##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549




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FORM 10-K



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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For The Fiscal Year Ended December 31,
2001

Commission File Number: 000-23747

GETTY IMAGES, INC.

(Exact Name of Registrant as Specified in its
Charter)


|                                                          |  |                                      
|--------------------------------------------------------- |  | -------------------------------------
|Delaware                                                  |  | 98-0177556                           
|(State or Jurisdiction of Incorporation
	or Organization) |  | (I.R.S. Employer
	Identification No.)

601 N. 34th Street,

Seattle, Washington 98103


(Address of Principal Executive
Offices)


Registrants Telephone Number, Including
Area Code:

(206) 925-5000


Securities Registered Pursuant to
Section 12(b) of the Act: None

Securities Registered Pursuant to
Section 12(g) of the Act:

Common Stock, par value $0.01 per
share


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 registrant was required to file such reports) and
(2) has been subject to such filing requirements for the
past 90 days.  Yes
x  No
o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.  o

The aggregate market value of the voting stock
held by non-affiliates of the Registrant was approximately
$1,046.3 million as of March 1, 2002 based upon the
closing price of $26.89 on the Nadsaq National Market reported
on such date.

As of March 1, 2002, the registrant had
52,059,743 shares of Common Stock, $0.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III of this document
is incorporated by reference to certain portions of the
companys definitive Proxy Statement (to be filed) for the
Annual Meeting of Stockholders to be held May 21, 2002.

An Index to Exhibits appears at Part IV,
Item 14, pages 29 - 31 herein



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TABLE OF CONTENTS



|              |                                                                                             |  |  |  |  |  |  | 
|------------- | ------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I       
|              | Item 1.Business                                                                            
|              | Item 2.Properties                                                                          
|              | Item 3.Legal Proceedings                                                                   
|              | Item 4.Submission of Matters to a Vote of Security Holders                                 
|PART II      
|              | Item 5.Market for Registrants Common Equity and Related Stockholder Matters               
|              | Item 6.Selected Consolidated Financial Data                                                
|              | Managements Discussion and Analysis of Financial Condition and Results of Operations      
|              | Item 8.Financial Statements and Supplementary Data                                         
|              | Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|PART III     
|              | Item 10.Directors and Executive Officers of the Registrant                                 
|              | Item 11.Executive Compensation                                                             
|              | Item 12.Security Ownership of Certain Beneficial Owners and Management                     
|              | Item 13.Certain Relationships and Related Transactions                                     
|PART IV      
|              | Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K                    
|Exhibit 3.1  
|Exhibit 10.2 
|Exhibit 10.3 
|Exhibit 10.4 
|Exhibit 10.15
|Exhibit 10.43
|Exhibit 10.44
|Exhibit 10.45
|Exhibit 10.46
|Exhibit 10.47
|Exhibit 21.1 
|Exhibit 23.1 
|Exhibit 23.2 



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##### Table of Contents



GETTY IMAGES, INC.

FORM 10-K

December 31, 2001


TABLE OF CONTENTS

|         |  |                                                                                        |  |      |    | 
|-------- |  | -------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                        |  | Page
|         |  |                                                                                        |  |     
|PART I  
|        
|Item 1.  |  | Business                                                                               |  |      | 1  | 
|Item 2.  |  | Properties                                                                             |  |      | 12 | 
|Item 3.  |  | Legal Proceedings                                                                      |  |      | 12 | 
|Item 4.  |  | Submission of Matters to a Vote of Security
	Holders                                   |  |      | 13 | 
|PART II 
|        
|Item 5.  |  | Market for Registrants Common Equity and
	Related Stockholder Matters                 |  |      | 13 | 
|Item 6.  |  | Selected Consolidated Financial Data                                                   |  |      | 14 | 
|Item 7.  |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |      | 15 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures About
	Market Risk                            |  |      | 26 | 
|Item 8.  |  | Financial Statements and Supplementary Data                                            |  |      | 28 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |  |      | 28 | 
|PART III
|        
|Item 10. |  | Directors and Executive Officers of the Registrant                                     |  |      | 28 | 
|Item 11. |  | Executive Compensation                                                                 |  |      | 28 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners
	and Management                        |  |      | 28 | 
|Item 13. |  | Certain Relationships and Related Transactions                                         |  |      | 28 | 
|PART IV 
|        
|Item 14. |  | Exhibits, Financial Statement Schedules and
	Reports on Form 8-K                       |  |      | 29 | 

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PART I




Item 1. Business

The Private Securities Litigation Reform Act
of 1995 provides a safe harbor for forward-looking statements
made by or on behalf of Getty Images, Inc. We may, from time to
time, make written or oral statements that are
forward-looking, including statements contained in
this Annual Report on Form 10-K, the documents incorporated
herein by reference, and other filings with the Securities and
Exchange Commission. These statements are based on
managements current expectations, assumptions, estimates
and projections about Getty Images, Inc. and its industry and
are made on the basis of managements views as of the time
the statements are made. All statements, trends, analyses and
other information contained in this report relative to trends in
sales, gross margin, anticipated expense levels and liquidity
and capital resources, as well as other statements including,
but not limited to, words such as anticipate,
believe, plan, estimate,
expect, seek, intend and
other similar expressions, constitute forward-looking
statements. These forward-looking statements are not guarantees
of future performance and are subject to certain risks and
uncertainties that are difficult to predict. Accordingly, actual
results may differ materially from those anticipated or
expressed in such statements. Potential risks and uncertainties
include, among others, those set forth herein under
Factors That May Affect the Business, as well as
Managements Discussion and Analysis of Financial
Condition and Results of Operations. Except as required by
law, the company undertakes no obligation to update any
forward-looking statement, whether as a result of new
information, future events or otherwise. Readers, however,
should carefully review the factors set forth in other reports
or documents that the company files from time to time with the
Securities and Exchange Commission.

In this Annual Report, Getty
Images, the company, we,
us, and our refer to Getty Images, Inc.
and its consolidated subsidiaries, unless the context otherwise
dictates.

A. Overview

Getty Images, Inc. was founded in 1995 and is a
leading provider of imagery and related products and services to
businesses worldwide, distributing products digitally via the
Internet and on CD-ROMs, as well as in film transparency form.
The company is headquartered in Seattle and has customers in
more than 55 countries. We pioneered the solution to
aggregate and distribute visual content and, since 1995, have
brought many of the visual content industrys leading
collections under one centralized corporate structure.

We provide our high quality, relevant imagery to
creative professionals at advertising agencies, graphic design
firms, corporations and film and broadcasting companies; press
and editorial customers involved in newspaper, magazine, book,
CD-ROM and online publishing; and corporate communications
departments and other business customers. By aggregating the
content of our various leading imagery collections on the
Internet and partnering with third-party providers, we offer a
comprehensive and user-friendly solution for our customers
imagery and related product needs, including still and moving
images and related products and services. We seek to leverage
our internally developed search and e-commerce technology to
enhance our position as a leader in the visual content industry.

B. Background

The company was formed in 1995 as a United
Kingdom (U.K.) corporation under the name Getty Communications
plc. We commenced operations on March 14, 1995, with the
acquisition of Tony Stone Images (now Stone), a
leading provider of contemporary stock photography. We
registered as a Delaware corporation on September 4, 1997,
under the name of Getty Communications (USA), Inc. The
companys name was changed to Getty Images, Inc. on
October 6, 1997, and Getty Images became the worldwide
corporate entity following the acquisition of PhotoDisc, Inc. on
February 9, 1998.

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C. Products, Services and
Customers

Products and Services

We offer our customers a variety of visual
content products, including creative imagery (both still and
moving images), news and sports photography, archival imagery,
illustrations and related products and services. Our imagery is
offered to customers through our creative photography
collections (The Image Bank, PhotoDisc, Stone, Eyewire and
others), Getty Images Motion, our news and sports business and
HultonyArchive. These products and services are offered through
our website, CD-ROMs, catalogs and our international
distribution network of company-operated offices in
approximately 25 cities and agents and distributors in
approximately 55 countries.

Customers

We serve a variety of customers in three major
categories: advertising and design agencies, publishing and
media companies and corporate communications departments.

Advertising and Design Agencies.For our advertising and design agency
customers, we supply images that cover a wide variety of
contemporary subjects including lifestyles, business, science,
health and beauty, sports, transportation and travel. These
customers usually have a commercial, advertising or editorial
message they are trying to convey and, consequently, are
typically looking for a specific conceptual image. Image quality
and relevance are important factors in the customers
decision. Advertising and design agency customers need to access
imagery as part of their everyday working life. Their workflow
is becoming increasingly digital, which we believe will spur
further demand for our images and services in this market.

Publishing and Media Companies.We supply images to a customer base of
professional image users who are involved in the publication of
newspapers, books and magazines, both online and in traditional
media, as well as the production of commercial motion pictures,
documentaries and other editorial media. The imagery that is
provided to these customers ranges from contemporary news,
celebrity and feature material and sports imagery, to archival
imagery covering major political, social and sporting events
since the beginning of photography in the early nineteenth
century. These customers are looking for imagery that conveys
information to illustrate the story they are covering and often
require the imagery to be delivered rapidly after the event has
occurred.

Corporate Communications Departments.We offer a variety of still and moving
imagery to corporate communications departments and other
business users. These customers need imagery for a wide range of
business communication materials for internal and external use,
including brochures, employee communications, annual reports,
newsletters, websites and presentations.

D. Content Development

For our customers requiring creative imagery, we
have creative teams in London, Los Angeles, Munich, Paris,
Seattle and New York that analyze customer requests and
buying behavior and perform research in key markets in order to
target and source images. We have contractual relationships with
contributing photographers to serve the creative professional,
including highly respected, internationally renowned
professional photographers representing a variety of styles,
specialties and backgrounds. In many cases, we provide art
direction for our photographers while they are taking the
photographs, working with them on location around the world. We
accept into our creative photography collections approximately
30,000 to 40,000 new images each year. All new images accepted
into our collections are digitized, keyworded, posted on our
website and available for search, selection, purchase and
download 24 hours a day, seven days a week.

For customers seeking film footage, we maintain
and license a growing library of commercially desirable
cinematography covering a broad range of contemporary and
archival subject matter. Our film business represents imagery
from hundreds of cinematographers and film producers, which is
cataloged on computer for quick access and retrieval in film,
tape and digital formats.

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For our publishing and media customers, our
ability to source imagery from news and sports events as they
occur and to make them immediately available to customers is
critical to our success. To this end, we have production hubs in
New York, Los Angeles, London and Sydney to which
photographers can submit imagery at any time. To serve our
publishing and media customers, we employ staff photographers
and have contractual relationships with hundreds of additional
photographers. In addition to topics that we believe will be of
interest perennially, we seek to identify upcoming events that
will generate demand for particular archival images. We also
offer in-depth research services for our customers more
extensive projects in addition to editorial and corporate
assignment services, handling the special photo assignment needs
of our editorial or corporate customers. We receive hundreds of
digital images per week from our photographers around the world,
and make these available through a proprietary online
subscription service and over the Internet. By using digital
technologies, we are able to make new images available online
within fifteen minutes of creation from major news and sports
events such as the war in Afghanistan or The Olympic Games.

E. Marketing, Sales and
Distribution

Marketing

We reach our customers through a diverse set of
marketing methods, such as print ads, direct mail, e-mail
communications, our website and printed catalogs. We believe
that these methods create brand awareness and, in many cases,
act as sales tools in the selection of image products for
license. We also serve our international markets by producing
localized marketing materials where appropriate.

Online Marketing.Our website acts as a marketing tool
as well as a sales tool, making the images of each collection
available for research and selection online. For example, we
often promote on our website new collections of images available
on CD-ROM. In addition, our news and sports business regularly
provides a summary of the latest breaking stories in the news
section of our website where customers can see, purchase and
download available imagery.

Printed Catalogs and Direct Mail.We use catalogs to market the
contemporary photography of our creative photography and
editorial collections. We believe that our catalog quality
contributes to our strong reputation and that the catalogs drive
demand for our images both to our website and into our customer
service centers.

Demonstration Reels.We market our film footage through
demonstration reels sent directly to our existing and potential
customers. These demonstration reels contain samples of
available footage.

Sales and Distribution

We license our imagery through our broad
international distribution network of company-operated offices,
agents and distributors in approximately 55 countries. We
believe that control of our outlets results in more focused
sales and marketing activities and better brand maintenance. A
direct sales force and key account management team targets
advertising, publishing and communications companies, as well as
other high volume users of images. Our direct sales force
focuses on reaching image purchasers who are generally
responsible for large order purchases. In order to assist our
customers in using the images, our sales force includes
technical support staff and training personnel who provide
assistance to customers. These consultants have expertise in
digital image applications, design tools and photo manipulation
methodologies.

We encourage our customers to take advantage of
the comprehensive image search capabilities of our website and
digital delivery of selected images. Over the past few years,
the percentage of our business that originates on our website
and is digitally delivered over the Internet to our customers
has increased substantially. We believe the ability to search
for, select, purchase and download images over the Web offers
our customers advantages in terms of convenience, speed and cost
efficiency, and enables us to achieve greater economies of
scale. We will continue to focus on digital delivery as the
primary method of delivering images to our customers. Direct
communication with our customers, however, remains a significant
component of our sales strategy. Our sales representatives
assist customers in finding the images they need and keep them
informed about new products and services offered by the company.
We also support and serve our customers who wish to receive our
imagery through traditional analog means, which involves the
physical distribution of imagery

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on duplicate film transparencies. In many
instances, we serve customers through a combination of
e-commerce and more traditional methods of customer service.


Product Rights.We
maintain ownership or control of our products at all times.
Customers may purchase the rights, on an exclusive or
non-exclusive basis, to use single images, video and film clips
or CD-ROM products containing multiple images. Customers may
also purchase rights to our press and editorial products on a
subscription basis. Ownership of the images never passes to the
customer.

F. Operations and Technology

In 2001, we achieved significant milestones in
the implementation of new enterprise-wide systems to enable
customers to search, select, purchase and download digital
content on our gettyimages.com website, as well as the
back-office systems to support our site, including sales order
processing, customer database management, finance and
accounting. These new systems span multiple operational
activities, including customer interaction, transaction
processing, order fulfillment and invoicing.

The October 6, 2001 launch of
gettyimages.com marked a significant milestone in the
business-wide initiative to integrate the companys Web
offerings and business processes. The gettyimages.com website
provides one centralized source for all of our products and
services, including photographs, film clips, illustrations,
fonts and services to manage, present, commission and license
imagery. The website provides advanced search capabilities as
well as enhancements to the price calculator enabling customers
to obtain precise real-time pricing 24 hours a day. An
additional milestone was reached in February 2002 with the
launch of localized language websites that enable customers to
search for and purchase imagery and related materials in United
States (U.S.) English, U.K. English, French and German and
complete transactions in U.S. dollars, Euros and British pounds.
Additionally, with the February 2002 system enterprise upgrade,
we migrated a significant portion of our royalty-free stock
photography business to the new gettyimages.com website.

The technology architecture supporting
gettyimages.com employs a set of software applications for:



| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | categorizing digital content and embedding
	appropriate keywords and search data (metadata);
|
| |  | searching large information databases across
	languages and linguistic context;             
|
| |  | presenting detailed information related to
	specific digital content elements;              
|
| |  | managing online e-commerce transactions for the
	purchase of digital content;               
|
| |  | managing invoice generation and accounts
	receivable from customers; and                    
|
| |  | tracking a broad range of intellectual property
	rights and permissions.                    

These services and systems use a combination of
our proprietary technologies and commercially available,
licensed technologies. We focus our internal development efforts
on creating and enhancing the specialized, proprietary software
that is unique to our business. We intend to continue to
investigate, qualify and develop technology and internal systems
that support key areas of our business to enhance the online and
offline experience for our customers. In particular, we have
implemented and continue to develop a flexible infrastructure
that will facilitate the sale and distribution of third party
digital content through our online e-commerce systems.

Certain of our image search, image selection,
rights management, customer interaction, order collection,
fulfillment and back-office systems are proprietary. Our online
platform architecture is primarily based on Microsoft
technologies. These systems were designed to provide reliable
e-commerce connectivity and responsive online customer
interaction. Our systems infrastructure is hosted internally at
multiple locations and externally at Cable & Wireless
Internet Services. Both internal and external hosting centers
provide 24-hour monitoring, power generators and limited back-up
systems.

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G. Competition

The market for visual content and related
products and services is highly competitive. We believe that the
principal competitive factors are name recognition, company
reputation, the quality, relevance and diversity of the images,
the quality of contributing photographers and cinematographers
under contract with a company, effective use of developing
technology, customer service, pricing, accessibility of imagery,
distribution capability and speed of fulfillment. Our current or
potential competitors include: other general visual content
providers such as Corbis Corporation, Digital Vision, Superstock
and Zefa Visual Media; specialized visual content companies that
are well established in their local, content or product-specific
markets such as Reuters News Service, the Associated Press,
Agence France Presse, Action Images plc and Science Photo
Library; stock film footage businesses such as Sekani, Inc.; and
commissioned photographers. There are also hundreds of small
stock photography and film footage agencies and image content
aggregators throughout the world.

Please see Item 1. Business  I.
Factors That May Affect the Business for more
information about the competitive conditions in the visual
content industry.

H. Intellectual Property

Most of the images licensed by us are obtained
from independent photographers and cinematographers on an
exclusive basis. Professional photographers and cinematographers
prefer to retain ownership of their work. As a result, copyright
to an image remains with the contributing photographer or
cinematographer in most cases, while we obtain the exclusive
right to market the image on behalf of the photographer or
cinematographer for a period of time. A substantial portion of
the news and sports images, HultonyArchive images and certain
images of our other collections are owned by us or are in the
public domain.

We also own numerous trademarks that are
important to our business. Depending upon the jurisdiction,
trademarks are valid as long as they are in use and/or their
registrations are properly maintained and they have not been
found to have become generic. Registrations of trademarks
generally can be renewed indefinitely as long as the trademarks
are in use (please see below at Item 1.
Business  I. Factors That May Affect the
Business  Our Right to Use the Getty Trademarks Is
Subject to Forfeiture in The Event We Experience a Change of
Control for more information about certain of our
trademarks).

I. Factors That May Affect the
Business

Our Business Could be Affected by a Failure
to Successfully Complete the Implementation of New Enterprise
Systems.

As a result of the acquisition strategy we have
pursued since our inception in 1995, we have focused significant
resources and attention on integrating acquired businesses. The
integration focused on the installation and development of new
enterprise systems for technology, business processes, sales and
marketing systems, finance and royalty systems, customer
interface, and other corporate administrative functions for the
continued transformation and consolidation of company-wide
systems. The October 6, 2001 launch of gettyimages.com
marked a significant milestone in the company-wide initiative to
integrate the companys Web offerings and business
processes. An additional milestone was reached in February 2002
with the launch of localized language websites and commerce
systems in France, Germany and the U.K., and with the migration
of a significant portion of our royalty-free stock photography
business to the gettyimages.com website. However, our future
performance will largely depend on our ability to complete the
implementation of new enterprise systems for our finance, sales
and customer database systems. These implementations create
risks such as:



| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | disruption of our ongoing business;                                                                                                                 
|
| |  | delays in reporting systems, which could impact
	our ability to process information on a timely basis;                                              
|
| |  | delays in properly identifying and processing
	data necessary for management functions, including accounting,
	financial reporting and planning; and
|
| |  | diversion of attention of our senior management
	from existing operations and other potential business
	opportunities.                              

We cannot guarantee that we will successfully
complete the implementation of new enterprise systems.

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We May Not be Able to Respond to Rapid
Technological Changes Relating to the Internet.

To be successful, we must adapt to rapidly
changing Internet technologies by continually enhancing our
products and services and introducing new services to address
the changing needs of our customers. We could incur substantial
development or acquisition costs if we are required to modify
our services or infrastructure to adapt to changes affecting
companies providing services on the Internet. If we are
unsuccessful in adapting to these changes, or do not
sufficiently increase the features and functionality of our
products and services, our customers may ultimately switch to
the product and service offerings of our competitors. Our
existing or potential competitors may develop an improved method
for distributing visual content through the Internet. If we are
unable to keep pace with the evolving technology of the
Internet, the demand for our imagery and related products and
services may decrease.

We May Not be Able to Compete Effectively
Against Our Existing or Potential Competitors.

The visual content industry is highly
competitive. We compete directly with a number of large and
small visual content companies and commissioned photographers to
provide imagery to businesses. We believe that the principal
competitive factors in the visual content industry are name
recognition, company reputation, the quality, relevance and
diversity of the images, the quality of the contributing
photographers and cinematographers under contract with a
company, effective use of developing technology, customer
service, pricing, accessibility of imagery, distribution
capability and speed of fulfillment. Some of our existing and
potential competitors may have significantly greater financial,
marketing and other resources or greater name recognition than
we have. In addition, possible new entrants into the visual
content industry could increase if technological advances make
archiving, searching and digital delivery systems more
affordable.

Our future performance also depends on our
ability to review and refresh our collections based on current
and future trends in order to provide our customers with the
most relevant content. Many of our customers are sensitive to
the latest trends and require new and fashionable content to
meet their needs. If we fail to determine such trends and add
relevant new imagery in a timely manner, customers requiring
such content may use other visual content providers to obtain
imagery.

We May Not Succeed in Establishing the
Getty Images Brand.

Historically, we have marketed each of Getty
Images brands as its own collection. On October 6,
2001, we launched gettyimages.com, a significant step toward
integrating the companys Web-based offerings, supporting
technology platform and business practices under the Getty
Images brand name. Continued positioning of the
Getty Images brand will largely depend on the
success of our advertising and promotional activities and our
ability to provide customers with high quality products and
strong customer service. We believe that a favorable customer
reception of this brand is important to our future success. If
our brand enhancement strategies are unsuccessful, we may be
unable to realize potential benefits of Getty
Images. Additionally, securing the Getty
Images trademark is an important part of the branding
strategy, and barriers arising from third parties or trademark
officials in various countries may hinder our effort to secure
trademarks in key markets or trademark classes.

Our Right to Use the Getty
Trademarks is Subject to Forfeiture in the Event We Experience a
Change of Control.

We own trademarks and trademark applications for
the names Getty Images and Hulton Getty,
and derivatives of those names, including the name
Getty and the related logo. We use Getty
Images as a corporate identity, as do certain of our
subsidiaries, and we have begun using Getty Images
as a product and service brand. We refer to the above as the
Getty Trademarks. In the event that a third party or
parties not affiliated with the Getty family acquire control of
us, Getty Investments L.L.C. has the right to call for an
assignment to it, for a nominal sum, of all rights to the Getty
Trademarks. In the event of an assignment, we will have
12 months to continue to use the Getty Trademarks, after
which time we no longer would have the right to use them. Getty
Investments right to cause such an assignment might have a
negative impact on the amount of consideration that a potential
acquirer would be willing to pay to acquire our common stock.

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Getty Investments L.L.C. owns approximately 18%
of the outstanding shares of our common stock as of
March 1, 2002. Mr. Mark Getty, the Executive Chairman
serves as the Chairman of the Board of Directors of Getty
Investments, while Mr. Jonathan Klein, the CEO of Getty
Images, and Mr. Andrew Garb, a member of our Board of
Directors, serve on the Board of Directors of Getty Investments.

Our Future Success Depends on Our Ability
to Retain Key Employees.

Our future success will depend upon our ability
to identify, retain and motivate highly skilled technical,
managerial, product development, editorial, merchandising,
sales, marketing and customer service employees. Our success
will also depend, in part, on the continued service of
Mr. Mark Getty, our Executive Chairman, and
Mr. Jonathan Klein, our Chief Executive Officer.
Mr. Getty and Mr. Klein are each party to an
employment agreement with us for a minimum period of three
years, which absent a breach cannot be terminated except on
twelve months written notice. We do not have key
person life insurance policies covering either
Mr. Getty or Mr. Klein.

Our Business is Sensitive to Changes in
Economic and Political Conditions.

Any economic, political, business or industry
conditions that cause customers or potential customers to
reduce, postpone or stop their use of imagery, or to reduce the
value of each image used, could have a negative effect on our
sales and profitability. The success and profitability of our
global operations are subject to numerous risks and
uncertainties, including local, regional and global economic
conditions, political instability, and changes in applicable tax
laws (including U.S. tax laws on our foreign operations).

There was a slowdown in advertising and media
spending in 2001, which we believe has had an impact on the
demand for the companys products and services. Management
does not know when the domestic or international economic
climate will improve. Additionally, continued economic and
political difficulties, the uncertainty arising from the impacts
of the September 11, 2001 attacks on the World Trade Center
and the Pentagon, and fears regarding war or additional
terrorist actions may have a potential negative impact on our
company and customer base.

Fluctuations in Foreign Exchange Rates
Could Have a Negative Impact on the Results of Our Non-U.S.
Based Operations.

We publish our consolidated financial statements
in U.S. dollars and conduct a portion of our business in
currencies other than U.S. dollars, particularly British pounds
and the Euro. As a result, we are exposed to changes in the
value of currencies against the U.S. dollar. Fluctuations in the
values of currencies against the U.S. dollar could affect the
translation of the results of our non-U.S. based operations into
U.S. dollars for inclusion in our consolidated financial
statements. We cannot accurately predict the impact that future
exchange rate fluctuations may have on our results.

Our Quarterly Financial Results May
Fluctuate.

Historical trends and quarter-to-quarter
comparisons of our operating results may not be good indicators
of our future performance. It is possible that some future
quarterly results may be below the expectations of public market
analysts and investors. For instance, on July 25, 2001, and
April 25, 2001, we announced that our second and first
quarter results, respectively, were below these expectations. In
this event, the effect on the trading prices of our subordinated
notes and our common stock may be difficult to predict. Our
revenues and operating results are expected to vary from quarter
to quarter due to a number of factors, including those listed in
this Risk Factors section and the following:



| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | demand for our products;                                                                                                                                            
|
| |  | changes in sales mix, including the mix of sales
	of analog and digital imagery, company owned and licensed
	imagery, and the geographic distribution of such sales;
|
| |  | our ability to attract visitors to our websites
	and the frequency of repeat purchases by our customers;                                                            

7



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| |   |                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------
| |  | shifts in the nature and amount of publicity
	about us, our competitors or the visual content industry;
|
| |  | changes in the growth rate of Internet commerce;                                                       
|
| |  | our ability to enhance our technology to
	accommodate any future growth in our operations or customers;
|
| |  | changes in our pricing policies or the pricing
	policies of our competitors;                           
|
| |  | costs related to potential acquisitions of
	technology or businesses; and                              
|
| |  | changes in U.S. and global financial and equity
	markets.                                              

Our Stock Price has Been and May Continue
to be Volatile.

The market price of our common stock has been
volatile, with a broad ranging market price in the past two
years alone. Fluctuations in the trading price of our common
stock may continue in response to a number of events and
factors, including the following:



| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | new products, services and strategic developments
	by us or our competitors;
|
| |  | business combinations and investments by us or
	our competitors;            
|
| |  | variations in our revenues, expenses or
	profitability;                     
|
| |  | changes in financial estimates and
	recommendations by securities analysts; 
|
| |  | failure to meet the expectations of securities
	analysts and investors; and 
|
| |  | performance by other visual content or media
	industry companies.           

Any of these events may cause the price of our
shares to change. Additionally, broad market and industry
fluctuations may adversely affect the market price of our
shares, regardless of our operating performance.

Impairment of the Value of Significant
Assets Could Have an Adverse Impact on Our Operating
Results.

Our operating results and earnings in future
periods may be adversely affected as a result of impairments to
the reported value of certain significant assets, the valuation
of which require managements most difficult judgments as a
result of the need to make estimates and assumptions about the
effect of matters that are inherently uncertain.

Deferred Income Taxes

Deferred income taxes reflect the impact of
temporary differences between financial and tax reporting and of
tax loss carryforwards, and are reduced by a valuation allowance
if, based on the weight of available evidence, it is more likely
than not that some portion or all of the deferred tax assets
will not be realized. As of December 31, 2001, the company
had net deferred tax assets of $65.1 million, net of a
valuation allowance of $12.8 million that was established
in 2001. Although realization is not assured, management
believes, based on its current estimates of future taxable
income for its U.S. operations and tax-planning strategies, that
it is more likely than not that the net deferred tax assets will
be realized within a reasonable period of time and substantially
prior to the expiration of the net operating loss carryforwards.
In the event that actual results differ from managements
expectations, the valuation allowance could materially change,
directly impacting our financial position and results of
operations. If domestic taxable income is not earned as planned,
the domestic tax loss carryforwards will expire from 2018 to
2021, and the company may be required to take the balance
through the income statement as income tax expense in advance of
the expiration of the loss carryforwards.

Goodwill and Identifiable
Intangibles

Intangible assets comprise goodwill and
identifiable intangibles. Goodwill is the excess of the purchase
price and related costs over the fair value of net assets
acquired in business combinations. Identifiable intangibles
consist mainly of customer lists, covenants not to compete,
photographer contracts, trademarks and

8



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tradenames. The net balance of goodwill and
identifiable intangibles at December 31, 2001 was
$636.5 million. Effective January 1, 2002, the company
will adopt Statement of Financial Accounting Standards (SFAS)
142, Goodwill and Other Intangible Assets. This
accounting pronouncement requires us to cease amortization of
goodwill, and alternatively test the net goodwill balance for
impairment annually, as well as under certain circumstances that
may indicate impairment. Should the company determine at some
point in the future that all or a portion of the goodwill
balance is impaired, the company would be required to write off
the impaired portion through the income statement in the period
of that determination.


Certain Assets

The useful lives of certain of the companys
assets, including capitalized image duplication and digitization
costs (included within property and equipment), are based upon
the estimated period over which the assets are expected to
provide benefit to the company. This future benefit is
inherently uncertain, and therefore, the lives of these assets
require managements most difficult judgments. The balance
of image duplicates and digitization, net of accumulated
depreciation, was $39.6 million at December 31, 2001
and is being depreciated over useful lives of two to four years.
Should the company determine at some point in the future that
the useful lives of these assets are shorter than previously
determined, the company would be required to accelerate the
depreciation, or possibly write off the impaired portion, of the
undepreciated balance of such assets.

Our Indebtedness Could Reduce Our
Flexibility and Make Us More Vulnerable to Economic
Downturns.

Our level of indebtedness may pose substantial
risks to our security holders, including the risk that we may
not be able to generate sufficient cash flow to satisfy our
obligations under our indebtedness or to meet our capital
requirements. A portion of our cash flow from operations will be
dedicated to the payment of principal and interest on our senior
credit facility, our 4.75% convertible subordinated notes due in
2003 and our 5.0% convertible subordinated notes due in 2007.
Our ability to service our indebtedness will depend on our
future performance, which will be affected by general economic
conditions and financial, business and other factors, many of
which are beyond our control. Such indebtedness could have
important consequences to our security holders, including the
following:



| |   |                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to make principal and interest
	payments on the notes could be negatively impacted;                                          
|
| |  | we may be unable to obtain necessary financing
	for working capital, capital expenditures, debt service
	requirements and other purposes;
|
| |  | our flexibility in planning for, or reacting to,
	changes in our business and competition could be reduced; and                          
|
| |  | we may be more vulnerable to economic downturns.                                                                                         

We May Not be Able to Secure Additional
Financing to Meet Our Future Capital Needs.

We currently anticipate that our available cash
resources, cash flow from operations and our senior credit
facility will be sufficient to meet our anticipated needs for
working capital and capital expenditures for at least the
following 12 months. After this time, if we are unable to
generate sufficient cash flows from operations to meet our
anticipated needs for working capital and capital expenditures,
we will need to raise additional funds to, among other things,
promote our products and services, develop new and enhanced
services, respond to competitive pressures or make acquisitions.
Our senior credit facility expires in October 2002. While we are
working to establish a new senior credit facility to replace our
expiring facility, we may be unable to obtain any required
additional financing on terms favorable to us, if at all. If
adequate funds are not available on acceptable terms, we may be
unable to complete our systems integration or other capital
improvements, promote our products and services successfully,
develop or enhance services, respond to competitive pressures or
take advantage of acquisition opportunities. If we raise
additional funds through the issuance of equity securities, our
stockholders may experience dilution of their ownership
interest, and the newly issued securities may have rights
superior to those of our common stock. If we raise additional
funds by issuing new debt, the

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new debt could be senior indebtedness and we may
be subject to limitations on our operations, including
limitations on the payment of dividends. Changes in U.S. and
global financial and equity markets, including significant
fluctuations in interest rates and the price of our equity
securities, may impede our access to, or increase the cost of,
external financing for our operations and any acquisitions.


Certain of Our Stockholders Can Exercise
Significant Influence Over Our Business and Affairs and May Have
Interests That Are Different Than Yours.

Some of our stockholders own substantial
percentages of the outstanding shares of our common stock.

The Getty Group collectively owned approximately
21% of the outstanding shares of our common stock as of
March 1, 2002, and comprises the following persons and
entities: Getty Investments L.L.C.; The October 1993 Trust; The
JD Klein Family Settlement; Mr. Mark Getty, our Executive
Chairman; and Mr. Jonathan Klein, our Chief Executive
Officer.

The Torrance Group collectively owned
approximately 6% of the outstanding shares of our common stock
as of March 1, 2002, and comprises the following persons
and entities: PDI, L.L.C.; Mr. Mark Torrance; Ms. Wade
Ballinger (the former wife of Mark Torrance); and certain of
their family members.

Pursuant to shareholder agreements among us, the
Getty Group and the Torrance Group, none of the members of the
Getty Group or the Torrance Group may transfer their shares of
our common stock except in accordance with the terms of those
agreements.

As a result of their share ownership, the Getty
Group and the Torrance Group each have significant influence
over all matters requiring approval of our stockholders,
including the election of directors and the approval of mergers
or other business combinations. The substantial percentage of
our stock held by the Getty Group and the Torrance Group could
also make us a less attractive acquisition candidate or have the
effect of delaying or preventing a third party from acquiring
control over us at a premium over the then-current price of our
common stock. In addition to ownership of common stock, certain
members of the Getty Group and the Torrance Group have
management and/or director roles within our company that
increase their influence over us.

Certain Provisions of Our Corporate
Documents and Delaware Corporate Law May Deter a Third Party
From Acquiring Our Company.

Our board of directors has the authority to issue
up to 5,000,000 shares of preferred stock and to fix the rights,
preferences, privileges and restrictions of such shares without
any further vote, approval or action by our stockholders. This
authority, together with certain provisions of our amended and
restated certificate of incorporation, may have the effect of
making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, control
of our company. This could occur even if our stockholders
consider such change in control to be in their best interests.
In addition, the concentration of beneficial ownership of our
common stock in the Getty Group and the Torrance Group, along
with certain provisions of Delaware law, may have the effect of
delaying, deterring or preventing a takeover of our company.

An Increase in Government Regulation of the
Internet and E-Commerce Could Have a Negative Impact On Our
Business.

We are subject to a number of regulations
applicable to businesses generally, as well as laws and
regulations directly applicable to e-commerce. Although existing
laws and regulations affecting e-commerce are not unduly
burdensome, state, federal and foreign governments have and may
continue to adopt legislation regulating the Internet and
e-commerce. Such legislation or regulation could both increase
our cost of doing business, and impede the growth of the
Internet while decreasing its acceptance as a communications and
commerce medium. If a decline in the use of the Internet occurs,
businesses and consumers may decide in the future not to use our
online services.

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Laws and regulations do now and could potentially
more significantly govern or restrict any of the following
issues:



| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | user privacy and data transmission;                                                 
|
| |  | pricing and taxation of goods and services over
	the Internet;                      
|
| |  | website content;                                                                    
|
| |  | characteristics and quality of products and
	services offered over the Internet; and
|
| |  | the liabilities for companies involved in the
	Internet or e-commerce.              

Systems Security Risks and Concerns May
Harm Our Business.

A significant barrier to e-commerce and online
communications is the secure transmission of confidential
information over public networks. Developments in computer
capabilities, viruses, and advances in the field of cryptography
or other events could result in compromises or breaches of our
security systems or those of other websites, jeopardizing our
proprietary and confidential information. Anyone who circumvents
our security measures could misappropriate proprietary or
confidential information or cause potentially serious
interruptions in our services, sales or operations.

The Internet is a public network, and data is
sent over it from many sources. In the past, computer viruses,
programs that disable or impair computers, have rapidly spread
over the Internet. Computer viruses could be introduced into our
systems or those of our customers, which could disrupt the
delivery of our imagery products and services or make them
inaccessible to our customers. We may be required to expend
significant capital resources to protect against the threat of
security breaches or to alleviate problems caused by such
breaches. To the extent that our activities may involve the
storage and transmission of proprietary information, such as
credit card numbers, security breaches could expose us to a risk
of loss or litigation and possible liability. Our security
measures may be inadequate to prevent security breaches and our
business could be harmed if we do not prevent them.
Additionally, any well-publicized compromises of our security
system or the Internet generally may reduce our customers
desire to transact business over the Web.

We May Experience System Failures and
Service Interruptions on Our Websites That Could Result in
Adverse Publicity, Customer Dissatisfaction and Revenue
Losses.

A key component of our growth strategy is the
increased digitization of our imagery and the distribution of
such imagery and related products and services over the
Internet. As a result, our revenues are dependent on the ability
of our customers to access our websites, including the new
gettyimages.com website. In the past, we have experienced
occasional system interruptions that made our former websites
unavailable or prevented us from efficiently fulfilling orders.
While we have made improvements in this area, we cannot be sure
that we can prevent these interruptions in the future. System
failures or interruptions will inconvenience our users and may
result in negative publicity and reduce the volume of images we
license online and the attractiveness of our online products and
services to our customers.

We will need to continue adding software and
hardware and continue to upgrade our enterprise systems and
network infrastructure to accommodate increased traffic on our
websites and increased sales volume. Without these upgrades, we
will face additional system interruptions, slower response
times, diminished customer service, impaired quality and speed
of order fulfillment, and delays in our financial reporting. We
cannot accurately project the rate or timing of any increases in
traffic or sales volume on our websites and, therefore, the
integration, timing and cost of these upgrades are uncertain.

The computer and communications hardware
necessary to operate our corporate functions and much of our
e-commerce operations is located at facilities in the Seattle,
Washington metropolitan area. Our other businesses have systems
in other locations worldwide. Any of these systems and
operations could be damaged or interrupted by fire, flood, power
loss, telecommunications failure, earthquake and similar events.
In addition, while we take steps to ensure the security and
integrity of our systems, computer viruses, physical or
electronic break-ins and similar disruptions could cause system
interruptions or delays that could temporarily

11



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prevent us from providing services and accepting
and fulfilling customer orders. We do not have full redundancy
for all of our computer and telecommunications facilities.


J. Relationship With Our
Employees

At December 31, 2001, we had
1,845 employees. Of these, 1,007 were located in North
America, 739 in Europe and 99 in the rest of the world. We
believe that we have satisfactory relations with our employees.

K. Governmental Regulation

All of our facilities, including those in the
U.S., are subject to environmental laws and regulations.
Compliance with these provisions has not had, and we do not
expect such compliance to have, any material adverse effect upon
our business, financial condition or results of operations.

L. Recent Significant Events

None.




Item 2. Properties

Our principal executive offices and worldwide
headquarters are in Seattle, Washington. We also have a
significant presence in New York City, New York and London,
England.

In Seattle, we are the lessee of approximately
297,100 square feet of office space pursuant to six leases.
Leases covering approximately 8,700 square feet, 78,600 square
feet, 29,600 square feet and 180,200 square feet expire in
December 2002, March 2003, September 2004 and August 2013,
respectively. Approximately 90,700 square feet of the total
leased space has been identified as excess, of which 59,400
square feet is currently subleased.

In New York, we are the lessee of approximately
283,900 square feet of office space pursuant to five leases.
Leases covering approximately 16,000 square feet, 10,000 square
feet and 257,900 square feet expire in January 2003, December
2005 and March 2015, respectively. Approximately 161,800 square
feet of the total leased space has been identified as excess,
all of which is currently subleased.

In London, we are the lessee of approximately
95,700 square feet of office space pursuant to seven leases.
Leases covering approximately 13,900 square feet, 1,500 square
feet, 13,000 square feet, 23,200 square feet, 9,700 square feet,
14,400 square feet and 20,000 square feet expire in December
2002, June 2004, August 2010, October 2010, March 2014, October
2015 and August 2016, respectively. We also own one freehold
property of approximately 8,000 square feet in London.
Approximately 26,900 square feet of the total leased space has
been identified as excess, none of which is currently subleased.

In addition, we lease office space for our wholly
owned offices throughout the world in key business centers.

Our existing facilities are adequate and
appropriate for our operations.




Item 3. Legal
Proceedings

We have been, and may continue to be, subject to
legal claims from time to time in the ordinary course of our
business, including those related to alleged infringement of the
trademarks and other intellectual property rights of third
parties, such as the failure to secure model and property
releases, and claims by photographers relating to our handling
of images submitted to us. We have accrued a liability and
charged operations for the estimated costs of settlement or
adjudication of claims for which we believe a loss is probable.
Presently, there are no pending legal proceedings to which we
are a party or to which any of our property is subject which,
either individually or in the aggregate, are expected to have a
material adverse effect on our consolidated financial position,
results of operations or liquidity.

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

No matter was submitted to a vote of the
companys stockholders, through solicitation of proxies or
otherwise, during the fourth quarter of fiscal year 2001.




PART II




Item 5. Market for
Registrants Common Equity and Related Stockholder
Matters

Our common stock is traded on the Nasdaq National
Market (Nasdaq) under the symbol GETY. The following
table sets forth, for each of the quarterly periods indicated,
the high and low sale prices of our common stock as reported on
the Nasdaq.

|                             |  |      |        |     |  |   |        | 
|---------------------------- |  | ---- | ------ | --- |  | - | ------ | 
|                             |  | High |        | Low
|                             |  |      |        |    
|Year Ended December 31, 2000 |  |      |        |     |  |   |        | 
|First Quarter                |  | $    | 64.375 |     |  | $ | 34.203 | 
|Second Quarter               |  |      | 45.375 |     |  |   | 25.000 | 
|Third Quarter                |  |      | 44.000 |     |  |   | 27.750 | 
|Fourth Quarter               |  |      | 37.375 |     |  |   | 21.250 | 
|                            
|Year Ended December 31, 2001 |  |      |        |     |  |   |        | 
|First Quarter                |  | $    | 37.250 |     |  | $ | 13.938 | 
|Second Quarter               |  |      | 32.660 |     |  |   | 13.700 | 
|Third Quarter                |  |      | 26.500 |     |  |   | 9.150  | 
|Fourth Quarter               |  |      | 23.740 |     |  |   | 10.000 | 

On March 1, 2002, the closing market price
of our common stock as reported on the Nasdaq was $26.89 per
share. There were approximately 143 holders of record of our
common stock on that date.

We have not paid or declared any dividends on our
common stock since our inception and anticipate that we will
retain our future earnings to finance the continuing development
of our business. The payment of any future dividends will be at
the discretion of our Board of Directors and will depend upon,
among other things, future earnings, the success of our business
activities, regulatory and capital requirements, our general
financial condition and general business conditions. In
addition, our current senior credit facility prohibits the
payment of dividends. Our Board of Directors does not expect to
declare cash dividends on our common stock in the near future.

13



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Item 6. Selected Consolidated
Financial Data

The following selected consolidated financial
data is qualified by reference to, and should be read in
conjunction with, our consolidated financial statements and
notes thereto included in Item 14(A) and the section
entitled Managements Discussion and Analysis of
Financial Condition and Results of Operations included in
Item 7. Historical results are not necessarily indicative
of the results to be expected in the future.

|                                            |         |                                       |         |                       |   |      |           |         |   |       |         |        |   |   |         |        |   |   |         |        | 
|------------------------------------------- | ------- | ------------------------------------- | ------- | --------------------- | - | ---- | --------- | ------- | - | ----- | ------- | ------ | - | - | ------- | ------ | - | - | ------- | ------ | 
|                                            |         |                                       |         |                       |   |      |           |         |   | Getty
|                                            |         |                                       |         | Communications plc   
|                                            |         | Getty Images, Inc.                    |         | (Predecessor Company)
|                                            |         |                                       |         |                      
|                                            |         |                                      
|                                            |         | Years Ended December 31,             
|                                            |         |                                      
|                                            |         | 2001                                  |         | 2000                  |   | 1999 |           | 1998(1) |   | 1997 
|                                            |         |                                       |         |                       |   |      |           |         |   |      
|                                            |         |                                      
|                                            |         | (In thousands, except per share data)
|Consolidated Statement of Operations
	Data: |         |                                       |         |                       |   |      |           |         |   |       |         |        |   |   |         |        |   |   |         |       
|Sales                                       |         | $                                     | 450,985 |                       |   | $    | 484,846   |         |   | $     | 247,840 |        |   | $ | 185,084 |        |   | $ | 100,797 |       
|Income (loss) before income taxes           |         |                                       | (98,662 | )                     |   |      | (164,151  | )       |   |       | (69,493 | )      |   |   | (32,873 | )      |   |   | 7,895   |       
|Net income (loss)                           |         |                                       | (95,312 | )                     |   |      | (169,334  | )       |   |       | (67,833 | )      |   |   | (36,383 | )      |   |   | 4,022   |       
|Net income (loss) per share                 |         |                                       |         |                       |   |      |           |         |   |       |         |        |   |   |         |        |   |   |         |       
|                                            | Basic   |                                       |         | (1.84                 | ) |      |           | (3.40   | ) |       |         | (1.94  | ) |   |         | (1.25  | ) |   |         | 0.11   | 
|                                            | Diluted |                                       |         | (1.84                 | ) |      |           | (3.40   | ) |       |         | (1.94  | ) |   |         | (1.25  | ) |   |         | 0.10   | 
|Shares used in computing per share amounts  |         |                                       |         |                       |   |      |           |         |   |       |         |        |   |   |         |        |   |   |         |       
|                                            | Basic   |                                       |         | 51,723                |   |      |           | 49,708  |   |       |         | 35,049 |   |   |         | 29,160 |   |   |         | 37,908 | 
|                                            | Diluted |                                       |         | 51,723                |   |      |           | 49,708  |   |       |         | 35,049 |   |   |         | 29,160 |   |   |         | 38,765 | 
|                                           
|Other Operating Data:                       |         |                                       |         |                       |   |      |           |         |   |       |         |        |   |   |         |        |   |   |         |       
|EBITDA(2)                                   |         | $                                     | 93,779  |                       |   | $    | 94,416    |         |   | $     | 34,998  |        |   | $ | 35,350  |        |   | $ | 19,347  |       
|Ratio of earnings to fixed charges(3)       |         |                                       | N/A     |                       |   |      | N/A       |         |   |       | N/A     |        |   |   | N/A     |        |   |   | 4.16    |       
|Deficiency of earnings to fixed charges(4)  |         | $                                     | 98,662  |                       |   | $    | 164,151   |         |   | $     | 69,493  |        |   | $ | 32,873  |        |   | $ |        |       
|                                           
|Consolidated Balance Sheet Data:            |         |                                       |         |                       |   |      |           |         |   |       |         |        |   |   |         |        |   |   |         |       
|Total assets                                |         | $                                     | 993,081 |                       |   | $    | 1,100,636 |         |   | $     | 939,569 |        |   | $ | 462,863 |        |   | $ | 171,638 |       
|Long-term debt, net of current maturities   |         |                                       | 256,215 |                       |   |      | 274,427   |         |   |       | 101,802 |        |   |   | 72,354  |        |   |   | 14,657  |       




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | This column reflects the combination of the
	consolidated financial statements of Getty Communications plc,
	our predecessor company, for the period January 1, 1998
	through February 9, 1998 and the companys
	consolidated financial statements for the period
	February 10, 1998 through December 31, 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | EBITDA is defined as earnings before income
	taxes, depreciation, amortization, interest, exchange gains and
	losses and, when applicable, integration costs and impairment of
	assets, loss on excess office space, restructuring costs, loss
	on impairment of investments, debt conversion expense,
	extraordinary items and other income and expenses. We believe
	that EBITDA provides investors and analysts with a measure of
	operating income unaffected by the financing and accounting
	effects of acquisitions and integration and restructuring
	activities, and assists in explaining trends in our operating
	performance. EBITDA should not be considered as an alternative
	to operating income as an indicator of our operating performance
	or to cash flows as a measure of our liquidity. EBITDA may not
	be comparable to other similarly titled measures used by other
	companies.
|   
|(3) | Ratio of earnings to fixed charges means the
	ratio of net income (before fixed charges and income taxes) to
	fixed charges, where fixed charges are the aggregate of
	interest, amortization of the costs related to debt and an
	allocation of rental charges to approximate equivalent interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) | Due to net losses incurred in 2001, 2000, 1999
	and 1998, the ratio of earnings to fixed charges in those years
	was less than 1:1. The company would have had to generate
	additional earnings in the amounts indicated in the table to
	have achieved a ratio of 1:1.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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Item 7.




Managements Discussion and Analysis
of Financial Condition and Results of Operations


The following should be read in conjunction
with our consolidated financial statements and the notes
thereto, Item 1. Business, Item 6.
Selected Consolidated Financial Data, and the other
financial information contained elsewhere and incorporated by
reference in this Annual Report. In the following discussion,
we, us and our refer to
Getty Communications plc for 1997, Getty Communications plc
combined with Getty Images, Inc. and subsidiaries (the company)
for 1998, and the company for 1999, 2000 and 2001.

The Private Securities Litigation Reform Act
of 1995 provides a safe harbor for forward-looking statements
made by or on behalf of Getty Images, Inc. We may, from time to
time, make written or oral statements that are
forward-looking, including statements contained in
this Annual Report on Form 10-K, the documents incorporated
herein by reference, and other filings with the Securities and
Exchange Commission. These statements are based on
managements current expectations, assumptions, estimates
and projections about Getty Images, Inc. and its industry and
are made on the basis of managements views as of the time
the statements are made. All statements, trends, analyses and
other information contained in this report relative to trends in
sales, gross margin, anticipated expense levels and liquidity
and capital resources, as well as other statements including,
but not limited to, words such as anticipate,
believe, plan, estimate,
expect, seek, intend and
other similar expressions, constitute forward-looking
statements. These forward-looking statements are not guarantees
of future performance and are subject to certain risks and
uncertainties that are difficult to predict. Accordingly, actual
results may differ materially from those anticipated or
expressed in such statements. Potential risks and uncertainties
include, among others, those set forth herein under
Managements Discussion and Analysis of Financial
Condition and Results of Operations, as well as
Factors That May Affect the Business. Except as
required by law, the company undertakes no obligation to update
any forward-looking statement, whether as a result of new
information, future events or otherwise. Readers, however,
should carefully review the factors set forth in other reports
or documents that the company files from time to time with the
Securities and Exchange Commission.

GENERAL

Overview

The company is a leading provider of imagery and
related products and services to businesses worldwide. We
pioneered the solution to aggregate and distribute visual
content and, since 1995, have brought many of the visual content
industrys leading collections under one centralized
corporate structure.

We provide our high quality, relevant imagery to
creative professionals at advertising agencies, graphic design
firms, corporations and film and broadcasting companies; press
and editorial customers involved in newspaper, magazine, book,
CD-ROM and online publishing; and corporate communications
departments and other business customers. By aggregating the
content of our various leading imagery collections on the
Internet and partnering with third party providers, we offer a
comprehensive and user-friendly solution for our customers
imagery and related product needs, including still and moving
images and related products and services.

We generate our revenue from granting rights to
use images and from providing related services. Revenue is
principally derived from a large number of relatively small
transactions involving granting rights to use single images,
video and film clips or CD-ROM products containing between 100
and 300 images. We also generate revenue from subscription or
bulk purchase agreements under which customers are provided
access to imagery online. We use a variety of distribution
platforms, including digital distribution via the Internet and
CD-ROMs as well as analog distribution of 35mm film, video and
analog transparencies. Price is generally determined by
resolution size and the extent of rights granted over the use of
the image or clip and can vary significantly across geographic
markets and customer groups.

Our cost of sales primarily consists of
commission payments to contributing photographers and
cinematographers. These suppliers are under contract with the
company and receive payments of up to 50% of the sales value,
depending on the type of product and where and how the product
is licensed. We own a significant number of the images in our
collections and these images do not require commission payments.
Cost of sales also includes, to the extent applicable, shipping
and handling costs for duplicate transparencies and the costs of

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CD-ROM production. As a result, our gross margin
is impacted by the mix of sales delivered digitally, sales of
company owned imagery, geographic distribution of sales and
collection sales mix.


For the company, EBITDA is defined as earnings
before income taxes, depreciation, amortization, interest,
exchange gains and losses and, when applicable, integration
costs and impairment of assets, loss on excess office space,
restructuring costs, loss on impairment of investments, debt
conversion expense, extraordinary items and other income and
expenses. This figure can more easily be calculated as gross
profit less selling, general and administrative expenses in the
years presented. We believe that EBITDA provides investors and
analysts with a measure of operating income unaffected by the
financing and accounting effects of acquisitions and integration
and restructuring activities, and assists in explaining trends
in our operating performance. EBITDA should not be considered as
an alternative to operating income as an indicator of our
operating performance or to cash flows as a measure of our
liquidity. EBITDA may not be comparable to other similarly
titled measures used by other companies.

Critical Accounting Policies and Estimates and
Assumptions

The preparation of financial statements in
conformity with accounting principles generally accepted in the
U.S. requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the revenues and
expenses reported during the period. Following are accounting
policies that management believes are both most important to the
portrayal of the companys financial condition and results
of operations and that require managements most difficult
judgments as a result of the need to make estimates and
assumptions about the effect of matters that are inherently
uncertain.

Income Taxes

Deferred income taxes, reflecting the impact of
temporary differences between financial and tax reporting and of
domestic tax loss carryforwards, are based on currently enacted
tax laws. Deferred tax assets are reduced by a valuation
allowance if, based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and
liabilities are classified into net current and net non-current
amounts, based on the balance sheet classification of the
related asset or liability.

As of December 31, 2001, the company had net
deferred tax assets of $65.1 million, net of a valuation
allowance of $12.8 million that was established in 2001.
The company has not generated taxable income from its U.S.
operations during recent years. It will be necessary to generate
taxable income from its primary U.S. operations of
approximately $158 million in order to utilize enough of
the tax loss carryforwards to realize the associated deferred
tax asset. As of December 31, 2001 the company has
completed its anticipated restructuring and integration actions
following several years of significant acquisitions of other
businesses and implemented cost reduction programs designed to
improve both U.S. and foreign levels of prospective taxable
income. Additionally, during 2002 the company will implement
tax-planning strategies that are intended to increase the ratio
of U.S. taxable income to worldwide taxable income. Management
believes it currently reasonable to estimate the results of
those actions for future periods and has computed the net
deferred tax asset at December 31, 2001 accordingly.
Although realization is not assured, management believes, based
on its current estimates of future taxable income for its U.S.
operations and tax-planning strategies, that it is more likely
than not that the net deferred tax assets will be realized
within a reasonable period of time and substantially prior to
the expiration of the net operating loss carryforwards. In the
event that actual results differ from managements
expectations, the valuation allowance could materially change,
directly impacting our financial position and results of
operations. If the company were able to use more of the deferred
tax asset than the current net balance, a portion of the
valuation allowance would be returned to income in the period
that such a determination was made. If the company were unable
to utilize the net deferred tax asset balance, a greater
valuation allowance would be recorded and charged to expense in
the period of that determination, which could be in advance of
the expiration of the loss carryforwards.

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Foreign Exchange

Foreign exchange gains and losses that arise from
the revaluation of foreign-currency denominated balances, other
than long-term intercompany balances, are included in the
results of operations for the period in which the exchange rate
changes. Foreign exchange gains and losses that arise from the
revaluation of intercompany balances that are of a long-term
investment nature, for which settlement is not planned or
anticipated in the foreseeable future, are reported and
accumulated in other comprehensive loss in the Consolidated
Balance Sheet. Should the company reclassify and settle a
portion of these intercompany balances at some point due to
domestic cash needs, these intercompany balances would be
redesignated as short-term, and all future revaluation gains and
losses would be taken through the income statement. In addition,
should the company sell one of the subsidiaries with which it
has a long-term intercompany balance, the accumulated other
comprehensive income or loss associated with that entity would
be included in the calculation of the gain or loss on the sale
of the subsidiary.

Foreign exchange losses of $8.0 million and
$14.4 million for the years ended December 31, 2001
and 2000, respectively, and gains of $2.7 million for the
year ended December 31, 1999, arose from the revaluation of
intercompany balances deemed to be long-term in nature and were
thus excluded from the Consolidated Statement of Operations and
included in the Consolidated Balance Sheet as a component of
other comprehensive loss.

Goodwill and Identifiable
Intangibles

Intangible assets comprise goodwill and
identifiable intangibles. Goodwill is the excess of the purchase
price and related costs over the fair value of net assets
acquired in business combinations. Identifiable intangibles
consist mainly of customer lists, covenants not to compete,
photographer contracts and trademarks and tradenames. The net
balance of goodwill and identifiable intangibles at
December 31, 2001 was $636.5 million. Identifiable
intangibles are amortized on a straight-line basis over their
estimated useful lives, ranging from two to 10 years.
Goodwill arising from business combinations prior to
July 1, 2001 has been amortized over its estimated useful
lives, ranging from three to 30 years. Amortization of
goodwill for 2001 was $66.8 million. Effective January 1,
2002, the company will adopt Statement of Financial Accounting
Standards (SFAS) 142, Goodwill and Other Intangible
Assets. This accounting pronouncement requires us to cease
amortization of goodwill and alternatively test the net goodwill
balance for impairment annually, as well as under the following
circumstances:



| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a significant decrease in the market price of
	Getty Images common stock;                                                                                                       
|
| |  | a significant adverse change in the extent or
	manner in which significant assets of the company are being used
	or in their physical condition;                                 
|
| |  | a significant adverse change in legal factors or
	in the business climate that could affect the value of the
	company, including an adverse action or assessment by a
	regulator;
|
| |  | a current-period operating or cash flow loss
	combined with a history of operating or cash flow losses or a
	projection or forecast that demonstrates continuing losses;         
|
| |  | a current expectation that, more likely than not,
	a subsidiary that constitutes a business will be sold or
	otherwise disposed of.                                              

Should the company determine at some point in the
future that all or a portion of the goodwill balance is
impaired, the company would be required to write off the
impaired portion through the income statement in the period of
that determination.

Certain Assets

The useful lives of certain of the companys
assets, including deferred catalogs and capitalized image
duplication and digitization costs (included within property and
equipment), are based upon the estimated period over which the
assets are expected to provide benefit to the company. This
future benefit is inherently uncertain, and therefore, the lives
of these assets require managements most difficult
judgments. The balance of deferred catalogs at December 31,
2001 was $8.3 million, and is being amortized over a
remaining useful

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life of less than one year. All catalog costs
incurred during the fourth quarter of 2001 and beyond have been
and will be expensed as incurred. The balance of image
duplicates and digitization, net of accumulated depreciation,
was $39.6 million at December 31, 2001, and is being
depreciated over useful lives of two to four years. Duplication
costs associated with analog images are depreciated over two
years, while duplication and digitization associated with
digital images are depreciated over four years. Should the
company determine at some point in the future that the useful
lives of these assets are shorter than previously determined,
the company would be required to accelerate the depreciation, or
possibly write off the impaired portion, of the undepreciated
balance of such assets.


Acquisitions

We acquired the agent of The Image Bank (TIB) in
Australia and certain assets of the TIB agent in Brazil in 2001,
neither of which were material to the financial statements.
During 2000 and 1999, the company acquired all of the
outstanding stock of various companies in the visual content
market. All acquisitions were accounted for as purchase business
combinations.

VCG

On March 22, 2000, the company acquired
Visual Communications Group Holdings, Ltd., VCG Holdings LLC,
and Definitive Stock, Inc. from their parent, Visual
Communications Group B.V. (a subsidiary of United News &
Media plc). The company also acquired Visual Communications
Group Deutschland GmbH from its parent United News & Media
plc. These acquired companies are collectively referred to as
VCG, and provide stock photography, specialty image collections
and news and feature photography internationally. The total
purchase price was $226.9 million, including
$204.7 million in cash, $18.7 million in debt assumed
and paid and $3.5 million in related transaction costs. Net
assets of $1.1 million were acquired, as well as
$25.8 million in identifiable intangibles that are
amortized over their useful lives ranging from five to
10 years. The remaining goodwill of $200.0 million was
assigned a 10 year life.

Other 2000 Acquisitions

During 2000, the company also made the following
acquisitions with cash, common stock, and/or exchangeable
preferred stock exchangeable into common stock:
i/us Corporation, an Ontario corporation and provider of
specialty graphics and publishing tools to website developers,
designers and graphics users; Cass & Cass Ltd. (d/b/a
TIB-U.K.), the TIB agent in the United Kingdom (U.K.); four
additional TIB agents in the United States, Canada and Sweden;
and a stock photo agency in Australia. The aggregate purchase
price, net assets acquired and related goodwill, respectively,
were $28.5 million, $0.6 million, and
$27.9 million.

Art.com

On May 4, 1999, Getty Images acquired
Art.com, a leading provider of framed and unframed art and
art-related products on the Internet. The total purchase price
was $135.0 million, including $10.0 million in cash,
$115.7 million in common stock, $5.9 million related
to stock options exchanged and $3.4 million in related
transaction costs. Net assets of $13.1 million were
acquired, leaving goodwill of $121.9 million that was
assigned a three year life. After a cash flow analysis was
performed in the fourth quarter of 2000 for Art.com and a
related business that operated as a division of Art.com, the
company determined that the long-lived assets related to these
businesses were impaired. The company wrote off
$53.4 million of Art.com goodwill, reducing the carrying
value of the remaining long-lived assets to their estimated fair
value. On May 17, 2001, the company terminated the
operations of Art.com.

The Image Bank

On November 24, 1999, the company acquired
The Image Bank (TIB), a leading provider of visual content to
the advertising design, publishing, corporate, broadcast and
editorial markets. The total purchase price was
$193.3 million, including $183.2 million in cash and
$10.1 million in related transaction costs. Net assets of

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$1.9 million were acquired, as well as
$20.1 million in identifiable intangibles that are
amortized over their useful lives ranging from five to
10 years. The remaining goodwill of $171.3 million was
assigned a 10 year life.


Other 1999 Acquisitions

During 1999, the company also made the following
acquisitions with cash, common stock, and/or exchangeable
preferred stock exchangeable into common stock: EyeWire, a
provider of royalty-free photography, video, typefaces, software
and other design resources; Online USA, an agency specializing
in the sourcing and distribution of celebrity imagery over the
Internet; American Royal Arts, a leading provider of animation
art; and Newsmakers, a digital news agency covering events, news
and celebrity photography. The aggregate purchase price, net
liabilities acquired and related goodwill, respectively, were
$45.1 million, $2.7 million, and $47.8 million.

Loss on Abandoned and Subleased
Property

During the fourth quarter of 2001, the company
re-evaluated its worldwide facilities requirements and
identified excess space in New York, Seattle, San Francisco,
Santa Monica, London and Munich. The company recorded a loss of
$11.6 million during the fourth quarter to account for
minimum rental payments and costs of subleasing the properties
over the remaining lives of the leases, net of expected sublease
income. Approximately $7.8 million of this charge remains
in accrued expenses at December 31, 2001, and will be paid
out in future periods through 2007.

Integration Costs and Loss on Impairment of
Assets

In 1999, the company commenced integration of all
of the companys businesses after the acquisition of The
Image Bank, Inc. and Art.com. Integration actions included: the
termination of employees; the abandonment of facilities and
assets; the review of processes and resultant actions to
implement processes that would benefit the company going
forward; contract re-negotiations and terminations; and
determination of what functions and facilities should be
combined, for which consulting and other professional assistance
was sought.

Subsequent to the VCG acquisition in 2000,
management determined that further integration of the
companys operations and facilities was necessary to
eliminate duplicate facilities and functions and to take
advantage of opportunities for further leveraging cost and
technology platforms. Integration actions included: the
termination of approximately 250 employees; abandonment of
23 sales facilities and related assets; the review of
processes and resultant actions to implement processes that
would benefit the company going forward; and determination of
what functions and facilities should be combined, for which
consulting and other professional assistance was sought.

The costs associated with these significant
integration projects were expensed as incurred as follows:

|                                        |       |                          |       |       |  |      |       |        |  |   |       |       | 
|--------------------------------------- | ----- | ------------------------ | ----- | ----- |  | ---- | ----- | ------ |  | - | ----- | ----- | 
|                                        |       |                         
|                                        |       | Years Ended December 31,
|                                        |       |                         
|                                        |       | 2001                     |       | 2000  |  | 1999
|                                        |       |                          |       |       |  |     
|                                        |       |                         
|                                        |       | (In thousands)          
|Employee terminations                   |       | $                        | 3,025 |       |  | $    | 6,622 |        |  | $ |      |      
|Abandonment of facilities               |       |                          | 1,540 |       |  |      | 3,621 |        |  |   |      |      
|Process review                          |       |                          | 417   |       |  |      | 3,593 |        |  |   | 1,436 |      
|Consulting and other professional fees  |       |                          | 223   |       |  |      | 2,899 |        |  |   | 630   |      
|Contract re-negotiation and termination |       |                          | 18    |       |  |      | 1,662 |        |  |   | 2,494 |      
|Other                                   |       |                          | 45    |       |  |      | 240   |        |  |   | 323   |      
|                                        |       |                          |       |       |  |      |       |        |  |   |       |      
|                                        | Total |                          | $     | 5,268 |  |      | $     | 18,637 |  |   | $     | 4,883 | 
|                                        |       |                          |       |       |  |      |       |        |  |   |       |      

After a cash flow analysis was performed in the
fourth quarter of 2000 for Art.com and a related business that
operated as a division of Art.com, the company determined that
the long-lived assets related to these businesses were impaired.
The company wrote off $53.4 million of Art.com goodwill,
reducing the carrying value of the remaining long-lived assets
to their estimated fair value.

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On May 17, 2001, the company terminated the
operations of Art.com and recorded integration costs of
approximately $2.1 million, including severance costs and
costs to terminate the operations and exit the facilities of
Art.com, as well as a loss on the impairment of related assets
of $6.5 million.

Also during the second quarter of 2001, the
company recorded integration costs of $0.9 million,
including severance costs and facilities exit costs, relating
primarily to the planned closure of the Calgary office and
consolidation of those operations into other offices.

The integration costs associated with the closure
of Art.com and the Calgary office were as follows:

|                          |       |                              |     |         |  |       |     |     |  |   |       |       | 
|------------------------- | ----- | ---------------------------- | --- | ------- |  | ----- | --- | --- |  | - | ----- | ----- | 
|                          |       |                             
|                          |       | Year Ended December 31, 2001
|                          |       |                             
|                          |       | Art.com                      |     | Calgary |  | Total
|                          |       |                              |     |         |  |      
|                          |       |                             
|                          |       | (In thousands)              
|Employee terminations     |       | $                            | 956 |         |  | $     | 719 |     |  | $ | 1,675 |      
|Abandonment of facilities |       |                              | 701 |         |  |       | 174 |     |  |   | 875   |      
|Other                     |       |                              | 430 |         |  |       |    |     |  |   | 430   |      
|                          |       |                              |     |         |  |       |     |     |  |   |       |      
|                          | Total |                              | $   | 2,087   |  |       | $   | 893 |  |   | $     | 2,980 | 
|                          |       |                              |     |         |  |       |     |     |  |   |       |      

Restructuring Costs

During the third quarter of 2001, management
announced that in response to further weakening in the U.S. and
global markets served by Getty Images, the company would reduce
its workforce by approximately 300 people worldwide across
multiple functions. The company recorded $4.5 million in
restructuring costs for a planned 320 employee terminations once
management had committed the company to a formal plan of
termination and had communicated to all employees the benefit
arrangements they would receive if terminated. The company also
incurred $0.3 million in other related restructuring costs.

As of December 31, 2001, 280 employees had
been terminated and approximately $4 million in termination
costs had been paid. The remaining 40 employees will exit the
company by the end of the first quarter of 2002. Management
expects a reduction in staff costs of approximately $15 to
$20 million per year when all planned employee terminations
have been completed.

Debt Conversion Expense

In 2000, the company incurred debt conversion
expense of $6.7 million related to premiums paid when we
induced the early retirement of approximately $62.3 million
of our then outstanding $75.0 million of 4.75% convertible
subordinated notes due 2003.

Loss on Impairment of Investments

During the second quarter of 2001, the company
wrote off its minority cost basis investment in two small
private companies after analyses showed that they suffered other
than temporary declines in fair value. These analyses were based
upon review of quantitative and qualitative information provided
to management, which indicated that these companies would be
unable to return the carrying value of Getty Images
investments. The total of these two impairment charges was
$4.2 million.

Extraordinary Item

In January 2000, a subsidiary of the company
retired $3.3 million of debt at a discount prior to
maturity. This resulted in an extraordinary gain of
$0.4 million, net of income taxes of $0.3 million, or
$0.01 per share.

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RESULTS OF OPERATIONS

2001 Results of Operations Compared to 2000
Results of Operations

Below are selected financial highlights of the
companys results of operations for the years shown:

|                                             |  |                                       |          |            |  |      |       |            |  |   |          |   |  |  |       |  
|-------------------------------------------- |  | ------------------------------------- | -------- | ---------- |  | ---- | ----- | ---------- |  | - | -------- | - |  |  | ----- | -
|                                             |  |                                      
|                                             |  | Years Ended December 31,             
|                                             |  |                                      
|                                             |  | 2001                                  |          | % of Sales |  | 2000 |       | % of Sales
|                                             |  |                                       |          |            |  |      |       |           
|                                             |  |                                      
|                                             |  | (In thousands, except percentages and
|                                             |  | per share amounts)                   
|Sales                                        |  | $                                     | 450,985  |            |  |      | 100.0 | %          |  | $ | 484,846  |   |  |  | 100.0 | %
|Gross profit                                 |  |                                       | 328,595  |            |  |      | 72.9  |            |  |   | 344,181  |   |  |  | 71.0  |  
|Selling, general and administrative expenses |  |                                       | (234,816 | )          |  |      | (52.1 | )          |  |   | (249,765 | ) |  |  | (51.5 | )
|Amortization                                 |  |                                       | (80,775  | )          |  |      | (17.9 | )          |  |   | (118,663 | ) |  |  | (24.5 | )
|Depreciation                                 |  |                                       | (59,507  | )          |  |      | (13.2 | )          |  |   | (49,476  | ) |  |  | (10.2 | )
|Income tax (expense) benefit                 |  |                                       | 3,350    |            |  |      | 0.7   |            |  |   | (5,567   | ) |  |  | (1.1  | )
|Net loss                                     |  |                                       | (95,312  | )          |  |      | (21.1 | )          |  |   | (169,334 | ) |  |  | (34.9 | )
|Net loss per share                           |  |                                       | (1.84    | )          |  |      |      |            |  |   | (3.40    | ) |  |  |      |  
|                                            
|EBITDA                                       |  |                                       | 93,779   |            |  |      | 20.8  |            |  |   | 94,416   |   |  |  | 19.5  |  

Net loss and net loss per share

The company recognized a net loss of
$95.3 million or $1.84 per share for the year ended
December 31, 2001, as compared to a net loss of
$169.3 million or $3.40 per share in 2000. Excluding the
effects of an extraordinary item, the company recognized net
losses of $169.7 million or $3.41 per share for 2000. There
were no extraordinary items recorded in 2001.

Sales

Consolidated sales of $451.0 million for
2001 declined $33.8 million or 7.0% from sales of
$484.8 million in 2000. The decline in Art.com sales in
2001 was approximately $10 million, while VCG sales for the
first quarter of 2000 as an independent entity were
approximately $20 million. The net effect on sales of these
acquired and disposed entities was an approximate
$10 million increase in sales from 2000 to 2001. Excluding
the effect of these acquired and disposed entities, sales
declined approximately $44 million or 9% from 2000 to 2001.
This sales decrease reflected mainly volume decreases, offset in
part by sales price increases. The company experienced declines
in many geographic areas, particularly in the U.S., where sales
declined approximately $29 million or 13%, and in the U.K.,
where sales declined approximately $5 million or 7%
(excluding the effects of Art.com and VCG).

Sales for 2001 were lower than expected across
nearly all of the companys collections and geographies,
due mainly to the continual worldwide decline in marketing and
advertising spending as a result of economic conditions, the
companys internal focus on integration of acquired
businesses and significant system conversions, and the terrorist
attacks on the U.S. on September 11, 2001. Management does
not expect the economy, either domestic or abroad, to improve
dramatically during 2002.

Gross Profit and Gross Margin

The companys gross profit and gross margin
were $328.6 million and 72.9%, respectively, for the year
ended December 31, 2001, as compared to gross profit and
gross margin of $344.2 million and 71.0%, respectively, for
the same period in 2000. The increase in the gross margin in the
current year was due to a continuing sales mix shift to higher
margin digitally delivered sales and sales of company owned
imagery.

Selling, General and Administrative
Expenses

Selling, general and administrative expenses were
$234.8 million or 52.1% of sales in 2001, as compared
$249.8 million or 51.5% of sales in 2000. The dollar
decline resulted primarily from lower advertising and marketing
costs and headcount reductions.

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As described in Note 2 to the consolidated
financial statements, effective October 1, 2001, the costs
of producing image marketing catalogs are expensed as incurred
rather than deferred and amortized. This change was required
because our new financial information systems no longer permit
us to directly associate image revenue with specific catalogs.
Selling, general and administrative expenses for 2001 include
$3.9 million of direct catalog production costs incurred in
the fourth quarter and $8.8 million of amortization of
deferred catalog costs incurred in the first three quarters of
the year, resulting in a total charge to selling, general and
administrative expenses in 2001 of $12.7 million.
Amortization of $6.7 million for the fourth quarter is
included in amortization expense because the costs of new
catalog production are now included in selling, general and
administrative expenses. Selling, general and administrative
expenses for 2000 include $10.5 million of amortization of
deferred catalog costs.

The company is committed to managing its selling,
general and administrative expenses as it continues to integrate
and consolidate its businesses and implement new and
standardized business systems. As discussed above, management
expects a reduction in staff costs of approximately $15 to
$20 million per year when all planned employee terminations
have been completed.

EBITDA

EBITDA for 2001 was $93.8 million or 20.8%
of sales, a dollar decline from EBITDA of $94.4 million or
19.5% of sales for 2000. EBITDA margin increased, however, due
to a larger increase in profit margin than in selling, general
and administrative expenses as a percentage of sales.

Amortization

Amortization decreased to $80.8 million in
2001 from $118.7 million in 2000, due mainly to the write
off of Art.com goodwill (previously amortized over three years)
in the fourth quarter of 2000, offset in part by the inclusion
of $6.7 million of catalog amortization in 2001, as
described above under selling, general and administrative
expenses. The balance of the deferred catalogs of
$8.3 million will be amortized in 2002.

In accordance with SFAS 142, the company will no
longer amortize goodwill beginning January 1, 2002, but
will continue to amortize identifiable intangible assets. In
addition, certain identifiable intangible assets will be
reclassified as goodwill under this new pronouncement and will
no longer be amortized. Management expects that the amortization
of intangible assets will be approximately $6 million for 2002,
based on unamortized balances at December 31, 2001. Any
additional acquisitions involving intangibles could materially
increase this amount.

Depreciation

Depreciation expense increased to
$59.5 million in 2001 from $49.5 million in 2000. The
increase was primarily related to business acquisitions during
2000, the continued development of technology assets related to
our Web-based sales strategy and implementation of new sales
order processing, customer database management, finance and
accounting systems in 2001. In addition, the figure for 2001
includes an adjustment of approximately $2.5 million
relating to the shortening of the depreciable lives of legacy
software systems upon conversion to new finance and accounting
systems in the fourth quarter. Management expects depreciation
expense in 2002 to exceed that of 2001 as a result of increased
technology investments.

Income Taxes

The company recorded an income tax benefit of
$3.4 million in 2001 as compared to income tax expense of
$5.6 million in 2000. Excluding the effect of items that
are not tax deductible, including amortization of goodwill and
certain reserves and valuation allowances, the companys
effective tax rates were 38.8% and 39.2% in 2001 and 2000,
respectively. Fluctuations in the effective tax rate were due to
variations in the profit mix and tax rates in the countries in
which we operated, the effect of debt conversion costs and loss
on impairment of long-lived assets that were not fully tax
deductible, and the establishment of a valuation allowance in
2001.

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As of December 31, 2001, the company had net
deferred tax assets of $65.1 million, net of a valuation
allowance of $12.8 million. Although realization is not
assured, management believes, based on its current estimates of
future taxable income and tax-planning strategies, that it is
more likely than not that the net deferred tax assets will be
realized.

2000 Results of Operations Compared to 1999
Results of Operations

Below are selected financial highlights of the
companys results of operations for the years shown:

|                                             |  |                                   |          |            |  |      |       |            |  |   |          |   |  |  |       |  
|-------------------------------------------- |  | --------------------------------- | -------- | ---------- |  | ---- | ----- | ---------- |  | - | -------- | - |  |  | ----- | -
|                                             |  |                                  
|                                             |  | Years Ended December 31,         
|                                             |  |                                  
|                                             |  | 2000                              |          | % of Sales |  | 1999 |       | % of Sales
|                                             |  |                                   |          |            |  |      |       |           
|                                             |  |                                  
|                                             |  | (In thousands, except percentages
|                                             |  | and per share amounts)           
|Sales                                        |  | $                                 | 484,846  |            |  |      | 100.0 | %          |  | $ | 247,840  |   |  |  | 100.0 | %
|Gross profit                                 |  |                                   | 344,181  |            |  |      | 71.0  |            |  |   | 180,576  |   |  |  | 72.9  |  
|Selling, general and administrative expenses |  |                                   | (249,765 | )          |  |      | (51.5 | )          |  |   | (145,578 | ) |  |  | (58.7 | )
|Amortization                                 |  |                                   | (118,663 | )          |  |      | (24.5 | )          |  |   | (64,330  | ) |  |  | (26.0 | )
|Depreciation                                 |  |                                   | (49,476  | )          |  |      | (10.2 | )          |  |   | (25,670  | ) |  |  | (10.4 | )
|Income tax (expense) benefit                 |  |                                   | (5,567   | )          |  |      | (1.1  | )          |  |   | 1,660    |   |  |  | 0.7   |  
|Net loss                                     |  |                                   | (169,334 | )          |  |      | (34.9 | )          |  |   | (67,833  | ) |  |  | (27.4 | )
|Net loss per share                           |  |                                   | (3.40    | )          |  |      |      |            |  |   | (1.94    | ) |  |  |      |  
|                                            
|EBITDA                                       |  |                                   | 94,416   |            |  |      | 19.5  |            |  |   | 34,998   |   |  |  | 14.1  |  

Net loss and net loss per share

The company recognized a net loss of
$169.3 million or $3.40 per share for the year ended
December 31, 2000, as compared to a net loss of and
$67.8 million or $1.94 per share in 1999. Excluding the
effects of extraordinary items discussed above, the company
recognized net losses of $169.7 million or $3.41 per share
for 2000. There were no extraordinary items recorded in 1999.

Sales

Consolidated sales of $484.8 million for
2000 grew $237.0 million or 96% over sales of
$247.8 million in 1999. This growth was experienced mainly
in sales to customers in North America and Europe, which
increased $149.7 million or 108% and $79.0 million or
84%, respectively.

Sales growth in 2000 was realized across all
collections, particularly VCG, Stone, TIB Stills and Film, which
grew $57.8 million, $42.8 million, $34.8 million
and $26.9 million, respectively. Sales in VCG, TIB Stills
and Film increased mainly due to significantly lower or no sales
in the prior year due to acquisition of these companies late in
1999 or in 2000. Stone, a worldwide provider of contemporary
stock photography, experienced growth due mainly to increased
customer usage of e-commerce as a means of selecting and taking
delivery of images. The increase in Stone revenues was primarily
volume based but does reflect the effects of price increases.

Gross Profit and Gross Margin

The companys gross profit and gross margin
were $344.2 million and 71.0%, respectively, for 2000, as
compared to gross profit and gross margin of $180.6 million and
72.9%, respectively, for 1999. The decrease in gross margin in
2000 was due to lower gross margins at VCG, acquired in March of
2000, and at Art.com. These decreases were partially offset by
increases resulting from a continuing sales mix shift to
digitally delivered sales and a higher sales mix of company
owned imagery.

Selling, General and Administrative
Expenses

Selling, general and administrative expenses were
$249.8 million or 51.5% of sales in 2000, as compared to
$145.6 million or 58.7% of sales in 1999. The majority of
the dollar increase was due to the inclusion of TIB-U.K., VCG
and TIB in the consolidated results of operations from the dates
of acquisition. Additional

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contributing factors included advertising and
marketing expenses associated with new websites, increased
investment in management and new sales offices, and costs
associated with the development of new technology products and
new business systems, particularly those related to e-commerce,
that were not capitalized. Selling, general and administrative
expenses declined as a percentage of sales over the same period
due to operational efficiencies gained through our restructuring
and integration efforts. During 2000, we closed 15 offices
and eliminated over 400 positions.


EBITDA

EBITDA for 2000 was $94.4 million or 19.5%
of sales, an increase of 170% over EBITDA of $35.0 million
or 14.1% of sales for 1999. Our continued drive to integrate our
businesses resulted in a significant increase in the EBITDA
margin in 2000, as selling, general and administrative expenses
declined as a percentage of sales.

Amortization

Amortization increased to $118.7 million in
2000 from $64.3 million in 1999 due to the inclusion of
intangible assets arising from additional acquisitions.

Depreciation

Depreciation expense increased to
$49.5 million in 2000 from $25.7 million in 1999. The
increase was primarily related to business acquisitions during
2000 and 1999, together with increased capital expenditures
related to the continued development of technology assets
related to our Web-based sales strategy and an increase in our
capitalized costs of image digitization.

Income Taxes

The company recorded income tax expense of
$5.6 million in 2000 as compared to a benefit of
$1.7 million in 1999. Excluding the effect of amortization
of goodwill, debt conversion expense and the loss on impairment
of long-lived assets, which are largely non-tax deductible, the
companys effective tax rates were 39.2% and 39.4% in 2000
and 1999, respectively. Fluctuations in the effective tax rate
were due to variations in the profit mix and tax rates in the
countries in which we operated, as well as the effect of debt
conversion costs and loss on impairment of long-lived assets
that were not fully tax deductible.

FINANCIAL CONDITION

At December 31, 2001, the company held
$46.2 million in cash and cash equivalents and had credit
facilities under a $100.0 million bank line of credit, of
which $80.0 million was unused.

Working Capital

At December 31, 2001, the companys
working capital was $13.3 million, a decrease of
$45.9 million from working capital of $59.2 million at
the end of 2000. Current assets decreased $51.2 million
during 2001, with declines in every category except deferred
taxes. Current liabilities decreased $5.3 million during
2001, with the current portion of long-term debt increasing and
accounts payable and income taxes payable decreasing.

Cash and cash equivalents decreased
$19.7 million during 2001. Significant uses of cash
included $72.7 million in capital expenditures,
$14.8 million in interest payments, $8.8 million in
tax payments and approximately $8 million in employee
severance payments. Significant cash inflows included
$7.1 million in proceeds from the issuance of common stock,
as well as $45.3 million of cash provided by operating
activities, net of interest, tax and severance payments above.

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Liquidity and Capital Resources

The table below illustrates payments for the
following five years under the companys significant
contractual obligations as of December 31, 2001. The table
assumes that all debt is repaid upon maturity and that interest
on variable rate debt will be charged at 4% in 2002.

|                          |  |                |        |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | - |  | - | ------ | -
|Contractual Obligations   |  | 2002           |        | 2003 |  | 2004 |        | 2005 |  | 2006
|                          |  |                |        |      |  |      |        |      |  |     
|                          |  |               
|                          |  | (In thousands)
|Debt  principal payments |  | $              | 20,000 |      |  | $    | 12,653 |      |  | $    |       |   |  | $ |       |   |  | $ |       |  
|Debt  interest payments  |  |                | 13,768 |      |  |      | 12,750 |      |  |      | 12,500 |   |  |   | 12,500 |   |  |   | 12,500 |  
|Operating lease payments  |  |                | 22,353 |      |  |      | 20,771 |      |  |      | 20,075 |   |  |   | 20,050 |   |  |   | 20,311 |  
|Sublease receipts         |  |                | (6,314 | )    |  |      | (5,628 | )    |  |      | (5,215 | ) |  |   | (5,103 | ) |  |   | (5,103 | )

The companys short-term debt at
December 31, 2001, consisted mainly of $20.0 million
in borrowings under a $100.0 million senior credit facility
with HSBC Investment Bank plc (HSBC). Interest is charged at a
variable rate equal to LIBOR, plus associated costs and a margin
ranging from 1.00% to 1.75% per year. The weighted average
interest rate on this facility in 2001 was 5.74%. The proceeds
of the senior credit facility are available for general
corporate purposes, including acquisitions and working capital
requirements. An annual commitment fee of .675% is charged on
the unused portion of the facility. As this facility expires in
October 2002, the company is negotiating a replacement facility
to be in place prior to expiration of the current facility.
There is no guarantee that the company will be able to negotiate
a facility on favorable terms, or at all.

Getty Images unconditionally guarantees all of
the obligations under the senior credit facility, and the
obligations of its subsidiaries that are parties to the credit
agreement. These obligations are collateralized by pledges of
shares of some of its subsidiaries, a lien on all of the
companys assets and the assets of the companys
subsidiaries that are parties to the credit agreement, and a
pledge of trademarks from two of the companys
subsidiaries. The credit agreement also requires compliance with
debt covenants, some of which were amended during 2001,
including prohibition of the payment of dividends, prohibition
of the repayment of outstanding subordinated notes prior to
maturity, maintenance of minimum ratios of EBITDA (as defined in
the agreement) to interest payable and EBITDA to total
borrowings, as well as the trigger of immediate repayment if the
company fails to make payment obligations, breaches the
agreement or experiences a change in the ownership of Getty
Images or its subsidiaries. Management believes that the company
is in compliance with such covenants for the years ended
December 31, 2001 and 2000.

The $12.7 million of 4.75% convertible
subordinated notes due in May 2003 are convertible by the holder
into common stock at $28.51 per share, subject to adjustments in
certain circumstances, at any time on or before June 1,
2003, and are subordinated to senior indebtedness of the company
and to all debt and liabilities, including trade payables and
lease obligations, if any, of the companys subsidiaries.
The company may redeem the notes, in whole or in part, at
101.90% until May 31, 2002 or at 100.95% beginning on
June 1, 2002, however, the current senior credit facility
with HSBC prohibits the repayment of outstanding subordinated
notes prior to maturity. Interest on the notes is payable June 1
and December 1 of each year.

On March 13, 2000, the company issued
$250.0 million of 5% convertible subordinated notes due
March 15, 2007. These notes are convertible by the holder
into common stock at $61.08 per share, subject to adjustments in
certain circumstances, at any time on or before March 15,
2007, and are subordinated to senior indebtedness of the company
and to all debt and liabilities, including trade payables and
lease obligations, if any, of the companys subsidiaries.
The 5% notes rank equal in right of payment to the
$12.7 million of 4.75% notes. The company may redeem the 5%
notes, in whole or in part, at any time on or after
March 20, 2003 at specified redemption prices ranging from
102.857% beginning on March 20, 2003 to 100.714% beginning
on March 15, 2006, however, the current senior credit
facility with HSBC prohibits the repayment of outstanding
subordinated notes prior to maturity. Interest on the notes is
payable on March 15 and September 15 of each year.

Existing cash balances, cash flows provided by
operating activities and borrowing capacity are expected to be
sufficient to fund operations, long-term debt requirements,
capital expenditures and lease commitments for at least the
following 12 months. These sources of liquidity, however,
could be impacted by any of the risk factors discussed in
Item 1, Section I of this document.

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Recent Accounting Pronouncements

Effective July 1, 2001, the company adopted
SFAS 141, Business Combinations. This statement
requires the use of the purchase method of accounting for all
new business combinations, requires that intangible assets be
recorded separate from goodwill only if they are contractual or
legal rights or if they are separable, and requires additional
disclosures. The adoption of this statement does not materially
affect the companys reported results of operations,
financial position or cash flows. The statement does, however,
more narrowly define identifiable intangible assets, thus
limiting the allocation of purchase price on future acquisitions
to such intangibles, expanding the allocation of purchase price
to goodwill and causing the reclassification of certain assets
from identifiable intangibles to goodwill. This will have the
effect of decreasing amortization expense associated with any
future acquisitions.

Effective January 1, 2002, the company will
adopt SFAS 142, Goodwill and Other Intangible
Assets. This pronouncement will change the accounting for
goodwill from an amortization method to an impairment-only
approach. Thus, amortization of goodwill, including goodwill
recorded in past business combinations, will cease. Initial
impairment tests are required to be completed by the end of the
first quarter of 2002 for intangible assets and by the end of
2002 for goodwill. Any loss resulting from these initial
impairment tests will be recognized as the effect of a change in
accounting principle. Annual impairment tests are required every
year thereafter, with any impairment recognized as a loss on
impairment of assets, included in the calculation of operating
income. Management has not yet completed an evaluation of the
complete effect this standard will have on the companys
consolidated financial statements. However, based on unamortized
balances of identifiable intangibles at December 31, 2001,
amortization related to intangible assets will be approximately
$68 million lower in 2002 than in 2001, due to the
cessation of goodwill amortization. Any additional acquisitions
involving intangibles could materially increase this amount. In
addition, the company could incur significant charges as a
result of the impairment tests.

Effective January 1, 2002, the company will
adopt SFAS 144, Accounting for the Impairment or Disposal
of Long-Lived Assets. This pronouncement requires one
model for accounting for long-lived assets to be disposed of and
broadens the presentation of discontinued operations to include
more transactions. This accounting pronouncement does not
immediately impact the company, however, it could cause any
future long-lived asset disposals to be accounted for or
presented in a different manner than in the past.

Item 7A. Quantitative and
Qualitative Disclosures About Market Risk

The company is exposed to a variety of market
risks, primarily related to changes in interest rates and
foreign currency exchange rates.

Interest Rate Risk

Our exposure to market rate risk for changes in
interest rates relates primarily to our debt instruments, the
majority of which are fixed rate borrowings. The book values,
before unamortized debt issuance costs, and respective fair
values of material long-term debt obligations are shown in the
table below:

|                      |  |                                    |        |              |  |      |        |       |  |      |         |      |  |   |         |   |  |   |         |   |  |   |         |  
|--------------------- |  | ---------------------------------- | ------ | ------------ |  | ---- | ------ | ----- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                      |  |                                    |        |              |  |      |        |       |  |     
|                      |  |                                    |        | Fair Value  
|                      |  | Maturities                         |        | December 31,
|                      |  |                                    |        |             
|Debt                  |  | 2002                               |        | 2003         |  | 2007 |        | Total |  | 2001 |         | 2000
|                      |  |                                    |        |              |  |      |        |       |  |      |         |     
|                      |  |                                   
|                      |  | (In thousands, except percentages)
|Fixed rate            |  | $                                  |       |              |  | $    | 12,653 |       |  | $    | 250,000 |      |  | $ | 262,653 |   |  | $ | 219,947 |   |  | $ | 208,104 |  
|Average interest rate |  |                                    |       |              |  |      | 4.75   | %     |  |      | 5.00    | %    |  |   | 4.99    | % |  |   | 4.99    | % |  |   | 4.99    | %
|Variable rate         |  | $                                  | 20,000 |              |  |      |       |       |  |      |        |      |  | $ | 20,000  |   |  | $ | 19,865  |   |  | $ | 19,003  |  
|Average interest rate |  |                                    | 5.74   | %            |  |      |       |       |  |      |        |      |  |   | 5.74    | % |  |   | 5.74    | % |  |   | 7.40    | %

The $250.0 million of 5% convertible
subordinated notes are convertible by the holders into common
stock at $61.08 per share, subject to adjustments in certain
circumstances, and are subordinated to senior indebtedness of
the company and to all debt and liabilities, including trade
payables and lease obligations, if any, of the companys
subsidiaries. The 5% notes rank equal in right of payment to the
$12.7 million of 4.75% notes. The company may redeem the
notes, in whole or in part, at any time on or after
March 20, 2003 at specified

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redemption prices ranging from 102.857% beginning
on March 20, 2003 to 100.714% beginning on March 15,
2006, however, the current senior credit facility with HSBC
prohibits the repayment of outstanding subordinated notes prior
to maturity. Interest on the notes is payable on March 15
and September 15 of each year.


The $12.7 million of 4.75% convertible
subordinated notes are convertible by the holder into Getty
Images common stock at $28.51 per share, subject to adjustments
in certain circumstances, and are subordinated to senior
indebtedness of the company and to all debt and liabilities,
including trade payables and lease obligations, if any, of the
companys subsidiaries. The company may redeem the notes,
in whole or in part, at 101.90% until May 31, 2002 or at
100.95% beginning on June 1, 2002, however, the current
senior credit facility with HSBC prohibits the repayment of
outstanding subordinated notes prior to maturity. Interest on
the notes is payable June 1 and December 1 of each
year.

The $20.0 million variable rate debt
represents utilized credit facilities under a
$100.0 million senior credit facility with HSBC Investment
Bank plc under an agreement that expires in October 2002. The
$20.0 million balance matures every one to three months and
is rolled over into a new borrowing. Interest is charged at a
variable rate equal to LIBOR, plus associated costs and a margin
ranging from 1.00% to 1.75% per year and is due each time a
borrowing matures. The weighted average interest rate on this
facility in 2001 was 5.74%. Issue costs of $1.4 million
incurred in obtaining the facility have been offset against the
balance due and are being amortized over the term of the
facility. A commitment fee of .675% annually is charged on the
unused portion of the facility and is paid quarterly.

Foreign Currency Risk

Foreign currency translation

We conduct our business primarily in the U.S. and
Europe, with cash flows primarily denominated in
U.S. dollars, Euros and British pounds. For non-U.S.
subsidiaries, the local currency is considered the functional
currency. For reporting purposes, assets and liabilities are
translated upon consolidation into U.S. dollars at the rate
of exchange in effect at the balance sheet date. Gains and
losses resulting from the translation of net assets are included
as translation adjustments in accumulated other comprehensive
loss on the Consolidated Balance Sheets. For reporting purposes,
revenues and expenses are translated into U.S. dollars at
weighted average monthly exchange rates. If revenues had been
translated into U.S. dollars at weighted average monthly
exchange rates in effect for the prior year, sales for 2001
would have been $467.5 million rather than
$451.0 million.

Foreign currency conversion

We are exposed to foreign exchange risk related
to foreign currency denominated transactions. All transactions
recorded in a non-functional currency are converted into the
functional currency of the respective company and then into the
reporting currency, U.S. dollars, at the current months
income statement rate, calculated as the weighted average daily
exchange rate for the prior month. Thus the U.S. dollar reported
transaction values fluctuate as the weighted average monthly
exchange rates change.

Foreign currency revaluation

We are exposed to foreign exchange risk related
to foreign currency denominated assets and liabilities. Foreign
exchange gains and losses that arise from the revaluation of
foreign-currency denominated balances, other than long-term
intercompany balances, are included in the results of operations
for the period in which the exchange rate changes. Foreign
exchange gains and losses that arise from the revaluation of
intercompany balances that are of a long-term investment nature,
for which settlement is not planned or anticipated in the
foreseeable future, are reported and accumulated in other
comprehensive loss in the Consolidated Balance Sheet in the same
manner as translation adjustments. Unrealized net foreign
exchange losses of $8.0 million and $14.4 million for
the years ended December 31, 2001 and 2000, respectively,
and gains of $2.7 million for the year ended December 31,
1999, arose from the revaluation of such balances.

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Risk mitigation

The company utilizes derivative financial
instruments, namely forward foreign currency exchange contracts,
to reduce the impact of foreign currency exchange rate risks
where natural hedging strategies cannot be effectively employed.
The companys forward exchange contracts generally range
from one to three months in original maturity and generally do
not cross over quarter ends.

The company does not hold or issue derivative
financial instruments for trading purposes. As stated above, the
company utilizes derivative financial instruments to reduce the
impact of foreign currency exchange rate risks where natural
hedging strategies cannot be effectively employed. In general,
the companys derivative activities do not create foreign
currency exchange rate risk because fluctuations in the value of
the instruments used for hedging purposes are offset by
fluctuations in the value of the underlying exposures being
hedged. Counterparties to derivative financial instruments
expose the company to credit-related losses in the event of
non-performance. However, the company has entered into these
instruments with creditworthy financial institutions and
considers the risk of non-performance to be remote.

Gains and losses on foreign exchange contracts
that are identified as and are effective as hedges of existing
assets and liabilities are recognized in exchange gains and
(losses) on the Consolidated Statements of Operations for
the period in which the exchange rate changes. If an underlying
hedged transaction were terminated earlier than initially
anticipated, the offsetting gain or loss on the related forward
foreign exchange contract would be recognized in operations in
the same period. There were no outstanding foreign exchange
contracts or related deferred gains or losses as of
December 31, 2001.




Item 8. Financial Statements and
Supplementary Data

See Item 14(A)




Item 9. Changes in and Disagreements
With Accountants on Accounting and Financial
Disclosure

None.




PART III




Item 10. Directors and Executive
Officers of the Registrant

The information required by this item will be
contained in our definitive proxy statement to be filed with the
Securities and Exchange Commission no later than 120 days
after the end of the fiscal year covered by this Annual Report
on Form 10-K and is incorporated by reference herein.




Item 11. Executive
Compensation

The information required by this item will be
contained in our definitive proxy statement to be filed with the
Securities and Exchange Commission no later than 120 days
after the end of the fiscal year covered by this Annual Report
on Form 10-K and is incorporated by reference herein.




Item 12. Security Ownership of Certain
Beneficial Owners and Management

The information required by this item will be
contained in our definitive proxy statement to be filed with the
Securities and Exchange Commission no later than 120 days
after the end of the fiscal year covered by this Annual Report
on Form 10-K and is incorporated by reference herein.




Item 13. Certain Relationships and
Related Transactions

The information required by this item will be
contained in our definitive proxy statement to be filed with the
Securities and Exchange Commission no later than 120 days
after the end of the fiscal year covered by this Annual Report
on Form 10-K and is incorporated by reference herein.

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PART IV






Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K


(A) Documents Filed as Part of This
Report

Financial Statements (See Index to Consolidated
Financial Statements on page F-1 of this Report)

All other schedules are omitted since the
required information is not present or is not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial
statements or notes thereto.

(B) Reports on Form 8-K

On May 29, 2001, the company filed a Current
Report on form 8-K to report the termination of the operations
of one of its subsidiaries, Art.com, a provider of framed and
unframed art and art-related products on the Internet.

(C) Exhibits

|        |       |                        |  |                                                                                                                                                                                                                   
|------- | ----- | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 2.1   |                        |  | Stock Purchase Agreement, dated as of
	March 21, 2000, among Getty Images, Inc. Getty
	Communications Limited, Visual Communications Group B.V., United
	Business Information B.V., and United News & Media plc(8)
|        | 2.2   |                        |  | Stock Purchase Agreement, dated as of
	March 21, 2000, among Getty Images, Inc. Tony Stone
	Associates GmbH, United Business Information B.V., Ludgate
	Holdings GmbH, and United News & Media plc(11)            
|        | 3.1*  |                        |  | Restated Certificate of Incorporation of Getty
	Images, Inc.                                                                                                                                                      
|        | 3.2   |                        |  | Bylaws of Getty Images, Inc.(1)                                                                                                                                                                                   
|        | 4.1   |                        |  | Indenture relating to the 4.75% Convertible
	Subordinated Notes due 2003, dated as of May 27, 1998,
	between Getty Images, Inc. and The Bank of New York, as
	Trustee(4)                                          
|        | 4.2   |                        |  | Indenture relating to Getty Images, Inc.s
	5.00% Subordinated Convertible Notes due 2007, dated
	March 13, 2000, between Getty Images, Inc. and The Bank of
	New York(8)                                         
|        | 4.3   |                        |  | Certificate of Designations of Series A
	Special Voting Preferred Stock(10)                                                                                                                                       
|        | 4.4   |                        |  | Certificate of Designations of Series B
	Special Voting Preferred Stock(10)                                                                                                                                       
|        | 10.1  |                        |  | Employment Agreement between Getty Communications
	plc and Mark Getty dated February 9, 1998(5)                                                                                                                   
|        | 10.2* |                        |  | Employment Agreement between Getty Images, Inc.
	and Jonathan Klein, effective October 1, 2001                                                                                                                    
|        | 10.3* |                        |  | Separation Agreement between Getty Images, Inc.
	and Sally von Bargen, dated November 9, 2001                                                                                                                     
|        | 10.4* |                        |  | Stock Option Agreement between Getty Images, Inc.
	and Sally von Bargen, dated November 6, 2001                                                                                                                   
|        | 10.5  |                        |  | Separation Agreement between Getty Images, Inc.
	and John Hallberg, dated April 10, 2001(13)                                                                                                                      
|        | 10.6  |                        |  | Employment Agreement between Getty Images, Inc.
	and William ONeill, dated April 3, 2000(8)                                                                                                                      
|        | 10.7  |                        |  | Employment Agreement between Getty Images, Inc.
	and Elizabeth J. Huebner, dated September 18, 2000(9)                                                                                                            
|        | 10.8  |                        |  | Employment Agreement between Getty Images, Inc.
	and A.D. Bud Albers, dated October 11, 1999(7)                                                                                                                 
|        | 10.9  |                        |  | Amendment to Employment Agreement between Getty
	Images, Inc. and A.D. Bud Albers, dated May 25,
	2000(12)                                                                                                      
|        | 10.10 |                        |  | Credit Agreement, dated October 25, 1999,
	among Getty Images, Inc. and HSBC Investment Bank plc(7)                                                                                                               
|        | 10.11 |                        |  | Amendment, dated December 3, 1999, to the
	Credit Agreement among Getty Images, Inc. and HSBC Investment
	Bank plc, dated October 25, 1999(7)                                                                     
|        | 10.12 |                        |  | Debenture, dated October 25, 1999, among the
	Chargors named therein and HSBC Investment Bank plc(7)                                                                                                              

29



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##### Table of Contents



|        |        |                        |  |                                                                                                                                                                                                                                                                                                               
|------- | ------ | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|Number  |        | Description of Exhibit
|        |        |                       
|        | 10.13  |                        |  | Pledge Agreement, dated October 29, 1999
	among Getty Images, Inc., Getty Communications Limited, Getty
	Images Limited, Tony Stone Images/ America, Inc., EyeWire
	Partners Company and HSBC Investment Bank plc(7)                                                                                          
|        | 10.14  |                        |  | Supplement to Pledge Agreement, dated
	December 17, 1999, by Getty Images, Inc. in favor of HSBC
	Investment Bank plc(7)                                                                                                                                                                                      
|        | 10.15* |                        |  | Amendment Letter, dated November 16, 2001,
	to the Credit Agreement, dated October 25, 1999, among
	Getty Images, Inc. and HSBC Investment Bank plc                                                                                                                                                           
|        | 10.16  |                        |  | Stockholders Transaction Agreement, dated
	as of September 15, 1997, among Getty Images, Inc., certain
	shareholders of PhotoDisc, Inc. and Mark Torrance, as
	representative of the shareholders(1)                                                                                                         
|        | 10.17  |                        |  | Restated Option Agreement among Getty Images,
	Inc., Getty Communications plc and Getty Investments L.L.C.
	dated February 9, 1998(1)                                                                                                                                                                         
|        | 10.18  |                        |  | Stockholders Agreement among Getty Images,
	Inc. and certain stockholders of Getty Images, Inc. dated
	February 9, 1998(1)                                                                                                                                                                                   
|        | 10.19  |                        |  | Registration Rights Agreement among Getty Images,
	Inc., PDI, L.L.C. and Mark Torrance(1)                                                                                                                                                                                                                     
|        | 10.20  |                        |  | Registration Rights Agreement among Getty Images,
	Inc. and Getty Investments L.L.C.(1)                                                                                                                                                                                                                       
|        | 10.21  |                        |  | Restated Shareholders Agreement among Getty
	Images, Inc., Getty Investments L.L.C. and the Investors named
	therein dated February 9, 1998(1)                                                                                                                                                               
|        | 10.22  |                        |  | Registration Rights Agreement dated July 3,
	1996 among Getty Communications plc, Simon Thornley, Brian
	Wolske, Lawrence Gould, Jonathan Klein and Mark Getty and Form
	of Amendment among Getty Images, Inc., Getty Communications plc,
	Lawrence Gould, Jonathan Klein and Mark Getty(1)                   
|        | 10.23  |                        |  | Registration Rights Agreement dated July 3,
	1996 among Getty Communications plc, Crediton Limited and
	October 1993 Trust and Form of Amendment among Getty Images,
	Inc., Getty Communications plc, Crediton Limited and October
	1993 Trust(1)                                                             
|        | 10.24  |                        |  | Registration Rights Agreement dated July 3,
	1996 among Getty Communications plc, Hambro European Ventures
	Limited, Hambro Group Investments Limited, RIT Capital Partners
	plc and Tony Stone and Form of Amendment among Getty Images,
	Inc., Getty Communications plc and The Schwartzberg Family
	L.P.(1)
|        | 10.25  |                        |  | Registration Rights Agreement dated July 25,
	1997 between Getty Communications plc and the Schwartzberg
	Family L.P. and Form of Amendment among Getty Images, Inc.,
	Getty Communications plc and the Schwartzberg Family L.P.(1)                                                                           
|        | 10.26  |                        |  | Form of Registration Rights Agreement between
	Getty Images, Inc. and each of the individual stockholders of
	Art.com(2)                                                                                                                                                                                      
|        | 10.27  |                        |  | Registration Rights Agreement, dated as of
	March 13, 2000, among Getty Images, Inc., Morgan Stanley
	& Co., Inc., Deutsche Bank Securities, Inc., SG Cowen
	Securities Corp. and Hambrecht & Quist, LLC(8)                                                                                                   
|        | 10.28  |                        |  | Indemnity between Getty Images, Inc. and Getty
	Investments L.L.C., dated January 1998(1)                                                                                                                                                                                                                     
|        | 10.29  |                        |  | Indemnity between Getty Images, Inc. and Getty
	Investments L.L.C., dated November 22, 1999(7)                                                                                                                                                                                                                
|        | 10.30  |                        |  | Form of Indemnity among Getty Images, Inc., Getty
	Communications plc and each of Mark Getty, Mark Torrance,
	Jonathan Klein, Lawrence Gould, Andrew Garb, Manny Fernandez,
	Christopher Sporborg, Anthony Stone and James Bailey(1)                                                                          
|        | 10.31  |                        |  | Lease dated October 18, 1995 between Allied
	Dunbar Assurance plc and Tony Stone Associates Limited(6)                                                                                                                                                                                                        
|        | 10.32  |                        |  | Lease dated March 11, 1993 between Bantry
	Investments Limited and Tony Stone Associates Limited(6)                                                                                                                                                                                                           
|        | 10.33  |                        |  | Counterpart Lease dated March 11, 1993
	between Bantry Investments Limited and Tony Stone Associates
	Limited(6)                                                                                                                                                                                              
|        | 10.34  |                        |  | Lease dated October 23, 1990 between Bantry
	Investments Limited and Tony Stone Associates Limited(6)                                                                                                                                                                                                         

30



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##### Table of Contents



|        |        |                        |  |                                                                                                                                                                   
|------- | ------ | ---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                       
|Number  |        | Description of Exhibit
|        |        |                       
|        | 10.35  |                        |  | Lease dated February 14, 1997 between Martin
	Selig and PhotoDisc, Inc.(6)                                                                                        
|        | 10.36  |                        |  | Lease dated July 27, 1999 between Bedford
	Property Investors, Inc. and Getty Images, Inc.(7)                                                                     
|        | 10.37  |                        |  | Lease dated November 30, 1999 between the
	Quadrant Corporation and Getty Images, Inc.(7)                                                                         
|        | 10.38  |                        |  | Sublease dated August 1998 between SVG
	Distribution, Inc. and PhotoDisc, Inc.(12)                                                                                
|        | 10.39  |                        |  | Lease dated March 31, 2000 between
	Tri-Energy Productions, Inc. and CST Water Garden II, LLC(8)                                                                  
|        | 10.40  |                        |  | Lease dated April 1, 2000 between PhotoDisc,
	Inc. and The Rector, Church-Wardens and Vestrymen of Trinity
	Church in the City of New York(8)                     
|        | 10.41  |                        |  | Lease dated December 13, 1993 between Visual
	Communications Limited and Carroll Development Corporation
	Limited(8)                                              
|        | 10.42  |                        |  | Lease between Visual Communications Limited and
	Innovation Land & Estates Limited(8)                                                                             
|        | 10.43* |                        |  | Sublease dated November 5, 2001 between
	PhotoDisc, Inc. and Morgan Stanley D.W. Inc.                                                                             
|        | 10.44* |                        |  | Amendment to Sublease dated November 20,
	2001 between PhotoDisc, Inc. and Morgan Stanley D.W. Inc.                                                               
|        | 10.45* |                        |  | First Amendment of Lease dated October 31,
	2001 between PhotoDisc, Inc. and The Rector, Church-Wardens and
	Vestrymen of Trinity Church in the City of New York  
|        | 10.46* |                        |  | Second Amendment of Lease dated November 20,
	2001 between PhotoDisc, Inc. and The Rector, Church-Wardens and
	Vestrymen of Trinity Church in the City of New York
|        | 10.47* |                        |  | Getty Images, Inc. 1998 Stock Incentive Plan                                                                                                                      
|        | 21.1*  |                        |  | Subsidiaries of the Registrant                                                                                                                                    
|        | 23.1*  |                        |  | Consent of PricewaterhouseCoopers LLP, Seattle,
	Washington                                                                                                       
|        | 23.2*  |                        |  | Consent of PricewaterhouseCoopers, London, England                                                                                                                




|  |                
|- | ---------------
|* | Filed herewith.



|    |                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference from the Exhibits to
	the Form S-4 Registration Statement No. 333-38777 of
	the Registrant, as amended, filed January 7, 1998.      
|   
|(2) | Incorporated by reference from the Exhibits to
	the Registrants Quarterly Report on Form 10-Q for the
	period ended March 31, 1999.                          
|   
|(3) | Incorporated by reference from the Exhibits to
	the Form S-8 Registration Statement No. 333-46325 of
	the Registrant, filed February 13, 1998.                
|   
|(4) | Incorporated by reference from the Exhibit to the
	Registrants Quarterly Report on Form 10-Q for the
	period ended June 30, 1998.                            
|   
|(5) | Incorporated by reference from the Exhibit to the
	Registrants Amendment No. 1 to Annual Report on
	Form 10-K/ A for the fiscal year ended December 31, 1997.
|   
|(6) | Incorporated by reference from the Exhibits to
	the Registrants Annual Report on Form 10-K for the
	fiscal year ended December 31, 1997.                     
|   
|(7) | Incorporated by reference from the Exhibits to
	the Registrants Annual Report on Form 10-K for the
	fiscal year ended December 31, 1999.                     
|   
|(8) | Incorporated by reference from the Exhibits to
	the Registrants Quarterly Report on Form 10-Q, for
	the period ended March 31, 2000.                         
|   
|(9) | Incorporated by reference from the Exhibits to
	the Registrants Quarterly Report on Form 10-Q, for
	the period ended September 30, 2000.                     



|     |                                                                                                                     
|---- | --------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference from the Exhibits to
	the Registrants Form 8-K, dated February 27,
	2000.                
|    
|(11) | Incorporated by reference from the Exhibits to
	the Registrants Form 8-K/ A, dated March 21, 2000.                 
|    
|(12) | Incorporated by reference from the Exhibits to
	the Registrants Form 10-K, for the period ended
	December 31, 2000.
|    
|(13) | Incorporated by reference from the Exhibits to
	the Registrants Form 10-Q, for the period ended
	March 31, 2001.   

31



---



##### Table of Contents



SIGNATURES

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



| |                   
| | ------------------
| | GETTY IMAGES, INC.



| |    |                                                                                            
| | -- | -------------------------------------------------------------------------------------------
| | By | /s/ ELIZABETH J. HUEBNER 
	 _______________________________________ 
	 Elizabeth J. Huebner

| |                                                   
| | --------------------------------------------------
| | Senior Vice President and Chief Financial
	Officer

March 29, 2002

We, the undersigned directors and executive
officers of the Registrant, hereby severally constitute Jonathan
D. Klein and Elizabeth J. Huebner, and each of them singly, our
true and lawful attorneys with full power to them and each of
them to sign for us, and in our names in the capacities
indicated below, any and all amendments to the Annual Report on
Form 10-K filed with the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as
they may be signed by our said attorneys to any and all
amendments to said Annual Report on Form 10-K.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed on
March 29, 2002, by the following persons on behalf of the
Registrant and in the capacities indicated below:

|                                                    |  |                                                                                                            
|--------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------
|Signature                                           |  | Title (Capacity)                                                                                           
|                                                    |  |                                                                                                            
|/s/ MARK H. GETTYMark H. Getty                      |  | Executive Chairman and Director                                                                            
|                                                   
|/s/ JONATHAN D. KLEINJonathan D. Klein              |  | Chief Executive Officer and Director
	(Principal Executive Officer)                                        
|                                                   
|N /s/ MARK TORRANCEMark Torrance                    |  | on-Executive Vice Chairman and Director                                                                    
|                                                   
|Senior /s/ ELIZABETH J. HUEBNERElizabeth J. Huebner |  | Vice President and Chief Financial Officer
	(Principal Financial Officer and Principal
	Accounting Officer)
|                                                   
|/s/ ANDREW S. GARBAndrew S. Garb                    |  | Director                                                                                                   
|                                                   
|/s/ JAMES N. BAILEYJames N. Bailey                  |  | Director                                                                                                   
|                                                   
|/s/ CHRISTOPHER H. SPORBORGChristopher H. Sporborg  |  | Director                                                                                                   

32



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##### Table of Contents



GETTY IMAGES, INC.

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

AND FINANCIAL STATEMENT SCHEDULES


|                                                 |  |      |     | 
|------------------------------------------------ |  | ---- | --- | 
|                                                 |  | Page
|                                                 |  |     
|Reports of Independent Accountants               |  |      | F-2 | 
|Consolidated Statements of Operations            |  |      | F-3 | 
|Consolidated Balance Sheets                      |  |      | F-4 | 
|Consolidated Statements of Stockholders
	Equity |  |      | F-5 | 
|Consolidated Statements of Cash Flows            |  |      | F-6 | 
|Notes to Consolidated Financial Statements       |  |      | F-7 | 

F-1



---



##### Table of Contents



REPORTS OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
Getty Images, Inc.

In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, of stockholders equity and of cash flows
present fairly, in all material respects, the financial position
of Getty Images, Inc. and subsidiaries (the company)
at December 31, 2001 and 2000 and the results of their
operations and their cash flows for the years ended
December 31, 2001 and 2000, in conformity with accounting
principles generally accepted in the United States of America.
These financial statements are the responsibility of the
companys management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America which require that we plan and perform the audits to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

PRICEWATERHOUSECOOPERS LLP

Seattle, Washington

February 1, 2002


To the Board of Directors and Shareholders of
Getty Images, Inc.

In our opinion, the accompanying consolidated
statements of operations, of stockholders equity and of
cash flows present fairly, in all material respects, the results
of operations and cash flows of Getty Images, Inc. and
subsidiaries (the company) for the year ended
December 31, 1999, in conformity with accounting principles
generally accepted in the United States of America. These
financial statements are the responsibility of the
companys management; our responsibility is to express an
opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of
America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.

PRICEWATERHOUSECOOPERS

Chartered Accountants


London, England

March 30, 2000


F-2



---



##### Table of Contents



GETTY IMAGES, INC.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |         |         |  
|----------------------------------------------------------- | ----------------------------------------------- | ------------------------------------- | ------- | ------- | ------- | ---- | ------- | -------- | -------- | - | ------- | ------- | ------- | -
|                                                            |                                                 |                                      
|                                                            |                                                 | Years Ended December 31,             
|                                                            |                                                 |                                      
|                                                            |                                                 | 2001                                  |         | 2000    |         | 1999
|                                                            |                                                 |                                       |         |         |         |     
|                                                            |                                                 |                                      
|                                                            |                                                 | (In thousands, except per share data)
|Sales                                                       |                                                 | $                                     | 450,985 |         |         | $    | 484,846 |          |          | $ | 247,840 |        
|Cost of sales                                               |                                                 |                                       | 122,390 |         |         |      | 140,665 |          |          |   | 67,264  |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|                                                            | Gross profit                                    |                                       |         | 328,595 |         |      |         | 344,181  |          |   |         | 180,576 |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|Selling, general and administrative expenses                |                                                 |                                       | 234,816 |         |         |      | 249,765 |          |          |   | 145,578 |        
|Amortization                                                |                                                 |                                       | 80,775  |         |         |      | 118,663 |          |          |   | 64,330  |        
|Depreciation                                                |                                                 |                                       | 59,507  |         |         |      | 49,476  |          |          |   | 25,670  |        
|Integration costs and loss on impairment of assets          |                                                 |                                       | 14,713  |         |         |      | 72,043  |          |          |   | 4,883   |        
|Loss on abandoned and subleased property                    |                                                 |                                       | 11,590  |         |         |      |        |          |          |   |        |        
|Restructuring costs                                         |                                                 |                                       | 4,776   |         |         |      | (1,090  | )        |          |   | 5,442   |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|                                                            | Operating expenses                              |                                       |         | 406,177 |         |      |         | 488,857  |          |   |         | 245,903 |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|                                                            |                                                 | Loss from operations                  |         |         | (77,582 | )    |         |          | (144,676 | ) |         |         | (65,327 | )
|Interest expense                                            |                                                 |                                       | (17,231 | )       |         |      | (15,828 | )        |          |   | (5,464  | )      
|Interest income                                             |                                                 |                                       | 2,026   |         |         |      | 4,163   |          |          |   | 879     |        
|Exchange (losses) gains, net                                |                                                 |                                       | (1,545  | )       |         |      | (1,083  | )        |          |   | 135     |        
|Other (expense) income, net                                 |                                                 |                                       | (106    | )       |         |      | (38     | )        |          |   | 284     |        
|Loss on impairment of investments                           |                                                 |                                       | (4,224  | )       |         |      |        |          |          |   |        |        
|Debt conversion expense                                     |                                                 |                                       |        |         |         |      | (6,689  | )        |          |   |        |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|                                                            | Loss before income taxes and extraordinary item |                                       |         | (98,662 | )       |      |         | (164,151 | )        |   |         | (69,493 | )      
|Income tax benefit (expense)                                |                                                 |                                       | 3,350   |         |         |      | (5,567  | )        |          |   | 1,660   |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|                                                            | Loss before extraordinary item                  |                                       |         | (95,312 | )       |      |         | (169,718 | )        |   |         | (67,833 | )      
|Extraordinary item, net of tax                              |                                                 |                                       |        |         |         |      | 384     |          |          |   |        |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|                                                            | Net loss                                        |                                       | $       | (95,312 | )       |      | $       | (169,334 | )        |   | $       | (67,833 | )      
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|Basic and diluted loss per share before
	extraordinary item |                                                 | $                                     | (1.84   | )       |         | $    | (3.41   | )        |          | $ | (1.94   | )      
|Extraordinary item                                          |                                                 |                                       |        |         |         |      | 0.01    |          |          |   |        |        
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|                                                            | Basic and diluted loss per share                |                                       | $       | (1.84   | )       |      | $       | (3.40    | )        |   | $       | (1.94   | )      
|                                                            |                                                 |                                       |         |         |         |      |         |          |          |   |         |        
|Shares used in computing basic and diluted loss
	per share  |                                                 |                                       | 51,723  |         |         |      | 49,708  |          |          |   | 35,049  |        

The accompanying notes to the consolidated
financial statements are an integral part of these statements.

F-3



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##### Table of Contents



GETTY IMAGES, INC.

CONSOLIDATED BALANCE SHEETS

|                                        |                                                                                                                                                |                                            |         |          |         |  |         |          |           | 
|--------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | -------- | ------- |  | ------- | -------- | --------- | 
|                                        |                                                                                                                                                |                                           
|                                        |                                                                                                                                                | December 31,                              
|                                        |                                                                                                                                                |                                           
|                                        |                                                                                                                                                | 2001                                       |         | 2000    
|                                        |                                                                                                                                                |                                            |         |         
|                                        |                                                                                                                                                |                                           
|                                        |                                                                                                                                                | (In thousands,                            
|                                        |                                                                                                                                                | except par value)                         
|ASSETS                                 
|Current assets                          |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        | Cash and cash equivalents                                                                                                                      |                                            | $       | 46,173   |         |  | $       | 65,894   |          
|                                        | Accounts receivable, net                                                                                                                       |                                            |         | 71,162   |         |  |         | 84,771   |          
|                                        | Inventories, net                                                                                                                               |                                            |         | 3,404    |         |  |         | 7,616    |          
|                                        | Prepaid expenses                                                                                                                               |                                            |         | 7,199    |         |  |         | 7,277    |          
|                                        | Deferred catalog costs                                                                                                                         |                                            |         | 8,253    |         |  |         | 17,998   |          
|                                        | Deferred income taxes, net                                                                                                                     |                                            |         | 9,430    |         |  |         | 6,082    |          
|                                        | Other current assets                                                                                                                           |                                            |         | 5,020    |         |  |         | 12,248   |          
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        |                                                                                                                                                | Total current assets                       |         |          | 150,641 |  |         |          | 201,886   | 
|Property and equipment, net             |                                                                                                                                                |                                            | 147,653 |          |         |  | 140,793 |         
|Intangible assets, net                  |                                                                                                                                                |                                            | 636,459 |          |         |  | 707,408 |         
|Investments                             |                                                                                                                                                |                                            | 516     |          |         |  | 4,751   |         
|Deferred income taxes, net              |                                                                                                                                                |                                            | 55,638  |          |         |  | 43,659  |         
|Other non-current assets                |                                                                                                                                                |                                            | 2,174   |          |         |  | 2,139   |         
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        |                                                                                                                                                | Total assets                               |         | $        | 993,081 |  |         | $        | 1,100,636 | 
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|LIABILITIES AND STOCKHOLDERS EQUITY   
|Current liabilities                     |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        | Accounts payable                                                                                                                               |                                            | $       | 50,913   |         |  | $       | 74,216   |          
|                                        | Accrued expenses                                                                                                                               |                                            |         | 52,011   |         |  |         | 51,424   |          
|                                        | Income taxes payable                                                                                                                           |                                            |         | 14,498   |         |  |         | 16,283   |          
|                                        | Current portion of long-term debt                                                                                                              |                                            |         | 19,944   |         |  |         | 739      |          
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        |                                                                                                                                                | Total current liabilities                  |         |          | 137,366 |  |         |          | 142,662   | 
|Long-term debt                          |                                                                                                                                                |                                            | 256,215 |          |         |  | 274,427 |         
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        |                                                                                                                                                | Total liabilities                          |         |          | 393,581 |  |         |          | 417,089   | 
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|Commitments and contingencies (Note 12) |                                                                                                                                                |                                            |        |          |         |  |        |         
|Stockholders equity                    |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        | Preferred stock, no par value, 5,000 shares
	authorized; no shares issued                                                                      |                                            |         |         |         |  |         |         |          
|                                        | Common stock, $0.01 per share par value, 75,000
	shares authorized: 51,924 issued at December 31, 2001 and
	50,806 issued at December 31, 2000 |                                            |         | 519      |         |  |         | 508      |          
|                                        | Exchangeable preferred stock, no par value, 5,000
	shares authorized: 85 issued at December 31, 2001 and
	534 issued at December 31, 2000      |                                            |         | 1        |         |  |         | 5        |          
|                                        | Additional paid-in capital                                                                                                                     |                                            |         | 969,134  |         |  |         | 957,108  |          
|                                        | Accumulated deficit                                                                                                                            |                                            |         | (360,738 | )       |  |         | (265,426 | )        
|                                        | Accumulated other comprehensive loss                                                                                                           |                                            |         | (9,416   | )       |  |         | (8,648   | )        
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        |                                                                                                                                                | Total stockholders equity                 |         |          | 599,500 |  |         |          | 683,547   | 
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         
|                                        |                                                                                                                                                | Total liabilities and stockholders equity |         | $        | 993,081 |  |         | $        | 1,100,636 | 
|                                        |                                                                                                                                                |                                            |         |          |         |  |         |         

The accompanying notes to the consolidated
financial statements

are an integral part of these statements.


F-4



---



##### Table of Contents



GETTY IMAGES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |          |          |  
|--------------------------------- | ------------------------------------------------------- | ------------------------ | ------ | ------------ |  | ------ | ----- | ------------ | - | ---------- | --- | --------- |  | ------------- | -- | ----- | - | - | ------- | ------- |  | - | -------- | -------- | - | - | ------ | ------ | - | - | ------- | -------- | -------- | -
|                                  |                                                         | No. of                   |        | No. of       |  |        |       |              |   |            |     |           |  |               |    |      
|                                  |                                                         | Shares of                |        | Shares of    |  |        |       |              |   |            |     |           |  |               |    |      
|                                  |                                                         | Common                   |        | Exchangeable |  |        |       |              |   |            |     |           |  |               |    |      
|                                  |                                                         | Stock                    |        | Preferred    |  |        |       |              |   |            |     |           |  | Accumulated   |    |      
|                                  |                                                         | $0.01                    |        | Stock        |  |        |       | Exchangeable |   | Additional |     | Retained  |  | Other         |    |      
|                                  |                                                         | Par                      |        | Without      |  | Common |       | Preferred    |   | Paid-In    |     | Earnings/ |  | Comprehensive |    |      
|                                  |                                                         | Value                    |        | Par Value    |  | Stock  |       | Stock        |   | Capital    |     | (Deficit) |  | Loss          |    | Total
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |      
|                                  |                                                         |                         
|                                  |                                                         | (In thousands)          
|Balance at December 31, 1998      |                                                         |                          | 30,575 |              |  |        |      |              |   | $          | 306 |           |  | $             |   |       |   | $ | 368,267 |         |  | $ | (28,259  | )        |   | $ | 3,613  |        |   | $ | 343,927 |         
|Components of comprehensive loss: |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  | Net loss                                                |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         |        |  |   |          | (67,833  | ) |   |        |       |   |   |         | (67,833  | )       
|                                  | Translation adjustments                                 |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         |        |  |   |          |         |   |   |        | (3,617 | ) |   |         | (3,617   | )       
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  |                                                         | Total comprehensive loss |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |          | (71,450  | )
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  | Issue of shares to sellers of Art.com                   |                          |        | 4,252        |  |        |       |             |   |            |     | 42        |  |               |    |      |   |   |         | 121,572 |  |   |          |         |   |   |        |       |   |   |         | 121,614  |         
|                                  | Issue of shares of exchangeable preferred stock         |                          |        |             |  |        |       | 1,561        |   |            |     |          |  |               |    | 16    |   |   |         | 32,418  |  |   |          |         |   |   |        |       |   |   |         | 32,434   |         
|                                  | Exchange of shares                                      |                          |        | 108          |  |        |       | (108         | ) |            |     | 1         |  |               |    | (1    | ) |   |         |        |  |   |          |         |   |   |        |       |   |   |         |         |         
|                                  | Issue of shares for other acquisitions                  |                          |        | 576          |  |        |       |             |   |            |     | 6         |  |               |    |      |   |   |         | 11,594  |  |   |          |         |   |   |        |       |   |   |         | 11,600   |         
|                                  | Getty Investments subscription                          |                          |        | 1,579        |  |        |       |             |   |            |     | 16        |  |               |    |      |   |   |         | 31,984  |  |   |          |         |   |   |        |       |   |   |         | 32,000   |         
|                                  | Secondary offering                                      |                          |        | 6,900        |  |        |       |             |   |            |     | 69        |  |               |    |      |   |   |         | 259,673 |  |   |          |         |   |   |        |       |   |   |         | 259,742  |         
|                                  | Stock options exercised                                 |                          |        | 1,276        |  |        |       |             |   |            |     | 12        |  |               |    |      |   |   |         | 9,997   |  |   |          |         |   |   |        |       |   |   |         | 10,009   |         
|                                  | Tax benefit from employee stock option exercises        |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         | 4,475   |  |   |          |         |   |   |        |       |   |   |         | 4,475    |         
|                                  | Accelerated stock options                               |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         | 1,340   |  |   |          |         |   |   |        |       |   |   |         | 1,340    |         
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|Balance at December 31, 1999      |                                                         |                          | 45,266 |              |  |        | 1,453 |              |   |            | 452 |           |  |               | 15 |       |   |   | 841,320 |         |  |   | (96,092  | )        |   |   | (4     | )      |   |   | 745,691 |         
|Components of comprehensive loss: |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  | Net loss                                                |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         |        |  |   |          | (169,334 | ) |   |        |       |   |   |         | (169,334 | )       
|                                  | Translation adjustments                                 |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         |        |  |   |          |         |   |   |        | (8,644 | ) |   |         | (8,644   | )       
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  |                                                         | Total comprehensive loss |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |          | (177,978 | )
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  | Exchange of shares                                      |                          |        | 1,068        |  |        |       | (1,068       | ) |            |     | 11        |  |               |    | (11   | ) |   |         |        |  |   |          |         |   |   |        |       |   |   |         |         |         
|                                  | Issue of shares for acquisitions                        |                          |        | 455          |  |        |       | 149          |   |            |     | 5         |  |               |    | 1     |   |   |         | 22,096  |  |   |          |         |   |   |        |       |   |   |         | 22,102   |         
|                                  | Issue of shares on conversion of debt                   |                          |        | 2,188        |  |        |       |             |   |            |     | 22        |  |               |    |      |   |   |         | 60,400  |  |   |          |         |   |   |        |       |   |   |         | 60,422   |         
|                                  | Stock options exercised                                 |                          |        | 1,829        |  |        |       |             |   |            |     | 18        |  |               |    |      |   |   |         | 19,790  |  |   |          |         |   |   |        |       |   |   |         | 19,808   |         
|                                  | Tax benefit from employee stock option exercises        |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         | 13,502  |  |   |          |         |   |   |        |       |   |   |         | 13,502   |         
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|Balance at December 31, 2000      |                                                         |                          | 50,806 |              |  |        | 534   |              |   |            | 508 |           |  |               | 5  |       |   |   | 957,108 |         |  |   | (265,426 | )        |   |   | (8,648 | )      |   |   | 683,547 |         
|Components of comprehensive loss: |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  | Net loss                                                |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         |        |  |   |          | (95,312  | ) |   |        |       |   |   |         | (95,312  | )       
|                                  | Translation adjustments                                 |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         |        |  |   |          |         |   |   |        | (768   | ) |   |         | (768     | )       
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  |                                                         | Total comprehensive loss |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |          | (96,080  | )
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|                                  | Exchange of shares                                      |                          |        | 449          |  |        |       | (449         | ) |            |     | 4         |  |               |    | (4    | ) |   |         |        |  |   |          |         |   |   |        |       |   |   |         |         |         
|                                  | Issue of shares for acquisition of assets and
	business |                          |        | 159          |  |        |       |             |   |            |     | 2         |  |               |    |      |   |   |         | 3,457   |  |   |          |         |   |   |        |       |   |   |         | 3,459    |         
|                                  | Stock options exercised                                 |                          |        | 510          |  |        |       |             |   |            |     | 5         |  |               |    |      |   |   |         | 7,100   |  |   |          |         |   |   |        |       |   |   |         | 7,105    |         
|                                  | Tax benefit from employee stock option exercises        |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         | 1,188   |  |   |          |         |   |   |        |       |   |   |         | 1,188    |         
|                                  | Accelerated stock options                               |                          |        |             |  |        |       |             |   |            |     |          |  |               |    |      |   |   |         | 281     |  |   |          |         |   |   |        |       |   |   |         | 281      |         
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         
|Balance at December 31, 2001      |                                                         |                          | 51,924 |              |  |        | 85    |              |   | $          | 519 |           |  | $             | 1  |       |   | $ | 969,134 |         |  | $ | (360,738 | )        |   | $ | (9,416 | )      |   | $ | 599,500 |         
|                                  |                                                         |                          |        |              |  |        |       |              |   |            |     |           |  |               |    |       |   |   |         |         |  |   |          |          |   |   |        |        |   |   |         |         

The accompanying notes to the consolidated
financial statements are an integral part of these statements.

F-5



---



##### Table of Contents



GETTY IMAGES, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |          |         |  
|-------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | ------------------------------------------- | ------- | ------- | ------- | ---- | -------- | -------- | ------- | - | -------- | -------- | ------- | -
|                                                                                 |                                                                                |                                            
|                                                                                 |                                                                                | Years Ended December 31,                   
|                                                                                 |                                                                                |                                            
|                                                                                 |                                                                                | 2001                                        |         | 2000    |         | 1999
|                                                                                 |                                                                                |                                             |         |         |         |     
|                                                                                 |                                                                                |                                            
|                                                                                 |                                                                                | (In thousands)                             
|Cash flows from operating activities:                                            |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|                                                                                 | Net loss                                                                       |                                             | $       | (95,312 | )       |      | $        | (169,334 | )       |   | $        | (67,833  | )      
|                                                                                 | Adjustments to reconcile net loss to net cash
	flow from operating activities: |                                             |         |         |         |      |          |          |         |   |          |          |        
|                                                                                 |                                                                                | Depreciation and amortization               |         |         | 140,282 |      |          |          | 168,139 |   |          |          | 90,000  |  
|                                                                                 |                                                                                | Deferred income taxes                       |         |         | (15,308 | )    |          |          | (27,734 | ) |          |          | (15,865 | )
|                                                                                 |                                                                                | Impairment of assets                        |         |         | 6,465   |      |          |          | 53,406  |   |          |          |        |  
|                                                                                 |                                                                                | Bad debt expense                            |         |         | 4,510   |      |          |          | 5,992   |   |          |          | 729     |  
|                                                                                 |                                                                                | Loss on impairment of investments           |         |         | 4,224   |      |          |          |        |   |          |          |        |  
|                                                                                 |                                                                                | Amortization of debt issuance costs         |         |         | 1,972   |      |          |          | 1,609   |   |          |          |        |  
|                                                                                 |                                                                                | Tax benefit from employee stock option plan |         |         | 1,188   |      |          |          | 13,502  |   |          |          | 4,475   |  
|                                                                                 |                                                                                | Gain on early extinguishment of debt        |         |         |        |      |          |          | (635    | ) |          |          |        |  
|                                                                                 |                                                                                | Loss on debt conversion                     |         |         |        |      |          |          | 6,689   |   |          |          |        |  
|                                                                                 |                                                                                | Other items                                 |         |         | 215     |      |          |          | 52      |   |          |          | 1,056   |  
|                                                                                 | Change in assets and liabilities, net of effects
	of business acquisitions:    |                                             |         |         |         |      |          |          |         |   |          |          |        
|                                                                                 |                                                                                | Accounts receivable                         |         |         | 7,948   |      |          |          | (7,274  | ) |          |          | (13,895 | )
|                                                                                 |                                                                                | Inventories                                 |         |         | 3,038   |      |          |          | (4,775  | ) |          |          | (459    | )
|                                                                                 |                                                                                | Accounts payable and accrued expenses       |         |         | (19,895 | )    |          |          | (15,507 | ) |          |          | 12,300  |  
|                                                                                 |                                                                                | Income taxes                                |         |         | (1,552  | )    |          |          | 12,584  |   |          |          | 2,305   |  
|                                                                                 |                                                                                | Other                                       |         |         | 7,485   |      |          |          | 968     |   |          |          | (7,442  | )
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Net cash provided by operating activities                                        |                                                                                |                                             | 45,260  |         |         |      | 37,682   |          |         |   | 5,371    |         
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Cash flows from investing activities:                                            |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|                                                                                 | Business acquisitions, net of cash acquired                                    |                                             |         | (737    | )       |      |          | (232,897 | )       |   |          | (193,956 | )      
|                                                                                 | Purchase of investments and intangible assets                                  |                                             |         | (1,199  | )       |      |          | (2,681   | )       |   |          | (1,688   | )      
|                                                                                 | Purchase of property and equipment                                             |                                             |         | (72,748 | )       |      |          | (78,634  | )       |   |          | (51,580  | )      
|                                                                                 | Proceeds from sale of property and equipment                                   |                                             |         | 2,886   |         |      |          | 523      |         |   |          | 12       |        
|                                                                                 | Security deposits                                                              |                                             |         |        |         |      |          | (2,138   | )       |   |          |         |        
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Net cash used in investing activities                                            |                                                                                |                                             | (71,798 | )       |         |      | (315,827 | )        |         |   | (247,212 | )       
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Cash flows from financing activities:                                            |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|                                                                                 | Proceeds from issuance of long-term debt                                       |                                             |         |        |         |      |          | 250,000  |         |   |          | 30,000   |        
|                                                                                 | Debt issue costs                                                               |                                             |         |        |         |      |          | (9,066   | )       |   |          | (1,061   | )      
|                                                                                 | Payments on debt conversion                                                    |                                             |         |        |         |      |          | (6,689   | )       |   |          |         |        
|                                                                                 | Payments on principal balance of debt                                          |                                             |         | (972    | )       |      |          | (12,757  | )       |   |          | (452     | )      
|                                                                                 | Proceeds from issuance of common stock                                         |                                             |         | 7,105   |         |      |          | 19,961   |         |   |          | 309,790  |        
|                                                                                 | Share issue costs                                                              |                                             |         |        |         |      |          | (797     | )       |   |          | (8,210   | )      
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Net cash provided by financing activities                                        |                                                                                |                                             | 6,133   |         |         |      | 240,652  |          |         |   | 330,067  |         
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Exchange rate differences arising from
	translation of foreign currency balances |                                                                                |                                             | 684     |         |         |      | (1,969   | )        |         |   | 980      |         
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Net (decrease)/increase in cash and cash
	equivalents                            |                                                                                |                                             | (19,721 | )       |         |      | (39,462  | )        |         |   | 89,206   |         
|Cash and cash equivalents:                                                       |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|                                                                                 | beginning of year                                                              |                                             |         | 65,894  |         |      |          | 105,356  |         |   |          | 16,150   |        
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|                                                                                 | end of year                                                                    |                                             | $       | 46,173  |         |      | $        | 65,894   |         |   | $        | 105,356  |        
|                                                                                 |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|Supplemental disclosures                                                         |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|                                                                                 | Interest paid                                                                  |                                             | $       | 14,769  |         |      | $        | 10,808   |         |   | $        | 5,167    |        
|                                                                                 | Income taxes paid                                                              |                                             |         | 8,812   |         |      |          | 5,407    |         |   |          | 7,780    |        
|Non-cash investing and financing activities                                      |                                                                                |                                             |         |         |         |      |          |          |         |   |          |         
|                                                                                 | Businesses acquired with the issuance of stock                                 |                                             | $       | 1,492   |         |      | $        | 16,946   |         |   | $        | 165,648  |        
|                                                                                 | Subordinated notes converted to common stock                                   |                                             |         |        |         |      |          | 62,347   |         |   |          |         |        
|                                                                                 | Assets acquired with the issuance of stock                                     |                                             |         | 1,965   |         |      |          | 5,155    |         |   |          |         |        

The accompanying notes to the consolidated
financial statements

are an integral part of these statements.


F-6



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##### Table of Contents



GETTY IMAGES, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

1. Description of the
Business

Getty Images, Inc. and subsidiaries (Getty
Images, the company, we), headquartered in Seattle, Washington,
is a leading provider of imagery and related products and
services to businesses worldwide, distributing products
digitally via the Internet and on CD-ROMs, as well as in film
transparency form to customers in more than 55 countries. The
company pioneered the solution to aggregate and distribute
visual content and, since 1995, has brought many of the visual
content industrys leading collections under one
centralized corporate structure.

The company provides high quality, relevant
imagery to creative professionals at advertising agencies,
graphic design firms, corporations and film and broadcasting
companies; press and editorial customers involved in newspaper,
magazine, book, CD-ROM and online publishing; and corporate
communications departments and other business customers. The
company offers its products through websites, CD-ROMs, catalogs
and an international distribution network of company-operated
offices, agents and distributors.

2. Summary of Significant
Accounting Policies

Estimates and Assumptions

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America (U.S.) requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the revenues and expenses reported during the period. Some
of the estimates and assumptions that require managements
most difficult judgments include: determining the appropriate
level of deferred tax asset valuation allowances; the
classification of intercompany balances as long-term investments
in nature; the appropriateness of the useful lives of long-lived
and intangible assets, the allowance for doubtful accounts, and
accruals for abandoned and subleased property and integration
and restructuring activities. These judgments are difficult as
matters that are inherently uncertain directly impact the
accounting for these items. Actual results may vary from
managements estimates and assumptions.

Principles of Consolidation

The consolidated financial statements include the
accounts of Getty Images, Inc. and its subsidiaries, from the
respective dates of acquisition. Significant intercompany
balances and transactions have been eliminated.

Reclassifications

Certain prior year amounts have been reclassified
to conform to the current years presentation with no
effect on previously reported net losses.

Foreign Currency Translation and Accumulated
Other Comprehensive Loss

For non-U.S. subsidiaries, the local currency is
considered the functional currency. For reporting purposes,
assets and liabilities are translated upon consolidation into
U.S. dollars at the rate of exchange in effect at the balance
sheet date. Gains and losses resulting from the translation of
net assets are included as translation adjustments in
accumulated other comprehensive loss on the Consolidated Balance
Sheets. For reporting purposes, revenues and expenses are
translated into U.S. dollars at weighted average monthly
exchange rates.

Unrealized net foreign exchange losses of
$8.0 million and $14.4 million and gains of
$2.7 million for the years ended December 31, 2001,
2000, and 1999, respectively, arose from the revaluation of
intercompany balances that are of a long-term investment nature,
for which settlement is not planned or anticipated in the
foreseeable future. These unrealized foreign exchange gains and
losses are reported and accumulated in other comprehensive loss
in the Consolidated Balance Sheet in the same manner as
translation adjustments.

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Foreign Exchange Gains and Losses and
Derivatives

Foreign exchange transaction gains and losses,
including those that arise from the revaluation of
foreign-currency denominated balances, other than long-term
intercompany balances, are included in the results of operations
for the period in which the exchange rate changes. The company
utilizes derivative financial instruments, namely forward
foreign currency exchange contracts, to reduce the impact of
foreign currency exchange rate risks where natural hedging
strategies cannot be effectively employed. The companys
forward exchange contracts generally range from one to three
months in original maturity and generally do not cross over
quarter ends.

The company does not hold or issue derivative
financial instruments for trading purposes. As stated above, the
company utilizes derivative financial instruments to reduce the
impact of foreign currency exchange rate risks where natural
hedging strategies cannot be effectively employed. In general,
the companys derivative activities do not create foreign
currency exchange rate risk because fluctuations in the value of
the instruments used for hedging purposes are offset by
fluctuations in the value of the underlying exposures being
hedged. Counterparties to derivative financial instruments
expose the company to credit-related losses in the event of
non-performance. However, the company has entered into these
instruments with creditworthy financial institutions and
considers the risk of non-performance to be remote.

Gains and losses on foreign exchange contracts
that are identified as, and are effective as, hedges of existing
assets and liabilities are recognized in exchange gains and
losses on the Consolidated Statements of Operations for the
period in which the exchange rate changes. The company had no
outstanding foreign exchange contracts or related deferred gains
or losses as of December 31, 2001.

Earnings Per Share

Basic earnings per share is calculated based upon
the weighted-average number of common shares outstanding during
each period, in accordance with Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per
Share. For the periods in which the company incurred a net
loss, diluted earnings per share were calculated based on the
same number of shares as basic earnings per share. Approximately
12.3 million, 11.0 million and 9.5 million common
shares potentially issuable from stock options (described in
Note 14) at December 31, 2001, 2000 and 1999,
respectively, are excluded from the computation, as are
4.5 million common shares potentially issuable, in all
years presented, from convertible subordinated notes (described
in Note 11).

Cash and Cash Equivalents

Cash equivalents are short-term, highly liquid
investments that are both readily convertible to cash and have
maturities at the date of acquisition of three months or less.

Accounts Receivable

Accounts receivable represent trade receivables,
net of provisions for doubtful accounts of $20.9 million
and $19.5 million at December 31, 2001 and 2000,
respectively. The provisions recorded during 2001, 2000 and 1999
were $4.5 million, $6.0 million and $0.9 million,
respectively. Concentration of credit risk with respect to trade
receivables is limited due to the wide variety of customers and
channels to and through which our products and services are
marketed, as well as their dispersion across many geographic
areas.

Inventories

Inventories are valued at the lower of cost or
market, with cost determined on a first-in, first-out basis.
Inventories consist mainly of CD-ROMs in 2001 and CD-ROMs and
framing and packaging materials (associated with Art.com) in
2000. Inventories are reviewed periodically for obsolescence,
and where

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

necessary, are reduced by a provision for
obsolescence. Inventories are stated net of provisions for
obsolescence of $0.8 million at December 31, 2001 and
2000.

Property and Equipment

Property and equipment are stated at cost, net of
accumulated depreciation. Expenditures for major renewals and
improvements that extend the life of property and equipment are
capitalized, while expenditures for repairs and maintenance are
charged to expense as incurred. Costs associated with image
duplication and digitization are capitalized. Direct costs
incurred in the application development stage of the development
of internal use software are capitalized and depreciated over
the estimated useful economic life of the software.

Depreciation is calculated using the
straight-line method over the estimated useful lives of the
assets, ranging from two to four years for image duplicates and
digitization, two to four years for computer software and
hardware, five to 10 years for furniture, fixtures and
studio equipment and 40 years for the archival picture
collection. Leasehold improvements are depreciated over the
shorter of the term of the lease or the estimated life of the
related asset. Depreciation of internal use software was
$7.0 million, $8.3 million and $3.9 million in
2001, 2000 and 1999, respectively.

Property and equipment as of the reported balance
sheet dates consisted of the following:

|                                             |  |                |         |      |  |   |         | 
|-------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | 
|                                             |  |               
|                                             |  | December 31,  
|                                             |  |               
|                                             |  | 2001           |         | 2000
|                                             |  |                |         |     
|                                             |  |               
|                                             |  | (In thousands)
|Image duplicates and digitization            |  | $              | 121,515 |      |  | $ | 114,587 | 
|Computer hardware and software purchased     |  |                | 77,819  |      |  |   | 67,188  | 
|Computer software developed for internal use |  |                | 52,889  |      |  |   | 42,301  | 
|Furniture, fixtures and studio equipment     |  |                | 29,157  |      |  |   | 24,671  | 
|Leasehold improvements                       |  |                | 33,711  |      |  |   | 19,045  | 
|Archival picture collection                  |  |                | 17,415  |      |  |   | 17,415  | 
|Other property and equipment                 |  |                | 9,880   |      |  |   | 3,174   | 
|                                             |  |                |         |      |  |   |         | 
|                                             |  |                | 342,386 |      |  |   | 288,381 | 
|Less accumulated depreciation                |  |                | 194,733 |      |  |   | 147,588 | 
|                                             |  |                |         |      |  |   |         | 
|Property and equipment, net                  |  | $              | 147,653 |      |  | $ | 140,793 | 
|                                             |  |                |         |      |  |   |         | 

Intangible Assets

Intangible assets comprise goodwill and
identifiable intangibles. Goodwill is the excess of the purchase
price and related costs over the fair value of net assets
acquired in business combinations. Identifiable intangibles
consist mainly of customer lists, covenants not to compete,
photographer contracts, trademarks and tradenames. Goodwill
arising from business combinations prior to July 1, 2001,
has been amortized over its estimated lives, ranging from three
to 30 years. Amortization of goodwill for 2001 was
$66.8 million. Effective January 1, 2002, the company
will adopt SFAS 142, Goodwill and Other Intangible
Assets. This pronouncement will change the accounting for
goodwill from an amortization method to an impairment-only
approach. Thus, amortization of goodwill, including goodwill
recorded in past business combinations, will cease. Identifiable
intangibles are amortized on a straight-line basis over their
estimated lives, ranging from two to 10 years.

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

|                              |  |                |         |      |  |   |         | 
|----------------------------- |  | -------------- | ------- | ---- |  | - | ------- | 
|                              |  |               
|                              |  | December 31,  
|                              |  |               
|                              |  | 2001           |         | 2000
|                              |  |                |         |     
|                              |  |               
|                              |  | (In thousands)
|Goodwill                      |  | $              | 767,536 |      |  | $ | 769,475 | 
|Identifiable intangibles      |  |                | 102,233 |      |  |   | 98,255  | 
|                              |  |                |         |      |  |   |         | 
|                              |  |                | 869,769 |      |  |   | 867,730 | 
|Less accumulated amortization |  |                | 233,310 |      |  |   | 160,322 | 
|                              |  |                |         |      |  |   |         | 
|Intangible assets, net        |  | $              | 636,459 |      |  | $ | 707,408 | 
|                              |  |                |         |      |  |   |         | 

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment
when events or circumstances indicate costs may not be
recoverable. Impairment exists when the carrying value of the
asset is greater than the pre-tax undiscounted future cash flows
expected to be provided by the asset. If impairment exists, the
asset is written down to its estimated fair value.

Leases

The company is the lessee of property, plant and
equipment through both operating and capital lease agreements.
Under capital leasing arrangements, the present value of the
future minimum lease payments is recorded as property and
equipment, while the corresponding lease commitments are
recorded as debt. Depreciation of leased assets is charged to
the Consolidated Statement of Operations over the shorter of the
lease term or the estimated useful lives of equivalent owned
assets. Under operating lease arrangements, rentals are charged
to selling, general and administrative expenses in the
Consolidated Statement of Operations on a straight-line basis
over the term of the lease.

Income Taxes

The company files two consolidated federal income
tax returns in the U.S. and numerous foreign and state income
tax returns. Deferred income taxes, reflecting the impact of
temporary differences between financial and tax reporting and of
tax loss carryforwards, are based on currently enacted tax laws.
Deferred tax assets are reduced by a valuation allowance if,
based on the weight of available evidence, it is more likely
than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are
classified into net current and net non-current amounts, based
on the balance sheet classification of the related asset or
liability.

Revenue Recognition

The company derives revenue principally from
granting rights to use images that are delivered digitally over
the Internet, in traditional analog form or on CD-ROMs. Revenue
is recognized when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the price
is fixed or determinable and collectibility is reasonably
assured. Delivery occurs upon the availability of the digital
image for downloading by the customer or upon shipment of
CD-ROMs and transparencies. Subscription revenue is recognized
ratably over the subscription period.

Revenue is recorded at invoiced amounts,
including shipping and handling, less any discounts, applicable
sales taxes and an allowance for returns.

Advertising and Marketing

Advertising and marketing brochure costs and
advertising placement costs are charged to selling, general and
administrative expenses upon initial mailing of the brochure and
when the advertising first takes place,

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

respectively. Advertising and marketing costs
charged to operations in the years ended December 31, 2001,
2000, and 1999 were $17.9 million, $28.1 million and
$22.9 million, respectively.

Catalogs

As part of its marketing efforts, the company
produces and distributes catalogs containing images offered
through its creative professional, press and editorial
collections. The costs of producing these catalogs through
September 30, 2001, were deferred and amortized over the
period during which revenue was generated by the catalog images.

In the fourth quarter of 2001, the company began
the implementation of new financial information systems. These
new systems are not capable of directly associating image
revenue with specific catalogs. Accordingly, as required by the
American Institute of Certified Public Accountants
(AICPA) Statement of Position No. 93-7 Reporting
on Advertising Costs, catalog production costs are
expensed as incurred effective October 1, 2001.

The new financial information systems also
promote and facilitate customer order entry through a new
company-wide digital website. As a result of the shift to
greater use of Web-based digital marketing and delivery, as well
general economic factors and anticipated catalog usage plans,
the company reassessed the expected remaining life of its
existing deferred catalog costs. Effective October 1, 2001,
the remaining period of catalog amortization was accelerated
from a maximum of three years to a maximum of one year.

Amortization of deferred catalog costs of
$8.8 million, $10.5 million and $6.7 million, for
the nine months ended September 30, 2001 and the years
ended December 31, 2000 and 1999, respectively, is included
in selling, general and administrative expenses. Direct catalog
production cost of $3.9 million for the three months ended
December 31, 2001, is also included in selling, general and
administrative expenses. Amortization subsequent to
October 1, 2001, of $6.7 million is included in
amortization expense because the costs of new catalog production
are included in selling, general and administrative expenses.

Shipping and Handling

As stated above, shipping and handling billed to
customers is included in revenue. Shipping and handling costs
associated with purchasing inventory and other items directly
associated with a product or service sold to customers are
charged to cost of sales.

Recent Accounting Pronouncements

Effective July 1, 2001, the company adopted
SFAS 141, Business Combinations. This statement
requires the use of the purchase method of accounting for all
new business combinations, requires that intangible assets be
recorded separate from goodwill only if they are contractual or
legal rights or if they are separable, and requires additional
disclosures. The adoption of this statement does not materially
affect the companys reported results of operations,
financial position or cash flows. The statement does, however,
more narrowly define identifiable intangible assets, thus
limiting the allocation of purchase price on future acquisitions
to such intangibles, expanding the allocation of purchase price
to goodwill and causing the reclassification of certain assets
from identifiable intangibles to goodwill. This will have the
effect of decreasing amortization expense associated with any
future acquisitions.

Effective January 1, 2002, the company will
adopt SFAS 142, Goodwill and Other Intangible
Assets. This pronouncement will change the accounting for
goodwill from an amortization method to an impairment-only
approach. Thus, amortization of goodwill, including goodwill
recorded in past business combinations, will cease. Initial
impairment tests are required to be completed by the end of the
first quarter of 2002 for intangible assets and by the end of
2002 for goodwill. Any loss resulting from these initial
impairment tests will be recognized as the effect of a change in
accounting principle. Annual impairment tests are required every

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

year thereafter, with any impairment recognized
as a loss on impairment of assets, included in the calculation
of operating income. Management has not yet completed an
evaluation of the complete effect this standard will have on the
companys consolidated financial statements. However, based
on unamortized balances of identifiable intangibles at
December 31, 2001, amortization related to intangible
assets will be approximately $68 million lower in 2002 than
in 2001 due to the cessation of goodwill amortization. Any
additional acquisitions involving intangibles could materially
increase this amount. In addition, the company could incur
significant charges as a result of the impairment tests.

Effective January 1, 2002, the company will
adopt SFAS 144, Accounting for the Impairment or Disposal
of Long-Lived Assets. This pronouncement requires one
model for accounting for long-lived assets to be disposed of and
broadens the presentation of discontinued operations to include
more transactions. This accounting pronouncement does not
immediately impact the company, however, it could cause any
future long-lived asset disposals to be accounted for or
presented in a different manner than in the past.

3. Acquisitions

We acquired the agent of The Image Bank (TIB) in
Australia and certain assets of the TIB agent in Brazil in 2001,
neither of which were material to the financial statements.
During 2000 and 1999, the company acquired all of the
outstanding stock of various companies in the visual content
market. Significant acquisitions included: March 22, 2000,
Visual Communications Group Holdings, Ltd., VCG Holdings LLC,
Definitive Stock, Inc. and Visual Communications Group
Deutschland GmbH (collectively VCG); November 24, 1999, The
Image Bank (TIB), a leading provider of visual content to the
advertising design, publishing, corporate, broadcast and
editorial markets; May 4, 1999, Art.com, a leading provider
of framed and unframed art and art-related products on the
Internet.

A summary of these significant acquisitions is as
follows:

|                                             |                      |                                     |         |         |  |         |         |         |  |   |         |         | 
|-------------------------------------------- | -------------------- | ----------------------------------- | ------- | ------- |  | ------- | ------- | ------- |  | - | ------- | ------- | 
|                                             |                      | VCG                                 |         | TIB     |  | Art.com
|                                             |                      |                                     |         |         |  |        
|                                             |                      |                                    
|                                             |                      | (In thousands, except useful lives)
|Cash                                         |                      | $                                   | 204,700 |         |  | $       | 183,167 |         |  | $ | 10,000  |        
|Common stock of the company                  |                      |                                     |        |         |  |         |        |         |  |   | 115,704 |        
|Fair value of vested stock options exchanged |                      |                                     |        |         |  |         |        |         |  |   | 5,910   |        
|Debt assumed and paid                        |                      |                                     | 18,700  |         |  |         |        |         |  |   |        |        
|Related transaction costs                    |                      |                                     | 3,500   |         |  |         | 10,094  |         |  |   | 3,412   |        
|                                             |                      |                                     |         |         |  |         |         |         |  |   |         |        
|                                             | Total purchase price |                                     |         | 226,900 |  |         |         | 193,261 |  |   |         | 135,026 | 
|Net assets acquired                          |                      |                                     | 1,131   |         |  |         | 1,885   |         |  |   | 13,104  |        
|Identifiable intangibles                     |                      |                                     | 25,797  |         |  |         | 20,074  |         |  |   |        |        
|                                             |                      |                                     |         |         |  |         |         |         |  |   |         |        
|Goodwill                                     |                      | $                                   | 199,972 |         |  | $       | 171,302 |         |  | $ | 121,922 |        
|                                             |                      |                                     |         |         |  |         |         |         |  |   |         |        
|Shares of common stock issued                |                      |                                     |        |         |  |         |        |         |  |   | 4,252   |        
|Identifiable intangibles  useful life       |                      |                                     | 5  10  |         |  |         | 5  10  |         |  |   |        |        
|Goodwill  useful life                       |                      |                                     | 10      |         |  |         | 10      |         |  |   | 3       |        

Initial estimates of purchase price allocations,
including accrued liabilities and asset valuations, were based
on preliminary information and were subsequently adjusted to the
balances reflected above when the required information necessary
to finalize the estimates was obtained. The company completed
the final valuations of identifiable intangibles in 2000 and
reclassified identifiable intangibles of TIB and VCG from
goodwill with no impact on previously reported losses.

Included in the net assets acquired above of VCG
and TIB were accrued costs of $5.8 million and
$3.2 million, respectively, related to plans to exit
activities and to terminate or relocate employees of these
acquired companies. These costs were recognized as liabilities
as of the consummation date of the purchase combination and
included in the allocation of the acquisition cost, in
accordance with Emerging Issues Task Force (EITF) 95-3,
Recognition of Liabilities in Connection with a Purchase
Business Combination. The exit costs had no future
economic benefit to the combined company, were incremental to
other costs incurred

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

by either company prior to the acquisition, and
were incurred as a direct result of the plan to exit certain
activities of the acquired companies.

These accrued liabilities and subsequent activity
and adjustments were as follows:

|                                                   |                         |                |       |        |   |   |       |        |  
|-------------------------------------------------- | ----------------------- | -------------- | ----- | ------ | - | - | ----- | ------ | -
|                                                   |                         | VCG            |       | TIB   
|                                                   |                         |                |       |       
|                                                   |                         |               
|                                                   |                         | (In thousands)
|Original accrual and balance at December 31,
	1999 |                         | $              |      |        |   | $ | 3,202 |       
|                                                  
|Fiscal year 2000 activity:                         |                         |                |       |        |   |   |       |       
|                                                   | Accruals                |                |       | 5,775  |   |   |       |       |  
|                                                   | Cash paid               |                |       | (3,142 | ) |   |       | (3,545 | )
|                                                   | Adjustments to accruals |                |       |       |   |   |       | 1,530  |  
|                                                   |                         |                |       |        |   |   |       |       
|Balance December 31, 2000                          |                         |                | 2,633 |        |   |   | 1,187 |       
|                                                  
|Fiscal year 2001 activity:                         |                         |                |       |        |   |   |       |       
|                                                   | Cash paid               |                |       | (1,245 | ) |   |       | (1,187 | )
|                                                   |                         |                |       |        |   |   |       |       
|Balance December 31, 2001                          |                         | $              | 1,388 |        |   | $ |      |       
|                                                   |                         |                |       |        |   |   |       |       

The remaining balances at the end of 2000 and
2001 consisted principally of minimum lease payments on
terminated leases. The $1.4 million balance at
December 31, 2001 will be paid out in future periods as the
payments come due.

During 2000, the company also made the following
acquisitions with cash, common stock, and/or exchangeable
preferred stock exchangeable into common stock: i/us
Corporation, an Ontario corporation and provider of specialty
graphics and publishing tools to website developers, designers
and graphics users; Cass & Cass Ltd. (d/b/a TIB-U.K.), the
agent of TIB in the United Kingdom; four additional TIB agents
in the United States, Canada and Sweden; and a stock photo
agency in Australia. The aggregate purchase price, net assets
acquired and related goodwill, respectively, were
$28.5 million, $0.6 million, and $27.9 million.

During 1999, the company also made the following
acquisitions with cash, common stock, and/or exchangeable
preferred stock exchangeable into common stock: EyeWire, a
provider of royalty-free photography, video, typefaces, software
and other design resources; Online USA, an agency specializing
in the sourcing and distribution of celebrity imagery over the
Internet; American Royal Arts, a leading provider of animation
art; and Newsmakers, a digital news agency covering events, news
and celebrity photography. The aggregate purchase price, net
liabilities acquired and related goodwill, respectively, were
$45.1 million, $2.7 million, and $47.8 million.

All acquisitions were accounted for using the
purchase method of accounting and, accordingly, the results of
operations since the respective dates of acquisition are
included with those of the company.

4. Loss on Abandoned and Subleased
Property

During the fourth quarter of 2001, the company
re-evaluated its worldwide facilities requirements and
identified excess space in New York, Seattle, San Francisco,
Santa Monica, London and Munich. The company recorded a loss of
$11.6 million during the fourth quarter to account for
minimum rental payments and costs of subleasing the properties
over the remaining lives of the leases, net of expected sublease
income. Approximately $7.8 million of this charge remains
in accrued expenses at December 31, 2001, and will be paid
out in future periods through 2007.

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GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

5. Integration Costs and Loss on
Impairment of Assets

In 1999, the company commenced integration of all
of the companys businesses after the acquisition of The
Image Bank, Inc. and Art.com. Integration actions included: the
termination of employees; the abandonment of facilities and
assets; the review of processes and resultant actions to
implement processes that would benefit the company going
forward; contract re-negotiations and terminations; and
determination of what functions and facilities should be
combined, for which consulting and other professional assistance
was sought.

Subsequent to the VCG acquisition in 2000,
management determined that further integration of the
companys operations and facilities was necessary to
eliminate duplicate facilities and functions and to take
advantage of opportunities for further leveraging cost and
technology platforms. Integration actions included: the
termination of approximately 250 employees; abandonment of
23 sales facilities and related assets; the review of
processes and resultant actions to implement processes that
would benefit the company going forward; and determination of
what functions and facilities should be combined, for which
consulting and other professional assistance was sought.

The costs associated with these significant
integration projects were expensed as incurred as follows:

|                                        |       |                          |       |       |  |      |       |        |  |   |       |       | 
|--------------------------------------- | ----- | ------------------------ | ----- | ----- |  | ---- | ----- | ------ |  | - | ----- | ----- | 
|                                        |       |                         
|                                        |       | Years Ended December 31,
|                                        |       |                         
|                                        |       | 2001                     |       | 2000  |  | 1999
|                                        |       |                          |       |       |  |     
|                                        |       |                         
|                                        |       | (In thousands)          
|Employee terminations                   |       | $                        | 3,025 |       |  | $    | 6,622 |        |  | $ |      |      
|Abandonment of facilities               |       |                          | 1,540 |       |  |      | 3,621 |        |  |   |      |      
|Process review                          |       |                          | 417   |       |  |      | 3,593 |        |  |   | 1,436 |      
|Consulting and other professional fees  |       |                          | 223   |       |  |      | 2,899 |        |  |   | 630   |      
|Contract re-negotiation and termination |       |                          | 18    |       |  |      | 1,662 |        |  |   | 2,494 |      
|Other                                   |       |                          | 45    |       |  |      | 240   |        |  |   | 323   |      
|                                        |       |                          |       |       |  |      |       |        |  |   |       |      
|                                        | Total |                          | $     | 5,268 |  |      | $     | 18,637 |  |   | $     | 4,883 | 
|                                        |       |                          |       |       |  |      |       |        |  |   |       |      

After a cash flow analysis was performed in the
fourth quarter of 2000 for Art.com and a related business that
operated as a division of Art.com, the company determined that
the long-lived assets related to these businesses were impaired.
The company wrote off $53.4 million of Art.com goodwill,
reducing the carrying value of the remaining long-lived assets
to their estimated fair value.

On May 17, 2001, the company terminated the
operations of Art.com and recorded integration costs of
approximately $2.1 million, including severance costs and
costs to terminate the operations and exit the facilities of
Art.com, as well as a loss on the impairment of related assets
of $6.5 million.

Also during the second quarter of 2001, the
company recorded integration costs of $0.9 million,
including severance costs and facilities exit costs, relating
primarily to the planned closure of the Calgary office and
consolidation of those operations into other offices.

The integration costs associated with the closure
of Art.com and the Calgary office were as follows:

|                          |       |                              |     |         |  |       |     |     |  |   |       |       | 
|------------------------- | ----- | ---------------------------- | --- | ------- |  | ----- | --- | --- |  | - | ----- | ----- | 
|                          |       |                             
|                          |       | Year Ended December 31, 2001
|                          |       |                             
|                          |       | Art.com                      |     | Calgary |  | Total
|                          |       |                              |     |         |  |      
|                          |       |                             
|                          |       | (In thousands)              
|Employee terminations     |       | $                            | 956 |         |  | $     | 719 |     |  | $ | 1,675 |      
|Abandonment of facilities |       |                              | 701 |         |  |       | 174 |     |  |   | 875   |      
|Other                     |       |                              | 430 |         |  |       |    |     |  |   | 430   |      
|                          |       |                              |     |         |  |       |     |     |  |   |       |      
|                          | Total |                              | $   | 2,087   |  |       | $   | 893 |  |   | $     | 2,980 | 
|                          |       |                              |     |         |  |       |     |     |  |   |       |      

F-14



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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

6. Restructuring Costs

During the third quarter of 2001, management
announced that in response to further weakening in the U.S. and
global markets served by Getty Images, the company would reduce
its workforce by approximately 300 people worldwide across
multiple functions. The company recorded $4.5 million in
restructuring costs for a planned 320 employee terminations once
management had committed the company to a formal plan of
termination and had communicated to all employees the benefit
arrangements they would receive if terminated. The company also
incurred $0.3 million in other related restructuring costs.

As of December 31, 2001, 280 employees had
been terminated and approximately $4 million in termination
costs had been paid. The remaining 40 employees will exit the
company by the end of the first quarter of 2002. Management
expects a reduction in staff costs of approximately $15 to
$20 million per year when all planned employee terminations
have been completed.

7. Debt Conversion

In March 2000, the company induced the voluntary
redemption of $62.3 million of the then outstanding
$75.0 million in 4.75% convertible subordinated notes,
resulting in the issuance of 2,187,034 shares of the
companys common stock. In connection with the redemption,
the company paid the note holders a cash premium of
approximately $6.7 million. This premium is included in the
Consolidated Statement of Operations as debt conversion expense.
The carrying value of the converted debt, net of issuance costs
of $1.9 million, was credited to common stock and
additional paid-in capital.

8. Loss on Impairment of
Investments

During the second quarter of 2001, the company
wrote off its minority cost basis investment in two small
private companies after analyses showed that they suffered other
than temporary declines in fair value. These analyses were based
upon review of quantitative and qualitative information provided
to management, which indicated that these companies would be
unable to return the carrying value of Getty Images
investments. The total of these two impairment charges was
$4.2 million.

9. Extraordinary Item

In January 2000, a subsidiary of the company
retired $3.3 million of debt at a discount prior to
maturity. This resulted in an extraordinary gain of
$0.4 million, net of income taxes of $0.3 million, or
$0.01 per share.

10. Business Segments and Geographic
Areas

As a provider of visual content, the company
operates in one business segment. Due to the nature of the
operations of the company, sales are made to a diverse client
base and there is no reliance on a single customer or group of
customers. Sales are reported in the geographic area where they
originate and are subject to the impact of translation
differences and are therefore not a reflection of the relative
performance of individual areas. Sales to customers by
geographic area, with countries experiencing more than 5% of
current year sales shown separately, are summarized below:

|                         |      |                |   |         |  |        |   |        |  |       |   |        |  |  |   |         |  |  |   |         | 
|------------------------ | ---- | -------------- | - | ------- |  | ------ | - | ------ |  | ----- | - | ------ |  |  | - | ------- |  |  | - | ------- | 
|                         |      | U.S.           |   | U.K.    |  | Canada |   | Other  |  | Total
|                         |      |                |   |         |  |        |   |        |  |      
|                         |      |               
|                         |      | (In thousands)
|Years ended December 31, |      |                |   |         |  |        |   |        |  |       |   |        |  |  |   |         |  |  |   |        
|                         | 2001 |                | $ | 202,787 |  |        | $ | 62,026 |  |       | $ | 43,508 |  |  | $ | 142,664 |  |  | $ | 450,985 | 
|                         | 2000 |                |   | 233,833 |  |        |   | 63,464 |  |       |   | 40,614 |  |  |   | 146,935 |  |  |   | 484,846 | 
|                         | 1999 |                |   | 134,192 |  |        |   | 37,178 |  |       |   | 4,123  |  |  |   | 72,347  |  |  |   | 247,840 | 

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Long-lived assets by geography, with countries
holding more than 5% of current year long-lived assets shown
separately, were as follows:

|                |      |                |   |         |  |               |   |          |  |       |   |        |  |  |   |        |  |  |   |         | 
|--------------- | ---- | -------------- | - | ------- |  | ------------- | - | -------- |  | ----- | - | ------ |  |  | - | ------ |  |  | - | ------- | 
|                |      |                |   |         |  | Other         |   | Deferred |  |      
|                |      | U.S.           |   | U.K.    |  | International |   | Taxes    |  | Total
|                |      |                |   |         |  |               |   |          |  |      
|                |      |               
|                |      | (In thousands)
|At December 31, |      |                |   |         |  |               |   |          |  |       |   |        |  |  |   |        |  |  |   |        
|                | 2001 |                | $ | 303,522 |  |               | $ | 428,697  |  |       | $ | 54,582 |  |  | $ | 55,639 |  |  | $ | 842,440 | 
|                | 2000 |                |   | 362,513 |  |               |   | 444,973  |  |       |   | 47,604 |  |  |   | 43,659 |  |  |   | 898,749 | 

11. Short-Term and Long-Term Debt

Short-Term

The companys short-term debt at
December 31, 2001, consisted mainly of borrowings under a
$100.0 million senior credit facility with HSBC Investment
Bank plc (HSBC). Interest is charged at a variable rate equal to
LIBOR, plus associated costs and a margin ranging from 1.00% to
1.75% per year. The weighted average interest rate on this
facility in 2001 was 5.74%. The proceeds of the senior credit
facility are available for general corporate purposes, including
acquisitions and working capital requirements. An annual
commitment fee of .675% is charged on the unused portion of the
facility. As this facility expires in October 2002, the company
is negotiating a replacement facility to be in place prior to
expiration of the current facility. There is no guarantee that
the company will be able to negotiate a facility on favorable
terms, or at all.

Getty Images unconditionally guarantees all of
the obligations under the senior credit facility, and the
obligations of its subsidiaries that are parties to the credit
agreement. These obligations are collateralized by pledges of
shares of some of its subsidiaries, a lien on all of the
companys assets and the assets of the companys
subsidiaries that are parties to the credit agreement, and a
pledge of trademarks from two of the companys
subsidiaries. The credit agreement also requires compliance with
debt covenants, some of which were amended during 2001,
including prohibition of the payment of dividends, prohibition
of the repayment of outstanding subordinated notes prior to
maturity, maintenance of minimum ratios of EBITDA (as defined in
the agreement) to interest payable and EBITDA to total
borrowings, as well as the trigger of immediate repayment if the
company fails to make payment obligations, breaches the
agreement or experiences a change in the ownership of Getty
Images or its subsidiaries. Management believes that the company
is in compliance with such covenants for the years ended
December 31, 2001 and 2000.

Long-Term

Long-term debt, net of unamortized issuance
costs, consisted of the following at December 31, 2001 and
2000:

|                                                |  |                |         |      |  |   |         | 
|----------------------------------------------- |  | -------------- | ------- | ---- |  | - | ------- | 
|                                                |  | 2001           |         | 2000
|                                                |  |                |         |     
|                                                |  |               
|                                                |  | (In thousands)
|Convertible subordinated notes due 2007 (5.00%) |  | $              | 243,487 |      |  | $ | 242,233 | 
|Bank loans                                      |  |                | 19,865  |      |  |   | 19,003  | 
|Convertible subordinated notes due 2003 (4.75%) |  |                | 12,475  |      |  |   | 12,342  | 
|Capital leases and other                        |  |                | 332     |      |  |   | 1,588   | 
|                                                |  |                |         |      |  |   |         | 
|                                                |  |                | 276,159 |      |  |   | 275,166 | 
|Less current portion                            |  |                | 19,944  |      |  |   | 739     | 
|                                                |  |                |         |      |  |   |         | 
|Long-term portion                               |  | $              | 256,215 |      |  | $ | 274,427 | 
|                                                |  |                |         |      |  |   |         | 

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GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The amounts outstanding at December 31, 2001
are payable as follows:

|                    |       |                |         |         |  |           |        |        |  |   |     |     |  |   |         |         | 
|------------------- | ----- | -------------- | ------- | ------- |  | --------- | ------ | ------ |  | - | --- | --- |  | - | ------- | ------- | 
|                    |       | Convertible    |         |         |  | Capital   |        |       
|                    |       | Subordinated   |         | Bank    |  | Leases    |        |       
|                    |       | Notes          |         | Loans   |  | and Other |        | Total 
|                    |       |                |         |         |  |           |        |       
|                    |       |               
|                    |       | (In thousands)
|2002                |       | $              |        |         |  | $         | 19,865 |        |  | $ | 79  |     |  | $ | 19,944  |        
|2003                |       |                | 12,475  |         |  |           |       |        |  |   | 253 |     |  |   | 12,728  |        
|2004                |       |                |        |         |  |           |       |        |  |   |    |     |  |   |        |        
|2005                |       |                |        |         |  |           |       |        |  |   |    |     |  |   |        |        
|2006 and thereafter |       |                | 243,487 |         |  |           |       |        |  |   |    |     |  |   | 243,487 |        
|                    |       |                |         |         |  |           |        |        |  |   |     |     |  |   |         |        
|                    | Total |                | $       | 255,962 |  |           | $      | 19,865 |  |   | $   | 332 |  |   | $       | 276,159 | 
|                    |       |                |         |         |  |           |        |        |  |   |     |     |  |   |         |        

The net $12.5 million of 4.75% convertible
subordinated notes are convertible by the holder into common
stock at $28.51 per share, subject to adjustments in certain
circumstances, at any time on or before June 1, 2003, and
are subordinated to senior indebtedness of the company and to
all debt and liabilities, including trade payables and lease
obligations, if any, of the companys subsidiaries. The
company may redeem the notes, in whole or in part, at 101.90%
until May 31, 2002 or at 100.95% beginning on June 1,
2002, however, the current senior credit facility with HSBC
prohibits the repayment of outstanding subordinated notes prior
to maturity. Interest on the notes is payable June 1 and
December 1 of each year.

On March 13, 2000, the company issued
$250.0 million of 5% convertible subordinated notes due
March 15, 2007. These notes are convertible by the holder
into common stock at $61.08 per share, subject to adjustments in
certain circumstances, at any time on or before March 15,
2007, and are subordinated to senior indebtedness of the company
and to all debt and liabilities, including trade payables and
lease obligations, if any, of the companys subsidiaries.
The 5% notes rank equal in right of payment to the
$12.5 million of 4.75% notes. The company may redeem the 5%
notes, in whole or in part, at any time on or after
March 20, 2003 at specified redemption prices ranging from
102.857% beginning on March 20, 2003 to 100.714% beginning
on March 15, 2006, however, the current senior credit
facility with HSBC prohibits the repayment of outstanding
subordinated notes prior to maturity. Interest on the notes is
payable on March 15 and September 15 of each year.

Interest expense relating to short-term and
long-term borrowings amounted to $17.2 million in 2001,
$15.8 million in 2000 and $5.5 million in 1999.

12. Commitments and
Contingencies

Following are the future minimum lease payments
associated with operating leases and future minimum receipts
under non-cancelable subleases in effect as of December 31,
2001:

|           |                              |                |         |           |  |   |       |        | 
|---------- | ---------------------------- | -------------- | ------- | --------- |  | - | ----- | ------ | 
|           |                              | Leases         |         | Subleases
|           |                              |                |         |          
|           |                              |               
|           |                              | (In thousands)
|2002       |                              | $              | 22,353  |           |  | $ | 6,314 |       
|2003       |                              |                | 20,771  |           |  |   | 5,628 |       
|2004       |                              |                | 20,075  |           |  |   | 5,215 |       
|2005       |                              |                | 20,050  |           |  |   | 5,103 |       
|2006       |                              |                | 20,311  |           |  |   | 5,103 |       
|Thereafter |                              |                | 160,982 |           |  |   | 714   |       
|           |                              |                |         |           |  |   |       |       
|           | Total minimum lease payments |                | $       | 264,542   |  |   | $     | 28,077 | 
|           |                              |                |         |           |  |   |       |       

Rent expense was $21.0 million,
$14.8 million and $10.0 million for the years ended
December 31, 2001, 2000, and 1999, respectively. Sublease
income for these same periods was insignificant.

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

From time to time, the company is subject to
various legal actions arising out of the normal course of
business, including claims relating to trademark, patent or
copyright infringements or other items. We have accrued a
liability and charged operations for the estimated costs of
settlement or adjudication of claims for which we believe a loss
is probable. Management believes the outcome of any such actions
and claims will not materially affect the companys
financial position, results of operations or cash flows.

13. Stockholders Equity

Preferred stock

The Board of Directors is authorized to issue up
to 5 million shares of no par value preferred stock. Under
the terms of the companys Articles of Incorporation, the
Board of Directors may determine the rights, preferences, and
terms of the companys authorized but unissued shares of
preferred stock without further action by shareholders.

Exchangeable preferred stock

In 1999, the company formed a wholly owned
subsidiary to transact a business acquisition. The subsidiary is
authorized to issue 5 million shares of no par value
exchangeable preferred stock. At December 31, 2001 and
2000, 85,092 and 533,680 shares were outstanding, respectively.
Each share votes as Getty Images common stock, shares in any
dividends payable to Getty Images common stockholders and is
exchangeable for one share of Getty Images common stock at the
discretion of the holder (scheduled to be exchanged by
August 4, 2006).

Getty Images Trademarks

Getty Images has trademark registrations and
applications for trademark registrations in respect of the names
Getty and Hulton Getty, and derivatives thereof and the related
logos (together, the Getty Trademarks). Getty Images
and Getty Investments have agreed that in the event that Getty
Images becomes controlled by a third party or parties not
affiliated with the Getty family, Getty Investments will have
the right to call for an assignment to it, for a nominal sum, of
all rights to the Getty Trademarks. Upon such assignment, Getty
Images will have 12 months in which it will be permitted to
continue to use the Getty Trademarks and thereafter will have to
cease such use.

14. Stock Options

Under the Getty Images, Inc. 1998 Stock Incentive
Plan (the Plan), the Board of Directors has the discretion to
grant stock options underlying shares of common stock at the
fair market value of the companys common stock on the date
of grant. Options generally vest 25% on the first anniversary of
the date of grant and on a monthly pro rata basis over three
years thereafter and have a term of ten years.

A total of 13 million shares are reserved
for issuance under the Plan. Shares under options that lapse are
available for re-issuance. Options become exercisable when
vested and remain exercisable through the remainder of the
option term except upon termination of employment, in which case
the options generally terminate 90 days after the
employees termination date.

The company also issued, during 2001, options for
a total of 134,999 shares outside of the Plan to two newly-hired
executive officers and to three non-executive members of our
Board of Directors. The terms of these options are substantially
identical to those granted under the Plan.

F-18



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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The following table presents activity in 2001,
2000 and 1999:

|                  |           |             |        |             |   |           |       |          |  |  |       |  |  |   |       |  | 
|----------------- | --------- | ----------- | ------ | ----------- | - | --------- | ----- | -------- |  |  | ----- |  |  | - | ----- |  | 
|                  |           |             |        |            
|                  |           | Outstanding |        | Exercisable
|                  |           |             |        |            
|                  |           |             |        | Weighted    |   |           |       | Weighted
|                  |           | Number of   |        | Average     |   | Number of |       | Average 
|                  |           | Shares in   |        | Exercise    |   | Shares in |       | Exercise
|                  |           | Thousands   |        | Price       |   | Thousands |       | Price   
|                  |           |             |        |             |   |           |       |         
|December 31, 1998 |           |             | 7,409  |             |   | $         | 14.57 |          |  |  | 2,419 |  |  | $ | 8.86  | 
|                  | Granted   |             |        | 4,069       |   |           |       | 18.28    |  |  |       |  |  |   |       |  | 
|                  | Exercised |             |        | (1,294      | ) |           |       | 6.85     |  |  |       |  |  |   |       |  | 
|                  | Lapsed    |             |        | (659        | ) |           |       | 18.17    |  |  |       |  |  |   |       |  | 
|                  |           |             |        |             |   |           |       |          |  |  |       |  |  |   |       | 
|December 31, 1999 |           |             | 9,525  |             |   |           | 16.96 |          |  |  | 3,671 |  |  |   | 15.17 | 
|                  | Granted   |             |        | 4,759       |   |           |       | 33.83    |  |  |       |  |  |   |       |  | 
|                  | Exercised |             |        | (1,754      | ) |           |       | 11.32    |  |  |       |  |  |   |       |  | 
|                  | Lapsed    |             |        | (1,486      | ) |           |       | 25.06    |  |  |       |  |  |   |       |  | 
|                  |           |             |        |             |   |           |       |          |  |  |       |  |  |   |       | 
|December 31, 2000 |           |             | 11,044 |             |   |           | 24.00 |          |  |  | 4,396 |  |  |   | 17.61 | 
|                  | Granted   |             |        | 3,528       |   |           |       | 17.56    |  |  |       |  |  |   |       |  | 
|                  | Exercised |             |        | (500        | ) |           |       | 14.16    |  |  |       |  |  |   |       |  | 
|                  | Lapsed    |             |        | (1,801      | ) |           |       | 29.91    |  |  |       |  |  |   |       |  | 
|                  |           |             |        |             |   |           |       |          |  |  |       |  |  |   |       | 
|December 31, 2001 |           |             | 12,271 |             |   | $         | 21.64 |          |  |  | 7,073 |  |  | $ | 21.65 | 
|                  |           |             |        |             |   |           |       |          |  |  |       |  |  |   |       | 

The following table summarizes additional
information for options outstanding and options exercisable at
December 31, 2001:

|                |  |                     |        |                     |  |                  |            |                |  |                  |       |  |  |  |       |  |  |   |       | 
|--------------- |  | ------------------- | ------ | ------------------- |  | ---------------- | ---------- | -------------- |  | ---------------- | ----- |  |  |  | ----- |  |  | - | ----- | 
|                |  |                     |        |                     |  |                 
|                |  | Options Outstanding |        |                    
|                |  |                     |        | Options Exercisable
|                |  |                     |        | Weighted-Average    |  |                  |            |               
|Range of        |  |                     |        | Remaining           |  | Weighted-Average |            |                |  | Weighted-Average
|Exercise Price  |  | Number              |        | Contractual Life    |  | Exercise Price   |            | Number         |  | Exercise Price  
|                |  |                     |        |                     |  |                  |            |                |  |                 
|                |  | (In thousands)      |        |                     |  |                  |            | (In thousands) |  |                 
|$ 0.00 - $14.94 |  |                     | 2,273  |                     |  |                  | 7.53 years |                |  | $                | 12.11 |  |  |  | 1,077 |  |  | $ | 11.42 | 
|$14.95 - $18.33 |  |                     | 2,641  |                     |  |                  | 7.79 years |                |  |                  | 16.90 |  |  |  | 1,100 |  |  |   | 16.81 | 
|$18.34 - $19.41 |  |                     | 739    |                     |  |                  | 7.66 years |                |  |                  | 19.06 |  |  |  | 471   |  |  |   | 19.10 | 
|$19.42 - $20.91 |  |                     | 2,188  |                     |  |                  | 6.32 years |                |  |                  | 20.84 |  |  |  | 2,020 |  |  |   | 20.89 | 
|$20.92 - $28.63 |  |                     | 2,605  |                     |  |                  | 8.40 years |                |  |                  | 26.09 |  |  |  | 1,641 |  |  |   | 26.28 | 
|$28.64 - $54.91 |  |                     | 1,825  |                     |  |                  | 8.37 years |                |  |                  | 35.99 |  |  |  | 764   |  |  |   | 36.68 | 
|                |  |                     |        |                     |  |                  |            |                |  |                  |       |  |  |  |       |  |  |   |       | 
|$ 0.00 - $54.91 |  |                     | 12,271 |                     |  |                  | 7.69 years |                |  | $                | 21.64 |  |  |  | 7,073 |  |  | $ | 21.65 | 
|                |  |                     |        |                     |  |                  |            |                |  |                  |       |  |  |  |       |  |  |   |       | 

The company applies Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock
Issued to Employees and related interpretations in
accounting for stock options. Accordingly, the company
recognizes no compensation expense related to employee stock
options, as no options are granted below the market price on the
date of the grant.

SFAS No. 123, Accounting for
Stock-Based Compensation, requires the disclosure of pro
forma information as if the company had adopted the fair-value
method of accounting for its stock option plan. Under this
method, compensation cost is measured on all options based on
the fair value of the stock options at the grant

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GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

date. The pro forma effect on the companys
net loss and loss per share of SFAS No. 123 would have been
as follows:

|                       |           |                          |   |       |  |      |   |       |  |  |   |      | 
|---------------------- | --------- | ------------------------ | - | ----- |  | ---- | - | ----- |  |  | - | ---- | 
|                       |           |                         
|                       |           | Years Ended December 31,
|                       |           |                         
|                       |           | 2001                     |   | 2000  |  | 1999
|                       |           |                          |   |       |  |     
|Net loss (in millions) |           |                          |   |       |  |      |   |       |  |  |   |     
|                       | Reported  |                          | $ | 95.3  |  |      | $ | 169.3 |  |  | $ | 67.8 | 
|                       | Pro forma |                          |   | 114.6 |  |      |   | 189.4 |  |  |   | 78.3 | 
|Net loss per share     |           |                          |   |       |  |      |   |       |  |  |   |     
|                       | Reported  |                          | $ | 1.84  |  |      | $ | 3.40  |  |  | $ | 1.94 | 
|                       | Pro forma |                          |   | 2.21  |  |      |   | 3.81  |  |  |   | 2.23 | 

The weighted-average estimated fair values of
options granted during 2001, 2000 and 1999 were $8.39, $17.25
and $11.61, respectively. Weighted-average estimated fair values
were calculated using a Black-Scholes option valuation model
with forfeitures recognized as they occur and the following
assumptions:

|                                          |  |                          |  |                  |  |             
|----------------------------------------- |  | ------------------------ |  | ---------------- |  | ------------
|                                          |  |                         
|                                          |  | Years Ended December 31,
|                                          |  |                         
|                                          |  | 2001                     |  | 2000             |  | 1999        
|                                          |  |                          |  |                  |  |             
|Expected future share price volatility    |  | 73%                      |  | 68%              |  | 75%         
|Weighted-average risk free rate of return |  | 4.22%                    |  | 5.26%            |  | 5.70%       
|Expected life of option                   |  | 1 year from vest         |  | 1 year from vest |  | 2 to 4 years
|Expected rate of dividends                |  | None                     |  | None             |  | None        

15.     Defined
Contribution Plans

The company contributes to defined contribution
plans for all employees in the U.S. and U.K., where the
significant portion of our employees is located.

In the U.S., the company now has one plan,
following the merger of legacy plans from acquired businesses.
Employees over 18 years of age may join this plan
immediately. The company matches 100% of employee contributions,
up to the first 4% of each participants salary.

With the exception of a limited number of
employees participating in legacy defined contribution plans
according to employment contracts, the company has one plan in
the U.K. Employees may join this plan after three months of
service with the company and must contribute a minimum of 2% of
their salary to maintain eligibility. The company contributes 5%
of each participants salary to the plan.

Total contributions to all plans of
$5.2 million, $1.7 million and $1.5 million were
expensed as incurred in 2001, 2000 and 1999, respectively.

16.     Fair Value of
Financial Instruments

For short-term financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable
and many accrued liabilities, the carrying amount approximates
the fair value because of the immediate or short-term nature of
those instruments. The fair value of long-term debt is estimated
based on quoted market prices for similar instruments or by
discounting expected cash flows at rates currently available to
the company for instruments with similar risks and maturities.

At December 31, 2001, the estimated current
market value of the companys long-term debt, based on
market prices and interest rates for similar obligations with
like maturities, was approximately $36.0 million less than
the amounts reported on the Consolidated Balance Sheets.

F-20



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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

17.     Income
Taxes

Income (loss) before income taxes was taxed under
the following jurisdictions:

|         |       |                          |          |         |   |      |          |          |   |   |         |         |  
|-------- | ----- | ------------------------ | -------- | ------- | - | ---- | -------- | -------- | - | - | ------- | ------- | -
|         |       |                         
|         |       | Years Ended December 31,
|         |       |                         
|         |       | 2001                     |          | 2000    |   | 1999
|         |       |                          |          |         |   |     
|         |       |                         
|         |       | (In thousands)          
|Domestic |       | $                        | (112,364 | )       |   | $    | (185,431 | )        |   | $ | (77,766 | )      
|Foreign  |       |                          | 13,702   |         |   |      | 21,280   |          |   |   | 8,273   |        
|         |       |                          |          |         |   |      |          |          |   |   |         |        
|         | Total |                          | $        | (98,662 | ) |      | $        | (164,151 | ) |   | $       | (69,493 | )
|         |       |                          |          |         |   |      |          |          |   |   |         |        

The components of income tax (expense)
benefit were as follows:

|                   |                   |                             |         |        |       |      |         |         |        |   |        |        |       | 
|------------------ | ----------------- | --------------------------- | ------- | ------ | ----- | ---- | ------- | ------- | ------ | - | ------ | ------ | ----- | 
|                   |                   |                            
|                   |                   | Years Ended December 31,   
|                   |                   |                            
|                   |                   | 2001                        |         | 2000   |       | 1999
|                   |                   |                             |         |        |       |     
|                   |                   |                            
|Current tax:       |                   | (In thousands)             
|                   | Federal           |                             | $       | (3,119 | )     |      | $       | (5,116  | )      |   | $      | (679   | )    
|                   | State             |                             |         | (295   | )     |      |         | (385    | )      |   |        | (465   | )    
|                   | Non-U.S.          |                             |         | (8,883 | )     |      |         | (13,156 | )      |   |        | (8,585 | )    
|                   |                   |                             |         |        |       |      |         |         |        |   |        |       
|Total current tax  |                   |                             | (12,297 | )      |       |      | (18,657 | )       |        |   | (9,729 | )     
|                   |                   |                             |         |        |       |      |         |         |        |   |        |       
|Deferred tax:      |                   |                             |         |        |       |      |         |         |        |   |        |       
|                   | Federal and State |                             |         | 14,567 |       |      |         | 12,560  |        |   |        | 11,254 |      
|                   | Non-U.S.          |                             |         | 1,080  |       |      |         | 530     |        |   |        | 135    |      
|                   |                   |                             |         |        |       |      |         |         |        |   |        |       
|Total deferred tax |                   |                             | 15,647  |        |       |      | 13,090  |         |        |   | 11,389 |       
|                   |                   |                             |         |        |       |      |         |         |        |   |        |       
|                   |                   | Total tax (expense) benefit |         | $      | 3,350 |      |         | $       | (5,567 | ) |        | $      | 1,660 | 
|                   |                   |                             |         |        |       |      |         |         |        |   |        |       

The income tax (expense) benefit differs
from the amounts that would result by applying the U.S.
statutory rate to earnings before income taxes. A reconciliation
of the difference follows:

|                                           |                             |                          |         |       |  |      |         |        |   |   |         |       | 
|------------------------------------------ | --------------------------- | ------------------------ | ------- | ----- |  | ---- | ------- | ------ | - | - | ------- | ----- | 
|                                           |                             |                         
|                                           |                             | Years Ended December 31,
|                                           |                             |                         
|                                           |                             | 2001                     |         | 2000  |  | 1999
|                                           |                             |                          |         |       |  |     
|                                           |                             |                         
|                                           |                             | (In thousands)          
|Income taxes based on statutory rate       |                             | $                        | 34,532  |       |  | $    | 57,216  |        |   | $ | 24,323  |      
|Non-deductible amortization of intangibles |                             |                          | (17,739 | )     |  |      | (60,224 | )      |   |   | (22,516 | )    
|Debt conversion expense                    |                             |                          |        |       |  |      | (2,086  | )      |   |   |        |      
|State income taxes, net of U.S. tax        |                             |                          | 1,462   |       |  |      | (382    | )      |   |   | (465    | )    
|Change in valuation allowance              |                             |                          | (12,844 | )     |  |      |        |        |   |   |        |      
|Other, net                                 |                             |                          | (2,061  | )     |  |      | (91     | )      |   |   | 318     |      
|                                           |                             |                          |         |       |  |      |         |        |   |   |         |      
|                                           | Total tax (expense) benefit |                          | $       | 3,350 |  |      | $       | (5,567 | ) |   | $       | 1,660 | 
|                                           |                             |                          |         |       |  |      |         |        |   |   |         |      

F-21



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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The components of deferred income taxes are as
follows:

|                                             |                                    |                |         |        |   |   |        |        |  
|-------------------------------------------- | ---------------------------------- | -------------- | ------- | ------ | - | - | ------ | ------ | -
|                                             |                                    | 2001           |         | 2000  
|                                             |                                    |                |         |       
|                                             |                                    |               
|                                             |                                    | (In thousands)
|Deferred tax assets:                         |                                    |                |         |        |   |   |        |       
|                                             | Loss carry forwards                |                | $       | 61,547 |   |   | $      | 42,749 |  
|                                             | Accrued liabilities and allowances |                |         | 24,593 |   |   |        | 6,082  |  
|                                             | Other                              |                |         | 1,626  |   |   |        | 1,185  |  
|                                             |                                    |                |         |        |   |   |        |       
|Total deferred tax assets                    |                                    |                | 87,766  |        |   |   | 50,016 |       
|                                             |                                    |                |         |        |   |   |        |       
|Deferred tax liabilities:                    |                                    |                |         |        |   |   |        |       
|                                             | Long-term assets                   |                |         | (9,854 | ) |   |        | (275   | )
|                                             |                                    |                |         |        |   |   |        |       
|Total deferred tax liabilities               |                                    |                | (9,854  | )      |   |   | (275   | )     
|                                             |                                    |                |         |        |   |   |        |       
|                                             |                                    |                | 77,912  |        |   |   | 49,741 |       
|Less deferred tax assets valuation allowance |                                    |                | (12,844 | )      |   |   |       |       
|                                             |                                    |                |         |        |   |   |        |       
|Net deferred tax assets                      |                                    | $              | 65,068  |        |   | $ | 49,741 |       
|                                             |                                    |                |         |        |   |   |        |       

Tax benefits of $1.2 million,
$13.5 million and $4.5 million associated with the
exercise of employee stock options were allocated to additional
paid-in capital in 2001, 2000 and 1999, respectively. Deferred
U.S. income taxes are not provided for unremitted foreign
earnings of our foreign subsidiaries because we expect those
earnings will be permanently reinvested.

The deferred tax assets in respect of loss carry
forwards and the related loss carryforwards at December 31,
2001 expire as follows:

|                                          |  |                |        |                    |  |   |         | 
|----------------------------------------- |  | -------------- | ------ | ------------------ |  | - | ------- | 
|                                          |  |                |        | Net Operating Loss
|                                          |  | Deferred Taxes |        | Carryforwards     
|                                          |  |                |        |                   
|                                          |  |               
|                                          |  | (In thousands)
|Between 2018 and 2021(primarily domestic) |  | $              | 60,330 |                    |  | $ | 157,933 | 
|Indefinite (foreign)                      |  |                | 1,217  |                    |  |   | 3,186   | 
|                                          |  |                |        |                    |  |   |         | 
|                                          |  | $              | 61,547 |                    |  | $ | 161,119 | 
|                                          |  |                |        |                    |  |   |         | 

As of December 31, 2001, the Company had net
deferred tax assets of $65.1 million, net of a valuation
allowance of $12.8 million that was established in 2001.
The Company has not generated taxable income from its U.S.
operations during recent years. It will be necessary to generate
taxable income from its primary U.S. operations of
approximately $158 million in order to utilize enough of
the tax loss carryforwards to realize the associated deferred
tax asset. As of December 31, 2001 the Company has
completed its anticipated restructuring and integration actions
following several years of significant acquisitions of other
businesses and implemented cost reduction programs designed to
improve both U.S. and foreign levels of prospective taxable
income. Additionally, during 2002 the Company will implement
tax-planning strategies that are intended to increase the ratio
of U.S. taxable income to worldwide taxable income.
Management believes it currently reasonable to estimate the
results of those actions for future periods and has computed the
net deferred tax asset at December 31, 2001 accordingly.
Although realization is not assured, management believes, based
on its current estimates of future taxable income for its U.S.
operations and tax-planning strategies, that it is more likely
than not that the net deferred tax assets will be realized
within a reasonable period of time and substantially prior to
the expiration of the net operating loss carryforwards. In the
event that actual results differ from managements
expectations, the valuation allowance could materially change,
directly impacting our financial position and results of
operations. If the Company were able to use more of the deferred
tax asset than the current net balance, a portion of the
valuation allowance would be returned to income in the period
that such a determination was made. If the Company were unable
to utilize the net deferred tax asset balance, a greater
valuation allowance would be recorded and charged to expense in
the period of that determination, which could be in advance of
the expiration of the loss carryforwards.

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##### Table of Contents



GETTY IMAGES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

18.     Supplementary
Financial Data (Unaudited)

|                             |                                                 |                                       |   |         |   |         |   |         |   |  |   |         |   |  |   |         |  
|---------------------------- | ----------------------------------------------- | ------------------------------------- | - | ------- | - | ------- | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                             |                                                 | First                                 |   | Second  |   | Third   |   | Fourth 
|                             |                                                 | Quarter                               |   | Quarter |   | Quarter |   | Quarter
|                             |                                                 |                                       |   |         |   |         |   |        
|                             |                                                 |                                      
|                             |                                                 | (In thousands, except per share data)
|Year ended December 31, 2001 |                                                 |                                       |   |         |   |         |   |         |   |  |   |         |   |  |   |        
|                             | Sales                                           |                                       | $ | 125,787 |   |         | $ | 115,856 |   |  | $ | 107,505 |   |  | $ | 101,838 |  
|                             | Gross profit                                    |                                       |   | 90,163  |   |         |   | 83,532  |   |  |   | 79,564  |   |  |   | 75,336  |  
|                             | Loss from operations                            |                                       |   | (7,847  | ) |         |   | (18,974 | ) |  |   | (16,226 | ) |  |   | (34,535 | )
|                             | Loss before income taxes                        |                                       |   | (11,928 | ) |         |   | (27,171 | ) |  |   | (20,775 | ) |  |   | (38,787 | )
|                             | Net loss(1)                                     |                                       |   | (14,559 | ) |         |   | (23,731 | ) |  |   | (18,234 | ) |  |   | (38,787 | )
|                             | Basic and diluted loss per share(1)             |                                       |   | (0.28   | ) |         |   | (0.46   | ) |  |   | (0.35   | ) |  |   | (0.75   | )
|                            
|Year ended December 31, 2000 |                                                 |                                       |   |         |   |         |   |         |   |  |   |         |   |  |   |        
|                             | Sales                                           |                                       | $ | 104,825 |   |         | $ | 123,647 |   |  | $ | 126,998 |   |  | $ | 129,376 |  
|                             | Gross profit                                    |                                       |   | 74,307  |   |         |   | 86,559  |   |  |   | 89,517  |   |  |   | 93,798  |  
|                             | Loss from operations                            |                                       |   | (25,550 | ) |         |   | (25,841 | ) |  |   | (19,327 | ) |  |   | (73,958 | )
|                             | Loss before income taxes and extraordinary item |                                       |   | (33,855 | ) |         |   | (29,524 | ) |  |   | (23,034 | ) |  |   | (77,738 | )
|                             | Loss before extraordinary item                  |                                       |   | (32,721 | ) |         |   | (30,274 | ) |  |   | (26,356 | ) |  |   | (80,367 | )
|                             | Net loss(2)                                     |                                       |   | (32,337 | ) |         |   | (30,274 | ) |  |   | (26,356 | ) |  |   | (80,367 | )
|                             | Loss per share before extraordinary item        |                                       |   | (0.69   | ) |         |   | (0.61   | ) |  |   | (0.52   | ) |  |   | (1.57   | )
|                             | Basic and diluted loss per share(2)             |                                       |   | (0.68   | ) |         |   | (0.61   | ) |  |   | (0.52   | ) |  |   | (1.57   | )




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net loss and basic and diluted loss per share
	include integration costs and loss on impairment of assets, loss
	on abandoned and subleased property and restructuring costs of
	$4.0 million, $9.3 million, $4.8 million and
	$13.0 million in the three months ended March 31, 2001,
	June 30, 2001, September 30, 2001, and December 31,
	2001, respectively.                                                                                                                     
|   
|(2) | Net loss and basic and diluted loss per share
	include integration costs and loss on impairment of assets and
	restructuring costs of $4.2 million, $4.6 million,
	$3.9 million and $59.3 million in the three months
	ended March 31, 2000, June 30, 2000, September 30,
	2000 and December 31, 2000, respectively. Net loss and
	basic and diluted loss per share also include $0.4 million
	after taxes relating to extraordinary gains in the three months
	ended March 31, 2000.

F-23