales of older equipment repurchased in 1997 at
lower gross profit margins. The 1997 operating loss was the result of
unseasonably cool weather during April and May and the acquisition of the
distributorship inventory during the period.

LIQUIDITY AND CAPITAL RESOURCES

THE COMPANY

MMG is a holding company and, accordingly, does not generate cash flows. The
Communications Group is dependent on MMG for significant capital infusions to
fund its operations and make acquisitions, as well as fulfill its commitments to
make capital contributions and loans to its Joint Ventures. Such funding
requirements are based on the anticipated funding needs of its Joint Ventures
and certain acquisitions committed to by the Company. Future capital
requirements of the Communications Group, including

36
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
future acquisitions, will depend on available funding from the Company and on
the ability of the Communications Group's Joint Ventures to generate positive
cash flows. Snapper is restricted under covenants contained in its credit
agreement from making dividend payments or advances to the Company and the
Company has periodically funded the short-term working capital needs of Snapper.
The Company, at its discretion, can make dividend payments on its 7% Cumulative
Convertible Preferred Stock ("Preferred Stock") in either cash or Common Stock.
If the Company were to elect to pay the dividend in cash, the annual cash
requirement would be $15.0 million. On March 15 and June 15, 1998 the Company
paid the quarterly dividend on the Preferred Stock in cash.

Since each of the Communications Group's Joint Ventures operates businesses,
such as cable television, fixed telephony, paging and cellular
telecommunications, that are capital intensive and require significant capital
investment in order to construct and develop operational systems and market its
services, the Company will require in addition to its cash on hand, additional
financing in order to satisfy its on-going working capital requirements and to
achieve its long-term business strategies. Such additional capital may be
provided through the public or private sale of equity or debt securities of the
Company or by separate equity or debt financings by the Communications Group or
certain companies of the Communications Group. No assurance can be given that
such additional financing will be available to the Company on acceptable terms,
if at all. If adequate additional funds are not available, the Company may be
required to curtail significantly its long-term business objectives and the
Company's results of operations may be materially and adversely affected. The
Company believes that its cash on hand will be sufficient to fund the Company's
working capital requirements for the remainder of 1998.

Management believes that its long-term liquidity needs will be satisfied through
a combination of the Company's successful implementation and execution of its
growth strategy to become a global communications and media company and the
Communications Group's Joint Ventures achieving positive operating results and
cash flows through revenue and subscriber growth and control of operating
expenses.

As the Communications Group is in the early stages of development, the Company
expects to generate significant consolidated net losses for the foreseeable
future as the Communications Group continues to build out and market its
services.

COMMUNICATIONS GROUP

The Communications Group has invested significantly (in cash or equipment
through capital contributions, loans and management assistance and training) in
its Joint Ventures. The Communications Group has also incurred significant
expenses in identifying, negotiating and pursuing new wireless
telecommunications opportunities in selected emerging markets. The
Communications Group and virtually all of its Joint Ventures are experiencing
continuing losses and negative operating cash flow since the businesses are in
the development and start-up phase of operations.

The ability of the Communications Group and its Joint Ventures to establish
profitable operations is also subject to significant political, economic and
social risks inherent in doing business in emerging markets such as Eastern
Europe, the FSU and China. These include matters arising out of government
policies, economic conditions, imposition of or changes to taxes or other
similar charges by governmental bodies, exchange rate fluctuations and controls,
civil disturbances, deprivation or unenforceablility of contractual rights, and
taking of property without fair compensation.

For the six months ended June 30, 1998, the Communications Group's primary
source of funds was from the Company in the form of non-interest bearing
intercompany loans.

37
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
Until the Communications Groups' operations generate positive cash flow, the
Communications Group will require significant capital to fund its operations,
and to make capital contributions and loans to its Joint Ventures. The
Communications Group relies on the Company to provide the financing for these
activities. The Company believes that as more of the Communications Group's
Joint Ventures commence operations and reduce their dependence on the
Communications Group for funding, the Communications Group will be able to
finance its own operations and commitments from its operating cash flow and will
be able to attract its own financing from third parties. There can be no
assurance, however, that additional capital in the form of debt or equity will
be available to the Communications Group at all or on terms and conditions that
are acceptable to the Communications Group or the Company, and as a result, the
Communications Group will continue to depend upon the Company for its financing
needs.

EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION

The cable television, paging, fixed wireless local loop telephony, GSM and
international toll calling businesses in the aggregate are capital intensive.
The Communications Group generally provides the primary source of funding for
its Joint Ventures both for working capital and capital expenditures, with the
exception of its GSM Joint Ventures. The Communications Group's Joint Venture
agreements generally provide for the initial contribution of cash or assets by
the Joint Venture partners, and for the provision of a line of credit from the
Communications Group to the Joint Venture. Under a typical arrangement, the
Communications Group's Joint Venture partner contributes the necessary licenses
or permits under which the Joint Venture will conduct its business, studio or
office space, transmitting tower rights and other equipment. The Communications
Group's contribution is generally cash and equipment, but may consist of other
specific assets as required by the applicable Joint Venture agreement.

In June 1997, the Communications Group's Latvian GSM Joint Venture, Baltcom GSM
entered into certain agreements with the European Bank for Reconstruction and
Development ("EBRD") pursuant to which the EBRD agreed to lend up to $23.0
million to Baltcom GSM in order to finance its system buildout and operations.
Baltcom GSM's ability to borrow under these agreements is conditioned upon
reaching certain gross revenue targets. The loan has an interest rate equal to
the 3-month LIBOR plus 4% per annum, with interest payable quarterly. The
principal amount must be repaid in installments starting in March 2002 with
final maturity in December 2006. The shareholders of Baltcom GSM were required
to provide $20.0 million to Baltcom GSM as a condition precedent to EBRD funding
the loan. In addition, the Communications Group and Western Wireless agreed to
provide or cause one of the shareholders of Baltcom GSM to provide an additional
$7.0 million in funding to Baltcom GSM if requested by EBRD.

As part of the financing, the EBRD was also provided a 5% interest in the joint
venture which it can put back to Baltcom GSM at certain dates in the future at a
multiple of Baltcom GSM's earnings before interest, taxes, depreciation and
amortization ("EBITDA"), not to exceed $6.0 million. The Company and Western
Wireless have guaranteed the obligation of Baltcom GSM to pay such amount. All
of the shareholders of Baltcom GSM, including MITI, pledged their respective
shares to the EBRD as security for repayment of the loan. Under the EBRD
agreements, amounts payable to the Communications Group are subordinated to
amounts payable to the EBRD.

In April 1997, the Communications Group's Georgian GSM Joint Venture, Magticom,
entered into a financing agreement with Motorola, Inc. ("Motorola") pursuant to
which Motorola agreed to finance 75% of the equipment, software and service it
provides to Magticom up to an amount equal to $15.0 million. Interest on the
financed amount accrues at 6-month LIBOR plus 5% per annum, with interest
payable semi-annually. Repayment of principal with respect to each drawdown
commences twenty-one months after such drawdown with the final payment being due
60 months after such drawdown. All drawdowns must be made within 3 years of the
initial drawdown date. Magticom is obligated to provide Motorola with

38
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
a security interest in the equipment provided by Motorola to the extent
permitted by applicable law. As additional security for the financing, the
Company has guaranteed Magticom's repayment obligation to Motorola. In June
1998, the financing agreement was amended and Motorola agreed to make available
an additional $10.0 million in financing. Interest on the additional $10.0
million accrues at 6-month LIBOR plus 3.5%. The Company has guaranteed
Magticom's repayment obligation to Motorola, under such amendment to Motorola.

The Communications Group and Western Wireless have funded the balance of the
financing to Magticom through a combination of debt and equity. Repayment of
indebtedness owned to such partners is subordinated to Motorola.

In January 1998, the Communications Group entered into a loan agreement with DSC
Finance Corporation ("DSC") pursuant to which DSC agreed to finance 50% of the
equipment it provides to the Communications Group up to $35.0 million. In June
1998, the Company agreed to guarantee the Communications Group's obligation to
repay DSC under such loan agreement.

Credit agreements between the Joint Ventures and the Communications Group are
intended to provide such ventures with sufficient funds for operations and
equipment purchases. The credit agreements generally provide for interest to
accrue at rates ranging from the prime rate to the prime rate plus 6% and for
payment of principal and interest from 90% of the Joint Venture's available cash
flow, as defined, prior to any distributions of dividends to the Communications
Group or its Joint Venture partners. The credit agreements also often provide
the Communications Group the right to appoint the general director of the Joint
Venture and the right to approve the annual business plan of the Joint Venture.
Advances under the credit agreements are made to the Joint Ventures in the form
of cash for working capital purposes, as direct payment of expenses or
expenditures, or in the form of equipment, at the cost of the equipment plus
cost of shipping. As of June 30, 1998, the Communications Group was committed to
provide funding under the various charter fund agreements and credit lines in an
aggregate amount of approximately $155.3 million, of which $24.8 million
remained unfunded. The Communications Group's funding commitments under a credit
agreement are contingent upon its approval of the Joint Venture's business plan.
To the extent that the Communications Group does not approve a Joint Venture's
business plan, the Communications Group is not required to provide funds to the
Joint Venture under the credit line.

The Communications Group's consolidated and unconsolidated Joint Ventures'
ability to generate positive operating results is dependent upon their ability
to attract subscribers to their systems, their ability to control operating
expenses and the sale of commercial advertising time. Management's current plans
with respect to the Joint Ventures are to increase subscriber and advertiser
bases and thereby operating revenues by developing a broader band of programming
packages for wireless cable and radio broadcasting and by offering additional
services and options for paging and telephony services. By offering the large
local populations of the countries in which the Joint Ventures operate desired
services at attractive prices, management believes that the Joint Ventures can
increase their subscriber and advertiser bases and generate positive operating
cash flow, reducing their dependence on the Communications Group for funding of
working capital. Additionally, advances in wireless subscriber equipment
technology are expected to reduce capital requirements per subscriber. Further
initiatives to develop and establish

39
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
profitable operations include reducing operating costs as a percentage of
revenue and assisting Joint Ventures in developing management information
systems and automated customer care and service systems. No assurances can be
given that such initiatives will be successful or if successful, will result in
such reductions. Additionally, if the Joint Ventures do become profitable and
generate sufficient cash flows in the future, there can be no assurance that the
Joint Ventures will pay dividends or will return capital at any time.

40
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)

CHINA

The Sichuan JV is a party to a Network System Cooperation Contract dated May
1996, with China Unicom (the "Sichuan Network System Cooperation Contract"). The
Chongqing JV subsequently assumed certain obligations and rights associated with
the Network Systems Cooperation Contract through a contract executed between the
Sichuan JV and Chongqing JV. The Sichuan Network System Cooperation Contract
provides for a 25-year period of cooperation between the Sichuan JV and the
Chongqing JV and China Unicom for the development of a local telephone network
(the "PSTN Network") in the Sichuan Province (such project is referred to herein
as the "Sichuan Project") with an initial capacity of 50,000 lines ("Phase 1")
and with China Unicom projecting growth of up to 1,000,000 lines in the Sichuan
Province within the next five years ("Phase 2"). In accordance with the terms of
the Sichuan Network System Cooperation Contract, the Sichuan JV and the
Chongqing JV are responsible for providing the initial capital to develop Phase
1 of the PSTN Network (including payments for import equipment) while China
Unicom is responsible for the construction of Phase 1 and the operation,
management and maintenance of the PSTN Network in the Sichuan Province and the
City of Chongqing. The Sichuan JV and the Chongqing JV will provide financing,
consulting and management support services to China Unicom for the construction
and operation of the PSTN Network in exchange for a service and support fee
equal to 78% of distributable cash flow from the PSTN Network for a 25-year
period for each phase of the PSTN Network developed, payable semi-annually.

In connection with MCC's investments in the Sichuan JV and the Chongqing JV, the
Joint Ventures have entered into a Phase 1 loan with Northern Telecom
Communications ("Nortel") for $20.0 million to finance the purchase of Nortel
equipment for the Sichuan Province and City of Chongqing Phase 1 project. The
Company has secured the Phase 1 loan repayment with a $20.0 million letter of
credit. Nortel has the right to draw on the $20.0 million letter of credit for
amounts due Nortel by the Sichuan JV and the Chongqing JV if a Phase 2 contract
has not been entered into with Nortel to expand the 50,000 lines in Phase 1
project to at least 150,000 lines within one year from the date of the Phase 1
contract with Nortel.

The estimated budget for Phase 1 of the Sichuan Project is approximately RMB 242
million or $29.5 million in the Sichuan Province and approximately RMB 242
million or $29.5 million in the City of Chongqing.

Ningbo Telecommunications has assigned to the Ningbo JV its Network System
Cooperation Contract with China Unicom (the "Ningbo Network System Cooperation
Contract") which provides for the development of a GSM telecommunications
network (the "GSM Network") in the City of Ningbo with a capacity of 50,000
lines (the "Ningbo Project"). In accordance with the terms of the Ningbo Network
System Cooperation Contract, the Ningbo JV is responsible for providing the
initial capital to develop the Ningbo Project of the GSM Network while China
Unicom is responsible for the construction of the GSM Network and operation,
management and maintenance of the GSM Network in the City of Ningbo. The Ningbo
JV will provide financing, consulting and management support services to China
Unicom for the construction and operation of the GSM Network in exchange for 73%
of the distributable cash flow from the GSM Network for a 15-year period.

The total estimated budget for the Ningbo Project is approximately RMB 247
million or $29.7 million.

On March 26, 1998 Ningbo JV and China Unicom signed a co-operation agreement for
Phase 1 re-expansion of the network. The re-expansion includes 35 new base
stations (total of 100 base stations) and 25,000 new subscribers (total capacity
of 75,000 subscribers). The feasibility study for the expansion was completed at
March 6, 1998 and forecast a total budget of approximately $17.0 million.

41
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
SNAPPER

Snapper's liquidity is generated from operations and borrowings. On November 26,
1996, Snapper entered into a credit agreement (the "Snapper Credit Agreement")
with AmSouth Bank of Alabama ("AmSouth") pursuant to which AmSouth agreed to
make available to Snapper a revolving line of credit up to $55.0 million, (the
"Snapper Revolver"). The Snapper Revolver was to terminate on January 1, 1999
and is guaranteed by the Company. The Snapper Revolver contains covenants
regarding minimum quarterly cash flow and equity requirements.

On November 12, 1997, Snapper amended and restated the Snapper Credit Agreement
to increase the amount of the revolving line of credit from $55.0 million to
$80.0 million. The amended Snapper Revolver bears interest at an applicable
margin above the prime rate (up to 1.5%) or a LIBOR rate (up to 4.0%), and
matures on January 1, 2000. The Snapper Revolver continues to be guaranteed by
the Company, as well as by John W. Kluge, the Company's Chairman of the Board,
and Stuart Subotnick, the Company's Vice-Chairman, President and Chief Executive
Officer, up to $10.0 million. The Snapper Credit Agreement, as amended,
continues to contain certain financial covenants regarding minimum tangible net
worth and satisfying certain quarterly cash flow requirements.

At December 31, 1997, Snapper was not in compliance with the financial covenants
under the Snapper Revolver. The Company and AmSouth amended the Snapper Credit
Agreement to provide for (i) a reduction in the amount of the line of credit
from $80.0 million to $55.0 million as of July 1, 1998 and (ii) a reduction in
the finished goods advance rate from 80% to 70% as of July 1, 1998 and 50% as of
December 31, 1998. As part of the amendment to the Snapper Credit Agreement,
AmSouth waived the covenant defaults as of December 31, 1997. Furthermore, the
amendment replaced the existing 1998 financial covenants with covenants
reflecting Snapper's anticipated cash flow and equity changes based on the
seasonality of the business.

At June 30, 1998, Snapper was not in compliance with certain financial covenants
under the Snapper Revolver. The Company and AmSouth amended the Snapper Credit
Agreement to provide for a reduction of the line of credit from $55.0 million to
$51.0 million, as of August 11, 1998. As part of the amendment to the Snapper
Credit Agreement, AmSouth waived the covenant defaults as of June 30, 1998,
however, based on the Company's expectations with complying with the financial
covenants contained in the Snapper Credit Agreement, the Snapper Revolver has
been classified as a current liability at June 30, 1998 in the accompanying
consolidated condensed balance sheet.

Snapper has entered into various long-term manufacturing and purchase agreements
with certain vendors for the purchase of manufactured products and raw
materials. As of June 30, 1998, noncancellable commitments under these
agreements amounted to approximately $25.0 million.

Snapper has an agreement with a financial institution which makes available
floor plan financing to distributors and dealers of Snapper products. This
agreement provides financing for dealer inventories and accelerates Snapper's
cash flow. Under the terms of the agreement, a default in payment by a dealer is
nonrecourse to both the distributor and to Snapper. However, Snapper is
obligated to repurchase any new and used equipment recovered from the dealer. At
June 30, 1998, there was approximately $89.1 million outstanding under this
floor plan financing arrangement. The Company has guaranteed Snapper's payment
obligations under this agreement.

The Company believes that Snapper's available cash on hand, the cash flow
generated by operating activities, borrowings from the Snapper Revolver and, on
an as needed basis, short-term working capital funding from the Company will
provide sufficient funds for Snapper to meet its obligations and capital
requirements.

42
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
YEAR 2000 SYSTEM MODIFICATIONS

The Company is currently working to evaluate and resolve the potential impact of
the Year 2000 on the processing of date-sensitive information and network
systems. The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the Year 2000, which could result
in miscalculations or system failures. The Company evaluates the costs
associated with modifying and testing its systems for the Year 2000. The Company
expects to make some of the necessary modifications through its ongoing
investment in system upgrades. The Company is not yet able to estimate the
incremental costs of the Year 2000 conversion effort, but such costs will be
expensed as incurred. The incremental costs to date have not been material. If
the Company, its Joint Ventures and projects where it does not have a
controlling management interest, customers or vendors are unable to resolve such
processing issues in a timely manner, it could result in a material financial
risk. Accordingly, the Company plans to devote the necessary resources to
resolve all significant Year 2000 issues.

MMG CONSOLIDATED

SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997.

CASH FLOWS FROM OPERATING ACTIVITIES

Cash used in operating activities for the six months ended June 30, 1998 was
$19.3 million, a decrease in cash used in operating activities of $21.0 million
from the same period in the prior year.

Losses from operating activities include significant non-cash items such as
discontinued operations, depreciation, amortization, equity in losses of joint
ventures and investees, and losses allocable to minority interests. Excluding
discontinued operations, non-cash items decreased $19.2 million from $36.4
million to $17.2 million for the six months ended June 30, 1997 and 1998,
respectively. The decrease relates principally to equity losses allocable to RDM
of $26.2 million, partially offset by the increase in equity losses of the
Communications Group's Joint Ventures of $9.4 million. Changes in operating
assets and liabilities, net of the effect of acquisitions, increased cash flows
for the six months ended June 30, 1998 by $8.6 million and decreased cash flows
by $16.2 million, for the six months ended June 30, 1997.

The increase in cash flows for the six months ended June 30, 1998 resulted from
the Company's decision to significantly decrease its production of inventory at
Snapper in the current year partially offset by increased losses in the
Communications Group's operations due to the start-up nature of these operations
and increases in selling, general and administrative expenses to support the
increase in the number of joint ventures.

CASH FLOWS FROM INVESTING ACTIVITIES

Cash provided by investing activities was $111.6 million for the six months
ended June 30, 1998 as compared to cash used in investing activities of $42.3
million for the six months ended June 30, 1997. The principal sources of funds
from investing activities in 1998 were proceeds from maturities of short-term
investments of $100.0 million and the net proceeds of $57.3 million from the
sale of Landmark. The principal uses of funds for the six months ended June 30,
1998 were investments in and advances to Joint Ventures of $34.6 million,
acquisitions by the Communications Group of $6.9 million and additions to
property, plant and equipment of $5.3 million. The principal uses of funds for
the six months ended June 30, 1997 were investments in and advances to Joint
Ventures of $20.6 million, acquisitions by the Communications Group of $8.1
million and additions to property, plant and equipment of $7.6 million.

43
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (continued)
CASH FLOWS FROM FINANCING ACTIVITIES

Cash used in financing activities was $19.0 million, for the six months ended
June 30, 1998 as compared to cash provided by financing activities of $3.5
million, for the six months ended June 30, 1997. Funds used in financing
activities in 1998 were for the Preferred Stock dividend of $7.5 million and the
repayment of debt of $16.9 million, principally the Snapper Revolver, which was
partially offset by proceeds of $5.3 million from the exercise of stock options.
Funds provided by financing were from borrowings under the Snapper Revolver of
$19.6 million and proceeds of $797,000 from the exercise of stock options,
partially offset by the repayment of debt of $16.8 million, of which $15.0
million was the repayment of the 9 7/8% debentures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company will be required to provide both quantitative and qualitative
disclosures about market risk in its December 31, 1998 Annual Report on Form
10-K.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q including, without limitation, statements
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Legal Proceedings" constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not
necessarily all, of such forward-looking statements can be identified by the use
of forward-looking terminology, such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involves risks and
uncertainties. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, which will, among other
things, affect demand for the Company's products and services; industry
capacity, which tends to increase during strong years of the business cycle;
changes in public taste and industry trends; demographic changes; competition
from other communications companies, which may affect the Company's ability to
enter into or acquire new joint ventures or to generate revenues; political,
social and economic conditions and laws, rules and regulations, particularly in
Eastern Europe and the FSU, China and selected other emerging markets, which may
affect the Company's results of operations; timely completion of construction
projects for new systems for the Joint Ventures in which the Company has
invested, which may impact the costs of such projects; developing legal
structures in Eastern Europe and the FSU, China and other selected emerging
markets, which may affect the Company's results of operations; cooperation of
local partners for the Company's communications investments in Eastern Europe
and the FSU, China and other selected emerging markets, which may affect the
Company's results of operations; exchange rate fluctuations; license renewals
for the Company's communications investments in Eastern Europe and the FSU,
China and other selected emerging markets; the loss of any significant
customers; changes in business strategy or development plans; quality of
management; availability of qualified personnel; changes in or the failure to
comply with government regulations; and other factors referenced herein. The
Company does not undertake, and specifically declines, any obligation to release
publicly any revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.

44
<PAGE>
PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Updated information on litigation and environmental matters subsequent to
December 31, 1997 is as follows:

FUQUA INDUSTRIES, INC. SHAREHOLDER LITIGATION

IN RE FUQUA INDUSTRIES, INC. SHAREHOLDER LITIGATION, Del. Ch., Consolidated
C.A. No. 11974. Plaintiff Virginia Abrams filed this purported class and
derivative action in the Delaware Court of Chancery (the "Court") on February
22, 1991 against Fuqua, Intermark, Inc. ("Intermark"), the then-current
directors of Fuqua and certain past members of the board of directors. The
action challenged certain transactions which were alleged to be part of a plan
to change control of the board of Fuqua from J.B. Fuqua to Intermark and sought
a judgment against defendants in the amount of $15.7 million, other unspecified
money damages, an accounting, declaratory relief and an injunction prohibiting
any business combination between Fuqua and Intermark in the absence of approval
by a majority of Fuqua's disinterested shareholders. Subsequently, two similar
actions, styled BEHRENS V. FUQUA INDUSTRIES, INC. ET AL. Del. Ch., C.A. No.
11988 and FREBERG V. FUQUA INDUSTRIES, INC. ET AL, Del. Ch., CA. No.11989 were
filed with the Court. On May 1, 1991, the Court ordered all of the foregoing
actions consolidated. On October 7, 1991, all defendants moved to dismiss the
complaint. Plaintiffs thereafter took three depositions during the next three
years.

On December 28, 1995, plaintiffs filed a consolidated second amended derivative
and class action complaint, purporting to assert additional facts in support of
their claim regarding an alleged plan, but deleting their prior request for
injunctive relief. On January 31, 1996, all defendants moved to dismiss the
second amended complaint. after the motion was briefed, oral argument was held
on November 6, 1996. On May 13, 1997, the Court issued a decision on defendants'
motion to dismiss, The Court dismissed all of plaintiffs' class claims and
dismissed all of plaintiffs' derivative claims except for the claims that Fuqua
board members (i) entered into an agreement pursuant to which Triton Group, Inc.
(which was subsequently merged into Intermark, "Triton") was exempted from 8
Del. C. 203 and (ii) undertook a program pursuant to which 4.9 million shares of
Fuqua common stock were repurchased, allegedly both in furtherance of an
entrenchment plan. On January 16, 1998, the Court entered an order implementing
the May 13, 1997 decision. The order also dismissed one of the defendants from
the case with prejudice and dismissed three other defendants without waiver of
any rights plaintiffs might have to reassert the claims if the opinion were to
be vacated or reversed on appeal.

On February 5, 1998, the plaintiffs filed a consolidated third amended
derivative complaint and named as defendants Messrs. J.B. Fuqua, Klamon,
Sanders, Scott, Warner and Zellars. The Complaint alleged that defendants (i)
entered into an agreement pursuant to which Triton was exempted from 8 Del. C.
203 and (ii) undertook a program pursuant to which 4.9 million shares of Fuqua
common stock were repurchased, both allegedly in furtherance of an entrenchment
plan. For their relief, plaintiffs seek damages and an accounting of profits
improperly obtained by defendants.

On March 9, 1998, defendants Klamon, Sanders, Zellars, Scott and Warner filed
their answers denying each of the substantive allegations of wrongdoing
contained in the third amended complaint. The Company filed its answer the same
day, submitting itself to the jurisdiction of the Court for a proper resolution
of the claims purported to be set forth by the plaintiffs. On March 10, 1998,
defendant J.B. Fuqua filed his answer denying each of the substantive
allegations of wrongdoing contained in the third amended complaint. The parties
are currently engaged in discovery.

45
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
MICHAEL SHORES V. SAMUEL GOLDWYN COMPANY, ET AL.

On May 20, 1996, a purported class action lawsuit, SHORES V. SAMUEL GOLDWYN
COMPANY, ET AL., Case No. BC 150360, was filed in the Superior Court of the
State of California. Plaintiff Michael Shores alleged that, in connection with
the merger of the Samuel Goldwyn Company ("Goldwyn"). Goldwyn's directors and
majority shareholder breached their fiduciary duties to the public shareholders
of Goldwyn. In amended complaints, plaintiff subsequently added claims that the
Company had aided and abetted other defendants' fiduciary breaches and had
negligently misrepresented and/or omitted material facts in the Company's
prospectus issued in connection with the merger. The Company successfully
demurred to the first and second amended complaints and plaintiff filed a third
amended complaint, which included only the negligent misrepresentation claim
against the Company. Following settlement discussions, the plaintiff agreed with
defendants to settle the action in exchange for a payment by defendants in the
amount of $490,000, which payment is to constitute a complete and final
satisfaction of the claims asserted by plaintiff and a plaintiff class certified
solely for the purposes of the settlement. The proposed settlement was
preliminarily approved by the court on July 27, 1998 and members of the
plaintiff class are being notified of the settlement. The court will hold a
further hearing on October 8, 1998 to determine finally the fairness,
reasonableness and adequacy of the settlement.

SAMUEL GOLDWYN, JR. V. METRO-GOLDWYN-MAYER INC., ET AL.

On October 29, 1997, Samuel Goldwyn, Jr., the former chairman of Goldwyn, filed
SAMUEL GOLDWYN, JR. V. METRO-GOLDWYN-MAYER INC., ET AL., Case No. BC 180290, in
Superior Court of the State of California, alleging that the Company
fraudulently induced him and the Samuel Goldwyn, Jr. Family Trust (the "Trust")
to enter into various agreements in connection with the Goldwyn Merger; breached
an agreement to guarantee the performance of Goldwyn Entertainment Company's
obligations to the Trust; and is using, without permission, the "Samuel Goldwyn"
trademark. The complaint also alleges that the Company and other defendants
breached Mr. Goldwyn's employment agreement and fiduciary duties owed to him and
the Trust, both before and after the sale of Goldwyn Entertainment Company to
Metro-Goldwyn-Mayer Inc. The Company had demurred on the plaintiff's complaint.
The parties are currently engaged in discovery. The Company believes it has
meritorious defenses and is vigorously defending such action.

SYDNEY H. SAPSOWITZ AND SID SAPSOWITZ & ASSOCIATES, INC. V. JOHN W. KLUGE,
STUART SUBOTNICK, METROMEDIA INTERNATIONAL GROUP, INC., ET AL.

On June 30, 1997, the plaintiffs in SYDNEY H. SAPSOWITZ AND SID SAPSOWITZ &
ASSOCIATES, INC. V. JOHN W. KLUGE, STUART SUBOTNICK, METROMEDIA INTERNATIONAL
GROUP, INC., ORION PICTURES CORPORATION, LEONARD WHITE, ET AL. filed a lawsuit
in Superior Court of the State of California alleging $28.7 million in damages
from the breach of an agreement to pay a finder's fee in connection with the
Entertainment Group Sale. The Company believes it has meritorious defenses and
is vigorously defending such action. Item 1. Legal Proceedings (continued)

ANTHONY NICHOLAS GEORGIOU, ET AL. V. MOBIL EXPLORATION AND PRODUCING SERVICES,
INC., METROMEDIA INTERNATIONAL TELECOMMUNICATIONS, INC., ET AL.

On January 14, 1998, Anthony Nicholas Georgiou, et al. v. Mobil Exploration and
Producing Services, Inc., Metromedia International Telecommunications, Inc., et
al., Civil Action No. H-98-0098, was filed in the United States District Court
for the Southern District of Texas. Plaintiffs claim that MITI conspired against
and tortiously interfered with plaintiffs' potential contracts involving certain
oil exploration and production contracts in Siberia and telecommunications
contracts in the Russian Federation. Plaintiffs are claiming damages, for which
all defendants could be held jointly and severally liable, of an amount in
excess of $395.0 million. On or about February 27, 1998 MITI filed its answer
denying each of the substantive allegations of wrongdoing contained in the
complaint. The parties are currently engaged in discovery. The Company believes
it has meritorious defenses and is vigorously defending this action.

46
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
INDEMNIFICATION AGREEMENTS

In accordance with Section 145 of the General Corporation Law of the State of
Delaware, pursuant to the Company's Restated Certificate of Incorporation, the
Company has agreed to indemnify its officers and directors against, among other
things, any and all judgments, fines, penalties, amounts paid in settlements and
expenses paid or incurred by virtue of the fact that such officer or director
was acting in such capacity to the extent not prohibited by law.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

At June 30, 1998, Snapper was not in compliance with certain financial covenants
under the Snapper Revolver. The Company and AmSouth amended the Snapper Credit
Agreement to provide for a reduction of the line of credit from $55.0 million to
$51.0 million, as of August 13, 1998. As part of the amendment to the Snapper
Credit Agreement, AmSouth waived the covenant defaults as of June 30, 1998,
however, based on the Company's expectations with complying with the financial
covenants contained in the Snapper Credit Agreement, the Snapper Revolver has
been classified as a current liability at June 30, 1998 in the accompanying
consolidated condensed balance sheet.

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

At the Company's 1998 Annual Meeting of Stockholders held on May 13, 1998, the
stockholders of the Company were asked to consider and vote on the following
matters: (i) the election of four members to the Company's Board of Directors to
serve as Class III Directors for three year terms ending in the year 2001; (ii)
the ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the year ending December 31, 1998; and (iii) a
proposal submitted by a stockholder of the Company to amend the Company's
certificate of incorporation to allow stockholders of the Company to take action
by written consent and to call special meetings (the "Stockholder Proposal").

At such meeting, a majority of the Company's stockholders voted to approve the
election of Clark A. Johnson, Carl E. Sanders, Silvia Kessel and Arnold L.
Wadler as Class III Directors for three year terms ending in the year 2001, the
ratification of the appointment of KPMG Peat Marwick LLP as the Company's
independent accountants for the year ending December 31, 1998 and did not
approve the Stockholder Proposal.

The following is a summary of the voting results with respect to each of the
proposals:

<TABLE>
<CAPTION>
PROPOSAL FOR WITHHELD
--------------------------------------- ------------ ------------
<S> <C> <C> <C>
1. The Election of Class III Directors
Name
---------------------------------------
Clark A. Johnson 58,446,393 109,807
Carl E. Sanders 58,432,044 124,156
Silvia Kessel 58,442,154 114,046
Arnold L. Wadler 58,443,353 112,847
</TABLE>

<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
2. Ratification of the Appointment of Independent
Auditors 58,409,305 52,155 94,740 --
3. The Stockholder Proposal 11,386,001 26,071,062 3,736,050 17,343,087
</TABLE>

No other matters were submitted to a vote of the Company's stockholders, through
the solicitation of proxies or otherwise, during the second quarter of the year
ended December 31, 1998.

47
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------
<S> <C>
11* Computation of Earnings Per Share
27* Financial Data Schedule
</TABLE>

(b) Reports on Form 8-K

None.

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

* Filed herewith

48
<PAGE>
SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
METROMEDIA INTERNATIONAL GROUP, INC.

By: /s/ SILVIA KESSEL
-----------------------------------------
Silvia Kessel
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
AND TREASURER
</TABLE>

Dated: August 13, 1998

<PAGE>

EXHIBIT 11

METROMEDIA INTERNATIONAL GROUP, INC.
Computation of Earnings Per Share
(in thousands, except per share amounts)
<TABLE>
<CAPTION>

Three months ended
------------------
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Loss Per Share - Basic (A):
Continuing operations $ (22,189) $ (45,958)
Cumulative convertible preferred stock dividend requirement (3,752) -
----------------- --------------
Continuing operation attributable to common stock (25,941) (45,958)
shareholders
Discontinued operations 5,267 (25,914)
Extraordinary item - (1,094)
----------------- --------------
Net loss available for common stock shareholders $ (20,674) $ (72,966)
----------------- --------------
----------------- --------------

Weighted average common shares outstanding during the period 69,046 66,186
----------------- --------------
----------------- --------------
Loss Per Share - Basic:
Continuing operations $ (0.38) $ (0.69)
Discontinued operations 0.08 (0.39)
Extraordinary item - (0.02)
----------------- --------------
Net loss $ (0.30) $ (1.10)
----------------- --------------
----------------- --------------
</TABLE>

Six months ended
----------------
June 30, June 30,
1998 1997
---- ----
<S> <C> <C>
Loss Per Share - Basic (A):
Continuing operations $ (45,152) $ (59,463)
Cumulative convertible preferred stock dividend requirement (7,504) -
----------------- --------------
Continuing operation attributable to common stock (52,656) (59,463)
shareholders

Discontinued operations 5,267 (34,667)
Extraordinary item - (1,094)
----------------- --------------
----------------- --------------
Net loss available for common stock shareholders $ (47,389) $ (95,224)
----------------- --------------
----------------- --------------

Weighted average common shares outstanding during the period 68,810 66,171
----------------- --------------
----------------- --------------

Loss Per Share - Basic:

Continuing operations $ (0.77) $ (0.90)
Discontinued operations 0.08 (0.52)
Extraordinary item - (0.02)
----------------- --------------
Net loss $ (0.69) $ (1.44)
----------------- --------------
----------------- --------------
</TABLE>

(A) In calculating diluted earnings per share, no potential shares of common
stock are to be included in the computation of diluted earnings per
share when a loss from continuing operations available to common
stockholders exists. For the three and six months ended June 30, 1998
and 1997, the Company had a loss from continuing operations.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FILED AS PART OF THE QUARTERLY
REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 202,938
<SECURITIES> 3,069
<RECEIVABLES> 38,196
<ALLOWANCES> (2,122)
<INVENTORY> 71,375
<CURRENT-ASSETS> 318,745
<PP&E> 64,028
<DEPRECIATION> (16,314)
<TOTAL-ASSETS> 726,120
<CURRENT-LIABILITIES> 104,768
<BONDS> 56,604
0
207,000
<COMMON> 69,068
<OTHER-SE> 242,607
<TOTAL-LIABILITY-AND-EQUITY> 726,120
<SALES> 134,158
<TOTAL-REVENUES> 134,158
<CGS> 86,433
<TOTAL-COSTS> 174,473
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,560
<INCOME-PRETAX> (44,522)
<INCOME-TAX> 630
<INCOME-CONTINUING> (45,152)
<DISCONTINUED> 5,267
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,885)
<EPS-PRIMARY> (0.69)
<EPS-DILUTED> (0.69)

</TABLE>