##### Table of Contents



UNITED STATES SECURITIES AND
EXCHANGE COMMISSION

Washington, D.C. 20549



---



Form 10-Q



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

For the quarterly period ended September 30, 2005

OR

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

Commission File Number: 001-31516



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GETTY IMAGES, INC.



(Exact name of registrant as specified in its charter)



|                         |  |                                     
|------------------------ |  | ------------------------------------
|DELAWARE                 |  | 98-0177556                          
|(State of Incorporation) |  | (I.R.S. Employer Identification No.)



601 NORTH 34TH STREET

SEATTLE, WASHINGTON 98103

(206)
925-5000

(Address, including zip code, and telephone number, including area code, of principal executive offices)



---



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 twelve 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 at least the past ninety days. Yes x No  ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No  ̈



Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes  ̈ No x



At October 31, 2005, there were 62,072,017 shares of the registrants common stock, par value
$0.01 per share, outstanding.



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##### Table of Contents



| |  |  |  |                    |  |  |  |          |  |  |  |           |  |  |  |  |  | 
| |  |  |  | ------------------ |  |  |  | -------- |  |  |  | --------- |  |  |  |  |  | 
| |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  |  |  |  |  | 



TABLE OF CONTENTS



|                                 |  |                                                                                                                                |  |     
|-------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | ----
|                                 |  |                                                                                                                                |  | PAGE
|                                 | 
|PART I.    FINANCIAL INFORMATION |  |                                                                                                                               
|                                 |  |                                                                                                                               
|ITEM 1.                          |  | Financial Statements (unaudited):                                                                                              |  | 1   
|                                 |  |                                                                                                                               
|                                 |  | Condensed Consolidated Statements of Incomefor the three and nine months ended September 30, 2005 and 2004                    |  | 1   
|                                 |  |                                                                                                                               
|                                 |  | Condensed Consolidated Balance Sheetsat September 30, 2005 and December 31, 2004                                              |  | 2   
|                                 |  |                                                                                                                               
|                                 |  | Condensed Consolidated Statement of Stockholders Equityat December 31, 2004 and for the nine months ended September 30, 2005 |  | 3   
|                                 |  |                                                                                                                               
|                                 |  | Condensed Consolidated Statements of Cash Flowsfor the nine months ended September 30, 2005 and 2004                          |  | 4   
|                                 |  |                                                                                                                               
|                                 |  | Notes to Condensed Consolidated Financial Statements                                                                           |  | 5   
|                                 |  |                                                                                                                               
|ITEM 2.                          |  | Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)                                   |  | 14  
|                                 |  |                                                                                                                               
|ITEM 3.                          |  | Quantitative and Qualitative Disclosures about Market Risk                                                                     |  | 22  
|                                 |  |                                                                                                                               
|ITEM 4.                          |  | Controls and Procedures                                                                                                        |  | 25  
|                                 | 
|PART II. OTHER INFORMATION       |  |                                                                                                                               
|                                 |  |                                                                                                                               
|ITEM 1.                          |  | Legal Proceedings                                                                                                              |  | 25  
|                                 |  |                                                                                                                               
|ITEM 2.                          |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                    |  | 25  
|                                 |  |                                                                                                                               
|ITEM 3.                          |  | Defaults Upon Senior Securities                                                                                                |  | 25  
|                                 |  |                                                                                                                               
|ITEM 4.                          |  | Submission of Matters to a Vote of Security Holders                                                                            |  | 25  
|                                 |  |                                                                                                                               
|ITEM 5.                          |  | Other Information                                                                                                              |  | 25  
|                                 |  |                                                                                                                               
|ITEM 6.                          |  | Exhibits                                                                                                                       |  | 25  
|                                 |  |                                                                                                                               
|SIGNATURE                        |  |                                                                                                                                |  | 26  
|                                 | 
|EXHIBIT INDEX                    |  | 27                                                                                                                            



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##### Table of Contents



|  |  |  |  |                    |  |  |  |          |  |  |  |           |  |        |  |  |  |       
|- |  |  |  | ------------------ |  |  |  | -------- |  |  |  | --------- |  | ------ |  |  |  | ------
|1 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)



|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | -------------------------------- | ------- | - | ------------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                             |  | THREE MONTHS ENDED SEPTEMBER 30, |         |   | NINE MONTHS ENDED SEPTEMBER 30, |  
|                                             |  |                                  |         |   |                                 |   |         |     
|                                             |  | 2005                             |         |   | 2004                            |   |         | 2005 |  |   | 2004    |  
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|(In thousands, except per share amounts)     |  |                                  |         |   |                                 |   |         |      |  |   |         |  
|                                             |  |                                  |         |  
|Revenue                                      |  | $                                | 184,516 |   |                                 | $ | 153,488 |      |  | $ | 547,916 |   |  | $ | 460,327 |  
|Cost of sales                                |  |                                  | 47,510  |   |                                 |   | 42,344  |      |  |   | 148,260 |   |  |   | 127,939 |  
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                 |  |                                  | 137,006 |   |                                 |   | 111,144 |      |  |   | 399,656 |   |  |   | 332,388 |  
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Selling, general and administrative expenses |  |                                  | 63,309  |   |                                 |   | 54,661  |      |  |   | 188,270 |   |  |   | 163,790 |  
|Depreciation                                 |  |                                  | 11,759  |   |                                 |   | 13,587  |      |  |   | 36,090  |   |  |   | 40,731  |  
|Amortization                                 |  |                                  | 2,744   |   |                                 |   | 1,175   |      |  |   | 6,421   |   |  |   | 3,360   |  
|Other operating expenses                     |  |                                  | 477     |   |                                 |   | 8       |      |  |   | 1,105   |   |  |   | 9       |  
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Operating expenses                           |  |                                  | 78,289  |   |                                 |   | 69,431  |      |  |   | 231,886 |   |  |   | 207,890 |  
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Income from operations                       |  |                                  | 58,717  |   |                                 |   | 41,713  |      |  |   | 167,770 |   |  |   | 124,498 |  
|Investment income                            |  |                                  | 2,787   |   |                                 |   | 2,671   |      |  |   | 8,715   |   |  |   | 6,465   |  
|Interest expense                             |  |                                  | (433    | ) |                                 |   | (907    | )    |  |   | (7,246  | ) |  |   | (2,887  | )
|Exchange gains (losses), net                 |  |                                  | 464     |   |                                 |   | 147     |      |  |   | 115     |   |  |   | (615    | )
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Income before income taxes                   |  |                                  | 61,535  |   |                                 |   | 43,624  |      |  |   | 169,354 |   |  |   | 127,461 |  
|Income tax expense                           |  |                                  | (22,475 | ) |                                 |   | (16,892 | )    |  |   | (62,196 | ) |  |   | (49,491 | )
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Net income                                   |  | $                                | 39,060  |   |                                 | $ | 26,732  |      |  | $ | 107,158 |   |  | $ | 77,970  |  
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Earnings per share                           |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Basic                                        |  | $                                | 0.63    |   |                                 | $ | 0.45    |      |  | $ | 1.75    |   |  | $ | 1.33    |  
|Diluted                                      |  |                                  | 0.60    |   |                                 |   | 0.44    |      |  |   | 1.64    |   |  |   | 1.28    |  
|                                             |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Shares used in computing earnings per share  |  |                                  |         |   |                                 |   |         |      |  |   |         |   |  |   |         |  
|Basic                                        |  |                                  | 61,820  |   |                                 |   | 59,406  |      |  |   | 61,368  |   |  |   | 58,557  |  
|Diluted                                      |  |                                  | 65,622  |   |                                 |   | 61,257  |      |  |   | 65,299  |   |  |   | 60,714  |  
|                                             | 



The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.



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##### Table of Contents



|  |  |  |  |                    |  |  |  |          |  |  |  |           |  |        |  |  |  |       
|- |  |  |  | ------------------ |  |  |  | -------- |  |  |  | --------- |  | ------ |  |  |  | ------
|2 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)



|                                                       |  |                    |           |   |                   |   |           |  
|------------------------------------------------------ |  | ------------------ | --------- | - | ----------------- | - | --------- | -
|                                                       |  | SEPTEMBER 30, 2005 |           |   | DECEMBER 31, 2004 |  
|                                                       |  |                    |           |   |                   |   |           |  
|(In thousands)                                         |  |                    |           |   |                   |  
|                                                       |  |                   
|ASSETS                                                 |  |                    |           |   |                   |   |           |  
|Current assets                                         |  |                    |           |   |                   |   |           |  
|Cash and cash equivalents                              |  | $                  | 151,238   |   |                   | $ | 194,752   |  
|Short-term investments                                 |  |                    | 300,320   |   |                   |   | 325,958   |  
|Accounts receivable, net                               |  |                    | 110,600   |   |                   |   | 89,272    |  
|Prepaid expenses                                       |  |                    | 12,112    |   |                   |   | 10,651    |  
|Deferred income taxes, net                             |  |                    | 8,335     |   |                   |   | 8,335     |  
|Other current assets                                   |  |                    | 3,853     |   |                   |   | 2,894     |  
|                                                       |  |                    |           |   |                   |   |           |  
|Total current assets                                   |  |                    | 586,458   |   |                   |   | 631,862   |  
|Property and equipment, net                            |  |                    | 128,797   |   |                   |   | 112,501   |  
|Goodwill                                               |  |                    | 809,210   |   |                   |   | 628,717   |  
|Identifiable intangible assets, net                    |  |                    | 54,249    |   |                   |   | 13,874    |  
|Deferred income taxes, net                             |  |                    | 9,307     |   |                   |   | 54,652    |  
|Other long-term assets                                 |  |                    | 4,515     |   |                   |   | 9,978     |  
|                                                       |  |                    |           |   |                   |   |           |  
|Total assets                                           |  | $                  | 1,592,536 |   |                   | $ | 1,451,584 |  
|                                                       |  |                    |           |   |                   |   |           |  
|                                                       |  |                   
|LIABILITIES AND STOCKHOLDERS EQUITY                   |  |                    |           |   |                   |   |           |  
|Current liabilities                                    |  |                    |           |   |                   |   |           |  
|Accounts payable                                       |  | $                  | 74,856    |   |                   | $ | 67,362    |  
|Accrued expenses                                       |  |                    | 42,565    |   |                   |   | 42,810    |  
|Income taxes payable                                   |  |                    | 102       |   |                   |   | 3,608     |  
|Short-term debt                                        |  |                    | 265,000   |   |                   |   |          |  
|                                                       |  |                    |           |   |                   |   |           |  
|Total current liabilities                              |  |                    | 382,523   |   |                   |   | 113,780   |  
|Long-term debt                                         |  |                    |          |   |                   |   | 265,000   |  
|Other long-term liabilities                            |  |                    | 12,021    |   |                   |   | 9,692     |  
|                                                       |  |                    |           |   |                   |   |           |  
|Total liabilities                                      |  |                    | 394,544   |   |                   |   | 388,472   |  
|                                                       |  |                    |           |   |                   |   |           |  
|Commitments and contingencies (Note 5)                 |  |                    |           |   |                   |   |           |  
|Stockholders equity                                   |  |                    |           |   |                   |   |           |  
|Common stock                                           |  |                    | 621       |   |                   |   | 607       |  
|Additional paid-in capital                             |  |                    | 1,269,842 |   |                   |   | 1,210,203 |  
|Unearned compensation                                  |  |                    | (4,025    | ) |                   |   |          |  
|Accumulated deficit                                    |  |                    | (61,445   | ) |                   |   | (168,603  | )
|Accumulated other comprehensive (loss) income (Note 6) |  |                    | (7,001    | ) |                   |   | 20,905    |  
|                                                       |  |                    |           |   |                   |   |           |  
|Total stockholders equity                             |  |                    | 1,197,992 |   |                   |   | 1,063,112 |  
|                                                       |  |                    |           |   |                   |   |           |  
|Total liabilities and stockholders equity             |  | $                  | 1,592,536 |   |                   | $ | 1,451,584 |  
|                                                       | 



The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.



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##### Table of Contents



|  |  |  |  |                    |  |  |  |          |  |  |  |           |  |        |  |  |  |       
|- |  |  |  | ------------------ |  |  |  | -------- |  |  |  | --------- |  | ------ |  |  |  | ------
|3 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(unaudited)



|                                                 |  |                                               |  |             |     |                            |   |                      |  |   |                    |   |  |                                             |          |   |       |   |         |   |  |   |           |  
|------------------------------------------------ |  | --------------------------------------------- |  | ----------- | --- | -------------------------- | - | -------------------- |  | - | ------------------ | - |  | ------------------------------------------- | -------- | - | ----- | - | ------- | - |  | - | --------- | -
|                                                 |  | No. of Shares of Common Stock $0.01 Par Value |  | CommonStock |     | Additional Paid-In Capital |   | UnearnedCompensation |  |   | AccumulatedDeficit |   |  | Accumulated OtherComprehensive(Loss) Income |          |   | Total |  
|                                                 |  |                                               |  |             |     |                            |   |                      |  |   |                    |   |  |                                             |          |   |       |   |         |   |  |   |           |  
|(In thousands)                                   |  |                                               |  |             |     |                            |   |                      |  |   |                    |   |  |                                             |          |   |       |  
|                                                 |  |                                               |  |             |     |                            |  
|Balance at December 31, 2004                     |  | 60,735                                        |  | $           | 607 |                            | $ | 1,210,203            |  | $ |                   |   |  | $                                           | (168,603 | ) |       | $ | 20,905  |   |  | $ | 1,063,112 |  
|Net income                                       |  |                                              |  |             |    |                            |   |                     |  |   |                   |   |  |                                             | 107,158  |   |       |   |        |   |  |   | 107,158   |  
|                                                 |  |                                               |  |             |     |                            |  
|Other comprehensive loss                         |  |                                              |  |             |    |                            |   |                     |  |   |                   |   |  |                                             |         |   |       |   | (27,906 | ) |  |   | (27,906   | )
|Restricted stock units granted to employees      |  |                                              |  |             |    |                            |   | 4,913                |  |   | (4,913             | ) |  |                                             |         |   |       |   |        |   |  |   |          |  
|Amortization of unearned compensation            |  |                                              |  |             |    |                            |   |                     |  |   | 888                |   |  |                                             |         |   |       |   |        |   |  |   | 888       |  
|Restricted stock vesting                         |  |                                              |  |             |    |                            |   | 43                   |  |   |                   |   |  |                                             |         |   |       |   |        |   |  |   | 43        |  
|Restricted stock unit vesting                    |  | 4                                             |  |             | 1   |                            |   |                     |  |   |                   |   |  |                                             |         |   |       |   |        |   |  |   | 1         |  
|Stock options exercised                          |  | 1,299                                         |  |             | 13  |                            |   | 33,203               |  |   |                   |   |  |                                             |         |   |       |   |        |   |  |   | 33,216    |  
|Tax benefit from employee stock option exercises |  |                                              |  |             |    |                            |   | 21,480               |  |   |                   |   |  |                                             |         |   |       |   |        |   |  |   | 21,480    |  
|                                                 |  |                                               |  |             |     |                            |   |                      |  |   |                    |   |  |                                             |          |   |       |   |         |   |  |   |           |  
|Balance at September 30, 2005                    |  | 62,038                                        |  | $           | 621 |                            | $ | 1,269,842            |  | $ | (4,025             | ) |  | $                                           | (61,445  | ) |       | $ | (7,001  | ) |  | $ | 1,197,992 |  
|                                                 | 



The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.



---

##### Table of Contents



|  |  |  |  |                    |  |  |  |          |  |  |  |           |  |        |  |  |  |       
|- |  |  |  | ------------------ |  |  |  | -------- |  |  |  | --------- |  | ------ |  |  |  | ------
|4 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                   |  |      |          |   |      |   |          |  
|---------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|NINE MONTHS ENDED SEPTEMBER 30,                                                    |  | 2005 |          |   | 2004 |  
|                                                                                   |  |      |          |   |      |   |          |  
|(In thousands)                                                                     |  |      |          |   |      |  
|                                                                                   |  |     
|Cash flows from operating activities                                               |  |      |          |   |      |   |          |  
|Net income                                                                         |  | $    | 107,158  |   |      | $ | 77,970   |  
|Adjustments to reconcile net income to net cash provided by operating activities   |  |      |          |   |      |   |          |  
|Deferred income taxes                                                              |  |      | 52,957   |   |      |   | 40,806   |  
|Depreciation                                                                       |  |      | 36,090   |   |      |   | 40,731   |  
|Amortization of identifiable intangible assets                                     |  |      | 6,421    |   |      |   | 3,360    |  
|Amortization of debt issuance and exchange costs                                   |  |      | 6,060    |   |      |   | 1,431    |  
|Bad debt expense                                                                   |  |      | 1,569    |   |      |   | 2,721    |  
|Other changes in long-term assets and liabilities and equity                       |  |      | 2,194    |   |      |   | 2,477    |  
|Changes in current assets and liabilities, net of effects of business acquisitions |  |      |          |   |      |   |          |  
|Accounts receivable                                                                |  |      | (15,461  | ) |      |   | (9,009   | )
|Accounts payable                                                                   |  |      | (6,887   | ) |      |   | (6,015   | )
|Accrued expenses                                                                   |  |      | (10,215  | ) |      |   | (10,816  | )
|Income taxes payable                                                               |  |      | (600     | ) |      |   | (3,931   | )
|Changes in other current assets and liabilities                                    |  |      | 2,060    |   |      |   | (927     | )
|                                                                                   |  |      |          |   |      |   |          |  
|Net cash provided by operating activities                                          |  |      | 181,346  |   |      |   | 138,798  |  
|                                                                                   |  |      |          |   |      |   |          |  
|Cash flows from investing activities                                               |  |      |          |   |      |   |          |  
|Acquisition of businesses, net of cash acquired                                    |  |      | (231,881 | ) |      |   | (22,952  | )
|Acquisition of available-for-sale investments                                      |  |      | (77,768  | ) |      |   | (225,579 | )
|Proceeds from available-for-sale investments                                       |  |      | 101,012  |   |      |   | 90,535   |  
|Acquisition of property and equipment                                              |  |      | (44,723  | ) |      |   | (25,693  | )
|Other investing activities                                                         |  |      | (594     | ) |      |   |         |  
|                                                                                   |  |      |          |   |      |   |          |  
|Net cash used in investing activities                                              |  |      | (253,954 | ) |      |   | (183,689 | )
|                                                                                   |  |      |          |   |      |   |          |  
|Cash flows from financing activities                                               |  |      |          |   |      |   |          |  
|Proceeds from the issuance of common stock                                         |  |      | 33,216   |   |      |   | 50,967   |  
|Debt issuance and exchange costs paid                                              |  |      | (558     | ) |      |   | (191     | )
|                                                                                   |  |      |          |   |      |   |          |  
|Net cash provided by financing activities                                          |  |      | 32,658   |   |      |   | 50,776   |  
|                                                                                   |  |      |          |   |      |   |          |  
|Effects of exchange rate changes                                                   |  |      | (3,564   | ) |      |   | (64      | )
|                                                                                   |  |      |          |   |      |   |          |  
|Net (decrease) increase in cash and cash equivalents                               |  |      | (43,514  | ) |      |   | 5,821    |  
|Cash and cash equivalents, beginning of period                                     |  |      | 194,752  |   |      |   | 140,058  |  
|                                                                                   |  |      |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                           |  | $    | 151,238  |   |      | $ | 145,879  |  
|                                                                                   | 



The accompanying notes are an integral part of
these Condensed Consolidated Financial Statements.



---

##### Table of Contents



|  |  |  |  |                    |  |  |  |          |  |  |  |           |  |        |  |  |  |       
|- |  |  |  | ------------------ |  |  |  | -------- |  |  |  | --------- |  | ------ |  |  |  | ------
|5 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)



NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Estimates and Assumptions

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America (U.S.) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of our consolidated financial statements and revenues and expenses reported during the period. Some of the estimates and assumptions that require managements most difficult judgments are: a) the appropriateness of the valuation and
useful lives, if applicable, of long-lived assets, including goodwill and identifiable intangible assets; b) the appropriateness of the amount of accrued income taxes and deferred tax asset valuation allowances; c) the designation of certain
foreign-currency denominated intercompany balances as long-term investments; and d) the sufficiency of the allowance for doubtful accounts. These judgments are difficult as matters that are inherently uncertain directly impact their valuation and
accounting. Actual results may vary from managements estimates and assumptions.



Principles of Consolidation

Our consolidated financial statements and notes thereto include the accounts of Getty Images, Inc. and its subsidiaries,
from the respective dates of acquisition. Intercompany balances and transactions have been eliminated.



Quarterly Results

Certain information and footnote disclosures normally included in annual financial statements, prepared in accordance
with accounting principles generally accepted in the U.S., have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (SEC). Management believes that the Condensed Consolidated Financial
Statements include all adjustments, which are of a normal recurring nature, necessary to a fair statement of our results of operations, financial position and cash flows for the interim periods presented. The condensed information should be read in
conjunction with the Consolidated Financial Statements and the accompanying notes in our latest Annual Report on Form 10-K.



Foreign Currency Derivatives

We utilize derivative financial instruments, namely forward
foreign currency exchange contracts, to reduce the impact of foreign currency exchange rate risks where natural hedging strategies cannot be effectively employed. At September 30, 2005, we held forward contracts to sell $21.2 million worth of
euros, $10.4 million worth of British pounds, $5.6 million worth of Japanese yen and $3.3 million worth of Canadian dollars in U.S. dollar functional currency sets of books and forward contracts to sell $16.6 million worth of euros in British pound
functional currency sets of books. At December 31, 2004, we held forward contracts to sell $17.5 million worth of euros and $3.5 million worth of British pounds in U.S. dollar functional currency sets of books and forward contracts to sell
$10.0 million worth of euros in British pound functional currency sets of books. We also held at both of these dates, contracts to sell other currencies that were less than $3.0 million individually.



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|6 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



Earnings per Share

Basic earnings per
share are calculated based on the weighted average number of common shares outstanding during each period. Diluted earnings per share are calculated based on the shares used to calculate basic earnings per share plus the effect of dilutive stock
options, restricted stock, restricted stock units and our convertible subordinated debentures.



|                                                                           |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|-------------------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- | - | ------ |  | ---- | ------- |  | - | ------
|                                                                           |  | THREE MONTHS ENDED SEPTEMBER 30, |        | NINE MONTHS ENDED SEPTEMBER 30,
|                                                                           |  |                                  |        |                                
|                                                                           |  | 2005                             |        | 2004                            |   | 2005   |  | 2004
|                                                                           |  |                                  |        |                                 |   |        |  |     
|(In thousands, except per share amounts)                                   |  |                                  |        |                                 |   |        |  |     
|                                                                           |  |                                  |        |                                
|Basic Earnings per Share                                                   |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|Income available to common stockholders (numerator)                        |  | $                                | 39,060 |                                 | $ | 26,732 |  | $    | 107,158 |  | $ | 77,970
|Weighted average common shares outstanding (denominator)                   |  |                                  | 61,820 |                                 |   | 59,406 |  |      | 61,368  |  |   | 58,557
|Basic earnings per share                                                   |  | $                                | 0.63   |                                 | $ | 0.45   |  | $    | 1.75    |  | $ | 1.33  
|                                                                           |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|                                                                           |  |                                  |        |                                
|Diluted Earnings per Share                                                 |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|Income available to common stockholders (numerator) 1                      |  | $                                | 39,060 |                                 | $ | 26,734 |  | $    | 107,158 |  | $ | 77,975
|                                                                           |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|Weighted average common shares outstanding                                 |  |                                  | 61,820 |                                 |   | 59,406 |  |      | 61,368  |  |   | 58,557
|Effect of dilutive securities                                              |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|0.5% convertible subordinated debentures                                   |  |                                  | 2,514  |                                 |   | 33     |  |      | 2,514   |  |   | 33    
|Stock options                                                              |  |                                  | 1,274  |                                 |   | 1,806  |  |      | 1,409   |  |   | 2,114 
|Restricted stock and restricted stock units                                |  |                                  | 14     |                                 |   | 12     |  |      | 8       |  |   | 10    
|                                                                           |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|Total weighted average common shares and dilutive securities (denominator) |  |                                  | 65,622 |                                 |   | 61,257 |  |      | 65,299  |  |   | 60,714
|                                                                           |  |                                  |        |                                 |   |        |  |      |         |  |   |       
|Diluted earnings per share                                                 |  | $                                | 0.60   |                                 | $ | 0.44   |  | $    | 1.64    |  | $ | 1.28  
|                                                                          

|  |  |                                                                                                                                                                                                                                                                           
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1 |  | Income available to common stockholders is higher in the 2004 diluted earnings per share calculations due to adding back interest expense (after tax) relating to $2.0 million of the 0.5% convertible
subordinated debentures that were outstanding at September 30, 2004



Approximately 35,100 and 47,177 other common
shares potentially issuable from stock options for the three and nine months ended September 30, 2004, respectively, were excluded from the computation of diluted earnings per share because they were anti-dilutive. There were no common shares
potentially issuable excluded from the computations in 2005.



For purposes of
calculating diluted earnings per share for all future periods in which our convertible subordinated debentures remain outstanding, we will not include any associated incremental shares in periods where the average closing price of our common stock
for the last five trading days of the reporting period is at or below $61.08 per share. In periods where the average closing price of our common stock exceeds $61.08 per share, we will include up to a theoretical maximum of approximately
6.9 million incremental shares. The following table shows the approximate number of incremental shares we would include in diluted weighted average shares outstanding at various stock prices, assuming $265.0 million of convertible subordinated
debentures outstanding:



|                                                                                                       |  |      |  |       |  |       |  |       |  |       |  |       |  |       |  |       |  |         |  |        
|------------------------------------------------------------------------------------------------------ |  | ---- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | ------- |  | -------
|                                                                                                      
|Average closing price per share of common stock for the last five trading days of the reporting period |  | $ 62 |  | $ 70  |  | $ 80  |  | $ 90  |  | $ 100 |  | $ 120 |  | $ 150 |  | $ 250 |  | $ 1,500 |  | $ 2,900
|Incremental dilutive shares outstanding (in thousands)                                                 |  | 129  |  | 1,106 |  | 2,052 |  | 2,788 |  | 3,377 |  | 4,260 |  | 5,144 |  | 5,884 |  | 6,768   |  | 6,853  
|                                                                                                      



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|7 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



Short-Term Investments

Short-term
investments consisted of the following available-for-sale investments at the reported balance sheet dates:



|                                                       |  |                |         |                        |   |                         |  |   |            |   |  |   |        
|------------------------------------------------------ |  | -------------- | ------- | ---------------------- | - | ----------------------- |  | - | ---------- | - |  | - | -------
|SEPTEMBER 30, 2005                                     |  | Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Fair Value
|                                                       |  |                |         |                        |   |                         |  |   |            |   |  |   |        
|(In thousands)                                        
|                                                       |  |                |         |                       
|U.S. agency securities                                 |  | $              | 176,064 |                        | $ |                        |  | $ | (3,261     | ) |  | $ | 172,803
|Auction rate securities                                |  |                | 70,450  |                        |   |                        |  |   |           |   |  |   | 70,450 
|Corporate obligations                                  |  |                | 45,102  |                        |   | 6                       |  |   | (502       | ) |  |   | 44,606 
|U.S. Treasury obligations                              |  |                | 6,034   |                        |   |                        |  |   | (144       | ) |  |   | 5,890  
|Money market funds                                     |  |                | 6,571   |                        |   |                        |  |   |           |   |  |   | 6,571  
|                                                       |  |                |         |                        |   |                         |  |   |            |   |  |   |        
|Total short-term investments                           |  | $              | 304,221 |                        | $ | 6                       |  | $ | (3,907     | ) |  | $ | 300,320
|                                                      
|DECEMBER 31, 2004                                      |  | Amortized Cost |         | Gross Unrealized Gains |   | Gross Unrealized Losses |  |   | Fair Value
|                                                       |  |                |         |                        |   |                         |  |   |            |   |  |   |        
|(In thousands)                                        
|                                                       |  |                |         |                       
|U.S. agency securities                                 |  | $              | 176,546 |                        | $ | 3                       |  | $ | (1,762     | ) |  | $ | 174,787
|Auction rate securities and variable rate demand notes |  |                | 95,600  |                        |   |                        |  |   |           |   |  |   | 95,600 
|Corporate obligations                                  |  |                | 46,616  |                        |   | 27                      |  |   | (414       | ) |  |   | 46,229 
|U.S. Treasury obligations                              |  |                | 6,030   |                        |   |                        |  |   | (50        | ) |  |   | 5,980  
|Money market funds                                     |  |                | 3,362   |                        |   |                        |  |   |           |   |  |   | 3,362  
|                                                       |  |                |         |                        |   |                         |  |   |            |   |  |   |        
|Total short-term investments                           |  | $              | 328,154 |                        | $ | 30                      |  | $ | (2,226     | ) |  | $ | 325,958
|                                                      



Available-for-sale investments are carried at
fair value, based on quoted market prices, with associated unrealized holding gains and losses recorded in accumulated other comprehensive income. Investments outstanding at September 30, 2005 mature between 2005 and 2043. Investments with
contractual maturities beyond one year are classified as short-term in our consolidated balance sheets because they represent the investment of cash that is available for current operations.



Following is detail of gross unrealized losses at September 30, 2005. These unrealized losses
were generated as interest rates rose and the rate of return on certain of our investments remained fixed at lower rates. Management has determined that these losses are temporary, as we have the ability and intent to hold the investments until we
recover at least substantially all of their cost, and the extent of the decline, both in dollars and percentage of cost, is not severe.



|                          |  |                                            |        |                       |                                      |        |            |                          |                       |         |  |            |        |                       |  |   |         |  |   |        |  
|------------------------- |  | ------------------------------------------ | ------ | --------------------- | ------------------------------------ | ------ | ---------- | ------------------------ | --------------------- | ------- |  | ---------- | ------ | --------------------- |  | - | ------- |  | - | ------ | -
|SEPTEMBER 30, 2005        |  | In a loss position for less than 12 months |        |                       | In a loss position 12 months or more |        |            | Total in a loss position |                      
|                          |  |                                            |        |                       |                                      |        |            |                          |                       |         |  |           
|                          |  | Fair Value                                 |        | GrossUnrealizedLosses |                                      |        | Fair Value |                          | GrossUnrealizedLosses |         |  | Fair Value |        | GrossUnrealizedLosses | 
|                          |  |                                            |        |                       |                                      |        |            |                          |                       |         |  |            |        |                       |  |   |         |  |   |        |  
|(In thousands)            | 
|                          |  |                                            |        |                       |                                      |       
|U.S. agency securities    |  | $                                          | 68,638 |                       | $                                    | (993   | )          |                          | $                     | 104,165 |  | $          | (2,268 | )                     |  | $ | 172,803 |  | $ | (3,261 | )
|Corporate obligations     |  |                                            | 17,382 |                       |                                      | (217   | )          |                          |                       | 17,536  |  |            | (285   | )                     |  |   | 34,918  |  |   | (502   | )
|U.S. Treasury obligations |  |                                            | 3,876  |                       |                                      | (93    | )          |                          |                       | 2,014   |  |            | (51    | )                     |  |   | 5,890   |  |   | (144   | )
|                          |  |                                            |        |                       |                                      |        |            |                          |                       |         |  |            |        |                       |  |   |         |  |   |        |  
|Totals                    |  | $                                          | 89,896 |                       | $                                    | (1,303 | )          |                          | $                     | 123,715 |  | $          | (2,604 | )                     |  | $ | 213,611 |  | $ | (3,907 | )
|                          | 



Gains and losses realized on the sale of
short-term investments are included in investment income in our consolidated statements of income based on the specific identification method and were insignificant in all periods presented.



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|8 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



The majority of our short-term investments comprise debt instruments issued by third parties and therefore expose us to
credit-related losses. We mitigate this risk by only buying investment grade debt securities. At September 30, 2005, 89% of our investments were in AAA rated or US Treasury debt instruments and no investments were rated below A. Significant
concentrations of investments at September 30, 2005 were Fannie Mae ($62.2 million fair value), Freddie Mac ($56.8 million fair value) and Federal Home Loan Bank ($52.9 million fair value). The majority (97%) of these concentrated
investments are AAA rated.



Accounts Receivable

Accounts receivable represent trade receivables, net of allowances for doubtful accounts and sales returns of $14.0 million and $13.2 million at September 30, 2005 and
December 31, 2004, respectively. Provisions for doubtful accounts recorded during the three months ended September 30, 2005 and 2004 totaled $0.2 million and $0.7 million, respectively. Provisions recorded during the nine months ended
September 30, 2005 and 2004 totaled $1.6 million and $2.7 million, respectively. Estimated sales returns are recorded as a reduction of revenue and were insignificant in all periods presented. Approximately 9% and 8% of our accounts receivable
balance, net of allowances for doubtful accounts and sales returns, was more than 90 days old at September 30, 2005 and December 31, 2004, respectively.



Property and Equipment

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



|                                             |  |                                           |  |                    |         |                          |   |            |  |             |         |                          |   |            |  |   |         |  |   |        
|-------------------------------------------- |  | ----------------------------------------- |  | ------------------ | ------- | ------------------------ | - | ---------- |  | ----------- | ------- | ------------------------ | - | ---------- |  | - | ------- |  | - | -------
|                                             |  |                                           |  | SEPTEMBER 30, 2005 |         | DECEMBER 31, 2004       
|                                             |  |                                           |  |                    |         |                         
|                                             |  | Range of EstimatedUseful Lives (in years) |  | GrossAmount        |         | Accumulated Depreciation |   | Net Amount |  | GrossAmount |         | Accumulated Depreciation |   | Net Amount
|                                             |  |                                           |  |                    |         |                          |   |            |  |             |         |                          |   |            |  |   |         |  |   |        
|(In thousands, except years)                 |  |                                           |  |                   
|                                             |  |                                           |  |                    |         |                          |  
|Contemporary image content                   |  | 4                                         |  | $                  | 263,664 |                          | $ | 208,676    |  | $           | 54,988  |                          | $ | 237,690    |  | $ | 200,087 |  | $ | 37,603 
|Computer hardware and software purchased     |  | 3                                         |  |                    | 95,783  |                          |   | 85,329     |  |             | 10,454  |                          |   | 94,960     |  |   | 83,280  |  |   | 11,680 
|Computer software developed for internal use |  | 3                                         |  |                    | 79,229  |                          |   | 58,272     |  |             | 20,957  |                          |   | 71,407     |  |   | 50,192  |  |   | 21,215 
|Leasehold improvements                       |  | 2-20                                      |  |                    | 36,129  |                          |   | 15,898     |  |             | 20,231  |                          |   | 35,404     |  |   | 14,978  |  |   | 20,426 
|Furniture, fixtures and studio equipment     |  | 5                                         |  |                    | 32,358  |                          |   | 26,695     |  |             | 5,663   |                          |   | 32,026     |  |   | 25,491  |  |   | 6,535  
|Archival image content                       |  | 40                                        |  |                    | 20,924  |                          |   | 4,515      |  |             | 16,409  |                          |   | 19,450     |  |   | 4,464   |  |   | 14,986 
|Other property and equipment                 |  | 3-4                                       |  |                    | 446     |                          |   | 351        |  |             | 95      |                          |   | 406        |  |   | 350     |  |   | 56     
|                                             |  |                                           |  |                    |         |                          |   |            |  |             |         |                          |   |            |  |   |         |  |   |        
|Totals                                       |  |                                           |  | $                  | 528,533 |                          | $ | 399,736    |  | $           | 128,797 |                          | $ | 491,343    |  | $ | 378,842 |  | $ | 112,501
|                                            



Depreciation of computer software developed for
internal use was $2.9 million, $4.9 million, $9.5 million and $13.8 million for the three and nine months ended September 30, 2005 and 2004, respectively.



Goodwill

We performed our annual goodwill impairment test as of August 31, 2005
and determined that there was no impairment as of this date. Goodwill changed during the first three quarters of 2005 as follows:



|                                                   |  |   |         |  
|-------------------------------------------------- |  | - | ------- | -
|(In thousands)                                     | 
|                                                   | 
|                                                   | 
|Goodwill at December 31, 2004                      |  | $ | 628,717 |  
|Business combinations                              |  |   | 192,931 |  
|Purchase price adjustments                         |  |   | 50      |  
|Effect of foreign currency translation adjustments |  |   | (12,488 | )
|                                                   |  |   |         |  
|Goodwill at September 30, 2005                     |  | $ | 809,210 |  
|                                                   | 



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|9 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



Identifiable Intangible Assets

We
reassess the remaining useful lives of our identifiable intangible assets each reporting period to determine whether events and circumstances warrant revisions to the remaining periods of amortization. No revisions were determined to be necessary
during the periods presented. Any future revisions would be applied prospectively.



Identifiable intangible assets consisted of the following at the reported balance sheet dates:



|                                       |  |                                          |  |                    |        |                          |   |            |  |              |        |                          |   |            |  |   |        |  |   |       
|-------------------------------------- |  | ---------------------------------------- |  | ------------------ | ------ | ------------------------ | - | ---------- |  | ------------ | ------ | ------------------------ | - | ---------- |  | - | ------ |  | - | ------
|                                       |  |                                          |  | SEPTEMBER 30, 2005 |        | DECEMBER 31, 2004       
|                                       |  |                                          |  |                    |        |                         
|                                       |  | Range of EstimatedUseful Lives(in years) |  | Gross Amount       |        | Accumulated Amortization |   | Net Amount |  | Gross Amount |        | Accumulated Amortization |   | Net Amount
|                                       |  |                                          |  |                    |        |                          |   |            |  |              |        |                          |   |           
|(In thousands, except years)           |  |                                          |  |                   
|                                       |  |                                          |  |                    |        |                          |  
|Customer lists                         |  | 4-7                                      |  | $                  | 33,185 |                          | $ | 13,911     |  | $            | 19,274 |                          | $ | 16,846     |  | $ | 10,550 |  | $ | 6,296 
|Trademarks, trade names and copyrights |  | 2-10                                     |  |                    | 37,995 |                          |   | 7,705      |  |              | 30,290 |                          |   | 11,682     |  |   | 5,742  |  |   | 5,940 
|Other identifiable intangible assets   |  | 2-10                                     |  |                    | 7,265  |                          |   | 2,580      |  |              | 4,685  |                          |   | 3,382      |  |   | 1,744  |  |   | 1,638 
|                                       |  |                                          |  |                    |        |                          |   |            |  |              |        |                          |   |            |  |   |        |  |   |       
|Totals                                 |  |                                          |  | $                  | 78,445 |                          | $ | 24,196     |  | $            | 54,249 |                          | $ | 31,910     |  | $ | 18,036 |  | $ | 13,874
|                                      



Based on balances at September 30, 2005,
expected amortization of identifiable intangible assets for the next five years, including amortization recorded during the first three quarters of 2005, is as follows:



|               |  |   |       
|-------------- |  | - | ------
|FISCAL YEAR   
|              
|(In thousands)
|               | 
|2005           |  | $ | 9,463 
|2006           |  |   | 11,446
|2007           |  |   | 9,397 
|2008           |  |   | 9,104 
|2009           |  |   | 5,871 
|              



Leases

Rent expense, net of sublease income, was $4.7 million, $4.7 million, $14.5 million and $13.9 million for the three and nine months ended September 30, 2005 and 2004,
respectively. Sublease income recorded as an offset to rent expense was insignificant in all periods presented.



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|10 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



Employee Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, as amended, (SFAS No. 123) requires the disclosure of pro forma information as if we had adopted the fair-value method of
accounting for employee stock-based compensation. Under this method, compensation cost is measured on all awards based on the fair value of the awards at the grant date. The pro forma effect on our net income and earnings per share of applying the
fair-value method of accounting, utilizing the assumptions in the second table below would have been as follows:



|                                                                               |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|------------------------------------------------------------------------------ |  | ------------------------------- | ------- | - | ------------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                               |  | THREE MONTHS ENDEDSEPTEMBER 30, |         |   | NINE MONTHS ENDEDSEPTEMBER 30, |  
|                                                                               |  |                                 |         |   |                                |  
|                                                                               |  | 2005                            |         |   | 2004                           |   |        | 2005 |  |   | 2004    |  
|                                                                               |  |                                 |         |   |                                |   |        |      |  |   |         |  
|(In thousands, except per share amounts)                                       |  |                                 |         |   |                                |   |        |      |  |   |         |  
|                                                                               |  |                                 |         |  
|Net income                                                                     |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|As reported                                                                    |  | $                               | 39,060  |   |                                | $ | 26,732 |      |  | $ | 107,158 |   |  | $ | 77,970 |  
|Add: APB Opinion No. 25 employee stock-based compensation, net of income taxes |  |                                 | 221     |   |                                |   | 131    |      |  |   | 558     |   |  |   | 364    |  
|Deduct: SFAS No. 123 employee stock-based compensation, net of income taxes    |  |                                 | (11,214 | ) |                                |   | (1,857 | )    |  |   | (14,364 | ) |  |   | (5,565 | )
|                                                                               |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Pro forma net income                                                           |  | $                               | 28,067  |   |                                | $ | 25,006 |      |  | $ | 93,352  |   |  | $ | 72,769 |  
|                                                                               |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Basic earnings per share                                                       |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|As reported                                                                    |  | $                               | 0.63    |   |                                | $ | 0.45   |      |  | $ | 1.75    |   |  | $ | 1.33   |  
|Pro forma                                                                      |  |                                 | 0.45    |   |                                |   | 0.42   |      |  |   | 1.52    |   |  |   | 1.24   |  
|                                                                               |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Diluted earnings per share                                                     |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|As reported                                                                    |  | $                               | 0.60    |   |                                | $ | 0.44   |      |  | $ | 1.64    |   |  | $ | 1.28   |  
|Pro forma                                                                      |  |                                 | 0.43    |   |                                |   | 0.41   |      |  |   | 1.43    |   |  |   | 1.19   |  
|                                                                               |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Shares used in computing pro forma earnings per share                          |  |                                 |         |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Basic                                                                          |  |                                 | 61,820  |   |                                |   | 59,406 |      |  |   | 61,368  |   |  |   | 58,557 |  
|Diluted                                                                        |  |                                 | 65,717  |   |                                |   | 61,490 |      |  |   | 65,412  |   |  |   | 60,946 |  
|                                                                               | 



The increase in SFAS No. 123 employee
stock-based compensation in 2005 resulted from 795,000 fully vested options granted on September 13, 2005 by the Compensation Committee of the Board of Directors under the Getty Images, Inc. 2005 Incentive Plan. These options were granted to
senior management, many of whom had not received equity grants in several years. Granting fully vested options results in the total fair value of the options being expensed immediately for purposes of these pro forma disclosures.



A Black-Scholes multiple option valuation model was utilized in calculating the pro forma figures in
the table above, with forfeitures recognized as they occur and the following assumptions:



|                                          |  |                                 |  |                                |  |         |  |              
|----------------------------------------- |  | ------------------------------- |  | ------------------------------ |  | ------- |  | -------------
|                                          |  | THREE MONTHS ENDEDSEPTEMBER 30, |  | NINE MONTHS ENDEDSEPTEMBER 30,
|                                          |  |                                 |  |                               
|                                          |  | 2005                            |  | 2004                           |  | 2005    |  | 2004         
|                                          |  |                                 |  |                                |  |         |  |              
|                                          |  |                                 |  |                               
|Expected share price volatility           |  | 35%                             |  | 50%                            |  | 40%     |  | 55%          
|Risk free rate of return                  |  | 3.96%                           |  | 2.69%                          |  | 3.43%   |  | 2.78%        
|Expected life of options (from vest date) |  | 2 years                         |  | 2 years                        |  | 2 years |  | 1 1/2-2 years
|Expected rate of dividends                |  | None                            |  | None                           |  | None    |  | None         
|                                         



There were no equity award modifications
resulting in other than nominal compensation expense for the periods presented in this report.



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|11 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



Advertising and Marketing

Advertising
and marketing costs expensed were $3.2 million, $2.3 million, $8.6 million and $6.5 million for the three and nine months ended September 30, 2005 and 2004, respectively. Prepaid marketing materials were insignificant at September 30, 2005
and December 31, 2004.



Recent Accounting Pronouncements



STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 123(R),
SHARE-BASED PAYMENT

In December of 2004, the FASB issued SFAS No. 123(R), which addresses the accounting for employee services received in
exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprises equity instruments or that may be settled by the issuance of such equity instruments. On April 14,
2005, the SEC delayed the effective date of SFAS No. 123(R) until January 1, 2006 for calendar year companies. SFAS No. 123(R) eliminates our ability to account for employee stock options using the intrinsic value provisions of
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations, and generally requires instead that we expense them using a fair-value-based method. Accordingly, we will expense the
fair value of all share-based compensation beginning January 1, 2006 to selling, general and administrative expenses over the vesting period. Our employee share-based compensation plan includes both stock options and restricted stock units. The
impact of this compensation plan on our income statement may vary greatly depending on the number of options and units granted and the future price of our common stock. However, management currently anticipates that our share-based compensation plan
will reduce 2006 diluted earnings per share by approximately $0.14 to $0.20. This estimate is based on a range of estimated prices of our common stock and current expectations of the number of shares that may be awarded.



SEC STAFF ACCOUNTING BULLETIN (SAB) NO. 107

In March of 2005, the SEC issued SAB No. 107, which interprets SFAS No. 123(R). In particular, this SAB includes interpretive guidance that may be applicable to us
related to: share-based payment transactions with nonemployees; methods of valuing share-based payments; the classification of compensation expense in the income statement; capitalization of compensation cost related to share-based payment
arrangements; the accounting for income tax effects of share-based payment arrangements upon adoption of SFAS No. 123(R); the modification of employee share options prior to adoption of SFAS No. 123(R); and disclosures in Managements
Discussion and Analysis subsequent to adoption of SFAS No. 123(R). This guidance was included in the development of the anticipated impact of SFAS No. 123(R) as discussed above.



SFAS NO. 154, ACCOUNTING FOR CHANGES AND ERROR
CORRECTIONS

In May of 2005, the FASB issued SFAS No. 154, which changes the requirements for the accounting for, and reporting of, a change in
accounting principle. Previously, most voluntary changes in accounting principle were recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires
retrospective application to prior periods financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. This Statement also requires
that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle. These changes are accounted for in the period of
change and future periods, as applicable, and may be made only if the new accounting principle is preferable. This Statement is effective for accounting principles changed on or after January 1, 2006.



NOTE 2. ACQUISITIONS OF BUSINESSES

On April 20, 2005, we acquired London-based Digital Vision Limited (Digital Vision), one of the worlds leading royalty-free photography businesses, for a purchase price of $177.5 million ($165.0 million of cash and
$12.5 million of direct acquisition costs and liabilities assumed). The majority of the purchase price was allocated to goodwill ($134.8 million) and identifiable intangible assets ($33.2 million). Prior to the acquisition, we had a significant
number of Digital Visions images available for license through our Image Partner program.



On June 8, 2005, we acquired Amana America, Inc., Amana Europe Limited and Iconica Limited (collectively Photonica) for a purchase price of $58.2 million ($48.1 million of cash and $10.1 million of direct acquisition costs and
liabilities assumed). Photonica is a rights-managed stock photography agency with its principal offices in New York and London. The majority of the purchase price was allocated to goodwill ($41.3 million) and identifiable intangible assets ($11.6
million).



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|12 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



We also completed several other small acquisitions in 2005. All acquisitions were accounted for using the purchase method of
accounting and, accordingly, the results of operations of the acquired businesses since the respective dates of acquisition are included in our consolidated financial statements. All acquisitions year-to-date were not material, individually or in
the aggregate, to the company as a whole and, therefore, pro forma financial information is not presented.



NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS

Our financial instruments consist of cash and cash equivalents, short-term investments,
forward foreign currency exchange contracts, accounts receivable, accounts payable and debt instruments. Short-term investments and forward foreign currency exchange contracts are carried at fair value as discussed under Short-Term
Investments and Foreign Currency Derivatives within Note 1. The fair value of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying values due to their short-term nature. The fair value of
our convertible subordinated debentures (our debt), based on quoted market prices, was approximately $514.4 million at September 30, 2005 and $409.4 million at December 31, 2004, or $249.4 million and $144.4 million, respectively, higher
than book value.



NOTE 4. DEBT

On July 1, 2005, our 0.5% convertible subordinated debentures became convertible by the holders due to a conversion condition having been met. The conversion condition was met
when the closing price of our common stock exceeded $73.30 for 20 trading days within the last 30 trading days ended June 30, 2005. As a result, we classified the $265.0 million of debentures as short-term debt on our balance sheet and
accelerated the amortization of the remaining $5.0 million of associated unamortized debt issuance costs. This amortization is included within interest expense in the second quarter of 2005 in our consolidated statement of income.



The conversion condition must be met each quarter and was met again in the quarter ended
September 30, 2005. Should all or some of the holders elect to convert their debentures, we would be required to repay the applicable principal in cash up to $265.0 million. The ability for the holders to convert will expire on
December 31, 2005 unless the conversion condition is met again in the last 30 trading days ending on that date. If the condition is not met during that period, we will reclassify the debt back to long-term. The closing price of our common stock
on October 31, 2005 was $83.01.



NOTE 5. COMMITMENTS AND CONTINGENCIES



Commitments

There have been no material changes in our commitments since year end.



Contingencies

We indemnify certain customers from claims related to alleged infringements of the intellectual property rights of third parties, such
as claims arising from failure to secure model and property releases for an image we license. The standard terms of these indemnifications require us to defend those claims and pay related damages, if any. We typically mitigate this risk by securing
all necessary model and property releases for imagery for which we hold the copyright, and by contractually requiring our contributing photographers and other imagery partners to do the same prior to submitting any imagery to us. We also require
contributing photographers, other imagery partners and sellers of businesses or image collections to indemnify us in certain circumstances in the event a claim arises in relation to an image they have provided or sold to us. Our imagery partners are
also typically required to carry insurance policies for losses related to such claims. We do not record any liabilities for these indemnifications until claims are made and we are able to assess the range of possible payments and available recourse
from our imagery partners, as applicable. Historically, our exposure to such claims has been immaterial, as were our recorded liabilities for intellectual property infringement at September 30, 2005 and December 31, 2004. As such, we
believe the estimated fair value of these liabilities is minimal.



In the ordinary
course of business, we also enter into certain types of agreements that require us to indemnify counterparties against third-party claims. These may include: agreements with vendors and suppliers, under which we may indemnify them against claims
arising from our use of their products or services; agreements with customers other than those licensing images, under which we may indemnify them against claims arising from their use of our products or services; agreements with delegates, under
which we may indemnify them against claims arising from their distribution of our products or services; real estate and equipment leases, under which we may indemnify lessors against third-party claims relating to use of their property; agreements
with directors and officers, under which we indemnify them to the full extent allowed by law against claims relating to their service to us; agreements with pur
-



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|13 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



chasers of businesses we have sold, under which we may indemnify the purchasers against claims arising from our operation of the businesses prior to sale; and
agreements with initial purchasers and underwriters of our securities, under which we indemnify them against claims relating to their participation in the transactions. The nature and terms of these indemnification obligations vary from contract to
contract, and generally a maximum obligation is not stated. Because we are unable to estimate our potential obligation, and because we believe the estimated fair value of these liabilities is minimal, no related liabilities are recorded at
September 30, 2005 or December 31, 2004. We hold insurance policies that mitigate potential losses arising from certain indemnifications, and historically, we have not incurred significant costs related to performance under these
obligations.



NOTE 6. COMPREHENSIVE INCOME

Comprehensive income consisted of the following during the periods presented:



|                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | ---- |  | - | ------- | - |  | - | ------ | -
|                                                                                  |  | THREE MONTHS ENDEDSEPTEMBER 30, |        |   | NINE MONTHS ENDEDSEPTEMBER 30, |  
|                                                                                  |  |                                 |        |   |                                |  
|                                                                                  |  | 2005                            |        |   | 2004                           |   |        | 2005 |  |   | 2004    |  
|                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |         |  
|(In thousands)                                                                    |  |                                 |        |   |                                |   |        |      |  |   |         |  
|                                                                                  |  |                                 |        |  
|Net income                                                                        |  | $                               | 39,060 |   |                                | $ | 26,732 |      |  | $ | 107,158 |   |  | $ | 77,970 |  
|Net unrealized (losses) gains on revaluation of long-term intercompany balances 1 |  |                                 | (3,871 | ) |                                |   | 1,027  |      |  |   | (26,199 | ) |  |   | 927    |  
|Net foreign currency translation adjustment gains (losses) 2                      |  |                                 | 441    |   |                                |   | (195   | )    |  |   | (2      | ) |  |   | (1,032 | )
|Net unrealized (losses) gains on short-term investments                           |  |                                 | (1,188 | ) |                                |   | 2,130  |      |  |   | (1,705  | ) |  |   | (1,135 | )
|Deferred taxes on net unrealized gains on short-term investments                  |  |                                 |       |   |                                |   |       |      |  |   |        |   |  |   | 46     |  
|                                                                                  |  |                                 |        |   |                                |   |        |      |  |   |         |   |  |   |        |  
|Total comprehensive income                                                        |  | $                               | 34,442 |   |                                | $ | 29,694 |      |  | $ | 79,252  |   |  | $ | 76,776 |  
|                                                                                  | 

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | 
|1 |  | Unrealized gains and losses resulting from changes in the exchange rates underlying foreign-currency denominated intercompany balances that are long-term in nature and for which settlement is not
planned or anticipated in the foreseeable future are reported in the same manner as translation adjustments (see footnote 2 to this table below). In connection with the acquisition of Digital Vision in the second quarter of 2005, a new $165.0
million long-term intercompany loan payable was established on the books of a subsidiary whose functional currency is the British pound.
|  | 
|2 |  | Each reporting period, the balance sheets and statements of income of the parent company and each subsidiary are translated into U.S. dollars, our reporting currency, and then consolidated. Monthly
revenues and expenses are translated into U.S. dollars at the prior months average daily exchange rate, while assets and liabilities are translated into U.S. dollars at the rate of exchange on the last day of the reported month. Due to the use
of these different exchange rates, translation adjustments arise.                                                                   



Accumulated other comprehensive (loss) income
consisted of the following at the reported balance sheet dates:



|                                                                                   |  |                   |         |   |                  |   |         |  
|---------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                   |  | SEPTEMBER 30,2005 |         |   | DECEMBER 31,2004 |  
|                                                                                   |  |                   |         |   |                  |   |         |  
|(In thousands)                                                                     |  |                   |         |   |                  |  
|                                                                                   |  |                  
|Accumulated net unrealized gains on revaluation of long-term intercompany balances |  | $                 | 9,271   |   |                  | $ | 35,470  |  
|Accumulated net foreign currency translation adjustment losses                     |  |                   | (12,371 | ) |                  |   | (12,369 | )
|Accumulated net unrealized losses on short-term investments                        |  |                   | (3,901  | ) |                  |   | (2,196  | )
|                                                                                   |  |                   |         |   |                  |   |         |  
|Total accumulated other comprehensive (loss) income                                |  | $                 | (7,001  | ) |                  | $ | 20,905  |  
|                                                                                   | 



Realized gains and losses (on investments sold)
transferred out of accumulated net unrealized losses on short-term investments above and into investment income were insignificant in all periods presented. Deferred taxes are not provided on unrealized gains and losses resulting from fluctuations
in the foreign currency exchange rates underlying foreign currency denominated long-term intercompany balances or on translation adjustments because management expects that these investments in our foreign subsidiaries will be permanent.



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|14 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 1



NOTE 7. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS

Our CEO (our chief operating decision maker) uses our consolidated financial statements to assess the companys financial performance and to determine how to allocate resources. Therefore, we operate the company as one business
segment. Our revenue is generated through a diverse customer base, and there is no reliance on a single customer or small group of customers; no customer represented 10% or more of our total revenue in the periods presented. Revenue is summarized
below by country based on the customers billing address, with countries comprising 5% or more of total revenue in a reportable period shown separately. Due to the impact of foreign currency translation, these figures may not clearly reflect
the relative performance of the individual countries.



|                                   |  |                                  |         |                                 |      |      |   |              |  |      |  |              |         |      |      |              |   |         |  |     
|---------------------------------- |  | -------------------------------- | ------- | ------------------------------- | ---- | ---- | - | ------------ |  | ---- |  | ------------ | ------- | ---- | ---- | ------------ | - | ------- |  | ----
|                                   |  | THREE MONTHS ENDED SEPTEMBER 30, |         | NINE MONTHS ENDED SEPTEMBER 30,
|                                   |  |                                  |         |                                
|                                   |  | 2005                             |         | % of Revenue                    |      | 2004 |   | % of Revenue |  | 2005 |  | % of Revenue |         | 2004 |      | % of Revenue
|                                   |  |                                  |         |                                 |      |      |   |              |  |      |  |              |         |      |      |             
|(In thousands, except percentages) |  |                                  |         |                                 |      |      |   |              |  |      |  |              |         |      |      |             
|                                   |  |                                  |         |                                 |      |      |   |             
|United States                      |  | $                                | 79,970  |                                 | 43%  |      | $ | 69,716       |  | 45%  |  | $            | 235,001 |      | 43%  |              | $ | 206,900 |  | 45% 
|United Kingdom                     |  |                                  | 26,824  |                                 | 15%  |      |   | 22,990       |  | 15%  |  |              | 80,288  |      | 15%  |              |   | 66,952  |  | 15% 
|Germany                            |  |                                  | 15,626  |                                 | 9%   |      |   | 11,885       |  | 8%   |  |              | 45,007  |      | 8%   |              |   | 35,117  |  | 8%  
|France                             |  |                                  | 9,675   |                                 | 5%   |      |   | 8,417        |  | 5%   |  |              | 31,030  |      | 6%   |              |   | 26,553  |  | 6%  
|Rest of world                      |  |                                  | 52,421  |                                 | 28%  |      |   | 40,480       |  | 27%  |  |              | 156,590 |      | 28%  |              |   | 124,805 |  | 26% 
|                                   |  |                                  |         |                                 |      |      |   |              |  |      |  |              |         |      |      |              |   |         |  |     
|Total revenue                      |  | $                                | 184,516 |                                 | 100% |      | $ | 153,488      |  | 100% |  | $            | 547,916 |      | 100% |              | $ | 460,327 |  | 100%
|                                  



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)



The following should be read in conjunction with our Consolidated Financial Statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form
10-Q.



GENERAL

Our key initiatives for 2005 are to: grow the volume of imagery licensed; accelerate international growth; continue to grow the editorial portion of our business; improve and customize the customer experience and search
capabilities on gettyimages.com; and achieve a 31% operating margin. We are on track to achieve our 2005 financial objectives; in the first three quarters of 2005 compared to the first three quarters of 2004: we licensed 13% more single still
creative images; we grew international revenue 24% (approximately 20% excluding changes in foreign currency exchange rates); editorial revenue increased 20% (approximately 18% excluding changes in foreign exchange rates); and we achieved a 31%
operating margin compared to an operating margin of 27% for the first three quarters of 2004. We have also spent the last 18 months mapping out how to improve our website and will begin to see the benefits of this work in 2006.



There have been no material changes in our sources of revenue and cost of sales or our critical
accounting policies and estimates and assumptions since December 31, 2004.



Acquisitions of Businesses

On April 20, 2005, we acquired London-based Digital Vision Limited (Digital Vision), one of the worlds leading
royalty-free photography businesses, for a purchase price of $177.5 million ($165.0 million of cash and $12.5 million of direct acquisition costs and liabilities assumed). The majority of the purchase price was allocated to goodwill ($134.8 million)
and identifiable intangible assets ($33.2 million). Prior to the acquisition, we had a significant number of Digital Visions images available for license through our Image Partner program.



On June 8, 2005, we acquired Amana America, Inc., Amana Europe Limited and Iconica Limited
(collectively Photonica) for a purchase price of $58.2 million ($48.1 million of cash and $10.1 million of direct acquisition costs and liabilities assumed). Photonica is a rights-managed stock photography agency with its principal offices in New
York and London. The majority of the purchase price was allocated to goodwill ($41.3 million) and identifiable intangible assets ($11.6 million).



We also completed several other small acquisitions in 2005. All acquisitions were accounted for using the purchase method of accounting and, accordingly, the results of operations
of the acquired businesses since the respective dates of acquisition are



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|15 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 2



included in our consolidated financial statements. All acquisitions year-to-date were not material, individually or in the aggregate, to the company as a whole and,
therefore, pro forma financial information is not presented.



RESULTS OF OPERATIONS

Below are selected highlights of our results of operations. All figures in the tables are shown in thousands, except percentages and price per image figures.



|                                                   |  |                                  |     |                                |   |      |  |      |     |  |   |     
|-------------------------------------------------- |  | -------------------------------- | --- | ------------------------------ | - | ---- |  | ---- | --- |  | - | ----
|                                                   |  | THREE MONTHS ENDED SEPTEMBER 30, |     | NINE MONTHS ENDEDSEPTEMBER 30,
|                                                   |  |                                  |     |                               
|                                                   |  | 2005                             |     | 2004                           |   | 2005 |  | 2004
|                                                   |  |                                  |     |                                |   |      |  |     
|                                                   |  |                                  |     |                               
|PORTFOLIO REVENUE AS A PERCENTAGE OF TOTAL REVENUE |  |                                  |     |                                |   |      |  |      |     |  |   |     
|Rights-managed still imagery                       |  |                                  | 42% |                                |   | 46%  |  |      | 43% |  |   | 49% 
|Royalty-free still imagery                         |  |                                  | 38% |                                |   | 34%  |  |      | 37% |  |   | 33% 
|Editorial imagery                                  |  |                                  | 12% |                                |   | 12%  |  |      | 12% |  |   | 11% 
|Film                                               |  |                                  | 5%  |                                |   | 6%   |  |      | 5%  |  |   | 5%  
|Other                                              |  |                                  | 3%  |                                |   | 2%   |  |      | 3%  |  |   | 2%  
|                                                   |  |                                  |     |                               
|GROSS MARGIN                                       |  |                                  |     |                                |   |      |  |      |     |  |   |     
|Rights-managed still imagery                       |  |                                  | 67% |                                |   | 67%  |  |      | 67% |  |   | 67% 
|Royalty-free still imagery                         |  |                                  | 82% |                                |   | 76%  |  |      | 79% |  |   | 77% 
|Editorial imagery                                  |  |                                  | 79% |                                |   | 82%  |  |      | 79% |  |   | 82% 
|Film                                               |  |                                  | 73% |                                |   | 71%  |  |      | 72% |  |   | 72% 
|                                                   |  |                                  |     |                               
|APPROXIMATE AVERAGE PRICE PER IMAGE 2, 3           |  |                                  |     |                                |   |      |  |      |     |  |   |     
|Rights-managed single still imagery                |  | $                                | 575 |                                | $ | 5651 |  | $    | 590 |  | $ | 5701
|Royalty-free single still imagery                  |  |                                  | 235 |                                |   | 2001 |  |      | 235 |  |   | 1951
|Film                                               |  |                                  | 545 |                                |   | 5901 |  |      | 575 |  |   | 5701
|                                                  

|  |  |                                                                                                                                                                                                                                                     
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | 
|1 |  | These prior period figures have been adjusted to reflect the inclusion of data for Asia Pacific, and for Film to also include royalty-free film data.                                                                                               
|  | 
|2 |  | Because many editorial images are licensed on a subscription basis, price per image is not meaningful and therefore editorial imagery is not included in the per image data.                                                                        
|  | 
|3 |  | All price per image figures are rounded to the nearest $5 and represent the approximate prices of single images (including flexible license packs but excluding prepackaged CDs) licensed by us directly
to our customers, not through distributors.



REVENUE



|                                |  |      |         |              |       |      |   |              |  |          |  |          |        |  |     
|------------------------------- |  | ---- | ------- | ------------ | ----- | ---- | - | ------------ |  | -------- |  | -------- | ------ |  | ----
|                                |  | 2005 |         | % of revenue |       | 2004 |   | % of revenue |  | $ change |  | % change
|                                |  |      |         |              |       |      |   |              |  |          |  |          |        |  |     
|                                |  |      |         |              |       |     
|Three months ended September 30 |  | $    | 184,516 |              | 100.0 |      | $ | 153,488      |  | 100.0    |  | $        | 31,028 |  | 20.2
|Nine months ended September 30  |  |      | 547,916 |              | 100.0 |      |   | 460,327      |  | 100.0    |  |          | 87,589 |  | 19.0
|                               



Revenue for the nine months ended
September 30, 2005 was favorably impacted by changes in foreign currency exchange rates year over year, particularly the British pound and euro to the U.S. dollar. The third quarter of 2005, year over year, however did not see much benefit from
currency. Net year over year changes in exchange rates added approximately $0.4 million and $10.6 million to revenue for the third quarter and first three quarters of 2005, respectively.



The following year over year revenue discussion excludes the impact of changes in exchange rates. Revenue increased approximately $30.6 million or
19.9% and $77.0 million or 16.7% for the third quarter and first three quarters of 2005, respectively. These



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increases were due primarily to higher volumes of images licensed from our royalty-free portfolio at a higher average price per image. The royalty-free volume increase
was particularly significant in Europe, where customers continue to adopt this licensing model. Increases in average price per image arose through a shift in the mix of images licensed within our royalty-free portfolio towards higher priced imagery
and through selective price increases. In addition to the success of the royalty-free model, the volume of rights- managed imagery licensed for the second and third quarters of 2005 increased modestly. This is in contrast to the first quarter of
2005 when we saw a decline in the volume of rights-managed imagery licensed. Revenue from licenses of editorial imagery and film also increased year-to-date. Revenue from licenses of film in the third quarter, however, was flat.



GROSS PROFIT



|                                |  |      |         |                             |      |      |   |                             |  |          |  |          |        |  |     
|------------------------------- |  | ---- | ------- | --------------------------- | ---- | ---- | - | --------------------------- |  | -------- |  | -------- | ------ |  | ----
|                                |  | 2005 |         | % of revenue (gross margin) |      | 2004 |   | % of revenue (gross margin) |  | $ change |  | % change
|                                |  |      |         |                            
|                                |  |      |         |                             |      |     
|Three months ended September 30 |  | $    | 137,006 |                             | 74.3 |      | $ | 111,144                     |  | 72.4     |  | $        | 25,862 |  | 23.3
|Nine months ended September 30  |  |      | 399,656 |                             | 72.9 |      |   | 332,388                     |  | 72.2     |  |          | 67,268 |  | 20.2
|                               



Gross profit and gross margin increased year
over year due to a shift in overall sales mix towards higher margin royalty-free imagery and a shift within our royalty-free portfolio to wholly-owned imagery. The shift towards wholly-owned imagery occurred as we acquired a significant number of
images in 2005 through both business combinations and asset purchases.



SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A)



|                                |  |      |         |              |      |      |   |              |  |          |  |          |        |  |     
|------------------------------- |  | ---- | ------- | ------------ | ---- | ---- | - | ------------ |  | -------- |  | -------- | ------ |  | ----
|                                |  | 2005 |         | % of revenue |      | 2004 |   | % of revenue |  | $ change |  | % change
|                                |  |      |         |             
|                                |  |      |         |              |      |     
|Three months ended September 30 |  | $    | 63,309  |              | 34.3 |      | $ | 54,661       |  | 35.6     |  | $        | 8,648  |  | 15.8
|Nine months ended September 30  |  |      | 188,270 |              | 34.4 |      |   | 163,790      |  | 35.6     |  |          | 24,480 |  | 14.9
|                               



Excluding the impact of changes in exchange
rates, SG&A increased $8.7 million or 16.0% and $22.0 million or 13.4% year over year for the third quarter and first three quarters of 2005, respectively. The year over year increase was due mainly to increased staff costs related to employees
who joined the company through business acquisitions during the last year and to annual salary increases effective April of 2005.



INVESTMENT INCOME



|                                |  |      |       |              |     |      |   |              |  |          |  |          |       |  |     
|------------------------------- |  | ---- | ----- | ------------ | --- | ---- | - | ------------ |  | -------- |  | -------- | ----- |  | ----
|                                |  | 2005 |       | % of revenue |     | 2004 |   | % of revenue |  | $ change |  | % change
|                                |  |      |       |             
|                                |  |      |       |              |     |     
|Three months ended September 30 |  | $    | 2,787 |              | 1.5 |      | $ | 2,671        |  | 1.7      |  | $        | 116   |  | 4.3 
|Nine months ended September 30  |  |      | 8,715 |              | 1.6 |      |   | 6,465        |  | 1.4      |  |          | 2,250 |  | 34.8
|                               



Investment income increased in 2005 due to
higher cash and cash equivalents and short-term investment balances (prior to funding business acquisitions in the second quarter of 2005) combined with an increase in interest rates.



INTEREST EXPENSE



|                                |  |      |        |   |              |      |   |      |   |        |              |  |      |          |  |   |          |   |  |       |  
|------------------------------- |  | ---- | ------ | - | ------------ | ---- | - | ---- | - | ------ | ------------ |  | ---- | -------- |  | - | -------- | - |  | ----- | -
|                                |  | 2005 |        |   | % of revenue |      |   | 2004 |   |        | % of revenue |  |      | $ change |  |   | % change |  
|                                |  |      |        |   |              |     
|                                |  |      |        |   |              |     
|Three months ended September 30 |  | $    | (433   | ) |              | (0.2 | ) |      | $ | (907   | )            |  | (0.6 | )        |  | $ | 474      |   |  | (52.3 | )
|Nine months ended September 30  |  |      | (7,246 | ) |              | (1.3 | ) |      |   | (2,887 | )            |  | (0.6 | )        |  |   | (4,359   | ) |  | 151.0 |  
|                                | 



Interest expense increased in 2005 as a
conversion condition of our convertible subordinated debentures was met during the second quarter, requiring accelerated amortization in June of 2005 of the remaining $5.0 million of unamortized debt issuance costs. The conversion condition was met
when the closing price of our common stock exceeded $73.30 for 20 trading days within the last 30



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trading days ended June 30, 2005. See discussion of our debentures under Liquidity and Capital Resources below for more information.



INCOME TAX EXPENSE



|                                |  |      |         |   |                    |       |   |      |            |   |                    |       |   |          |   |         |          |  |     
|------------------------------- |  | ---- | ------- | - | ------------------ | ----- | - | ---- | ---------- | - | ------------------ | ----- | - | -------- | - | ------- | -------- |  | ----
|                                |  | 2005 |         |   | effective tax rate |       |   | 2004 |            |   | effective tax rate |       |   | $ change |   |         | % change
|                                |  |      |         |   |                   
|                                |  |      |         |   |                    |      
|Three months ended September 30 |  | $    | (22,475 | ) |                    | (36.5 | ) |      | $  (16,892 | ) |                    | (38.7 | ) |          | $ | (5,583  | )        |  | 33.1
|Nine months ended September 30  |  |      | (62,196 | ) |                    | (36.7 | ) |      | (49,491    | ) |                    | (38.8 | ) |          |   | (12,705 | )        |  | 25.7
|                               



Our effective tax rate for 2005 decreased from
2004 due to higher income in jurisdictions with lower tax rates, reduction in non-deductible compensation expense, increased ability to recognize a greater benefit from foreign tax credits generated in the current year, and favorable developments in
tax audits.



RESULTS OF OPERATIONS OUTLOOK



Many of the statements contained herein and for the remainder of the MD&A are
forward-looking and are based on managements current expectations, assumptions and projections about Getty Images, Inc. and its industry and are made on the basis of managements views as of the date this document is filed
with the Securities and Exchange Commission (SEC). These forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that are difficult to predict and that could cause our actual results to
differ materially from our past performance and managements current expectations, assumptions and projections. Differences may result from actions taken by us as well as from risks and uncertainties beyond our control. Potential risks and
uncertainties include, among others, those specifically set forth in this section and those under Factors That May Affect the Business below. Except as required by law, we undertake no obligation to update any forward-looking statement,
whether as a result of new information, future developments or otherwise. Readers should carefully review all documents that we file with, and furnish to, the SEC, as we will periodically update these forward-looking statements through these
documents. Therefore, these forward-looking statements should not be considered current beyond the date this document is filed with the SEC unless read in conjunction with all of our documents filed with, and furnished to, the SEC thereafter.



During the first three quarters of 2005, revenue grew 19%, at a gross margin of 73%
and an operating margin of 31%. For the full year of 2005, management expects to report: revenue growth of approximately 18%, at a gross margin of approximately 73%; an approximate 11% to 12% increase in selling, general and administrative expenses;
an approximate 6% to 8% decline in depreciation expense; an increase in amortization expense of over 100% due to intangible assets acquired through business combinations late in 2004 and in 2005; an operating margin of approximately 31%; an annual
effective income tax rate for 2005 of approximately 37%; and diluted earnings per share of approximately $2.24 to $2.27 based on diluted weighted average shares outstanding of approximately 65 million. These expectations reflect business
acquisitions completed during the first three quarters of the year but do not include the effect of future acquisitions of businesses, if any.



These expectations are subject to the risks and uncertainties specific to results of operations that are outlined in the Results of Operations Outlook in Part II,
Item 7 of our 2004 Annual Report on Form 10-K, as well as the general risks and uncertainties outlined below under Factors that May Affect the Business.



LIQUIDITY AND CAPITAL RESOURCES



|                                                     |  |                    |         |                   |   |        
|---------------------------------------------------- |  | ------------------ | ------- | ----------------- | - | -------
|                                                     |  | SEPTEMBER 30, 2005 |         | DECEMBER 31, 2004
|                                                     |  |                    |         |                   |   |        
|(In thousands, except current ratio)                 |  |                    |         |                  
|                                                     |  |                   
|Cash and cash equivalents and short-term investments |  | $                  | 451,558 |                   | $ | 520,710
|Working capital                                      |  | $                  | 203,935 |                   | $ | 518,082
|Current ratio                                        |  |                    | 1.53    |                   |   | 5.55   
|                                                    



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Cash and cash equivalents and short-term investment balances decreased in the first three quarters of 2005, due to $231.9 million
in cash paid for businesses acquired in 2005. This significant use of cash was offset in part by cash flows provided by operating activities of $181.3 million for the first three quarters of 2005.



On July 1, 2005, our 0.5% convertible subordinated debentures became convertible by the holders
due to a conversion condition having been met. The conversion condition was met when the closing price of our common stock exceeded $73.30 for 20 trading days within the last 30 trading days ended June 30, 2005 and September 30, 2005. As a
result, we reclassified the $265.0 million of debentures as short-term debt on our June 30 and September 30 balance sheets. This reclassification caused a significant decrease from year end in our working capital and current ratio. Had we
not reclassified the debentures, our working capital would have been $468.9 million and our current ratio would have been 4.99 at September 30, 2005, with the decline from December 2004 due to cash paid for businesses acquired.



We believe the likelihood of a significant number of debentures being tendered for conversion prior to
the date that we are able to call the debentures is remote; however, should all or some of the holders elect to convert, we would be required to repay the applicable principal in cash up to $265.0 million, which we would likely fund with existing
cash and cash equivalents and short-term investments. The ability for the holders to convert will expire on December 31, 2005 unless the conversion condition is met again in the last 30 trading days ending on that date. If the condition is not
met during that period, we will reclassify the debt back to long-term. The closing price of our common stock on October 31, 2005 was $83.01.



In February of 2005, we cancelled our senior credit facility that would have expired in July of 2005 and elected not to replace this facility as it is anticipated that we will be
able to satisfy our liquidity needs through existing cash and cash equivalents and short-term investment balances and internally generated cash.



Cash Flows Provided by Operating Activities

Cash flows provided by operating activities
increased to $181.3 million for the first three quarters of 2005 from $138.8 million for the first three quarters of 2004 as revenue growth outpaced growth in cash operating expenses, offset in part by a modest increase in days sales outstanding
(DSO) to 55 days as of September 2005 from 54 days as of September 2004. Management expects to report approximately $70 million to $80 million in cash flows provided by operating activities for the fourth quarter of 2005.



Cash Flows Used in Investing Activities

Cash flows used in investing activities grew to $254.0 million for the first three quarters of 2005 from $183.7 million for the first three quarters of 2004, due mainly to the
acquisition of businesses and collections of imagery in the second and third quarters of 2005. These acquisitions were completed in order to increase our holdings of wholly-owned imagery. Management expects capital expenditures to total
approximately $60 million for the full year of 2005, $10 million higher than its previous expectation due to the acquisition of an image collection for $9.0 million in the third quarter.



There were neither material changes in our contractual obligations and rights nor any other material changes in our financial condition during the
first three quarters of 2005.



RECENT ACCOUNTING PRONOUNCEMENTS



Statement of Financial Accounting Standards No. 123(R), Share-Based Payment

In December of 2004, the FASB issued SFAS No. 123(R), which addresses the accounting for employee services received in exchange for (a) equity
instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprises equity instruments or that may be settled by the issuance of such equity instruments. On April 14, 2005, the SEC delayed the
effective date of SFAS No. 123(R) until January 1, 2006 for calendar year companies. SFAS No. 123(R) eliminates our ability to account for employee stock options using the intrinsic value provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations, and generally requires instead that we expense them using a fair-value-based method. Accordingly, we will expense the fair value of all
share-based compensation beginning January 1, 2006 to selling, general and administrative expenses over the vesting period. Our employee share-based compensation plan includes both stock options and restricted stock units. The impact of this
compensation plan on our income statement may vary greatly depending on the number of options and units granted and the future price of our common stock. However, management currently anticipates that our share-based compensation plan will reduce
2006 diluted earnings per share by approximately $0.14 to $0.20. This estimate is based on a range of estimated prices of our common stock and current expectations of the number of shares that may be awarded.



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SEC Staff Accounting Bulletin (SAB) No. 107

In March of 2005, the SEC issued SAB No. 107, which interprets SFAS No. 123(R). In particular, this SAB includes interpretive guidance that may be applicable to us related to: share-based payment transactions with nonemployees;
methods of valuing share-based payments; the classification of compensation expense in the income statement; capitalization of compensation cost related to share- based payment arrangements; the accounting for income tax effects of share-based
payment arrangements upon adoption of SFAS No. 123(R); the modification of employee share options prior to adoption of SFAS No. 123(R); and disclosures in Managements Discussion and Analysis subsequent to adoption of SFAS
No. 123(R). This guidance was included in the development of the anticipated impact of SFAS No. 123(R) as discussed above.



SFAS No. 154, Accounting for Changes and Error Corrections

In May of
2005, the FASB issued SFAS No. 154, which changes the requirements for the accounting for, and reporting of, a change in accounting principle. Previously, most voluntary changes in accounting principle were recognized by including in net income
of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods financial statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the cumulative effect of the change. This Statement also requires that a change in depreciation, amortization, or depletion method for long-lived, nonfinancial assets be accounted for
as a change in accounting estimate effected by a change in accounting principle. These changes are accounted for in the period of change and future periods, as applicable, and may be made only if the new accounting principle is preferable. This
Statement is effective for accounting principles changed on or after January 1, 2006.



FACTORS THAT MAY AFFECT THE BUSINESS



We May Not be Able to Compete
Effectively Against Competitors

The market for visual content and related services is highly competitive. We believe the principal competitive factors are: name
recognition; company reputation; the quality, relevance and breadth of the images in a companys collections; the quality of contributing photographers, filmmakers and other imagery partners under contract with a company; effective use of
current and emerging technology; customer service; pricing and licensing models, policies and practices; and accessibility of imagery and speed and ease of search and fulfillment. Some of our existing and potential competitors may have or may
develop products, services or technology superior to ours, or other competitive advantages. If we are not able to compete effectively, we could lose market share, which could have an adverse impact on our revenues and operating results. See the
listing of some of our current and potential competitors under Competition in Part I, Item 1 of our 2004 Annual Report on Form 10-K.



Our Financial Results and Stock Price May Fluctuate

We expect our revenues and operating
results to vary from quarter to quarter due to a number of factors, both within and outside of our control, including, but not limited to, the following:

| |  |  | demand for our existing and new imagery and related services, and those of our competitors;
| | - |  | -------------------------------------------------------------------------------------------

| |  |  | changes in our pricing policies and practices;
| | - |  | ----------------------------------------------

| |  |  | changes in the sales mix of our products and services, including the mix of licensed uses, company-owned versus contributor-supplied imagery, and the geographic distribution of such licenses,
each of which affect the price of a license and/or the royalty we pay on the license;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | our ability to attract and retain customers;
| | - |  | --------------------------------------------

| |  |  | costs related to potential acquisitions and the development and/or use of technology, services or products;
| | - |  | -----------------------------------------------------------------------------------------------------------

| |  |  | fluctuations in foreign currency exchange rates, changes in global capital markets and economic conditions, and changes to applicable tax laws and regulations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the termination of certain image partner, distributor, or reseller agreements; and
| | - |  | ----------------------------------------------------------------------------------

| |  |  | changes in estimates and assumptions made by management in preparing our financial statements, including those discussed in the Critical Accounting Policies and Estimates and
Assumptions section of Managements Discussion and Analysis of Financial Condition and Results of Operations under Item 7 in Part II of our 2004 Annual Report on Form 10-K.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Because of these risks and others, it is possible that our future results may differ from our
expectations and the expectations of analysts and investors, causing our stock price to fluctuate.



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We May Not be Successful in Integrating Acquired Businesses

As part of our business strategy, we have in the past acquired, and may in the future seek to acquire or invest in businesses, products or technologies that could complement or expand our business. The evaluation and
negotiation of potential acquisitions, as well as the integration of acquired businesses, divert management time and other resources. Certain other financial and operational risks related to acquisitions that may have a material impact on our
business or prevent us from benefiting from an acquisition include:

| |  |  | costs incurred in performing due diligence relating to potential acquisitions;
| | - |  | ------------------------------------------------------------------------------

| |  |  | use of cash resources, incurrence of debt or stockholder dilution through issuances of our securities to fund acquisitions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

| |  |  | assumption of actual or contingent liabilities that are or are not identified during due diligence;
| | - |  | ---------------------------------------------------------------------------------------------------

| |  |  | amortization expenses related to acquired intangible assets, impairment of any goodwill acquired and other adverse accounting consequences;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | difficulties and expenses in assimilating the operations, products, technology and information systems of an acquired company; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------

| |  |  | retention of key employees, customers, and suppliers of the acquired business.
| | - |  | ------------------------------------------------------------------------------



We May Not be Able to Obtain External Financing or Service Our Indebtedness

While
management currently anticipates that our current cash and cash equivalents and short-term investment balances and future operating cash flows will be sufficient to meet our needs for working capital and capital expenditures for at least the next 12
months, we could be required to obtain external financing should our financial results not meet managements expectations or should we need additional funds to acquire selected businesses or otherwise achieve our objectives. In addition, our
convertible subordinated debentures require cash repayment of up to the $265.0 million of principal borrowed potentially at any time upon certain conditions and no later than upon maturity in 2023. On June 21, 2005, we announced that the
debentures were convertible by the holders as of July 1, 2005, due to a conversion condition having been met. See Item 2.04 of the Current Report on Form 8-K we filed on June 21, 2005, and the discussion of the terms of these
debentures in the Financial Condition section of Managements Discussion and Analysis of Financial Condition and Results of Operations under Item 7 in Part II of our 2004 Annual Report on Form 10-K. The conversion
condition was met again at September 30, 2005. Should all or some of the holders elect to convert, we would be required to repay the applicable principal in cash up to $265.0 million. The ability for the holders to convert will expire on
December 31, 2005 unless the conversion condition is met again in the last 30 trading days ending on that date. Should we need to obtain external financing, through debt or equity, our ability to do so could be affected by changes in U.S. and
global capital markets and economies, significant fluctuations in interest rates, the price of our equity securities, fluctuations in the results of our operations, and other financial and business conditions, many of which are beyond our control.



We May Experience System and Service Disruptions and Difficulties

The digitization and Internet distribution of our visual content is a key component of our business, which involves operations in multiple countries using multiple localized areas
of our website all of which use a common technology platform. As a result, we are particularly dependent upon, and have expended significant resources to ensure, the efficient functioning of our website (and the technology behind it) to allow our
customers to access and conduct transactions through our website. We also have focused significant resources and attention on the installation and development of systems for technology, business processes, sales and marketing systems, royalty and
other finance systems, customer interfaces, and other corporate administrative functions, which we depend on to manage and control our operations.



We will need to continue to improve our website and these systems, as well as our network infrastructure, to improve our customer experience and to accommodate anticipated
increased traffic on our website, sales volume, and the processing of the resulting information. If we do not continue to update and upgrade our website and these other systems, or if we experience significant disruptions or difficulties as a result
of or during any such updates or upgrades, we may face system interruptions, poor response times, diminished customer services, impaired quality and speed of order fulfillment, and potential problems with our internal control over financial
reporting.



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In the past, we have experienced infrequent and brief system interruptions that made portions of our website unavailable or
prevented us from efficiently taking, processing or fulfilling orders. Additionally, we depend on certain third party software and system providers for the processing and distribution of our imagery and related services. System disruptions and
difficulties, whether as a result of our internally developed systems or those of the third-party providers, may inconvenience our customers and/or result in negative publicity, and may negatively affect our ability to provide services and the
volume of images we license and deliver over the Internet.



Additionally, the computer
and communications hardware necessary to operate our corporate functions are located in metropolitan areas worldwide. Any of these systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure,
earthquake and similar events. We do not have complete redundancy for all of our network and telecommunications facilities.



Systems Security Risks and Concerns May Harm Our Business

An important component of our
business is the secure transmission of confidential information and the transaction of commerce over the Internet. Developments in computer capabilities, viruses, or other events could result in compromises or breaches of our systems or those of
other websites and networks, jeopardizing proprietary and confidential information belonging to us or our customers, or causing potentially serious interruptions in our services, sales or operations. We continue to expend significant resources to
protect against the threat of security breaches or to alleviate problems caused by such breaches. Significant compromises of our security system or the Internet may reduce our customers desire to transact business over the Internet.



Certain of Our Stockholders Can Exercise Significant Influence over Our Business and
Affairs

Some of our stockholders own substantial percentages of the outstanding shares of our common stock. Getty Investments L.L.C.; The October 1993 Trust; The
JD Klein Family Settlement; Mr. Mark H. Getty, our Chairman; and Mr. Jonathan D. Klein, our Chief Executive Officer (collectively the Getty Group), owned approximately 17% of the outstanding shares of our common stock
at September 30, 2005. Getty Investments alone owned approximately 16% of the outstanding shares of our common stock at September 30, 2005. Mr. Getty serves as the Chairman of the Board of Directors of Getty Investments, and
Mr. Klein serves on the Board of Directors of Getty Investments.



As a result of
their share ownership, the Getty Group has significant influence over all matters requiring approval of our stockholders, including the election of directors and the approval of business combinations. The substantial percentage of our common stock
held by the Getty Group could also make us a less attractive acquisition candidate or have the effect of delaying or preventing a third party from acquiring control over us at a premium over the then-current price of our common stock. In addition to
ownership of our common stock, the Getty Groups influence over us is increased by Mr. Gettys role as the Chairman of our Board of Directors, and Mr. Kleins role as Chief Executive Officer and as a member of our Board of
Directors.



We May Lose the Right to Use Getty Images Trademarks in the
Event We Experience a Change of Control

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



An
Increase in Government Regulation of the Internet and E-commerce Could Have a Negative Impact on Our Business

We are subject to a number of laws and regulations
directly applicable to e-commerce. State, federal and foreign governments have adopted, and may continue to adopt, legislation regulating the Internet and e-commerce. Such regulation could both increase our cost of doing business and impede the
growth of our business or of the Internet, while decreasing the Internets acceptance or effectiveness as a communications and commerce medium.



Existing or future laws and other regulations that may impact our business include, but are not limited to, those that govern or restrict:

| |  |  | privacy issues and data collection, processing, retention and transmission;
| | - |  | ---------------------------------------------------------------------------

| |  |  | pricing and taxation of goods and services offered over the Internet;
| | - |  | ---------------------------------------------------------------------

| |  |  | website content, or the manner in which products and services may be offered and/or marketed over the Internet; and
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|22 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 3



Certain Provisions of Our Corporate Documents and Delaware Corporate Law May Deter a Third Party from Acquiring Us

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



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Interest Rate Risk

The table below provides information about our financial instruments for which the fair values are sensitive to
changes in interest rates. For investments, the table presents cash flows and weighted average interest rates by stated maturity dates. For our debt obligation, the table presents principal cash flows by stated maturity date, though the applicable
principal of the debentures would be required to be paid in cash if some or all of the debentures were converted by the holders (see discussion under Debt below). The respective fair values are determined through market quotes. All
instruments are denominated and presented in U.S. dollars.



|                                      |  |                      |       |            |   |        |  |      |        |      |   |            |  |       |        |                   |   |                  |  |   |         |  |   |         |  |   |        
|------------------------------------- |  | -------------------- | ----- | ---------- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ | ----------------- | - | ---------------- |  | - | ------- |  | - | ------- |  | - | -------
|                                      |  | STATED MATURITY DATE |       | FAIR VALUE
|                                      |  | 2005                 |       | 2006       |   | 2007   |  | 2008 |        | 2009 |   | THEREAFTER |  | TOTAL |        | SEPTEMBER 30,2005 |   | DECEMBER 31,2004
|                                      |  |                      |       |            |   |        |  |      |        |      |   |            |  |       |        |                   |   |                  |  |   |         |  |   |         |  |   |        
|(In thousands, except interest rates) |  |                      |       |            |   |        |  |      |        |      |   |            |  |       |        |                   |   |                 
|                                      |  |                      |       |            |   |        |  |      |       
|Short-term investments                |  |                      |       |            |   |        |  |      |        |      |   |            |  |       |        |                   |   |                  |  |   |         |  |   |         |  |   |        
|Fixed rate                            |  | $                    | 6,562 |            | $ | 52,305 |  | $    | 54,890 |      | $ | 12,714     |  | $     | 6,176  |                   | $ | 2,520            |  | $ | 135,167 |  | $ | 132,930 |  | $ | 136,470
|Weighted average interest rate        |  |                      | 3.47% |            |   | 3.30%  |  |      | 3.36%  |      |   | 3.38%      |  |       | 3.38%  |                   |   | 3.84%            |  |   | 3.35%   |  |   |        |  |   |       
|Variable rate                         |  | $                    | 6,571 |            | $ | 3,834  |  | $    | 2,000  |      | $ |           |  | $     | 1,000  |                   | $ | 70,653           |  | $ | 84,058  |  | $ | 84,064  |  | $ | 105,252
|Weighted average interest rate        |  |                      | 3.74% |            |   | 3.79%  |  |      | 3.95%  |      |   |           |  |       | 4.00%  |                   |   | 2.24%            |  |   | 2.49%   |  |   |        |  |   |       
|Step-up rate                          |  | $                    |      |            | $ |       |  | $    | 29,996 |      | $ | 45,000     |  | $     | 10,000 |                   | $ |                 |  | $ | 84,996  |  | $ | 83,326  |  | $ | 84,236 
|Weighted average interest rate        |  |                      |      |            |   |       |  |      | 3.12%  |      |   | 2.78%      |  |       | 3.25%  |                   |   |                 |  |   | 2.96%   |  |   |        |  |   |       
|                                      |  |                      |       |            |   |        |  |      |       
|Debt                                  |  |                      |       |            |   |        |  |      |        |      |   |            |  |       |        |                   |   |                  |  |   |         |  |   |         |  |   |        
|Fixed rate                            |  | $                    |      |            | $ |       |  | $    |       |      | $ |           |  | $     |       |                   | $ | 265,000          |  | $ | 265,000 |  | $ | 514,431 |  | $ | 409,425
|Weighted average interest rate        |  |                      |      |            |   |       |  |      |       |      |   |           |  |       |       |                   |   | 0.50%            |  |   | 0.50%   |  |   |        |  |   |       
|                                     



SHORT-TERM
INVESTMENTS

Short-term investments at September 30, 2005 consisted of available-for-sale U.S. agency securities ($172.8 million), auction rate securities
($70.5 million), corporate obligations ($44.6 million), U.S. Treasury obligations ($5.9 million) and money market funds ($6.6 million), carried at market value with associated unrealized holding gains and losses recorded in other comprehensive
income. Available-for-sale investments with contractual maturities beyond one year are classified as short-term in our consolidated balance sheets because they represent the investment of cash that is available for current operations.



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|23 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 3



DEBT

The debt shown in the table above represents our convertible subordinated debentures. As discussed in Part I, Item 2 under Liquidity and Capital Resources, we believe the likelihood of a significant number of debentures
being tendered for conversion prior to the date that we are able to call the debentures is remote. Therefore, we have included it in the table at its stated maturity date; however, should all or some of the holders convert, we would likely fund the
required applicable principal cash repayment of up to $265.0 million with existing cash and cash equivalents and short-term investment balances. The ability for the holders to convert will expire on December 31, 2005 unless the conversion
condition is met again in the last 30 trading days ending on that date. The closing price of our common stock on October 31, 2005 was $83.01.



Credit Risk

In addition to interest rate risk, our short-term investments expose us to
credit-related losses as they comprise debt instruments issued by third parties. We mitigate this risk by only buying investment grade debt securities. At September 30, 2005, 89% of our investments were in AAA rated or US Treasury debt
instruments, as compared to 88% at December 31, 2004. No investments were rated below A at either date. Significant concentrations of investments at September 30, 2005 were Fannie Mae ($62.2 million fair value), Freddie Mac ($56.8 million
fair value) and Federal Home Loan Bank ($52.9 million fair value). Concentrations of investments at December 31, 2004 were Fannie Mae ($62.6 million fair value), Freddie Mac ($56.8 million fair value) and Federal Home Loan Bank ($54.5 million
fair value). The majority of these concentrated investments were AAA rated at September 30, 2005 (97%) and December 31, 2004 (98%).



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|24 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 3



Foreign Currency Exchange Rate Risk



FOREIGN CURRENCY TRANSACTIONS

Short-Term Foreign Currency Balances    Foreign-currency denominated assets and liabilities, other than long-term intercompany balances (discussed below), which are subject to transaction gains and losses each
month, that were outstanding at September 30, 2005 and December 31, 2004, and were in excess of $3.0 million individually at these dates are summarized in the table below by the functional currency of the subsidiary where the balances are
recorded. Changes in balances since December 31, 2004 are due to intercompany management charges and royalties, cash settlements, foreign currency revaluation, and forward foreign exchange contract activity. All balances at September 30,
2005 are expected to settle within 12 months in the currencies listed.



|                                                                                                                   |  |                   |         |   |                  |   |         |  
|------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                   |  | SEPTEMBER 30,2005 |         |   | DECEMBER 31,2004 |  
|                                                                                                                   |  |                   |         |   |                  |   |         |  
|(In thousands, except settlement rates)                                                                            |  |                   |         |   |                  |  
|                                                                                                                   |  |                  
|British Pound Functional Currency                                                                                  |  |                   |         |   |                  |   |         |  
|Receivables (payables) denominated in:                                                                             |  |                   |         |   |                  |   |         |  
|Euros                                                                                                              |  | $                 | 12,972  |   |                  | $ | 6,092   |  
|U.S. dollars                                                                                                       |  |                   | 11,144  |   |                  |   | (1,986  | )
|Forward foreign currency exchange contracts:                                                                       |  |                   |         |   |                  |   |         |  
|Receive British pounds/pay euros                                                                                   |  |                   |         |   |                  |   |         |  
|Contract amount (13,800 and 7,500 notional amounts at September 30, 2005 and December 31, 2004, respectively)    |  | $                 | (16,646 | ) |                  | $ | (10,037 | )
|Weighted average contractual settlement rate                                                                       |  |                   | 0.68    |   |                  |   | 0.70    |  
|                                                                                                                   |  |                  
|Euro Functional Currency                                                                                           |  |                   |         |   |                  |   |         |  
|Receivables (payables) denominated in:                                                                             |  |                   |         |   |                  |   |         |  
|British pounds                                                                                                     |  | $                 | (2,524  | ) |                  | $ | 3,890   |  
|                                                                                                                   |  |                  
|U.S. Dollar Functional Currency                                                                                    |  |                   |         |   |                  |   |         |  
|Receivables denominated in:                                                                                        |  |                   |         |   |                  |   |         |  
|British pounds                                                                                                     |  | $                 | 15,171  |   |                  | $ | 3,764   |  
|Euros                                                                                                              |  |                   | 8,281   |   |                  |   | 4,215   |  
|Japanese yen                                                                                                       |  |                   | 4,659   |   |                  |   | 2,364   |  
|Forward foreign currency exchange contracts:                                                                       |  |                   |         |   |                  |   |         |  
|Receive U.S. dollars/pay British pounds                                                                            |  |                   |         |   |                  |   |         |  
|Contract amount (£5,900 and £1,850 notional amounts at September 30, 2005 and December 31, 2004, respectively)     |  | $                 | (10,431 | ) |                  | $ | (3,545  | )
|Weighted average contractual settlement rate                                                                       |  |                   | 1.80    |   |                  |   | 1.89    |  
|Receive U.S. dollars/pay Canadian dollars                                                                          |  |                   |         |   |                  |   |         |  
|Contract amount (C$3,810 and C$1,410 notional amounts at September 30, 2005 and December 31, 2004, respectively)   |  | $                 | (3,281  | ) |                  | $ | (1,172  | )
|Weighted average contractual settlement rate                                                                       |  |                   | 1.19    |   |                  |   | 1.21    |  
|Receive U.S. dollars/pay euros                                                                                     |  |                   |         |   |                  |   |         |  
|Contract amount (15,200 and 12,925 notional amounts at September 30, 2005 and December 31, 2004, respectively)   |  | $                 | (21,171 | ) |                  | $ | (17,498 | )
|Weighted average contractual settlement rate                                                                       |  |                   | 1.23    |   |                  |   | 1.32    |  
|Receive U.S. dollars/pay Japanese yen                                                                              |  |                   |         |   |                  |   |         |  
|Contract amount (¥621,000 and ¥190,000 notional amounts at September 30, 2005 and December 31, 2004, respectively) |  | $                 | (5,570  | ) |                  | $ | (1,850  | )
|Weighted average contractual settlement rate                                                                       |  |                   | 110.92  |   |                  |   | 104.05  |  
|                                                                                                                   | 



Long-Term Intercompany
Balances    Foreign exchange losses of $26.2 million and gains of $0.9 million for the first three quarters of 2005 and 2004, respectively, arose from the revaluation of foreign-currency denominated long-term intercompany
balances and were



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|25 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART I |  |  |  | ITEM 3



included in accumulated other comprehensive income. In connection with the acquisition of Digital Vision in the second quarter of 2005, a new $165.0 million long-term
intercompany loan payable was established on the books of a subsidiary whose functional currency is the British pound. This new loan doubled that subsidiarys long-term U.S. dollar exposure. There were no other changes in long-term intercompany
balances in 2005.



FOREIGN CURRENCY TRANSLATION

We recognized translation adjustment losses of two thousand dollars and $1.0 million in the first three quarters of 2005 and 2004, respectively. Accumulated
translation losses included in accumulated other comprehensive income at September 30, 2005 and December 31, 2004 were $12.4 million at both dates. Changes from the first three quarters of 2004 to the first three quarters of 2005 in the
exchange rates used to translate the results of operations of subsidiaries with non-U.S. dollar functional currencies resulted in increases in U.S. dollar reported revenue, selling, general and administrative expenses and depreciation of
approximately $10.6 million, $2.5 million and $0.3 million, respectively.



ITEM 4. CONTROLS AND PROCEDURES



Evaluation of
Disclosure Controls and Procedures

The Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2005. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of
September 30, 2005, these disclosure controls and procedures were effective.



Changes in Internal Control Over Financial Reporting

During the period covered by this report, there were no changes in our internal control over
financial reporting identified in connection with managements evaluation of the effectiveness of our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.



PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS

We have been, and may continue to be, subject to legal claims from time to time in the ordinary course of
our business, including those related to alleged infringements of the intellectual property rights of third parties, such as the alleged failure to secure model or property releases for imagery we license. Claims may also include those brought by
photographers and filmmakers relating to our handling of images submitted to us or to the companies we have acquired. We have accrued a liability for the anticipated costs of defending, adjudicating or settling claims for which we believe a loss is
probable. There are no pending legal proceedings to which we are a party or to which any of our property is subject that, either individually or in the aggregate, are expected to have a material adverse effect on our consolidated financial position,
results of operations or cash flows.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None



ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None



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

None



ITEM 5. OTHER INFORMATION

None



ITEM 6. EXHIBITS

Reference is made to the Exhibit Index beginning on page 27 for a list of all exhibits filed as part of this
report.



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|26 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  |  |  |  |  | SIGNATURE



SIGNATURE



Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



GETTY IMAGES, INC.By:

/s/    ELIZABETH J. HUEBNERElizabeth J. Huebner Senior Vice President and Chief Financial
Officer (Principal Financial and Accounting Officer)




November 3, 2005



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|27 |  |  |  | GETTY IMAGES, INC. |  |  |  | Q3  2005 |  |  |  | FORM 10-Q |  | PART II |  |  |  | ITEM 6



EXHIBIT INDEX



|               |  |                                                                      
|-------------- |  | ---------------------------------------------------------------------
|Exhibit Number |  | Description of Exhibit                                               
|               | 
|10.39 *        |  | Form of Executive Stock Option Agreement                             
|               | 
|12.1           |  | Statement Regarding Computation of Ratio of Earnings to Fixed Charges
|               | 
|31.1           |  | Section 302 Certification by Jonathan D. Klein, CEO                  
|               | 
|31.2           |  | Section 302 Certification by Elizabeth J. Huebner, CFO               
|               | 
|32.1           |  | Section 906 Certification by Jonathan D. Klein, CEO                  
|               | 
|32.2           |  | Section 906 Certification by Elizabeth J. Huebner, CFO               

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|* |  | Indicates management contracts or compensatory plans or arrangements.
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