<PAGE>
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                   FORM 10-Q
 
                                   (MARK ONE)
 
  /X/    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE
         ACT OF 1934
 
         FOR THE PERIOD ENDED MARCH 31, 1999
 
                                       OR
 
  / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE
         ACT OF 1934
 
         FOR THE TRANSITION PERIOD FROM               TO
 
                          COMMISION FILE NUMBER 1-5706
 
                            ------------------------
 
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
            (Exact name of registrant, as specified in its charter)
 
                  DELAWARE                             58-0971455
      (State or other jurisdiction of               (I.R.S. Employer
       incorporation or organization)              Identification No.)
 
             ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NJ 07073-2137
             (Address and zip code of principal executive offices)
 
                                 (201) 531-8000
              (Registrant's telephone number, including area code)
 
                         ------------------------------
 
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /
 
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MAY 7, 1999 WAS
69,161,937.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
                                    INDEX TO
                         QUARTERLY REPORT ON FORM 10-Q
 
                         PART I--FINANCIAL INFORMATION
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Item 1.  Financial Statements (unaudited)
 
Consolidated Condensed Statements of Operations............................................................           2
 
Consolidated Condensed Balance Sheets......................................................................           3
 
Consolidated Condensed Statements of Cash Flows............................................................           4
 
Consolidated Condensed Statement of Stockholders' Equity...................................................           5
 
Consolidated Condensed Statements of Comprehensive Loss....................................................           6
 
Notes to Consolidated Condensed Financial Statements.......................................................           7
 
Item 2.  Management's Discussion and Analysis of Financial Condition
        and Results of Operations..........................................................................          27
 
Item 3.  Quantitative and Qualitative Disclosures about Market Risk........................................          61
 
                                               PART II--OTHER INFORMATION
 
Item 1.  Legal Proceedings.................................................................................          63
 
Item 3.  Defaults Upon Senior Securities...................................................................          66
 
Item 6.  Exhibits and Reports on Form 8-K..................................................................          66
 
Signatures.................................................................................................          67
</TABLE>
 
                                       1
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED
                                                                          --------------------
                                                                          MARCH 31,  MARCH 31,
                                                                            1999       1998
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Revenues:
  Communications Group..................................................  $   7,608  $   8,962
  Lawn and garden equipment.............................................     60,034     51,257
                                                                          ---------  ---------
                                                                             67,642     60,219
Cost and expenses:
  Cost of sales and operating expenses..................................     40,596     37,317
  Selling, general and administrative...................................     32,425     34,730
  Depreciation and amortization.........................................      4,367      5,315
                                                                          ---------  ---------
Operating loss..........................................................     (9,746)   (17,143)
Other income (expense):
  Interest expense......................................................     (3,406)    (5,003)
  Interest income.......................................................      1,700      3,034
  Equity in losses of unconsolidated investees..........................     (1,685)    (5,500)
  Foreign currency gain (loss)..........................................       (508)        97
                                                                          ---------  ---------
                                                                             (3,899)    (7,372)
Loss before income tax expense and minority interest....................    (13,645)   (24,515)
Income tax expense......................................................        (94)      (487)
Minority interest.......................................................      2,469      2,039
                                                                          ---------  ---------
Net loss................................................................    (11,270)   (22,963)
Cumulative convertible preferred stock dividend requirement.............     (3,752)    (3,752)
                                                                          ---------  ---------
Net loss attributable to common stockholders............................  $ (15,022) $ (26,715)
                                                                          ---------  ---------
                                                                          ---------  ---------
 
Weighted average number of common shares--Basic.........................     69,123     68,572
                                                                          ---------  ---------
                                                                          ---------  ---------
 
Loss per common share--Basic:
  Net loss attributable to common stockholders..........................  $   (0.22) $   (0.39)
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
     See accompanying notes to consolidated condensed financial statements.
 
                                       2
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
                     CONSOLIDATED CONDENSED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                                                                         1998
                                                                                        MARCH 31,    ------------
                                                                                           1999
                                                                                       ------------
                                                                                       (UNAUDITED)
<S>                                                                                    <C>           <C>
ASSETS:
Current assets:
  Cash and cash equivalents..........................................................  $    123,845   $  137,625
  Accounts receivable:
    Snapper, net.....................................................................        36,846       27,055
    Other, net.......................................................................         9,145       18,826
  Inventories........................................................................        61,186       62,777
  Other assets.......................................................................         6,129        5,441
                                                                                       ------------  ------------
      Total current assets...........................................................       237,151      251,724
Investments in and advances to Joint Ventures:
  Eastern Europe and the Republics of the Former Soviet Union........................        84,200       87,163
  China..............................................................................        72,855       71,559
Property, plant and equipment, net of accumulated depreciation.......................        35,523       36,067
Intangible assets, less accumulated amortization.....................................       159,304      159,530
Other assets.........................................................................         4,007        3,598
                                                                                       ------------  ------------
      Total assets...................................................................  $    593,040   $  609,641
                                                                                       ------------  ------------
                                                                                       ------------  ------------
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Accounts payable...................................................................  $     24,704   $   28,779
  Accrued expenses...................................................................        66,333       63,329
  Current portion of long-term debt..................................................         1,303        1,723
                                                                                       ------------  ------------
      Total current liabilities......................................................        92,340       93,831
Long-term debt.......................................................................        53,259       50,111
Other long-term liabilities..........................................................         4,769        5,410
                                                                                       ------------  ------------
      Total liabilities..............................................................       150,368      149,352
                                                                                       ------------  ------------
Minority interest....................................................................        32,560       34,749
 
Commitments and contingencies
Stockholders' equity:
  7 1/4% Cumulative Convertible Preferred Stock......................................       207,000      207,000
  Common Stock, $1.00 par value, authorized 400,000,000 shares, issued and
    outstanding 69,123,841 and 69,118,841 shares at March 31, 1999 and December 31,
    1998, respectively...............................................................        69,124       69,119
  Paid-in surplus....................................................................     1,012,816    1,012,794
  Accumulated deficit................................................................      (872,315)    (857,293)
  Accumulated other comprehensive loss...............................................        (6,513)      (6,080)
                                                                                       ------------  ------------
      Total stockholders' equity.....................................................       410,112      425,540
                                                                                       ------------  ------------
      Total liabilities and stockholders' equity.....................................  $    593,040   $  609,641
                                                                                       ------------  ------------
                                                                                       ------------  ------------
</TABLE>
 
     See accompanying notes to consolidated condensed financial statements.
 
                                       3
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                           THREE MONTHS ENDED
                                                                          --------------------
                                                                          MARCH 31,  MARCH 31,
                                                                            1999       1998
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
Operating activities:
  Net loss..............................................................  $ (11,270) $ (22,963)
Adjustments to reconcile net loss to net cash used in operating
  activities:
  Equity in losses of unconsolidated investees..........................      1,685      5,500
  Depreciation and amortization.........................................      4,367      5,315
  Minority interest.....................................................     (2,469)    (2,039)
  Other.................................................................         --        553
Changes in operating assets and liabilities, net of acquisitions:
  (Increase) decrease in accounts receivable............................         33     (8,091)
  Decrease in inventories...............................................      1,600      6,272
  Increase in other assets..............................................     (1,626)    (1,217)
  Decrease in accounts payable and accrued expenses.....................     (1,177)    (6,571)
  Other operating activities, net.......................................        435         19
                                                                          ---------  ---------
    Cash used in operating activities...................................     (8,422)   (23,222)
                                                                          ---------  ---------
Investing activities:
  Investments in and advances to Joint Ventures.........................     (5,065)   (13,091)
  Distributions from Joint Ventures.....................................      2,719      1,400
  Purchase of short-term investments....................................         --       (953)
  Cash paid for acquisitions and additional equity in subsidiaries......       (455)    (3,926)
  Additions to property, plant and equipment............................     (1,560)    (2,794)
  Other investing activities, net.......................................         --        188
                                                                          ---------  ---------
      Cash used in investing activities.................................     (4,361)   (19,176)
                                                                          ---------  ---------
Financing activities:
  Proceeds from issuance of long-term debt..............................      8,149         --
  Payments on notes and subordinated debt...............................     (5,421)    (1,998)
  Proceeds from issuance of common stock related to incentive plans.....         27      4,565
  Preferred stock dividends paid........................................     (3,752)    (3,752)
                                                                          ---------  ---------
      Cash used in financing activities.................................       (997)    (1,185)
                                                                          ---------  ---------
  Net decrease in cash and cash equivalents.............................    (13,780)   (43,583)
  Cash and cash equivalents at beginning of period......................    137,625    129,661
                                                                          ---------  ---------
  Cash and cash equivalents at end of period............................  $ 123,845  $  86,078
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>
 
     See accompanying notes to consolidated condensed financial statements.
 
                                       4
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
            CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                    7 1/4% CUMULATIVE
                                       CONVERTIBLE
                                     PREFERRED STOCK            COMMON STOCK                                   ACCUMULATED
                                  ----------------------  ------------------------                                OTHER
                                   NUMBER OF               NUMBER OF                 PAID-IN   ACCUMULATED    COMPREHENSIVE
                                    SHARES      AMOUNT      SHARES       AMOUNT      SURPLUS     DEFICIT          LOSS
                                  -----------  ---------  -----------  -----------  ---------  ------------  ---------------
<S>                               <C>          <C>        <C>          <C>          <C>        <C>           <C>
Balances, December 31, 1998.....   4,140,000   $ 207,000  69,118,841    $  69,119   $1,012,794  $ (857,293)     $  (6,080)
Issuance of stock and stock
  options related to incentive
  plans.........................          --          --       5,000            5          22           --             --
Dividends on 7 1/4% cumulative
  convertible preferred stock...          --          --          --           --          --       (3,752)            --
Other comprehensive loss........          --          --          --           --          --           --           (433)
Net loss........................          --          --          --           --          --      (11,270)            --
                                  -----------  ---------  -----------  -----------  ---------  ------------       -------
Balances, March 31, 1999........   4,140,000   $ 207,000  69,123,841    $  69,124   $1,012,816  $ (872,315)     $  (6,513)
                                  -----------  ---------  -----------  -----------  ---------  ------------       -------
                                  -----------  ---------  -----------  -----------  ---------  ------------       -------
 
<CAPTION>
 
                                    TOTAL
                                  ---------
<S>                               <C>
Balances, December 31, 1998.....  $ 425,540
Issuance of stock and stock
  options related to incentive
  plans.........................         27
Dividends on 7 1/4% cumulative
  convertible preferred stock...     (3,752)
Other comprehensive loss........       (433)
Net loss........................    (11,270)
                                  ---------
Balances, March 31, 1999........  $ 410,112
                                  ---------
                                  ---------
</TABLE>
 
     See accompanying notes to consolidated condensed financial statements.
 
                                       5
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
            CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
                                 (IN THOUSANDS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                              THREE MONTHS ENDED
                                                                                            ----------------------
                                                                                            MARCH 31,   MARCH 31,
                                                                                               1999        1998
                                                                                            ----------  ----------
<S>                                                                                         <C>         <C>
Net loss..................................................................................  $  (11,270) $  (22,963)
Other comprehensive loss, net of tax:
  Foreign currency translation adjustment.................................................        (433)       (195)
                                                                                            ----------  ----------
Other comprehensive loss..................................................................        (433)       (195)
                                                                                            ----------  ----------
Comprehensive loss........................................................................  $  (11,703) $  (23,158)
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
     See accompanying notes to consolidated condensed financial statements.
 
                                       6
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 
1. BASIS OF PRESENTATION AND LIQUIDITY
 
BASIS OF PRESENTATION
 
The accompanying interim consolidated condensed financial statements include the
accounts of Metromedia International Group, Inc. ("MMG" or the "Company") and
its wholly-owned subsidiaries, Metromedia International Telecommunications, Inc.
("MITI") and Snapper Inc. ("Snapper"). MITI and MITI's majority owned
subsidiary, Metromedia China Corporation ("MCC"), are together defined as the
"Communications Group". All significant intercompany transactions and accounts
have been eliminated.
 
Investments in other companies, including those of the Communications Group's
Joint Ventures ("Joint Ventures") that are not majority owned, or in which the
Company does not have control but exercises significant influence, are accounted
for using the equity method. The Company reflects its net investments in Joint
Ventures under the caption "Investments in and advances to Joint Ventures." The
Company reports the results of the operations of the Communications Group's
operations in Eastern Europe and the republics of the former Soviet Union, and
the distributable cash flow generated by the telephony systems of China Unicom,
on a three month lag.
 
The accompanying interim consolidated condensed financial statements have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations although the Company believes that the disclosures made are adequate
to make the information presented not misleading. These financial statements
should be read in conjunction with the consolidated financial statements and
related footnotes included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 (the "1998 Form 10-K"). In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of March
31, 1999, and the results of its operations and its cash flows for the
three-month periods ended March 31, 1999 and 1998, have been included. The
results of operations for the interim period are not necessarily indicative of
the results which may be realized for the full year.
 
LIQUIDITY
 
MMG is a holding company, and accordingly, does not generate cash flows from
operations. The Communications Group is dependent on MMG for significant capital
infusions to fund its operations, its commitments to make capital contributions
and loans to its Joint Ventures and any acquisitions. Such funding requirements
are based on the anticipated funding needs of its Joint Ventures and certain
acquisitions committed to by the Company. Future capital requirements of the
Communications Group, including future acquisitions, will depend on available
funding from the Company or alternative sources of financing and on the ability
of the Communications Group's Joint Ventures to generate positive cash flows. In
addition, Snapper is restricted under covenants contained in its credit
agreement from making dividend payments or advances to MMG.
 
In the near-term, the Company intends to satisfy its working capital and capital
commitments with available cash on hand. However, the Communications Group's
businesses in the aggregate are capital intensive and require the investment of
significant amounts of capital in order to construct and develop operational
systems and market its services. As a result, the Company will require
additional financing in order to satisfy its on-going working capital,
acquisition and expansion requirements and to achieve
 
                                       7
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
1. BASIS OF PRESENTATION AND LIQUIDITY (CONTINUED)
its long-term business strategies. Such additional capital may be provided
through the public or private sale of equity or debt securities of the Company
or by separate equity or debt financings by the Communications Group or
companies of the Communications Group. No assurance can be given that additional
financing will be available to the Company on acceptable terms, if at all. If
adequate additional funds are not available, the Company may be required to
curtail significantly its long term business objectives and the Company's
results from operations may be materially and adversely affected.
 
Management believes that its long term liquidity needs will be satisfied through
a combination of the Company's successful implementation and execution of its
growth strategy to become a global communications and media company and through
the Communications Group's Joint Ventures achieving positive operating results
and cash flows through revenue and subscriber growth and control of operating
expenses.
 
2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION
 
The Communications Group records its investments in other companies and Joint
Ventures which are less than majority-owned, or which the Company does not
control but in which it exercises significant influence, at cost, net of its
equity in earnings or losses. Advances to the Joint Ventures under the line of
credit agreements between the Company or one of its subsidiaries and the Joint
Ventures are reflected based on amounts recoverable under the credit agreement,
plus accrued interest.
 
Advances are made to Joint Ventures in the form of cash, for working capital
purposes and for payment of expenses or capital expenditures, or in the form of
equipment purchased on behalf of the Joint Ventures. Interest rates charged to
the Joint Ventures range from prime rate to prime rate plus 6%. The credit
agreements generally provide for the payment of principal and interest from 90%
of the Joint Ventures' available cash flow, as defined, prior to any substantial
distributions of dividends to the Joint Venture partners. The Communications
Group has entered into charter fund and credit agreements with its Joint
Ventures to provide up to $214.9 million in funding of which $52.2 million in
funding obligations remain at March 31, 1999. The Communications Group's funding
commitments are contingent on its approval of the Joint Ventures' business
plans.
 
In 1998, the Communications Group's paging business continued to incur operating
losses. Accordingly, the Communications Group developed a revised operating plan
to stabilize its paging operations. Under the revised plan, the Communications
Group is managing its paging business to a level that should not require
significant additional funding for its operations. As a result of the revised
plan, in 1998 the Company took a non-cash, nonrecurring charge on its paging
assets of $49.9 million, which included a $35.9 million write off of goodwill
and other intangibles. The non-cash, nonrecurring charge adjusted the carrying
value of goodwill and other intangibles, fixed assets and investments in and
advances to Joint Ventures and wrote down inventory. The write down relates to
both consolidated Joint Ventures and Joint Ventures recorded under the equity
method. The Company has adjusted its investments in certain paging operations
which are recorded under the equity method to zero, and unless it provides
future funding will no longer record its proportionate share of any future net
losses of these investees.
 
At March 31, 1999 and December 31, 1998, the Communications Group's
unconsolidated investments in the Joint Ventures in Eastern Europe and the
republics of the former Soviet Union, at cost, net of
 
                                       8
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
adjustments for its equity in earnings or losses, write downs, and distributions
were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                                         YEAR
                                                                                                      OPERATIONS
NAME                                                             1999       1998     OWNERSHIP %     COMMENCED (8)
-------------------------------------------------------------  ---------  ---------  ------------  -----------------
<S>                                                            <C>        <C>        <C>           <C>
CELLULAR TELECOMMUNICATIONS
Baltcom GSM, Latvia (1)......................................  $   9,699  $   9,817      22%                1997
Magticom, Georgia (1)........................................     12,398     13,048      35%                1997
                                                               ---------  ---------
                                                                  22,097     22,865
                                                               ---------  ---------
FIXED TELEPHONY
Instaphone, Kazakhstan.......................................        986      1,168      50%                1998
                                                               ---------  ---------
INTERNATIONAL AND LONG DISTANCE TELEPHONY
Telecom Georgia, Georgia.....................................      5,534      5,922      30%                1994
                                                               ---------  ---------
CABLE TELEVISION
Kosmos TV, Moscow, Russia....................................      1,262      1,385      50%                1992
Baltcom TV, Riga, Latvia.....................................      4,515      4,003      50%                1992
Ayety TV, Tbilisi, Georgia...................................      2,803      3,045      49%                1993
Kamalak TV, Tashkent, Uzbekistan.............................      2,961      2,976      50%                1993
Sun TV, Chisinau, Moldova....................................      4,290      4,731      50%                1994
Cosmos TV, Minsk, Belarus....................................      3,084      2,934      50%                1996
Alma TV, Almaty, Kazakhstan..................................      6,015      5,994      50%                1995
Teleplus, St. Petersburg, Russia.............................      1,813      1,941      45%                1998
                                                               ---------  ---------
                                                                  26,743     27,009
                                                               ---------  ---------
PAGING
Baltcom Plus, Latvia (2).....................................         --         --      50%                1995
Paging One, Georgia (2)......................................         --         --      45%                1994
Raduga Poisk, Nizhny Novgorod, Russia (2)....................         --         --      45%                1994
PT Page, St. Petersburg, Russia (2)..........................         --         --      40%                1995
Paging Ajara, Batumi, Georgia (2)............................         --         --      35%                1997
Kazpage, Kazakhstan (2) (3)..................................         --         --     26-41%              1997
Alma Page, Almaty, Kazakhstan (2)............................         --         --      50%                1995
Kamalak Paging, Tashkent, Uzbekistan.........................      2,228      2,260      50%                1993
Mobile Telecom, Russia (4)...................................      7,272      7,405      50%                1998
                                                               ---------  ---------
                                                                   9,500      9,665
                                                               ---------  ---------
</TABLE>
 
                                       9
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                                                         YEAR
                                                                                                      OPERATIONS
NAME                                                             1999       1998     OWNERSHIP %     COMMENCED (8)
-------------------------------------------------------------  ---------  ---------  ------------  -----------------
<S>                                                            <C>        <C>        <C>           <C>
RADIO BROADCASTING
Radio Katusha, St. Petersburg, Russia........................  $      --  $      --      75%                1995
Radio Nika, Socci, Russia....................................        251        244      51%                1995
AS Trio LSL, Estonia.........................................      1,862      1,903      49%                1997
                                                               ---------  ---------
                                                                   2,113      2,147
                                                               ---------  ---------
OTHER
Trunked mobile radio ventures (5)............................         --         --
                                                               ---------  ---------
PRE-OPERATIONAL (6)
ATK, Archangelsk, Russia (7).................................         --      1,746      81%                  --
Tyumenruskom, Russia.........................................      3,711      2,228      46%                  --
Caspian American Telecom, Azerbaijian........................      7,553      5,488      38%                  --
Telephony related ventures and equipment.....................      2,510      2,612
Other........................................................      3,453      6,313
                                                               ---------  ---------
                                                                  17,227     18,387
                                                               ---------  ---------
TOTAL........................................................  $  84,200  $  87,163
                                                               ---------  ---------
                                                               ---------  ---------
</TABLE>
 
------------------------------
 
(1) In August 1998, the Communications Group increased its ownership at Baltcom
    GSM from 21% to 22% and in Magticom from 34% to 35%.
 
(2) Investment balance reflects write down of investment.
 
(3) Kazpage is comprised of a service entity and 10 paging Joint Ventures. The
    Company's interests in the paging Joint Ventures range from 26% to 41% and
    its interest in the service entity is 51%.
 
(4) In January 1998, the Communications Group signed a definitive agreement to
    purchase 50% of Mobile Telecom. The purchase closed during June 1998 at a
    price of $7.0 million plus two future contingent payments of $2.5 million
    each, to be adjusted up or down based on performance of the business.
    Simultaneously with the purchase of Mobile Telecom, the Company purchased a
    50% interest in a paging distribution company for $500,000. Approximately
    $7.0 million of the purchase price was allocated to goodwill.
 
(5) In July 1998, the Communications Group sold its investment in Protocall
    Ventures Limited. The Company's interest in Spectrum, a trunked mobile radio
    venture in Kazakhstan, was written off in 1998.
 
(6) At March 31, 1999 and December 31, 1998, amounts disbursed for proposed
    Joint Ventures, pre-operational Joint Ventures and amounts expended for
    equipment for future wireless local loop projects are included in
    pre-operational Joint Ventures.
 
(7) Included in the Company's consolidated financial statements in the current
    period.
 
(8) Indicates year operations commenced, or in the case of the acquisitions of
    operational entities, the year of acquisition.
 
                                       10
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
Summarized combined balance sheet financial information of unconsolidated Joint
Ventures as of March 31, 1999 and December 31, 1998, and combined statement of
operations financial information for the three months ended March 31, 1999 and
1998 accounted for under the equity method that have commenced operations as of
the dates indicated are as follows (in thousands):
 
COMBINED INFORMATION OF UNCONSOLIDATED JOINT VENTURES
 
COMBINED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                                         MARCH 31,   DECEMBER 31,
                                                                                            1999         1998
                                                                                         ----------  ------------
<S>                                                                                      <C>         <C>
Assets:
  Current assets.......................................................................  $   28,549   $   34,617
  Investments in systems and equipment.................................................     114,102      111,114
  Other assets.........................................................................       4,340        7,103
                                                                                         ----------  ------------
    Total assets.......................................................................  $  146,991   $  152,834
                                                                                         ----------  ------------
                                                                                         ----------  ------------
Liabilities and Joint Ventures' Deficit:
  Current liabilities..................................................................  $   32,869   $   31,934
  Amount payable under MITI credit facility............................................      77,828       66,574
  Other long-term liabilities..........................................................      70,161       82,314
                                                                                         ----------  ------------
                                                                                            180,858      180,822
  Joint Ventures' deficit..............................................................     (33,867)     (27,988)
                                                                                         ----------  ------------
    Total liabilities and Joint Ventures' deficit......................................  $  146,991   $  152,834
                                                                                         ----------  ------------
                                                                                         ----------  ------------
</TABLE>
 
COMBINED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                                THREE MONTHS ENDED
                                                                                             ------------------------
                                                                                              MARCH 31,    MARCH 31,
                                                                                                1999         1998
                                                                                             -----------  -----------
<S>                                                                                          <C>          <C>
Revenues...................................................................................   $  26,388    $  23,143
Costs and Expenses:
  Cost of sales and operating expenses.....................................................       5,944        7,815
  Selling, general and administrative......................................................      13,938       13,427
  Depreciation and amortization............................................................       6,712        6,371
  Other....................................................................................          --           30
                                                                                             -----------  -----------
    Total expenses.........................................................................      26,594       27,643
                                                                                             -----------  -----------
Operating loss.............................................................................        (206)      (4,500)
Interest expense...........................................................................      (3,655)      (2,579)
Other loss.................................................................................         (11)        (898)
Foreign currency transactions..............................................................        (966)        (862)
                                                                                             -----------  -----------
Net loss...................................................................................   $  (4,838)   $  (8,839)
                                                                                             -----------  -----------
                                                                                             -----------  -----------
</TABLE>
 
                                       11
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
For the three months ended March 31, 1999 and 1998 the results of operations
presented above are before the elimination of intercompany interest. Financial
information for Joint Ventures which are not yet operational is not included in
the above summary.
 
The following tables represent summary financial information for all operating
entities being grouped as indicated as of and for the three months ended March
31, 1999 and 1998. For the three months ended March 31, 1999 and 1998 the
results of operations presented below are before the elimination of intercompany
interest (in thousands, except subscribers):
<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED MARCH 31, 1999
                                       ----------------------------------------------------------------------------------------
<S>                                    <C>                <C>            <C>              <C>          <C>        <C>
                                                                          INTERNATIONAL
                                                                            AND LONG
                                        CELLULAR TELE-        FIXED         DISTANCE         CABLE                    RADIO
                                        COMMUNICATIONS      TELEPHONY       TELEPHONY     TELEVISION    PAGING    BROADCASTING
                                       -----------------  -------------  ---------------  -----------  ---------  -------------
COMBINED
Revenues.............................      $   8,956        $      20       $   6,149      $   7,981   $   4,771    $   5,892
Depreciation and amortization........          2,916               15             526          3,455         466          451
Operating income (loss)..............           (454)            (106)          1,141         (1,160)       (877)        (425)
Interest income......................              1               --              --             65          --           16
Interest expense.....................          2,314               47               6          1,478         884          144
Net loss.............................         (2,031)            (291)           (998)        (2,156)     (1,944)        (543)
 
Assets...............................         81,411              983          23,814         41,998       9,082       13,926
Capital expenditures.................         10,281               49             732          3,563         553          291
Subscribers (1)......................         65,601              121             N/a        374,537     113,379          n/a
 
CONSOLIDATED SUBSIDIARIES AND JOINT
  VENTURES (2)
Revenues.............................      $      --        $      --       $      --      $   1,248   $     944    $   5,189
Depreciation and amortization........             --               --              --            443         291          383
Operating income (loss)..............             --               --              --            (58)     (1,153)        (464)
Interest income......................             --               --              --             --          --           16
Interest expense.....................             --               --              --            240         845          133
Net loss.............................             --               --              --           (419)     (2,175)        (531)
 
Assets...............................             --               --              --          8,351       3,276       12,596
Capital expenditures.................             --               --              --            320         329          267
 
UNCONSOLIDATED JOINT VENTURES
Revenues.............................      $   8,956        $      20       $   6,149      $   6,733   $   3,827    $     703
Depreciation and amortization........          2,916               15             526          3,012         175           68
Operating income (loss)..............           (454)            (106)          1,141         (1,102)        276           39
Interest income......................              1               --              --             65          --           --
Interest expense.....................          2,314               47               6          1,238          39           11
Net income (loss)....................         (2,031)            (291)           (998)        (1,737)        231          (12)
 
Assets...............................         81,411              983          23,814         33,647       5,806        1,330
Capital expenditures.................         10,281               49             732          3,243         224           24
 
Net investment in Joint Ventures.....         22,097              986           5,534         26,743       9,500        2,113
Equity in income (losses) of
  unconsolidated investees...........           (528)            (379)           (299)          (362)        162          (14)
 
<CAPTION>
 
<S>                                    <C>
 
                                         TOTAL
                                       ---------
COMBINED
Revenues.............................  $  33,769
Depreciation and amortization........      7,829
Operating income (loss)..............     (1,881)
Interest income......................         82
Interest expense.....................      4,873
Net loss.............................     (7,963)
Assets...............................    171,214
Capital expenditures.................     15,469
Subscribers (1)......................    553,638
CONSOLIDATED SUBSIDIARIES AND JOINT
  VENTURES (2)
Revenues.............................  $   7,381
Depreciation and amortization........      1,117
Operating income (loss)..............     (1,675)
Interest income......................         16
Interest expense.....................      1,218
Net loss.............................     (3,125)
Assets...............................     24,223
Capital expenditures.................        916
UNCONSOLIDATED JOINT VENTURES
Revenues.............................  $  26,388
Depreciation and amortization........      6,712
Operating income (loss)..............       (206)
Interest income......................         66
Interest expense.....................      3,655
Net income (loss)....................     (4,838)
Assets...............................    146,991
Capital expenditures.................     14,553
Net investment in Joint Ventures.....     66,973
Equity in income (losses) of
  unconsolidated investees...........     (1,420)
</TABLE>
 
                                       12
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
2. COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
UNION (CONTINUED)
<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED MARCH 31, 1998
                                        ----------------------------------------------------------------------------------------
<S>                                     <C>                <C>              <C>          <C>          <C>            <C>
                                                            INTERNATIONAL
                                                              AND LONG
                                         CELLULAR TELE-       DISTANCE         CABLE                      RADIO
                                         COMMUNICATIONS       TELEPHONY     TELEVISION     PAGING     BROADCASTING    OTHER(3)
                                        -----------------  ---------------  -----------  -----------  -------------  -----------
COMBINED
Revenues..............................      $   4,017         $   7,049      $   7,250    $   4,729     $   6,148     $   2,825
Depreciation and amortization.........          2,302               538          3,082        1,013           335           529
Operating income (loss)...............         (2,940)            2,016         (2,952)      (3,232)        1,149        (1,102)
Interest income.......................             --                --             11           12            40            14
Interest expense......................          1,088               167          1,316          471           124           103
Net income (loss).....................         (4,222)            1,369         (5,025)      (4,067)          266        (1,225)
 
Assets................................         60,663            29,164         37,259       19,468        19,113        16,960
Capital expenditures..................         18,568               652          2,560          320           213         1,437
Subscribers...........................         28,510               n/a        255,116       64,975           n/a            --
 
CONSOLIDATED SUBSIDIARIES AND JOINT
  VENTURES (2)
Revenues..............................      $      --         $      --      $     709    $     887     $   5,528     $   1,751
Depreciation and amortization.........             --                --            327          559           291           251
Operating income (loss)...............             --                --           (779)      (2,857)        1,203          (128)
Interest income.......................             --                --             10           10            40            14
Interest expense......................             --                --            237          300           119            34
Net income (loss).....................             --                --         (1,010)      (3,187)          332          (200)
 
Assets................................             --                --          8,401        7,627        18,116         9,576
Capital expenditures..................             --                --            478          315           179            --
 
UNCONSOLIDATED JOINT VENTURES
Revenues..............................      $   4,017         $   7,049      $   6,541    $   3,842     $     620     $   1,074
Depreciation and amortization.........          2,302               538          2,755          454            44           278
Operating income (loss)...............         (2,940)            2,016         (2,173)        (375)          (54)         (974)
Interest income.......................             --                --              1            2            --            --
Interest expense......................          1,088               167          1,079          171             5            69
Net income (loss).....................         (4,222)            1,369         (4,015)        (880)          (66)       (1,025)
 
Assets................................         60,663            29,164         28,858       11,841           997         7,384
Capital expenditures..................         18,568               652          2,082            5            34         1,437
Net investment in Joint Ventures......         18,308             6,007         22,527        8,325         1,876         4,061
Equity in income (losses) of
  unconsolidated investees............         (1,372)              411         (2,746)        (862)          (30)         (423)
 
<CAPTION>
 
<S>                                     <C>
 
                                          TOTAL
                                        ---------
COMBINED
Revenues..............................  $  32,018
Depreciation and amortization.........      7,799
Operating income (loss)...............     (7,061)
Interest income.......................         77
Interest expense......................      3,269
Net income (loss).....................    (12,904)
Assets................................    182,627
Capital expenditures..................     23,750
Subscribers...........................    348,601
CONSOLIDATED SUBSIDIARIES AND JOINT
  VENTURES (2)
Revenues..............................  $   8,875
Depreciation and amortization.........      1,428
Operating income (loss)...............     (2,561)
Interest income.......................         74
Interest expense......................        690
Net income (loss).....................     (4,065)
Assets................................     43,720
Capital expenditures..................        972
UNCONSOLIDATED JOINT VENTURES
Revenues..............................  $  23,143
Depreciation and amortization.........      6,371
Operating income (loss)...............     (4,500)
Interest income.......................          3
Interest expense......................      2,579
Net income (loss).....................     (8,839)
Assets................................    138,907
Capital expenditures..................     22,778
Net investment in Joint Ventures......     61,104
Equity in income (losses) of
  unconsolidated investees............     (5,022)
</TABLE>
 
------------------------
 
(1) Paging subscribers reported in 1999 include 35,430 subscribers from
    investments written off at December 31, 1998. Calling party pays subscribers
    are not included in the reported paging subscribers.
 
(2) Does not reflect the Communications Group's headquarter's revenue and
    selling, general and administrative expenses for the three months ended
    March 31, 1999 and 1998.
 
(3) Other includes the results of Protocall Ventures, the Communications Group's
    trunked mobile radio operations, consolidated and unconsolidated Joint
    Ventures through the three months ended December 31, 1997.
 
                                       13
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA
 
At March 31, 1999 and December 31, 1998 the Company's investments, through MCC,
in the Joint Ventures in China, at cost, net of adjustments for its equity in
earnings or losses, were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                                    YEAR          YEAR
                                                                                                   VENTURE     OPERATIONS
NAME                                                      1999       1998        OWNERSHIP %       FORMED       COMMENCED
------------------------------------------------------  ---------  ---------  -----------------  -----------  -------------
<S>                                                     <C>        <C>        <C>                <C>          <C>
Sichuan Tai Li Feng Telecommunications Co.,
  Ltd. ("Sichuan JV").................................  $  19,215  $  19,292             92%           1996          1999
 
Chongqing Tai Le Feng Telecommunications Co.,
  Ltd. ("Chongqing JV")...............................     15,360     15,504             92%           1997          1999
 
Ningbo Ya Mei Telecommunications Co.,
  Ltd. ("Ningbo JV")..................................     29,873     29,741             70%           1996          1997
 
Ningbo Ya Lian Telecommunications Co.,
  Ltd. ("Ningbo JV II")...............................      8,407      7,022             70%           1998          1998
                                                        ---------  ---------
 
                                                        $  72,855  $  71,559
                                                        ---------  ---------
                                                        ---------  ---------
</TABLE>
 
The Joint Ventures participate in cooperation contracts with China Unicom that
entitle the Joint Ventures to specified percentages of the projects'
distributable cash flows. The Joint Ventures amortize the contributions to these
cooperation contracts over the cooperation contract periods of benefit (15 to 25
years).
 
(A) SICHUAN JV
 
On May 21, 1996, Asian American Telecommunications Corporation("AAT"), a
majority-owned subsidiary of the Company, entered into a Joint Venture Agreement
with China Huaneng Technology Development Corp. ("CHTD") for the purpose of
establishing Sichuan Tai Li Feng Telecommunications Co., Ltd. Also on May 21,
1996, Sichuan JV entered into a Network Systems Cooperation Contract (the "STLF
Contract") with China Unicom. The STLF Contract covers the funding, construction
and development of a fixed line Public Services Telephone Network ("PSTN")
providing local telephone service in cities within Sichuan Province and long
distance telephone service among those cities (the "Sichuan Network"). The
initial project covered by the STLF Contract includes development of 50,000
local telephone lines in Chengdu and Chongqing cities, and construction of a
fiber optic long distance facility between these two cities. Subsequent projects
covered by the STLF Contract and the existing and future Joint Ventures may
expand services to one million local telephone lines in cities throughout
Sichuan Province, and construct fiber optic long distance facilities among these
cities. The STLF Contract has a cooperation term of twenty-five years.
 
Under the STLF Contract, China Unicom will be responsible for the construction
and operation of the Sichuan Network, while Sichuan JV will provide financing
and consulting services for the project. Distributable cash flows, as defined in
the STLF Contract, are to be distributed 22% to China Unicom and 78% to Sichuan
JV throughout the term of the STLF contract. Sichuan JV holds non-transferable
title to all assets acquired or constructed with the funds that it provides to
China Unicom, except for any assets used to provide inter-city long distance
service, title to which immediately passes to China Unicom. On the tenth
anniversary of completion of the Sichuan Network's initial phase, title to
assets
 
                                       14
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
held by Sichuan JV will transfer to China Unicom. Sichuan JV and China Unicom
consider the cost of all assets acquired or constructed with investment funds
from Sichuan JV to be part of Sichuan JV's contribution to the STLF Contract,
regardless of whether Sichuan JV holds title to such assets.
 
The total amount to be invested in Sichuan JV is $29.5 million with equity
contributions from its shareholders amounting to $12.0 million. AAT has made
capital contributions to Sichuan JV of $11.1 million of its $11.4 million share
and CHTD has contributed $600,000. The remaining investment will be in the form
of up to $17.5 million of loans from AAT, plus deferred payment credit from the
manufacturers of the equipment used in construction of the Sichuan Network. As
of March 31, 1999, AAT had loans outstanding to Sichuan JV in the amount of $9.5
million. These loans bear interest at 10% per annum. Ownership of the Sichuan JV
is 92% by AAT and 8% by CHTD.
 
AAT also has a consulting contract with CHTD covering the latter's assistance
with operations in China. Under the contract, AAT is obligated to pay CHTD an
annual consulting fee of RMB 15.0 million (U.S. $1.8 million at March 31, 1999
exchange rates).
 
(B) CHONGQING JV
 
In May 1997, Chongqing Municipality was made a separate region from Sichuan
Province administered directly by the Chinese government. In an amendment to the
STLF Contract, China Unicom agreed to recognize Chongqing Municipality as being
covered by the terms of that contract, thereby explicitly extending Sichuan JV's
rights and obligations under that contract to include the newly independent
Chongqing Municipality, including rights and obligations for any long distance
services developed by China Unicom between cities in Chongqing Municipality and
those of Sichuan Province. On September 9, 1997, AAT entered into a Joint
Venture Agreement with CHTD for the purpose of establishing Chongqing JV.
Sichuan JV and Chongqing JV entered into an agreement whereby Chongqing JV
assumed the rights and obligations of Sichuan JV under the STLF Contract, as
amended, that relate to financing of and consulting services for those portions
of the originally contemplated Sichuan Network that would now lie within
Chongqing Municipality (the "Chongqing Network"). Rights and obligations under
the STLF Contract, as amended, that relate to financing and consulting services
for those portions of the originally contemplated Sichuan Network lying within
the redefined boundaries of Sichuan Province (a redefinition of the "Sichuan
Network") would remain with Sichuan JV.
 
The total amount to be invested in Chongqing JV is $29.5 million with registered
capital contributions from its shareholders amounting to $14.8 million. AAT has
made capital contributions of $13.6 million of its total $14.1 million
contribution and CHTD has contributed $740,000. The remaining investment in
Chongqing JV will be in the form of up to $14.7 million of loans from AAT plus
deferred payment credit from the manufacturers of the equipment used in
construction of the Chongqing Network. As of March 31, 1999, AAT had loans
outstanding to Chongqing JV in the amount of $2.5 million. The loans bear
interest at 10% per annum. Ownership in Chongqing JV is 92% by AAT and 8% by
CHTD.
 
Commercial operations were launched on the Chongqing Network and Sichuan Network
in January 1999.
 
                                       15
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
 
        NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
 
3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
(C) NINGBO JV
 
AAT entered into a Joint Venture Agreement with Ningbo United Telecommunications
Investment Co., Ltd. ("NUT") on September 17, 1996 for the purpose of
establishing Ningbo Ya Mei Telecommunications Co., Ltd. ("Ningbo JV").
Previously NUT had entered into a Network System Cooperation Contract with China
Unicom (the "NUT Contract") covering development of a GSM telecommunications
project in the City of Ningbo, Zhejiang Province, for China Unicom. The project
entails construction of a mobile communications network with a total capacity of
50,000 subscribers. China Unicom constructed and operates the network. Under the
NUT Contract, NUT is to provide financing and consulting services to China
Unicom. The cooperation period for the NUT Contract is fifteen years.
 
With the formation of Ningbo JV, NUT assigned all of its rights and obligations
under the NUT Contract to Ningbo JV. This assignment of rights and obligations
was explicitly ratified by China Unicom in an amendment to the NUT Contract. NUT
also agreed to assign rights of first refusal on additional telecommunications
projects to Ningbo JV in the event such rights are granted to NUT by China
Unicom. Distributable cash flows, as defined in the amended NUT Contract, are to
be distributed 27% to China Unicom and 73% to Ningbo JV throughout the
contract's cooperation period. Under the amended NUT Contract, Ningbo JV will
hold non-transferable title to 70% of all assets acquired or constructed by
China Unicom with investment funds provided by Ningbo JV. Ningbo JV's title to
these assets will transfer to China Unicom as Ningbo JV's funding of the assets
is returned by distributions from China Unicom. Ningbo JV and China Unicom
consider the cost of all assets acquired with funding from Ningbo JV to be part
of Ningbo JV's contribution to the NUT Contract, regardless of whether Ningbo JV
holds title to such assets.
 
                                       16
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
 
The initial amount to be invested in Ningbo JV was $29.5 million with registered
capital contributions from its investors amounting to $11.9 million. AAT has
currently provided $8.3 million in capital contributions, representing 70% of
Ningbo JV's registered capital. NUT provided $3.6 million of registered capital
contributions to Ningbo JV, representing 30% of Ningbo JV's equity. Ningbo JV
arranged loans with AAT, manufacturers of the equipment for the project and
banks. As of March 31, 1999, AAT had long term loans to Ningbo JV in the amount
of $23.5 million. A substantial portion of these loans was incurred to refinance
previous loans from manufacturers. These loans bear interest at 10% per annum.
Ownership in Ningbo JV is 70% by AAT and 30% by NUT.
 
(D)  NINGBO JV II
 
On March 26, 1998, Ningbo JV and China Unicom signed an amendment to the NUT
Contract covering expansion of China Unicom's GSM service throughout Ningbo
Municipality (the "Ningbo Expansion Agreement"). The expansion is being
undertaken as a separate project, and provides capacity for an additional 25,000
GSM subscribers within Ningbo Municipality. The feasibility study for the
expansion project was completed on March 6, 1998 and forecasts a total budget of
approximately $17.0 million. The terms of the Ningbo Expansion Agreement match
those of the underlying NUT Contract, except that the Ningbo Expansion Agreement
will have its own cooperation period of fifteen years. In the Ningbo Expansion
Agreement, China Unicom and Ningbo JV explicitly contemplated establishment of a
separate joint venture to provide financing and consulting services to the
expansion project.
 
Pursuant to the Ningbo Expansion Agreement, AAT and NUT entered into a second
Joint Venture Agreement and formed Ningbo Ya Lian Telecommunications Co., Ltd.
In an amendment to the Ningbo Expansion Agreement dated July 8, 1998, China
Unicom and Ningbo JV agreed to assign all rights and obligations originally held
by Ningbo JV under the Ningbo Expansion Agreement to Ningbo JV II.
 
The total amount to be invested in Ningbo JV II is $18.0 million with registered
capital contributions from its investors amounting to $7.2 million. As of March
31, 1999, AAT had made its $5.0 million registered capital contribution, and NUT
had made its $2.2 million registered capital contribution. The remaining
investment in Ningbo JV II beyond planned registered capital contributions from
its investors will be in the form of up to $10.8 million of loans from AAT plus
deferred payment credit from the manufacturers of the equipment used in
construction of the expansion network. As of March 31, 1999, AAT had loans
outstanding to Ningbo JV II in the amount of $3.4 million. The loans bear
interest ranging from 8% to 10% per annum. Ownership in Ningbo JV II is 70% by
AAT and 30% by NUT.
 
Commercial services commenced on the completed portions of the Ningbo expansion
in November 1998. The network was fully completed and in service in February
1999.
 
                                       17
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (CONTINUED)
The following tables represent summary financial information for the Joint
Ventures and their related projects in China as of and for the three months
ended March 31, 1999 and 1998, respectively, (in thousands, except subscribers):
 
<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED MARCH 31, 1999
                                                            -------------------------------------------------------
<S>                                                         <C>        <C>        <C>        <C>          <C>
                                                             NINGBO     NINGBO     SICHUAN    CHONGQING
                                                               JV        JV II       JV          JV         TOTAL
                                                            ---------  ---------  ---------  -----------  ---------
Revenues..................................................  $     988  $      --  $      --   $      24   $   1,012
Depreciation and amortization.............................        608         --         16          58         682
Operating income (loss)...................................        293        (15)       (83)       (143)         52
Interest expense, net.....................................       (862)       (36)      (234)        (80)     (1,212)
Net loss..................................................       (569)       (51)      (317)       (223)     (1,160)
Equity in losses of Joint Ventures........................        (16)        (8)       (93)       (148)       (265)
 
Assets....................................................     33,095     16,176     22,028      18,179      89,478
Net investment in project.................................     30,718     12,162     19,877      10,882      73,639
Subscribers...............................................     52,305         --         --          --      52,305
</TABLE>
 
<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED MARCH 31, 1998
                                                                       --------------------------------------------
<S>                                                                    <C>        <C>        <C>          <C>
                                                                        NINGBO     SICHUAN    CHONGQING
                                                                          JV         JV          JV         TOTAL
                                                                       ---------  ---------  -----------  ---------
Revenues.............................................................  $     638  $      --   $      --   $     638
Depreciation and amortization........................................        560          9          --         569
Operating income (loss)..............................................         47       (169)       (232)       (354)
Interest income (expense), net.......................................       (715)         7          --        (708)
Net loss.............................................................       (668)      (162)       (232)     (1,062)
Equity in losses of Joint Ventures...................................       (115)      (149)       (214)       (478)
 
Assets...............................................................     35,713     11,803      14,689      62,205
Net investment in project............................................     32,967     10,186       2,075      45,228
Subscribers..........................................................     19,085         --          --      19,085
</TABLE>
 
For the three months ended March 31, 1999 and 1998 the results of operations
presented above are before the elimination of intercompany interest. Ningbo JV
records revenues from the Ningbo China Unicom GSM project based on amounts of
revenues and profits reported to it by China Unicom through the period October
1, 1998 to December 31, 1998 and October 1, 1997 to December 31, 1997. Chongqing
JV records revenues from the lease of space currently unused by China Unicom
within a building that was purchased by Chongqing JV for China Unicom's long
term use as a switching and operations center. As of March 31, 1999, Chongqing
JV directly owned this building, but Chongqing JV plans to eventually transfer
the building to China Unicom as part of its funding and support under the STLF
Contract.
 
4. EARNINGS PER SHARE OF COMMON STOCK
 
Basic EPS excludes all dilutive securities. It is based upon the weighted
average number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that would occur if securities exercisable for
or convertible into common stock were exercised or converted into common stock.
In calculating diluted EPS, no potential shares of common stock are to be
included in the
 
                                       18
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
4. EARNINGS PER SHARE OF COMMON STOCK (CONTINUED)
computation when a loss from continuing operations available to common
stockholders exists. For
the three months ended March 31, 1999 and in 1998 the Company had losses from
continuing
operations.
 
The computation of basic EPS for the three months ended March 31, 1999 and 1998
is as follows
(in thousands, except per share amounts):
 
<TABLE>
<CAPTION>
                                                                               LOSS          SHARES        PER-SHARE
                                                                           (NUMERATOR)    (DENOMINATOR)     AMOUNT
                                                                           ------------  ---------------  -----------
<S>                                                                        <C>           <C>              <C>
1999:
Loss from continuing operations..........................................   $  (11,270)
Less: Preferred stock dividend requirement...............................        3,752
                                                                           ------------
Loss from continuing operations attributable to common stockholders......   $  (15,022)        69,123      $   (0.22)
                                                                           ------------        ------     -----------
                                                                           ------------        ------     -----------
1998:
Loss from continuing operations..........................................   $  (22,963)
Less: Preferred stock dividend requirement...............................        3,752
                                                                           ------------
Loss from continuing operations attributable to common stockholders......   $  (26,715)        68,572      $   (0.39)
                                                                           ------------        ------     -----------
                                                                           ------------        ------     -----------
</TABLE>
 
The Company had, for the three months ended March 31, 1999 and 1998, potentially
dilutive shares of common stock of 18,901,000 and 19,136,000, respectively.
 
5. LONG-TERM DEBT
 
At March 31, 1999, Snapper was not in compliance with all financial covenants
under its loan and security agreement ("Loan and Security Agreement"). On May
14, 1999, the lenders of the Loan and Security Agreement waived any event of
default arising from such noncompliance.
 
                                       19
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6. BUSINESS SEGMENT DATA
 
The business activities of the Company constitute three business segments and
are set forth as of and for the three months ended March 31, 1999 and 1998 in
the following table (in thousands):
 
<TABLE>
<CAPTION>
                                                                                               1999        1998
                                                                                            ----------  ----------
<S>                                                                                         <C>         <C>
COMMUNICATIONS GROUP--EASTERN EUROPE AND
  THE REPUBLICS OF THE FORMER SOVIET UNION:
Revenues..................................................................................  $    7,608  $    8,962
Direct operating costs....................................................................     (13,742)    (19,585)
Depreciation and amortization.............................................................      (2,027)     (2,744)
                                                                                            ----------  ----------
  Operating loss..........................................................................      (8,161)    (13,367)
                                                                                            ----------  ----------
                                                                                            ----------  ----------
Equity in losses of unconsolidated investees..............................................      (1,420)     (5,022)
Foreign currency gain (loss)..............................................................        (508)         97
Minority interest.........................................................................         293          95
                                                                                            ----------  ----------
                                                                                            ----------  ----------
Assets at March 31, 1999 and December 31, 1998............................................     191,680     194,864
Capital expenditures......................................................................  $      928  $    4,429
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
COMMUNICATIONS GROUP--CHINA:
Revenues..................................................................................  $       --  $       --
Direct operating costs....................................................................      (2,763)     (2,594)
Depreciation and amortization.............................................................        (784)       (756)
                                                                                            ----------  ----------
  Operating loss..........................................................................      (3,547)     (3,350)
                                                                                            ----------  ----------
                                                                                            ----------  ----------
Equity in losses of unconsolidated investees..............................................        (265)       (478)
Foreign currency gain.....................................................................          --          --
Minority interest.........................................................................       2,176       1,944
                                                                                            ----------  ----------
                                                                                            ----------  ----------
Assets at year end........................................................................     140,491     139,726
Capital expenditures......................................................................  $        2  $      403
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
SNAPPER:
Revenues..................................................................................  $   60,034  $   51,257
Direct operating costs....................................................................     (55,160)    (48,579)
Depreciation and amortization.............................................................      (1,555)     (1,814)
                                                                                            ----------  ----------
  Operating income........................................................................       3,319         864
                                                                                            ----------  ----------
                                                                                            ----------  ----------
Assets at March 31, 1999 and December 31, 1998............................................     142,158     134,460
Capital expenditures......................................................................  $      630  $      932
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
                                       20
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6. BUSINESS SEGMENT DATA (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                                               1999        1998
                                                                                            ----------  ----------
<S>                                                                                         <C>         <C>
OTHER:
Revenues..................................................................................  $       --  $       --
Direct operating costs....................................................................      (1,356)     (1,289)
Depreciation and amortization.............................................................          (1)         (1)
                                                                                            ----------  ----------
  Operating loss..........................................................................      (1,357)     (1,290)
                                                                                            ----------  ----------
                                                                                            ----------  ----------
Assets at March 31, 1999 and December 31, 1998, including eliminations....................  $  118,711  $  140,591
                                                                                            ----------  ----------
                                                                                            ----------  ----------
 
CONSOLIDATED:
Revenues..................................................................................  $   67,642  $   60,219
Direct operating costs....................................................................     (73,021)    (72,047)
Depreciation and amortization.............................................................      (4,367)     (5,315)
                                                                                            ----------  ----------
  Operating loss..........................................................................      (9,746)    (17,143)
Interest expense..........................................................................      (3,406)     (5,003)
Interest income...........................................................................       1,700       3,034
Equity in losses of unconsolidated investees..............................................      (1,685)     (5,500)
Foreign currency gain (loss)..............................................................        (508)         97
Minority interest.........................................................................       2,469       2,039
                                                                                            ----------  ----------
  Loss before income tax expense..........................................................     (11,176)    (22,476)
Income tax expense........................................................................         (94)       (487)
                                                                                            ----------  ----------
  Net loss................................................................................     (11,270)    (22,963)
                                                                                            ----------  ----------
                                                                                            ----------  ----------
Assets at March 31, 1999 and December 31, 1998............................................     593,040     609,641
Capital expenditures......................................................................  $    1,560  $    2,794
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>
 
                                       21
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
6. BUSINESS SEGMENT DATA (CONTINUED)
Information about the Communications Group's operations in different geographic
locations for the three months ended March 31, 1999 and 1998 and as of March 31,
1999 and December 31, 1998 is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                              REVENUES                ASSETS
                                                                        --------------------  ----------------------
<S>                                                                     <C>        <C>        <C>         <C>
COUNTRY                                                                   1999       1998        1999        1998
----------------------------------------------------------------------  ---------  ---------  ----------  ----------
Austria...............................................................  $     140  $     182  $      654  $    1,049
Azerbaijan............................................................         --         --       6,962       5,172
Belarus...............................................................         --         --       3,084       2,934
Czech Republic........................................................        588         47       3,460       3,527
Estonia...............................................................        205        306       1,985       2,026
Georgia...............................................................        120         --      23,384      24,412
Germany...............................................................         28        115       4,336       4,941
Hungary...............................................................      2,593      3,282       5,748       6,288
Kazakhstan............................................................         --         --       6,940       7,162
Latvia................................................................        229        224      14,617      14,219
Lithuania.............................................................        251        139       2,096       2,141
Moldova...............................................................         --         --       4,455       4,896
People's Republic of China............................................         --         --     140,491     139,726
Romania...............................................................      1,326        968       5,353       6,115
Russia................................................................      1,745      1,860      19,658      17,676
Ukraine...............................................................        165         --       3,020       3,640
United Kingdom........................................................         --      1,489         819       1,568
United States (1).....................................................        218        350      79,920      81,862
Uzbekistan............................................................         --         --       5,189       5,236
                                                                        ---------  ---------  ----------  ----------
                                                                        $   7,608  $   8,962  $  332,171  $  334,590
                                                                        ---------  ---------  ----------  ----------
                                                                        ---------  ---------  ----------  ----------
</TABLE>
 
------------------------------
 
(1) Assets include goodwill of $53.9 million, and $54.5 million at March 31,
    1999 and December 31, 1998, respectively.
 
The revenues and assets by the Communications Group's line of business
operations are disclosed in notes 2 and 3. All remaining assets and
substantially all remaining revenue relate to operations in the United States.
 
7. INVESTMENT IN RDM SPORTS GROUP, INC.
 
The Company owns approximately 39% of the outstanding common stock of RDM Sports
Group, Inc. ("RDM"). In August 1997, RDM and certain of its affiliates filed a
voluntary bankruptcy petition under chapter 11 of the Bankruptcy Code. The
chapter 11 trustee is in the process of selling all of RDM's assets to satisfy
its obligations to its creditors and the Company believes that its equity
interest will not be entitled to receive any distribution. The Company also
holds certain claims in the RDM proceedings, although there can be no assurance
that the Company will receive any distributions with respect to such claims.
 
On August 19, 1998, a purported class action lawsuit, THEOHAROUS V. FONG, ET AL,
Civ. No. 1:98CV2366, was filed in United States District Court for the Northern
District of Georgia. The complaint alleges that certain officers, directors and
shareholders of RDM, including the Company, are liable under
 
                                       22
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
7. INVESTMENT IN RDM SPORTS GROUP, INC. (CONTINUED)
federal securities laws for misrepresenting and failing to disclose information
regarding RDM's alleged financial condition during the period between July 19,
1996 and August 22, 1997, on which date RDM disclosed that its management had
discussed the possibility of filing for bankruptcy. The complaint also alleges
that the plaintiffs, including the Company, are secondarily liable as
controlling persons of RDM. On October 19, 1998, a second purported class action
lawsuit with substantially the same allegations, SCHUETTE V. FONG, ET AL., Civ.
No. 1:98CV3034, was filed in United States District Court for the Northern
District of Georgia. On December 30, 1998, the chapter 11 trustee of RDM brought
an adversary proceeding in the bankruptcy of RDM, HAYS, ET AL.v. FONG, ET AL.,
Adv. Proc. No. 98-1128, in the United States Bankruptcy Court, Northern District
of Georgia, alleging that former officers or directors of the Company, while
serving as directors on the board of RDM, breached fiduciary duties allegedly
owed to RDM's shareholders and creditors in connection with the bankruptcy of
RDM. On January 25, 1999, the plaintiff filed a first amended complaint. The
official committee of unsecured creditors of RDM ("the Creditors' Committee")
has moved to proceed as co-plaintiff or to intervene in this proceeding, and the
official committee of bondholders of RDM ("the Bondholders' Committee") has
moved to intervene in or join the proceeding. On February 16, 1999, the
Creditors' Committee brought an adversary proceeding, THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF RDM SPORTS GROUP, INC. AND RELATED DEBTORS v. METROMEDIA
INTERNATIONAL GROUP, INC. Adv. Proc. No. 99-1023, seeking in the alternative to
recharacterize as contributions to equity a secured claim in the amount of $15
million made by the Company arising out of the Company's financing of RDM, or to
equitably subordinate such claim made by Metromedia against RDM and other
debtors in the bankruptcy proceedings. On March 3, 1999, the Bondholders'
Committee brought an adversary proceeding, THE OFFICIAL COMMITTEE OF BONDHOLDERS
OF RDM SPORTS GROUP, INC. v. METROMEDIA INTERNATIONAL GROUP, INC., Adv. Proc.
No. 99-1029, with substantially the same allegations as the above proceedings.
The Company believes it has meritorious defenses and plans to vigorously defend
these actions. Due to the early stage of these proceedings, the Company cannot
evaluate the likelihood of an unfavorable outcome or an estimate of the likely
amount or range of possible loss, if any.
 
8. OTHER CONSOLIDATED CONDENSED FINANCIAL STATEMENT INFORMATION
 
ACCOUNTS RECEIVABLE
 
The total allowance for doubtful accounts at March 31, 1999 and December 31,
1998 was $2.4 million and $2.2 million, respectively.
 
                                       23
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
8. OTHER CONSOLIDATED CONDENSED FINANCIAL STATEMENT INFORMATION (CONTINUED)
INVENTORIES
 
Inventories consist of the following as of March 31, 1999 and December 31, 1998
(in thousands):
 
<TABLE>
<CAPTION>
                                                                                                1999       1998
                                                                                              ---------  ---------
<S>                                                                                           <C>        <C>
Lawn and garden equipment:
  Raw materials.............................................................................  $   9,301  $   8,388
  Finished goods............................................................................     52,830     55,488
                                                                                              ---------  ---------
                                                                                                 62,131     63,876
Less: LIFO reserve..........................................................................      1,660      1,660
                                                                                              ---------  ---------
                                                                                                 60,471     62,216
                                                                                              ---------  ---------
Telecommunications:
  Pagers....................................................................................        289         --
  Telephony.................................................................................         --         --
  Cable.....................................................................................        426        561
                                                                                              ---------  ---------
                                                                                                    715        561
                                                                                              ---------  ---------
                                                                                              $  61,186  $  62,777
                                                                                              ---------  ---------
                                                                                              ---------  ---------
</TABLE>
 
STOCK OPTION PLANS
 
On March 31, 1998, the Company granted approximately 200,000 stock options at an
exercise price of $11.69 under the 1996 Metromedia International Group, Inc.
Incentive Stock Plan. This resulted in a compensation expense of approximately
$550,000 which is included in selling, general and administrative expense for
the three months ended March 31, 1998.
 
9. CONTINGENCIES
 
RISKS ASSOCIATED WITH THE COMMUNICATIONS GROUP'S INVESTMENTS
 
The ability of the Communications Group and its Joint Ventures to establish
profitable operations is subject to, among other things, significant political,
economic and social risks inherent in doing business in Eastern Europe, the
republics of the former Soviet Union and China. These include potential risks
arising out of government policies, economic conditions, imposition of taxes or
other similar charges by government bodies, foreign exchange fluctuations and
controls, civil disturbances, deprivation or unenforceability of contractual
rights, and taking of property without fair compensation.
 
In 1998, a number of emerging market economies suffered significant economic and
financial difficulties resulting in liquidity crises, devaluation of currencies,
higher interest rates and reduced opportunities for financing. At this time, the
prospect for recovery by the economies of the Russian Federation and other
republics of the former Soviet Union and Eastern Europe negatively affected by
the economic crisis remain unclear. The economic crisis has resulted in a number
of defaults by borrowers in the Russian Federation and other countries and a
reduced level of financing available to investors in these countries. The
devaluation of many of the currencies in the region has also negatively affected
the U.S. dollar value of the revenues generated by certain of the Company's
Joint Ventures and may lead to certain additional restrictions on the
convertibility of certain local currencies. The Company expects that these
problems will negatively affect certain of its cable television, telephony,
radio broadcasting and paging ventures.
 
                                       24
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
9. CONTINGENCIES (CONTINUED)
The Communications Group's strategy is to minimize its foreign currency risk. To
the extent possible, in countries that have experienced high rates of inflation,
the Communications Group bills and collects all revenues in U.S. dollars or an
equivalent local currency amount adjusted on a monthly basis for exchange rate
fluctuations. The Communications Group's Joint Ventures are generally permitted
to maintain U. S. dollar accounts to serve their U.S. dollar debt and current
account obligations, thereby reducing foreign currency risk. As the
Communications Group and its Joint Ventures expand their operations and become
more dependent on local currency based transactions, the Communications Group
expects that its foreign currency exposure will increase. The Communications
Group does not hedge against foreign exchange rate risks at the current time
and, therefore, could be subject in the future to any declines in exchange rates
between the time a Joint Venture receives its funds in local currencies and the
time it distributes such funds in U.S. dollars to the Communications Group.
 
The Communications Group may also be materially and adversely affected by laws
restricting foreign investment in the field of communications. Some countries,
including China, have extensive restrictions on foreign investment in the
communications field and the Communications Group attempts to structure its
prospective projects in order to comply with such laws. However, there can be no
assurance that such legal and regulatory restrictions will not increase in the
future or, as currently promulgated, will not be interpreted in a manner giving
rise to tighter restrictions, and thus may have a material adverse effect on the
Communications Group's existing and prospective projects in the country. The
Russian Federation has periodically proposed legislation that would limit the
ownership percentage that foreign companies can have in radio and television
businesses and more recently has proposed legislation that would limit the
number of radio and television businesses that any company could own in a single
market. While such proposed legislation has not been enacted, it is possible
that such legislation could be enacted in Russia and that other countries in
Eastern Europe and the republics of the former Soviet Union may enact similar
legislation which could have a material adverse effect on the business
operations, financial condition or prospects of the Communications Group. The
proposed foreign investment legislation could be similar to United States
Federal law which limits foreign ownership in entities owning broadcasting
licenses. There is no way of predicting whether additional ownership limitations
will be enacted in any of the Communications Group's markets, or whether any
such law, if enacted, will force the Communications Group to reduce or
restructure its ownership interest in any of the ventures in which the
Communications Group currently has an ownership interest. If additional
ownership limitations are enacted in any of the Communications Group's markets
and the Communications Group is required to reduce or restructure its ownership
interests in any ventures, it is unclear how such reduction or restructuring
would be implemented, or what impact such reduction or restructuring would have
on the Communications Group.
 
The Communications Group's investments in Joint Ventures in China have been made
through a structure known as the Sino-Sino-Foreign ("SSF") joint venture, an
arrangement in which the foreign invested SSF Joint Venture is a provider of
telephony equipment, financing and technical services to telecommunications
operators and not a direct provider of telephone service. Since mid-1998,
positions unofficially taken by some departments of the Chinese government have
raised uncertainty regarding the continued viability of the SSF structure and,
as a result, the Communications Group's associated financing, service and
consulting arrangements with China Unicom. No formal decisions or regulations on
the resolution of SSF issues have yet been announced by the Chinese government.
There is a risk that the Communications Group along with other telecommunication
participants in China, may be required to substantially restructure the terms of
its current SSF Joint Ventures arrangements with
 
                                       25
<PAGE>
                      METROMEDIA INTERNATIONAL GROUP, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
9. CONTINGENCIES (CONTINUED)
China Unicom to meet new Chinese government regulations. It can not be
determined at this time what effects, if any, such actions would have on the
future value of the Communications Group's SSF Joint Ventures and the Joint
Ventures' ability to generate revenue, cash flow or net income.
 
The licenses pursuant to which the Communications Group's businesses operate are
issued for limited periods, including in some cases licenses that are renewable
annually. Certain of these licenses expire over the next several years. One of
the licenses held by the Communications Group has expired, although the
Communications Group has been permitted to continue operations while the
decision on reissuance is pending. Certain other licenses held or used by the
Communications Group will expire during 1999. The failure of such licenses to be
renewed may have a material adverse effect on the Company's results of
operations. Additionally, certain of the licenses pursuant to which the
Communications Group's businesses operate contain network build-out milestone
clauses. The failure to satisfy such milestones could result in the loss of such
licenses which may have a material adverse effect on the Communications Group.
 
The Company's Joint Ventures will apply for renewals of their licenses. While
there can be no assurance that these licenses will be renewed, based on past
experience, the Communications Group expects to obtain such renewals.
 
LITIGATION
 
The Company is involved in various legal and regulatory proceedings and while
the results of any litigation or regulatory issue contain an element of
uncertainty, management believes that, subject to the information disclosed in
note 7, the outcome of any known, pending or threatened legal proceedings will
not have a material effect on the Company's consolidated financial position and
results of operations.
 
                                       26
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with the Company's
consolidated condensed financial statements and related notes thereto.
 
The business activities of Metromedia International Group, Inc. ("MMG" or "the
Company") are composed of two operating groups, the Communications Group and
Snapper. The Communications Group consists of two geographic business segments,
Eastern Europe and the republics of the former Soviet Union ("the FSU"), and
China. There are four lines of business in Eastern Europe and the FSU as
follows: (i) various types of telephony services; (ii) cable television; (iii)
paging services; and (iv) radio broadcasting. The Company's investments in
various telephony services in China is a separate segment. The Company's third
segment is the manufacture of lawn and garden products through Snapper.
 
In 1998, the Communications Group's paging business continued to incur operating
losses. Accordingly, the Communications Group developed a revised operating plan
to stabilize its paging operation. Under the revised plan, the Communications
Group intends to manage its paging business to a level that will not require
significant additional funding for its operations. As a result of the revised
plan, in 1998 the Company recorded a non-cash, nonrecurring charge on its paging
assets of $49.9 million, which included a $35.9 million write off of goodwill
and other intangibles. The non-cash, nonrecurring charge adjusted the carrying
value of goodwill and other intangibles, fixed assets and investments in and
advances to Joint Ventures and wrote down inventory. It is anticipated that
under the revised plan the Communications Group paging business's operating
losses will decrease significantly.
 
On November 1, 1995, as a result of the mergers of Orion Pictures Corporation
and Metromedia International Telecommunications, Inc. ("MITI") with and into
wholly-owned subsidiaries of the Company and MCEG Sterling Incorporated
("Sterling) with and into the Company (collectively the "November 1 Merger"),
the Company changed its name from "The Actava Group Inc." to "Metromedia
International Group, Inc." As part of the November 1 Merger, the Company
acquired approximately 39% of RDM Sports Group, Inc. ("RDM"). On August 29,
1997, RDM and certain of its affiliates filed voluntary bankruptcy petitions
under chapter 11. The Company does not believe it will be entitled to any funds
from its equity interest in RDM.
 
Certain statements set forth below under this caption constitute
"Forward-Looking Statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). See "Special Note
Regarding Forward-Looking Statements" on page 62.
 
COMMUNICATIONS GROUP
 
The Company, through the Communications Group, is the owner of various interests
in Joint Ventures that are currently in operation or planning to commence
operations in Eastern Europe, the FSU, China and other selected emerging
markets. The Communications Group's Joint Ventures currently offer cellular
telecommunications, fixed telephony, international and long distance telephony
services, cable television, paging, and radio broadcasting. The Communications
Group's Joint Ventures' partners are often governmental agencies or ministries.
 
The Communications Group reports its activity and invests in communications
businesses in two primary geographic areas, Eastern Europe and the FSU, and the
People's Republic of China. In Eastern Europe and the FSU, the Communications
Group generally owns 50% or more of the operating Joint Ventures in which it
invests. Currently, legal restrictions in China prohibit foreign ownership and
operation in the telecommunications sector. The Communications Group's China
Joint Ventures invest in telephony system construction and development networks
being undertaken by China
 
                                       27
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
United Telecommunications Incorporated ("China Unicom"). The completed systems
are operated by China Unicom. The Communications Group's China Joint Ventures
receive payments from China Unicom based on revenues and profits generated by
the systems in return for their providing financing, technical advice and
consulting and other services. Hereinafter, all references to the Communications
Group Joint Ventures relate to the operating Joint Ventures in Eastern Europe
and the FSU and the Communications Group's Joint Ventures in China. Statistical
data regarding subscribers, population, etc. for the Joint Ventures in China
relate to the telephony systems of China Unicom to which such Joint Ventures
provide funding and services.
 
The Company's financial statements consolidate only the accounts and results of
operations of 16 of the Communications Group's 47 operating Joint Ventures at
March 31, 1999. Investments in other companies and Joint Ventures which are not
majority owned, or which the Communications Group does not control, but over
which the Communications Group exercises significant influence, have been
accounted for using the equity method. Investments of the Communications Group
or its consolidated subsidiaries over which significant influence is not
exercised are carried under the cost method. See Notes 2 and 3 to the "Notes to
Consolidated Condensed Financial Statements" of the Company, for those Joint
Ventures recorded under the equity method and their summary financial
information.
 
The Communications Group accounts for the majority of its Joint Ventures under
the equity method of accounting since it generally does not exercise control.
Under the equity method of accounting, the Communications Group reflects the
cost of its investments, adjusted for its share of the income or losses of the
Joint Ventures, on its balance sheet. The losses recorded for the three months
ended 1999 and 1998 represent the Communications Group's equity in the losses of
the Joint Ventures in Eastern Europe, the FSU and China. Equity in the losses of
the Joint Ventures by the Communications Group are generally reflected according
to the level of ownership of the Joint Venture by the Communications Group until
such Joint Venture's contributed capital has been fully depleted. The
Communications Group recognizes the full amount of losses generated by the Joint
Venture when the Communications Group is the sole funding source of the Joint
Ventures.
 
The following table summarizes the Communications Group's Joint Ventures and
subsidiaries at March 31, 1999, as well as the amounts contributed, amounts
loaned net of repayments and total amounts invested in such Joint Ventures and
subsidiaries at March 31, 1999 (in thousands).
 
<TABLE>
<CAPTION>
                                                                              AMOUNT       AMOUNT        TOTAL
                                                                            CONTRIBUTED    LOANED     INVESTED IN
                                                                             TO JOINT     TO JOINT       JOINT
                                                                COMPANY      VENTURE/     VENTURE/     VENTURE/
JOINT VENTURE (1)                                             OWNERSHIP %   SUBSIDIARY   SUBSIDIARY  SUBSIDIARY(2)
-----------------------------------------------------------  -------------  -----------  ----------  -------------
<S>                                                          <C>            <C>          <C>         <C>
CELLULAR TELECOMMUNICATIONS
Baltcom GSM (Latvia).......................................       22%        $  13,736   $       --   $    13,736
Magticom (Tbilisi, Georgia)................................       35%            2,450       17,564        20,014
Tyumenruskom (Tyumen, Russia) (3)..........................       46%            1,908        1,997         3,905
Ningbo Ya Mei Telecommunications Co., Ltd. (Ningbo City,
  China) (4)...............................................       41%            9,530       23,518        33,048
Ningbo Ya Lian Telecommunications Co., Ltd. (Ningbo
  Municipality, China) (3) (4).............................       41%            5,046        3,429         8,475
                                                                            -----------  ----------  -------------
                                                                                32,670       46,508        79,178
                                                                            -----------  ----------  -------------
</TABLE>
 
                                       28
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                              AMOUNT       AMOUNT        TOTAL
                                                                            CONTRIBUTED    LOANED     INVESTED IN
                                                                             TO JOINT     TO JOINT       JOINT
                                                                COMPANY      VENTURE/     VENTURE/     VENTURE/
JOINT VENTURE (1)                                             OWNERSHIP %   SUBSIDIARY   SUBSIDIARY  SUBSIDIARY(2)
-----------------------------------------------------------  -------------  -----------  ----------  -------------
<S>                                                          <C>            <C>          <C>         <C>
FIXED TELEPHONY
Sichuan Tai Li Feng Telecommunications Co., Ltd.
(Sichuan Province, China) (3) (5)..........................       54%        $  11,087   $    9,531   $    20,618
Chongqing Tai Le Feng Telecommunications Co.,
  Ltd.(Chongqing Municipality, China) (3) (5)..............       54%           13,581        2,540        16,121
Instaphone (Kazakhstan)....................................       50%               93        1,675         1,768
Caspian American Telecommunications
  (Azerbaijan) (3).........................................       38%              200        7,625         7,825
                                                                            -----------  ----------  -------------
                                                                                24,961       21,371        46,332
                                                                            -----------  ----------  -------------
INTERNATIONAL AND LONG DISTANCE TELEPHONY
Telecom Georgia (Tbilisi, Georgia).........................       30%            2,554           --         2,554
                                                                            -----------  ----------  -------------
CABLE TELEVISION
Romsat Cable TV (Bucharest, Romania) (6)...................      100%            2,405        6,291         8,696
Viginta (Vilnius, Lithuania) (6)...........................       55%              397        3,253         3,650
ATK (Archangelsk, Russia)..................................       81%            2,053          153         2,206
Kosmos TV (Moscow, Russia).................................       50%            1,093       13,311        14,404
Baltcom TV (Riga, Latvia)..................................       50%              819       12,352        13,171
Ayety TV (Tbilisi, Georgia)................................       49%              779        8,887         9,666
Kamalak TV (Tashkent, Uzbekistan)..........................       50%              400        3,004         3,404
Sun TV (Chisinau, Moldova).................................       50%              400        7,276         7,676
Alma TV (Almaty, Karaganda, Actau and Ust-Kamenogorsk,
  Kazakhstan)..............................................       50%              222        6,394         6,616
Cosmos TV (Minsk, Belarus).................................       50%              400        4,593         4,993
Teleplus (St. Petersburg, Russia)..........................       45%              990        1,446         2,436
                                                                            -----------  ----------  -------------
                                                                                 9,958       66,960        76,918
                                                                            -----------  ----------  -------------
</TABLE>
 
                                       29
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                             AMOUNT       AMOUNT        TOTAL
                                                                           CONTRIBUTED    LOANED     INVESTED IN
                                                                            TO JOINT     TO JOINT       JOINT
                                                               COMPANY      VENTURE/     VENTURE/     VENTURE/
JOINT VENTURE (1)                                            OWNERSHIP %   SUBSIDIARY   SUBSIDIARY  SUBSIDIARY(2)
-----------------------------------------------------------  ------------  -----------  ----------  -------------
<S>                                                          <C>           <C>          <C>         <C>
PAGING
Baltcom Paging (Tallinn, Estonia) (6)......................      85%        $   3,715   $    2,741   $     6,456
CNM (Romania) (6)..........................................      54%              490       13,129        13,619
Paging One Services (Austria) (6)..........................      100%           1,036       11,661        12,697
Eurodevelopment (Ukraine) (6)..............................      51%            1,000        1,448         2,448
Kamalak Paging (Tashkent, Samarkand, Bukhara and Andijan,
  Uzbekistan)..............................................      50%              435        2,046         2,481
Mobile Telecom (Russia) (6)................................      50%            7,277          200         7,477
Baltcom Plus (Riga, Latvia) (8)............................      50%               --           --            --
Paging One (Tbilisi, Georgia) (8)..........................      45%               --           --            --
Raduga Poisk (Nizhny Novgorod, Russia) (8).................      45%               --           --            --
PT Page (St. Petersburg, Russia) (8).......................      40%               --           --            --
Kazpage (Kazakhstan) (8) (9)...............................     26-41%             --           --            --
Alma Page (Almaty and Ust-Kamenogorsk, Kazakhstan) (8).....      50%               --           --            --
Paging Ajara (Batumi, Georgia) (8).........................      35%               --           --            --
                                                                           -----------  ----------  -------------
                                                                               13,953       31,225        45,178
                                                                           -----------  ----------  -------------
RADIO BROADCASTING
Radio Juventus (Budapest, Hungary) (6).....................      100%           8,107        1,027         9,134
SAC (Moscow, Russia) (6)...................................      83%              631        2,560         3,191
Radio Skonto (Riga, Latvia) (6)............................      55%              302           --           302
Radio One (Prague, Czech Republic) (6).....................      80%              627          495         1,122
NewsTalk Radio (Berlin, Germany) (6).......................      85%            2,758        6,596         9,354
Radio Vladivostok, (Vladivostok, Russia) (6)...............      51%              267           58           325
Country Radio (Prague, Czech Republic) (6).................      85%            2,043           --         2,043
Radio Georgia (Tbilisi, Georgia) (6) (10)..................      51%              705          179           884
Radio Katusha (St. Petersburg, Russia) (6) (10)............      75%              464          705         1,169
Radio Nika (Socci, Russia).................................      51%              260           --           260
AS Trio LSL (Tallinn, Estonia) (10)........................      49%            1,536          395         1,931
                                                                           -----------  ----------  -------------
                                                                               17,700       12,015        29,715
                                                                           -----------  ----------  -------------
OTHER (12)
Spectrum (Kazakhstan) (8)..................................      33%               --           --            --
                                                                           -----------  ----------  -------------
TOTAL......................................................                 $ 101,796   $  178,079   $   279,875
                                                                           -----------  ----------  -------------
                                                                           -----------  ----------  -------------
</TABLE>
 
------------------------------
 
(1) Each parenthetical notes the area of operations for each operational Joint
    Venture or the area for which each pre-operational Joint Venture is
    licensed.
 
(2) Total investment does not include any income or losses.
 
(3) Pre-operational systems as of March 31, 1999.
 
(4) Ningbo Ya Mei Telecommunications is supporting the development by China
    Unicom (a Chinese telecommunications operator) of a GSM mobile telephone
    system in Ningbo City, China. Ningbo Ya Lian Telecommunications is similarly
 
                                       30
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
    supporting development by China Unicom of expansion of GSM services
    throughout Ningbo Municipality, China. Both Joint Ventures provide
    financing, technical assistance and consulting services to the Chinese
    operator.
 
(5) Sichuan Tai Li Feng Telecommunications and Chongqing Tai Le Feng
    Telecommunications are supporting the development by China Unicom of
    fixed-line, PSTN's in Sichuan Province and Chongqing Municipality, China,
    respectively. Both Joint Ventures provide financing, technical assistance
    and consulting services to the Chinese operator. In January 1999, the fixed
    wireline telephony systems in Sichuan and Chongqing commenced commercial
    operations.
 
(6) Results of operations are consolidated with the Company's financial
    statements.
 
(7) The Company's purchase of Mobile Telecom closed during June 1998. The
    Company purchased its 50% interest in Mobile Telecom for $7.0 million plus
    two additional earnout payments to be made on February 14, 2000 and February
    14, 2001. Each of the two earnout payments is to be equal to $2.5 million,
    adjusted up or down based upon performance compared to certain financial
    targets. Simultaneously with the purchase of Mobile Telecom, the Company
    purchased 50% of a related pager distribution company for $500,000.
 
(8) Balances reflect write down of investment.
 
(9) Kazpage is comprised of a service entity and 10 paging Joint Ventures that
    provide services in Kazakhstan. The Company's interest in the Joint Ventures
    ranges from 26% to 41% and its interest in the service entity is 51%.
    Amounts described as loaned in the above table represent loans to the
    service entity which in turn funds the Joint Ventures. The results of
    operations of the service entity are consolidated with the Company's
    financial statements.
 
(10) Radio Katusha includes two radio stations operating in St. Petersburg,
    Russia and AS Trio LSL includes five radio stations operating in various
    cities throughout Estonia. Radio Georgia includes two radio stations
    operating in Georgia.
 
(11) In July 1998 the Communications Group sold its share of Protocall Ventures
    Limited. The Communications Group retained Protocall Ventures Limited's
    ownership interest in Spectrum
 
                                       31
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
The following table summarizes by country the amounts contributed, amounts
loaned net of repayments and total amounts invested in the Communications
Group's Joint Ventures and subsidiaries at March 31, 1999 (in thousands):
 
<TABLE>
<CAPTION>
                                                        AMOUNT                  AMOUNT                 TOTAL
                                                      CONTRIBUTED               LOANED                INVESTED
                                                       TO JOINT                TO JOINT               IN JOINT
                                                       VENTURE/                VENTURE/               VENTURE/
COUNTRY                                               SUBSIDIARY       %      SUBSIDIARY      %      SUBSIDIARY      %
----------------------------------------------------  -----------  ---------  ----------  ---------  ----------  ---------
<S>                                                   <C>          <C>        <C>         <C>        <C>         <C>
Austria.............................................   $   1,036         1.0  $   11,661        6.6  $   12,697        4.5
Azerbaijan..........................................         200         0.2       7,625        4.3       7,825        2.8
Belarus.............................................         400         0.4       4,593        2.6       4,993        1.8
Czech Republic......................................       2,670         2.6         495        0.3       3,165        1.1
Estonia.............................................       5,251         5.2       3,136        1.8       8,387        3.0
Georgia.............................................       6,488         6.4      26,630       14.9      33,118       11.8
Germany.............................................       2,758         2.7       6,596        3.7       9,354        3.4
Hungary.............................................       8,107         8.0       1,027        0.6       9,134        3.3
Kazakhstan..........................................         315         0.3       8,069        4.5       8,384        3.0
Latvia..............................................      14,857        14.6      12,352        6.9      27,209        9.7
Lithuania...........................................         397         0.4       3,253        1.8       3,650        1.3
Moldova.............................................         400         0.4       7,276        4.1       7,676        2.7
People's Republic of China..........................      39,244        38.5      39,018       21.9      78,262       28.0
Romania.............................................       2,895         2.8      19,420       10.9      22,315        8.0
Russia..............................................      14,943        14.7      20,430       11.5      35,373       12.6
Ukraine.............................................       1,000         1.0       1,448        0.8       2,448        0.9
Uzbekistan..........................................         835         0.8       5,050        2.8       5,885        2.1
                                                      -----------  ---------  ----------  ---------  ----------  ---------
                                                       $ 101,796       100.0  $  178,079      100.0  $  279,875      100.0
                                                      -----------  ---------  ----------  ---------  ----------  ---------
                                                      -----------  ---------  ----------  ---------  ----------  ---------
</TABLE>
 
SNAPPER
 
Snapper manufactures Snapper-Registered Trademark- brand premium-priced power
lawnmowers, lawn tractors, garden tillers, snowthrowers and related parts and
accessories. The lawnmowers include rear engine riding mowers, front-engine
riding mowers or lawn tractors, and self-propelled and push-type walk-behind
mowers. Snapper also manufactures a line of commercial lawn and turf equipment
under the Snapper brand. Snapper provides lawn and garden products through
distribution channels to domestic and foreign retail markets.
 
The following tables set forth operating results for the three months ended
March 31, 1999 and 1998, for the Company's Communications Group's two segments
and the lawn and garden products segment.
 
                                       32
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
 
                              SEGMENT INFORMATION
                       THREE MONTHS ENDED MARCH 31, 1999
                                 (IN THOUSANDS)
                                   SEE NOTE 1
<TABLE>
<CAPTION>
                                                             COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE
                                                                                  FORMER SOVIET UNION
                                                            ---------------------------------------------------------------
<S>                                                         <C>          <C>          <C>            <C>          <C>
                                                                                      INTERNATIONAL
                                                             CELLULAR                   AND LONG
                                                             TELECOM-       FIXED       DISTANCE        CABLE
                                                            MUNICATIONS   TELEPHONY     TELEPHONY    TELEVISION    PAGING
                                                            -----------  -----------  -------------  -----------  ---------
COMBINED
Revenues..................................................   $   8,956    $      20     $   6,149     $   7,981   $   4,771
Depreciation and amortization.............................       2,916           15           526         3,455         466
Operating income (loss)...................................        (454)        (106)        1,141        (1,160)       (877)
 
CONSOLIDATED
Revenues..................................................          --           --            --         1,248         944
Gross profit..............................................
Depreciation and amortization.............................          --           --            --           443         291
Operating income (loss)...................................          --           --            --           (58)     (1,153)
 
UNCONSOLIDATED JOINT VENTURES
Revenues..................................................       8,956           20         6,149         6,733       3,827
Depreciation and amortization.............................       2,916           15           526         3,012         175
Operating income (loss)...................................        (454)        (106)        1,141        (1,102)        276
Net income (loss).........................................      (2,031)        (291)         (998)       (1,737)        231
Equity in income (losses) of
  unconsolidated investees (Note 2).......................        (528)        (379)         (299)         (362)        162
 
Foreign currency loss.....................................
Minority interest.........................................
 
Interest expense..........................................
Interest income...........................................
Income tax expense........................................
Net loss..................................................
 
<CAPTION>
 
<S>                                                         <C>        <C>
 
                                                               RADIO       SEGMENT               COMMUNICATIONS
                                                              BROAD-        HEAD-                    GROUP -
                                                              CASTING     QUARTERS      TOTAL         CHINA        SNAPPER
                                                            -----------  -----------  ---------  ---------------  ---------
COMBINED
Revenues..................................................   $   5,892    $     227   $  33,996
Depreciation and amortization.............................         451          910       8,739
Operating income (loss)...................................        (425)      (6,486)     (8,367)
CONSOLIDATED
Revenues..................................................       5,189          227       7,608     $      --     $  60,034
Gross profit..............................................                                                           20,093
Depreciation and amortization.............................         383          910       2,027           784         1,555
Operating income (loss)...................................        (464)      (6,486)     (8,161)       (3,547)        3,319
UNCONSOLIDATED JOINT VENTURES
Revenues..................................................         703           --      26,388         1,012
Depreciation and amortization.............................          68           --       6,712           682
Operating income (loss)...................................          39           --        (206)           52
Net income (loss).........................................         (12)          --      (4,838)       (1,160)
Equity in income (losses) of
  unconsolidated investees (Note 2).......................         (14)          --      (1,420)         (265)           --
Foreign currency loss.....................................                                 (508)           --            --
Minority interest.........................................                                  293         2,176            --
Interest expense..........................................
Interest income...........................................
Income tax expense........................................
 
Net loss..................................................
 
<CAPTION>
 
                                                              OTHER    CONSOLIDATED
                                                            ---------  ------------
COMBINED
Revenues..................................................
Depreciation and amortization.............................
Operating income (loss)...................................
CONSOLIDATED
Revenues..................................................  $      --   $   67,642
Gross profit..............................................
Depreciation and amortization.............................          1        4,367
Operating income (loss)...................................     (1,357)      (9,746)
UNCONSOLIDATED JOINT VENTURES
Revenues..................................................
Depreciation and amortization.............................
Operating income (loss)...................................
Net income (loss).........................................
Equity in income (losses) of
  unconsolidated investees (Note 2).......................         --       (1,685)
Foreign currency loss.....................................         --         (508)
Minority interest.........................................         --        2,469
Interest expense..........................................                  (3,406)
Interest income...........................................                   1,700
Income tax expense........................................                     (94)
                                                                       ------------
Net loss..................................................              $  (11,270)
                                                                       ------------
                                                                       ------------
</TABLE>
 
------------------------------
 
Note 1: The Company evaluates the performance of its operating segments based on
earnings before interest, taxes, depreciation, and amortization ("EBITDA"). The
above segment information and the discussion of the Company's operating segments
is based on operating income (loss) which includes depreciation and
amortization. In addition, the Company evaluates the performance of the
Communications Group's operating segment in Eastern Europe and the republics of
the former Soviet Union on a combined basis. The Company is providing as
supplemental information an analysis of combined revenues and operating income
(loss) for its consolidated and unconsolidated Joint Ventures in Eastern Europe
and the republics of the former Soviet Union. As previously discussed, legal
restrictions in China prohibit foreign participation in the operations or
ownership in the telecommunications sector. The above segment information for
the Communications Group's China Joint Ventures represents the investment in
network construction and development of telephony networks for China Unicom. The
above segment information does not reflect the results of operations of China
Unicom's telephony networks.
 
Note 2: Equity in income (losses) of unconsolidated investees reflects
elimination of intercompany interest.
 
                                       33
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
 
                              SEGMENT INFORMATION
                       THREE MONTHS ENDED MARCH 31, 1998
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                             COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION
                                            ------------------------------------------------------------------------------------
<S>                                         <C>          <C>            <C>          <C>        <C>        <C>        <C>
                                                         INTERNATIONAL
                                             CELLULAR      AND LONG                               RADIO                SEGMENT
                                             TELECOM-      DISTANCE        CABLE                 BROAD-                 HEAD-
                                            MUNICATIONS    TELEPHONY    TELEVISION    PAGING     CASTING     OTHER     QUARTERS
                                            -----------  -------------  -----------  ---------  ---------  ---------  ----------
COMBINED
Revenues..................................   $   4,017     $   7,049     $   7,250   $   4,729  $   6,148  $   2,825  $       87
Depreciation and amortization.............       2,302           538         3,082       1,013        335        529       1,316
Operating income (loss)...................      (2,940)        2,016        (2,952)     (3,232)     1,149     (1,102)    (10,806)
 
CONSOLIDATED
Revenues..................................          --            --           709         887      5,528      1,751          87
Gross profit..............................
Depreciation and amortization.............          --            --           327         559        291        251       1,316
Operating income (loss)...................          --            --          (779)     (2,857)     1,203       (128)    (10,806)
 
UNCONSOLIDATED JOINT VENTURES
Revenues..................................       4,017         7,049         6,541       3,842        620      1,074          --
Depreciation and amortization.............       2,302           538         2,755         454         44        278          --
Operating income (loss)...................      (2,940)        2,016        (2,173)       (375)       (54)      (974)         --
Net income (loss).........................      (4,222)        1,369        (4,015)       (880)       (66)    (1,025)         --
Equity in income (losses) of
  unconsolidated investees (Note 2).......      (1,372)          411        (2,746)       (862)       (30)      (423)         --
 
Foreign currency gain.....................
Minority interest.........................
 
Interest expense..........................
Interest income...........................
Income tax expense........................
Net loss..................................
 
<CAPTION>
 
<S>                                         <C>         <C>              <C>        <C>        <C>
 
                                                        COMMUNICATIONS
                                                            GROUP -
                                              TOTAL          CHINA        SNAPPER     OTHER    CONSOLIDATED
                                            ----------  ---------------  ---------  ---------  ------------
COMBINED
Revenues..................................  $   32,105
Depreciation and amortization.............       9,115
Operating income (loss)...................     (17,867)
CONSOLIDATED
Revenues..................................       8,962     $      --     $  51,257  $      --   $   60,219
Gross profit..............................                                  15,508
Depreciation and amortization.............       2,744           756         1,814          1        5,315
Operating income (loss)...................     (13,367)       (3,350)          864     (1,290)     (17,143)
UNCONSOLIDATED JOINT VENTURES
Revenues..................................      23,143           638
Depreciation and amortization.............       6,371           569
Operating income (loss)...................      (4,500)         (354)
Net income (loss).........................      (8,839)       (1,062)
Equity in income (losses) of
  unconsolidated investees (Note 2).......      (5,022)         (478)           --         --       (5,500)
Foreign currency gain.....................          97            --            --         --           97
Minority interest.........................          95         1,944            --         --        2,039
Interest expense..........................                                                          (5,003)
Interest income...........................                                                           3,034
Income tax expense........................                                                            (487)
                                                                                               ------------
Net loss..................................                                                      $  (22,963)
                                                                                               ------------
                                                                                               ------------
</TABLE>
 
                                       34
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
 
RESULTS OF OPERATIONS--THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
  MONTHS ENDED
  MARCH 31, 1998
 
LEGEND
 
C = Consolidated
E = Equity method
P = Pre-operational
N/A = Not applicable
N/M = Not meaningful
 
COMMUNICATIONS GROUP--EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET
  UNION
 
The following sets forth, by line of business, the Communications Group's
consolidated and unconsolidated subsidiaries and Joint Ventures, the
Communications Group's ownership percentage and selected income statement
information for the three months ended March 31, 1999 and 1998 (in thousands):
 
TELEPHONY
 
CELLULAR TELECOMMUNICATIONS
 
<TABLE>
<CAPTION>
                                                                                            MARCH 31,
                                                                                      ----------------------
JOINT VENTURE/SUBSIDIARY                                              OWNERSHIP %        1999        1998
-----------------------------------------------------------------  -----------------     -----     ---------
<S>                                                                <C>                <C>          <C>
Baltcom GSM (Latvia).............................................             22%              E           E
Magticom (Tbilisi, Georgia)......................................             35%              E           E
Tyumenruskom (Tyumen, Russia)....................................             46%              P         N/A
</TABLE>
 
UNCONSOLIDATED JOINT VENTURES
 
The following table sets forth the revenues, operating loss, net loss and equity
in losses of the Communications Group's investment in unconsolidated Joint
Ventures recorded under the equity method (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      % CHANGE
                                                               1999       1998      1999 TO 1998
                                                             ---------  ---------  ---------------
<S>                                                          <C>        <C>        <C>
Revenues...................................................  $   8,956  $   4,017           123%
Operating loss.............................................  $    (454) $  (2,940)          (85)%
Net loss...................................................  $  (2,031) $  (4,222)          (52)%
Equity in losses of Joint Ventures.........................  $    (528) $  (1,372)          (62)%
</TABLE>
 
REVENUES.  Revenues for cellular communications reflects the result of
operations in Latvia and Georgia, both of which commenced operations in 1997.
There is limited wireline telephone service in these markets, thus the demand
for reliable and mobile telephone service is increasing. Increased revenue of
$3.0 million and $1.8 million in Latvia and Georgia, respectively, for the three
months ended March 31, 1999 as compared to the three months ended March 31, 1998
is consistent with the growth in total subscribers from 28,510 in 1998 to 65,601
in 1999.
 
                                       35
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OPERATING LOSS.  Included in operating losses in 1999 and 1998 were depreciation
and amortization charges of $2.9 million and $2.3 million, respectively. The
decreased operating loss in 1999 as compared to 1998 is a result of increasing
revenue while controlling selling, general and administrative costs.
 
NET LOSS.  Included in net losses in 1999 and 1998 was interest expense of $2.3
million and $1.1 million, respectively. The increase in interest expense in 1999
from the prior year represents additional borrowings by the Joint Ventures to
fund and expand their operations.
 
EQUITY IN LOSSES OF JOINT VENTURES.  The Communications Group initially
recognizes its proportionate share of the net income or loss of its Joint
Ventures. However, since 1998, the Communications Group recognized the full
amount of losses generated by the Joint Ventures since the contributed capital
of the Joint Venture had been depleted and the Communications Group was
generally the sole funding source.
 
FIXED TELEPHONY
 
<TABLE>
<CAPTION>
                                                                                            MARCH 31,
                                                                                      ----------------------
JOINT VENTURE/SUBSIDIARY                                              OWNERSHIP %        1999        1998
-----------------------------------------------------------------  -----------------     -----     ---------
<S>                                                                <C>                <C>          <C>
Instaphone (Kazakhstan)..........................................             50%              E           P
Caspian American Telecommunications (Azerbaijan).................             38%              P         N/A
</TABLE>
 
UNCONSOLIDATED JOINT VENTURES
 
The following table sets forth the revenues, operating loss, net loss and equity
in losses of the Communications Group's investment in unconsolidated Joint
Ventures recorded under the equity method (in thousands):
 
<TABLE>
<CAPTION>
                                                                                          % CHANGE
                                                                   1999       1998      1999 TO 1998
                                                                 ---------  ---------  ---------------
<S>                                                              <C>        <C>        <C>
Revenues.......................................................  $      20  $      --           N/A
Operating loss.................................................  $    (106) $      --           N/A
Net loss.......................................................  $    (291) $      --           N/A
Equity in losses of Joint Ventures.............................  $    (379) $      --           N/A
</TABLE>
 
EQUITY IN LOSSES OF JOINT VENTURES.  Results above are those of the
Communications Group's Joint Venture in Kazakhstan. Operations have been delayed
by the lack of success in securing an interconnection agreement with the local
ministry. Included in the operating loss are depreciation charges of $15,000.
Included in net loss are interest charges of $47,000.
 
INTERNATIONAL AND LONG DISTANCE TELEPHONY
 
<TABLE>
<CAPTION>
                                                                                              MARCH 31,
                                                                                            -------------
JOINT VENTURE/SUBSIDIARY                                               OWNERSHIP %        1999         1998
------------------------------------------------------------------  -----------------     -----        -----
<S>                                                                 <C>                <C>          <C>
Telecom Georgia (Tbilisi, Georgia)................................             30%              E            E
</TABLE>
 
                                       36
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
UNCONSOLIDATED JOINT VENTURES
 
The following table sets forth the revenues, operating income, net income (loss)
and equity in income (loss) of the Communications Group's investment in Telecom
Georgia which is recorded under the equity method (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        % CHANGE
                                                                 1999       1998      1999 TO 1998
                                                               ---------  ---------  ---------------
<S>                                                            <C>        <C>        <C>
Revenues.....................................................  $   6,149  $   7,049           (13)%
Operating income.............................................  $   1,141  $   2,016           (43)%
Net income (loss)............................................  $    (998) $   1,369           N/M
Equity in income (loss) of Joint Venture.....................  $    (299) $     411           N/M
</TABLE>
 
REVENUES.  International and long distance calling revenues are generated at
Telecom Georgia which handles international calls inbound to and outbound from
the Republic of Georgia. Revenues for the quarter ended March 31, 1999 as
compared to the quarter ended March 31, 1998 decreased as a result of increasing
competition from other international telephone service providers and the
devaluation of the Georgian lari. During the quarter ended March 31, 1998,
Telecom Georgia was the only entity licensed to handle international call
traffic in and out of Georgia.
 
OPERATING INCOME.  Included in operating income in 1999 and 1998 were
depreciation and amortization charges of $526,000 and $538,000 respectively.
Operating income in the first quarter of 1999 decreased as a result of
contractual reductions in termination accounting rates in international
settlement agreements for traffic with overseas carriers.
 
NET INCOME (LOSS).  Included in net income (loss) in 1999 and 1998 were interest
charges of $6,000 and $167,000, respectively. The net loss in the quarter ended
March 31, 1999 as compared to the net income in the quarter ended March 31, 1998
is attributable to the significant devaluation of the Georgian lari.
 
EQUITY IN INCOME (LOSS) OF JOINT VENTURE.  Equity in income (loss) of Joint
Venture represents the Communications Group's proportionate share of Telecom
Georgia's net income (loss) in 1999 and 1998.
 
CABLE TELEVISION
 
<TABLE>
<CAPTION>
                                                                                          MARCH 31,
                                                                                    ----------------------
JOINT VENTURE/SUBSIDIARY                                             OWNERSHIP %       1999        1998
-----------------------------------------------------------------  ---------------     -----     ---------
<S>                                                                <C>              <C>          <C>
Romsat Cable TV (Bucharest, Romania).............................           100%             C           C
Viginta (Vilnius, Lithuania).....................................            55%             C           C
ATK (Archangelsk, Russia)........................................            81%             C         N/A
Kosmos TV (Moscow, Russia).......................................            50%             E           E
Baltcom TV (Riga, Latvia)........................................            50%             E           E
Ayety TV (Tbilisi, Georgia)......................................            49%             E           E
Kamalak TV (Tashkent, Uzbekistan)................................            50%             E           E
Sun TV (Chisinau, Moldova).......................................            50%             E           E
Alma TV (Almaty, Kazakhstan).....................................            50%             E           E
Cosmos TV (Minsk, Belarus).......................................            50%             E           E
Teleplus (St. Petersburg, Russia)................................            45%             E           P
</TABLE>
 
                                       37
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
CONSOLIDATED SUBSIDIARIES AND JOINT VENTURES
 
The following table sets forth the consolidated revenues and operating loss for
cable television (in thousands):
 
<TABLE>
<CAPTION>
                                                                                         % CHANGE
                                                                  1999       1998      1999 TO 1998
                                                                ---------  ---------  ---------------
<S>                                                             <C>        <C>        <C>
Revenues......................................................  $   1,248  $     709            76%
Operating loss................................................  $     (58) $    (779)          (93)%
</TABLE>
 
REVENUES.  The revenue increases from cable television consolidated subsidiaries
and Joint Ventures for the quarter ended March 31, 1999 as compared to the
quarter ended March 31, 1998, were the result of increases of $322,000 and
$112,000 at the operations in Romania and Lithuania, respectively, as well as
the acquisition of a system in the Archangelsk region of Russia.
 
OPERATING LOSS.  Included in operating losses in 1999 and 1998 were depreciation
and amortization charges of $443,000 and $327,000, respectively. The decreased
operating loss for the quarter ended March 31, 1999 as compared to the quarter
ended March 31, 1998 reflects the successful implementation of the
Communications Group's strategy to increase the customer base by wiring
buildings in advance and targeting for a lower priced, broader based program
package to a system in Romania that was acquired during the first quarter of
1998.
 
UNCONSOLIDATED JOINT VENTURES
 
The following table sets forth the revenues, operating loss, net loss and equity
in losses of the Company's investment in unconsolidated Joint Ventures recorded
under the equity method (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      % CHANGE
                                                               1999       1998      1999 TO 1998
                                                             ---------  ---------  ---------------
<S>                                                          <C>        <C>        <C>
Revenues...................................................  $   6,733  $   6,541             3%
Operating loss.............................................  $  (1,102) $  (2,173)          (49)%
Net loss...................................................  $  (1,737) $  (4,015)          (57)%
Equity in losses of Joint Ventures.........................  $    (362) $  (2,746)          (87)%
</TABLE>
 
REVENUES.  During the first quarter of 1999 as compared to the first quarter of
1998, revenues increased at the cable operations in Almaty, Kazakhstan and
Minsk, Belarus by approximately $400,000 and $419,000 respectively, and were
offset by decreases of $281,000, $273,000 and $201,000 experienced at the
operations in Moscow, Russia, Tashkent, Uzbekistan and Chisinau, Moldova,
respectively as well as the devaluation of the Russian rouble. The
Communications Group is intentionally slowing the growth of its Joint Venture in
Belarus, as a result of regulations instituted by various governmental
ministries which may adversely affect the operations of the venture
 
OPERATING LOSS.  Included in operating losses in 1999 and 1998 were depreciation
and amortization charges of $3.0 million and $2.7 million, respectively. The
improvements in operating results reflect the fact that certain operating costs
are fixed and the number of subscribers increased, reducing the operating loss
per subscriber, combined with cost savings achieved through economies of scale
resulting from contract renegotiation with programmers and other suppliers.
 
                                       38
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
NET LOSS.  Included in net losses in 1999 and 1998 was interest expense of $1.2
million and $1.0 million, respectively. The increase in interest expense in 1999
relates to additional borrowings by the Joint Ventures to fund and expand their
operations. The decreased net loss is comprised of improved results at the
operations in Moscow, Russia, Riga, Latvia and Almaty, Kazakstan of
approximately $322,000, $1.4 million and $431,000, respectively.
 
EQUITY IN LOSSES OF JOINT VENTURES.  The Communications Group initially
recognizes its proportionate share of the net income or loss of its Joint
Ventures. However, for 1999 and 1998, the Communications Group recognized the
full amount of losses generated in certain Joint Ventures since the contributed
capital of the Joint Venture has been depleted and the Communications Group was
generally the sole funding source.
 
COMBINED RESULTS OF OPERATIONS
 
The following table sets forth the revenues, depreciation and amortization and
operating loss on a combined basis of the Communications Group's consolidated
and unconsolidated subsidiaries and Joint Ventures (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      % CHANGE
                                                               1999       1998      1999 TO 1998
                                                             ---------  ---------  ---------------
<S>                                                          <C>        <C>        <C>
Revenues...................................................  $   7,981  $   7,250            10%
Depreciation and amortization..............................  $  (3,455) $  (3,082)          (12)%
Operating loss.............................................  $  (1,160) $  (2,952)          (61)%
</TABLE>
 
ANALYSIS OF COMBINED RESULTS OF OPERATIONS.  As noted above, subscriber growth
and revenue increases in 1999 were the result of further implementation of the
strategy by which buildings were wired in advance and targeted for a lower
priced, broader band program package. Total subscribers increased from 255,116
in 1998 to 374,537 in 1999. In 1999, the improvement in operating results
reflects the favorable relationship between certain fixed operating costs and
the increase in subscribers as described above, combined with cost savings
achieved through economies of scale resulting in advantageous contract
renegotiations with programmers and other suppliers.
 
PAGING
 
OVERVIEW.  In 1998, the Communications Group's paging business continued to
incur operating losses. Accordingly, the Communications Group developed a
revised operating plan to stabilize its paging operations. Under the revised
plan, the Communications Group intends to manage its paging business to a level
that should not require significant additional funding for its operation. It is
anticipated that under the revised plan the Communications Group's paging
business operating losses will decrease significantly. The Company has adjusted
its investment in certain paging operations which were recorded under the equity
method to zero, and unless it provides future funding, will no longer record
 
                                       39
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
its proportionate share of any future net losses of these investees and is
reflected in the following table as E*.
 
<TABLE>
<CAPTION>
                                                                                                          MARCH 31,
                                                                                                     --------------------
JOINT VENTURE/SUBSIDIARY                                                               OWNERSHIP %     1999       1998
-------------------------------------------------------------------------------------  ------------  ---------  ---------
<S>                                                                                    <C>           <C>        <C>
Paging One Services (Austria)........................................................         100%           C          C
Baltcom Paging (Tallinn, Estonia)....................................................          85%           C          C
CNM (Romania)........................................................................          54%           C          C
Eurodevelopment (Ukraine)............................................................          51%           C        N/A
Kamalak Paging (Tashkent, Samarkand, Bukhara and
Andijan, Uzbekistan).................................................................          50%           E          E
Mobile Telecom (Russia)..............................................................          50%           E        N/A
Baltcom Plus (Riga, Latvia)..........................................................          50%           E*         E
Alma Page (Almaty and Ust-Kamenogorsk, Kazakhstan)...................................          50%           E*         E
Paging One (Tbilisi, Georgia)........................................................          45%           E*         E
Raduga Poisk (Nizhny Novgorod, Russia)...............................................          45%           E*         E
PT Page (St. Petersburg, Russia).....................................................          40%           E*         E
Kazpage (Kazakhstan).................................................................       26-41%           E*         E
Paging Ajara (Batumi, Georgia).......................................................          35%           E*         E
</TABLE>
 
CONSOLIDATED SUBSIDIARIES AND JOINT VENTURES
 
The following table sets forth the consolidated revenues and operating loss for
paging (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      % CHANGE
                                                               1999       1998      1999 TO 1998
                                                             ---------  ---------  ---------------
<S>                                                          <C>        <C>        <C>
Revenues...................................................  $     944  $     887             6%
Operating loss.............................................  $  (1,153) $  (2,857)          (60)%
</TABLE>
 
REVENUES.  The increase in revenues in the quarter ended March 31, 1999 as
compared to the quarter ended March 31, 1998 is attributable to the acquisition
during the fourth quarter of 1998 of a paging operation in Ukraine, offset by a
decrease at the operation in Estonia.
 
OPERATING LOSS.  Included in operating loss in 1999 and 1998 were depreciation
and amortization charges of $291,000 and $559,000, respectively. The decreased
operating loss for the quarter ended March 31, 1999 is partially attributable to
the sale during the quarter of inventory and material relating to a promotional
campaign in Romania that was written off at December 31, 1998. Additionally,
during the quarter ended March 31, 1998, increased marketing, advertising,
technical and distribution expenses were incurred to introduce calling party
pays service.
 
                                       40
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
UNCONSOLIDATED JOINT VENTURES
 
The following table sets forth the revenues, operating income (loss), net loss
and equity in losses of the Communications Group's investment in unconsolidated
Joint Ventures, which are recorded under the equity method (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        % CHANGE
                                                                 1999       1998      1999 TO 1998
                                                               ---------  ---------  ---------------
<S>                                                            <C>        <C>        <C>
Revenues.....................................................  $   3,827  $   3,842        --
Operating income (loss)......................................  $     276  $    (375)       N/M
Net income (loss)............................................  $     231  $    (880)       N/M
Equity in income (losses) of Joint Ventures..................  $     162  $    (862)       N/M
</TABLE>
 
REVENUES.  The change in revenue for the quarter ended March 31, 1999 as
compared to March 31, 1998 is attributable to the acquisition, during the third
quarter of 1998, of an operation in Moscow, Russia, which generated revenue of
$3.3 million for the three months ended March 31, 1999, offset by the effect of
discontinuing the application of the equity method of accounting to those
investments which were written down to zero at December 31, 1998.
 
OPERATING INCOME (LOSS).  Included in operating income (loss) in 1999 and 1998
were depreciation and amortization charges of $175,000 and $454,000,
respectively.
 
NET INCOME (LOSS).  Included in net income (loss) in the three months ended
March 31, 1999 and March 31, 1998 were interest expenses of $39,000 and
$171,000, respectively. The operating income and net income for the three months
ended March 31, 1999 as compared to the net loss for the three months ended
March 31, 1998 is attributable to the acquisition, as noted above, of an
operation in Moscow, Russia, and by the effect of discontinuing the application
of the equity method of accounting to those investments which were written down
to zero at December 31, 1998.
 
EQUITY IN INCOME (LOSSES) OF JOINT VENTURES.  As noted above, the Communications
Group recognizes its proportionate share of the net income or loss of its Joint
Ventures, however, for 1998, the Communications Group recognized the full amount
of losses generated by the Joint Ventures since the contributed capital of the
Joint Venture had been depleted and the Communications Group was generally the
sole funding source. During 1998, the Company adjusted its investments in
certain paging operations which were recorded under the equity method to zero,
and as noted above, unless it provides future funding will no longer record its
proportionate share of any future net losses of these investees.
 
COMBINED RESULTS OF OPERATIONS
 
The following table sets forth the revenues, depreciation and amortization and
operating loss on a combined basis of the Communications Group's consolidated
and unconsolidated subsidiaries and Joint Ventures (in thousands):
 
<TABLE>
<CAPTION>
                                                                                       % CHANGE
                                                                1999       1998      1999 TO 1998
                                                              ---------  ---------  ---------------
<S>                                                           <C>        <C>        <C>
Revenues....................................................  $   4,771  $   4,729             1%
Depreciation and amortization...............................  $    (466) $  (1,013)         (54)%
Operating loss..............................................  $    (877) $  (3,232)         (73)%
</TABLE>
 
                                       41
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
ANALYSIS OF COMBINED RESULTS OF OPERATIONS.  Total subscribers increased from
64,975 in 1998 to 113,379 in 1999. Revenues of investments written off at
December 31, 1998 are not included in the results of the unconsolidated or
combined Joint Ventures above. Subscribers reported in 1999 does not include
35,430 subscribers of these investments. Calling party pays subscribers are not
included in the subscriber count. Decreases in operating loss in 1999 were due
to the implementation during the quarter ended March 31, 1999 of the
Communications Group's revised operating plan.
 
RADIO BROADCASTING
 
<TABLE>
<CAPTION>
                                                                                            MARCH 31,
                                                                                          -------------
JOINT VENTURE/SUBSIDIARY                                              OWNERSHIP %       1999         1998
------------------------------------------------------------------  ---------------     -----        -----
<S>                                                                 <C>              <C>          <C>
Radio Juventus (Budapest, Hungary)................................           100%             C            C
Country Radio (Prague, Czech Republic)............................            85%             C            P
NewsTalk Radio (Berlin, Germany)..................................            85%             C            C
SAC (Moscow, Russia)..............................................            83%             C            C
Radio One (Prague, Czech Republic)................................            80%             C            C
Radio Katusha (St. Petersburg, Russia)............................            75%             C            E
Radio Skonto (Riga, Latvia).......................................            55%             C            C
Radio Vladivostok, (Vladivostok, Russia)..........................            51%             C            P
Radio Georgia (Tbilisi, Georgia)..................................            51%             C            P
Radio Nika (Socci, Russia)........................................            51%             E            E
AS Trio LSL (Tallinn, Estonia)....................................            49%             E            E
</TABLE>
 
CONSOLIDATED SUBSIDIARIES AND JOINT VENTURES
 
The following table sets forth the consolidated revenues and operating income
(losses) for radio broadcasting (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        % CHANGE
                                                                 1999       1998      1999 TO 1998
                                                               ---------  ---------  ---------------
<S>                                                            <C>        <C>        <C>
Revenues.....................................................  $   5,189  $   5,528       (6)%
Operating income (loss)......................................  $    (464) $   1,203        N/M
</TABLE>
 
REVENUES.  The decrease in revenues in the three months ended ended March 31,
1999 as compared to the three months ended March 31, 1998 is primarily comprised
of a decrease of $689,000 at the radio operation in Hungary offset by revenues
of $427,000 generated at the operation in the Czech Republic, which was
purchased in the first quarter of 1998. The decrease in revenues at the radio
operation in Hungary was the result of increased competition from television and
from a new national radio network and the devaluation of the Hungarian forint.
 
OPERATING INCOME (LOSS).  Included in operating income (loss) in 1999 and 1998
were depreciation and amortization charges of $383,000 and $291,000,
respectively. The operating loss for the quarter ended March 31, 1999 as
compared to the operating income for the quarter ended March 31, 1998 is
primarily attributable to an increased loss of approximately $457,000 at the
radio station in Berlin, Germany coupled with a $1.2 million decrease in
operating income at the radio station in Budapest, Hungary. At the Berlin
station, increased programming and other expenses associated with the News Talk
format account for the loss. The News Talk format has higher start up costs than
traditional music
 
                                       42
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
radio stations. The decrease in revenues at the station in Hungary, as noted
above, combined with increased advertising costs, account for the decrease in
operating income.
 
UNCONSOLIDATED JOINT VENTURES
 
The following table sets forth the revenues, operating income (loss), net loss
and equity in losses of the Communications Group's investment in unconsolidated
Joint Ventures, which are recorded under the equity method (in thousands):
 
<TABLE>
<CAPTION>
                                                                                          % CHANGE
                                                                    1999       1998     1999 TO 1998
                                                                  ---------  ---------  ------------
<S>                                                               <C>        <C>        <C>
Revenues........................................................  $     703  $     620      13%
Operating income (loss).........................................  $      39  $     (54)     N/M
Net loss........................................................  $     (12) $     (66)    (82)%
Equity in losses of Joint Ventures..............................  $     (14) $     (30)    (53)%
</TABLE>
 
REVENUES.  The increase in revenues in the quarter ended March 31, 1999 as
compared to the quarter ended March 31, 1998 is primarily attributable to the
purchase of an additional station at the radio operation in Tallinn, Estonia.
 
OPERATING INCOME (LOSS).  Included in operating income (loss) in 1999 and 1998
were depreciation and amortization charges of $68,000 and $44,000, respectively.
The operating income in 1999 is a result of the increases in revenue growth and
is reflective of management's philosophy to continually develop existing
audience share and revenue base.
 
NET LOSS.  Included in net loss in 1999 and 1998 were interest charges of
$11,000 and $5,000, respectively.
 
EQUITY IN LOSSES OF JOINT VENTURES.  The Communications Group initially
recognizes its proportionate share of the net income or loss of its Joint
Ventures. However, since 1996, the Communications Group recognized the full
amount of losses generated by the Joint Ventures since the contributed capital
of the Joint Venture had been depleted and the Communications Group was
generally the sole funding source.
 
                                       43
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
 
COMBINED RESULTS OF OPERATIONS
 
The following table sets forth the revenues, depreciation and amortization, and
operating income (loss) on a combined basis of the Communications Group's
consolidated and unconsolidated subsidiaries
and Joint Ventures (in thousands):
 
<TABLE>
<CAPTION>
                                                                                        % CHANGE
                                                                 1999       1998      1999 TO 1998
                                                               ---------  ---------  ---------------
<S>                                                            <C>        <C>        <C>
Revenues.....................................................  $   5,892  $   6,148            (4)%
Depreciation and amortization................................  $    (451) $    (335)           35%
Operating income (loss)......................................  $    (425) $   1,149        N/M
</TABLE>
 
ANALYSIS OF COMBINED RESULTS OF OPERATIONS.  As noted above, decreases in the
quarter ended March 31, 1999 as compared to the quarter ended March 31, 1998 are
primarily due to lower operating income at the station in Hungary and increased
losses at the radio station in Berlin, Germany, partially offset by the addition
of a station in Tallinn, Estonia.
 
OTHER
 
OVERVIEW.  In July 1998, the Communications Group sold its investment in
Protocall Ventures Limited. Additionally, the Company has adjusted its
investment in Spectrum to zero, and unless it provides future funding, will no
longer record its proportionate share of any future net losses of this
investment and is reflected in the following table as E*.
 
<TABLE>
<CAPTION>
                                                                                           MARCH 31,
                                                                                      --------------------
<S>                                                                <C>                <C>        <C>
JOINT VENTURE/SUBSIDIARY                                              OWNERSHIP %       1999       1998
-----------------------------------------------------------------  -----------------  ---------  ---------
Spectrum (Kazakhstan)............................................             33%            E*      E
Protocall Ventures Ltd...........................................                           N/A        C/E
</TABLE>
 
CONSOLIDATED SUBSIDIARIES AND JOINT VENTURES
 
The following table sets forth the consolidated revenues and operating income
(loss) for trunked mobile radio (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      % CHANGE
                                                               1999       1998      1999 TO 1998
                                                             ---------  ---------  ---------------
<S>                                                          <C>        <C>        <C>
Revenues...................................................  $  --      $   1,751           N/A
Operating loss.............................................  $  --      $    (128)          N/A
</TABLE>
 
REVENUES AND OPERATING LOSS.  Operations of the consolidated trunked mobile
radio ventures for the quarter ended March 31, 1998 reflect the activities of
the Protocall Venture's operations in Portugal, Spain and Belgium. In July 1998,
the Communications Group sold its investment in Protocall Ventures Limited.
 
                                       44
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
UNCONSOLIDATED JOINT VENTURES
 
The following table sets forth the revenues, operating loss, net loss and equity
in losses of the Communications Group's investment in unconsolidated Joint
Ventures, which are recorded under the equity method (in thousands):
 
<TABLE>
<CAPTION>
                                                                                     % CHANGE
                                                              1999       1998      1999 TO 1998
                                                            ---------  ---------  ---------------
<S>                                                         <C>        <C>        <C>
Revenues..................................................  $  --      $   1,074           N/A
Operating loss............................................  $  --      $    (974)          N/A
Net loss..................................................  $  --      $  (1,025)          N/A
Equity in losses of Joint Ventures........................  $  --      $    (423)          N/A
</TABLE>
 
REVENUES, OPERATING LOSS AND NET LOSS.  Included in operating loss in the
quarter ended March 31, 1998 were depreciation and amortization charges of
$278,000 and interest charges of $69,000. Results for the quarter ended March
31, 1998, include results of Protocall Ventures' equity investments as well as
results of Spectrum. As has been noted, the Communications Group sold its
interest in Protocall Ventures in July 1998. Additionally, the Company's
interest in Spectrum was written off during the fourth quarter of 1998.
 
EQUITY IN LOSSES OF JOINT VENTURES.  Equity in losses of Joint Ventures
represent the Communications Group's proportionate share of the net losses of
the Joint Ventures.
 
COMBINED RESULTS OF OPERATIONS
 
The following table sets forth the revenues, depreciation and amortization, and
operating loss on a combined basis of the Communications Group's consolidated
and unconsolidated subsidiaries and Joint Ventures (in thousands):
 
<TABLE>
<CAPTION>
                                                                                         % CHANGE
                                                                  1999       1998      1999 TO 1998
                                                                ---------  ---------  ---------------
<S>                                                             <C>        <C>        <C>
Revenues......................................................  $      --  $   2,825           N/A
Depreciation and amortization.................................  $      --  $    (529)          N/A
Operating loss................................................  $      --  $  (1,102)          N/A
</TABLE>
 
ANALYSIS OF COMBINED RESULTS OF OPERATIONS.  As noted above, in July 1998 the
Communications Group sold its investment in Protocall Ventures, and at December
31, 1998 has written down the investment in Spectrum to zero.
 
SEGMENT HEADQUARTERS
 
The following table sets forth the consolidated revenues and operating losses
for the segment headquarters (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      % CHANGE
                                                              1999        1998      1999 TO 1998
                                                            ---------  ----------  ---------------
<S>                                                         <C>        <C>         <C>
Revenues..................................................  $     227  $       87           161%
Operating loss............................................  $  (6,486) $  (10,806)          (40)%
</TABLE>
 
REVENUES.  The increased revenue from 1998 to 1999 reflects an increase in
programming and management fee revenues from the Communications Group's
unconsolidated subsidiaries.
 
                                       45
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
OPERATING LOSS.  Included in operating losses in 1999 and 1998 were depreciation
and amortization charges of $910,000, and $1.3 million, respectively. The
decreased operating loss from 1998 to 1999 is primarily a result of reductions
to headcount made in the fourth quarter of 1998, and the ensuing decreases in
salary, employee benefits and travel expenses. These reductions were made in
accordance with the Communications Group's plan to decrease corporate management
and administration operating expenses.
 
The following table sets forth minority interest and foreign currency gain
(loss) for the consolidated operations of the Communications Group--Eastern
Europe and the Republics of the Former
Soviet Union.
 
<TABLE>
<CAPTION>
                                                                                            % CHANGE
                                                                    1999        1998      1999 TO 1998
                                                                  ---------     -----     -------------
<S>                                                               <C>        <C>          <C>
Foreign currency gain (loss)....................................  $    (137)  $      97        N/M
Minority interest...............................................  $     293   $      95          208%
</TABLE>
 
FOREIGN CURRENCY GAIN (LOSS) AND MINORITY INTEREST.  For the three months ended
March 31, 1999 and 1998, foreign currency gain (loss) includes losses from
consolidated Joint Ventures and subsidiaries operating in highly inflationary
economies. Foreign currency losses represent the remeasurement of the Joint
Ventures' financial statements, in all cases using the U.S. dollar as the
functional currency. U.S. dollar transactions are shown at their historical
value. Monetary assets and liabilities denominated in local currencies are
translated into U.S. dollars at the prevailing period-end exchange rate. All
other assets and liabilities are translated at historical exchange rates.
Results of operations have been translated using the monthly average exchange
rates. The foreign currency loss is the transaction differences resulting from
the use of these different rates. For the three months ended March 31, 1999 and
1998, minority interest represents the allocation of losses by the
Communications Group's majority owned subsidiaries and Joint Ventures to its
minority ownership interest. The increase in 1999 represents the allocation of
losses from Telcell Wireless, LLC, a subsidiary of MITI that owns the interest
in Magticom Limited.
 
COMMUNICATIONS GROUP--CHINA
<TABLE>
<CAPTION>
                                                                                                                MARCH 31,
                                                                                                               -----------
<S>                                                                                         <C>                <C>
JOINT VENTURE/SUBSIDIARY                                                                       OWNERSHIP %        1999
------------------------------------------------------------------------------------------  -----------------     -----
CELLULAR TELECOMMUNICATIONS
Ningbo Ya Mei Telecommunications Co., Ltd. (Ningbo City, China)...........................             70%              E
Ningbo Ya Lian Telecommunications Co., Ltd. (Ningbo Municipality, China)..................             70%              P
FIXED TELEPHONY
Sichuan Tai Li Feng Telecommunications Co., Ltd. (Sichuan Province, China)................             92%              P
Chongqing Tai Le Feng Telecommunications Co., Ltd. (Chongqing Municipality, China)........             92%              P
 
<CAPTION>
 
<S>                                                                                         <C>
JOINT VENTURE/SUBSIDIARY                                                                      1998
------------------------------------------------------------------------------------------  ---------
CELLULAR TELECOMMUNICATIONS
Ningbo Ya Mei Telecommunications Co., Ltd. (Ningbo City, China)...........................      E
Ningbo Ya Lian Telecommunications Co., Ltd. (Ningbo Municipality, China)..................     N/A
FIXED TELEPHONY
Sichuan Tai Li Feng Telecommunications Co., Ltd. (Sichuan Province, China)................      P
Chongqing Tai Le Feng Telecommunications Co., Ltd. (Chongqing Municipality, China)........      P
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                  DISTRIBUTABLE
                                                                                   CASH FLOW %
CHINA UNICOM PROJECT                                                            TO JOINT VENTURE
-----------------------------------------------------------------------------  -------------------
<S>                                                                            <C>
Ningbo Project I.............................................................              73%
Ningbo Project II............................................................              73%
Sichuan Province.............................................................              78%
Chongqing Municipality.......................................................              78%
</TABLE>
 
                                       46
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
JOINT VENTURE INFORMATION
 
<TABLE>
<CAPTION>
                                                                               THREE MONTHS ENDED MARCH 31, 1999
                                                                 -------------------------------------------------------------
<S>                                                              <C>          <C>          <C>          <C>          <C>
                                                                   NINGBO       NINGBO       SICHUAN     CHONGQING
                                                                     JV          JV II         JV           JV         TOTAL
                                                                 -----------  -----------  -----------  -----------  ---------
Revenues.......................................................   $     988    $      --    $      --    $      24   $   1,012
Depreciation and amortization..................................   $    (608)   $      --    $     (16)   $     (58)  $    (682)
Operating income (loss)........................................   $     293    $     (15)   $     (83)   $    (143)  $      52
Net loss.......................................................   $    (569)   $     (51)   $    (317)   $    (223)  $  (1,160)
Equity in losses of Joint Ventures.............................   $     (16)   $      (8)   $     (93)   $    (148)  $    (265)
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED MARCH 31, 1998
                                                                          ------------------------------------------------
<S>                                                                       <C>          <C>          <C>          <C>
                                                                            NINGBO       SICHUAN     CHONGQING
                                                                              JV           JV           JV         TOTAL
                                                                          -----------  -----------  -----------  ---------
Revenues................................................................   $     638    $      --    $      --   $     638
Depreciation and amortization...........................................   $    (560)   $      (9)   $      --   $    (569)
Operating income (loss).................................................   $      47    $    (169)   $    (232)  $    (354)
Net loss................................................................   $    (668)   $    (162)   $    (232)  $  (1,062)
Equity in losses of Joint Ventures......................................   $    (115)   $    (149)   $    (214)  $    (478)
</TABLE>
 
The following table sets forth operating loss, equity in losses of Joint
Ventures and minority interests for the Communications Group's various
telephony-related in China (in thousands):
 
<TABLE>
<CAPTION>
                                                                                      % CHANGE
                                                               1999       1998      1999 TO 1998
                                                             ---------  ---------  ---------------
<S>                                                          <C>        <C>        <C>
Operating loss.............................................  $  (3,547) $  (3,350)            6%
Equity in losses of Joint Ventures.........................  $    (265) $    (478)          (45)%
Minority interests.........................................  $   2,176  $   1,944            12%
</TABLE>
 
OPERATING LOSS.  The operating loss increased $197,000 to $3.5 million for the
three months ended March 31, 1999 as compared to the same period in 1998. The
increase in operating loss is principally attributable to the increase in
selling, general and administrative expenses by $170,000. The increase relates
to expenses associated with employee compensation in 1999. The Company launched
two new Joint Ventures, Chongqing Tai Le Feng Telecommunications Co., Ltd. and
Ningbo Ya Lian Telecommunications Co., Ltd., each of which necessitated
recruitment of additional support staff. The wireline telephone network project
in China began actual network construction in early 1998 and launched commercial
service in January 1999. Expansion of the Ningbo City GSM network was undertaken
with the Company's Chinese partners during the second half of 1998 and the first
quarter of 1999. These measures necessitated recruitment of additional
engineering staff to support the activities. Finally, the Company undertook an
aggressive effort in 1998 to secure additional projects in China, including due
diligence and discussion of draft documentation of Joint Venture contracts with
several potential partners. This necessitated expansion of the Company's
business development staff during 1998. Some 1998 staff expansions have since
been offset by outplacement of employees no longer required for continuing
operations, and all separation related costs have been expensed in the first
quarter of 1999. Depreciation and amortization expenses are approximately the
same as the prior year.
 
EQUITY IN LOSSES OF JOINT VENTURES.  Equity in losses of the Communications
Group's Joint Ventures in China amounted to $265,000 in 1999 as compared to
$478,000 in 1998. The majority of the 1999 and 1998 losses arise from the
absence of any Joint Venture revenues during the pre-operational state of
 
                                       47
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
the projects each venture supports. The Joint Ventures in the pre-operational
stage contributed $241,000 and $363,000 of the 1999 and 1998 losses,
respectively. The Company's wireline telephone network Joint Venture in Sichuan
Province and the Chongqing Municipality remained in a pre-operational state
until the commercial service launch in January 1999. The Company's operational
ventures in China during the fourth quarter of 1998, supporting the Ningbo City
and Ninbgo Municipality GSM network, recorded losses of $24,000 in 1999 and
$115,000 in 1998. The Ningbo City project generated $988,000 in year to date
1999 revenues to the Joint Ventures, but this was not yet sufficient to overcome
the Joint Ventures' $1.5 million of the amortization and interest expenses
during the same period. Amortization and interest accounted for 94% of the Joint
Ventures' total expenses. These expenses will remain essentially constant as the
Joint Ventures' revenues grow.
 
MINORITY INTERESTS.  For the three months ended March 31, 1999 and 1998,
minority interests represents the allocation of losses to Metromedia China
Corporation's minority ownership.
 
INFLATION AND FOREIGN CURRENCY
 
Certain of the Communications Group's subsidiaries and Joint Ventures operate in
countries where the rate of inflation is extremely high relative to that in the
United States. While the Communications Group's subsidiaries and Joint Ventures
attempt to increase their subscription rates to offset increases in operating
costs, there is no assurance that they will be able to do so. Therefore,
operating costs may rise faster than associated revenue, resulting in a material
negative impact on operating results. The Company itself is generally negatively
impacted by inflationary increases in salaries, wages, benefits and other
administrative costs, the effects of which to date have not been material to the
Company.
 
In 1998, a number of emerging market economies suffered significant economic and
financial difficulties resulting in liquidity crises, devaluation of currencies,
higher interest rates and reduced opportunities for financing. At this time, the
prospects for recovery by the economies of the Russian Federation and other
republics of the former Soviet Union and Eastern Europe negatively affected by
the economic crisis remain unclear. The economic crisis has resulted in a number
of defaults by borrowers in the Russian Federation and other countries and a
reduced level of financing available to investors in these countries. The
devaluation of many of the currencies in the region has also negatively affected
the U.S. dollar value of the revenues generated by certain of the Company's
Joint Ventures and may lead to certain additional restrictions on the
convertibility of certain local currencies. The Company expects that these
problems will negatively affect certain of its cable television, telephony,
radio broadcasting and paging ventures.
 
The Communications Group's strategy is to minimize its foreign currency risk. To
the extent possible, the Communications Group bills and collects all revenues in
U.S. dollars or an equivalent local currency amount adjusted on a monthly basis
for exchange rate fluctuations. The Communications Group's subsidiaries and
Joint Ventures are generally permitted to maintain U.S. dollar accounts to
service their U.S. dollar denominated debt and current account obligations,
thereby reducing foreign currency risk. As the Communications Group's
subsidiaries and Joint Ventures expand their operations and become more
dependent on local currency based transactions, the Communications Group expects
that its foreign currency exposure will increase. The Communications Group does
not hedge against foreign exchange rate risks at the current time and therefore
could be subject in the future to any declines in exchange rates between the
time a subsidiary or a Joint Venture receives its funds in local currencies and
the time it distributes such funds in U.S. dollars to the Communications Group.
 
                                       48
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
SNAPPER
 
The following table sets forth Snapper's results of operations for the three
months ended March 31, 1999 and 1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                                                 % CHANGE
                                                          1999       1998      1999 TO 1998
                                                        ---------  ---------  ---------------
<S>                                                     <C>        <C>        <C>
Revenues..............................................  $  60,034  $  51,257            17%
Gross profit..........................................  $  20,093  $  15,508            30%
Operating income......................................  $   3,319  $     864           284%
</TABLE>
 
REVENUES.  Snapper's 1999 first quarter sales were $60.0 million as compared to
$51.3 million in 1998. Sales of lawn and garden equipment contributed the
majority of the revenues during both periods. Current year sales were higher due
primarily to an increase of $6.2 million snowthrower sales due to heavy snow in
the Midwest in January.
 
GROSS PROFIT.  Gross profit during 1999 was $20.1 million as compared to $15.5
million in 1998. The lower gross profit in 1998 was due to lower sales noted
above, as well as sales of older equipment during the quarter at incentive
pricing to assist eliminating older inventory acquired from distributor
inventory repurchases during 1997.
 
OPERATING INCOME.  Operating income was $3.3 million in 1999 as compared to
$864,000 in 1998. The current year operating income increased due to additional
sales and higher gross profit margins as noted above. The current year operating
income was negatively impacted by a $1.8 million judgment related to a lawsuit
filed by a former distributor.
 
CORPORATE HEADQUARTERS
 
The following table sets forth the operating loss for Corporate Headquarters (in
thousands):
 
<TABLE>
<CAPTION>
                                                                                   % CHANGE
                                                           1999       1998       1999 TO 1998
                                                         ---------  ---------  -----------------
<S>                                                      <C>        <C>        <C>
Operating loss.........................................  $  (1,357) $  (1,290)             5%
</TABLE>
 
OPERATING LOSS.  For the three months ended March 31, 1999 and 1998, Corporate
Headquarters had general and administrative expenses of approximately $1.4
million and $1.3 million, respectively. Corporate headquarters includes general
and administrative expenses.
 
MMG CONSOLIDATED
 
The following table sets forth on a consolidated basis the following items for
the three months ended March 31, 1999 and 1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                                                 % CHANGE
                                                         1999        1998      1999 TO 1998
                                                      ----------  ----------  ---------------
<S>                                                   <C>         <C>         <C>
Interest expense....................................  $   (3,406) $   (5,003)          (32)%
Interest income.....................................  $    1,700  $    3,034           (44)%
Income tax expense..................................  $      (94) $     (487)       N/M
Net loss............................................  $  (11,270) $  (22,963)          (51)%
</TABLE>
 
INTEREST EXPENSE.  Interest expense decreased $1.6 million to $3.4 million for
the three months ended March 31, 1999. The decrease in interest was due to the
repayment of debt at Corporate Headquarters and the Communications Group, and a
decrease in borrowings at Snapper.
 
                                       49
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
INTEREST INCOME.  Interest income decreased $1.3 million to $1.7 million in
1999, principally from the reduction of funds at Corporate Headquarters which
have been utilized in the operation of the Company.
 
INCOME TAX EXPENSE.  For the three months ended March 31, 1999 and 1998, the
income tax benefit that would have resulted from applying the federal statutory
rate of 35% was $3.9 million and $7.9 million, respectively. The income tax
benefit in 1999 and 1998 was reduced principally by losses attributable to
foreign operations, equity losses in Joint Ventures currently not deductible and
a 100% valuation allowance on the current year loss not utilized. The income tax
expense in 1999 and 1998 reflects foreign taxes in excess of the federal credit.
 
NET LOSS.  Net loss decreased to $11.3 million for the three months ended March
31, 1999 from $23.0 million for the three months ended March 31, 1998. The
decrease in operating loss and net loss in 1999 is primarily from a reduction in
the Communications Group's operating loss and equity in losses of unconsolidated
investees in the current year, $5.0 million and $3.8 million, respectively, and
an increase in the operating income of Snapper in the current year of $2.5
million.
 
LIQUIDITY AND CAPITAL RESOURCES
 
THE COMPANY
 
MMG is a holding company and, accordingly, does not generate cash flows from
operations. The Communications Group is dependent on MMG for significant capital
infusions to fund its operations and make acquisitions, as well as to fulfill
its commitments to make capital contributions and loans to its Joint Ventures.
Such funding requirements are based on the anticipated funding needs of its
Joint Ventures and certain acquisitions committed to by the Company. Future
capital requirements of the Communications Group, including future acquisitions,
will depend on available funding from the Company and on the ability of the
Communications Group's Joint Ventures to generate positive cash flows. Snapper
is restricted under covenants contained in its credit agreement from making
dividend payments or advances, other than certain permitted debt repayments, to
the Company and the Company has periodically funded the short-term working
capital needs of Snapper. The Company, at its discretion, can make dividend
payments on its 7 1/4% Cumulative Convertible Preferred Stock ("Preferred
Stock") in either cash or Common Stock. If the Company elects to continue to pay
the dividend in cash, the annual cash requirement will be $15.0 million. During
1998, the Company paid its four quarterly dividends of the Preferred Stock in
cash. On March 15, 1999 the Company paid the quarterly dividend on the Preferred
Stock in cash.
 
Since each of the Communications Group's Joint Ventures operates or invests in
businesses, such as cable television, fixed telephony and cellular
telecommunications, that are capital intensive and require significant capital
investment in order to construct and develop operational systems and market its
services, the Company will require in addition to its cash on hand, additional
financing in order to satisfy its long-term business objectives including its
on-going working capital requirements, and acquisition and expansion
requirements. Such additional capital may be provided through the public or
private sale of equity or debt securities of the Company or by separate equity
or debt financings by the Communications Group or companies of the
Communications Group. No assurance can be given that such additional financing
will be available to the Company on acceptable terms, if at all. If adequate
additional funds are not available, the Company may be required to curtail
significantly its long-term business objectives and the Company's results of
operations may be materially and adversely affected. The Company believes that
its cash on hand will be sufficient to fund the Company's working capital
requirements for the remainder of 1999.
 
                                       50
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
Management believes that its long-term liquidity needs will be satisfied through
a combination of the Company's successful implementation and execution of its
growth strategy to become a global communications and media company and the
Communications Group's Joint Ventures achieving positive operating results and
cash flows through revenue and subscriber growth and control of operating
expenses.
 
As the Communications Group is in the early stages of development, the Company
expects to generate significant consolidated net losses for the foreseeable
future as the Communications Group continues to build out and market its
services.
 
COMMUNICATIONS GROUP
 
The Communications Group has invested significantly (in cash or equipment
through capital contributions, loans and management assistance and training) in
its Joint Ventures. The Communications Group has also incurred significant
expenses in identifying, negotiating and pursuing new telecommunications
opportunities in selected emerging markets.
 
The Communications Group and many of its Joint Ventures are experiencing
continuing losses and negative operating cash flow since many of the businesses
are in the development and start-up phase of operations. The Communications
Group's primary source of funds was from the Company in the form of
inter-company loans.
 
Until the Communications Group's operations generate positive cash flow, the
Communications Group will require significant capital to fund its operations,
and to make capital contributions and loans to its Joint Ventures. The
Communications Group relies on the Company to provide the financing for these
activities. The Company believes that as more of the Communications Group's
Joint Ventures commence operations and reduce their dependence on the
Communications Group for funding, the Communications Group will be able to
finance its own operations and commitments from its operating cash flow and will
be able to attract its own financing from third parties. There can be no
assurance, however, that additional capital in the form of debt or equity will
be available to the Communications Group at all or on terms and conditions that
are acceptable to the Communications Group or the Company, and as a result, the
Communications Group will continue to depend upon the Company for its financing
needs.
 
Credit agreements between the Joint Ventures and the Communications Group are
intended to provide such ventures with sufficient funds for operations and
equipment purchases. The credit agreements generally provide for interest to
accrue at rates ranging from the prime rate to the prime rate plus 6% and for
payment of principal and interest from 90% of the Joint Venture's available cash
flow, as defined, prior to any distributions of dividends to the Communications
Group or its Joint Venture partners. The credit agreements also often provide
the Communications Group the right to appoint the general director of the Joint
Venture and the right to approve the annual business plan of the Joint Venture.
Advances under the credit agreements are made to the Joint Ventures in the form
of cash for working capital purposes, as direct payment of expenses or
expenditures, or in the form of equipment, at the cost of the equipment plus
cost of shipping. As of March 31, 1999, the Communications Group was committed
to provide funding under various charter fund agreements and credit lines in an
aggregate amount of approximately $214.9 million, of which $52.2 million
remained unfunded. The Communications Group's funding commitments under a credit
agreement are contingent upon its approval of the Joint Venture's business plan.
To the extent that the Communications Group does not approve a Joint Venture's
business plan, the Communications Group is not required to provide funds to the
Joint Venture under the credit line.
 
                                       51
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
The Communications Group's consolidated and unconsolidated Joint Ventures'
ability to generate positive operating results is dependent upon their ability
to attract subscribers to their systems, the sale of commercial advertising time
and their ability to control operating expenses. Management's current plans with
respect to the Joint Ventures are to increase subscriber and advertiser bases
and thereby operating revenues by developing a broader band of programming
packages for cable television and radio broadcasting and by offering additional
services and options for telephony services. By offering the large local
populations of the countries in which the Joint Ventures operate desired
services at attractive prices, management believes that the Joint Ventures can
increase their subscriber and advertiser bases and generate positive operating
cash flow, reducing their dependence on the Communications Group for funding of
working capital. Additionally, advances in the price performance of telephony
technology are expected to reduce capital requirements per subscriber. Further
initiatives to develop and establish profitable operations include reducing
operating costs as a percentage of revenue and assisting Joint Ventures in
developing management information systems and automated customer care and
service systems. No assurances can be given that such initiatives will be
successful or if successful, will result in such reductions. Additionally, if
the Joint Ventures do become profitable and generate sufficient cash flows in
the future, there can be no assurance that the Joint Ventures will pay dividends
or will return capital at any time.
 
EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION
 
The fixed telephony, cellular, international and long distance telephony and
cable television businesses in the aggregate are capital intensive. The
Communications Group generally provides the primary source of funding for its
Joint Ventures both for working capital and capital expenditures, with the
exception of its GSM Joint Ventures. The Communications Group's Joint Venture
agreements generally provide for the initial contribution of cash or assets by
the Joint Venture partners, and for the provision of a line of credit from the
Communications Group to the Joint Venture. Under a typical arrangement, the
Communications Group's Joint Venture partner contributes the necessary licenses
or permits under which the Joint Venture will conduct its business, studio or
office space, transmitting tower rights and other equipment. The Communications
Group's contribution is generally cash and equipment, but may consist of other
specific assets as required by the applicable Joint Venture agreement.
 
In June 1997, the Communications Group's Latvian GSM Joint Venture, Baltcom GSM,
entered into certain agreements with the European Bank for Reconstruction and
Development ("EBRD") pursuant to which the EBRD agreed to lend up to $23.0
million to Baltcom GSM in order to finance its system buildout and operations.
Baltcom GSM's ability to borrow under these agreements is conditioned upon
reaching certain gross revenue targets. The loan has an interest rate equal to
the 3-month LIBOR plus 4% per annum, with interest payable quarterly. The
principal amount must be repaid in installments starting in March 2002 with
final maturity in December 2006. The shareholders of Baltcom GSM were required
to provide $20.0 million to Baltcom GSM as a condition precedent to EBRD funding
the loan. In addition, the Communications Group and Western Wireless agreed to
provide or cause one of the shareholders of Baltcom GSM to provide an additional
$7.0 million in funding to Baltcom GSM if requested by EBRD which amount has
been provided. In August 1998, the EBRD and Baltcom GSM amended their loan
agreement in order to provide Baltcom GSM the right to finance the purchase of
up to $3.5 million in additional equipment from Nortel. As part of such
amendment, the Communications Group and Western Wireless agreed to provide
Baltcom GSM the funds needed to repay Nortel, if necessary, and to provide
Baltcom GSM debt service support for the loan agreement with the EBRD in an
amount not to exceed the greater of $3.5 million or the aggregate of the
additional equipment purchased from Nortel plus interest payable on the
financing.
 
                                       52
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
 
As part of the financing, the EBRD was also provided a 5% interest in the Joint
Venture which it can put back to Baltcom GSM at certain dates in the future at a
multiple of Baltcom GSM's earnings before interest, taxes, depreciation and
amortization ("EBITDA"), not to exceed $6.0 million. The Company and Western
Wireless have guaranteed the obligation of Baltcom GSM to pay such amount. All
of the shareholders of Baltcom GSM, including MITI, pledged their respective
shares to the EBRD as security for repayment of the loan. Under the EBRD
agreements, amounts payable to the Communications Group are subordinated to
amounts payable to the EBRD.
 
In April 1997, the Communications Group's Georgian GSM Joint Venture, Magticom,
entered into a financing agreement with Motorola, Inc. ("Motorola") pursuant to
which Motorola agreed to finance 75% of the equipment, software and service it
provides to Magticom up to $15.0 million. Interest on the financed amount
accrues at 6-month LIBOR plus 5% per annum, with interest payable semi-annually.
Repayment of principal with respect to each drawdown commences twenty-one months
after such drawdown with the final payment being due 60 months after such
drawdown. All drawdowns must be made within 3 years of the initial drawdown
date. Magticom is obligated to provide Motorola with a security interest in the
equipment provided by Motorola to the extent permitted by applicable law. As
additional security for the financing, the Company has guaranteed Magticom's
repayment obligation to Motorola. In June 1998, the financing agreement was
amended and Motorola agreed to make available an additional $10.0 million in
financing. Interest on the additional $10.0 million accrues at 6-month LIBOR
plus 3.5%.
 
The Company has guaranteed Magticom's repayment obligation to Motorola, under
such amendment to Motorola.
 
The Communications Group and Western Wireless have funded the balance of the
financing to Magticom through a combination of debt and equity. Repayment of
indebtedness owed to such partners is subject to certain conditions set forth in
the Motorola financing agreements.
 
In January 1998, the Communications Group entered into a loan agreement with DSC
Finance Corporation ("DSC") pursuant to which DSC agreed to finance 50% of the
equipment it provides to the Communications Group up to $35.0 million. In June
1998, the Company agreed to guarantee the Communications Group's obligation to
repay DSC under such loan agreement.
 
As of August 1998, the Communication Group acquired a 76% interest in
Omni-Metromedia Caspian, Ltd., a company that owns 50% of a Joint Venture in
Azerbaijan, CAT. CAT has been licensed by the Ministry of Communications of
Azerbaijan to provide high speed wireless local loop services and digital
switching throughout Azerbaijan. Omni-Metromedia has committed to provide up to
$40.5 million in loans to CAT for the funding of equipment acquisition and
operational expense in accordance with CAT's business plans. The Communications
Group is obligated to contribute approximately $5.0 million in equity to
Omni-Metromedia and to lend up to $36.5 million in accordance with CAT's
business plan.
 
As part of the transaction, the Communications Group has sold a 17.1%
participation in the $36.5 million loan to AIG Silk Road Fund, Ltd., ("AIG")
which requires AIG to provide the Communications Group 17.1% of the funds to be
provided under the loan agreement and entitles AIG to 17.1% of the repayments to
the Communications Group. The Communications Group agreed to repurchase such
loan participation from AIG in August 2005 on terms and conditions agreed by the
parties. In addition, the Communications Group provided AIG the right to put its
15.7% ownership interest in Omni-Metromedia to the Communications Group starting
in February 2001 for a price equal
 
                                       53
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
to seven times the EBITDA of CAT minus debt, as defined, multiplied by AIG's
percentage ownership interest.
 
As part of its investment in Tyumenruskom announced in November 1998, the
Communications Group agreed to provide a guarantee of payment of $6.1 million to
Ericsson Radio Systems, A.B. ("Ericsson") for equipment financing provided by
Ericsson to one of the Communication Group's wholly owned subsidiaries and to
its 46% owned Joint Venture, Tyumenruskom. Tyumenruskom is purchasing a Digital
Advanced Mobile Phone System ("DAMPS") cellular system from Ericsson in order to
provide fixed and mobile cellular telephone in the regions of Tyumen and
Tobolsk, Russian Federation. The Communications Group has agreed to make a $1.7
million equity contribution to Tyumenruskom and to lend the Joint Venture up to
$4.0 million for start-up costs and other operating expenses. Tyumenruskom also
intends to provide wireless local loop telephone services.
 
The license pursuant to which the Communications Group's radio Joint Venture in
Hungary, Radio Juventus, was renewed on January 1, 1999 for a period of 8 years.
The license fee to be paid over the term of the license is approximately $8.0
million in Hungarian forints adjusted for inflation.
 
CHINA
 
Sichuan JV is party to a Network System Cooperation Contract dated May 1996 with
China Unicom (the "STLF Contract"). The STLF Contract covers the funding,
construction and development of a fixed line PSTN providing local telephone
service in cities within Sichuan Province (as its borders were defined in May
1996) and long distance telephone service among those cities (the "PSTN
Network"). The initial project ("Phase 1") covered by the STLF Contract includes
development of 50,000 local telephone lines in Chengdu and Chongqing cities, and
construction of a fiber optic long distance facility between these two cities.
Subsequent projects covered by the STLF Contract will expand services to one
million local telephone lines in cities throughout Sichuan Province (as its
borders were defined in May 1996), and will construct fiber optic long distance
facilities among these cities. The STLF Contract has a cooperation term of
twenty-five years.
 
Subsequent to the signing of the STLF Contract, Chongqing Municipality was made
a separate region from Sichuan Province administered directly by the Chinese
government. Chongqing JV subsequently assumed certain obligations and rights
associated with the STLF Contract with respect to the Chongqing Municipality
through an agreement between Sichuan JV and Chongqing JV and endorsed by China
Unicom. Under the terms of the amended STLF Contract, Sichuan JV and Chongqing
JV are each responsible for providing China Unicom with the capital to develop
the Phase 1 PSTN Network within Sichuan Province and Chongqing Municipality
respectively.
 
Sichuan JV and Chongqing JV may also provide additional capital for China
Unicom's later expansion of the PSTN Network within and between Sichuan Province
and Chongqing Municipality up to a capacity of one million total subscribers.
China Unicom is responsible for construction, operation, management and
maintenance of the PSTN Network. Sichuan JV and Chongqing JV provide financing,
consulting and technical support services to China Unicom in exchange for
receiving 78% of distributable cash flow from China Unicom's PSTN and long
distance operations within and between Sichuan Province and Chongqing
Municipality for a 25-year period, payable semi-annually.
 
In December 1997, Sichuan JV and Chongqing JV entered into a Phase 1 loan with
Northern Telecom Communications ("Nortel") for the purchase of up to $20.0
million of Nortel equipment during Phase 1. The Company secured the Phase 1 loan
repayment with a $20.0 million letter of credit. Nortel had the right to draw on
the $20.0 million letter of credit in January and July of 1999 for amounts due
 
                                       54
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
Nortel at such times for Phase 1 equipment purchases. In December 1998, Nortel,
Sichuan JV, Chongqing JV, China Unicom and the Company executed a settlement of
various outstanding matters pertaining to this Phase 1 loan. Under this
settlement, except for amounts owed for equipment and interest of $3.4 million
which are payable in July 1999, all outstanding deferred amounts owed to Nortel
were paid. The loan agreements between Nortel and the Joint Ventures were
terminated. The $20.0 million letter of credit associated with the Phase 1 loan
agreement was reduced to $3.4 million and Nortel has the right to draw on the
$3.4 million in July 1999. Commercial service was launched on the Phase 1
network in January 1999.
 
The estimated total investment for Phase 1 is approximately $29.5 million in
Sichuan Province and approximately $29.5 million in Chongqing Municipality. As
of March 31, 1999 AAT has contributed in registered capital and loans $20.4
million and $16.1 million to Sichuan JV and Chongqing JV, respectively.
 
Ningbo United Telecommunications Investment Co., Ltd. ("NUT") was party to a
Network System Cooperation Contract with China Unicom (the "NUT Contract")
covering China Unicom's development of a GSM telecommunications project in the
City of Ningbo, Zhejiang Province. The project entails construction of a mobile
communications network with a total capacity of 50,000 subscribers (the "Phase 1
GSM Network"). The cooperation period for the NUT Contract is fifteen years. NUT
has assigned its rights and obligations under the NUT Contract to Ningbo JV with
China Unicom's express concurrence. In accordance with the terms of the NUT
Contract, Ningbo JV is responsible for providing China Unicom with the capital
to develop the Phase 1 GSM Network in Ningbo City. China Unicom is responsible
for the construction, operation, management and maintenance of the GSM Network.
Ningbo JV will provide financing, consulting and technical support services to
China Unicom in exchange for 73% of the distributable cash flow from China
Unicom's Phase 1 GSM Network operations for a 15-year period.
 
The total investment for the Phase 1 GSM Network project was approximately $29.5
million. The Phase 1 GSM Network was completed and put into commercial service
in mid-August 1997.
 
On March 26, 1998, Ningbo JV and China Unicom signed an amendment to the NUT
Contract covering expansion of China Unicom's GSM service throughout Ningbo
Municipality (the "Ningbo Expansion Agreement"). The expansion work will be
undertaken as a separate project, and will provide capacity for an additional
25,000 GSM subscribers within Ningbo Municipality (the "Phase 2 GSM Network").
The terms of the Ningbo Expansion Agreement match those of the underlying NUT
Contract, however, the Ningbo Expansion Agreement will have its own cooperation
period of fifteen years. In the Ningbo Expansion Agreement, China Unicom and
Ningbo JV explicitly contemplated establishment of a separate joint venture to
provide financing and consulting services to the Phase 2 GSM Network project.
Ningbo JV assigned all of its rights and obligations under the Ningbo Expansion
Agreement regarding the Phase 2 GSM Network to Ningbo JV II. The feasibility
study for the Phase 2 GSM Network project was completed on March 6, 1998 and
forecasts a total investment of approximately $17.0 million. As of March 31,
1999, AAT has made registered capital contributions of $5.0 million and loans of
$3.4 million which bear interest at 8%. Commercial services commenced on the
completed portions of the Phase 2 GSM Network in November 1998. The Phase 2
Network was fully completed and in service in February 1999.
 
The Communications Group's China Joint Ventures' ability to generate positive
operating results is heavily dependent on the ability of China Unicom to
successfully construct commercially viable networks and attract customers to
these networks. Chinese regulations currently prohibit the Joint Ventures from
taking a direct role in either construction or operation. Management seeks to
minimize
 
                                       55
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
the construction and operations risks facing those China Unicom entities with
which the Joint Ventures have contracted through a program of active technical
and management consulting. Experts within the Joint Ventures and the Company's
other China offices work directly with the Chinese operators to enhance the
operators' technical, marketing and operational plans. Training of the Chinese
operators' personnel is provided in both classroom and on-the-job formats. Joint
Venture personnel assist the Chinese operators with general project management
and vendor contract administration. The Company's efforts in each of these areas
has continued despite uncertainty over continuation of Joint Venture's SSF
contracts with China Unicom, although the extent of the Company's engagement
with China Unicom has been moderated by both parties pending resolution of this
uncertainty.
 
At present, management's active efforts with China Unicom remain focused on
assisting China Unicom in growing the number of customers in each market served
by the Joint Ventures and on solidifying China Unicom's operational readiness to
serve each such market. Management has had continuing discussions with China
Unicom concerning transition of the Company's current SSF-based relationships
with China Unicom to new formats that would preserve all parties' value in the
businesses already built under the current SSF contracts if such transition
becomes desirable or necessary. However, in view of both the uncertain future of
SSF and the potential opportunities suggested by rumored changes in the
regulation of foreign participation in the Chinese telecommunications and
information industries management has also begun active investigation of
projects in China other than those currently being undertaken to service China
Unicom. No assurance can be given that the Communications Group's projects with
China Unicom will be successful, and if the Joint Ventures serving China Unicom
do become profitable, there can be no assurance that these Joint Ventures will
pay dividends or return the capital invested by the Company. Additionally, no
assurance can be given that management's efforts will be successful in
transitioning current SSF-based relationships with China Unicom into some
alternative format, should such action be desirable or necessary. If the
Company's current SSF agreements must be altered, there can be no assurance that
such actions will preserve or return the entirety of the capital previously
invested by the Company under these contracts. Finally, there can be no
assurance that the Company will be successful in securing new business ventures
in China, regardless of the outcome of potential changes in Chinese regulation
of foreign participation in the telecommunications and information industries.
 
RISKS ASSOCIATED WITH THE COMMUNICATIONS GROUP'S INVESTMENTS
 
The ability of the Communications Group and its Joint Ventures to establish
profitable operations is subject to significant political, economic and social
risks inherent in doing business in emerging markets such as Eastern Europe, the
FSU and China. These include matters arising out of government policies,
economic conditions, imposition of or changes in government regulations and
policies, imposition of or changes to taxes or other similar charges by
governmental bodies, exchange rate fluctuations and controls, civil
disturbances, deprivation or unenforceablility of contractual rights, and taking
of property without fair compensation.
 
In 1998, a number of emerging market economies suffered significant economic and
financial difficulties resulting in liquidity crises, devaluation of currencies,
higher interest rates and reduced opportunities for financing. At this time, the
prospects for recovery by the economies of the Russian Federation and other
republics of the former Soviet Union and Eastern Europe negatively affected by
the economic crisis remain unclear. The economic crisis has resulted in a number
of defaults by borrowers in the Russian Federation and other countries and a
reduced level of financing available to investors in these countries. The
devaluation of many of the currencies in the region has also negatively affected
the U.S. dollar value of the revenues generated by certain of the Company's
Joint Ventures
 
                                       56
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
and may lead to certain additional restrictions on the convertibility of certain
local currencies. The Company expects that these problems will negatively affect
certain of its cable television, telephony, radio broadcasting and paging
ventures.
 
The Communications Group's strategy is to minimize its foreign currency risk. To
the extent possible, in countries that have experienced high rates of inflation,
the Communications Group bills and collects all revenues in U.S. dollars or an
equivalent local currency amount adjusted on a monthly basis for exchange rate
fluctuations. The Communications Group's Joint Ventures are generally permitted
to maintain U. S. dollar accounts to serve their U.S. dollar obligations,
thereby reducing foreign currency risk. As the Communications Group and its
Joint Ventures expand their operations and become more dependent on local
currency based transactions, the Communications Group expects that its foreign
currency exposure will increase. The Communications Group does not hedge against
foreign exchange rate risks at the current time and, therefore, could be subject
in the future to any declines in exchange rates between the time a Joint Venture
receives its funds in local currencies and the time it distributes such funds in
U.S. dollars to the Communications Group.
 
The Communications Group may also be materially and adversely affected by laws
restricting foreign investment in the field of communications. Some countries,
including China, have extensive restrictions on foreign investment in the
communications field and the Communications Group attempts to structure its
prospective projects in order to comply with such laws. However, there can be no
assurance that such legal and regulatory restrictions will not increase in the
future or, as currently promulgated, will not be interpreted in a manner giving
rise to tighter restrictions, and thus may have a material adverse effect on the
Communications Group's existing and prospective projects in the country. The
Russian Federation has periodically proposed legislation that would limit the
ownership percentage that foreign companies can have in radio and television
businesses and more recently has proposed legislation that would limit the
number of radio and television businesses that any company could own in a single
market. While such proposed legislation has not been enacted, it is possible
that such legislation could be enacted in Russia and that other countries in
Eastern Europe and the republics of the former Soviet Union may enact similar
legislation which could have a material adverse effect on the business
operations, financial condition or prospects of the Communications Group. The
proposed foreign investment legislation could be similar to United States
Federal law which limits foreign ownership in entities owning broadcasting
licenses. There is no way of predicting whether additional ownership limitations
will be enacted in any of the Communications Group's markets, or whether any
such law, if enacted, will force the Communications Group to reduce or
restructure its ownership interest in any of the ventures in which the
Communications Group currently has an ownership interest. If additional
ownership limitations are enacted in any of the Communications Group's markets
and the Communications Group is required to reduce or restructure its ownership
interests in any ventures, it is unclear how such reduction or restructuring
would be implemented, or what impact such reduction or restructuring would have
on the Communications Group.
 
The Communications Group's investments in Joint Ventures in China have been made
through a structure known as the Sino-Sino-Foreign ("SSF") joint venture, an
arrangement in which the foreign invested SSF Joint Venture is a provider of
telephony equipment, financing and technical services to telecommunications
operators and not a direct provider of telephone service. Since mid-1998,
positions unofficially taken by some departments of the Chinese government have
raised uncertainty regarding the continued viability of the SSF structure and,
as a result, the Communications Group's associated financing, service and
consulting arrangements with China Unicom. No formal decisions or regulations on
the resolution of SSF issues have yet been announced by the Chinese government.
There is a risk that the Communications Group along with other telecommunication
participants in China, may be
 
                                       57
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
required to substantially restructure the terms of its current SSF Joint
Ventures arrangements with China Unicom to meet new Chinese government
regulations. It cannot be determined at this time what effects, if any, such
actions would have on the future value of the Communications Group's SSF Joint
Ventures and the Joint Ventures' ability to generate revenue, cash flow or net
income.
 
SNAPPER
 
Snapper's liquidity is generated from operations and borrowings. On November 11,
1998, Snapper entered into a Loan and Security Agreement with the Lenders named
therein and Fleet Capital Corporation, as agent and as the initial Lender,
pursuant to which the Lenders have agreed to provide Snapper with a $5.0 million
term loan facility and a $55.0 million revolving credit facility (the "Snapper
Loan"), the proceeds of which were used to refinance Snapper's then outstanding
obligations under its prior revolving credit agreement and will also be used for
working capital purposes. The Snapper Loan will mature in November 2003 (subject
to automatic one-year renewals), and is guaranteed by the Company up to $10.0
million (increasing to $15.0 million on the occurrence of specified events).
Interest on the Snapper Loan is payable at Snapper's option at a rate equal to
prime plus up to 0.5% or LIBOR plus between 2.5% and 3.25%, in each case
depending on Snapper's leverage ratio under the Snapper Loan agreement. The
agreements governing the Snapper Loan contain standard representation and
warranties, covenants, conditions precedent and events of default, and provide
for the grant of a security interest in substantially all of Snapper's assets
other than real property. At March 31, 1999, Snapper was not in compliance with
all financial covenants required under the Loan and Security Agreement; the
Lenders have waived any event of default arising from such noncompliance.
 
Snapper has entered into various long-term manufacturing and purchase agreements
with certain vendors for the purchase of manufactured products and raw
materials. As of March 31, 1999, noncancellable commitments under these
agreements amounted to approximately $17.7 million.
 
Snapper has an agreement with a financial institution which makes available
floor plan financing to dealers of Snapper products. This agreement provides
financing for dealer inventories and accelerates Snapper's cash flow. Under the
terms of the agreement, a default in payment by a dealer is nonrecourse to
Snapper. However, Snapper is obligated to repurchase any new and unused
equipment recovered from the dealer. At March 31, 1999, there was approximately
$119.0 million outstanding under this floor plan financing arrangement. The
Company has guaranteed Snapper's payment obligations under this agreement.
 
The Company believes that Snapper's available cash on hand, the cash flow
generated by operating activities, borrowings from the Snapper Loan agreement
and, on an as needed basis, short-term working capital funding from the Company,
will provide sufficient funds for Snapper to meet its obligations and capital
requirements.
 
MMG CONSOLIDATED
 
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
 
CASH FLOWS FROM OPERATING ACTIVITIES
 
Cash used in operations for the three months ended March 31, 1999 was $8.4
million, a decrease in cash used in operations of $14.8 million from the same
period in the prior year.
 
                                       58
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (CONTINUED)
Losses from operations include significant non-cash items such as depreciation,
amortization, equity in losses of unconsolidated investees and losses allocable
to minority interests. Non-cash items decreased $5.7 million from $9.3 million
to $3.6 million for the three months ended March 31, 1998 and 1999,
respectively. The decrease related principally to the decrease in depreciation
and amortization expenses and a reduction in the equity in losses of
unconsolidated investees. Changes in operating assets and liabilities, net of
the effect of acquisitions, decreased cash flows for the three months ended
March 31, 1999 by $735,000 and decreased cash flows by $9.6 million for the
three months ended March 31, 1998.
 
The decrease in cash flows used in operating activities for the three months
ended March 31, 1999 resulted from the decreased losses in the Communications
Group's operations, improved operating results of Snapper and the collection of
a tax refund in connection with the sale of a discontinued operation.
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
Cash used in investing activities decreased $14.8 million to $4.4 million for
the three months ended March 31, 1999. The principal components of investing
activities are investments in and advances to Joint Ventures of $5.1 million and
$13.1 million in 1999 and 1998, respectively, and the Communications Group
utilized $455,000 and $3.9 million of funds for acquisitions during the three
months ended March 31, 1999 and 1998, respectively.
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
Cash used in financing activities was $997,000 for the three months ended March
31, 1999 a decrease of $188,000 from the same period in the prior year. For the
three months ended March 31, 1999 the Company used $3.8 million to pay its
Preferred Stock dividend, and there were $5.4 million of debt payments and $8.1
million of additions to long-term debt borrowed under the Snapper Revolving
Loan. For the three months ended March 31, 1998 the Company used $3.8 million to
pay its Preferred Stock dividend and $2.0 million for debt repayments, which
were partially offset by proceeds of $4.6 million from the issuance of common
stock from the exercise of stock options
 
YEAR 2000 SYSTEM MODIFICATIONS
 
The Company is currently working to evaluate and resolve the potential impact of
the Year 2000 on the processing of date-sensitive information and network
systems. The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the Year 2000, which could result
in miscalculations or system failures resulting from recognition of a date using
"00" as the year 1900 rather than the year 2000. The Company expects to make
some of the necessary modifications through its ongoing investment in system
upgrades.
 
The Company has delegated responsibility to a group of executives to coordinate
the identification, evaluation and implementation of changes to computer systems
and applications necessary to achieve the Company's goal of a Year 2000 date
conversion which would minimize the effect on the Company's subsidiaries, Joint
Ventures and their subscribers and customers, and avoid disruption to business
operations. The Company is also focusing on outside forces that may affect the
Company's operations, including the Company's and its subsidiaries' and Joint
Ventures' vendors, banks and utility companies. The Company's analysis of the
Year 2000 problem is on-going and will be continuously updated through the
remainder of 1999 as necessary.
 
                                       59
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
 
The Company has developed a Year 2000 project plan for the Company, its
subsidiaries and unconsolidated Joint Ventures. However, The Company is not
directly responsible for Year 2000 readiness of many of its Joint Ventures and
in some cases has no access to the Joint Venture's management regarding these
matters. Executives of the Company are responsible for monitoring Year 2000
activities across all subsidiaries and Joint Ventures. Individual Joint Ventures
and subsidiaries are responsible for initiating and executing specific Year 2000
action plans.
 
The Company has completed its inventory of information technology ("IT") and
non-IT systems. Joint Venture IT and non-IT systems have principally been
reviewed on a line of business basis for cable television, telephony, radio and
paging ventures. The mission critical systems identified for the Company's Joint
Ventures are those that relate to revenue generation, customer service and
collection and billing. Non-IT mission critical systems include GSM switches,
ACS/Tocom systems, satellite program delivery systems and paging terminals and
related equipment.
 
The Company has initiated communications with all of its suppliers and its Joint
Ventures' suppliers of mission critical systems. The Company has accepted the
service providers' statement of Year 2000 compliance as evidence in its
assessment phase. For those mission critical systems determined not to be
compliant, the Company is in the process of replacing or remediating the system
at each significant Joint Venture or subsidiary. In addition, limited testing
has been performed at certain Joint Ventures and at the subsidiaries and Joint
Venturers' technical facilities.
 
The Company recognizes that to the extent its remediation efforts and those of
its Joint Ventures fail to prevent Year 2000 problems from arising a temporary
interruption of service and loss of revenue may occur. High level contingency
plans have been developed which include the removal of noncompliant technology
from service on a temporary basis, replacing systems or reverting to manual
processes to deal with such possible occurrences. The Company expects to
complete this project prior to January 1, 2000.
 
Based on the preliminary data, the Company's estimate is that the Year 2000
effort will cost approximately $750,000, covering the period from January 1,
1998 through December 31, 1999, out of a total expected cost of information
systems of $10.4 million for this period, although there can be no assurance as
to the ultimate cost of the Year 2000 effort or the total cost of information
systems. Such costs will be expensed as incurred, except to the extent such
costs are incurred for the purchase or lease of capital equipment.
 
As of March 31, 1999, the Company has incurred $595,000 in respect of its Year
2000 conversion effort, or 79% of the total estimated cost. The Company expects
that the source of funds for Year 2000 costs will be cash on hand. No other
information systems projects of the Company and its subsidiaries and Joint
Ventures have been deferred due to the Year 2000 efforts.
 
The Company's Communications Group is heavily dependent on third parties, many
of whom are themselves heavily dependent on technology. In some cases, the
Company's third-party dependence is on vendors of technology who are themselves
working toward solutions to Year 2000 problems. Moreover, the Company is
dependent on the continued functioning of basic, heavily computerized services
such as banking and telephony. Further, the Company's Communications Group's
businesses are located in countries where basic services are operated by the
government or other governmental entities and the Company may not be able to
obtain information on Year 2000 problems. In certain Joint Ventures within the
Communications Group, the Company does not have a controlling management
interest and cannot unilaterally cause the Joint Venture to commit the necessary
resources to solve any Year 2000 problems. However, substantially all of the
Company's Joint Ventures operate or
 
                                       60
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS (CONTINUED)
are planned to operate in countries where reliance on automated systems is
substantially less significant, and more recent, than in the United States.
Therefore, the Company believes that, in the event Year 2000 problems arise in
such Joint Ventures, the local operators of such Joint Ventures and customers
and vendors should be able to revert to manual methods. If the Company, its
Joint Ventures in which it does not have a controlling management interest, and
their respective customers and vendors are unable to solve any Year 2000 issues,
a material adverse effect on the Company's results of operations and financial
condition could result.
 
The above information is based on the Company's current estimates using numerous
assumptions of future events. Given the complexity of the Year 2000 issues and
possible unidentified risks, actual results may vary from those anticipated and
discussed above.
 
NEW ACCOUNTING DISCLOSURES
 
ACCOUNTING FOR DERIVATIVES
 
In June 1998, Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities", was issued. SFAS
133 established accounting and reporting standards for derivative instruments
and for hedging activities. SFAS 133 requires that an entity recognize all
derivatives as either assets or liabilities and measure those instruments at
fair value. The accounting for the gain or loss due to changes in fair value of
the derivative instrument depends on whether the derivative instrument qualifies
as a hedge. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. SFAS 133 can not be applied retroactively to
financial statements of prior periods. The Company anticipates that the adoption
of SFAS 133 will not have a material impact on the Company's consolidated
financial position and results of operations.
 
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
In the normal course of business, the financial position of the Company is
routinely subjected to a variety of risks. In addition to the market risk
associated with interest rate movements on outstanding debt and currency rate
movements on non-U.S. dollar denominated assets and liabilities, other examples
of risk include collectibility of accounts receivable and significant political,
economic and social risks inherent in doing business in emerging markets such as
Eastern Europe, the FSU and China.
 
With the exception of Snapper, the Company did not have any significant long
term obligations at March 31, 1999. Since Snapper's bank debt is a floating rate
instrument, its carrying value approximates its fair value. A 100 basis point
increase in the level of interest rates with all other variables held constant
would result in an increase in interest expense of $10,000. In addition, a 100
basis point increase in interest rates on Snapper's floor plan financing to its
distributors and dealers would have resulted in an increase in interest expense
of $23,000.
 
The Company does not hedge against foreign exchange rate risks at the current
time. In the majority of the countries that the Communications Group's Joint
Ventures operate, there currently do not exist derivative instruments to allow
the Communications Group to hedge foreign currency risk. In addition, at the
current time the majority of the Communications Group's Joint Ventures are in
the early stages of development and the Company does not expect in the near term
to repatriate significant funds from the Communications Group's Joint Ventures.
"Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations--Inflation and Foreign Currency" contains additional
 
                                       61
<PAGE>
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
information on risks associated with the Company's investments in Eastern
Europe, the FSU and China.
 
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
Certain statements in this Form 10-Q including, without limitation, statements
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Legal Proceedings" constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not
necessarily all, of such forward-looking statements can be identified by the use
of forward-looking terminology, such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involves risks and
uncertainties. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, which will, among other
things, affect demand for the Company's products and services; industry
capacity, which tends to increase during strong years of the business cycle;
changes in public taste and industry trends; demographic changes; competition
from other communications companies, which may affect the Company's ability to
enter into or acquire new joint ventures or to generate revenues; political,
social and economic conditions and laws, rules and regulations, and changes
therein, particularly in Eastern Europe and the FSU, China and selected other
emerging markets, which may affect the Company's results of operations; timely
completion of construction projects for new systems for the Joint Ventures in
which the Company has invested, which may impact the costs of such projects;
developing legal structures in Eastern Europe and the FSU, China and other
selected emerging markets, which may affect the Company's results of operations;
cooperation of local partners for the Company's communications investments in
Eastern Europe and the FSU, China and other selected emerging markets, which may
affect the Company's results of operations; exchange rate fluctuations; license
renewals for the Company's communications investments in Eastern Europe and the
FSU, China and other selected emerging markets; the loss of any significant
customers; changes in business strategy or development plans; quality of
management; availability of qualified personnel; changes in or the failure to
comply with government regulations; and other factors referenced herein. The
Company does not undertake, and specifically declines, any obligation to release
publicly any revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
 
                                       62
<PAGE>
                           PART II--OTHER INFORMATION
 
ITEM 1. LEGAL PROCEEDINGS
 
Updated information on litigation and environmental matters subsequent to
December 31, 1998 is as follows:
 
FUQUA INDUSTRIES, INC. SHAREHOLDER LITIGATION
 
IN RE FUQUA INDUSTRIES, INC. SHAREHOLDER LITIGATION, Del. Ch., Consolidated C.A.
No. 11974, plaintiff Virginia Abrams filed a purported class and derivative
action in the Delaware Court of Chancery (the "Court") on February 22, 1991
against Fuqua Industries, Inc. ("Fuqua"), Intermark, Inc. ("Intermark"), the
then-current directors of Fuqua and certain past members of the board of
directors. The action challenged certain transactions which were alleged to be
part of a plan to change control of the board of Fuqua from J.B. Fuqua to
Intermark and sought a judgment against defendants in the amount of $15.7
million, other unspecified money damages, an accounting, declaratory relief and
an injunction prohibiting any business combination between Fuqua and Intermark
in the absence of approval by a majority of Fuqua's disinterested shareholders.
Subsequently, two similar actions, styled BEHRENS V. FUQUA INDUSTRIES, INC. ET
AL., Del. Ch., C.A. No. 11988 and FREBERG V. FUQUA INDUSTRIES, INC. ET AL., Del.
Ch., C.A. No. 11989 were filed with the Court. On May 1, 1991, the Court ordered
all of the foregoing actions consolidated. On October 7, 1991, all defendants
moved to dismiss the complaint. Plaintiffs thereafter took three depositions
during the next three years.
 
On December 28, 1995, plaintiffs filed a consolidated second amended derivative
and class action complaint, purporting to assert additional facts in support of
their claim regarding an alleged plan, but deleting their prior request for
injunctive relief. On January 31, 1996, all defendants moved to dismiss the
second amended complaint. After the motion was briefed, oral argument was held
on November 6, 1996. On May 13, 1997, the Court issued a decision on defendants'
motion to dismiss, the Court dismissed all of plaintiffs' class claims and
dismissed all of plaintiffs' derivative claims except for the claims that Fuqua
board members (i) entered into an agreement pursuant to which Triton Group, Inc.
(which was subsequently merged into Intermark, "Triton") was exempted from 8
Del. C. 203 and (ii) undertook a program pursuant to which 4.9 million shares of
Fuqua common stock were repurchased, allegedly both in furtherance of an
entrenchment plan. On January 16, 1998, the Court entered an order implementing
the May 13, 1997 decision. The order also dismissed one of the defendants from
the case with prejudice and dismissed three other defendants without waiver of
any rights plaintiffs might have to reassert the claims if the opinion were to
be vacated or reversed on appeal.
 
On February 5, 1998, plaintiffs filed a consolidated third amended derivative
complaint and named as defendants Messrs. J.B. Fuqua, Klamon, Sanders, Scott,
Warner and Zellars. The complaint alleged that defendants (i) entered into an
agreement pursuant to which Triton was exempted from 8 Del. C. 203 and (ii)
undertook a program pursuant to which 4.9 million shares of Fuqua common stock
were repurchased, both allegedly in furtherance of an entrenchment plan. For
their relief, plaintiffs seek damages and an accounting of profits improperly
obtained by defendants.
 
In March 1998, defendants J. B. Fuqua, Klamon, Sanders, Zellars, Scott and
Warner filed their answers denying each of the substantive allegations of
wrongdoing contained in the third amended complaint. The Company also filed its
answer, submitting itself to the jurisdiction of the Court for a proper
resolution of the claims purported to be set forth by the plaintiffs.
 
Discovery is ongoing. The individual defendants have also filed motions to
disqualify Abrams and Freberg as derivative plaintiffs. No decision has been
rendered with respect to either motion.
 
                                       63
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
MICHAEL SHORES V. SAMUEL GOLDWYN COMPANY, ET AL.
 
On May 20, 1996, a purported class action lawsuit, MICHAEL SHORES V. SAMUEL
GOLDWYN COMPANY, ET AL., Case No. BC 150360, was filed in the Superior Court of
the State of California. Plaintiff Michael Shores alleged that, in connection
with the merger of the Samuel Goldwyn Company ("Goldwyn"), Goldwyn's directors
and majority shareholder breached their fiduciary duties to the public
shareholders of Goldwyn. In amended complaints, plaintiff subsequently added
claims that the Company had aided and abetted other defendants' fiduciary
breaches and had negligently misrepresented and/or omitted material facts in the
Company's prospectus issued in connection with the merger. The Company
successfully demurred to the first and second amended complaints and plaintiff
filed a third amended complaint, which included only the negligent
misrepresentation claim against the Company. The plaintiff agreed to settle the
action in exchange for a payment by defendants in the amount of $490,000, which
payment constitutes a complete and final satisfaction of the claims asserted by
the plaintiff and a plaintiff class certified solely for the purposes of the
settlement. The settlement and the settlement class were approved by the court
on October 8, 1998. Members of the class have been notified of the settlement
and were able to file proofs of claim until February 15, 1999, which claims are
now being processed. The court will hold a hearing on July 7, 1999 regarding the
final distribution of the settlement fund.
 
SAMUEL GOLDWYN, JR. V. METRO-GOLDWYN-MAYER INC., ET AL.
 
On October 29, 1997, Samuel Goldwyn, Jr., the former chairman of Goldwyn, filed
SAMUEL GOLDWYN, JR. V. METRO-GOLDWYN-MAYER INC., ET AL., Case No. BC 180290, in
Superior Court of the State of California, alleging that the Company
fraudulently induced him and the Samuel Goldwyn, Jr. Family Trust (the "Trust")
to enter into various agreements in connection with the merger of the Samuel
Goldwyn Company (since renamed Goldwyn Entertainment Company); breached an
agreement to guarantee the performance of Goldwyn Entertainment Company's
obligations to the Trust; and used, without permission, the "Goldwyn" trademark.
The action also alleged that the Company and other defendants breached Mr.
Goldwyn's employment agreement and fiduciary duties owed to him and the Trust,
both before and after the sale of Goldwyn Entertainment Company to
Metro-Goldwyn-Mayer Inc. After the Company successfully demurred to the
trademark and the breach of fiduciary duty claims, the plaintiffs amended their
pleading, revising and reasserting the trademark and breach of fiduciary duty
claims. Following a period of discovery, the Company reached a settlement with
the plaintiffs. The court ordered the plaintiffs' claims against the Company
dismissed with prejudice on January 11, 1999.
 
SYDNEY H. SAPSOWITZ AND SID SAPSOWITZ & ASSOCIATES, INC. V. JOHN W KLUGE, STUART
  SUBOTNICK, METROMEDIA INTERNATIONAL GROUP, ET AL.
 
On June 30, 1997, the plaintiffs in SYDNEY H. SAPSOWITZ AND SID SAPSOWITZ &
ASSOCIATES, INC. V. JOHN W. KLUGE, STUART SUBOTNICK, METROMEDIA INTERNATIONAL
GROUP, INC., ORION PICTURES CORPORATION, LEONARD WHITE, ET AL. filed a lawsuit
in Superior Court of the State of California alleging $28.7 million in damages
from the alleged breach of an oral agreement to pay a finder's fee in connection
with the Entertainment Group Sale. The Company denies the existence of any such
contract and believes it has meritorious defenses and is vigorously defending
this action.
 
ANTHONY NICHOLAS GEORGIOU, ET AL. V. MOBIL EXPLORATION AND PRODUCING SERVICES,
  INC., METROMEDIA INTERNATIONAL TELECOMMUNICATIONS, INC., ET AL.
 
On January 14, 1998, ANTHONY NICHOLAS GEORGIOU, ET AL. V. MOBIL EXPLORATION AND
PRODUCING SERVICES, INC., METROMEDIA INTERNATIONAL TELECOMMUNICATIONS, INC., ET
AL., Civil Action No. H-98-0098, was filed in the
 
                                       64
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
United States District Court for the Southern District of Texas. Plaintiffs
claim that MITI conspired against and tortiously interfered with plaintiffs'
potential contracts involving certain oil exploration and production contracts
in Siberia and telecommunications contracts in the Russian Federation.
Plaintiffs are claiming damages, for which all defendants could be held jointly
and severally liable, of an amount in excess of $395.0 million. On or about
February 27, 1998 MITI filed its answer denying each of the substantive
allegations of wrongdoing contained in the complaint. The contracts between
plaintiff Tiller International Limited ("Tiller") and defendant Mobil
Exploration and Producing Services, Inc. ("MEPS") which are at issue in this
case contain broad arbitration clauses. In accordance with these arbitration
clauses, MEPS instituted arbitration proceeding before the London Court of
International Arbitration on July 31, 1997. On August 27, 1998, Judge David
Hittner entered an order staying and administratively closing the Houston
litigation pending final completion of arbitration proceedings in Great Britain.
As such, this matter is presently inactive. The parties have engaged in some
discovery. The Company believes it has meritorious defenses and is vigorously
defending this action.
 
LEGAL PROCEEDINGS IN CONNECTION WITH RDM.
 
On August 19, 1998, a purported class action lawsuit, THEOHAROUS V. FONG, ET AL,
Civ. No. 1:98CV2366, was filed in United States District Court for the Northern
District of Georgia. The complaint alleges that certain officers, directors and
shareholders of RDM, including the Company, are liable under federal securities
laws for misrepresenting and failing to disclose information regarding RDM's
alleged financial condition during the period between July 19, 1996 and August
22, 1997, on which date RDM disclosed that its management had discussed the
possibility of filing for bankruptcy. The complaint also alleges that the
plaintiffs, including the Company, are secondarily liable as controlling persons
of RDM. On October 19, 1998, a second purported class action lawsuit with
substantially the same allegations, SCHUETTE V. FONG, ET AL., Civ. No.
1:98CV3034, was filed in United States District Court for the Northern District
of Georgia. On December 30, 1998, the chapter 11 trustee of RDM brought an
adversary proceeding in the bankruptcy of RDM, HAYS, ET AL. v. FONG, ET AL.,
Adv. Proc. No. 98-1128, in the United States Bankruptcy Court, Northern District
of Georgia, alleging that former officers or directors of the Company, while
serving as directors on the board of RDM, breached fiduciary duties allegedly
owed to RDM's shareholders and creditors in connection with the bankruptcy of
RDM. On January 25, 1999, the plaintiff filed a first amended complaint. The
official committee of unsecured creditors of RDM ("the Creditors' Committee")
has moved to proceed as co-plaintiff or to intervene in this proceeding, and the
official committee of bondholders of RDM ("the Bondholders' Committee") has
moved to intervene in or join the proceeding. On February 16, 1999, the
Creditors' Committee brought an adversary proceeding, THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS OF RDM SPORTS GROUP, INC. AND RELATED DEBTORS V. METROMEDIA
INTERNATIONAL GROUP, INC., Adv. Proc. No. 99-1023, seeking in the alternative to
recharacterize as contributions to equity a secured claim in the amount of $15
million made by the Company arising out of the Company's financing of RDM, or to
equitably subordinate such claim made by Metromedia against RDM and other
debtors in the bankruptcy proceeding. On March 3, 1999, the Bondholders'
Committee brought an adversary proceeding, THE OFFICIAL COMMITTEE OF BONDHOLDERS
OF RDM SPORTS GROUP, INC. v. METROMEDIA INTERNATIONAL GROUP, INC., Adv. Proc.
No. 99-1029, with substantially the same allegations as the above proceedings.
The Company believes it has meritorious defenses and plans to vigorously defend
these actions. Due to the early stage of these proceedings, the Company cannot
evaluate the likelihood of an unfavorable outcome or an estimate of the likely
amount or range of possible loss, if any.
 
INDEMNIFICATION AGREEMENTS
 
In accordance with Section 145 of the General Corporation Law of the State of
Delaware, pursuant to the Company's Restated Certificate of Incorporation, the
Company has agreed to indemnify its officers
 
                                       65
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
and directors against, among other things, any and all judgments, fines,
penalties, amounts paid in settlements and expenses paid or incurred by virtue
of the fact that such officer or director was acting in such capacity to the
extent not prohibited by law.
 
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
At March 31, 1999, Snapper was not in compliance with all financial covenants
under its loan and security agreement ("Loan and Security Agreements"). On May
14, 1999, the lenders of the Loan and Security Agreement waived any event of
default arising from such noncompliance.
 
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
 
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                                  DESCRIPTION
---------  --------------------------------------------------------------------------------------------------------
<S>        <C>
11*        Computation of Earnings Per Share
27*        Financial Data Schedule
 
(b)        Reports on Form 8-K
 
           None
</TABLE>
 
------------------------
 
*   Filed herewith
 
                                       66
<PAGE>
                                   SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
<TABLE>
<S>                             <C>  <C>
                                METROMEDIA INTERNATIONAL GROUP, INC.
 
                                By:              /s/ SILVIA KESSEL
                                     -----------------------------------------
                                                   Silvia Kessel
                                              EXECUTIVE VICE PRESIDENT
                                              CHIEF FINANCIAL OFFICER
                                                   AND TREASURER
</TABLE>
 
Dated: May 17, 1999
 
                                       67