METROMEDIA INTERNATIONAL GROUP INC, 10-Q, 2000-11-13

METROMEDIA INTERNATIONAL GROUP INC
10-Q, 2000-11-13
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 SEPTEMBER 30, 2000

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-5706

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

METROMEDIA INTERNATIONAL GROUP, INC.

(Exact name of registrant, as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 58-0971455
(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)W 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 NOVEMBER 9, 2000 WAS
94,034,947.

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<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

INDEX TO
QUARTERLY REPORT ON FORM 10-Q

PART I--FINANCIAL INFORMATION

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
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....................... 30

Item 3. Quantitative and Qualitative Disclosures about
Market Risk............................................... 73

PART II--OTHER INFORMATION

Item 1. Legal Proceedings................................... 75

Item 3. Defaults Upon Senior Securities..................... 78

Item 6. Exhibits and Reports on Form 8-K.................... 78

Signature................................................... 79
</TABLE>

1
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Communications Group............................... $ 35,469 $ 5,945 $ 99,170 $ 19,374
Snapper............................................ 33,989 46,989 136,519 166,207
-------- -------- -------- --------
69,458 52,934 235,689 185,581
Cost and expenses:
Cost of sales and operating expenses --
Communications Group............................. 9,221 317 25,597 1,214
Cost of sales -- Snapper........................... 24,930 33,652 91,845 112,327
Selling, general and administrative................ 34,918 30,461 107,504 91,063
Depreciation and amortization...................... 18,075 57,971 50,341 66,558
Reduction in estimate of restructuring and asset
impairment charges............................... (703) -- (4,901) --
-------- -------- -------- --------
Operating loss....................................... (16,983) (69,467) (34,697) (85,581)

Other income (expense):
Interest expense................................... (7,279) (2,792) (23,299) (9,721)
Interest income.................................... 1,502 1,852 3,025 6,098
Equity in income (losses) of unconsolidated
investees........................................ 197 (909) 2,341 (6,842)
Gain on settlement of option....................... -- -- 2,500 --
Gain (loss) on disposition of businesses........... 2,752 (1,200) 2,752 (1,200)
Foreign currency gain (loss)....................... 16 (1,260) 57 (4,054)
-------- -------- -------- --------
Loss before income tax expense, minority interest and
discontinued operations............................ (19,795) (73,776) (47,321) (101,300)
Income tax expense................................... (2,341) (153) (6,952) (358)
Minority interest.................................... (67) 22,382 (1,063) 27,234
-------- -------- -------- --------
Loss from continuing operations...................... (22,203) (51,547) (55,336) (74,424)
Discontinued operations:
Loss on disposition................................ -- (12,776) -- (12,776)
-------- -------- -------- --------
Net loss............................................. (22,203) (64,323) (55,336) (87,200)
Cumulative convertible preferred stock dividend
requirement........................................ (3,752) (3,752) (11,256) (11,256)
-------- -------- -------- --------
Net loss attributable to common stockholders......... $(25,955) $(68,075) $(66,592) $(98,456)
======== ======== ======== ========
Weighted average number of common shares -- Basic.... 94,035 69,172 93,959 69,149
======== ======== ======== ========
Loss per share attributable to common stockholders --
Basic:
Continuing operations.............................. $ (0.28) $ (0.80) $ (0.71) $ (1.24)
Discontinued operations............................ $ -- $ (0.18) $ -- $ (0.18)
Net loss........................................... $ (0.28) $ (0.98) $ (0.71) $ (1.42)
======== ======== ======== ========
</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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................................. $ 80,980 $ 50,985
Accounts receivable:
Communications Group, net............................... 23,255 20,682
Snapper, net............................................ 19,281 26,898
Other, net.............................................. 395 265
Inventories............................................... 52,461 55,209
Other assets.............................................. 22,822 20,650
----------- -----------
Total current assets.................................. 199,194 174,689
Investments in and advances to joint ventures:
Eastern Europe and the republics of the former Soviet
Union................................................... 77,396 78,067
China..................................................... -- 40,982
Property, plant and equipment, net of accumulated
depreciation.............................................. 183,786 191,018
Intangible assets, less accumulated amortization............ 231,632 274,025
Other assets................................................ 5,018 18,073
----------- -----------
Total assets.......................................... $ 697,026 $ 776,854
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable.......................................... $ 28,901 $ 38,808
Accrued expenses.......................................... 85,864 85,527
Current portion of long-term debt......................... 36,098 11,383
----------- -----------
Total current liabilities............................. 150,863 135,718
Long-term debt.............................................. 183,698 212,569
Other long-term liabilities................................. 15,243 13,758
----------- -----------
Total liabilities..................................... 349,804 362,045
----------- -----------
Minority interest........................................... 29,301 29,874
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 94,034,947 and 93,284,589
shares at September 30, 2000 and December 31, 1999,
respectively............................................ 94,035 93,285
Paid-in surplus........................................... 1,102,769 1,102,308
Accumulated deficit....................................... (1,080,876) (1,014,284)
Accumulated other comprehensive loss...................... (5,007) (3,374)
----------- -----------
Total stockholders' equity............................ 317,921 384,935
----------- -----------
Total liabilities and stockholders' equity............ $ 697,026 $ 776,854
=========== ===========
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Operating activities:
Net loss.................................................. $(55,336) $(87,200)
Items not requiring cash outlays:
Loss on disposition of discontinued operations............ -- 12,776
Equity in (income) losses of unconsolidated investees..... (2,341) 6,842
Depreciation and amortization............................. 50,341 66,558
Reduction in estimate of restructuring and asset
impairment charge....................................... (4,901) --
Amortization of debt discount............................. 13,926 --
Gain on settlement of option.............................. (2,500) --
(Gain) loss on disposition of businesses.................. (2,752) 1,200
Minority interest......................................... 1,063 (27,234)
Other..................................................... (1,676) 283
Changes in:
Accounts receivable....................................... 4,355 17,510
Inventories............................................... 2,748 14,844
Other assets and liabilities.............................. 3,643 (2,611)
Accounts payable and accrued expenses..................... (6,875) (16,704)
Other operating activities, net........................... -- 1,696
-------- --------
Cash used in operating activities....................... (305) (12,040)
-------- --------
Investing activities:
Investments in and advances to joint ventures............. (3,457) (14,467)
Distributions from joint ventures......................... 71,965 8,354
Cash paid in acquisition of PLD Telekom, net.............. -- (19,622)
Cash paid for acquisitions and additional equity in
subsidiaries............................................ (5,377) (1,435)
Additions to property, plant and equipment................ (15,723) (4,284)
Proceeds from sale of businesses.......................... 400 --
Cash received in settlement of option..................... 11,000 --
Other investing activities, net........................... -- (5,500)
-------- --------
Cash provided by (used in) investing activities......... 58,808 (36,954)
-------- --------
Financing activities:
Proceeds from long-term debt.............................. 746 --
Payments on notes and subordinated debt................... (18,194) (15,423)
Proceeds from issuance of common stock related to
incentive plans......................................... 1,211 99
Preferred stock dividends paid............................ (11,256) (11,256)
Dividends paid to minority interest in PeterStar.......... (1,015) --
-------- --------
Cash used in financing activities....................... (28,508) (26,580)
-------- --------
Net increase (decrease) in cash and cash equivalents...... 29,995 (75,574)
Cash and cash equivalents at beginning of period.......... 50,985 137,625
-------- --------
Cash and cash equivalents at end of period................ $ 80,980 $ 62,051
======== ========
</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 LOSS
--------- -------- ---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1998...... 4,140,000 $207,000 69,118,841 $69,119 $1,012,794 $ (857,293) $(6,080)

Net loss......................... -- -- -- -- -- (87,200) --

Other comprehensive income,
net of tax:

Foreign currency translation
adjustments.................... -- -- -- -- -- -- 1,634

Total comprehensive loss.........

Issuance of stock and valuation
of stock options and warrants
related to the acquisition of
PLD Telekom Inc................ -- -- 24,107,449 24,107 89,254 -- --

Issuance of stock and stock
options related to incentive
and other plans................ -- -- 56,413 57 252 -- --

Dividends on 7 1/4% cumulative
convertible preferred stock.... -- -- -- -- -- (11,256) --
--------- -------- ---------- ------- ---------- ----------- -------

Balances, September 30, 1999..... 4,140,000 $207,000 93,282,703 $93,283 $1,102,300 $ (955,749) $(4,446)
========= ======== ========== ======= ========== =========== =======

Balances, December 31, 1999...... 4,140,000 $207,000 93,284,589 $93,285 $1,102,308 $(1,014,284) $(3,374)

Net loss......................... -- -- -- -- -- (55,336) --

Other comprehensive income,
net of tax:

Foreign currency translation
adjustments.................... -- -- -- -- -- -- (1,244)

Minimum pension liability........ -- -- -- -- -- -- (389)

Total comprehensive loss.........

Issuance of stock related to
incentive plans................ -- -- 750,358 750 461 -- --

Dividends on 7 1/4% cumulative
convertible preferred stock.... -- -- -- -- -- (11,256) --
--------- -------- ---------- ------- ---------- ----------- -------

Balances, September 30, 2000..... 4,140,000 $207,000 94,034,947 $94,035 $1,102,769 $(1,080,876) $(5,007)
========= ======== ========== ======= ========== =========== =======

TOTAL
COMPREHENSIVE
LOSS
-------------
<S> <C>
Balances, December 31, 1998...... $ --
Net loss......................... (87,200)
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments.................... 1,634
--------
Total comprehensive loss......... $(85,566)
========
Issuance of stock and valuation
of stock options and warrants
related to the acquisition of
PLD Telekom Inc................
Issuance of stock and stock
options related to incentive
and other plans................
Dividends on 7 1/4% cumulative
convertible preferred stock....
Balances, September 30, 1999.....
Balances, December 31, 1999...... $ --
Net loss......................... (55,336)
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments.................... (1,244)
Minimum pension liability........ (389)
--------
Total comprehensive loss......... $(56,969)
========
Issuance of stock related to
incentive plans................
Dividends on 7 1/4% cumulative
convertible preferred stock....
Balances, September 30, 2000.....
</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 consolidated financial statements include the accounts of
Metromedia International Group, Inc. ("MMG" or the "Company") and its
wholly-owned subsidiaries, Metromedia International Telecommunications, Inc.
("MITI"), Snapper Inc. ("Snapper") and as of September 30, 1999, PLD
Telekom Inc. ("PLD Telekom"). PLD Telekom, MITI and its majority owned
subsidiary, Metromedia China Corporation, are collectively known as the
"Communications Group". PLD Telekom has been included in the Company's results
of operations since September 30, 1999. All significant intercompany
transactions and accounts have been eliminated.

Investments in other companies, including those of the Communications Group's
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 in joint ventures under
the caption "Investments in and advances to joint ventures."

Almost all of the Communications Group's joint ventures other than the
businesses of PLD Telekom report their financial results on a three-month lag.
Therefore, the Communications Group's financial results for September 30 include
the financial results for those joint ventures for the three and nine months
ending June 30. The Company is currently evaluating the financial reporting of
these ventures and the possibility of reducing or eliminating the three-month
reporting lag for certain of its principal businesses for the purpose of
presenting the Company's results of operations on a more timely basis.

The accompanying interim consolidated condensed financial statements have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange 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 for the
year ended December 31, 1999. 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 September 30, 2000, and the results of
its operations and its cash flows for the three and nine month periods ended
September 30, 2000 and 1999, 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

The Company is a holding company and, accordingly, does not generate cash flows
from operations. The Company believes that its cash on hand will be sufficient
to fund the Company's working capital requirements for the near term.

6
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

1. BASIS OF PRESENTATION AND LIQUIDITY (CONTINUED)
hand. Future financing requirements of the Communications Group, including
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, and if necessary, selective dispositions of assets.

In addition to funding the cash requirements of the Communications Group, the
Company has periodically funded the short-term working capital needs of its
wholly owned subsidiary, Snapper, which manufactures and sells lawn and garden
equipment. PLD Telekom and Snapper are restricted under covenants contained in
their credit agreements from making dividend payments or advances, other than
certain permitted repayments, to the Company.

The Company will also be required to pay interest on its 10 1/2% senior discount
notes issued in connection with the acquisition of PLD Telekom commencing
September 30, 2002. As a result, the Company will require additional financing
in order to satisfy its on-going working capital requirements, debt service and
acquisition and expansion requirements. 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 or proceeds from the sale of assets. 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.

Management believes that its long-term liquidity needs (including debt service)
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 and subsidiaries achieving positive operating results and cash flows
through revenue and subscriber growth and control of operating expenses.

2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION

GENERAL

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 line of
credit agreements between the Company or one of its subsidiaries and the joint
ventures are reflected based on amounts recoverable under the credit agreement,
plus accrued interest.

Advances are made to joint ventures and subsidiaries in the form of cash, for
working capital purposes, payment of expenses or capital expenditures, or in the
form of equipment purchased on behalf of the joint ventures or subsidiaries.
Interest rates charged to the joint ventures and subsidiaries range from prime
rate to prime rate plus 6%. The credit agreements generally provide for the
payment of principal and interest from 90% of the joint ventures' and
subsidiaries' available cash flow, as defined, prior to any distributions of
dividends to the joint venture partners. The Communications Group has entered
into charter fund and credit agreements with its joint ventures and subsidiaries
to provide up to $234.0 million in funding of which $47.3 million in funding
obligations remain at September 30, 2000. The Communications Group's funding
commitments are contingent on its approval of the joint ventures' and
subsidiaries' business plans.

7
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
COMSTAR

As part of the Communications Group's strategy to develop further its fixed
telephony business, in June 2000 it entered into an agreement with Marconi
Communications Limited of the U.K. to acquire Marconi's 50% ownership position
in Comstar, a digital overlay operator with an optical fiber network throughout
Moscow. The Company has agreed to pay $60.0 million for the 50% interest in
Comstar. The parties expect the transaction to close in 2000, following the
completion of due diligence and the resolution of any issues arising from that
process. Comstar is a 50/50 joint venture with the Moscow City Telephone Network
("MGTS"). This network supports local, national and international data and
telephony services and is interconnected into MGTS' public network. Comstar
facilitates all types of IP services through a Central Internet Service Node.

Under the agreement with Marconi, the Communications Group placed $3.0 million
in escrow, pending closing of the transaction. In the event that the acquisition
is not completed by November 30, 2000, Marconi has the right to terminate the
Purchase Agreement and, in certain circumstances, retain the escrowed funds. In
addition, the purchase price is subject to escalation in certain circumstances,
with the additional amount not exceeding approximately $1.2 million.

INTERNET SERVICES

The Communications Group is actively seeking to develop internet services and in
June 2000 the Company's joint venture in Romania, Romsat TV, acquired a 70%
ownership position in FX Internet, an ISP, web hosting and domain registration
service in Romania. FX Internet provides dial-up, leased line and wireless
internet access services in Romania with 9,100 active subscribers, offering
internet connectivity to customers in four districts, reaching a total
population of approximately five million. The Communications Group paid
$2.5 million for its 70% interest in FX Internet, $2.0 million of which was paid
to the existing shareholders and $500,000 of which will be used to expand its
network to eight additional regions before year-end to bring its total
serviceable population to over eight million.

FX Internet, working in combination with Romsat TV, will enable MITI ventures to
offer bundled TV and internet services to Romsat TV's approximately 100,000
existing customers.

SALE OF BALTCOM GSM

In October 2000 the Communications Group sold its indirect 22% interest in
Baltcom GSM, a Latvian mobile operator, to Tele2 AB, for total cash
consideration of $66.3 million. The Communications Group's sale of its interest
in Baltcom GSM was part of a sale by all of the selling shareholders of their
stakes to Tele2. The sale agreement contained customary representations and
warranties for the selling shareholders, including the Communications Group, and
indemnification provisions for the benefit of the buyer from the selling
shareholders.

The Communications Group expects to report the after tax gain on this disposal,
approximately $50 million, in the final quarter of 2000. Taxes payable on the
gain are expected to be negligible.

1999 RESTRUCTURING AND IMPAIRMENT CHARGES

Shortly after completing its September 30, 1999 acquisition of PLD Telekom, the
Company began identifying synergies and redundancies between its MITI and PLD
Telekom subsidiaries. The

8
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
Company's efforts were directed toward streamlining its operations. Following
the review of its operations, the Communications Group determined to make
significant reductions in its projected overhead costs for 2000 by closing its
offices in Stamford, Connecticut and London, England, consolidating its
executive offices in New York, New York, consolidating its operational
headquarters in Vienna, Austria and consolidating its two Moscow offices into
one. As part of this streamlining of its operations, the Company announced an
employee headcount reduction. Employees impacted by the restructuring were
notified in December 1999 and in almost all cases were terminated effective
December 31, 1999. The total number of U.S. domestic and expatriate employees
separated was approximately 60. In addition, there were reductions in locally
hired staff. In 1999 the Company recorded a charge of $8.4 million in connection
with the restructuring.

Following is a rollforward of the activity and balances of the restructuring
reserve account from inception to September 30, 2000 (in thousands):

<TABLE>
<CAPTION>
RESTRUCTURING DECEMBER 31, SEPTEMBER 30,
TYPE OF COST COST PAYMENTS 1999 PAYMENTS ADJUSTMENTS 2000
------------ ------------- -------- ------------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Employee separations...... $6,175 $(303) $5,872 $(3,959) $(676) $1,237
Facility closings......... 1,456 -- 1,456 (912) (147) 397
------ ----- ------ ------- ----- ------
7,631 $(303) $7,328 $(4,871) $(823) $1,634
===== ====== ======= ===== ======
Write off of fixed
assets.................. 800
------
$8,431
======
</TABLE>

Adjustments are primarily due to actual employee termination costs being lower
than originally estimated.

Concurrent with the review of its existing operations and the change in
management as the result of the acquisition of PLD Telekom, the Communications
Group completed a strategic review of its telephony, cable television, radio
broadcasting and paging assets. As a result of the Company's strategic review,
the Company determined that certain businesses (including some pre-operational
businesses) in its portfolio did not meet certain of the business objectives
identified in the strategic review, such as the Company's ability to obtain
control of the venture, geographic focus or convergence. The long lived assets
or the investments in these businesses were evaluated to determine whether any
impairment in their recoverability existed at the determination date. The
Company assessed whether the estimated cash flows of the businesses over the
estimated lives of the related assets were sufficient to recover their costs.
Where such cash flows were insufficient, the Company utilized a discounted cash
flow model to estimate the fair value of assets or investments and recorded an
impairment charge to adjust the carrying values to estimated fair value. As a
result of this evaluation, the Company recorded a non-cash impairment charge on
certain of its paging, cable television and telephony businesses of
$23.2 million.

At September 30, 2000 and December 31, 1999, unconsolidated investments in joint
ventures in Eastern Europe and the republics of the former Soviet Union of the
Communications Group, including PLD

9
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
Telekom, at cost, net of adjustments for its equity in earnings or losses, write
downs, and distributions were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR
OPERATIONS
NAME 2000 1999 OWNERSHIP % COMMENCED (1)
---- -------- ------- ----------- -------------
<S> <C> <C> <C> <C>
WIRELESS TELEPHONY
Baltcom GSM, Latvia (2).......................... $ 8,425 $ 8,348 22% 1997
Magticom, Georgia................................ 17,872 11,110 35% 1997
Tyumenruskom, Russia (3)......................... (273) 575 46% 1999
BELCEL, Belarus.................................. 959 1,088 50% 1999
------- -------
26,983 21,121
------- -------
FIXED TELEPHONY
Instaphone, Kazakhstan........................... 176 (68) 50% 1998
Caspian American Telecom, Azerbaijan (3)......... 1,277 3,206 37% 1999
MTR-Sviaz, Russia................................ 5,677 5,620 49% 1999
Telecom Georgia, Georgia......................... 3,577 4,018 30% 1994
------- -------
10,707 12,776
------- -------
CABLE TELEVISION
Kosmos TV, Moscow, Russia........................ 4,075 1,547 50% 1992
Baltcom TV, Riga, Latvia......................... 4,824 5,285 50% 1992
Ayety TV, Tbilisi, Georgia (4)................... 3,230 2,194 49% 1993
Kamalak TV, Tashkent, Uzbekistan................. 3,097 3,329 50% 1993
Sun TV, Chisinau, Moldova (5).................... 2,984 3,941 50% 1994
Cosmos TV, Minsk, Belarus........................ 2,035 2,783 50% 1996
Alma TV, Almaty, Kazakhstan...................... 6,656 7,549 50% 1995
Teleplus, St. Petersburg, Russia (3)............. (74) -- 45% 1998
------- -------
26,827 26,628
------- -------
PAGING
Baltcom Plus, Latvia (3)......................... -- -- 50% 1995
Paging One, Georgia (3).......................... -- -- 45% 1994
Raduga Poisk, Nizhny Novgorod, Russia (3)........ -- -- 45% 1994
PT Page, St. Petersburg, Russia (3).............. -- -- 40% 1995
Paging Ajara, Batumi, Georgia (3)................ -- -- 35% 1997
Kazpage, Kazakhstan (3).......................... -- -- 26-41% 1997
Alma Page, Almaty, Kazakhstan (3)................ -- -- 50% 1995
Kamalak Paging, Tashkent, Uzbekistan............. 1,259 1,884 50% 1993
Mobile Telecom, Russia (6)....................... 5,696 6,711 50% 1998
------- -------
6,955 8,595
------- -------
RADIO BROADCASTING
Radio Nika, Socci, Russia (7).................... -- 287 51% 1995
AS Trio LSL, Estonia............................. 1,119 1,514 49% 1997
------- -------
1,119 1,801
------- -------
</TABLE>

10
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)

<TABLE>
<CAPTION>
YEAR
OPERATIONS
NAME 2000 1999 OWNERSHIP % COMMENCED (1)
---- -------- ------- ----------- -------------
<S> <C> <C> <C> <C>
PRE-OPERATIONAL (8)
Telephony related ventures and equipment......... 974 954
Other............................................ 3,831 6,192
------- -------
4,805 7,146
------- -------
Total............................................ $77,396 $78,067
======= =======
</TABLE>

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

(1) Indicates year operations commenced, or in the case of acquired operational
entities, the year of acquisition.

(2) At December 31, 1999, the results of Baltcom GSM were taken off the
three-month lag. Accordingly, amounts reported above reflect results for the
nine months ended September 30, 2000 and June 30, 1999. The Communications
Group's interest in the venture was sold in October 2000.

(3) Investment balance reflects write down of investment.

(4) During the quarter ended September 30, 2000, the Communications Group
increased its ownership interest in Ayety TV to 76%. The results of this
venture will be consolidated in the fourth quarter of 2000.

(5) The Communications Group is currently negotiating to increase its ownership
in Sun TV to 65%.

(6) The Company purchased its 50% interest in Mobile Telecom and a related
paging distribution company in June 1998 for $7.5 million plus two potential
earnout payments to be made in 2000 and 2001. The Company has not yet made
any earnout payments, based on the operational results of the ventures.
Approximately $7.0 million of the purchase price was allocated to goodwill.

(7) The Communications Group's interest in Radio Nika was sold in second quarter
of 2000.

(8) At September 30, 2000 and December 31, 1999, amounts disbursed for proposed
joint ventures, pre-operational joint ventures and amounts expended for
equipment for future wireless local loop projects are included in
pre-operational joint ventures.

11
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
Summarized combined balance sheet financial information of unconsolidated joint
ventures as of September 30, 2000 and December 31, 1999, and combined statement
of operations financial information for the nine months ended September 30, 2000
and 1999 accounted for 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>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- -------------
<S> <C> <C>
Assets:
Current assets.................................... $ 31,030 $ 37,611
Investments in systems and equipment.............. 135,502 131,592
Other assets...................................... 4,210 5,642
-------- --------
Total assets.................................... $170,742 $174,845
======== ========
Liabilities and Joint Ventures' Deficit:
Current liabilities............................... $ 49,049 $ 46,160
Amounts payable under credit facilities........... 135,780 98,540
Other long-term liabilities....................... 44,730 79,053
-------- --------
229,559 223,753
Joint ventures' deficit............................. (58,817) (48,908)
-------- --------
Total liabilities and joint ventures' deficit... $170,742 $174,845
======== ========
</TABLE>

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
2000 1999
-------- --------
<S> <C> <C>
Revenues................................................ $101,840 $ 76,311
Costs and Expenses:
Cost of sales and operating expenses.................. 28,640 18,459
Selling, general and administrative................... 37,678 39,081
Depreciation and amortization......................... 26,682 19,374
-------- --------
Total expenses...................................... 93,000 76,914
-------- --------
Operating income (loss)................................. 8,840 (603)
Interest expense........................................ (14,577) (12,134)
Other income............................................ 1,380 203
Foreign currency transactions........................... (2,062) (2,978)
-------- --------
Net loss................................................ $ (6,419) $(15,512)
======== ========
</TABLE>

For the nine months ended September 30, 2000 and 1999 the results of operations
presented above are before the elimination of intercompany interest.

12
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. COMMUNICATIONS GROUP--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 three and nine months
ended September 30, 2000 and 1999. For the three and nine months ended
September 30, 2000 and 1999 the results of operations presented below are before
the elimination of intercompany interest (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------------------------------------------
WIRELESS FIXED CABLE RADIO
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING TOTAL
--------- --------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................. $51,598 $20,738 $22,311 $1,312 $5,881 $101,840
Depreciation and amortization............. 14,251 4,676 7,100 126 529 26,682
Operating income (loss)................... 12,275 (1,956) (433) (224) (822) 8,840
Interest expense.......................... 7,513 2,295 4,578 38 153 14,577
Net income (loss)......................... 7,228 (4,938) (6,809) (311) (1,589) (6,419)

Assets.................................... 105,601 32,729 29,752 511 2,149 170,742
Capital expenditures...................... 22,442 1,240 5,240 10 550 29,482

Net investment in joint ventures.......... 26,983 10,707 26,827 1,119 6,955 72,591
Equity in income (losses) of
unconsolidated investees................ 8,999 (2,234) (2,146) (473) (1,122) 3,024
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------
WIRELESS FIXED CABLE RADIO
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING TOTAL
--------- --------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................... $27,624 $17,563 $20,410 $1,795 $8,919 $76,311
Depreciation and amortization.............. 9,981 2,086 6,700 190 417 19,374
Operating income (loss).................... (579) (544) 560 12 (52) (603)
Interest income............................ 19 -- 224 -- -- 243
Interest expense........................... 7,371 698 3,907 32 126 12,134
Net loss................................... (6,474) (4,817) (3,741) (8) (472) (15,512)

Assets..................................... 80,307 27,110 33,477 1,171 4,926 146,991
Capital expenditures....................... 4,470 7,184 6,083 39 358 18,134

Net investment in joint ventures........... 21,167 16,756 26,399 2,126 9,187 75,635
Equity in income (losses) of unconsolidated
investees................................ (2,860) (3,470) 199 (24) (35) (6,190)
</TABLE>

13
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------------------------------------------
WIRELESS FIXED CABLE RADIO
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING TOTAL
--------- --------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................... $17,105 $6,495 $6,868 $463 $1,505 $32,436
Depreciation and amortization.............. 5,308 1,689 2,255 26 180 9,458
Operating income (loss).................... 2,651 (342) (1,123) (34) 219 1,371
Interest income............................ 550 -- -- -- -- 550
Interest expense........................... 2,407 1,413 1,650 12 52 5,534
Net income (loss).......................... 2,477 (1,850) (2,984) (57) (53) (2,467)
Equity in income (losses) of unconsolidated
investees................................ 2,000 (276) (1,334) (47) (1) 342
</TABLE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------
WIRELESS FIXED CABLE RADIO
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING TOTAL
--------- --------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues................................... $9,704 $5,924 $6,783 $608 $2,387 $25,406
Depreciation and amortization.............. 3,426 1,025 855 59 113 5,478
Operating income (loss).................... 294 (1,301) 1,791 30 (244) 570
Interest income............................ 18 -- 76 -- -- 94
Interest expense........................... 2,782 526 1,346 10 46 4,710
Net income (loss).......................... (995) (2,164) 226 80 (272) (3,125)
Equity in income (losses) of unconsolidated
investees................................ (616) (1,324) 1,436 56 44 (404)
</TABLE>

PRO FORMA INFORMATION

The following unaudited pro forma information illustrates the effect of the
acquisition of PLD Telekom on revenue, net loss and loss per share from
continuing operations attributable to common stockholders for the nine months
ended September 30, 1999, and assumes that the acquisition of PLD Telekom
occurred at the beginning of 1999 (in thousands, except per share amount):

<TABLE>
<CAPTION>
1999
---------
<S> <C>
Revenues.................................................... $ 269,875
---------
Net loss.................................................... $(132,481)
=========
Net loss per common share attributable to common stock
shareholders.............................................. $ (1.42)
=========
</TABLE>

The unaudited pro forma results have been prepared for comparative purposes only
and include certain adjustments, such as additional amortization expense as a
result of goodwill and increased interest expense on acquisition debt. They do
not purport to be indicative of the results of operations that actually would
have resulted had the acquisition occurred at the beginning of 1999, or of
future results of operations of the consolidated entity.

14
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

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

At September 30, 2000 and December 31, 1999 the Company's investments, through
Metromedia China, in non-consolidated 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 2000 1999 OWNERSHIP % FORMED COMMENCED
---- ------------- -------- ----------- -------- -----------------------
<S> <C> <C> <C> <C> <C>
Sichuan Tai Li Fen Telecommunications
Co., Ltd. ("Sichuan JV")............ $ -- $15,899 92% 1996 1999
Chongqing Tai Le Feng
Telecommunications Co., Ltd.
("Chongqing JV").................... -- 14,001 92% 1997 1999
Ningbo Ya Mei Telecommunications Co.,
Ltd. ("Ningbo JV").................. -- 5,153 70% 1996 1997
Ningbo Ya Lian Telecommunications Co.,
Ltd. ("Ningbo JV II")............... -- 4,949 70% 1998 1998
Huaxia Metromedia Information
Technology Co., Ltd. ("Huaxia
JV")................................ -- 980 98%(a) 1999 Pre-operational
------------- -------
$ -- $40,982
============= =======
</TABLE>

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

(a) consolidated as of June 30, 2000

The reduction in investment in and advances to joint ventures during the first
nine months of 2000 reflects the liquidation of Sichuan JV, Chongqing JV, Ningbo
JV and Ningbo JV II (as described below). In connection with the liquidation of
the telecommunications joint ventures, the Company as of July 1, 1999 stopped
recording its share of distributable cash flows and amortization of project
investments for the affected joint ventures.

The Company and MITI have made intercompany loans to Metromedia China under a
credit agreement, and Metromedia China has used the proceeds of these loans to
fund its investments in these joint ventures in China. At September 30, 2000,
Metromedia China owed $4.9 million under this credit agreement (including
accrued interest).

TELECOMMUNICATIONS JOINT VENTURES

The Company held interests in four telecommunications joint ventures in China,
each of which engaged in cooperation contracts with China United
Telecommunications Incorporated ("China Unicom") to finance and support
development of local telecommunications services. All four of these ventures
prematurely terminated operations by order of the Chinese government in 1999.
Concurrent with this termination, the Company reached agreement with China
Unicom and its Chinese partners in the ventures, for the distribution of
approximately $94.7 million in settlement of all claims under the joint venture
agreements and cooperation contracts. The Company has received all of its
distributions as of September 30, 2000, and Ningbo JV, Ningbo JV II, Sichuan JV
and Chongqing JV have been dissolved.

Due to favorable resolution of certain matters in connection with the
liquidation of the joint ventures, the Company received a total distribution
from the liquidated joint ventures of $94.7 million, an increase of
$4.6 million over prior estimates.

15
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
As of September 30, 2000, the Company has recorded a non-cash impairment charge
of $41.7 million for the write-off of goodwill associated with projects
undertaken by Ningbo JV, Ningbo JV II, Sichuan JV and Chongqing JV based on the
anticipated amounts to be recovered in dissolution of the joint ventures. As of
September 30, 2000, all remaining goodwill associated with these projects had
been written off, to reflect the excess of actual total amounts recovered in
dissolution of the joint ventures over net investment.

Since July 1999, the Company's financial statements no longer reflect the
operating results of its China telecommunications joint ventures. The following
tables represent summary financial information for these telecommunications
joint ventures and their related projects in China as of and for the nine and
three months ended September 30, 1999, respectively (in thousands):

TELECOMMUNICATIONS JOINT VENTURES

<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------ ------------------
TOTAL TOTAL
------------------ ------------------
<S> <C> <C>
Revenues................................... $ 2,530 $ 3
Depreciation and amortization.............. (1,900) (184)
Operating loss............................. (47) (378)
Interest expense, net...................... (3,311) (1,204)
Net loss................................... (3,357) (1,581)
Equity in losses of joint ventures......... (652) (505)
Assets..................................... 82,846 82,846
Net investment in project.................. 69,743 69,743
</TABLE>

For the three and nine months ended September 30, 1999 the results of operations
presented above are before the elimination of intercompany interest. Ningbo JV
recorded revenues from the Ningbo China Unicom GSM project based on amounts of
revenues and profits reported to it by China Unicom for the period October 1,
1998 to June 30, 1999.

CHINA E-COMMERCE JOINT VENTURES

In May 1999, Metromedia China's wholly-owned subsidiary, Asian American
Telecommunications, entered into a joint venture agreement with All Warehouse
Commodity Electronic Commerce Information Development Co., Ltd., a Chinese
trading company. This agreement was for the purpose of establishing Huaxia
Metromedia Information Technology Co., Ltd., known as Huaxia JV. The Chinese
government licensed Huaxia JV in July 1999 to develop and provide technical
services for the operation of electronic commerce computer information systems
for China-based corporate clients. Also in May 1999, Huaxia JV entered into a
30-year computer information system and services contract with All Warehouse and
its parent company, China Product Firm, that granted Huaxia JV exclusive rights
to manage all of China Product Firm's electronic trading systems during the
contract period. China Product Firm anticipated launching a commercial online
trading service employing systems provided and operated by Huaxia JV. By
agreement with All Warehouse and its parent, Huaxia JV's principal efforts were
to be initially directed to e-commerce systems for use by China Product Firm and
its affiliates and customers.

16
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
The terms under which Huaxia JV is licensed originally required a total amount
to be invested in the joint venture of $25.0 million, of which $10.0 million had
to be in the form of registered capital contributions from its shareholders. At
its formation, Asian American Telecommunications owned a 49% interest in Huaxia
JV and was obligated to make total registered capital contributions of
$4.9 million over a three-year period. All Warehouse owned a 51% interest,
obligating it to contribute $5.1 million. The remaining investment in Huaxia JV
was to be in the form of up to $15.0 million of loans from Asian American
Telecommunications.

Huaxia JV commenced trial operation of an e-commerce system with China Product
Firm in late 1999. The Company considered this business activity to be
"pre-operational" since its purpose was to test technical and operational
aspects of Huaxia JV's intended computer services and to support China Product
Firm's initial trial of commercial online trading services. The technical and
operational trials continued successfully through May 2000, but China Product
Firm proved unable to successfully launch its intended online trading service.
All Warehouse proposed in May 2000 to substantially reduce its equity interest
in Huaxia JV and that Huaxia JV be relieved of further contractual obligations
to serve All Warehouse's parent company China Product Firm. Negotiations to
effect a change in the equity structure of Huaxia JV were concluded in
June 2000.

On September 20, 2000 the Company obtained a 98% ownership interest in Huaxia JV
with the Chinese government approval of a revised joint venture contract.
Concurrently, the licensed total investment level for Huaxia JV was reduced to
$10.0 million of which $5.0 million must in the form of registered capital
contributions from the shareholders. The Company's only material cost for its
increased ownership position in Huaxia JV will be its increased obligation for
future registered capital contributions. Huaxia JV's business license remains
unchanged. Its software development and service efforts will no longer be
principally restricted to China Product Firm. Huaxia JV is currently recruiting
other China-based clients for its e-commerce support systems and the Company
expects this joint venture to enter into commercial operations in the fourth
quarter of 2000.

As of September 30, 2000, Asian American Telecommunications had made $980,000 of
its scheduled registered capital investment and had advanced $242,000 in
shareholder loans. For the nine months ended September 30, 2000, the Company
recorded an equity in losses of the operations of $682,000 which represents the
costs for establishing the joint venture and its technical and operational
testing. The Company has reflected Huaxia's JV's results of operations through
September 30, 2000 as an equity method investment and has consolidated Huaxia JV
as of September 30, 2000 and will consolidate its results of operations
subsequent to September 30, 2000.

17
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
Huaxia JV is pre-operational as of September 30, 2000 and its results of
operations are included under the equity method. The following tables represent
summary financial information for the Company's China e-commerce Huaxia JV as of
and for the nine and three months ended September 30, 2000, respectively, (in
thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------ ------------------
<S> <C> <C>
Revenues................................... $ -- $ --
Depreciation and amortization.............. 38 13
Operating loss............................. (683) (143)
Net loss................................... (683) (145)
Assets..................................... 676 676
</TABLE>

On July 24, 2000, the Company's majority-owned subsidiary Metromedia China
Corporation purchased an 80% equity interest in Twin Poplars LLC, a U.S. limited
liability company registered in Delaware, for $300,000 and obtained options to
acquire the remaining 20% equity interest for $75,000. At the time of purchase,
Twin Poplars owned 90% equity interests in Beijing Great Poplars Consulting
Company, Limited, or Great Poplars JV, and Beijing 66cities.com Company,
Limited, or 66cities JV, both equity joint ventures licensed to engage in
information content provision and e-commerce services in China. Great Poplars JV
was an operational venture, licensed in 1998 to provide business information and
associated services in China including especially to Chinese publishers.
66cities JV, licensed in June 2000, was formed to support operations of a newly
developed website and e-commerce service and take over all lines of business
earlier developed by Great Poplars JV. Subsequent to the Company's purchase,
Twin Poplars transferred all employees, business activities and principal assets
of Great Poplars JV to 66cities JV. These transfers represented a planned
consolidation of Twin Poplars China-based lines of business for management
purposes and had no material impact on the continuing business activities or
value of Twin Poplars. On completion of these transfers, Twin Poplars' remaining
equity interest in Great Poplars JV reflected only accumulated losses from prior
operations and Twin Poplars sold its interest in Great Poplars JV on
September 20, 2000 for minimal consideration in lieu of liquidating the joint
venture.

On August 31, 2000, the Company exercised its option to acquire an additional
10% equity interest in Twin Poplars. As of September 30, 2000, the Company had
advanced $802,000 to Twin Poplars, all of which was invested in or advanced to
66cities JV. Twin Poplars operates as a holding company for 66cities JV and has
no operations or assets other than its interests in these ventures. Currently,
Twin Poplars' equity interest in 66cities JV is 97%.

By virtue of its ownership interest in Twin Poplars, as of September 30, 2000
the Company owns an indirect 87% interest in the 66cities JV. The licensed total
investment level for 66cities JV is $2.5 million of which $1.8 million shall be
in the form of registered capital. As of September 30, 2000, Twin Poplars had
invested $500,000 registered capital in and advanced $302,000 to 66cities JV.

66cities JV provides information content related services pertinent to
publication of travel and entertainment guides in print and electronic formats.
The joint venture currently supports publication by Chinese interests of the
weekly English-language magazine "City Weekend", distributed in Beijing and
Shanghai, and of various Chinese and English language guides in book format. It
also operates the

18
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
66cities.com website, which offers comparable information via the internet and
hosts links to various Chinese travel and entertainment related services.

66cities JV is not, itself, a publisher and is paid service fees for information
preparation and various forms of support to its Chinese publishing clients'
operations. Although its service revenues may, in part, reflect advertising fees
collected by its Chinese publisher clients, it does not generate advertising
revenue itself. The website it supports is operated under a hosting agreement
with a Chinese internet service provider and 66cities JV does not generate any
direct revenues for providing internet access or similar basic internet
services. Revenues generated from service provider clients linked to the
66cities JV's website reflect commissions on sales that such service providers
make to parties accessing the website. These factors reflect current
restrictions of Chinese law as to the scope of business permitted for
foreign-invested entities operating in China.

4. EARNINGS PER SHARE OF COMMON STOCK

Basic earnings per share excludes all dilutive securities. It is based upon the
weighted average number of common shares outstanding during the period. Diluted
earnings per share reflects the potential dilution that would occur if
securities exercisable for or convertible into common stock were exercised or
converted into common stock. In calculating diluted earnings per share, no
potential shares of common stock are to be included in the computation when a
loss from continuing operations attributable to common stockholders exists. For
the three and nine months ended September 30, 2000 and 1999 the Company had
losses from continuing operations.

At September 30, 2000 and 1999, the Company had potentially dilutive shares of
common stock of 26,706,194 and 25,174,436, respectively.

5. INVESTMENT IN RDM

On August 29, 1997, RDM Sports Group, Inc. and certain of its affiliates filed
voluntary petitions for relief under chapter 11 of the Bankruptcy Code. At the
time of the filings, the Company owned 39% of the outstanding common stock of
RDM Sports Group, Inc. In addition, during the chapter 11 case the Company
honored a $15.0 million guaranty obligation to RDM's prepetition senior secured
lender, and, as a result, the Company has asserted a subrogation claim in that
amount (together with interest and other amounts owing in respect thereof) in
the RDM chapter 11 case. On February 19, 1998, the Bankruptcy Court ordered the
appointment of a chapter 11 trustee. On July 18, 2000, the Bankruptcy Court
confirmed the Second Amended and Restated Joint Chapter 11 Plan of Liquidation
for RDM Sports Group, Inc. and Related Debtor Entities (the "Plan"). Under the
Plan the Company's 39% equity interest will likely be cancelled by operation of
the Plan. The treatment of the aforementioned subrogation claim under the Plan
remains subject to the bankruptcy-related proceedings described below.

19
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

5. INVESTMENT IN RDM (CONTINUED)
and current and former officers of the Company who served as directors of RDM,
were liable under federal securities laws for misrepresenting and failing to
disclose information regarding RDM's alleged financial condition during the
period between November 7, 1995 and August 22, 1997, the date on which RDM
disclosed that its management had discussed the possibility of filing for
bankruptcy. The amended complaints also alleged that the defendants, including
the Company and current and former officers of the Company who served as
directors of RDM, were secondarily liable as controlling persons of RDM. In an
opinion dated March 10, 2000, the court dismissed these actions in their
entirety. On April 7, 2000, plaintiffs in each of these actions filed notices of
appeal to the United States Court of Appeals for the Eleventh Circuit.

On February 16, 1999, the creditors' committee brought an adversary proceeding,
THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF RDM SPORTS GROUP, INC. AND
RELATED DEBTORS V. METROMEDIA INTERNATIONAL GROUP INC., Adv. Proc. No. 99-1023,
seeking in the alternative to recharacterize as contributions to equity a
secured claim in the amount of $15 million made by the Company arising out of
the Company's financing of RDM, or to equitably subordinate such claim made by
the Company against RDM and other debtors in the bankruptcy proceeding. On
March 3, 1999, the bondholders' committee brought an adversary proceeding, THE
OFFICIAL COMMITTEE OF BONDHOLDERS OF RDM SPORTS GROUP, INC. V. METROMEDIA
INTERNATIONAL GROUP, INC., Adv. Proc. No. 99-1029, with substantially the same
allegations as the above proceeding. In addition to the equitable and injunctive
relief sought by plaintiffs described above, plaintiffs in these adversary
proceedings sought actual damages in an amount to be proven at trial, reasonable
attorneys' fees, and such other and further relief as the court deems just and
proper.

Upon the Plan's effective date, the creditors' committee and the bondholders'
committee dissolved, and the right to continue the adversary proceedings
described above fell to the Plan's "liquidating agent," the former chapter 11
trustee. The Plan also provided that, if the liquidating agent chose to pursue
the adversary proceedings, he should consolidate them.

On August 18, 2000, the liquidating agent filed first amended complaints in both
the former creditors' committee adversary proceeding and the former bondholders'
committee adversary proceeding. On October 17, 2000, the bankruptcy court
approved a consent order, signed by the parties, staying all activity in these
proceedings pending the bankruptcy court's ruling on an anticipated motion by
the liquidating agent to consolidate the adversary proceedings.

20
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

5. INVESTMENT IN RDM (CONTINUED)
The Company believes that it has meritorious defenses and plans to defend
vigorously these actions. Due to the early stage of these proceedings, the
Company cannot evaluate the likelihood of an unfavorable outcome or estimate the
likely amount or range of possible loss, if any. Accordingly, the Company has
not recorded any liability in connection with these adversary proceedings.

6. BUSINESS SEGMENT DATA

The business activities of the Company consist of two operating groups, the
Communications Group and Snapper.

The Communications Group has operations in Eastern Europe and the republics of
the former Soviet Union and China. Operations in Eastern Europe and the
republics of the former Soviet Union provide the following services:
(i) wireless telephony; (ii) fixed telephony; (iii) cable television;
(iv) radio broadcasting; and (v) paging. The Communications Group is developing
e-commerce business opportunities in China and currently owns controlling
interests in a pre-operational Chinese software services and operational
information services joint venture. Until recently, the Company also held
interests in several telecommunications joint ventures in China. Those joint
ventures were terminated in late 1999 at the direction of the Chinese government
and the Company received distribution of approximately $94.7 million in
settlement of all claims under the joint venture agreements.

Snapper manufactures Snapper-Registered Trademark- brand premium priced power
lawnmowers, lawn tractors, garden tillers, snow throwers and related parts and
accessories.

The Company evaluates the performance of its operating segments based on
earnings before interest, taxes, depreciation, and amortization. The segment
information is based on operating income (loss) which includes depreciation and
amortization. Equity in income (losses) of unconsolidated investees reflects
elimination of intercompany interest expense.

The Company's segment information is set forth as of and for the nine months
ended September 30, 2000 and 1999 in the following table (in thousands):

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

6. BUSINESS SEGMENT DATA (CONTINUED)

NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMUNICATIONS GROUP--EASTERN EUROPE AND
THE REPUBLICS OF THE FORMER SOVIET UNION
------------------------------------------------------------------------------
RADIO SEGMENT
WIRELESS FIXED CABLE BROAD- HEAD- COMMUNICATIONS
TELEPHONY TELEPHONY TELEVISION CASTING PAGING QUARTERS TOTAL GROUP-CHINA
--------- --------- ---------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues......................... $61,990 $87,470 $28,732 $13,056 $ 7,364 $ 2,258 $200,870
Depreciation and amortization.... 18,092 16,949 10,027 1,008 749 25,642 72,467
Operating income (loss).......... 9,558 12,553 (1,154) (590) (545) (42,262) (22,440)
CONSOLIDATED
Revenues......................... $10,392 $66,732 $ 6,421 $11,744 $ 1,483 $ 2,258 $ 99,030 $ 140
Gross profit..................... 44,674
Depreciation and amortization.... 3,841 12,273 2,927 882 220 25,642 45,785 180
Reduction in estimate of
restructuring and asset
impairment charges............. -- -- -- -- -- (823) (823) (4,078)
Operating income (loss).......... (2,717) 14,509 (721) (366) 277 (42,262) (31,280) (374)
UNCONSOLIDATED JOINT VENTURES
Revenues......................... $51,598 $20,738 $22,311 $1,312 $ 5,881 $ -- $101,840 $ --
Depreciation and amortization.... 14,251 4,676 7,100 126 529 -- 26,682 38
Operating income (loss).......... 12,275 (1,956) (433) (224) (822) -- 8,840 (683)
Net income (loss)................ 7,228 (4,938) (6,809) (311) (1,589) -- (6,419) (683)
Equity in income (losses) of
unconsolidated investees....... 8,999 (2,234) (2,146) (473) (1,122) -- 3,024 (683)
Gain on disposition of
business....................... 2,752 --
Foreign currency gain............ 57 --
Minority interest................ (2,860) 1,797
Interest expense.................
Interest income..................
Gain on settlement of option.....
Income tax expense...............
Net loss.........................
Capital expenditures............. 12,995 211
Assets at September 30, 2000..... 524,398 2,499

CORPORATE
SNAPPER HEADQUARTERS CONSOLIDATED
-------- ------------ ------------
<S> <C> <C> <C>
COMBINED
Revenues.........................
Depreciation and amortization....
Operating income (loss)..........
CONSOLIDATED
Revenues......................... $136,519 $ -- $235,689
Gross profit.....................
Depreciation and amortization.... 4,326 50 50,341
Reduction in estimate of
restructuring and asset
impairment charges............. -- -- (4,901)
Operating income (loss).......... 1,418 (4,461) (34,697)
UNCONSOLIDATED JOINT VENTURES
Revenues.........................
Depreciation and amortization....
Operating income (loss)..........
Net income (loss)................
Equity in income (losses) of
unconsolidated investees....... -- -- 2,341
Gain on disposition of
business....................... -- -- 2,752
Foreign currency gain............ -- -- 57
Minority interest................ -- -- (1,063)
Interest expense................. (23,299)
Interest income.................. 3,025
Gain on settlement of option..... 2,500
Income tax expense............... (6,952)
--------
Net loss......................... $(55,336)
========
Capital expenditures............. 2,517 -- $ 15,723
Assets at September 30, 2000..... 105,686 64,443 $697,026
</TABLE>

22
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

6. BUSINESS SEGMENT DATA (CONTINUED)

NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMUNICATIONS GROUP--EASTERN EUROPE AND
THE REPUBLICS OF THE FORMER SOVIET UNION
------------------------------------------------------------------------------
RADIO SEGMENT
WIRELESS FIXED CABLE BROAD- HEAD- COMMUNICATIONS
TELEPHONY TELEPHONY TELEVISION CASTING PAGING QUARTERS TOTAL GROUP-CHINA
--------- --------- ---------- -------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues......................... $27,624 $17,563 $24,510 $13,326 $11,402 $ 1,260 $ 95,685
Depreciation and amortization.... 9,981 2,086 8,066 3,550 1,063 4,064 28,810
Operating income (loss).......... (579) (544) 348 (4,259) (1,809) (21,401) (28,244)
CONSOLIDATED
Revenues......................... $ -- $ -- $ 4,100 $11,531 $ 2,483 $ 1,260 $ 19,374 $ --
Gross profit..................... 53,880
Depreciation and amortization.... -- -- 1,366 3,360 646 4,064 9,436 52,507
Operating income (loss).......... -- -- (212) (4,271) (1,757) (21,401) (27,641) (59,396)
UNCONSOLIDATED JOINT VENTURES
Revenues......................... $27,624 $17,563 $20,410 $ 1,795 $ 8,919 $ -- $ 76,311 $(2,530)
Depreciation and amortization.... 9,981 2,086 6,700 190 417 -- 19,374 1,900
Operating income (loss).......... (579) (544) 560 12 (52) -- (603) (47)
Net loss......................... (6,474) (4,817) (3,741) (8) (472) -- (15,512) (3,357)
Equity in income (losses) of
unconsolidated investees....... (2,860) (3,470) 199 (24) (35) -- (6,190) (652)
Loss on disposition of
business....................... (1,200) --
Foreign currency loss............ (4,054) --
Minority interest................ 352 26,882
Interest expense.................
Interest income..................
Income tax expense...............
Discontinued operations..........
Net loss.........................
Capital expenditures............. 2,013 33
Assets at December 31, 1999...... 537,279 66,451

CORPORATE
SNAPPER HEADQUARTERS CONSOLIDATED
-------- ------------ ------------
<S> <C> <C> <C>
COMBINED
Revenues.........................
Depreciation and amortization....
Operating income (loss)..........
CONSOLIDATED
Revenues......................... $166,207 $ -- $185,581
Gross profit.....................
Depreciation and amortization.... 4,610 5 66,558
Operating income (loss).......... 6,317 (4,861) (85,581)
UNCONSOLIDATED JOINT VENTURES
Revenues.........................
Depreciation and amortization....
Operating income (loss)..........
Net loss.........................
Equity in income (losses) of
unconsolidated investees....... -- -- (6,842)
Loss on disposition of
business....................... -- -- (1,200)
Foreign currency loss............ -- -- (4,054)
Minority interest................ -- -- 27,734
Interest expense................. (9,721)
Interest income.................. 6,098
Income tax expense............... (358)
Discontinued operations.......... (12,776)
--------
Net loss......................... $(87,200)
========
Capital expenditures............. 2,238 -- $ 4,284
Assets at December 31, 1999...... 118,259 54,865 $776,854
</TABLE>

23
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

6. BUSINESS SEGMENT DATA (CONTINUED)

Information about the Communications Group's operations by geographic location
for the nine months ended September 30, 2000 and 1999 and as of September 30,
2000 and December 31, 1999 is as follows (in thousands):

<TABLE>
<CAPTION>
REVENUES ASSETS
------------------ -------------------
COUNTRY 2000 1999 2000 1999
------- -------- ------- -------- --------
<S> <C> <C> <C> <C>
Austria............................................... $ -- $ 537 $ -- $ --
Azerbaijan............................................ -- -- 3,190 3,274
Belarus............................................... 319 -- 6,749 6,985
Bulgaria.............................................. -- -- 28 --
Cyprus................................................ -- -- 26 --
Czech Republic........................................ 1,200 1,241 3,071 3,117
Estonia............................................... 376 559 1,272 1,636
Georgia............................................... 157 273 27,218 19,372
Germany............................................... 305 97 -- 1,555
Hungary............................................... 4,565 5,242 3,460 5,469
Kazakhstan............................................ 10,391 -- 59,547 63,432
Kyrgyzstan............................................ 178 -- 1,895 1,668
Latvia................................................ 374 502 13,757 14,029
Lithuania............................................. 994 795 1,322 1,643
Moldova............................................... -- -- 2,984 4,147
People's Republic of China (2)........................ 140 -- 2,499 66,451
Romania............................................... 4,950 3,730 10,906 10,470
Russia................................................ 72,589 4,641 254,620 256,304
Ukraine............................................... 699 511 689 975
United Kingdom........................................ -- -- 51 226
United States (1)..................................... 1,933 1,246 129,256 137,765
Uzbekistan............................................ -- -- 4,357 5,212
------- ------- -------- --------
$99,170 $19,374 $526,897 $603,730
======= ======= ======== ========
</TABLE>

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

(1) Assets include goodwill of $113.5 million, and $123.6 million at
September 30, 2000 and December 31, 1999, respectively.

(2) Revenues from operations in the People's Republic of China reflect the
Communications Group's operations in a joint venture in which it acquired a
controlling interest in July 2000.

All of the Company's remaining assets and substantially all remaining revenue
relate to operations in the United States.

7. OTHER CONSOLIDATED CONDENSED FINANCIAL STATEMENT INFORMATION

ACCOUNTS RECEIVABLE

The total allowance for doubtful accounts at September 30, 2000 and
December 31, 1999 was $3.0 million and $2.9 million, respectively.

24
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

7. OTHER CONSOLIDATED CONDENSED FINANCIAL STATEMENT INFORMATION (CONTINUED)
INVENTORIES

Inventories consist of the following as of September 30, 2000 and December 31,
1999 (in thousands):

<TABLE>
<CAPTION>
2000 1999
-------- -------
<S> <C> <C>
Lawn and garden equipment:
Raw materials........................................... $ 9,098 $11,346
Finished goods.......................................... 39,859 40,380
------- -------
48,957 51,726
Less: LIFO reserve........................................ -- --
------- -------
48,957 51,726
------- -------
Communications Group:
Pagers.................................................. 132 152
Telecommunications...................................... 2,979 2,934
Cable................................................... 393 397
------- -------
3,504 3,483
------- -------
$52,461 $55,209
======= =======
</TABLE>

LONG-TERM DEBT

At September 30, 2000, Snapper was not in compliance with all financial
covenants under its loan and security agreement. On October 30, 2000 the lenders
under the loan and security agreement waived any event of default arising from
such noncompliance. The Company is currently negotiating a new credit agreement
with its lenders to replace its current loan and security agreement. Since it is
possible that Snapper may not be in compliance with all its financial
requirements under its current loan and security agreement in the next four
calendar quarters, the Company has reclassified, as required under generally
accepted accounting principles, its debt to its lenders of $32.5 million as a
current liability.

INTEREST EXPENSE

Interest expense includes amortization of debt discount of $13.9 million for the
nine months ended September 30, 2000.

GAIN ON SETTLEMENT OF OPTION

For the nine months ended September 30, 2000, the Company recorded a
$2.5 million gain representing the gain realized on the buyout of options to
acquire an indirect interest in Telecominvest, a holding company with diverse
telecommunications interests in northwest Russia.

GAIN ON SALE OF BUSINESS

During the three months ended September 30, 2000, the Communications Group
disposed of the operation of News Talk Radio, its radio operation in Germany,
for $400,000 and generated a gain of $2.8 million primarily from the settlement
of accrued liabilities without a cash payment.

25
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

7. OTHER CONSOLIDATED CONDENSED FINANCIAL STATEMENT INFORMATION (CONTINUED)
DISCONTINUED OPERATIONS

The Company became involved in litigation concerning the sale of the
Entertainment Group on July 10, 1997. On June 30, 1997, the plaintiffs in SIDNEY
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 in the State of
California alleging $28.7 million in damages from the alleged breach of an oral
agreement to pay a finder's fee in connection with the Entertainment Group Sale.
On September 23, 1999, the jury in this litigation returned a verdict of
$4.5 million in compensatory damages and $3.4 million in other damages against
the Company. Before the conclusion of the proceedings relating to punitive
damages, the Company agreed to a settlement with the plaintiffs. Under the terms
of the settlement, the Company paid $5.0 million to the plaintiffs on both
September 30, 2000 and 1999 and is obligated to pay an additional $4.0 million
on September 30, 2001.

The settlement fully resolves all litigation among the Company and the other
parties in this litigation. The final payment is secured by a collateralized
letter of credit of $4.0 million. The Company has recorded a $12.8 million
charge, which represents the net present value of the payments to be made,
against discontinued operations in its results of operations for the three and
nine months ended September 30, 1999 as a result of this settlement.

8. CONTINGENCIES

RISKS ASSOCIATED WITH THE COMMUNICATIONS GROUP'S INVESTMENTS

The ability of the Communications Group and its joint ventures and subsidiaries
to establish and maintain profitable operations is subject to, among other
things, significant political, economic and social risks inherent in doing
business in emerging markets such as Eastern Europe, the republics of the former
Soviet Union and China. These include matters arising out of government
policies, economic conditions, imposition of or changes in government
regulations or policies, imposition of or changes to taxes or other similar
charges by government bodies, exchange rate fluctuations and controls, civil
disturbances, deprivation or unenforceability of contractual rights, and taking
of property without fair compensation. These and other risks associated with the
Company are discussed more fully in the Company's Form 10-K "Item 1--Risks
Associated with the Company."

During 1998, and continuing in 1999, a number of emerging market economies
suffered significant economic and financial difficulties resulting in liquidity
crises, devaluation of currencies, higher interest rates and reduced
opportunities for financing. In 2000 there have been indications that the
economic climate may be improving, however, at this time, the prospects for
complete recovery for the economies of Russia and the other republics of the
former Soviet Union and Eastern Europe negatively affected by the economic
crisis remain unclear. The economic crisis of 1998 resulted in a number of
defaults by borrowers in Russia and other countries. Although some debt was
rescheduled in the first part of 2000, a reduced level of financing remains
available to investors in these countries. The devaluation of many of the
currencies in the region in 2000 has not been as marked as in previous years but
the potential still remains for future negative effect on the U.S. dollar value
of the revenues generated by certain of the Communications Group's joint
ventures and may lead to certain additional restrictions on the convertibility
of certain local currencies. The effect of these uncertainties has negatively
impacted the

26
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

8. CONTINGENCIES (CONTINUED)
financial performance of certain of the Communications Group's cable television,
telephony, radio broadcasting and paging ventures.

Some of the Communications Group's subsidiaries and joint ventures operate in
countries where the inflation rate in the past has been high. For example,
inflation in Russia increased dramatically following the August 1998 financial
crisis and there are increased risks of inflation in Kazakhstan. The inflation
rates in Belarus have been at hyperinflationary levels for some years and as a
result, the currency has essentially lost all intrinsic value. Although the rate
of inflation in 2000 has not been as high as in previous years, the risk of
further increases in the future remains possible.

While the Communications Group's subsidiaries and joint ventures attempt to
increase their subscription rates to offset increases in operating costs, there
is no assurance that they will be able to do so. Therefore, operating costs may
rise faster than associated revenue, resulting in a material negative impact on
operating results. The Company itself is generally negatively impacted by
inflationary increases in salaries, wages, benefits and other administrative
costs, the effects of which to date have not been material to the Company.

The value of the currencies in the countries in which the Communications Group
operates in the past has fluctuated, sometimes significantly. For example,
during 1998 and 1999, the value of the Russian Rouble was under considerable
economic and political pressure and has suffered significant declines against
the U.S. dollar and other currencies. In addition, in 1999 local currency
devaluations in Uzbekistan, Kazakhstan and Georgia, in addition to weakening of
local currencies in Austria and Germany, had an adverse effect on the
Communications Group's ventures in these countries. The Communications Group
currently does not hedge against exchange rate risk and therefore could be
negatively impacted by declines in exchange rates between the time one of its
joint ventures receives its funds in local currency and the time it distributes
these funds in U.S. dollars to the Communications Group.

The Communications Group's strategy is to minimize its foreign currency risk. To
the extent possible, 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 subsidiaries and
joint ventures are generally permitted to maintain U.S. dollar accounts to
service their U.S. dollar denominated debt and current account obligations,
thereby reducing foreign currency risk. As the Communications Group's
subsidiaries and 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.

RISKS ASSOCIATED WITH THE COMPANY'S CHINA E-COMMERCE JOINT VENTURES

Chinese regulation of business activities involving use of the internet and
provision of information content or services via the internet or similar
networks are under active development. Regulations addressing the extent of
direct foreign investment permitted in Chinese business units engaged in these
activities could, if promulgated in the most severe form presently being
considered, require the Company to reduce its equity participation in current
joint ventures or limit the scale of such participation in future ventures.
Regulations governing the permitted scope and nature of commercial transactions
via electronic networks and systems (e-commerce) could limit the extent or
profitability of the Company's current or anticipated ventures. Regulations
limiting dissemination of information for

27
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

8. CONTINGENCIES (CONTINUED)
political, social or security reasons could impose added operating expense
burdens on the Company's current or anticipated ventures.

This uncertainty regarding future Chinese regulations is applicable to all of
the Company's current and planned activities in China. The Company believes that
its current China joint ventures are in compliance with all currently published
Chinese regulations and further believes that future regulatory developments in
China will not unduly limit these ventures or other planned business activities.
However, there can be no assurance at this time that all such activities will be
permitted or be economically feasible under future Chinese regulatory regimes
and, therefore, the Company's investments in China or future profitability of
these investments could be jeopardized.

The Company's Huaxia JV is licensed to develop and sell software and provide
technical services relating to operation of electronic commerce-computer
information systems for China-based corporate clients. Computer and software
products and services, such as offered by Huaxia JV, are subject to regulatory
regimes different from those applied to telecommunications, internet and
information service operations in China. The Company expects that a significant
portion of Huaxia JV's planned future revenues will, however, derive from other
businesses in China (including other of the Company's own joint ventures) that
may be subject to internet, e-commerce or information service regulatory regimes
and, therefore, the potential scale of such revenues could be limited by future
regulatory developments in those areas. The Company believes that its equity
interest in Huaxia JV is not viewed under current Chinese regulation as foreign
equity investment in telecommunications operations or any other line of business
restricted for foreign investment and the Company does not anticipate that the
extent of its equity investment in Huaxia JV will be challenged by future
Chinese regulation.

The Company's indirect ownership interest in 66cities JV entails certain risks
resulting both from regulatory uncertainty and the generally sensitive nature of
any publishing related activities within China. 66cities JV provides support
services to Chinese publishers and offers information content via the internet
on the website it supports. With respect to current regulatory prohibitions
against foreign investment in publishing businesses in China, the Company
believes that 66cities JV would not be deemed to be operating as a publishing
business, since it is providing content and services to licensed Chinese
publisher clients under contract for fixed fees. However, regulatory action that
alters, revokes or limits the clients' publishing rights or the clients'
contracts with 66cities JV could significantly impact 66cities JV's current
principal revenue stream. Since 66cities JV does not itself actually publish the
content it develops, the Chinese publishing clients' revocation of existing
service contracts with 66cities JV could have significant adverse financial
impact on the joint venture. With respect to internet-related operations,
66cities JV could be required in the future to adjust its web hosting and
internet content provision arrangements to comply with new regulatory
developments and such adjustment could adversely affect 66cities JV's overall
costs of operation.

LITIGATION

The Company is involved in various legal and regulatory proceedings and while
the results of any litigation or regulatory issue contain an element of
uncertainty, the Company believes that, subject to the information disclosed in
note 5, the outcome of any known, pending or threatened legal proceedings will
not have a material adverse effect on the Company's consolidated financial
position and results of operations.

28
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

9. SUBSEQUENT EVENT

On November 8, 2000, the Company's Board of Directors authorized management to
evaluate structural alternatives to separate its Snapper, Metromedia China and
eastern European radio and cable businesses from its Russian and eastern
European telephony assets. These alternatives may include sales of certain or
all of these assets to third parties or the spin-off of certain or all of these
assets as independent companies to MMG's stockholders.

The Company's Board of Directors has not approved any definitive transaction and
any final action would remain subject to a number of conditions in addition to
final Board of Director approval, including, for certain transactions, obtaining
the consent of the Company's banks and bondholders. The Company does not
currently believe that any spin-off of its businesses could be accomplished on a
tax-free basis.

29
<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.

The business activities of the Company consist of two operating groups, the
Communications Group and Snapper.

COMMUNICATIONS GROUP

OVERVIEW

The Communications Group has operations in Eastern Europe and the republics of
the former Soviet Union and an e-commerce business in China. Operations in
Eastern Europe and the republics of the former Soviet Union provide the
following services: (i) wireless telephony; (ii) fixed telephony; (iii) cable
television; (iv) radio broadcasting; and (v) paging. The Company also held
interests in several telecommunications joint ventures in China. These ventures
terminated operations in late 1999 by order of the Chinese government and the
Company reached agreement with its partners in the ventures for the distribution
of approximately $94.7 million in settlement of all claims under the joint
venture agreements, all of which has been received at September 30, 2000. The
Communications Group is currently developing e-commerce business opportunities
in China.

On September 30, 1999, the Company consummated the acquisition of PLD
Telekom Inc. ("PLD Telekom"), a provider of high quality long distance and
international telecommunications services in the republics of the former Soviet
Union. As a result of the acquisition, PLD Telekom became a wholly owned
subsidiary of the Company.

The Company is focusing its growth strategy on opportunities in communications
businesses in Eastern Europe and the republics of the former Soviet Union. The
convergence of cable television and telephony, and the relationship of each
business to internet access, provides the Company with new opportunities.

The Communications Group's consolidated revenues represent approximately 42% and
10% of the Company's total consolidated revenues for the nine months ended
September 30, 2000 and 1999, respectively. The Company expects this proportion
to increase as the Communications Group's joint ventures develop their
businesses. Consolidated revenues of the Company for the nine months ended
September 30, 2000 include $77.4 million attributable to PLD Telekom.

BASIS OF PRESENTATION

Almost all of the Communications Group's joint ventures other than the PLD
Telekom businesses report their financial results on a three-month lag.
Therefore, the Communications Group's financial results for September 30 include
the financial results for those joint ventures for the three and nine months
ending June 30. The Company is currently evaluating the financial reporting of
these ventures and the possibility of reducing or eliminating the three-month
reporting lag for certain of its principal businesses for the purpose of
presenting the Company's results of operations on a more timely basis.

SALE OF BALTCOM GSM

30
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
shareholders, including the Communications Group, and indemnification provisions
for the benefit of the buyer from the selling shareholders.

The Communications Group expects to report the after tax gain on this disposal,
approximately $50 million, in the final quarter of 2000. Taxes payable on the
gain are expected to be negligible.

1999 RESTRUCTURING AND IMPAIRMENT CHARGES

Shortly after completing its September 30, 1999 acquisition of PLD Telekom, the
Company began identifying synergies and redundancies between its Metromedia
International Telecommunications, Inc. ("MITI") and PLD Telekom subsidiaries.
The Company's efforts were directed toward streamlining its operations.
Following the review of its operations, the Communications Group determined to
make significant reductions in its projected overhead costs for 2000 by closing
its offices in Stamford, Connecticut and London, England, consolidating its
executive offices in New York, New York, consolidating its operational
headquarters in Vienna, Austria and consolidating its two Moscow offices into
one. As part of this streamlining of its operations, the Company announced an
employee headcount reduction. Employees impacted by the restructuring were
notified in December 1999 and in almost all cases were terminated effective
December 31, 1999. The total number of U.S. domestic and expatriate employees
separated was approximately 60. In addition, there were reductions in locally
hired staff. In 1999 the Company recorded a charge of $8.4 million in connection
with the restructuring.

Following is a rollforward of the activity and balances of the restructuring
reserve account from inception to September 30, 2000 (in thousands):

<TABLE>
<CAPTION>
RESTRUCTURING DECEMBER 31, SEPTEMBER 30,
TYPE OF COST COST PAYMENTS 1999 PAYMENTS ADJUSTMENTS 2000
------------ ------------- -------- ------------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Employee separations............. $6,175 $(303) $5,872 $(3,959) $(676) $1,237
Facility closings................ 1,456 -- 1,456 (912) (147) 397
------ ----- ------ ------- ----- ------
7,631 $(303) $7,328 $(4,871) $(823) $1,634
===== ====== ======= ===== ======
Write off of fixed assets........ 800
------
$8,431
======
</TABLE>

Adjustments are primarily due to actual employee termination costs being lower
than originally estimated.

Concurrent with the review of its existing operations and the change in
management as the result of the acquisition of PLD Telekom, the Communications
Group completed a strategic review of its telephony, cable television, radio
broadcasting and paging assets. As a result of the Company's strategic review,
the Company determined that certain businesses (including some pre-operational
businesses) in its portfolio did not meet certain of the business objectives
identified in the strategic review, such as the Company's ability to obtain
control of the venture, geographic focus or convergence. The long lived assets
or the investments in these businesses were evaluated to determine whether any
impairment in their recoverability existed at the determination date. As a
result, the Company assessed whether the estimated cash flows of the businesses
over the estimated lives of the related assets were sufficient to recover their
costs. Where such cash flows were insufficient, the Company utilized a
discounted cash flow model to estimate the fair value of assets or investments
and recorded an impairment charge to adjust the carrying values to estimated
fair value. As a result of this evaluation, the Company recorded

31
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
a non-cash impairment charge on certain of its paging, cable television and
telephony businesses of $23.2 million.

TERMINATION OF CHINA TELECOMMUNICATIONS JOINT VENTURES

Between 1996 and 1999, the Company made investments in four telecommunications
joint ventures in China through its majority-owned subsidiary, Asian American
Telecommunications Corporation. These joint ventures engaged in cooperation
projects under contracts with China Unicom. All four of these ventures
prematurely terminated operations by order of the Chinese government in late
1999. Concurrent with this termination, the Company reached agreement with China
Unicom and its Chinese partners in the ventures, for the distribution of
approximately $94.7 million in settlement of all claims under the joint venture
agreements and cooperation contracts. The Company has received full distribution
of these funds as of September 30, 2000 and Ningbo JV, Ningbo JV II, Sichuan JV
and Chongqing JV have been fully dissolved. The $94.7 million in total
distributions from the joint ventures was insufficient to fully recover the
goodwill originally recorded in connection with the Company's investment in
these joint ventures. As of September 30, 2000, the Company had recorded
non-cash impairment charges of $41.7 million for the write-off of goodwill to
reflect this shortfall.

SUBSEQUENT EVENT

JOINT VENTURE OWNERSHIP STRUCTURES

The following table summarizes the Communications Group's joint ventures and
subsidiaries at September 30, 2000 and the Communications Group's ownership in
each company:

<TABLE>
<CAPTION>
COMPANY
JOINT VENTURE (1) OWNERSHIP %
----------------- -----------
<S> <C>
WIRELESS TELEPHONY
Baltcom GSM (Latvia) (2).................................... 22%
Magticom (Tbilisi, Georgia)................................. 35%
ALTEL (Kazakhstan) (3)...................................... 50%
BELCEL (Belarus)............................................ 50%
Tyumenruskom (Tyumen, Russia)............................... 46%
Gorizont-RT (Sakha) (4)..................................... 25%
</TABLE>

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

<TABLE>
<CAPTION>
COMPANY
JOINT VENTURE (1) OWNERSHIP %
----------------- -----------
<S> <C>
FIXED AND OTHER TELEPHONY
PeterStar (St. Petersburg, Russia) (3)...................... 71%
Baltic Communications Limited (St. Petersburg, Russia)
(3)....................................................... 100%
Teleport-TP (Moscow, Russia) (3)(5)......................... 56%
Telecom Georgia (Tbilisi, Georgia).......................... 30%
MTR-Sviaz (Moscow, Russia) (5).............................. 49%
Instaphone (Kazakhstan) (6)................................. 50%
Caspian American Telecommunications (Azerbaijan) (7)........ 37%
CPY Yellow Pages (St. Petersburg, Russia) (3)............... 100%
Cardlink ZAO (Moscow, Russia) (3)........................... 84.5%
Spectrum (Kazakhstan) (6)................................... 33%

INTERNET SERVICES
Huaxia Metromedia Information Technology Co., Ltd. (Beijing,
China) (3)(8)............................................. 57%
66cities.com Co., Ltd. (Beijing, China) (3)(8).............. 51%

CABLE TELEVISION
Romsat Cable TV (Bucharest, Romania) (3).................... 100%
Viginta (Vilnius, Lithuania) (3)............................ 55%
ATK (Archangelsk, Russia) (3)............................... 81%
Ala TV (Bishkek, Kyrgyzstan) (3)............................ 53%
Ayety TV (Tbilisi, Georgia) (3)(9).......................... 76%
Kosmos TV (Moscow, Russia).................................. 50%
Baltcom TV (Riga, Latvia)................................... 50%
Kamalak TV (Tashkent, Uzbekistan)........................... 50%
Sun TV (Chisinau, Moldova) (10)............................. 50%
Alma TV (Almaty, Kazakhstan)................................ 50%
Cosmos TV (Minsk, Belarus).................................. 50%
Teleplus (St. Petersburg, Russia) (6)....................... 45%

RADIO BROADCASTING
Radio Juventus (Budapest, Hungary) (3)...................... 100%
SAC (Moscow, Russia) (3).................................... 83%
Radio Skonto (Riga, Latvia) (3)............................. 55%
Radio One (Prague, Czech Republic) (3)...................... 80%
Radio Vladivostok, (Vladivostok, Russia) (3)................ 51%
Country Radio (Prague, Czech Republic) (3).................. 85%
Radio Georgia (Tbilisi, Georgia) (3)(11).................... 51%
Radio Katusha (St. Petersburg, Russia) (3)(11).............. 75%
AS Trio LSL (Estonia) (11).................................. 49%
</TABLE>

33
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
COMPANY
JOINT VENTURE (1) OWNERSHIP %
----------------- -----------
<S> <C>
PAGING
Baltcom Paging (Estonia) (3)................................ 85%
CNM (Romania) (3)(12)....................................... 54%
Eurodevelopment (Ukraine) (3)............................... 51%
Baltcom Plus (Latvia) (6)................................... 50%
Paging One (Tbilisi, Georgia) (6)........................... 45%
Raduga Poisk (Nizhny Novgorod, Russia) (6).................. 45%
PT Page (St. Petersburg, Russia) (6)(13).................... 40%
Kazpage (Kazakhstan) (6).................................... 26-41%
Kamalak Paging (Tashkent, Samarkand, Bukhara and Andijan,
Uzbekistan)............................................... 50%
Alma Page (Almaty and Ust-Kamenogorsk, Kazakhstan) (6)...... 50%
Paging Ajara (Batumi, Georgia) (6).......................... 35%
Mobile Telecom (Russia) (14)................................ 50%
</TABLE>

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

(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) The Communications Group's interest in Baltcom GSM was sold on October 20,
2000 for total cash consideration of $66.3 million.

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

(4) The Communications Group is selling its 25% interest to one of the other
partners in the venture and the sale is expected to close prior to
December 31, 2000.

(5) The Company's interests in Teleport-TP and MTR-Sviaz are held through its
wholly owned subsidiary Technocom Limited.

(6) Results of operations for the venture are no longer reported.

(7) 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. Caspian American 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
Caspian American for the funding of equipment acquisition and operational
expenses subject to its concurrence with Caspian American's business plans.
Caspian American Telecommunications launched commercial operations in
April 1999. In May 1999, the Communications Group sold 2.2% of
Omni-Metromedia thereby reducing its ownership interest in Caspian American
Telecommunications to 37%.

(8) The Communications Group's majority-owned subsidiary Metromedia China
Corporation owns 98% of Huaxia JV. Metromedia China currently owns 90% of
Twin Poplars LLC with an option to acquire the remaining 10%, and Twin
Poplars owns 97% of 66cities JV.

(9) During the quarter ended September 30, 2000, the Communications Group
increased its ownership interest in Ayety TV to 76%. The results of this
venture will be consolidated in the fourth quarter of 2000.

34
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
(10) The Communications Group is currently negotiating to increase its ownership
interest in Sun TV to 65%.

(11) Radio Katusha includes two radio stations operating in St. Petersburg,
Russia. AS Trio LSL operates five radio stations in various cities
throughout Estonia. Radio Georgia has two radio stations operating in
Georgia.

(12) CNM is currently in liquidation.

(13) The Communications Group is currently negotiating to dispose of 11% of PT
Page, in exchange for an additional 14% of Teleplus.

(14) The Company purchased its 50% interest in Mobile Telecom and a related
paging distribution company in June 1998 for $7.5 million plus two potential
earnout payments to be made in 2000 and 2001 based on the operational
results of the ventures. The Company has not yet made any earnout payments.
Approximately $7.0 million of the purchase price was allocated to goodwill.

SNAPPER

Snapper manufactures 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.

CERTAIN DISPOSITIONS OF ASSETS AND OTHER COMPANY INFORMATION

On November 1, 1995, as a result of the mergers of Orion Pictures Corporation
and Metromedia International Telecommunications, Inc. with and into wholly-owned
subsidiaries of the Company and of MCEG Sterling Incorporated with and into the
Company, the Company changed its name from "The Actava Group Inc." to
"Metromedia International Group, Inc." As part of the November 1, 1995 merger,
the

Company acquired approximately 39% of RDM Sports Group, Inc. On August 29, 1997,
RDM and certain of its affiliates filed voluntary bankruptcy petitions under
chapter 11. The Company does not believe it will receive any funds 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 and Section 21E of the Securities Exchange Act of 1934,
as amended. See "Special Note Regarding Forward-Looking Statements" on page 74.

SEGMENT INFORMATION

The following table sets forth the operating results for the three and nine
months ended September 30, 2000 and 1999 of the Company's Communications Group
and lawn and garden products segments.

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

SEGMENT INFORMATION
THREE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
SEE NOTE 1
<TABLE>
<CAPTION>
COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER
SOVIET UNION
----------------------------------------------------------------------------------
SEGMENT
WIRELESS FIXED CABLE RADIO HEAD-
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING QUARTERS TOTAL
--------- --------- ---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues.......................... $20,615 $30,827 $ 9,773 $4,333 $1,944 $ 273 $ 67,765
Depreciation and amortization..... 6,582 5,945 3,790 331 255 9,226 26,129
Operating income (loss)........... 1,808 5,463 (1,516) 2 747 (13,811) (7,307)

CONSOLIDATED
Revenues.......................... $ 3,510 $24,332 $ 2,905 $3,870 $ 439 $ 273 $ 35,329
Gross profit...................... 9,059
Depreciation and amortization..... 1,274 4,256 1,535 305 75 9,226 16,671
Reduction in estimate of
restructuring and asset
impairment charges.............. -- -- -- -- -- (609) (609)
Operating income (loss)........... (843) 5,805 (393) 36 528 (13,811) (8,678)

UNCONSOLIDATED JOINT VENTURES
Revenues.......................... $17,105 $ 6,495 $ 6,868 $ 463 $1,505 $ -- $ 32,436
Depreciation and amortization..... 5,308 1,689 2,255 26 180 -- 9,458
Operating income (loss)........... 2,651 (342) (1,123) (34) 219 -- 1,371
Net income (loss)................. 2,477 (1,850) (2,984) (57) (53) -- (2,467)
Equity in income (losses) of
unconsolidated investees (note
2).............................. 2,000 (276) (1,334) (47) (1) -- 342
Gain on disposition of business... 2,752
Foreign currency gain............. 16
Minority interest................. (609)
Interest expense..................
Interest income...................
Income tax expense................
Net loss..........................

COMMUNICATIONS CORPORATE
GROUP--CHINA SNAPPER HEADQUARTERS CONSOLIDATED
-------------- -------- ------------ ------------
<S> <C> <C> <C> <C>
COMBINED
Revenues..........................
Depreciation and amortization.....
Operating income (loss)...........
CONSOLIDATED
Revenues.......................... $ 140 $33,989 $ -- $ 69,458
Gross profit......................
Depreciation and amortization..... 78 1,311 15 18,075
Reduction in estimate of
restructuring and asset
impairment charges.............. (94) -- -- (703)
Operating income (loss)........... (791) (6,110) (1,404) (16,983)
UNCONSOLIDATED JOINT VENTURES
Revenues.......................... $ --
Depreciation and amortization..... 13
Operating income (loss)........... (143)
Net income (loss)................. (145)
Equity in income (losses) of
unconsolidated investees (note
2).............................. (145) -- -- 197
Gain on disposition of business... -- -- -- 2,752
Foreign currency gain............. -- -- -- 16
Minority interest................. 542 -- -- (67)
Interest expense.................. (7,279)
Interest income................... 1,502
Income tax expense................ (2,341)
--------
Net loss.......................... $(22,203)
========
</TABLE>

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

Note 1: The Company evaluates the performance of its operating segments based on
earnings before interest, taxes, depreciation, and amortization. The above
segment information and the discussion of the Company's operating segments is
based on operating income (loss) which includes depreciation and amortization.
In addition, the Company evaluates the performance of the Communications Group's
operating segment in Eastern Europe and the republics of the former Soviet Union
on a combined basis. The Company is providing as supplemental information an
analysis of combined revenues and operating income (loss) for its consolidated
and unconsolidated joint ventures in Eastern Europe and the republics of the
former Soviet Union.

Note 2: Equity in income (losses) of unconsolidated investees reflects
elimination of intercompany interest expense.

36
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

SEGMENT INFORMATION
THREE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER
SOVIET UNION
----------------------------------------------------------------------------------
SEGMENT
WIRELESS FIXED CABLE RADIO HEAD-
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING QUARTERS TOTAL
--------- --------- ---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues.......................... $ 9,704 $ 5,924 $ 8,222 $4,034 $3,125 $ 342 $ 31,351
Depreciation and amortization..... 3,426 1,025 1,268 2,888 452 1,898 10,957
Operating income (loss)........... 294 (1,301) 1,757 (2,988) (702) (7,372) (10,312)

CONSOLIDATED
Revenues.......................... $ -- $ -- $ 1,439 $3,426 $ 738 $ 342 $ 5,945
Gross profit...................... 13,337
Depreciation and amortization..... -- -- 413 2,829 339 1.898 5,479
Operating loss.................... -- -- (34) (3,018) (458) (7,372) (10,882)

UNCONSOLIDATED JOINT VENTURES
Revenues.......................... $ 9,704 $ 5,924 $ 6,783 $ 608 $2,387 $ -- $ 25,406
Depreciation and amortization..... 3,426 1,025 855 59 113 -- 5,478
Operating income (loss)........... 294 (1,301) 1,791 30 (244) -- 570
Net loss.......................... (995) (2,164) 226 80 (272) -- (3,125)
Equity in income (losses) of
unconsolidated investees (note
2).............................. (616) (1,324) 1,436 56 44 -- (404)
Loss on disposition of business... (1,200)
Foreign currency loss............. (1,260)
Minority interest................. (272)
Interest expense..................
Interest income...................
Income tax expense................
Discontinued operations...........
Net loss..........................

COMMUNICATIONS CORPORATE
GROUP--CHINA SNAPPER HEADQUARTERS CONSOLIDATED
-------------- -------- ------------ ------------
<S> <C> <C> <C> <C>
COMBINED
Revenues..........................
Depreciation and amortization.....
Operating income (loss)...........
CONSOLIDATED
Revenues.......................... $ -- $46,989 $ -- $ 52,934
Gross profit......................
Depreciation and amortization..... 50,933 1,557 2 57,971
Operating loss.................... (52,323) (4,334) (1,928) (69,467)
UNCONSOLIDATED JOINT VENTURES
Revenues.......................... $ 3
Depreciation and amortization..... 184
Operating income (loss)........... (378)
Net loss.......................... (1,581)
Equity in income (losses) of
unconsolidated investees (note
2).............................. (505) -- -- (909)
Loss on disposition of business... -- -- -- (1,200)
Foreign currency loss............. -- -- -- (1,260)
Minority interest................. 22,654 -- -- 22,382
Interest expense.................. (2,792)
Interest income................... 1,852
Income tax expense................ (153)
Discontinued operations........... (12,776)
--------
Net loss.......................... $(64,323)
========
</TABLE>

37
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

SEGMENT INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMUNICATIONS GROUP--EASTERN EUROPE AND
THE REPUBLICS OF THE FORMER SOVIET UNION
----------------------------------------------------------------------------------
SEGMENT
WIRELESS FIXED CABLE RADIO HEAD-
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING QUARTERS TOTAL
--------- --------- ---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues......................... $61,990 $87,470 $28,732 $13,056 $ 7,364 $ 2,258 $200,870
Depreciation and amortization.... 18,092 16,949 10,027 1,008 749 25,642 72,467
Operating income (loss).......... 9,558 12,553 (1,154) (590) (545) (42,262) (22,440)
CONSOLIDATED
Revenues......................... $10,392 $66,732 $ 6,421 $11,744 $ 1,483 $ 2,258 $ 99,030
Gross profit..................... 44,674
Depreciation and amortization.... 3,841 12,273 2,927 882 220 25,642 45,785
Reduction in estimate of
restructuring and asset
impairment charges............. -- -- -- -- -- (823) (823)
Operating income (loss).......... (2,717) 14,509 (721) (366) 277 (42,262) (31,280)
UNCONSOLIDATED JOINT VENTURES
Revenues......................... $51,598 $20,738 $22,311 $ 1,312 $ 5,881 $ -- $101,840
Depreciation and amortization.... 14,251 4,676 7,100 126 529 -- 26,682
Operating income (loss).......... 12,275 (1,956) (433) (224) (822) -- 8,840
Net income (loss)................ 7,228 (4,938) (6,809) (311) (1,589) -- (6,419)
Equity in income (losses) of
unconsolidated investees (note
2)............................. 8,999 (2,234) (2,146) (473) (1,122) -- 3,024
Gain on disposition of
business....................... 2,752
Foreign currency gain............ 57
Minority interest................ (2,860)
Interest expense.................
Interest income..................
Gain on settlement of option.....
Income tax expense...............
Net loss.........................

COMMUNICATIONS CORPORATE
GROUP-CHINA SNAPPER HEADQUARTERS CONSOLIDATED
-------------- -------- ------------ ------------
<S> <C> <C> <C> <C>
COMBINED
Revenues.........................
Depreciation and amortization....
Operating income (loss)..........
CONSOLIDATED
Revenues......................... $ 140 $136,519 $ -- $235,689
Gross profit.....................
Depreciation and amortization.... 180 4,326 50 50,341
Reduction in estimate of
restructuring and asset
impairment charges............. (4,078) -- -- (4,901)
Operating income (loss).......... (374) 1,418 (4,461) (34,697)
UNCONSOLIDATED JOINT VENTURES
Revenues......................... $ --
Depreciation and amortization.... 38
Operating income (loss).......... (683)
Net income (loss)................ (683)
Equity in income (losses) of
unconsolidated investees (note
2)............................. (683) -- -- 2,341
Gain on disposition of
business....................... -- -- -- 2,752
Foreign currency gain............ -- -- -- 57
Minority interest................ 1,797 -- -- (1,063)
Interest expense................. (23,299)
Interest income.................. 3,025
Gain on settlement of option..... 2,500
Income tax expense............... (6,952)
--------
Net loss......................... $(55,336)
========
</TABLE>

38
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

SEGMENT INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMUNICATIONS GROUP--EASTERN EUROPE AND
THE REPUBLICS OF THE FORMER SOVIET UNION
----------------------------------------------------------------------------------
SEGMENT
WIRELESS FIXED CABLE RADIO HEAD-
TELEPHONY TELEPHONY TELEVISION BROADCASTING PAGING QUARTERS TOTAL
--------- --------- ---------- ------------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues......................... $27,624 $17,563 $24,510 $13,326 $11,402 $ 1,260 $ 95,685
Depreciation and amortization.... 9,981 2,086 8,066 3,550 1,063 4,064 28,810
Operating income (loss).......... (579) (544) 348 (4,259) (1,809) (21,401) (28,244)
CONSOLIDATED
Revenues......................... $ -- $ -- $ 4,100 $11,531 $ 2,483 $ 1,260 $ 19,374
Gross profit..................... 53,880
Depreciation and amortization.... -- -- 1,366 3,360 646 4,064 9,436
Operating income (loss).......... -- -- (212) (4,271) (1,757) (21,401) (27,641)
UNCONSOLIDATED JOINT VENTURES
Revenues......................... $27,624 $17,563 $20,410 $ 1,795 $ 8,919 $ -- $ 76,311
Depreciation and amortization.... 9,981 2,086 6,700 190 417 -- 19,374
Operating income (loss).......... (579) (544) 560 12 (52) -- (603)
Net loss......................... (6,474) (4,817) (3,741) (8) (472) -- (15,512)
Equity in income (losses) of
unconsolidated investees (note
2)............................. (2,860) (3,470) 199 (24) (35) -- (6,190)
Loss on disposition of
business....................... (1,200)
Foreign currency loss............ (4,054)
Minority interest................ 352
Interest expense.................
Interest income..................
Income tax expense...............
Discontinued operations..........
Net loss.........................

COMMUNICATIONS CORPORATE
GROUP-CHINA SNAPPER HEADQUARTERS CONSOLIDATED
-------------- -------- ------------ ------------
<S> <C> <C> <C> <C>
COMBINED
Revenues.........................
Depreciation and amortization....
Operating income (loss)..........
CONSOLIDATED
Revenues......................... $ -- $166,207 $ -- $185,581
Gross profit.....................
Depreciation and amortization.... 52,507 4,610 5 66,558
Operating income (loss).......... (59,396) 6,317 (4,861) (85,581)
UNCONSOLIDATED JOINT VENTURES
Revenues......................... $ 2,530
Depreciation and amortization.... 1,900
Operating income (loss).......... (47)
Net loss......................... (3,357)
Equity in income (losses) of
unconsolidated investees (note
2)............................. (652) -- -- (6,842)
Loss on disposition of
business....................... -- -- -- (1,200)
Foreign currency loss............ -- -- -- (4,054)
Minority interest................ 26,882 -- -- 27,234
Interest expense................. (9,721)
Interest income.................. 6,098
Income tax expense............... (358)
Discontinued operations.......... (12,776)
--------
Net loss......................... $(87,200)
========
</TABLE>

39
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1999, AND NINE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999

LEGEND

C = Consolidated
D = Dissolution
E = Equity method
L = Liquidated
P = Pre-operational
N/A = Not applicable
N/M = Not meaningful

COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION

Operations in Eastern Europe and the republics of the former Soviet Union
provide the following services: (i) wireless telephony; (ii) fixed telephony;
(iii) cable television; (iv) radio broadcasting; and (v) paging. Certain of the
Communications Group's ventures pay management fees to their shareholders. The
figures presented for the ventures reflect all payments of such fees (i.e.
management fees are included in operating expenses, the same as other expenses
of the ventures). Certain of the Communications Group's investments have been
written down to zero and, since the Communications Group no longer funds their
operations, the results of these ventures are no longer reported.

WIRELESS TELEPHONY

The following sets forth the names, ownership percentage and accounting
treatment of the Communications Group's wireless telephony ventures as of and
for the three and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
VENTURE OWNERSHIP % 1999 2000
------- ----------- -------- --------
<S> <C> <C> <C>
ALTEL* (Almaty, Kazakhstan)................................. 50% C C
Baltcom GSM (Latvia)........................................ 22% E E
Magticom (Tbilisi, Georgia)................................. 35% E E
Tyumenruskom (Tyumen, Russia)............................... 46% E P
BELCEL* (Minsk, Belarus).................................... 50% E E
</TABLE>

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

* Acquired in connection with the Company's acquisition of PLD Telekom on
September 30, 1999.

The following table sets forth the revenues and operating loss for consolidated
wireless telephony ventures (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
WIRELESS TELEPHONY--CONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
-------------------------------- -------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues..................................... $3,510 $ -- N/A $10,392 $ -- N/A
Operating loss............................... $ (843) $ -- N/A $(2,717) $ -- N/A
</TABLE>

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

REVENUES. Wireless telephony consolidated revenues for the nine months ended
September 30, 2000 amounted to $10.4 million and were attributable entirely to
ALTEL, the D-AMPS operator in Kazakhstan acquired with PLD Telekom in
September 1999. ALTEL's revenues for the first nine months of 1999 amounted to
$18.8 million. ALTEL's revenues for the nine months ended September 30, 2000
were adversely affected by continued competition from two GSM operators which
entered the Kazakhstan market in 1999.

Wireless telephony consolidated revenues for the three months ended
September 30, 2000 amounted to $3.5 million. There were no consolidated wireless
telephony revenues for the comparable period of 1999.

OPERATING LOSS. In response to the above mentioned competition from the two GSM
operators, ALTEL in early 2000 revised its tariff rates and its method of
billing customers. The resulting reduction in revenues together with reduced
operating margins led the venture to report an operating loss of $2.7 million
for the nine months ended September 30, 2000, compared to operating income of
$2.5 million for the same period in 1999. Although revenue levels stabilized in
the third quarter of 2000, the long term effect on revenues of ALTEL's change in
tariffs and billing process is uncertain. In 2001, ALTEL plans to roll out its
prepaid platform in eight Kazakh cities where it currently offers basic service.

Wireless telephony consolidated operating losses for the three months ended
September 30, 2000 amounted to $843,000.

The following table sets forth the revenues, operating income (loss), net income
(loss), equity in income (losses) of the unconsolidated joint ventures, which
are recorded under the equity method (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
WIRELESS TELEPHONY--UNCONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
---------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues..................................... $17,105 $9,704 76% $51,598 $27,624 87%
Operating income (loss)...................... $ 2,651 $ 294 802% $12,275 $ (579) N/M
Net income (loss)............................ $ 2,477 $ (995) N/M $ 7,228 $(6,474) N/M
Equity in income (losses) of joint
ventures................................... $ 2,000 $ (616) N/M $ 8,999 $(2,860) N/M
</TABLE>

EQUITY IN INCOME (LOSSES) OF JOINT VENTURES. The share in income from
investments in wireless telephony ventures for the nine months ended
September 30, 2000 amounted to $9.0 million, compared to losses of $2.9 million
in the nine months ended September 30, 1999. These results were attributable
mainly to GSM wireless operations in Latvia and Georgia.

In Latvia, Baltcom GSM's revenues for the nine months ended September 30, 2000
increased by 56% to $26.6 million from $17.0 million in the nine months ended
September 30, 1999. In late 1999 the three month reporting lag for Baltcom GSM
was eliminated. Accordingly, year to date 2000 revenues for the venture
represented results for the nine months ended September 30, 2000, whereas year
to date 1999 results represented those for the nine months ended June 30, 1999.
The increase in revenues for the nine months ended September 30, 2000 as
compared with the nine months ended June 30, 1999 was due primarily to continued
subscriber growth and the above mentioned elimination of the reporting lag.
Baltcom GSM's operating income for the nine months ended September 30, 2000
increased to $4.3 million from a loss of $143,000 for the nine months ended
September 30, 1999.

41
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
As mentioned previously, on October 20, 2000 the Communications Group disposed
of its interest in Baltcom GSM, and anticipates recording an estimated gain on
this disposal, approximately $50.0 million.

In Georgia, Magticom's revenues for the nine months ended September 30, 2000
amounted to $18.4 million, an 74% increase on the nine months ended
September 30, 1999 revenues of $10.6 million which was due to continued growth
in subscribers and higher air time. Magticom recorded operating income of
$8.6 million in the nine months ended September 30, 2000, as compared to
operating losses of $436,000 during the same period in 1999. The venture's
future operations may be adversely affected by the emergence in 2000 of
competing wireless networks in Georgia.

Other ventures in this category include BELCEL, which operates an NMT 450
wireless network in Belarus and was acquired with PLD Telekom in
September 1999, and Tyumenruscom, a D-AMPS operator in Tyumen, Russia. These
ventures together generated revenues of $6.6 million and operating losses of
$666,000 for the nine months ended September 30, 2000. Tyumenruscom was
pre-operational in 1999.

The Company's share in income from investments in wireless telephony ventures
for the three months ended September 30, 2000 amounted to $2.0 million, compared
to its share of losses of $616,000 for the three months ended September 30,
1999. In Latvia, Baltcom GSM reported operating income of $1.6 million on
revenues of $9.2 million for the three months ended September 30, 2000 compared
with operating income of $442,000 on revenues of $6.0 million for the three
months ended September 30, 1999. In Georgia, for the three months ended
September 30, 2000 Magticom reported operating income of $1.1 million on
revenues of $5.1 million as compared with an operating loss of $148,000 on
revenues of $3.7 million in the corresponding period of 1999. For the three
months ended September 30, 2000 operating losses for Tyumenruscom and BELCEL in
the aggregate amounted to $76,000.

FIXED TELEPHONY

The following sets forth the names, ownership percentage and accounting
treatment of the Communications Group's fixed telephony ventures as of and for
the three and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
VENTURE OWNERSHIP % 2000 1999
------- ----------- -------- --------
<S> <C> <C> <C>
Technocom (Moscow, Russia)*................................. 100% C C
PeterStar (St. Petersburg, Russia)*......................... 71% C C
Baltic Communications (St. Petersburg, Russia)*............. 100% C C
Instaphone (Kazakhstan)**................................... 50% E E
MTR Sviaz*.................................................. 49% E E
Caspian American Telecommunications (Azerbaijan)............ 38% E E
Telecom Georgia (Tbilisi, Georgia).......................... 30% E E
Spectrum (Kazakhstan)**..................................... 33% E E
</TABLE>

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

* Acquired in connection with the Company's acquisition of PLD Telekom on
September 30, 1999.

** Results not reported.

42
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The following table sets forth the revenues and operating income for the
consolidated fixed telephony ventures (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
FIXED TELEPHONY--CONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................... $24,332 $ -- N/A $66,732 $ -- N/A
Operating income............................ $ 5,805 $ -- N/A $14,509 $ -- N/A
</TABLE>

REVENUES. Fixed telephony consolidated revenues for the nine months ended
September 30, 2000 amounted to $66.7 million and were attributable to
subsidiaries acquired in connection with the Company's acquisition of PLD
Telekom on September 30, 1999. The most significant ventures acquired were
PeterStar, which operates a fully digital, city-wide fiber optic
telecommunications network in St. Petersburg, Russia, and Technocom, which
through Teleport-TP operates Moscow-based long distance and international
telephony networks using satellite and fiber optic technology. The Company also
acquired Baltic Communications, which provides international direct dial,
payphone and leased line services for Russian and international businesses in
St. Petersburg, Russia.

In the nine months ended September 30, 2000 PeterStar generated revenues of
$41.4 million, as compared to revenues of $41.3 million generated in the same
period in 1999. The 1999 figures included installation revenues of
$3.0 million. The Company's accounting policy is to defer such revenue over the
average customer life.

In the first nine months of 2000, Technocom generated revenues of $19.6 million
compared to $13.2 million in the same period in 1999, the increase due to higher
volumes of international and long distance traffic volumes in the current year.
The venture's revenues are expected to continue to improve in the remaining
quarter of 2000.

Fixed telephony consolidated revenues for the three months ended September 30,
2000 amounted to $24.3 million. PeterStar's revenues for the three months ended
September 30, 2000 amounted to $14.5 million, a marginal increase on revenues of
$13.6 million generated in the same period in 1999. Technocom's revenues
increased from $4.2 million for the three months ended September 30, 1999 to
$8.0 million in the comparable period in 2000.

OPERATING INCOME. During the nine months ended September 30, 2000, fixed
telephony consolidated ventures generated operating income of $14.5 million.
PeterStar's operating income for the nine months ended September 30, 2000
amounted to $14.9 million compared to $11.0 million for the nine months ended
September 30, 1999. Although revenues remained flat as compared with the same
period in 1999, PeterStar's profitability for the nine months ended
September 30, 2000 was favorably affected by reduced overhead expenses.
Technocom generated an operating loss of $54,000 during the first nine months of
2000 compared to a loss of $4.2 million in the corresponding period in 1999. The
reduction of Technocom's operating loss was due to a restructuring of operations
in early 1999 resulting in reduced overhead expense, and also to the above
mentioned increase in revenue.

Fixed telephony operating profits for the three months ended September 30, 2000
amounted to $5.8 million. PeterStar's operating income for the three months
ended September 30, 2000 increased to $5.3 million from $2.5 million in the same
period of 1999. In the three months ended September 30, 2000 Technocom generated
operating income of $454,000 as compared with an operating loss of $869,000 in
the corresponding period of 1999.

43
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The following table sets forth the revenues, operating loss, net loss and equity
in losses of the unconsolidated fixed telephony joint ventures which are
recorded under the equity method (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
FIXED TELEPHONY--UNCONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............................. $ 6,495 $ 5,924 10% $20,738 $17,563 18%
Operating loss........................ $ (342) $(1,301) (74)% $(1,956) $ (544) 260%
Net loss.............................. $(1,850) $(2,164) (15)% $(4,938) $(4,817) 3%
Equity in losses of joint ventures.... $ (276) $(1,324) (79)% $(2,234) $(3,470) (36)%
</TABLE>

EQUITY IN LOSSES OF JOINT VENTURES. The Communications Group's share in losses
from investments in fixed telephony ventures for the nine months ended
September 30, 2000 decreased to $2.2 million from $3.5 million in the nine
months ended September 30 1999. These results were attributable mainly to the
operations of Telecom Georgia and Caspian American Telephone ("CAT").

In the nine months ended September 30, 2000, Telecom Georgia generated revenues
of $18.1 million compared to revenues of $17.2 million in the prior period.
Telecom Georgia's operating losses for the period amounted to $444,000 as
compared with operating income of $1.3 million achieved in the same period in
1999. The venture's operating results for the nine months ended September 30,
2000 were adversely affected by lower termination rates and increased
competition.

CAT generated revenues of $1.4 million in the nine months ended September 30,
2000 compared to $212,000 in the corresponding period of 1999. Revenues in 1999
were low because the venture became operational only in the latter part of that
year. Operating losses generated during the first three quarters of 2000
amounted to $1.7 million compared to $1.6 million during the first three
quarters of 1999. High start up costs impaired the venture's 1999 results. In
2000, CAT's performance continues to be adversely affected by limited subscriber
growth, high build-out costs and competition from GSM. In late 1999 the Company
recorded an impairment charge of $9.9 million in the value of its investment in
this venture. The Communications Group is continuing to review various options
to maximize the value of this venture.

The above results also include MTR Sviaz which was acquired with PLD Telekom on
September 30, 1999 and which operates a Moscow-based telephony network using
fiber optic technology. During the nine months ended September 30, 2000, MTR
Sviaz generated revenues of $1.3 million and an operating income of $166,000,
marginally lower than revenues of $1.4 million and operating income of $200,000
for the same period in 1999.

The Communications Group's share of losses from investments in fixed telephony
ventures for the three months ended September 30, 2000 decreased by 79% to
$276,000 from $1.3 million during the same period in 1999. Telecom Georgia
generated operating income of $155,000 for the three months ended September 30,
2000 as compared with operating income of $406,000 for the same period in 1999.
CAT reported operating losses of $507,000 for the three months ended
September 30, 2000 as compared to losses of $1.6 million in the same period in
1999 when the venture was in its first year of operation.

44
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

CABLE TELEVISION

The following sets forth the names, ownership percentage and accounting
treatment of the Communications Group's cable television ventures as of and for
the three and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
VENTURE OWNERSHIP % 2000 1999
------- ----------- -------- --------
<S> <C> <C> <C>
Romsat Cable TV (Bucharest, Romania)........................ 100% C C
Ala TV (Bishkek, Kyrgyzstan)................................ 53% C N/A
Viginta (Vilnius, Lithuania)................................ 55% C C
ATK (Archangelsk, Russia)................................... 81% C C
Kosmos TV (Moscow, Russia).................................. 50% E E
Baltcom TV (Riga, Latvia)................................... 50% E E
Ayety TV (Tbilisi, Georgia)................................. 49% E E
Kamalak TV (Tashkent, Uzbekistan)........................... 50% E E
Sun TV (Chisinau, Moldova).................................. 50% E E
Alma TV (Almaty, Kazakhstan)................................ 50% E E
Cosmos TV (Minsk, Belarus).................................. 50% E E
Teleplus (St. Petersburg, Russia)*.......................... 45% E E
</TABLE>

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

* Results not reported

The following table sets forth the revenues and operating loss of the
consolidated cable television joint ventures (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
CABLE TELEVISION--CONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
------------------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................................ $2,905 $1,439 102% $6,421 $4,100 57%
Operating loss.................................. $ (393) $ (34) 1,056% $ (721) $ (212) 240%
</TABLE>

REVENUES. Cable television operations generated consolidated revenues of
$6.4 million in the nine months ended September 30, 2000, representing a 57%
increase on 1999 prior year nine months consolidated revenues of $4.1 million.
The majority of consolidated revenues were attributable to Romsat, Viginta, and
ATK.

In Romania, Romsat reported revenues of $4.5 million for the nine months ended
September 30, 2000, as compared to revenues of $2.9 million in the same period
of 1999, due to higher levels of subscribers, including those of the Devasat
operation, acquired by Romsat in late 1999, and other smaller acquisitions. In
Lithuania, Viginta generated revenues of $994,000 in the nine months ended
September 30, 2000 as compared with $795,000 for the same period in 1999,
attributable to improved programming. ATK, which commenced operations in
Arkhangelsk, Russia in 1999, reported revenues of $707,000 for the nine months
ended September 30, 2000, a 57% increase on revenues of $451,000 generated
during the same period in 1999 when the venture was still in its start up phase.

In the three months ended September 30, 2000, cable television operations
generated consolidated revenues of $2.9 million compared to $1.4 million in the
corresponding period of 1999. Romsat generated revenues of $2.3 million, a 135%
increase on revenues of $980,000 for the third quarter of

45
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
1999. For the three months ended September 30, 2000, Viginta's revenues amounted
to $339,000 compared with revenues of $279,000 during the corresponding period
in 1999. ATK had revenues of $226,000 for the three months ended September 30,
2000, a 26% increase compared with revenues of $180,000 generated in the same
period of 1999.

OPERATING LOSS. For the nine months ended September 30, 2000 cable television
reported a consolidated operating loss of $721,000, compared to an operating
loss of $212,000 for the same period in 1999. Romsat reported operating income
of $179,000 for the nine months ended September 30, 2000 compared to $189,000
for the same period in 1999. Romsat's results in 2000 have been adversely
affected by additional goodwill amortization expense associated with the Devasat
acquisition in 1999. Viginta's operating loss for the nine months ended
September 30, 2000 decreased to $267,000 as compared to $518,000 in the
corresponding period in 1999, the improvement due to the above mentioned
increase in revenues. ATK reported operating losses of $331,000 for the nine
months ended September 30, 2000, as compared to losses of $52,000 for the same
period in 1999 due to higher programming costs.

For the three months ended September 30, 2000, cable television operations
reported a consolidated operating loss of $393,000 as compared to an operating
loss of $34,000 for the corresponding period in 1999. Romsat reported an
operating loss of $59,000 for the three months ended September 30, 2000 compared
to an operating profit of $51,000 for the third quarter of 1999. Viginta
reported an operating loss of $88,000 for the three months ended September 30,
2000 compared to losses of $134,000 in the same period of 1999. ATK's operating
profit decreased from $64,000 for the three months ended September 30, 1999 to
an operating loss of $134,000 in the same period of 2000.

The following table sets forth the revenues, operating income (loss), net income
(loss) and equity in income (losses) of unconsolidated cable television joint
ventures, which are recorded under the equity method (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
CABLE TELEVISION--UNCONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
-------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues...................................... $ 6,868 $6,783 1% $22,311 $20,410 9%
Operating income (loss)....................... $(1,123) $1,791 N/M $ (433) $ 560 N/M
Net income (loss)............................. $(2,984) $ 226 N/M $(6,809) $(3,741) 82%
Equity in income (losses) of joint ventures... $(1,334) $1,436 N/M $(2,146) $ 199 N/M
</TABLE>

EQUITY IN INCOME (LOSSES) OF JOINT VENTURES. The Communications Group's share
in losses from equity investments in cable television ventures in the nine
months ended September 30, 2000 amounted to $2.1million, compared to income of
$199,000 in the nine months ended September 30, 1999. The operating results for
unconsolidated cable television ventures were mainly attributable to Baltcom TV
in Latvia, Kosmos TV in Moscow and Alma TV in Kazakhstan.

Baltcom TV reported revenues of $5.3 million in the first nine months of 2000, a
10% increase on revenues of $4.8 million for the same period in 1999. The
venture reported operating income of $723,000 in the nine months ended
September 30, compared to $2.1 million in the same period of 1999. The 1999
results of Baltcom TV were favorably affected by a reconciling adjustment of
approximately $1.7 million decreasing depreciation expense. Although subscriber
numbers increased during 2000, Baltcom TV's customers in 2000 tended to opt for
lower margin program packages. Kosmos TV's revenues declined by $118,000 in the
nine months ended September 30, 2000 to $4.4 million from $4.5 million in the
same period of 1999. The venture generated an operating loss of

46
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
$43,000 for the first nine months of 2000 as compared with an operating profit
of $32,000 for the same period in 1999. Kosmos TV's growth has been limited due
to the effect of competition. The digitalization of Kosmos' network which is
commencing in the fourth quarter of 2000 is expected to improve significantly
the venture's competitive position. Alma TV's revenues increased from
$3.8 million in the nine months ended September 30, 1999 to $4.4 million in the
nine months ended September 30, 2000 due to continued subscriber growth.
However, due to increased costs associated with improved programming, the
venture reported an operating loss of $768,000 in the first nine months of 2000,
compared to income of $425,000 for the same period in 1999.

The Communications Group's share in losses from equity investments in cable
television ventures for the three months ended September 30, 2000 amounted to
$1.3 million, compared to income of $1.4 million during the same period of 1999.
Baltcom TV reported operating income of $201,000, down 88% on operating income
of $1.6 million during the third quarter of 1999. Kosmos TV generated an
operating loss of $148,000 in the three months ended September 30, 2000 as
compared with a profit of $355,000 in the corresponding period of 1999. Alma
TV's operating loss for the three months ended September 30, 2000 amounted to
$896,000 compared to operating income of $152,000 in the third quarter of 1999.

RADIO BROADCASTING

The following sets forth the names, ownership percentage and accounting
treatment of the Communications Group's radio broadcasting ventures as of and
for the three and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
VENTURE OWNERSHIP % 2000 1999
------- ----------- -------- --------
<S> <C> <C> <C>
Radio Juventus (Budapest, Hungary).......................... 100% C C
SAC (Moscow, Russia)........................................ 83% C C
Radio Skonto (Riga, Latvia)................................. 55% C C
Radio One (Prague, Czech Republic).......................... 80% C C
NewsTalk Radio (Berlin, Germany) (1)........................ 85% N/A C
Radio Vladivostok, (Vladivostok, Russia).................... 51% C C
Country Radio (Prague, Czech Republic)...................... 85% C C
Radio Georgia (Tbilisi, Georgia)............................ 51% C C
Radio Katusha (St. Petersburg, Russia)...................... 75% C C
Radio Nika (Socci, Russia) (2).............................. 51% N/A E
AS Trio LSL (Tallinn, Estonia).............................. 49% E E
</TABLE>

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

(1) Sold in the third quarter of 2000.

(2) Sold in the second quarter of 2000.

47
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The following table sets forth the consolidated revenues and operating income
(losses) for radio broadcasting (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
RADIO--CONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues...................................... $3,870 $ 3,426 13% $11,744 $11,531 2%
Operating income (loss)....................... $ 36 $(3,018) N/M $ (366) $(4,271) (91)%
</TABLE>

REVENUES. Radio operations reported consolidated revenues of $11.7 million in
the first nine months of 2000, representing a 2% increase on revenues of
$11.5 million generated in the same period in 1999. The majority of revenues
were generated by SAC and Radio Katusha in Russia, and by Radio Juventus in
Hungary.

In Russia, SAC and Radio Katusha's revenues rose from $3.0 million and
$1.2 million in the nine months ended September 30, 1999, to $3.7 million and
$1.4 million respectively in the same period of 2000. In Moscow, SAC revenues
were higher partly due to the recovery of the Russian economy in 2000 compared
to 1999 and the resultant increase in demand for advertising. In St Petersburg,
Radio Katusha acquired more listeners and acquired a premier position in that
market. In Hungary, Radio Juventus in the nine months ended September 30, 2000
generated revenues of $4.6 million, down 12% compared to revenues of
$5.2 million for the same period of 1999. Radio Juventus' results continue to be
adversely affected by devaluation of the local currency, competition from
Hungarian radio networks, and more competitive TV advertising rates. However,
the venture's results are expected to improve as a result of its affiliation
with a number of regional stations to commence shortly. In addition to its
market leading position in Budapest, these affiliates will give Radio Juventus
coverage of approximately 70% of the Hungarian market.

Consolidated radio revenues for the three months ended September 30, 2000
amounted to $3.9 million, 13% higher than revenues of $3.4 million generated in
the corresponding period of 1999. SAC and Radio Katusha in Russia together
generated revenues of $1.7 million for three months ended September 30, 2000,
compared with $1.3 million in the same period of 1999. In Hungary, Radio
Juventus reported revenues of $1.4 million for three months ended September 30,
2000, 7% lower than revenues of $1.5 million for the same period of 1999.

OPERATING LOSS. During the nine months ended September 30, 2000, radio
operations generated an operating loss of $366,000 compared to a loss of
$4.3 million the first three quarters of 1999. Radio ventures' results in 1999
were adversely affected by goodwill write-offs amounting to $2.5 million
connected with NewsTalk Radio. During the nine months ended September 30, 2000,
SAC and Radio Katusha together generated operating income of $1.7 million
compared to $763,000 in the same period of 1999, the increase being due to the
higher revenues mentioned above. In Germany, NewsTalk Radio reported year to
date operating losses of $2.3 million, representing a 34% decrease in its
operating losses of $3.5 million for the corresponding period of 1999. Disposal
of the operations of NewsTalk Radio was finalized on July 28, 2000 and generated
a non-cash gain to the Communications Group of $2.8 million. The gain resulted
primarily from the settlement of $2.3 million of liabilities without a cash
payment. In Hungary, Radio Juventus generated operating income of $131,000 for
the three months ended September 30, 2000, compared with operating income of
$696,000 in the same period of 1999, the decrease due mainly to the reduced
levels of revenue discussed above.

The Communications Group's radio businesses generated a consolidated operating
profit of $36,000 for the three months ended September 30, 2000, as compared
with losses of $3.0 million for the three

48
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
months ended September 30, 1999. SAC and Radio Katusha reported operating income
of $589,000 and $17,000 for the three months ended September 30, 2000, compared
with operating income of $103,000 and an operating loss of $10,000 respectively
for in the corresponding period of 1999. Radio Juventus generated an operating
profit of $31,000 in the quarter ended September 30, 2000, compared with a
profit of $121,000 in the corresponding period of 1999.

The following table sets forth the revenues, operating income (loss), net income
(loss) and equity in income (losses) of the Communications Group's investment in
unconsolidated radio joint ventures, which are recorded under the equity method
(in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
RADIO--UNCONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
--------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................................... $463 $608 (24 )% $1,312 $1,795 (27 )%
Operating income (loss)............................ $(34) $ 30 N/M $ (224) $ 12 N/M
Net income (loss).................................. $(57) $ 80 N/M $ (311) $ (8) 3,788%
Equity in income (losses) of joint ventures........ $(47) $ 56 N/M $ (473) $ (24) 1,871%
</TABLE>

EQUITY IN INCOME (LOSSES) OF JOINT VENTURES. The Communications Group's share
in losses from equity investments in radio ventures amounted to $473,000 in the
nine months ended September 30, 2000, compared to losses of $24,000 in the nine
months ended September 30, 1999. These results were partly attributable to a
loss of $205,000 on the sale of the Communications Group's investment in Radio
Nika in June 2000. They were also attributable to Radio Trio, Estonia, which
generated revenues of $1.3 million during the first nine months of 2000 compared
to $1.7 million during the same period in 1999. Radio Trio's revenues were
adversely affected by the effect of strong local competition, including a number
of new entrants into the market. The venture reported operating losses of
$214,000 for the nine months ended September 30, 2000 compared to operating
profits of $13,000 in the corresponding period of 1999.

The share in losses for the three months ended September 30, 2000 from equity
investments in radio joint ventures amounted to $47,000, including the above
mentioned loss on the sale of Radio Nika, compared to profits of $56,000 in the
same period of 1999. Radio Trio reported operating losses of $34,000 for the
three months ended September 30, 2000 compared with operating profits of $30,000
in the same period of 1999.

PAGING

OVERVIEW. In 1999, the Communications Group stopped funding most paging
operations and it continues to manage almost all of its paging ventures on a
cash break even basis. The Communications Group will continue to manage its
paging businesses to levels not requiring significant additional funding as it
continues to review options to maximize the value of its paging investments. The
Company has adjusted to zero the carrying value of its investments in certain
paging operations which were recorded under the equity method, and unless it
provides future funding, will no longer record its proportionate share of any
future net losses of these ventures.

49
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The following sets forth the names, ownership percentage and accounting
treatment of the Communications Group's paging ventures as of and for the three
and nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
VENTURE OWNERSHIP % 2000 1999
------- ----------- -------- --------
<S> <C> <C> <C>
Baltcom Paging (Tallinn, Estonia)........................... 85% C C
CNM (Romania)**............................................. 54% C C
Eurodevelopment (Ukraine)................................... 51% C C
Kamalak Paging (Tashkent, Samarkand, Bukhara and Andijan,
Uzbekistan)............................................... 50% E E
Mobile Telecom (Russia)..................................... 50% E E
Baltcom Plus (Riga, Latvia)*................................ 50% E E
Paging One (Tbilisi, Georgia)*.............................. 45% E E
Raduga Poisk (Nizhny Novgorod, Russia)*..................... 45% E E
PT Page (St. Petersburg, Russia)*........................... 40% E E
Kazpage (Kazakhstan)*....................................... 26-41% E E
Alma Page (Almaty and Ust-Kamenogorsk, Kazakhstan)*......... 50% E E
Paging Ajara (Batumi, Georgia)*............................. 35% E E
</TABLE>

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

* Results not reported.

** In liquidation.

The following table sets forth the consolidated revenues and operating income
(loss) for paging (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
PAGING--CONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
-------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.......................................... $439 $ 738 (41)% $1,483 $ 2,483 (40)%
Operating income (loss)........................... $528 $(458) N/M $ 277 $(1,757) N/M
</TABLE>

REVENUES. The Communications Group's paging ventures generated consolidated
revenues of $1.5 million in the first nine months of 2000, representing a 40%
decrease on revenues of $2.5 million for the same period in 1999. The decrease
was due primarily to continued competition from wireless telephony providers. A
significant portion of the revenues for the nine months ended September 30, 2000
were attributable to Eurodevelopment in the Ukraine, whose revenues amounted to
$699,000 compared with $511,000 for the same period in 1999 when the venture was
in its start up phase. CNM in Romania generated revenues of $408,000 for the
nine months ended September 30, 2000 compared to $876,000 in the first nine
months of 1999. The operations of CNM are currently being liquidated by the
Company. In the second quarter of 2000 the Communications Group incurred a
charge of $250,000 in respect of anticipated liquidation costs. Other
consolidated paging revenues were attributable to Baltcom, Estonia, which
generated revenues of $376,000 in the first nine months of 2000 as compared to
$559,000 for the nine months ended September 30, 1999.

Consolidated paging revenues for the three months ended September 30, 2000
amounted to $439,000, representing a 41% decrease on revenues of $738,000 during
the same period in 1999.

50
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OPERATING LOSS. Consolidated operating profit arising from paging operations
amounted to $277,000 in the nine months ended September 30, 2000, compared to a
$1.8 million loss during the same period in 1999. Operating losses for the nine
months ended September 30, 1999 were adversely affected by Paging One Services
which generated operating losses of $1.6 million for that period and which was
disposed of later in 1999. CNM's operating income, including costs connected
with the disposition of the venture, amounted to $285,000 for the nine months
ended September 30, 2000 as compared to $84,000 in the corresponding period of
1999.

Consolidated operating income arising from paging operations for the three
months ended September 30, 2000 amounted to $528,000 compared to operating
losses of $458,000 the three months ended September 30, 1999.

The following table sets forth the revenues, operating income (loss), net loss
and equity in income (losses) of unconsolidated joint ventures, which are
recorded under the equity method (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
PAGING--UNCONSOLIDATED 2000 1999 % CHANGE 2000 1999 % CHANGE
---------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................................ $1,505 $2,387 (37)% $ 5,881 $8,919 (34)%
Operating income (loss)......................... $ 219 $ (244) N/M $ (822) $ (52) 1,481%
Net loss........................................ $ (53) $ (272) (81)% $(1,589) $ (472) 237%
Equity in income (losses) of joint ventures..... $ (1) $ 44 N/M $(1,122) $ (35) 3,106%
</TABLE>

EQUITY IN LOSSES OF JOINT VENTURES. The Communications Group's share of losses
from equity investments in paging ventures for the nine months ended
September 30, 2000 amounted to $1.1 million compared to $35,000 for the same
period in 1999 and related primarily to the operations of Mobile Telecom in
Moscow.

Mobile Telecom generated revenues of $5.1 million during the first nine months
of 2000, a decrease of $2.5 million compared to the same period in 1999. The
venture has experienced strong competition from the wireless telephony sector.
In addition, the venture incurred a $500,000 write-off of obsolete inventory in
the second quarter of 2000. As a result of the write-off and decreased revenues,
the venture reported a net loss of $800,000 for the nine months ended
September 30, 2000 compared to net losses of $504,000 for the nine months ended
September 30, 1999.

For the three months ended September 30, 2000, the Company's share of losses
from equity investments in paging ventures amounted to $1,000 compared to a
$44,000 operating income for the same period in 1999. Increased losses were
largely attributable to the revenue decline arising from strong competition from
the wireless telephony sector.

SEGMENT HEADQUARTERS

Segment headquarters operations relate to executive, administrative, logistical
and joint venture support activities. The following table sets forth the
consolidated revenues and operating loss for the segment headquarters (in
thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2000 1999 % CHANGE 2000 1999 % CHANGE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues.................................. $ 273 $ 342 (20)% $ 2,258 $ 1,260 79%
Operating loss............................ $(13,811) $(7,372) 87% $(42,262) $(21,401) 97%
</TABLE>

51
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

REVENUES. Increased revenues in the nine months ended September 30, 2000
compared to the same period in the prior year reflect continued growth in
programming and management fee revenues from the Communications Group's
unconsolidated businesses.

OPERATING LOSS. Operating losses for the nine months ended September 30, 2000
amounted to $42.3 million, a 97% increase on operating losses of $21.4 million
generated in the corresponding period of 1999. The increase in operating losses
was attributable to nine full months of goodwill amortization and depreciation
expenses associated with the September 1999 acquisition of PLD Telekom amounting
to $18.6 million, for which there were no comparative expenses in the prior year
nine months results. Operating losses also included combined selling, general
and administrative costs of MITI and the former PLD Telekom corporate offices.
Operating losses was favorably impacted by the reversal of $823,000 in primarily
accrued severance costs in connection with the 1999 restructuring of operations.

GAIN (LOSS) ON SALE OF BUSINESSES, FOREIGN CURRENCY GAIN (LOSS) AND MINORITY
INTEREST

The following table sets forth the gain (loss) on sale of businesses, foreign
currency gains (losses) and minority interest, for the consolidated operations
of the Communications Group--Eastern Europe and the republics of the former
Soviet Union (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2000 1999 % CHANGE 2000 1999 % CHANGE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Gain (loss) on sale of businesses...... $2,752 $(1,200) N//M $ 2,752 $(1,200) N/M
Foreign currency gain (loss)........... $ 16 $(1,260) N/M $ 57 $(4,054) N/M
Minority interest...................... $ (609) $ (272) 124% $(2,860) $ 352 N/M
</TABLE>

The Communications Group realized a gain on the disposal of businesses amounting
to $2.8 million in the nine months ended September 30, 2000. The gain was
attributable to the sale of NewsTalk Radio, Berlin, in July 2000 and resulted
primarily from the settlement of $2.3 million of liabilities without a cash
payment. For the nine months ended September 30, 1999 the Communications Group
incurred losses amounting to $1.2 million relating to its disposition of its
Paging One business in Austria.

Foreign currency gains for the first nine months of 2000 amounted to $57,000
compared to losses of $4.1 million in the first nine months of 1999 and
represented the remeasurement of the ventures' financial statements, in most
cases using the U.S. dollar as the functional currency. U.S. dollar transactions
are shown at their historical value. Monetary assets and liabilities denominated
in local currencies are translated into U.S. dollars at the prevailing
period-end exchange rate. All other assets and liabilities are translated at
historical exchange rates. Results of operations have been translated using the
monthly average exchange rates. The foreign currency gain related to the
transaction differences resulting from the use of these different rates. During
the nine months ended September 30, 2000 a small foreign currency gain resulted
primarily from the fluctuation of the U.S. dollar against the local currency in
Russia. Large foreign currency losses in 1999 were incurred due primarily to the
adverse effect of the weakening of local currencies in Germany and Austria.

Minority interest represents the allocation of income or losses by the
Communications Group's majority owned subsidiaries and joint ventures to its
minority ownership interest.

52
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
COMMUNICATIONS GROUP--CHINA

The following sets forth the names, ownership percentage and accounting
treatment of the Communications Group's ventures as of and for the three and
nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
JOINT VENTURE/SUBSIDIARY OWNERSHIP % 2000 1999
------------------------ ----------- -------- --------
<S> <C> <C> <C>
WIRELESS TELEPHONY
Ningbo Ya Mei Telecommunications Co., Ltd. (Ningbo City,
China).................................................... 70% L D
Ningbo Ya Lian Telecommunications Co., Ltd. (Ningbo
Municipality, China)...................................... 70% L D

FIXED TELEPHONY
Sichuan Tai Li Feng Telecommunications Co., Ltd. (Sichuan
Province, China).......................................... 92% L D
Chongqing Tai Le Feng Telecommunications Co., Ltd.
(Chongqing
Municipality, China)...................................... 92% L D

INTERNET SERVICES--E-COMMERCE
Huaxia Metromedia Information Technology Co., Ltd. (Beijing,
China).................................................... 98% C P
66cities.com Co., Ltd. (Beijing, China)..................... 97% C N/A
</TABLE>

TELECOMMUNICATIONS JOINT VENTURE INFORMATION

The Company is no longer recording the operations of its China
telecommunications joint ventures as of July 1, 1999. The following tables
represent summary financial information for the Company's telecommunications
joint ventures and their related projects in China as of and for the nine and
three months ended September 30, 1999, respectively, (in thousands):

TELECOMMUNICATIONS JOINT VENTURES

<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1999
------------------ ------------------
TOTAL TOTAL
------------------ ------------------
<S> <C> <C>
Revenues................................................... $2,530 $ 3
Depreciation and amortization.............................. (1,900) (184)
Operating loss............................................. (47) (378)
Net loss................................................... (3,357) (1,581)
Equity in losses of joint ventures......................... (652) (505)
</TABLE>

OVERVIEW. The Company held interests in four telecommunications joint ventures
in China, each of which engaged in cooperation contracts with China United
Telecommunications Incorporated ("China Unicom") to finance and support
development of local telecommunications services. All four of these ventures
prematurely terminated operations by order of the Chinese government in 1999.
Concurrent with this termination, the Company reached agreement with China
Unicom and its Chinese partners in the ventures, for the distribution of
approximately $94.7 million in settlement of all claims under the joint venture
agreements and cooperation contracts. The Company has received all of its
distributions

53
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
as of September 30, 2000 and Ningbo JV, Ningbo JV II, Sichuan JV and Chongqing
JV have been dissolved.

The $94.7 million in total distributions from the joint ventures was
insufficient to fully recover the goodwill originally recorded in connection
with the Company's investment in these joint ventures. As of September 30, 2000,
the Company had recorded non-cash impairment charges of $41.7 million for the
write-off of goodwill to reflect this shortfall.

CHINA E-COMMERCE JOINT VENTURE INFORMATION

Huaxia JV had engaged since its formation in development of online trading
software largely aimed at supporting its Chinese partner's trading activities.
Since mid-2000, its scope of business activity has broadened to encompass
development and support of general e-commerce and enterprise management
software, aimed principally at Chinese enterprise clients. Huaxia JV will
provide the software needed by all of the Company's current and planned
e-commerce business units. On September 20, 2000, the Chinese government
approved a revised joint venture agreement for Huaxia JV whereby the Company's
ownership interest in the joint venture was increased to 98%. The Company's only
material cost for its increased ownership position in Huaxia JV is a
corresponding increase in its obligation for future registered capital
contributions. Huaxia JV's business license remains unchanged.

The terms under which Huaxia JV is currently licensed require a total investment
of $10.0 million, of which $5.0 million must be in the form of registered
capital contributions from the joint venture's shareholders. The registered
capital contributions must be made within three years and the joint venture's
debt to registered capital ratio cannot exceed 50%. As of September 30, 2000,
Asian American Telecommunications had made $980,000 of its scheduled registered
capital investment and had advanced $242,000 in shareholder loans. For the nine
months ended September 30, 2000, the Company recorded equity in losses of Huaxia
JV's operations of $683,000 which represents the costs for establishing the
joint venture and its pre-operational software development and testing
activities. The Company has reflected Huaxia JV's results of operations through
September 30, 2000 as an equity method investment and has consolidated Huaxia JV
as of September 30, 2000 and will consolidate its results of operations
subsequent to September 30, 2000.

54
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Huaxia JV is pre-operational as of September 30, 2000 and its results of
operations are included under the equity method. The following tables represent
summary financial information for the Company's China e-commerce Huaxia joint
venture as of and for the nine and three months ended September 30, 2000,
respectively, (in thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------ ------------------
<S> <C> <C>
Revenues................................................... $ -- $ --
Depreciation and amortization.............................. 38 13
Operating loss............................................. (683) (143)
Net loss................................................... (683) (145)
Assets..................................................... 676 676
</TABLE>

On July 24, 2000, the Company's majority-owned subsidiary Metromedia China
Corporation purchased an 80% equity interest in Twin Poplars, a U.S. limited
liability company registered in Delaware, for $300,000 and obtained options to
acquire the remaining 20% equity interest for $75,000. On August 31, 2000, the
Company exercised its option to acquire an additional 10% equity interest in
Twin Poplars. Twin Poplars owns a 97% equity interest in Beijing 66cities.com
Company, Limited, a Chinese equity joint venture licensed to engage in
information content provision and e-commerce services in China ("66cities JV").
Twin Poplars operates as a holding company for 66cities JV and has no operations
or assets other than its interests in the venture. As of September 30, 2000, the
Company had advanced $802,000 to Twin Poplars, all of which was invested in or
advanced to 66cities JV.

55
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The following tables sets forth operating loss, equity in losses of joint
ventures and minority interests for the Communications Group's various telephony
and e-commerce related joint ventures in China (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
2000 1999 % CHANGE 2000 1999 % CHANGE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating loss........................ $(791) $(52,323) N/M $ (374) $(59,396) N/M
Equity in losses of joint ventures.... $(145) $ (505) 71% $ (683) $ (652) (5)%
Minority interests.................... $ 542 $ 22,654 (98)% $1,797 $ 26,882 (93)%
</TABLE>

OPERATING LOSS INCLUDING ASSET IMPAIRMENT CHARGES. For the three and nine
months ended September 30, 2000, operating loss was $791,000 and $374,000,
respectively. In the comparable periods in the prior years, the Company recorded
operating losses of $52.3 million and $59.4 million, respectively, including a
write-down of goodwill of $50.9 million in connection with the dissolution of
the Company's former telecommunications joint ventures. Current year operating
losses primarily reflect reductions in asset impairment charges from
distribution of settlement proceeds received in connection with dissolution of
the Company's former telecommunications joint ventures in China offset by
operating expenses and the start-up of operations of Twin Poplars. Operating
expenses for the three and nine months ended September 30, 2000 were $947,000
and $4.4 million, respectively, as compared to $ 1.4 million and $6.9 million,
respectively, for the three and nine months ended September 30, 1999. With the
dissolution of its telecommunications joint ventures, the Company has
substantially reduced its overhead expenses.

EQUITY IN LOSSES OF JOINT VENTURES. For the three and nine months ended
September 30, 2000, the Company has recorded an equity in losses of the
operations of $145,000 and $683,000 which principally represents the start-up
and pre-operational losses of Huaxia JV. Equity in losses of the Communications
Group's joint ventures in China for the three and nine months ended
September 30, 1999 reflect the operating losses of the Company's former
telecommunications joint ventures prior to their signing the settlement
agreements with China Unicom on December 3, 1999.

MINORITY INTERESTS. For the three and nine months ended September 30, 2000 and
1999, minority interests represents the allocation of income (losses) to
Metromedia China Corporation's minority ownership.

INFLATION AND FOREIGN CURRENCY

During 1998, and continuing in 1999, a number of emerging market economies
suffered significant economic and financial difficulties resulting in liquidity
crises, devaluation of currencies, higher interest rates and reduced
opportunities for financing. In 2000, there have been indications that the
economic climate may be improving, however, at this time, the prospects for
complete recovery for the economies of Russia and the other republics of the
former Soviet Union and Eastern Europe negatively affected by the economic
crisis remain unclear. The economic crisis of 1998 resulted in a number of
defaults by borrowers in Russia and other countries. Although some debt was
rescheduled in the first part of 2000, a reduced level of financing remains
available to investors in these countries. The devaluation of many of the
currencies in the region in 2000 has not been as marked as in previous years but
the potential still remains for future negative effect on the U.S. dollar value
of the revenues generated by certain of the Communications Group's joint
ventures and may lead to certain additional restrictions on the convertibility
of certain local currencies. The effect of these uncertainties has negatively
impacted the

56
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
financial performance of certain of the Communications Group's cable television,
telephony, radio broadcasting and paging ventures.

SNAPPER

The following table sets forth Snapper's revenues, gross profit and operating
income (loss) for the three and nine months ended September 30, 2000 and 1999
(in thousands):

57
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

REVENUES. Snapper's sales for the three months ended September 30, 2000 were
$34.0 million as compared to $47.0 million for the same period in 1999. Sales of
lawn and garden equipment contributed the majority of the revenues during both
periods. Sales for the quarter ended September 30, 2000 were lower in all lawn
and garden categories due to a continued drought in the Southeast. Snapper's
snowthrower sales for the quarter ended September 30, 2000 were also lower by
$3.4 million. Also, in the first quarter of 2000, Snapper notified a number of
its commissioned distributors and commissioned agents of Snapper's decision not
to extend their existing contracts, which expired August 31, 2000. Snapper chose
not to renew these contracts in order to give it direct control over these
territories, which may allow it to improve profit margins in the future. This
announcement negatively impacted sales during the third quarter, and is
anticipated to negatively impact sales for the remainder of 2000. In addition,
Snapper agreed to repurchase parts and accessories owned by these distributors
whose contracts were not renewed, and recorded a $2.7 million reduction of
revenue during the quarter ended September 30, 2000. During the quarter ended
September 30, 2000, Snapper introduced a new Grounds Cruiser utility vehicle,
which generated $3.4 million in sales.

On September 19, 2000, Snapper announced that it had reached an agreement with
Wal-Mart Stores, Inc. to sell several models of Snapper walk-behind mowers, lawn
tractors and rear-engine riding mowers throughout most Wal-Mart stores and
Wal-Mart Supercenter locations in the U.S. The Wal-Mart agreement marks a major
change in Snapper's distribution focus. Snapper traditionally marketed its
products through more than 4,000 independent outdoor power equipment dealers
throughout the U.S. The strengthening popularity of home center stores and mass
merchants has led Snapper to seek additional opportunities to reach consumers.
Snapper expects to begin shipping products to Wal-Mart by December 2000.
Snapper's network of dealers will continue to sell Snapper residential
equipment, commercial equipment, snowthrowers, tillers and its new utility
vehicle, as well as handle all service for Snapper equipment.

Snapper's sales for the nine months ended September 30, 2000 were
$136.5 million as compared to $166.2 million for the same period in 1999.
Drought conditions in the Southeast, decreases in sales from not renewing
commissioned distributor and agent contracts discussed above, the repurchase of
parts and accessories and a $8.4 million decrease in snowthrower sales in 2000
as compared to 1999 accounted for decreases in current year-to-date sales.

GROSS PROFIT. Gross profit for the three months ended September 30, 2000 was
$9.1 million as compared to $13.3 million for the same period in 1999. The lower
gross profit was due to lower sales and distributor buybacks noted above. In
addition, Snapper recorded an additional $500,000 writedown for excess inventory
related to the distributor parts and accessories buybacks in 2000, which
negatively impacted gross profit.

Gross profit for the nine months ended September 30, 2000 was $44.7 million as
compared to $53.9 million for the same period in 1999. The lower gross profit
was due to lower sales and distributor buybacks as noted above.

OPERATING INCOME (LOSS). Operating loss for the three months ended
September 30, 2000 was $6.1 million as compared to $4.3 million for the same
period in 1999. The increase in operating loss was due to lower sales and
distributor buybacks as noted above. In addition, third quarter 2000 profits
were negatively impacted due to $1.5 million in additional expenses related to
the non-renewal of commissioned distributor contracts.

For the nine months ended September 30, 2000, operating income was $1.4 million
as compared to $6.3 million for the same period in 1999. Decreases in operating
income for the nine months ended

58
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
September 30, 2000 were due to lower sales as noted above, as well as
$2.0 million of additional expenses related to non-renewal of commissioned
distributor contracts.

In connection with Snapper's decision not to extend the existing sales contracts
to certain commissioned distributors and commissioned agents, Snapper has
incurred approximately $3.8 million in costs. Snapper anticipates minimal
additional costs to complete this program, which should be completed prior to
December 31, 2000.

CORPORATE HEADQUARTERS

The following table sets forth the operating loss for Corporate Headquarters (in
thousands):

OPERATING LOSS. For the three and nine months ended September 30, 2000 and
1999, Corporate Headquarters had general and administrative expenses of
approximately $1.4 million and $4.5 million, and $1.9 million and $4.9 million,
respectively. Corporate headquarters includes general and administrative
expenses.

MMG CONSOLIDATED

The following table sets forth on a consolidated basis the following items for
the three months and nine months ended September 30, 2000 and 1999 (in
thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------- ---------------------------------
2000 1999 % CHANGE 2000 1999 % CHANGE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest expense................. $ (7,279) $ (2,792) (161)% $(23,299) $ (9,721) (140)%
Interest income.................. $ 1,502 $ 1,852 (19)% $ 3,025 $ 6,098 (50)%
Gain on settlement of option..... $ -- $ -- N/A $ 2,500 $ -- N/A
Income tax expense............... $ (2,341) $ (153) N/M $ (6,952) $ (358) N/M
Discontinued operations.......... $ -- $(12,776) N/A $ -- $(12,776) N/A
Net loss......................... $(22,203) $(64,323) (65)% $(55,336) $(87,200) (37)%
</TABLE>

INTEREST EXPENSE. Interest expense increased $4.5 million to $7.3 million, and
$13.6 million to $23.3 million, for the three and nine months ended
September 30, 2000, respectively, when compared to 1999. The increase in
interest was principally due to the $4.7 million and $13.9 million,
respectively, of amortization of debt discount on the Company's 10 1/2% senior
discount notes for the three and nine months ended September 30, 2000.

INTEREST INCOME. Interest income decreased $351,000 to $1.5 million for the
three months ended September 30, 2000 when compared to 1999, principally from
the reduction of funds at Corporate Headquarters which have been utilized in the
operation of the Company.

Interest income decreased $3.1 million to $3.0 million for the nine months ended
September 30, 2000, principally from the reduction of funds at Corporate
Headquarters which have been utilized in the operations of the Company.

59
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
INCOME TAX EXPENSE. For the three and nine months ended September 30, 2000 and
1999, the income tax benefit that would have resulted from applying the federal
statutory rate of 35% was $7.0 million and $16.9 million, $18.0 million and
$25.9 million, respectively. The income tax benefit in 2000 and 1999 was reduced
principally by losses attributable to foreign operations, equity losses in joint
ventures currently not deductible and a 100% valuation allowance on the current
year loss not utilized. The income tax expense in 2000 is principally from
income taxes on the Company's PeterStar operations. The income tax expense in
1999 reflects foreign taxes in excess of the federal credit.

NET LOSS INCLUDING DISCONTINUED OPERATIONS AND GAIN ON SETTLEMENT OF
OPTION. Net loss decreased to $22.2 million for the three months ended
September 30, 2000 from $64.3 million for the three months ended September 30,
1999. The decrease in net loss is principally from the reduction in operating
loss from $69.5 million in 1999 to $17.0 million in 2000. The decrease in
operating losses is attributable to the write off of goodwill in 1999 of
$50.9 million in connection with the Company's operations in China, reduction in
overhead costs at the Communications Group's operations in Eastern Europe and
the republics of the former Soviet Union and China, partially offset by an
increase in amortization costs related to the amortization of goodwill and
licenses attributable to the acquisition of PLD Telekom and the change in the
estimated useful life from 25 years to 10 years on goodwill attributable to the
Communications Group's operations in Eastern Europe and the republics of the
former Soviet Union. The net loss in the three months ended September 30, 2000
was negatively impacted by the increase in interest expense of $4.5 million
principally from the amortization of debt discount on the Company's 10 1/2%
senior discount notes and increased income tax expense of $2.2 million partially
offset by the gains on disposition of businesses by the Communications Group's
operations in Eastern Europe and the republics of the former Soviet Union. The
net loss in 1999 includes from discontinued operations the settlement of a
lawsuit in connection with the sale of the Company's former entertainment assets
and the allocation of the net loss attributable to the Company's China
operations, including the $50.9 million write off of goodwill.

Net loss decreased to $55.3 million for the nine months ended September 30, 2000
from $87.2 million for the nine months ended September 30, 1999. The decrease in
net loss is principally from the reduction in operating loss from $85.6 million
in 1999 to $34.7 million in 2000. The decrease in operating loss is attributable
to the write off of goodwill in 1999 of $50.9 million in connection with the
Company's operation in China, reduction in overhead costs at the Communications
Group's operation in Eastern Europe and the republics of the former Soviet Union
and China, partially offset by an increase in amortization costs related to the
amortization of goodwill and licenses attributable to the acquisition of PLD
Telekom and the change in the estimated useful life from 25 years to 10 years on
goodwill attributable to the Communications Group's operations in Eastern Europe
and the republics of the former Soviet Union. The net loss in the nine months
ended September 30, 2000 was negatively impacted by the increase in interest
expense of $13.6 million principally from the amortization of debt discount on
the Company's 10 1/2% senior discount notes and increased income tax expense of
$6.6 million partially offset by gains related to the buyout of an option to
acquire an ownership interest in a telecommunications entity and gains on
dispositions of businesses by the Communications Group's operations in Eastern
Europe and the republics of the former Soviet Union. The net loss in 1999
includes from discontinued operations the settlement of a lawsuit in connection
with the sale of the Company's former entertainment assets and the allocation of
the net loss attributable to the Company's China operations including the
$50.9 million write off of goodwill.

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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES

THE COMPANY

OVERVIEW. The Company is a holding company and, accordingly, does not generate
cash flows from operations. The Company believes that its cash on hand will be
sufficient to fund the Company's working capital requirements for the near-term.

The Communications Group is dependent on the Company for significant capital
infusions to fund its operations and make acquisitions, as well as to fulfill
its commitments to make capital contributions and loans to its joint ventures.
Many of the Communications Group's joint ventures operate or invest in
businesses, such as cable television, fixed telephony and cellular
telecommunications, that are capital intensive and require significant capital
investment in order to construct and develop operational systems and market
their services. To date, such financing requirements have been funded from cash
on hand. Future financing requirements of the Communications Group, including
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, and if necessary, selective disposition of assets.

In addition to funding the cash requirements of the Communications Group, the
Company has periodically funded the short-term working capital needs of Snapper.
PLD Telekom and Snapper are restricted under covenants contained in their credit
agreements from making dividend payments or advances, other than certain
permitted repayments, to the Company.

Management believes that its long-term liquidity needs (including debt service)
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
and subsidiaries achieving positive operating results and cash flows through
revenue and subscriber growth and control of operating expenses.

The Company expects to generate consolidated net losses for the foreseeable
future as the Communications Group continues to build out and market its
services.

CONVERTIBLE PREFERRED STOCK. On September 16, 1997 the Company completed a
public offering of 4,140,000 shares of $1.00 par value, 7 1/4% cumulative
convertible preferred stock with a liquidation preference of $50.00 per share,
generating net proceeds of approximately $199.4 million. Dividends on the
preferred stock are cumulative from the date of issuance and payable quarterly,
in arrears, commencing on December 15, 1997. The Company may make any payments
due on the preferred stock, including dividend payments and redemptions (i) in
cash; (ii) through issuance of the Company's common stock or (iii) through a
combination thereof. Since its initial dividend payment on December 15, 1997,
through September 15, 2000, the Company has paid its quarterly dividends on the

61
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
preferred stock in cash. If the Company elects to continue to pay the dividend
in cash, the annual cash requirement will be $15.0 million. The preferred stock
is convertible at the option of the holder at any time, unless previously
redeemed, into the Company's common stock, at a conversion price of $15.00 per
share equivalent to a conversion rate of 3 1/3 shares of common stock for each
share of preferred stock, subject to adjustment under certain conditions.

The preferred stock is redeemable at any time on or after September 15, 2000, in
whole or in part, at the option of the Company, initially at a price of $52.5375
and thereafter at prices declining to $50.00 per share on or after
September 15, 2007, plus in each case all accrued and unpaid dividends to the
redemption date. Upon any change of control, as defined in the certificate of
designation of the preferred stock, each holder of preferred stock shall, in the
event that the market value at such time is less than the conversion price of
$15.00, have a one-time option to convert the preferred stock into the Company's
common stock at a conversion price equal to the greater of (i) the market value,
as of the change of control date, as defined in the certificate of designation,
and (ii) $8.00. In lieu of issuing shares of the Company's common stock, the
Company may, at its option, make a cash payment equal to the market value of the
Company's common stock otherwise issuable.

SENIOR DISCOUNT NOTES. In connection with the acquisition of PLD Telekom, the
Company issued $210.6 million in aggregate principal amount at maturity of its
10 1/2% Senior Discount Notes due 2007 (the "Senior Discount Notes") to the
holders of PLD Telekom's then outstanding 14% senior discount notes due 2004 and
9% convertible subordinated notes due 2006 pursuant to an agreement to exchange
and consent, dated as of May 18, 1999, by and among the Company, PLD Telekom and
such holders. The terms of the Senior Discount Notes are set forth in an
Indenture, dated as of September 30, 1999, between the Company and U.S. Bank
Trust National Association, as Trustee. The Senior Discount Notes will mature on
September 30, 2007. The Senior Discount Notes were issued at a discount to their
aggregate principal amount at maturity and will accrete in value until
March 30, 2002 at the rate of 10 1/2% per year, compounded semi-annually to an
aggregate principal amount at maturity of $210.6 million. The Senior Discount
Notes will not accrue cash interest before March 30, 2002. After this date, the
Senior Discount Notes will pay interest at the rate of 10 1/2% per year, payable
semi-annually in cash and in arrears to the holders of record on March 15 or
September 15 immediately preceding the interest payment date on March 30 and
September 30 of each year, commencing September 30, 2002. The interest on the
Senior Discount Notes will be computed on the basis of a 360-day year comprised
of twelve months.

The Senior Discount Notes are general senior unsecured obligations of the
Company, rank senior in right of payment to all existing and future subordinated
indebtedness of the Company, rank equal in right of payment to all existing and
future senior indebtedness of the Company and will be effectively subordinated
to all existing and future secured indebtedness of the Company to the extent of
the assets securing such indebtedness and to all existing and future
indebtedness of the Company's subsidiaries, whether or not secured.

The Senior Discount Notes will be redeemable at the sole option of the Company
on and after March 30, 2002 only at a redemption price equal to their principal
amount plus accrued and unpaid interest, if any, up to but excluding the date of
redemption.

Upon the occurrence of a change of control of the Company (as such term is
defined in the Indenture), the holders of the Senior Discount Notes will be
entitled to require the Company to repurchase such holders' notes at a purchase
price equal to 101% of the accreted value of the Senior Discount Notes (if such
repurchase is before March 30, 2002) or 101% of the principal amount of such

62
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
notes plus accrued and unpaid interest to the date of repurchase (if such
repurchase is after March 30, 2002).

The Indenture for the Senior Discount Notes permits the Company to finance the
development of its communications operations. The Indenture for the Senior
Discount Notes limits the ability of the Company and certain of its subsidiaries
to, among other things, incur additional indebtedness or issue capital stock or
preferred stock, pay dividends on, and repurchase or redeem their capital stock
or subordinated obligations, invest in and sell assets and subsidiary stock,
engage in transactions with affiliates and incur additional liens. The Indenture
for the Senior Discount Notes also limits the ability of the Company to engage
in consolidations, mergers and transfers of substantially all of its assets and
also contains limitations on restrictions on distributions from its
subsidiaries.

TRAVELERS. Also at completion of the Company's acquisition of PLD Telekom, PLD
Telekom paid The Travelers Insurance Company and The Travelers Indemnity Company
(together, "Travelers") approximately $8.7 million of amounts due under the
revolving credit and warrant agreement dated November 26, 1997 between PLD
Telekom and Travelers (the "Old Travelers Agreement"). PLD Telekom and Travelers
also entered into an amended and restated revolving credit note agreement (the
"New Travelers Agreement") pursuant to which PLD Telekom agreed to repay
Travelers the remaining $4.9 million due under the Old Travelers Agreement on
August 30, 2000 and to pay interest on the outstanding amount at a rate of
10 1/2%. The $4.9 million was repaid on August 30, 2000, fully discharging the
obligation to Travelers.

COMSTAR. As part of the Communications Group's strategy to further develop its
fixed telephony business, in June 2000 it entered into an agreement with Marconi
Communications Limited of the U.K. to acquire Marconi's 50% ownership position
in Comstar, the third largest digital overlay operator in Moscow. The Company
has agreed to pay $60.0 million for the 50% interest in Comstar. The parties
expect the transaction to close in 2000, following the completion of due
diligence and the resolution of any issues arising from that process. Comstar is
a 50/50 joint venture with the Moscow City Telephone Network ("MGTS"). It has a
756 mile optical fiber network throughout Moscow. This network supports local,
national and international data and telephony services and is interconnected
into MGTS' public network of 4.5 million customers. Comstar has a
well-established platform that facilitates all types of IP services through a
Central Internet Service Node based on Marconi technology. This platform will
enable Comstar to develop VoIP services, point-to-point data communications,
frame relay, ATM and a total package of ISP services.

The acquisition of the Comstar interest is expected to give the Communications
Group a significant presence in the Moscow market, which remains the most
important in Russia, and complements its position in Russia's second largest
city, St. Petersburg, through its majority owned interests in PeterStar and its
wholly owned interest in Baltic Communications Limited.

The agreement with Marconi required the Communications Group to place
$3.0 million in escrow, pending closing of the transaction. In the event that
the acquisition is not completed by November 30, 2000, Marconi has the right to
terminate the Purchase Agreement and, in certain circumstances, retain the
escrowed funds. In addition, the purchase price is subject to escalation in
certain circumstances, with the additional amount not exceeding approximately
$1.2 million.

TELECOMINVEST. In September and October 1999, PLD Telekom entered into certain
option agreements (subsequently assigned to the Company) with Commerzbank AG and
First National Holding S.A. which owns the majority of the ordinary shares of
OAO Telecominvest, a Russian company with interests in a wide range of
telecommunications companies in St. Petersburg and Northwestern Russia, and
which is PLD Telekom's joint venture partner in its subsidiary PeterStar. The
aggregate consideration for the

63
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
options was $8.5 million. The options gave the Company the right to participate
in a planned private placement by First National Holding by acquiring, for
nominal value, that number of shares equal to $8.5 million divided by 80% of the
issuance price in the placement or, if the placement was not completed on or
before December 31, 1999 (extended by amendment to January 31, 2000), to acquire
up to 16% of First National Holding for additional consideration of
approximately $8.5 million. In resolution of disputes regarding the parties'
rights under those agreements, on March 30, 2000, First National Holding paid
the Company $11.0 million in full settlement of the Company's and PLD Telekom's
rights under the option agreements.

COMMUNICATIONS GROUP-EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION

OVERVIEW. The Communications Group has invested significantly (through capital
contributions in cash or equipment, loans and management assistance and
training) in its joint ventures. The Communications Group has also incurred
significant expenses in identifying, negotiating and pursuing new
telecommunications opportunities in selected emerging markets.

The Communications Group and certain of its joint ventures are experiencing
continuing losses and negative operating cash flow since many of the businesses
are in the development and start-up phase of operations. The Communications
Group's primary source of funds has been from the Company in the form of
inter-company loans.

Until the Communications Group's 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 may continue to depend upon the Company for its financing
needs.

Credit agreements between certain of 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 September 30, 2000, the Communications Group was
committed to provide funding under various charter fund agreements and credit
lines in an aggregate amount of approximately $234.0 million, of which
$47.3 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.

64
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

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, the sale of commercial advertising time
and their ability to control operating expenses.

FORMER PLD BUSINESSES. PLD Telekom's operating businesses have become largely
self-sustaining, and while they continue to have on-going capital requirements
associated with the development of their businesses, they have been able to pay
for capital expenditures and operational expenses out of internally generated
cash flows from operations and/or have been able to arrange their own financing,
including supplier financing. In no case is PLD Telekom specifically obligated
to provide capital to its operating businesses as all past obligations have been
met.

As a result of the acquisition of PLD Telekom by the Company, the majority of
PLD Telekom's commitments at the holding company level have been satisfied or
assumed by the Company, such that the $4.9 million paid to Travelers on
August 30, 2000, as described above was the only material obligation required to
be satisfied during 2000.

MAGTICOM. In April 1997, the Communications Group's Georgian GSM Joint Venture,
Magticom, entered into a financing agreement with Motorola, Inc. pursuant to
which Motorola agreed to finance 75% of the equipment, software and service it
provides to Magticom up to $15.0 million. Interest on the financed amount
accrues at 6-month London interbank offered rate or 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 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%. Under such amendment, the
Company guaranteed Magticom's repayment obligation 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 owed to such partners is subject to certain conditions set forth in
the Motorola financing agreements.

AZERBAIJAN. As of 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. Caspian American 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 Caspian American for the
acquisition of equipment and operational expenses subject to its concurrence
with Caspian American's business plans. The Communications Group was obligated
to contribute approximately $5.0 million in equity to Omni-Metromedia and to
lend up to $36.5 million subject to its concurrence with Caspian American's
business plan.

As part of the original transaction, the Communications Group sold a 17.1%
participation in the $36.5 million loan commitment to AIG Silk Road Fund, Ltd.,
which requires AIG Silk Road Fund to provide the Communications Group 17.1% of
the funds to be provided under the loan agreement and entitles AIG Silk Road
Fund to 17.1% of the repayments to the Communications Group. The Communications
Group agreed to repurchase such loan participation from AIG Silk Road Fund in
August 2005 on terms and conditions agreed by the parties. In addition, the
Communications Group provided AIG Silk Road Fund the right to put its 15.7%
ownership interest in Omni-Metromedia to

65
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
the Communications Group starting in February 2001 for a price equal to seven
times the EBITDA of Caspian American minus debt, as defined, multiplied by AIG
Silk Road Fund's percentage ownership interest.

In May 1999, the Communications Group sold 2.2% of the shares of Omni-Metromedia
to Verbena Servicos e Investimentos, S.A., thereby reducing its ownership
interest in Caspian American from 38% to 37%. In addition, the Communications
Group sold a 2.4% participation in the $36.5 million loan to Verbena Servicos e
Investimentos, which requires Verbena Servicos e Investimentos to provide the
Communications Group 2.4% of the funds to be provided under the loan agreement
and entitles Verbena Servicos e Investimentos to 2.4% of the repayments to the
Communications Group. The Communications Group has agreed to repurchase such
loan participation from Verbena Servicos e Investimentos in August 2005 on terms
and conditions agreed by the parties. In addition, the Communications Group
provided Verbena Servicos e Investimentos the right to put its 2.2% ownership
interest in Omni Metromedia to the Communications Group starting in
February 2001 for a price equal to seven times the EBITDA of Caspian American
minus debt, as defined, multiplied by Verbena Servicos e Investimentos'
percentage ownership interest.

In January 1999, Caspian American entered into an equipment purchase agreement
with Innowave Tadiran Telecommunications Wireless Systems, Ltd. to purchase
wireless local loop telecommunications equipment. In connection with such
agreement, the Communications Group provided Innowave Tadiran a payment
guarantee of $2.0 million, which was paid during 1999.

As part of its ongoing strategic review, in late 1999 the Company reevaluated
the operations of Caspian American in order to ascertain the requirement to
account for impairment losses. In view of the limited number of potential
customers in the region in which the business operates and limited potential for
growth, it was determined that an impairment loss of $9.9 million was required
in 1999 relating to the Company's investment in Caspian American. The venture
has developed a revised operating plan to stabilize its operations and minimize
future funding requirements until potential restructuring options have been
fully explored.

TYUMENRUSKOM. As part of its investment in Tyumenruskom announced in
November 1998, the Company agreed to provide a guarantee of payment of
$6.1 million to Ericsson Radio Systems AB for equipment financing provided by
Ericsson to one of the Communication Group's wholly owned subsidiaries and to
its 46% owned joint venture, Tyumenruskom. Tyumenruskom has purchased a digital
advanced mobile phone or DAMPS cellular system from Ericsson in order to provide
fixed and mobile cellular telephone in the regions of Tyumen and Tobolsk,
Russian Federation. The Communications Group has made a $1.7 million equity
contribution to Tyumenruskom and has agreed to lend the joint venture up to
$4.0 million for start-up costs and other operating expenses. Tyumenruskom also
intends to provide wireless local loop telephone services.

Following a reevaluation of the venture's operations as part of the Company's
ongoing strategic reviews, in 1999, $3.8 million of the Company's investment in
this venture was recorded as an impairment charge in view of its low
profitability and limited potential for improvement.

INTERNET SERVICES

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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
million. The Communications Group paid $2.5 million for its 70% interest in FX
Internet, $2.0 million of which was paid to the existing shareholders and
$500,000 of which will be used to expand its network to eight additional regions
before year-end to bring its total serviceable population to over eight million.

FX Internet, working in combination with Romsat TV, will enable MITI ventures to
offer bundled TV and internet services to Romsat TV's approximately 100,000
existing customers with competitive advantages, such as tiers of service and
discounts, that other operators in the Romanian market are currently unable to
duplicate. The transaction is part of the Communications Group's convergence
strategy and is expected to enhance the value of Romsat TV by allowing it to
bundle services and facilitate internet and portal development in Romania.

PORTAL DEVELOPMENT

The Communications Group has commenced the roll out of three national language
portal websites affiliated with its radio stations in Estonia and Hungary. Over
the next twelve months, the Communications Group expects to rollout additional
national language portal websites in Latvia and the Czech Republic, and using
the marketing power of its eighteen radio stations in Eastern Europe and the
republics of the former Soviet Union to create the first transnational network
of consumer-oriented entertainment portals in this part of the world. In
addition, the Company is working to develop a full range of internet service
offerings related to all of the Company's assets in Eastern Europe and the
republics of the former Soviet Union.

The portal UunoWeb features all the functionalities of a general portal site
including real time local and international news, search engines, classified and
personal sections, TV and radio schedule information, SMS-short message service,
forums and chat rooms. Users can access real time information about the song
playing on the appropriate MITI radio station, including information on the
artist, engage in voting and polling, and purchase CDs on-line. Users have the
ability to listen to the latest newscast, updated every half hour. This service
will be extended to provide mobile users the ability to access this information
and more, using WAP (wireless access protocol) services.

The portal also contains banner ads and a full database of current advertisers,
including product mini websites and product commercials, offered through
UunoWeb's proprietary software, the rights to which are controlled by the
Communications Group. This proprietary software, the only one of its kind in use
in Eastern Europe, will form the basis of the development and rollout of the
Communications Group's portal network. In addition, UunoWeb has peering
agreements with other sites such as Yahoo, AltaVista and Rolling Stone, enabling
the portal to generate revenues each time these sites are accessed via the
portal.

CARDLINK

The Communications Group is continuing the development of its Cardlink business,
which utilizes proprietary wireless technology owned by the Communications Group
and is targeted initially at the processing and management of wireless
electronic payment transactions. Cardlink ZAO, in which the Communications Group
has a 84.5% interest, is introducing this technology in Moscow, but it has
potential application in other regions of Russia and Eastern and Central Europe.
Cardlink has entered into agreements with several Russian banks for the
processing of card transactions, and the card processing network commenced
operations in June 2000, processing point of sale transactions for a Russian
Bank.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Although initially targeted as wireless card verification transactions with
banks and credit card issuers, the Cardlink technology can be applied to
developing and implementing other wireless data communication network
infrastructures where conventional telephone networks are either non-existent or
poor in terms of coverage and availability. Cardlink has also recently entered
into an agreement in the United Kingdom to utilize the Cardlink technology in
the recharge of prepaid mobile phones and is exploring the commercial
development of other applications using this technology.

COMMUNICATIONS GROUP-CHINA

From 1996 through 1999, the Company made investments in four telecommunications
joint ventures in China through its majority-owned subsidiary, Asian American
Telecommunications Corporation. All four of these ventures prematurely
terminated operations by order of the Chinese government in late 1999.
Concurrent with this termination, the Company reached agreement with China
Unicom and its Chinese partners in the ventures, for the distribution of
approximately $94.7 million in settlement of all claims under the joint venture
agreements and cooperation contracts. The Company has received all of its
distributions as of September 30, 2000, and Ningbo JV, Ningbo JV II, Sichuan JV
and Chongqing JV have been dissolved.

The Company and MITI have made inter-company loans to majority-owned subsidiary
Metromedia China Corporation under a credit agreement, and Metromedia China has
used the proceeds of these loans principally to fund its investments in joint
ventures in China. Cash proceeds from the dissolution of the China
telecommunications joint ventures were applied to repayment of these loans plus
accrued interest. At September 30, 2000, Metromedia China owed $4.9 million
under this credit agreement (including accrued interest).

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
On July 24, 2000, the Company's majority-owned subsidiary Metromedia China
Corporation purchased an 80% equity interest in Twin Poplars, a U.S. limited
liability company registered in Delaware, for $300,000 and obtained options to
acquire the remaining 20% equity interest for $75,000. On August 31, 2000, the
Company exercised its option to acquire an additional 10% equity interest in
Twin Poplars. Twin Poplars owns a 97% equity interest in Beijing 66cities.com
Company, Limited, a Chinese equity joint venture licensed to engage in
information content provision and e-commerce services. Twin Poplars operates as
a holding company for 66cities JV and has no operations or assets other than its
interests in the venture. As of September 30, 2000, the Company had advanced
$802,000 to Twin Poplars, all of which was invested in or advanced to 66cities
JV. Twin Poplars operates as a holding company for the Chinese joint venture and
has no operations or assets other than its interests in the venture.

Huaxia JV is pre-operational as of September 30, 2000. Twin Poplars' publishing
support lines of business in China were commercially operational during 2000 and
66cities JV is in pre-operational testing of its 66cities.com website.

The Communications Group is actively pursuing other investment opportunities in
China's information industry sector.

SNAPPER

Snapper's liquidity is generated from operations and borrowings. On
November 11, 1998, Snapper entered into a loan and security agreement with the
Lenders named therein and Fleet Capital Corporation, as agent and as the initial
lender, pursuant to which the lenders have agreed to provide Snapper with a
$5.0 million term loan facility and a $55.0 million revolving credit facility,
the proceeds of which were used to refinance Snapper's then outstanding
obligations under its prior revolving credit agreement and will also be used for
working capital purposes. The Snapper loan will mature in November 2003 (subject
to automatic one-year renewals), and is guaranteed by the Company up to
$10.0 million (increasing to $15.0 million on the occurrence of specified
events). Interest on the

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Snapper loan is payable at Snapper's option at a rate equal to prime plus up to
0.5% or the London interbank offered rate or LIBOR plus between 2.5% and 3.25%,
in each case depending on Snapper's leverage ratio under the Snapper loan
agreement. The agreements governing the Snapper loan contain standard
representations and warranties, covenants, conditions precedent and events of
default, and provide for the grant of a security interest in substantially all
of Snapper's assets other than real property. At September 30, 2000 and 1999,
Snapper's outstanding liability for its term loan and line of credit was
$31.8 million and $35.0 million, respectively.

Snapper signed a $2.5 million term loan on June 1, 2000 with its lenders to fund
additional capital expenditures, over and above the capital expenditures the
Company is allowed to purchase under its Loan and Security Agreement. The loan
will be funded on an as approved basis for up to 12 months after the effective
date, and will be due in 20 consecutive quarterly installments beginning
October 1, 2000, with the interest rate at prime plus .25%. As of September 30,
2000, Snapper had received approximately $745,000 in funding under this loan.

As of September 30, 2000, Snapper was not in compliance with certain financial
covenants under the loan and security agreement. On October 30, 2000, the
lenders under the loan and security agreement waived any event of default
arising from such noncompliance. The Company is currently negotiating a new
credit agreement with its lenders to replace its current loan and security
agreement. Since it is possible that Snapper may not be in compliance with all
its financial requirements under its current loan and security agreement in the
next four calendar quarters, the Company has reclassified, as required under
generally accepted accounting principles, its debt to its lenders of
$32.5 million as a current liability.

On March 24, 2000, Snapper's leased distribution facility in Greenville, Ohio
was substantially damaged by fire. Snapper was adequately insured for the loss,
and received a total of $1.9 million for inventory losses and expenses incurred
related to the fire on August 30, 2000 from the insurer.

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 September 30, 2000, noncancelable commitments under these
agreements amounted to approximately $10.8 million.

Snapper has an agreement with a financial institution which makes available
floor plan financing to dealers of Snapper products. This agreement provides
financing for inventories and accelerates Snapper's cash flow. Under the terms
of the agreement, a default in payment by a dealer is nonrecourse to Snapper.
However, the third-party financial institution can require Snapper to repurchase
new and unused equipment, if the dealer defaults and the inventory can not be
sold to another dealer. At September 30, 2000 and 1999, there was approximately
$71.2 million and $82.9 million, respectively, outstanding under this floor plan
financing arrangement. The Company has guaranteed Snapper's repurchase
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 loan agreement
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.

RISKS ASSOCIATED WITH THE COMPANY

The ability of the Communications Group and its joint ventures to establish
profitable operations is subject to significant political, economic and social
risks inherent in doing business in emerging markets such as Eastern Europe,
republics of the former Soviet Union and China. These include matters arising
out of government policies, economic conditions, imposition of or changes in
government regulations or

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
policies, imposition of or changes to taxes or other similar charges by
governmental bodies, exchange rate fluctuations and controls, civil
disturbances, deprivation or unenforceability of contractual rights, and taking
of property without fair compensation.

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 serve their U.S. dollar obligations,
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 Company's Huaxia JV is licensed to develop and sell software and provide
technical services relating to operation of electronic commerce computer
information systems for China-based corporate clients. Computer and software
products and services, such as offered by Huaxia JV, are subject to regulatory
regimes different from those applied to telecommunications, internet and
information service operations in China. The Company expects that a significant
portion of Huaxia JV's planned future revenues will, however, derive from other
businesses in China (including other of the Company's own joint ventures) that
may be subject to internet, e-commerce or information service regulatory regimes
and, therefore, the potential scale of such revenues could be limited by future
regulatory developments in those areas. The Company believes that its equity
interest in Huaxia JV is not viewed under current Chinese regulation as foreign
equity investment in telecommunications operations or any other line of business
restricted for foreign investment and the Company does not anticipate that the
extent of its equity investment in Huaxia JV will be challenged by future
Chinese regulation.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)

The Company's investment in 66cities JV entails certain risks resulting both
from regulatory uncertainty and the generally sensitive nature of any publishing
related activities within China. 66cities JV provides support services to
Chinese publishers and offers information content via the internet on The
website it supports. With respect to current regulatory prohibitions against
foreign investment in publishing businesses in China, the Company believes that
66cities JV would not be deemed to be operating as a publishing business, since
it is providing content and services to licensed Chinese publisher clients under
contract for fixed fees. However, regulatory action that alters, revokes or
limits the clients' publishing rights or the clients' contracts with 66cities JV
could significantly impact 66cities JV's current principal revenue stream. Since
66cities JV does not itself actually publish the content it develops, the
Chinese publishing clients' revocation of existing service contracts with
66cities JV could have significant adverse financial impact on the joint
venture. With respect to internet-related operations, 66cities JV could be
required in the future to adjust its web hosting and internet content provision
arrangements to comply with new regulatory developments and such adjustment
could adversely affect 66cities JV's overall costs of operation.

MMG CONSOLIDATED

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1999

CASH FLOWS FROM OPERATING ACTIVITIES

Cash used in operating activities for the nine months ended September 30, 2000
was $305,000, a decrease in cash used in operating activities of $11.7 million
from the same period in the prior year.

Losses from operating activities include significant non-cash items such as
discontinued operations, dispositions of businesses, depreciation, amortization,
equity in income (losses) of investees, amortization of interest, and income
(loss) allocable to minority interests. Non-cash items decreased $9.2 million
from $60.4 million to $51.2 million for the nine months ended September 30, 1999
and 2000, respectively. The decrease relates principally to the writeoff of
$50.9 million of goodwill on the Communications Group's operations in China,
partially offset by increased depreciation and amortization expenses related to
the operations of PLD Telekom which was acquired September 30, 1999. Changes in
operating assets and liabilities, net of the effect of acquisitions, increased
cash flows for the nine months ended September 30, 2000 by $3.9 million and
increased cash flows for the nine months ended September 30, 1999 by
$14.7 million.

CASH FLOWS FROM INVESTING ACTIVITIES

Cash provided by investing activities for the nine months ended September 30,
2000 was $58.8 million as compared to cash used in investing activities was
$37.0 million for the nine months ended September 30, 1999. The principal
sources of funds in 2000 are cash received of $11.0 million in connection with
the settlement of an option agreement and distributions received from joint
ventures of $72.0 million, primarily related to the liquidation of the
telecommunications joint ventures in China. In 2000, the Company utilized
$15.7 million for additions to property, plant and equipment and $5.4 million of
funds for acquisitions. The principal uses of funds for the nine months ended
September 30, 1999 were investments in and advances to joint ventures of
$14.5 million, funds to acquire PLD Telekom of $19.6 million, acquisitions by
the Communications Group of $1.4 million and additions to property, plant and
equipment of $4.3 million.

CASH FLOWS FROM FINANCING ACTIVITIES

Cash used in financing activities was $28.5 million and $26.6 million, for the
nine months ended September 30, 2000 and 1999, respectively. For the nine months
ended September 30, 2000 the

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Company used $11.3 million to pay its preferred stock dividend, and there were
$18.2 million of debt payments. Funds used in financing activities in 1999 were
for the preferred stock dividend of $11.3 million and payments of Snapper's debt
of $15.4 million.

NEW ACCOUNTING DISCLOSURES

ACCOUNTING FOR DERIVATIVES

In June 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("SFAS 133"), 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. In June 2000, SFAS 138 was issued which
addresses a limited number of issues causing implementation difficulties for
numerous entities that have applied SFAS 133. SFAS 133 and SFAS 138 are
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
SFAS 133 can not be applied retroactively to financial statements of prior
periods. Given the complexity of SFAS 133 and SFAS 138 and the continued
uncertainty surrounding certain implementation issues, which has led to a
Derivatives Implementation Group, the Company has not completed its evaluation
of the impact of SFAS 133 and SFAS 138 on its consolidated financial position
and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, the financial position of the Company is
routinely subjected to a variety of risks. In addition to the market risk
associated with interest rate movements on outstanding debt and currency rate
movements on non-U.S. dollar denominated assets and liabilities, other examples
of risk include collectibility of accounts receivable and significant political,
economic and social risks inherent in doing business in emerging markets such as
Eastern Europe, republics of the former Soviet Union and China.

With the exception of Snapper and prior to the acquisition of PLD Telekom at
September 30, 1999, the Company did not have any significant long term
obligations. Since Snapper's bank debt is a floating rate instrument, its
carrying value approximates its fair value. A 100 basis point increase in the
level of interest rates with all other variables held constant would result in
an increase in interest expense of $28,000. In addition, a 100 basis point
increase in interest rates on Snapper's floor plan financing for dealers would
have resulted in an increase in interest expense of $61,000.

With the exception of certain vendor financing at the operating business level
(approximately $5.7 million in the aggregate), the Company's debt obligations
and those of its operating businesses are fixed rate obligations, and are
therefore not exposed to market risk from changes in interest rates. The Company
does not believe that it is exposed to a material market risk from changes in
interest rates. Furthermore, with the exception of the approximately
$5.6 million in vendor financing which is denominated in Euros, Deutsche Marks
and Dutch Guilders, the Company's long-term debt and that of its operating
businesses are denominated in U.S. dollars. The Company does not believe that
the Communications Group's debt not denominated in U.S. dollars exposes the
Company to a material market risk from changes in foreign exchange rates.

The Company does not hedge against foreign exchange rate risks at the current
time. In the majority of the countries that the Communications Group's joint
ventures operate, there currently do not exist derivative instruments to allow
the Communications Group to hedge foreign currency risk. In addition, at the
current time the majority of the Communications Group's joint ventures are in
the early stages

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
of development and the Company does not expect in the near term to repatriate
significant funds from the Communications Group's joint ventures. "Item
2--Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Inflation and Foreign Currency" contains additional information on
risks associated with the Company's investments in Eastern Europe, the republics
of the former Soviet Union and China.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q including, without limitation, statements
under "Legal Proceedings" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" 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 changes in laws, rules and regulations or
their administration or interpretation, particularly in Eastern Europe and the
republics of the former Soviet Union, 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 republics of the former Soviet Union,
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 republics of the former
Soviet Union, 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 republics
of the former Soviet Union, 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; ability of the Company to
consummate the spin-off or sale of its businesses; obtaining the requisite
consents for any spin-off or sale of the Company's businesses; the timing and
structure of any spin-off or sale of the Company's businesses; the consideration
or values obtained by the Company for any businesses that are spun off or sold;
and other factors referenced herein. Any forward-looking statement speaks only
as of the date on which it is made. New factors emerge from time to time and it
is not possible for the Company to predict which will arise. In addition, the
Company cannot assess the impact of each factor on its business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statement.

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PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Updated information on litigation and environmental matters subsequent to
December 31, 1999 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 a purported class and derivative
action in the Delaware Court of Chancery on February 22, 1991 against Fuqua
Industries, Inc., Intermark, Inc., the then-current directors of Fuqua
Industries 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 Industries 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 Industries and Intermark in
the absence of approval by a majority of Fuqua Industries' 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., C.A. 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
Industries board members (i) entered into an agreement pursuant to which Triton
Group, Inc. (which was subsequently merged into Intermark), was exempted from 8
Del. C. 203 and (ii) undertook a program pursuant to which 4.9 million shares of
Fuqua Industries 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, 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
Industries 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.

In March 1998, defendants J. B. Fuqua, 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 also filed its
answer, submitting itself to the jurisdiction of the Court for a proper
resolution of the claims purported to be set forth by the plaintiffs. Discovery
is ongoing.

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<PAGE>
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 claimed that Metromedia
International Telecommunications conspired against and tortuously interfered
with plaintiffs' potential contracts involving certain oil exploration and
production contracts in Siberia and telecommunications contracts in the Russian
Federation. On or about February 27, 1998 Metromedia International
Telecommunications filed its answer denying each of the allegations contained in
the complaint. On or about September 15, 2000, the United States District Court
for the Southern District of Texas, Houston Division entered a Stipulation of
Dismissal with Prejudice agreed to by the parties thereby dismissing this case.

LEGAL PROCEEDINGS IN CONNECTION WITH RDM

In December 1994, the Company acquired 19,169,000 shares of RDM common stock,
representing approximately 39% of the outstanding shares of RDM common stock as
of the date thereof, in exchange for all of the issued and outstanding capital
stock of four of its wholly owned subsidiaries. At the time of the transaction,
RDM, a New York Stock Exchange listed company, through its operating
subsidiaries, was a leading manufacturer of fitness equipment and toy products
in the United States.

In connection with the transaction pursuant to which the Company acquired the
RDM shares, the Company, RDM and certain officers of RDM entered into a
shareholders agreement, pursuant to which, among other things, the Company
obtained the right to designate four individuals to serve on RDM's Board of
Directors, subject to certain reductions.

In June 1997, RDM entered into a $100.0 million revolving credit facility with a
syndicate of lenders led by Foothill Capital Corporation and used a portion of
the proceeds of such facility to refinance its existing credit facility. In
order to induce Foothill to extend the entire amount of the RDM credit facility,
Metromedia Company, an affiliate of the Company, provided Foothill with a
$15.0 million letter of credit that could be drawn by Foothill (i) upon five
days notice, if RDM defaulted in any payment of principal or interest or
breached any other convenant or agreement in the RDM credit facility and as a
result of such other default the lenders accelerated the amounts outstanding
under the RDM credit facility, subject, in each such case, to customary grace
periods, or (ii) immediately, upon the bankruptcy or insolvency of RDM. In
consideration for the Metromedia Company letter of credit, RDM issued to
Metromedia Company 10-year warrants to acquire 3,000,000 shares of RDM common
stock, exercisable after 90 days from the date of issuance at an exercise price
of $.50 per share. 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 the Metromedia Company
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 payment. As a result, on August 22, 1997, Foothill declared
an event of default under the RDM credit facility and accelerated all amounts
outstanding under such facility. On August 29, 1997, 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 discontinued ongoing business operations and
their assets are being liquidated. As of August 22, 1997,

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ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
the closing price per share of RDM common stock was $.50 and the quoted market
value of the Company's investment in RDM was approximately $9.6 million. As a
result of RDM's financial difficulties and uncertainties, the New York Stock
Exchange halted trading in the shares of RDM common stock and the Company
believes that it will not receive any compensation for its equity interest.

After the commencement of the chapter 11 cases, Foothill drew the entire amount
of the letter of credit. Consequently, the Company will become subrogated to
Foothill's secured claims against the Company in an amount equal to the drawing
under the letter of credit, following payment in full of Foothill. The Company
intends to vigorously pursue its subrogation claims in the chapter 11 cases.
However, it is uncertain whether the Company will succeed in any such
subrogation claims or if it is successful in asserting any such subrogation
claims, whether RDM's remaining assets will be sufficient to pay them.

On August 19, 1998, a purported class action lawsuit, THEOHAROUS V. FONG, ET
AL., Civ. No. 1:98CV2366, was filed in United States District Court for the
Northern District of Georgia. On October 19, 1998, a second purported class
action lawsuit with substantially the same allegations, SCHUETTE V. FONG, ET
AL., Civ. No. 1:98CV3034, was filed in United States District Court for the
Northern District of Georgia. On June 7, 1999, plaintiffs in each of these
lawsuits filed amended complaints. The amended complaints alleged that certain
officers, directors and shareholders of RDM, including the Company and current
and former officers of the Company who served as directors of RDM, were liable
under federal securities laws for misrepresenting and failing to disclose
information regarding RDM's alleged financial condition during the period
between November 7, 1995 and August 22, 1997, the date on which RDM disclosed
that its management had discussed the possibility of filing for bankruptcy. The
amended complaints also alleged that the defendants, including the Company and
current and former officers of the Company who served as directors of RDM, were
secondarily liable as controlling persons of RDM. In an opinion dated March 10,
2000, the court dismissed these actions in their entirety. On April 7, 2000,
plaintiffs in each of these actions filed notices of appeal to the United States
Court of Appeals for the Eleventh Circuit.

On December 30, 1998, the chapter 11 trustee of RDM brought an adversary
proceeding in the bankruptcy of RDM, HAYS, ET AL. V. FONG, ET AL., Adv. Proc.
No. 98-1128, in the United States Bankruptcy Court, Northern District of
Georgia, alleging that current and former officers or directors of the Company,
while serving as directors of RDM, and other RDM directors breached fiduciary
duties allegedly owed to RDM's shareholders and creditors in connection with the
bankruptcy of RDM. On January 25, 1999, the plaintiff filed a first amended
complaint. The official committee of unsecured creditors of RDM has moved to
proceed as co-plaintiff or to intervene in this proceeding, and the official
committee of bondholders of RDM has moved to intervene in or join the
proceeding. Plaintiffs in this adversary proceeding seek the following relief
against the defendants, including the current and former officers of the Company
who served as directors of RDM: actual damages in an amount to be proven at
trial, reasonable attorney's fees and expenses, and such other and further
relief as the court deems just and proper. On February 16, 1999, the creditors'
committee brought an adversary proceeding, THE OFFICIAL COMMITTEE OF UNSECURED
CREDITORS OF RDM SPORTS GROUP, INC. AND RELATED DEBTORS V. METROMEDIA
INTERNATIONAL GROUP, INC., Adv. Proc. No. 99-1023, seeking in the alternative to
recharacterize as contributions to equity a secured claim in the amount of
$15 million made by the Company arising out of the Company's financing of RDM,
or to equitably subordinate such claim made by the Company against RDM and other
debtors in the bankruptcy proceeding. On March 3, 1999, the bondholders'
committee brought an adversary proceeding, THE OFFICIAL COMMITTEE OF BONDHOLDERS
OF RDM SPORTS GROUP, INC. V. METROMEDIA INTERNATIONAL GROUP, INC., Adv. Proc.
No. 99-1029, with substantially the same allegations as the above proceeding. In
addition to the equitable and injunctive

77
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
relief sought by plaintiffs described above, plaintiffs in these adversary
proceedings seek actual damages in an amount to be proven at trial, reasonable
attorneys' fees, and such other and further relief as the court deems just and
proper. The Company believes it has meritorious defenses and plans to vigorously
defend these actions. Due to the early stage of these proceedings, the Company
cannot evaluate the likelihood of an unfavorable outcome or an estimate of the
likely amount or range of possible loss, if any.

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 September 30, 2000, Snapper was not in compliance with all financial
covenants under its loan and security agreement ("Loan and Security Agreement").
On October 30, 2000, the lenders of the Loan and Security Agreement waived any
event of default arising from such noncompliance.

ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------------------- ------------------------------------------
<S> <C> <C>
11 * Computation of Earnings Per Share
27 * Financial Data Schedule
(b) Reports on Form 8-K
None
</TABLE>

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

* Filed herewith

78
<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

Dated: November 13, 2000
</TABLE>