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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE
ACT OF 1934



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For the Quarterly Period Ended June 30, 2003



Commission File No. 1-13481



METRO-GOLDWYN-MAYER INC.

(Exact name
of registrant as specified in its charter)



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|Delaware                                                       |  | 95-4605850                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|10250 Constellation Boulevard, Los Angeles, CA                 |  | 90067                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code: (310) 449-3000



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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes ̈No



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



The number of shares of the Registrants common stock
outstanding as of July 23, 2003 was 244,865,632.



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##### Table of Contents

METRO-GOLDWYN-MAYER INC.



FORM 10-Q



June 30, 2003



INDEX



|               |  |                                                                                                                          |  | Page No.
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | --------
|Part I.        |  | FINANCIAL INFORMATION                                                                                                    |  |         
|               |  |                                                                                                                         
|Item 1.        |  | Financial Statements                                                                                                     |  |         
|               |  |                                                                                                                         
|               |  | Condensed Consolidated Balance Sheets as of June 30, 2003 (unaudited) and December 31, 2002                              |  | 1       
|               |  |                                                                                                                         
|               |  | Condensed Consolidated Statements of Operations for the Quarters and Six Months ended June 30, 2003 and 2002 (unaudited) |  | 2       
|               |  |                                                                                                                         
|               |  | Condensed Consolidated Statement of Stockholders Equity for the Six Months ended June 30, 2003 (unaudited)              |  | 3       
|               |  |                                                                                                                         
|               |  | Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2003 and 2002 (unaudited)              |  | 4       
|               |  |                                                                                                                         
|               |  | Notes to Condensed Consolidated Financial Statements                                                                     |  | 5       
|               |  |                                                                                                                         
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 16      
|               |  |                                                                                                                         
|Item 3.        |  | Quantitative and Qualitative Disclosures About Market Risk                                                               |  | 29      
|               |  |                                                                                                                         
|Item 4.        |  | Controls and Procedures                                                                                                  |  | 29      
|               |  |                                                                                                                         
|Part II.       |  | OTHER INFORMATION                                                                                                        |  |         
|               |  |                                                                                                                         
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                                      |  | 30      
|               |  |                                                                                                                         
|Item 5.        |  | Other Information                                                                                                        |  | 30      
|               |  |                                                                                                                         
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                                                         |  | 31      
|               | 
|Signatures     |  | 32                                                                                                                      
|               | 
|Certifications |  | 33                                                                                                                      



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##### Table of Contents

PART I.    FINANCIAL INFORMATION



Item 1.    Financial Statements



METRO-GOLDWYN-MAYER INC.



CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



|                                                                                                                |  | June 30, 2003 |            |   | December 31,2002 |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ---------------- | -
|                                                                                                                |  | (unaudited)   |            |   |                  |  
|ASSETS                                                                                                          |  |               |            |   |                  |  
|Cash and cash equivalents                                                                                       |  | $             | 671,884    |   |                  | $
|Short-term investments                                                                                          |  |               | 34,809     |   |                  |  
|Accounts and contracts receivable (net of allowance for doubtful accounts of $42,593 and $40,980,
respectively) |  |               | 560,001    |   |                  |  
|                                                                                                                | 
|Film and television costs, net                                                                                  |  |               | 1,794,387  |   |                  |  
|Investments in and advances to affiliates                                                                       |  |               | 521,104    |   |                  |  
|Property and equipment, net                                                                                     |  |               | 57,729     |   |                  |  
|Goodwill                                                                                                        |  |               | 516,706    |   |                  |  
|Other assets                                                                                                    |  |               | 26,461     |   |                  |  
|                                                                                                                |  |               |            |   |                  |  
|                                                                                                                |  | $             | 4,183,081  |   |                  | $
|                                                                                                                |  |               |            |   |                  |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                            |  |               |            |   |                  |  
|Liabilities:                                                                                                    |  |               |            |   |                  |  
|Bank and other debt                                                                                             |  | $             | 1,151,702  |   |                  | $
|Accounts payable and accrued liabilities                                                                        |  |               | 244,507    |   |                  |  
|Accrued participants share                                                                                     |  |               | 275,233    |   |                  |  
|Income taxes payable                                                                                            |  |               | 34,510     |   |                  |  
|Advances and deferred revenues                                                                                  |  |               | 74,453     |   |                  |  
|Other liabilities                                                                                               |  |               | 111,483    |   |                  |  
|                                                                                                                |  |               |            |   |                  |  
|Total liabilities                                                                                               |  |               | 1,891,888  |   |                  |  
|                                                                                                                |  |               |            |   |                  |  
|Commitments and contingencies                                                                                   |  |               |            |   |                  |  
|                                                                                                                |  |              
|Stockholders equity:                                                                                           |  |               |            |   |                  |  
|Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued                                      |  |               |           |   |                  |  
|Common stock, $.01 par value, 500,000,000 shares authorized, 251,960,505 shares issued                          |  |               | 2,520      |   |                  |  
|Additional paid-in capital                                                                                      |  |               | 3,915,133  |   |                  |  
|Deficit                                                                                                         |  |               | (1,535,213 | ) |                  |  
|Accumulated other comprehensive loss                                                                            |  |               | (4,780     | ) |                  |  
|Less: treasury stock, at cost, 7,517,923 and 3,107,609 shares                                                   |  |               | (86,467    | ) |                  |  
|                                                                                                                |  |               |            |   |                  |  
|Total stockholders equity                                                                                      |  |               | 2,291,193  |   |                  |  
|                                                                                                                |  |               |            |   |                  |  
|                                                                                                                |  | $             | 4,183,081  |   |                  | $
|                                                                                                                |  |               |            |   |                  |  



The accompanying Notes
to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.



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##### Table of Contents

METRO-GOLDWYN-MAYER INC.



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)



|                                                      |  | Quarter Ended June 30, |             |   | Six Months Ended June 30, |  
|----------------------------------------------------- |  | ---------------------- | ----------- | - | ------------------------- | -
|                                                      |  | 2003                   |             |   | 2002                      |  
|Revenues                                              |  | $                      | 487,702     |   |                           | $
|Expenses:                                             |  |                        |             |   |                           |  
|Operating                                             |  |                        | 276,478     |   |                           |  
|Selling, general and administrative                   |  |                        | 224,698     |   |                           |  
|Depreciation                                          |  |                        | 5,013       |   |                           |  
|                                                      |  |                        |             |   |                           |  
|Total expenses                                        |  |                        | 506,189     |   |                           |  
|                                                      |  |                        |             |   |                           |  
|Operating loss                                        |  |                        | (18,487     | ) |                           |  
|Other income (expense):                               |  |                        |             |   |                           |  
|Write-down of investment in cable channels            |  |                        | (93,059     | ) |                           |  
|Equity in net earnings (losses) of affiliates         |  |                        | (1,211      | ) |                           |  
|Interest expense, net of amounts capitalized          |  |                        | (18,863     | ) |                           |  
|Interest and other income                             |  |                        | 3,069       |   |                           |  
|                                                      |  |                        |             |   |                           |  
|Total other expenses                                  |  |                        | (110,064    | ) |                           |  
|                                                      |  |                        |             |   |                           |  
|Loss before provision for income taxes                |  |                        | (128,551    | ) |                           |  
|Income tax provision                                  |  |                        | (5,028      | ) |                           |  
|                                                      |  |                        |             |   |                           |  
|Net loss                                              |  | $                      | (133,579    | ) |                           | $
|                                                      |  |                        |             |   |                           |  
|Loss per share:                                       |  |                        |             |   |                           |  
|Basic and diluted                                     |  | $                      | (0.55       | ) |                           | $
|                                                      |  |                        |             |   |                           |  
|Weighted average number of common shares outstanding: |  |                        |             |   |                           |  
|Basic and diluted                                     |  |                        | 244,807,107 |   |                           |  
|                                                      |  |                        |             |   |                           |  





The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.



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METRO-GOLDWYN-MAYER INC.



CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(in thousands, except share data)



|                                                         |  | Preferred Stock |  | Common Stock |   | AddlPaid-inCapital |             | Deficit  |   |       | ComprehensiveIncome (Loss) |   |           | Accum.OtherComprehensiveIncome (Loss) |   |            | Less:TreasuryStock |  |   | TotalStockholdersEquity |  
|-------------------------------------------------------- |  | --------------- |  | ------------ | - | ------------------- | ----------- | -------- | - | ----- | -------------------------- | - | --------- | ------------------------------------- | - | ---------- | ------------------ |  | - | ------------------------ | -
|                                                         |  | No. ofShares    |  | ParValue     |   | No. ofShares        |             | ParValue |   |       |                            |   |           |                                      
|Balance December 31, 2002                                |  |                |  | $            |  |                     | 251,960,505 |          | $ | 2,520 |                            | $ | 3,914,923 |                                       | $ | (1,345,812 | )                  |  | $ |                         |  
|Common stock issued to directors, officers and employees |  |                |  |              |  |                     |            |          |   |      |                            |   | 210       |                                       |   |           |                    |  |   |                         |  
|Acquisition of treasury stock, at cost                   |  |                |  |              |  |                     |            |          |   |      |                            |   |          |                                       |   |           |                    |  |   |                         |  
|Comprehensive income (loss):                             |  |                 |  |              |   |                     |             |          |   |       |                            |   |           |                                       |   |            |                    |  |   |                          |  
|Net loss                                                 |  |                |  |              |  |                     |            |          |   |      |                            |   |          |                                       |   | (189,401   | )                  |  |   | (189,401                 | )
|Unrealized gain on derivative instruments                |  |                |  |              |  |                     |            |          |   |      |                            |   |          |                                       |   |           |                    |  |   | 13,893                   |  
|Unrealized loss on securities                            |  |                |  |              |  |                     |            |          |   |      |                            |   |          |                                       |   |           |                    |  |   | (436                     | )
|Foreign currency translation adjustments                 |  |                |  |              |  |                     |            |          |   |      |                            |   |          |                                       |   |           |                    |  |   | 124                      |  
|                                                         |  |                 |  |              |   |                     |             |          |   |       |                            |   |           |                                       |   |            |                    |  |   |                          |  
|Comprehensive loss                                       |  |                |  |              |  |                     |            |          |   |      |                            |   |          |                                       |   |           |                    |  |   | (175,820                 | )
|                                                         |  |                 |  |              |   |                     |             |          |   |       |                            |   |           |                                       |   |            |                    |  |   |                          |  
|Balance June 30, 2003 (unaudited)                        |  |                |  | $            |  |                     | 251,960,505 |          | $ | 2,520 |                            | $ | 3,915,133 |                                       | $ | (1,535,213 | )                  |  | $ |                         |  
|                                                         |  |                 |  |              |   |                     |             |          |   |       |                            |   |           |                                       |   |            |                    |  |   |                          |  





The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.



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METRO-GOLDWYN-MAYER INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                           |  | Six Months EndedJune 30, |        
|------------------------------------------------------------------------------------------ |  | ------------------------ | -------
|                                                                                           |  | 2003                     |        
|Net cash provided by (used in) operating activities                                        |  | $                        | 159,537
|                                                                                           |  |                          |        
|Investing activities:                                                                      |  |                          |        
|Dividend received from cable channel                                                       |  |                          | 10,000 
|Purchase of short-term investments                                                         |  |                          | (28,321
|Additions to property and equipment                                                        |  |                          | (9,518 
|Investment in and advances to affiliates                                                   |  |                          | (2,752 
|                                                                                           |  |                          |        
|Net cash used in investing activities                                                      |  |                          | (30,591
|                                                                                           |  |                          |        
|Financing activities:                                                                      |  |                          |        
|Net proceeds from issuance of common stock to outside parties                              |  |                          |       
|Net proceeds from issuance of common stock to related parties                              |  |                          | 31     
|Acquisition of treasury stock                                                              |  |                          | (49,785
|Additions to borrowed funds                                                                |  |                          |       
|Repayments of borrowed funds                                                               |  |                          | (579   
|Financing fees and other                                                                   |  |                          |       
|                                                                                           |  |                          |        
|Net cash (used in) provided by financing activities                                        |  |                          | (50,333
|                                                                                           |  |                          |        
|Net change in cash and cash equivalents from operating, investing and financing activities |  |                          | 78,613 
|Net increase in cash due to foreign currency fluctuations                                  |  |                          | 140    
|                                                                                           |  |                          |        
|Net change in cash and cash equivalents                                                    |  |                          | 78,753 
|Cash and cash equivalents at beginning of the year                                         |  |                          | 593,131
|                                                                                           |  |                          |        
|Cash and cash equivalents at end of the period                                             |  | $                        | 671,884
|                                                                                           |  |                          |        





The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these condensed consolidated statements.



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



June 30, 2003



Note 1Basis of
Presentation



Basis of
Presentation.    The accompanying consolidated financial statements include the accounts of Metro-Goldwyn-Mayer Inc. (MGM), Metro-Goldwyn-Mayer Studios Inc. and its majority owned subsidiaries (collectively,
MGM Studios) and Orion Pictures Corporation and its majority owned subsidiaries (collectively, Orion) (collectively, the Company). MGM is a Delaware corporation formed on July 10, 1996 specifically to acquire MGM
Studios, and is majority owned by an investor group comprised of Tracinda Corporation and a corporation that is principally owned by Tracinda (collectively, Tracinda) and certain current and former executive officers of the Company. The
acquisition of MGM Studios by MGM was completed on October 10, 1996, at which time MGM commenced principal operations. The acquisition of Orion was completed on July 10, 1997. The Company completed the acquisition of certain film libraries and film
related rights that were previously owned by PolyGram N.V. and its subsidiaries (collectively, PolyGram) on January 7, 1999.



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States for interim financial statements and the instructions to Form 10-Q related to interim period financial statements. Accordingly, these financial statements do not include certain information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements. However, these financial statements contain all adjustments consisting only of normal recurring accruals which, in the opinion of management, are necessary in
order to make the financial statements not misleading. The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial statements. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be
read in conjunction with the Companys audited financial statements and notes thereto included in the Companys Form 10-K for the year ended December 31, 2002. As permitted by American Institute of Certified Public Accountants Statement of
Position (SOP) 00-2, Accounting by Producers or Distributors of Films, the Company has presented unclassified balance sheets.



Goodwill.    Beginning January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No.
142, Goodwill and Other Intangible Assets. Upon adoption and subsequently on an annual basis, the Company completes an impairment review and has not recognized any impairment of goodwill and other intangible assets already included in
the financial statements. The Company expects to receive future benefits from previously acquired goodwill over an indefinite period of time. Accordingly, beginning January 1, 2002, the Company has foregone all related amortization expense. Since
the Company is recording its equity in net earnings of the Cable Channels (see Note 4) on a one-quarter lag, amortization of goodwill of the Cable Channels ($9,528,000 for the quarter ended March 31, 2002) is not included in the calculation of the
Companys equity in the net earnings in this investment commencing on April 1, 2002.



For the six months ended June 30, 2003 and 2002, the reconciliation of reported net loss and net loss per share to adjusted net loss and adjusted net loss per share reflecting the elimination of goodwill amortization
is as follows (in thousands, except per share data, unaudited):



|                                                                 |  | Six Months Ended June 30, |         
|---------------------------------------------------------------- |  | ------------------------- | --------
|                                                                 |  | Net Loss                  |         
|                                                                 |  | 2003                      |         
|Net loss, as reported                                            |  | $                         | (189,401
|Elimination of goodwill amortization related to equity investees |  |                           |        
|                                                                 |  |                           |         
|Net loss, as adjusted                                            |  | $                         | (189,401
|                                                                 |  |                           |         



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Comprehensive Loss.    Components of other comprehensive loss are shown
below (in thousands, unaudited):



|                                                    |  | Quarter EndedJune 30, |          |   | Six Months EndedJune 30, |  
|--------------------------------------------------- |  | --------------------- | -------- | - | ------------------------ | -
|                                                    |  | 2003                  |          |   | 2002                     |  
|Net loss                                            |  | $                     | (133,579 | ) |                          | $
|Other comprehensive income (loss):                  |  |                       |          |   |                          |  
|Unrealized gain on derivative instruments           |  |                       | 7,799    |   |                          |  
|Unrealized loss on securities                       |  |                       | (240     | ) |                          |  
|Cumulative foreign currency translation adjustments |  |                       | (178     | ) |                          |  
|                                                    |  |                       |          |   |                          |  
|Total comprehensive loss                            |  | $                     | (126,198 | ) |                          | $
|                                                    |  |                       |          |   |                          |  



Components of
accumulated other comprehensive income (loss) are shown below (in thousands, unaudited):



|                             |  | Unrealized Gain (Loss) on Derivative Instruments |         |   | Unrealized Loss on Securities |   |        | Unfunded Pension Plan Obligation |  |   | Cumulative Translation Adjustments |   | Accumulated Other Comprehensive Income (Loss) |  
|---------------------------- |  | ------------------------------------------------ | ------- | - | ----------------------------- | - | ------ | -------------------------------- |  | - | ---------------------------------- | - | --------------------------------------------- | -
|Balance at December 31, 2002 |  | $                                                | (13,859 | ) |                               | $ | (782   | )                                |  | $ | (3,994                             | ) |                                               | $
|Current year change          |  |                                                  | 13,893  |   |                               |   | (436   | )                                |  |   |                                   |   |                                               |  
|                             |  |                                                  |         |   |                               |   |        |                                  |  |   |                                    |   |                                               |  
|Balance at June 30, 2003     |  | $                                                | 34      |   |                               | $ | (1,218 | )                                |  | $ | (3,994                             | ) |                                               | $
|                             |  |                                                  |         |   |                               |   |        |                                  |  |   |                                    |   |                                               |  



New Accounting
Pronouncements.    In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. This statement addresses financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement costs. The purpose of this statement is to develop consistent accounting of asset retirement obligations and related costs in the financial statements and provide more
information about future cash outflows, leverage and liquidity regarding retirement obligations and the gross investment in long-lived assets. This statement is effective for financial statements issued for fiscal years beginning after June 15,
2002. The Company implemented SFAS No. 143 on January 1, 2003. The impact of such adoption did not have a material effect on the Companys financial statements.



In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.
This statement requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 nullifies EITF Issue No 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). This statement is effective prospectively with regards to exit or disposal activities initiated
after December 31, 2002. The Company implemented SFAS No. 146 on January 1, 2003. The impact of such adoption did not have a material effect on the Companys financial statements.



In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosurean amendment of SFAS No. 123. This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This statement also amends the
disclosure requirements of SFAS No. 123 and APB Opinion No. 28, Interim Financial Reporting, to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The Company implemented SFAS No. 148 effective January 1, 2003 regarding



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



disclosure requirements for condensed financial statements for interim periods. The Company has not yet determined whether it will voluntarily change to the
fair value based method of accounting for stock-based employee compensation.



Note 2Severance and Other Related Costs



In June 1999, the Company incurred $85,171,000 of severance and other related costs, as well as the estimated costs of withdrawing from the Companys arrangements with United International Pictures B.V. (UIP) on November 1,
2000. The severance charge in 1999 included the termination of 46 employees, including the Companys former Chairman and Vice Chairman, across all divisions of the Company.



In June 2000, the Company reduced previously charged reserves by $5,000,000 due to a negotiated settlement with UIP
regarding the Companys withdrawal from the joint venture. Additionally, in June 2000, the Company incurred severance and other related charges of $1,285,000 related to the closure of a foreign sales office.



As of June 30, 2003, the Company has paid $54,844,000 of the severance and
other related costs. In January and February 2002, in accordance with certain agreements with the Companys former Chairman and Vice Chairman, $16,964,000 of the severance and related costs were converted into 863,499 shares of common stock of
the Company. The remaining unpaid severance at June 30, 2003 consists of unexercised stock options held by the Companys former Chairman, which are marked to market under variable option accounting.



Note 3Film and Television Costs



Film and television costs, net of amortization, are summarized as follows
(in thousands):



|                                 |  | June 30, 2003 |            |   | December 31, 2002 |  
|-------------------------------- |  | ------------- | ---------- | - | ----------------- | -
|                                 |  | (unaudited)   |            |   |                   |  
|Theatrical productions:          |  |               |            |   |                   |  
|Released                         |  | $             | 4,124,196  |   |                   | $
|Less: accumulated amortization   |  |               | (2,810,091 | ) |                   |  
|                                 |  |               |            |   |                   |  
|Released, net                    |  |               | 1,314,105  |   |                   |  
|Completed not released           |  |               | 92,624     |   |                   |  
|In production                    |  |               | 118,349    |   |                   |  
|In development                   |  |               | 32,476     |   |                   |  
|                                 |  |               |            |   |                   |  
|Subtotal: theatrical productions |  |               | 1,557,554  |   |                   |  
|                                 |  |               |            |   |                   |  
|Television programming:          |  |               |            |   |                   |  
|Released                         |  |               | 992,419    |   |                   |  
|Less: accumulated amortization   |  |               | (786,660   | ) |                   |  
|                                 |  |               |            |   |                   |  
|Released, net                    |  |               | 205,759    |   |                   |  
|In production                    |  |               | 30,114     |   |                   |  
|In development                   |  |               | 960        |   |                   |  
|                                 |  |               |            |   |                   |  
|Subtotal: television programming |  |               | 236,833    |   |                   |  
|                                 |  |               |            |   |                   |  
|                                 |  | $             | 1,794,387  |   |                   | $
|                                 |  |               |            |   |                   |  



Interest costs
capitalized to theatrical productions were $2,204,000 and $5,174,000 during the quarter and six months ended June 30, 2003, and $3,522,000 and $5,387,000 during the quarter and six months ended June 30, 2002, respectively.



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##### Table of Contents

METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 4Investments In and Advances to Affiliates



Investments are summarized as follows (in thousands):



|                        |  | June 30, 2003 |         | December 31, 2002
|----------------------- |  | ------------- | ------- | -----------------
|                        |  | (unaudited)   |         |                  
|Domestic cable channels |  | $             | 497,250 |                  
|Foreign cable channels  |  |               | 14,740  |                  
|Joint ventures          |  |               | 8,964   |                  
|Others                  |  |               | 150     |                  
|                        |  |               |         |                  
|                        |  | $             | 521,104 |                  
|                        |  |               |         |                  



Domestic Cable
Channels.    On April 2, 2001, the Company invested $825,000,000 in cash for a 20 percent interest in two general partnerships which owned and operated the American Movie Classics, the Independent Film Channel, WE:
Womens Entertainment (formerly Romance Classics) and Bravo cable channels, collectively referred to as the Cable Channels. These partnerships were wholly-owned by Rainbow Media Holdings, Inc. (Rainbow Media), a 74
percent subsidiary of Cablevision Systems Corporation (Cablevision). The proceeds of the $825,000,000 investment were used as follows: (i) $365,000,000 was used to repay bank debt of the partnerships; (ii) $295,500,000 was used to repay
intercompany loans from Cablevision and its affiliates; and (iii) $164,500,000 was added to the working capital of the partnerships. The Company financed the investment through the sale of equity securities, which provided aggregate net proceeds of
approximately $635,600,000, and borrowings under the Companys credit facilities. Based upon certain assumptions that management of the Company believes are reasonable, the Companys determination of the difference between the
Companys original cost basis in their investment in the Cable Channels and the Companys share of the underlying equity in net assets (referred to as intangible assets) was approximately $762,000,000.



On December 5, 2002, the Company and Cablevision, together with an affiliate
of Cablevision, sold their ownership interests in the Bravo cable channel (Bravo) to an affiliate of the National Broadcasting Company (NBC) for $1.25 billion. The proceeds were divided between Cablevision and the Company in
accordance with their 80 percent and 20 percent ownership interests in Bravo. The Company received $250,000,000 in cash from an affiliate of NBC for its interest in Bravo, and recorded a gain of $32,514,000 on the sale.



On July 18, 2003, the Company sold its 20 percent equity interest in the
American Movie Classics, The Independent Film Channel and WE: Womens Entertainment cable channels to Cablevision for $500,000,000 (see Note 11). As the Companys investment in these cable channels exceeds the net selling price, the
Company has recorded a write-down of its investment in the cable channels of $93,059,000 during the quarter ended June 30, 2003.



In accordance with APB No. 18, The Equity Method of Accounting for Investment in Common Stock, the Company has been recording its share of the
earnings and losses in the Cable Channels based on the most recently available financial statements received from the Cable Channels. Due to a lag in the receipt of the financial statements from the Cable Channels, the Company has reported its
interest in the Cable Channels on a one-quarter lag. Beginning April 1, 2003, due to the agreement to sell the remaining cable channels for less than the book value of the investment, which closed on July 18, 2003 (see Note 11), the Company is no
longer recording its 20 percent equity interest in the operating results of the cable channels in its results of operations.



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##### Table of Contents

METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Summarized financial information for the Cable Channels as of March 31, 2003, and for the quarter and
six months ended March 31, 2003 (including Bravo through December 5, 2002), were as follows (in thousands, unaudited):



|As of March 31, 2003:                                |  |   |        
|---------------------------------------------------- |  | - | -------
|Current assets                                       |  | $ | 262,854
|Non-current assets                                   |  | $ | 382,127
|Current liabilities                                  |  | $ | 118,236
|Non-current liabilities                              |  | $ | 168,981
|For the quarter and six months ended March 31, 2003: |  |   |        
|Revenues, net                                        |  | $ | 128,561
|Operating income                                     |  | $ | 36,414 
|Net income                                           |  | $ | 33,751 



In the quarter ended
March 31, 2003, the Companys share of the Cable Channels net operating results was a profit of $4,781,000. In the quarter and six months ended June 30, 2002, the Companys share of the Cable Channels net operating results was
a profit of $7,277,000 and $3,546,000, respectively, which in the six-month period included goodwill amortization of $9,528,000 (see Note 1).



Foreign Cable Channels.    The Company holds minority equity interests in various television channels located in certain
international territories for which the Company records its share of the channels net operating results, which aggregated a net loss of $77,000 and $912,000 in the quarter and six months ended June 30, 2003, and a loss of $371,000 and
$2,096,000 in the quarter and six months ended June 30, 2002, respectively. The Company is accounting for these investments in accordance with APB Opinion No. 18.



Joint Ventures.    On August 13, 2001, the Company, through its wholly-owned subsidiary, MGM On
Demand Inc., acquired a 20 percent interest in a joint venture established to create an on-demand movie service to offer a broad selection of theatrically-released motion pictures via digital delivery for broadband internet users in the United
States. Other partners in the joint venture include Sony Pictures Entertainment, Universal Studios, Warner Bros. and Paramount Pictures. The Company has funded $13,609,000 for its equity interest and its share of operating expenses of the joint
venture as of June 30, 2003. The Company financed its investment through utilization of cash and borrowings under its credit facilities. The Company is committed to fund its share of the operating expenses of the joint venture, as required. The
Company is accounting for its interest in the joint venture under the equity method. In the quarter and six months ended June 30, 2003, the Company recognized a net loss of $1,479,000 and $3,081,000, respectively, for its share of the operating
results of the joint venture, and in the quarter and six months ended June 30, 2002 recognized a net loss of $690,000 and $982,000, respectively.



In February 2002, the Company, through its wholly-owned subsidiary, MGM Domestic Television Distribution Inc., and NBC Enterprises, Inc. (each a
Member and, collectively the Members) formed a new media sales company, MGM-NBC Media Sales, LLC (MGM-NBC Media Sales), to act as an agent to sell advertising time received by the Members as barter ad spots
received as full or partial consideration from the sale of feature film and television programming product in the syndication market. The joint venture recognizes income from distribution fees of ten percent earned on sales of each Members
barter advertising, and incurs overhead costs to operate the joint venture, which are shared between the Members. Each Member is entitled to its share of the net profits or losses of MGM-NBC Media Sales based on a contractual formula as specified in
the agreement. In the quarter and six months ended June 30, 2003, the Company recognized a profit of $345,000 and $490,000, and in the quarter and six months ended June 30, 2002 recognized a loss of $196,000 and $262,000, respectively, for its share
of the operating results of the joint venture.



On March 27,
2002, the Company, through its wholly-owned subsidiary, MGM Digital Development Inc. (MGM Digital), acquired a one-seventh interest in NDC, LLC (NDC), a partnership created with the six



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



other major studios to (i) develop and/or ratify standards for digital motion picture equipment and for digital cinema technology to be used in the delivery
of high quality in-theatre digital cinema, and (ii) update and deploy a limited amount of new digital motion picture equipment in theatres. MGM Digital contributed $979,000 for its initial interest in NDC. The agreement has an initial term expiring
on March 27, 2004. During the six months ended June 30, 2002, the Company expensed its aggregate investment of $1,020,000 in the joint venture.



Note 5Bank and Other Debt



Bank and other debt is summarized as follows (in thousands):



|                                                   |  | June 30, 2003 |           | December 31, 2002
|-------------------------------------------------- |  | ------------- | --------- | -----------------
|                                                   |  | (unaudited)   |           |                  
|Revolving Facility                                 |  | $             |          |                  
|Term Loans                                         |  |               | 1,150,000 |                  
|Capitalized lease obligations and other borrowings |  |               | 1,702     |                  
|                                                   |  |               |           |                  
|                                                   |  | $             | 1,151,702 |                  
|                                                   |  |               |           |                  



On June 11, 2002, the
Company, through its MGM Studios and Orion subsidiaries, entered into a third amended and restated credit facility with a syndicate of banks, which amended a pre-existing credit facility, aggregating $1.75 billion (the Amended Credit
Facility) consisting of a five-year $600,000,000 revolving credit facility (the Revolving Facility), a five-year $300,000,000 term loan (Tranche A Loan) and a six-year $850,000,000 term loan (Tranche B Loan)
(collectively, the Term Loans). The Revolving Facility and the Tranche A Loan bear interest at 2.75 percent over the Adjusted LIBOR rate, as defined (3.87 percent at June 30, 2003). The Tranche B Loan bears interest at 3.00 percent over
the Adjusted LIBOR rate, as defined (4.12 percent at June 30, 2003). Scheduled amortization of the Term Loans under the Amended Credit Facility is $16,411,000 in 2003, $65,643,000 in each of 2004, 2005 and 2006, $122,785,000 in 2007 and $813,875,000
in 2008. The Revolving Facility matures on June 30, 2007.



The
Companys borrowings under the Amended Credit Facility are secured by substantially all the assets of the Company, with the exception of the copyrights in the James Bond series of motion pictures. The Amended Credit Facility contains various
covenants including limitations on dividends, capital expenditures and indebtedness, and the maintenance of certain financial ratios. The Amended Credit Facility limits the amount of the investment in MGM which may be made by MGM Studios and Orion
in the form of loans or advances, or purchases of capital stock of MGM, up to a maximum aggregate amount of $300,000,000. As of June 30, 2003, $86,467,000 was loaned to MGM by MGM Studios to fund the purchase of treasury stock by MGM (see Note 7).
Restricted net assets of MGM Studios and Orion at June 30, 2003 are approximately $2.0 billion. As of June 30, 2003, the Company was in compliance with all applicable covenants.



Capitalized lease obligations and other borrowings relate principally to contractual liabilities for the purchase of
computers and other equipment.



Note 6Financial Instruments



The Company is exposed to the impact of interest rate
changes as a result of its variable rate long-term debt. In order to reduce its exposure, the Company had previously entered into three-year fixed interest rate swap



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



agreements whereby the Company agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate amounts
calculated by reference to an agreed notional principal amount. The swap agreements aggregate a notional value of $535,000,000 at an average rate of approximately 5.98 percent and expired in July 2003. As of June 30, 2003, the Company would be
required to pay approximately $1,390,000 if all such swap agreements were terminated, and this amount has been included in other liabilities and accumulated other comprehensive loss.



The Company is subject to market risks resulting from fluctuations in foreign currency exchange rates because approximately
25 percent of the Companys revenues are denominated, and the Company incurs certain operating and production costs, in foreign currencies. In certain instances, the Company enters into foreign currency exchange forward contracts in order to
reduce exposure to changes in foreign currency exchange rates that affect the value of the Companys firm commitments and certain anticipated foreign currency cash flows. The Company currently intends to continue to enter into such contracts to
hedge against future material foreign currency exchange rate risks. As of June 30, 2003, the Company has outstanding foreign currency forward contracts aggregating Canadian $27,625,000 and British pounds 1,004,000. As of June 30, 2003, the Company
would be entitled to receive approximately $1,424,000 if all such foreign currency forward contracts were terminated, and this amount has been included in other assets and accumulated other comprehensive loss.



Note 7Stockholders Equity



Earnings Per Share.    The Company computes
earnings per share in accordance with SFAS No. 128, Earnings Per Share (EPS). The weighted average number of shares used in computing basic earnings or loss per share was 244,807,107 and 246,628,261 in the quarter and six
months ended June 30, 2003, respectively, and 251,732,625 and 247,155,037 in the quarter and six months ended June 30, 2002, respectively. Dilutive securities of 28,147 and 14,790 in the quarter and six months ending June 30, 2003, respectively, and
securities of 684,283 and 1,947,994 in the quarter and six months ended June 30, 2002, respectively, are not included in the calculation of diluted EPS because they are antidilutive. Additionally, potentially dilutive securities of 30,182,873 and
30,530,673 in the quarter and six months ended June 30, 2003, respectively, and 16,664,256 and 12,489,294 in the quarter and six months ended June 30, 2002, respectively, have not been included in the calculation of diluted EPS because their
exercise prices are greater than the average market price of the Companys common stock during the periods.



Treasury Stock.    On July 26, 2002, the Company announced a share repurchase program authorizing the Company to purchase up to
10,000,000 shares of its common stock. The Company intends to fund the repurchase program from available cash on hand. As of June 30, 2003, the Company had repurchased 7,488,000 shares of common stock at an aggregate cost of $82,494,000. During the
quarter and six months ended June 30, 2003, the Company issued 102,650 and 210,886 shares of common stock, respectively, from treasury valued at $1,161,000 and $2,332,000, respectively, for directors, officers and employees.



Stock Options.    The Company has an Amended and
Restated 1996 Stock Incentive Plan (the 1996 Incentive Plan), which allows for the granting of stock awards aggregating not more than 36,000,000 shares. Awards under the 1996 Incentive Plan are generally not restricted to any specific
form or structure and may include, without limitation, qualified or non-qualified stock options, incentive stock options, restricted stock awards and stock appreciation rights (collectively, Awards). Awards may be conditioned on
continued employment, have various vesting schedules and accelerated vesting and exercisability provisions in the event of, among other things, a change in control of the Company.



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company applies APB Opinion No. 25, Accounting For Stock Issued to Employees, and
related interpretations in accounting for its plan. Had compensation cost for the plan been determined consistent with SFAS No. 148, the Companys net loss would have been the following pro forma amounts (in thousands, except per share data,
unaudited):



|                                                                                                              |  | Quarter EndedJune 30, |          |   | Six Months EndedJune 30, |  
|------------------------------------------------------------------------------------------------------------- |  | --------------------- | -------- | - | ------------------------ | -
|                                                                                                              |  | 2003                  |          |   | 2002                     |  
|Net loss:                                                                                                     |  |                       |          |   |                          |  
|As reported                                                                                                   |  | $                     | (133,579 | ) |                          | $
|Less: total stock-based employee compensation expense determined under fair value based method for all awards |  |                       | (11,510  | ) |                          |  
|                                                                                                              |  |                       |          |   |                          |  
|Pro forma                                                                                                     |  | $                     | (145,089 | ) |                          | $
|                                                                                                              |  |                       |          |   |                          |  
|Basic and diluted loss per share:                                                                             |  |                       |          |   |                          |  
|As reported                                                                                                   |  | $                     | (0.55    | ) |                          | $
|Pro forma                                                                                                     |  | $                     | (0.59    | ) |                          | $



The fair value of each
option grant was estimated using the Black-Scholes model based on the following assumptions: the weighted average fair value of stock options granted in the quarter and six months ended June 30, 2003 was $4.96 and $4.71, respectively, and was $7.31
in the quarter and six months ended June 30, 2002. The dividend yield was 0 percent in each period, and expected volatility was 52.6 percent and 52.8 percent in the quarter and six months ended June 30, 2003, respectively, and was 51.0 percent for
the quarter and six months ended June 30, 2002. Also, the calculation uses a weighted average expected life of 5.0 years in each period, and a weighted average assumed risk-free interest rate of 2.5 percent and 2.6 percent for the quarter and six
months ended June 30, 2003, respectively, and 4.4 percent for the quarter and six months ended June 30, 2002.



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 8Segment Information



The Company applies the disclosure provisions of SFAS No. 131, Disclosures About Segments of an Enterprise and Related
Information. The Companys business units have been aggregated into four reportable operating segments: feature films, television programming, cable channels and other. The factors for determining the reportable segments were based on the
distinct nature of their operations. They are managed as separate business units because each requires and is responsible for executing a unique business strategy. Income or losses of industry segments and geographic areas, other than those
accounted for under the equity method, exclude interest income, interest expense, goodwill amortization, income taxes and other unallocated corporate expenses. Identifiable assets are those assets used in the operations of the segments. Other
corporate assets consist of cash and certain corporate receivables. Summarized financial information concerning the Companys reportable segments is shown in the following tables (in thousands, unaudited):



|                                   |  | Quarter EndedJune 30, |         |   | Six Months EndedJune 30, |  
|---------------------------------- |  | --------------------- | ------- | - | ------------------------ | -
|                                   |  | 2003                  |         |   | 2002                     |  
|Revenues:                          |  |                       |         |   |                          |  
|Feature films                      |  | $                     | 427,487 |   |                          | $
|Television programming             |  |                       | 50,149  |   |                          |  
|Cable channels                     |  |                       | 10,244  |   |                          |  
|Other                              |  |                       | 8,985   |   |                          |  
|                                   |  |                       |         |   |                          |  
|Subtotal                           |  |                       | 496,865 |   |                          |  
|Less: unconsolidated companies     |  |                       | (9,163  | ) |                          |  
|                                   |  |                       |         |   |                          |  
|Consolidated revenues              |  | $                     | 487,702 |   |                          | $
|                                   |  |                       |         |   |                          |  
|Segment income (loss):             |  |                       |         |   |                          |  
|Feature films                      |  | $                     | 8,421   |   |                          | $
|Television programming             |  |                       | 3,103   |   |                          |  
|Cable channels                     |  |                       | (898    | ) |                          |  
|Other                              |  |                       | 7,151   |   |                          |  
|                                   |  |                       |         |   |                          |  
|Subtotal                           |  |                       | 17,777  |   |                          |  
|Less: unconsolidated companies     |  |                       | 1,211   |   |                          |  
|                                   |  |                       |         |   |                          |  
|Consolidated segment income (loss) |  | $                     | 18,988  |   |                          | $
|                                   |  |                       |         |   |                          |  



The following table
presents the details of other operating segment income:



|                            |  | Quarter Ended June 30, |       | Six Months EndedJune 30,
|--------------------------- |  | ---------------------- | ----- | ------------------------
|                            |  | 2003                   |       | 2002                    
|Licensing and merchandising |  | $                      | 1,829 |                         
|Interactive media           |  |                        | 1,043 |                         
|Music                       |  |                        | 2,364 |                         
|Other                       |  |                        | 1,915 |                         
|                            |  |                        |       |                         
|                            |  | $                      | 7,151 |                         
|                            |  |                        |       |                         



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METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following is a reconciliation of reportable segment loss to loss from operations before provision
for income taxes:



|                                                       |  | Quarter EndedJune 30, |          |   | Six Months EndedJune 30, |  
|------------------------------------------------------ |  | --------------------- | -------- | - | ------------------------ | -
|                                                       |  | 2003                  |          |   | 2002                     |  
|Segment loss                                           |  | $                     | 18,988   |   |                          | $
|General and administrative expenses                    |  |                       | (32,462  | ) |                          |  
|Depreciation                                           |  |                       | (5,013   | ) |                          |  
|                                                       |  |                       |          |   |                          |  
|Operating loss                                         |  |                       | (18,487  | ) |                          |  
|Write-down of investment in cable channels             |  |                       | (93,059  | ) |                          |  
|Equity in net earnings (losses) of affiliates          |  |                       | (1,211   | ) |                          |  
|Interest expense, net of amounts capitalized           |  |                       | (18,863  | ) |                          |  
|Interest and other income                              |  |                       | 3,069    |   |                          |  
|                                                       |  |                       |          |   |                          |  
|Loss from operations before provision for income taxes |  | $                     | (128,551 | ) |                          | $
|                                                       |  |                       |          |   |                          |  



The following is a
reconciliation of the change in reportable segment assets:



|                                |  | December 31, 2002 |           | Increase (Decrease) |   |          | June 30, 2003
|------------------------------- |  | ----------------- | --------- | ------------------- | - | -------- | -------------
|Feature films                   |  | $                 | 2,640,294 |                     | $ | (87,602  | )            
|Television programs             |  |                   | 369,723   |                     |   | 5,286    |              
|Cable channels                  |  |                   | 620,644   |                     |   | (98,626  | )            
|Other                           |  |                   | 12,349    |                     |   | (10,301  | )            
|                                |  |                   |           |                     |   |          |              
|Total reportable segment assets |  | $                 | 3,643,010 |                     | $ | (191,243 | )            
|                                |  |                   |           |                     |   |          |              



The following is a
reconciliation of reportable segment assets to consolidated total assets:



|                                                                        |  | June 30, 2003 |           | December 31, 2002
|----------------------------------------------------------------------- |  | ------------- | --------- | -----------------
|Total assets for reportable segments                                    |  | $             | 3,451,767 |                  
|Other unallocated amounts (principally cash and short-term investments) |  |               | 731,314   |                  
|                                                                        |  |               |           |                  
|Consolidated total assets                                               |  | $             | 4,183,081 |                  
|                                                                        |  |               |           |                  



Note 9Commitments and
Contingencies



The Company, together with other major
companies in the filmed entertainment industry, has been subject to numerous antitrust suits brought by various motion picture exhibitors, producers and others. In addition, various legal proceedings involving alleged breaches of contract, antitrust
violations, copyright infringement and other claims are now pending, which the Company considers routine to its business activities.



The Company has provided an accrual for pending litigation as of June 30, 2003 in accordance with SFAS No. 5, Accounting for Contingencies. In
the opinion of Company management, any liability under pending litigation is not expected to be material in relation to the Companys financial condition or results of operations.



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##### Table of Contents

METRO-GOLDWYN-MAYER INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 10Supplementary Cash Flow Information



The Company paid interest, net of capitalized interest, of $34,214,000 and
$29,657,000 during the six months ended June 30, 2003 and 2002, respectively. The Company paid income taxes of $8,581,000 and $8,128,000 during the six months ended June 30, 2003 and 2002, respectively.



During the six months ended June 30, 2003, property and equipment additions
include a non-cash addition for tenant improvements of $17,066,000 paid by the landlord of our new corporate headquarters in Los Angeles, California. A corresponding liability has been established and will be amortized over the life of the lease as
a reduction of rent expense.



During the six months ended June
30, 2002, the Company contributed 1,406,753 shares of common stock with an aggregate fair market value of $27,616,000 to participants of the Senior Management Bonus Plan.



Note 11Subsequent Events



On July 18, 2003, the Company sold its 20 percent equity interest in the American Movie Classics, The Independent Film Channel and WE: Womens
Entertainment cable channels to Cablevision for $500,000,000. The Company received $250,000,000 cash and a $250,000,000 promissory note that matures five months from the closing date. The promissory note requires monthly payments of $2,500,000 and
bears interest at LIBOR, as defined, plus four percent. At maturity, Cablevision has the option to pay the remaining balance of the note in cash or in Cablevision Class A common stock. As the Companys cost basis in these cable channels exceeds
the net selling price, the Company has recorded a write-down of its investment in the cable channels of $93,059,000 during the quarter ended June 30, 2003.



Pursuant to an International Home Video Subdistribution Services Agreement dated June 18, 1999 between Metro-Goldwyn-Mayer Home Entertainment
(MGMHE) and Twentieth Century Fox Home Entertainment, Inc. (Fox), MGMHE has the option to terminate the agreement effective as of January 31 of each year beginning in 2004, by giving notice of termination to Fox by July 31 of
the preceding year. In the event MGMHE exercises such termination, a termination fee is payable to Fox within 15 days after the effective termination date. On June 24, 2003, MGMHE gave notice to Fox of its intent to terminate the agreement as of
January 31, 2004. A termination payment of $10,000,000 would be due to Fox by February 15, 2004. However, MGMHE and Fox are presently in negotiations to continue the agreement in a modified form under which Fox would continue to provide
subdistribution services in certain territories, and the termination payment may be reduced accordingly.



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##### Table of Contents

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



This report includes forward-looking statements. Generally, the words believes, anticipates, may, will,
should, expect, intend, estimate, continue, and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to
differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.



The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-Q.



General



We are engaged primarily in the development, production and worldwide distribution of theatrical motion pictures and television programming.



Recent Developments



Notice of Termination of Third Party International Home Video Subdistribution Services Agreement. Pursuant to an International Home Video
Subdistribution Services Agreement dated June 18, 1999 between Metro-Goldwyn-Mayer Home Entertainment and Twentieth Century Fox Home Entertainment, Inc., we have the option to terminate the agreement effective as of January 31 of each year beginning
in 2004 by giving notice of termination to Fox by July 31 of the preceding year. In the event we exercise such termination, a termination fee is payable to Fox within 15 days after the effective termination date. On June 24, 2003, we gave notice to
Fox of our intent to terminate the agreement as of January 31, 2004. A termination payment of $10,000,000 would be due to Fox by February 15, 2004. However, Metro-Goldwyn-Mayer Home Entertainment and Fox are presently in negotiations to continue the
agreement in a modified form under which Fox would continue to provide subdistribution services in certain territories, and the termination payment may be reduced accordingly.



Sales of Equity Interests in Rainbow Media Cable Channels.    On December 5, 2002, we sold
our 20 percent ownership interest in Bravo to an affiliate of the National Broadcasting Company for $250.0 million cash. We reported a gain on the sale of Bravo of $32.5 million in the year ended December 31, 2002.



On July 18, 2003, we sold our 20 percent equity interest in the Rainbow Media
cable channels American Movie Classics, The Independent Film Channel and WE: Womens Entertainment to Cablevision Systems Corporation for $500.0 million. We received $250.0 million cash and a $250.0 million promissory note that matures five
months from the closing date. The promissory note requires monthly payments of $2.5 million and bears interest at LIBOR, as defined, plus 4 percent. At maturity, Cablevision has the option to pay the remaining balance of the note in cash or in
Cablevision Class A common stock. As our investment in these cable channels exceeds the net selling price, we reported a write-down of approximately $93.1 million of our investment in the cable channels during the quarter ended June 30, 2003.



Sale of Common Stock by
Tracinda.    In January 2003, we filed a registration statement pursuant to registration rights held by Tracinda in connection with the underwritten public offering by it of 25,000,000 shares of common stock. Tracinda also
granted the underwriters an over-allotment option for 3,750,000 shares which was exercised in February 2003. We did not receive any of the proceeds of this offering. Pursuant to our contractual obligations, we paid for the costs of the offering.



Collective Bargaining
Agreements.    The motion picture and television programs produced by MGM Studios, and the other major studios in the United States, generally employ actors, writers and directors who are members of the Screen Actors Guild,
Writers Guild of America and Directors Guild of America, pursuant to



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##### Table of Contents

industry-wide collective bargaining agreements. The collective bargaining agreement with Writers Guild of America was successfully renegotiated and became
effective beginning May 2, 2001 for a term of three years. Negotiations regarding the collective bargaining agreement with Screen Actors Guild were successfully completed on July 3, 2001 and the agreement was ratified effective as of July 1, 2001
for a term of three years. The Directors Guild of America collective bargaining agreement was successfully renegotiated and has been ratified with a term of three years from July 1, 2002. Many productions also employ members of a number of other
unions, including, without limitation, the International Alliance of Theatrical and Stage Employees and the Teamsters. Negotiations with the International Alliance of Theatrical and Stage Employees were successfully completed on November 16, 2002
and a successor collective bargaining agreement has been ratified with an effective date of August 1, 2003 for a term of three years. A strike by one or more of the unions that provide personnel essential to the production of motion pictures or
television programs could delay or halt our ongoing production activities. Such a halt or delay, depending on the length of time involved, could cause delay or interruption in our release of new motion pictures and television programs and thereby
could adversely affect our cash flow and revenues. Our revenues from motion pictures and television programs in our library should not be affected and may partially offset the effects of a strike to the extent, if any, that television exhibitors buy
more library product to compensate for interruption in their first-run programming.



Industry Accounting Practices



Accounting for Motion Picture and Television Costs.    In accordance with accounting principles generally accepted in the United States and industry practice, we amortize the costs of
production, including capitalized interest and overhead, as well as participations and talent residuals, for feature films and television programming using the individual-film-forecast method under which such costs are amortized for each film or
television program in the ratio that revenue earned in the current period for such title bears to managements estimate of the total revenues to be realized from all media and markets for such title. All exploitation costs, including
advertising and marketing costs, are expensed as incurred. Theatrical print costs are amortized over the periods of theatrical release of the respective territories.



Management regularly reviews, and revises when necessary, its total revenue estimates on a title-by-title basis, which may
result in a change in the rate of amortization and/or a write-down of the film or television asset to estimated fair value. These revisions can result in significant quarter-to-quarter and year-to-year fluctuations in film write-downs and
amortization. A typical film or television program recognizes a substantial portion of its ultimate revenues within the first two years of release. By then, a film has been exploited in the domestic and international theatrical markets and the
domestic and international home video markets, as well as the domestic and international pay television and pay-per-view markets, and a television program has been exploited on network television or in first-run syndication. A similar portion of the
films or television programs capitalized costs should be expected to be amortized accordingly, assuming the film or television program is profitable.



The commercial potential of individual motion pictures and television programming varies dramatically, and is not directly
correlated with production or acquisition costs. Therefore, it is difficult to predict or project a trend of our income or loss. However, the likelihood that we report losses, particularly in the year of a motion pictures release, is increased
by the industrys method of accounting which requires the immediate recognition of the entire loss (through increased amortization) in instances where it is estimated the ultimate revenues of a motion picture or television program will not
recover our capitalized costs. On the other hand, the profit of a profitable motion picture or television program must be deferred and recognized over the entire revenue stream generated by that motion picture or television program. This method of
accounting may also result in significant fluctuations in reported income or loss, particularly on a quarterly basis, depending on our release schedule, the timing of advertising campaigns and the relative performance of individual motion pictures
or television programs.



Equity
Investments.    We are accounting for our investment in the cable channels in accordance with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common



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Stock. In accordance with APB Opinion No. 18, management continually reviews its equity investments to determine if any impairment has occurred. If, in
managements judgment, an investment has sustained an other-than-temporary decline in its value, the investment is written down to its fair value by a charge to earnings. Such determination is dependent on the specific facts and circumstances,
including the financial condition of the investee, subscriber demand and growth, demand for advertising time and space, the intent and ability to retain the investment, and general economic conditions in the areas in which the investee operates. We
reported a write-down of approximately $93.1 million on our investment in the cable channels during the quarter ended June 30, 2003 (see Recent DevelopmentsSale of Equity Interests in Rainbow Media Cable Channels).



New Accounting
Pronouncements.    In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations. This statement addresses financial
accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The purpose of this statement is to develop consistent accounting of asset retirement obligations and
related costs in the financial statements and provide more information about future cash outflows, leverage and liquidity regarding retirement obligations and the gross investment in long-lived assets. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. We implemented this statement on January 1, 2003. The impact of such adoption did not have a material effect on our financial statements.



In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. Statement of Financial Accounting Standards No. 146 nullifies Emerging Issues Task Force Issue No 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to
Exit an Activity (including Certain Costs Incurred in a Restructuring). This statement is effective prospectively with regards to exit or disposal activities initiated after December 31, 2002. We implemented this statement on January 1, 2003.
The impact of such adoption did not have a material effect on our financial statements.



In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 148, Accounting for Stock-Based CompensationTransition and Disclosurean amendment of
Statement of Financial Accounting Standard No. 123. This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This statement also amends
the disclosure requirements of Statement of Financial Accounting Standard No. 123 and Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We implemented Statement of Financial Accounting Standard No. 148 effective January 1, 2003 regarding disclosure
requirements for condensed financial statements for interim periods. We have not yet determined whether we will voluntarily change to the fair value based method of accounting for stock-based employee compensation.



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Results of Operations



The following table sets forth our reported operating results for the quarters and six months ended June 30, 2003 and 2002:



|                                              |  | Quarter endedJune 30, |          |   | Six Months endedJune 30, |  
|--------------------------------------------- |  | --------------------- | -------- | - | ------------------------ | -
|                                              |  | 2003                  |          |   | 2002                     |  
|Revenues:                                     |  |                       |          |   |                          |  
|Feature films                                 |  | $                     | 427,487  |   |                          | $
|Television programs                           |  |                       | 50,149   |   |                          |  
|Other                                         |  |                       | 10,066   |   |                          |  
|                                              |  |                       |          |   |                          |  
|Total revenues                                |  |                       | 487,702  |   |                          |  
|                                              |  |                       |          |   |                          |  
|Operating income (loss):                      |  |                       |          |   |                          |  
|Feature films                                 |  |                       | 8,421    |   |                          |  
|Television programs                           |  |                       | 3,103    |   |                          |  
|Other                                         |  |                       | 7,464    |   |                          |  
|General and administration expenses           |  |                       | (32,462  | ) |                          |  
|Depreciation                                  |  |                       | (5,013   | ) |                          |  
|                                              |  |                       |          |   |                          |  
|Operating loss                                |  |                       | (18,487  | ) |                          |  
|Write-down of investment in cable channels    |  |                       | (93,059  | ) |                          |  
|Equity in net earnings (losses) of affiliates |  |                       | (1,211   | ) |                          |  
|Interest expense, net of amounts capitalized  |  |                       | (18,863  | ) |                          |  
|Interest and other income                     |  |                       | 3,069    |   |                          |  
|                                              |  |                       |          |   |                          |  
|Loss before provision for income taxes        |  |                       | (128,551 | ) |                          |  
|Income tax provision                          |  |                       | (5,028   | ) |                          |  
|                                              |  |                       |          |   |                          |  
|Net loss                                      |  | $                     | (133,579 | ) |                          | $
|                                              |  |                       |          |   |                          |  



Unconsolidated
companies include our investment in the Rainbow Media cable channels and our investments in joint ventures, as well as various interests in international cable channels, the majority of which are accounted for under the equity method. Consolidated
and unconsolidated companies revenues, operating income (loss) and EBITDA (defined as operating income (loss) before depreciation and non-film amortization) are as follows:



|                         |  | Quarter ended June 30, |         |   | Six Months ended June 30, |  
|------------------------ |  | ---------------------- | ------- | - | ------------------------- | -
|                         |  | 2003                   |         |   | 2002                      |  
|Revenues:                |  |                        |         |   |                           |  
|Consolidated companies   |  | $                      | 487,702 |   |                           | $
|Unconsolidated companies |  |                        | 9,163   |   |                           |  
|                         |  |                        |         |   |                           |  
|Total                    |  | $                      | 496,865 |   |                           | $
|                         |  |                        |         |   |                           |  
|Operating income (loss): |  |                        |         |   |                           |  
|Consolidated companies   |  | $                      | (18,487 | ) |                           | $
|Unconsolidated companies |  |                        | (809    | ) |                           |  
|                         |  |                        |         |   |                           |  
|Total                    |  | $                      | (19,296 | ) |                           | $
|                         |  |                        |         |   |                           |  
|EBITDA:                  |  |                        |         |   |                           |  
|Consolidated companies   |  | $                      | (13,474 | ) |                           | $
|Unconsolidated companies |  |                        | (230    | ) |                           |  
|                         |  |                        |         |   |                           |  
|Total                    |  | $                      | (13,704 | ) |                           | $
|                         |  |                        |         |   |                           |  



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While management considers EBITDA to be an important measure of comparative operating performance, it
should be considered in addition to, but not as a substitute for or superior to, operating income (loss), net earnings (loss), cash flow and other measures of financial performance prepared in accordance with accounting principles generally accepted
in the United States. EBITDA does not reflect cash available to fund cash requirements, and the items excluded from EBITDA, such as depreciation and non-film amortization, are significant components in assessing our financial performance. Other
significant uses of cash flows are required before cash will be available to us, including debt service, taxes and cash expenditures for various long-term assets. We use EBITDA to evaluate the operating performance of our business segments and as a
measure of performance for compensation purposes. We believe that EBITDA is also used by some investors, equity analysts and others as a measure of performance to make informed investment decisions. Our calculation of EBITDA may be different from
the calculation used by other companies and, therefore, comparability may be limited.



The following table reconciles consolidated and unconsolidated EBITDA to net income (loss) for the quarters and six months ended June 30, 2003 and 2002:



|                                                |  | Quarter ended June 30, |          |   | Six Months ended June 30, |  
|----------------------------------------------- |  | ---------------------- | -------- | - | ------------------------- | -
|                                                |  | 2003                   |          |   | 2002                      |  
|Consolidated:                                   |  |                        |          |   |                           |  
|EBITDA                                          |  | $                      | (13,474  | ) |                           | $
|Depreciation                                    |  |                        | (5,013   | ) |                           |  
|                                                |  |                        |          |   |                           |  
|Operating loss                                  |  |                        | (18,487  | ) |                           |  
|Write-down of investment in cable channels      |  |                        | (93,059  | ) |                           |  
|Equity in net earnings (losses) of affiliates   |  |                        | (1,211   | ) |                           |  
|Interest expense, net of amounts capitalized    |  |                        | (18,863  | ) |                           |  
|Interest and other income                       |  |                        | 3,069    |   |                           |  
|                                                |  |                        |          |   |                           |  
|Loss before provision for income taxes          |  |                        | (128,551 | ) |                           |  
|Income tax provision                            |  |                        | (5,028   | ) |                           |  
|                                                |  |                        |          |   |                           |  
|Net loss                                        |  | $                      | (133,579 | ) |                           | $
|                                                |  |                        |          |   |                           |  
|Unconsolidated:                                 |  |                        |          |   |                           |  
|EBITDA                                          |  | $                      | (230     | ) |                           | $
|Depreciation and non-film amortization          |  |                        | (579     | ) |                           |  
|                                                |  |                        |          |   |                           |  
|Operating income (loss)                         |  |                        | (809     | ) |                           |  
|Interest and other income (expense), net        |  |                        | 17       |   |                           |  
|                                                |  |                        |          |   |                           |  
|Income (loss) before provision for income taxes |  |                        | (792     | ) |                           |  
|Income tax provision                            |  |                        | (419     | ) |                           |  
|                                                |  |                        |          |   |                           |  
|Net income (loss)                               |  | $                      | (1,211   | ) |                           | $
|                                                |  |                        |          |   |                           |  



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See further details of operating changes under segments discussion below.



Feature Films



Consolidated feature films revenues and operating loss are as follows:



|                        |  | Quarter ended June 30, |         |      | Six Months ended June 30, |        
|----------------------- |  | ---------------------- | ------- | ---- | ------------------------- | -------
|                        |  | 2003                   |         | 2002 |                           |        
|Revenues                |  | $                      | 427,487 |      | $                         | 297,365
|Operating income (loss) |  | $                      | 8,421   |      | $                         | (73,642



Quarter Ended June
30, 2003 Compared to Quarter Ended June 30, 2002



Revenues.    Feature film revenues increased by $130.1 million, or 44 percent, to $427.5 million in the quarter ended June 30, 2003 (the 2003 Quarter) as compared to the quarter ended June 30, 2002
(the 2002 Quarter).



Worldwide theatrical revenues
decreased by $2.0 million, or nine percent, to $23.9 million in the 2003 Quarter. In the 2003 Quarter, we released theatrically Bulletproof Monk and It Runs In The Family, as well as City of Ghosts and Together on a
limited basis. In the 2002 Quarter, our theatrical releases included Windtalkers and Deuces Wild,as well as the release ofCQandPumpkinon a limited basis. Overall, in the 2003 Quarter, we released four new
feature films domestically and two films internationally, as compared to the release of four new feature films domestically and one new film internationally in the 2002 Quarter.



Worldwide home video revenues increased by $134.8 million, or 72 percent, to $321.9 million in the 2003 Quarter. In the 2003
Quarter, we released Die Another Day, A Guy Thing,Dark Blue and Evelyn in the home video marketplace, as well as benefiting from the continuing growth in library DVD sales. The majority of the increase reflected the
successful worldwide home video release of Die Another Day. There were no comparable releases in the 2002 Quarter. In the 2002 Quarter, our home video releases included Bandits, Rollerballand No Mans Land.In the
2003 Quarter, worldwide DVD sales, including Die Another Day, increased to $279.1 million, or 112 percent, from $131.6 million in the 2002 Quarter.



Worldwide pay television revenues from feature films decreased by $6.1 million, or 15 percent, to $33.6 million in the 2003 Quarter. In 2003, we delivered
three new films to domestic pay television, Windtalkers, CQ and Pumpkin, which earned less revenue on a combined basis than the releases of Legally Blonde and Heartbreakers in the 2002 Quarter. There were no new
films licensed to network television in the 2003 Quarter as compared to $0.7 million in network revenue in the 2002 Quarter. Worldwide syndicated television revenues from feature films increased by $7.4 million, or 19 percent, to $46.1 million in
the 2003 Quarter, principally due to increased sales in international markets.



Other revenues decreased by $3.3 million, or 62 percent, to $2.0 million in the 2003 Quarter, principally due to the timing of miscellaneous rebates, audit recoveries and entitlement royalties.



Operating Results.    Operating income from
feature films increased by $82.1 million, or 112 percent, to $8.4 million in the 2003 Quarter as compared to a loss of $73.6 million in the 2002 Quarter. In the 2003 Quarter, we benefited from the successful theatrical performance of Agent Cody
Banks,which was released in the first quarter, as well as the worldwide home video release of Die Another Day. The operating results in the 2002 Quarter principally reflected the disappointing theatrical performance of
Windtalkers. In the 2003 Quarter, we incurred feature film write-downs of only $2.5 million as compared to write-downs of $41.8 million in the 2002 Quarter. Also, in the 2003 Quarter our theatrical distribution costs were lower by $13.6
million than the amount expended in the 2002 Quarter, and our home video margin improved in the 2003 Quarter due to product mix and lower manufacturing costs. However, in the 2003 Quarter we recorded a charge associated with the settlement of



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negotiations with a third party distributor regarding the distribution of our product in the international home video markets (see Recent
DevelopmentsNotice of Termination of Third Party International Home Video Subdistribution Services Agreement).



Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002



Revenues.    Feature film revenues increased by $205.5 million, or 36 percent, to $783.6 million
in the six months ended June 30, 2003 (the 2003 Period) as compared to the six months ended June 30, 2002 (the 2002 Period).



Worldwide theatrical revenues increased by $42.6 million, or 84 percent, to $93.3 million in the 2003 Period. In the 2003 Period, we benefited from the
continued successful worldwide theatrical release of Die Another Day as well as the new theatrical release Agent Cody Banks.Additionally, in 2003 we releasedBulletproof Monk, It Runs In The Family, A Guy ThingandDark
Blue, as well as the release on a limited basis of Together, City of Ghosts and Assassination Tango. In the 2002 Period, our releases included Windtalkers, Rollerball, Harts WarandDeuces
Wild, as well as five other titles released on a limited basis, which were less successful than the 2003 releases. Overall, in the 2003 Period, we released eight new feature films domestically and three films internationally, as compared to the
release of nine new feature films domestically and two films internationally in the 2002 Period.



Worldwide home video revenues increased by $162.6 million, or 45 percent, to $524.5 million in the 2003 Period. In the 2003 Period, our releases generated
substantially more revenue than in the 2002 Period. Our home video releases in 2003 included Die Another Day, Barbershop, A Guy Thing, Dark Blue, Igby Goes Down, EvelynandKilling Me Softly. In the 2002 Period, our home video
releases included Bandits, Rollerball, Jeepers Creepers, Whats The Worst That Could Happen, Original Sin and Ghost World.Additionally, in the 2003 Period, worldwide DVD sales increased to $451.6 million, or 77
percent, from $254.6 million in the 2002 Period.



Worldwide pay
television revenues from feature films decreased by $4.5 million, or six percent, to $67.6 million in the 2003 Period. In 2003, we delivered seven new films to domestic pay television, including Windtalkers, Harts Warand
Deuces Wild, as compared to the delivery of three new films, Hannibal, Legally Blonde and Heartbreakers in 2002, which generated substantially higher license fees than the 2003 films. However, sales in international
pay television markets increased in the 2003 Period due to the release of Legally Blondeinternationally in 2003. Network television revenues decreased by $3.2 million, or 37 percent, to $5.4 million in the 2003 Period, principally due to the
delivery of Return To Me in 2003 which carried a lower license fee than The Thomas Crown Affair which was delivered in 2002. Worldwide syndicated television revenues from feature films increased by $11.9 million, or 15 percent, to
$89.0 million in the 2003 Period, principally due to the basic cable sale of Autumn In NewYork and increased library sales in international markets.



Other revenues decreased by $3.8 million, or 50 percent, to $3.8 million in the 2003 Period, principally due to the timing of miscellaneous rebates, audit
recoveries and entitlement royalties.



Operating
Results.    Operating loss from feature films improved by $118.2 million, or 100 percent, to a loss of $0.2 million in the 2003 Period as compared to a loss of $118.4 million in the 2002 Period. In the 2003 Period, we
benefited from the successful worldwide theatrical and home video performance of Die Another Day,the theatrical release ofAgent Cody Banks,and the home video release ofBarbershop, among others. The operating results in the
2002 Period principally reflected the disappointing theatrical performances of Windtalkers, Rollerball and Harts War. In the 2003 Period, we incurred feature film write-downs of only $6.8 million as compared to write-downs
of $74.1 million in the 2002 Period. Our home video margin improved in the 2003 Period due to product mix and lower manufacturing costs. Also, in the 2002 Period we incurred higher bad debt expenses associated with customer bankruptcies or liquidity
issues, resulting in additional charges of $10.4 million as compared to the 2003 Period. The improved results in the 2003 Period were partially offset by increased distribution costs compared to the 2002



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Period and a charge associated with the settlement of negotiations with a third party distributor regarding the distribution of our product in the
international home video markets (see Recent DevelopmentsNotice of Termination of Third Party International Home Video Subdistribution Services Agreement).



Television Programming



Consolidated television programming revenues and operating income (loss) are as follows:



|                        |  | Quarter endedJune 30, |        |      | Six Months endedJune 30, |       
|----------------------- |  | --------------------- | ------ | ---- | ------------------------ | ------
|                        |  | 2003                  |        | 2002 |                          |       
|Revenues                |  | $                     | 50,149 |      | $                        | 30,055
|Operating income (loss) |  | $                     | 3,103  |      | $                        | (3,941



Quarter Ended June
30, 2003 Compared to Quarter Ended June 30, 2002



Revenues.    Television programming revenues increased by $20.1 million, or 67 percent, to $50.1 million in the 2003 Quarter as compared to the 2002 Quarter.



Network television revenues increased by $5.9 million, or 100 percent, in the
2003 Quarter due to the delivery of the new series Fame. There were no new series on network television in the 2002 Quarter. Worldwide pay television revenues increased by $2.7 million, or 30 percent, to $11.6 million in the 2003 Quarter,
principally due to the delivery of the new series Dead Like Me as well as the second year of Jeremiah on domestic pay television. Worldwide syndicated television programming revenues increased by $5.2 million, or 31 percent, to $22.2
million in the 2003 Quarter, primarily due to the syndication of the new series She Spiesas well as new episodes of Stargate SG-1and Jeremiah. Worldwide home video revenues with respect to television programming increased by
$6.2 million, or 155 percent, to $10.2 million in the 2003 Quarter, primarily due to worldwide sales of Stargate SG-1.



Other revenues were $0.2 million in the 2003 Quarter.



Operating Results.    Operating income from television programming increased by $7.0 million, or 179 percent, to $3.1 million
in the 2003 Quarter as compared to the 2002 Quarter, principally due to the increase in revenues discussed above as well as reduced write-downs on new series and lower bad debt expense.



Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002



Revenues.    Television programming revenues
increased by $26.5 million, or 48 percent, to $81.7 million in the 2003 Period as compared to the 2002 Period.



Network television revenues increased by $5.9 million, or 100 percent, in the 2003 Period due to the delivery of the new series Fame. There were no
new series on network television in the 2002 Period. Worldwide pay television revenues increased by $3.6 million, or 25 percent, to $18.1 million in the 2003 Period, principally due to the delivery of the new series Dead Like Me and the
second year of Jeremiah on domestic pay television, as well as the delivery in international markets of two made-for-television movies. Worldwide syndicated television programming revenues increased by $10.4 million, or 34 percent, to $40.9
million in the 2003 Period, primarily due to the syndication of the new series She Spiesas well as new sales of Stargate SG-1and Jeremiah. Worldwide home video revenues with respect to television programming increased by $7.2
million, or 80 percent, to $16.3 million in the 2003 Period, primarily due to worldwide sales of Stargate SG-1.



Other revenues decreased by $0.7 million, or 58 percent, to $0.5 million in the 2003 Period due to lower third party royalties collected in the period.



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Operating Results.    Operating income from television programming increased
by $9.0 million, or 108 percent, to $0.7 million in the 2003 Period as compared to loss of $8.3 million in the 2002 Period, principally due to the increase in revenues discussed above as well as reduced write-downs on new series and lower bad debt
expense.



Other Businesses



Consolidated revenues and operating income from other businesses, including
consumer products, interactive media and branded programming services, music soundtrack and royalty income, are as follows:



|                 |  | Quarter endedJune 30, |        | Six Months endedJune 30,
|---------------- |  | --------------------- | ------ | ------------------------
|                 |  | 2003                  |        | 2002                    
|Revenues         |  | $                     | 10,066 |                         
|Operating income |  | $                     | 7,464  |                         



Quarter Ended June
30, 2003 Compared to Quarter Ended June 30, 2002



Revenues.    Revenues from other businesses increased by $0.6 million, or six percent, to $10.1 million in the 2003 Quarter as compared to the 2002 Quarter. Operating results in 2003 included consumer products
revenue of $3.4 million and music soundtrack and royalty revenue of $2.8 million, as compared to consumer products revenue of $3.3 million and music soundtrack and royalty revenue of $3.2 million in 2002. Interactive media revenues were $2.7 million
in 2003, which included royalties from the interactive game release of 007-Nightfire, as compared to interactive revenues of $2.1 million in 2002, which included royalties from the interactive game release of 007-Agent Under Fire.
Branded programming services revenues aggregated $1.1 million in 2003 as compared to $0.1 million in 2002. Revenues from other businesses in 2003 also included the receipt of $0.1 million in third-party audit recoveries and other miscellaneous
income as compared to $0.9 million in 2002.



Operating
Results.    Operating income from other businesses increased by $1.6 million, or 28 percent, to $7.5 million in the 2003 Quarter. Expenses for other businesses include interactive product costs of $1.6 million in 2003 and
2002. Consumer product costs were $0.7 million in 2003 and $1.0 million in 2002. Overhead costs related to other businesses aggregated $1.8 million in 2003 and $1.1 million in 2002. Other expenses, including distribution costs associated with music
and branded programming services, aggregated $1.0 million in 2003 and $0.7 million in 2002. We recognized foreign currency transaction gains of $2.5 million in 2003 and $0.7 million in 2002.



Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002



Revenues.    Revenues from
other businesses decreased by $1.2 million, or six percent, to $17.7 million in the 2003 Period as compared to the 2002 Period. Operating results in 2003 included consumer products revenue of $5.4 million and music soundtrack and royalty revenue of
$4.3 million, as compared to consumer products revenue of $5.5 million and music soundtrack and royalty revenue of $4.5 million in 2002. Interactive media revenues were $6.0 million in 2003, which included royalties from the interactive game release
of 007-Nightfire, as compared to interactive revenues of $7.2 million in 2002, which included royalties from the interactive game release of 007-Agent Under Fire. Branded programming services revenues aggregated $1.7 million in 2003 as
compared to $0.1 million in 2002. Revenues from other businesses in 2003 also included the receipt of $0.3 million in third-party audit recoveries and other miscellaneous income as compared to $1.7 million in 2002.



Operating Results.    Operating income from other
businesses increased by $1.5 million, or 15 percent, to $10.9 million in the 2003 Period. Expenses for other businesses include interactive product costs of $3.5 million in 2003 as compared to $4.3 million in 2002. Consumer product costs were $1.4
million in 2003 and 2002. Overhead costs related to other businesses aggregated $3.5 million in 2003 and $2.7 million in 2002. Other expenses, including distribution costs associated with music and branded programming services, aggregated $1.5



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million in 2003 and $1.1 million in 2002. We recognized foreign currency transaction gains of $3.1 million in 2003 and $0.4 million in 2002.



Corporate and Other



Quarter Ended June 30, 2003 Compared to Quarter Ended June 30, 2002



General and Administrative
Expenses.    In the 2003 Quarter, general and administrative expenses increased by $9.8 million, or 43 percent, to $32.5 million, as compared to the 2002 Quarter. In the 2003 Quarter, we recognized significantly higher
incentive plan costs than in the 2002 Quarter, when we realized a benefit principally from the change in the price of our common stock, associated with both our current employees and related to certain of our former senior executives. The Company
also incurred relocation costs of approximately $1.5 million in the 2003 Quarter to move to our new corporate headquarters.



Depreciation.    Depreciation expense in the 2003 Quarter increased by $0.2 million, or three percent, to $5.0 million, as
compared to the 2002 Quarter, due to fixed asset purchases placed in service during the period principally related to our move to our new corporate headquarters.



Write-Down of Investment in Cable Channels.    On July 18, 2003, we sold our 20 percent equity
interest in the American Movie Classics, The Independent Film Channel and WE: Womens Entertainment cable channels to Cablevision Systems Corporation for $500,000,000 (see Note 11). As our investment in these cable channels exceeds the net
selling price, we have recorded a write-down of our investment in the cable channels of $93,059,000 during the 2003 Quarter.



Equity in Net Earnings (Losses) of Affiliates.    In the 2003 Quarter, EBITDA from unconsolidated companies was a loss of $0.2
million, operating loss was $0.8 million and net loss was $1.2 million. In the 2003 Quarter, we are no longer recording our 20 percent share of the operating results of the Rainbow Media cable channels as the book value was written down to the net
sales proceeds. We sold the cable channels to Cablevision on July 18, 2003 (the Bravo cable channel was sold on December 5, 2002).



In the 2002 Quarter, EBITDA from unconsolidated companies was $7.8 million, operating income was $6.4 million and net income was $6.0 million (including
$8.2 million in EBITDA, $7.0 million in operating income and $7.3 million in net income from our interest in the Rainbow Media cable channels).



Interest Expense, Net of Amounts Capitalized.    Net interest expense in the 2003 Quarter decreased by $7.7 million, or 29
percent, to $18.9 million, as compared to the 2002 Quarter, primarily due to the refinancing of our credit arrangements in June 2002 as well as lower borrowing rates.



Interest and Other Income, Net.    Interest and other income in the 2003 Quarter increased by
$2.1 million, or 230 percent, to $3.1 million, as compared to the 2002 Quarter due to increased interest income earned on our short-term investments. We had significantly higher average invested cash balances in the 2003 Quarter than in the 2002
Quarter, principally due to the refinancing of our credit facilities in June 2002 and the proceeds received from the sale of Bravo on December 5, 2002 for $250 million, as well as the receipt of $40 million in dividends from the Rainbow Media cable
channels.



Income Tax
Provision.    The provision for income taxes in the 2003 Quarter increased by $2.1 million, or 69 percent, to $5.0 million, as compared to the 2002 Quarter, principally due to foreign remittance taxes attributable to
increased international distribution revenues.



Six Months
Ended June 30, 2003 Compared to Six Months Ended June 30, 2002



General and Administrative Expenses.    In the 2003 Period, general and administrative expenses increased by $19.8 million, or 51 percent, to $58.7 million, as compared to the 2002 Period. In the 2003 Period, we
recognized significantly higher incentive plan costs than in the 2002 Period, when we realized a benefit, principally from the change in the price of our common stock, associated with both our current employees and



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related to certain of our former senior executives. The Company also incurred relocation costs of approximately $1.5 million in the 2003 Period to move to
our new corporate headquarters.



Depreciation.    Depreciation expense in the 2003 Period increased by $0.8 million, or eight percent, to $10.3 million, as compared to the 2002 Period, due to fixed asset purchases placed in service during the
period principally associated with our move to our new corporate headquarters.



Write-Down of Investment in Cable Channels.    On July 18, 2003, we sold our 20 percent equity interest in the American Movie Classics, The Independent Film Channel and WE: Womens
Entertainment cable channels to Cablevision Systems Corporation for $500,000,000 (see Note 11). As our investment in these cable channels exceeds the net selling price, we have recorded a write-down of our investment in the cable channels of
$93,059,000 during the 2003 Period.



Equity in Net Earnings
(Losses) of Affiliates.    In the 2003 Period, EBITDA from unconsolidated companies was $4.5 million, operating income was $2.3 million and net income was $1.3 million (which included EBITDA of $6.0 million, operating income
of $5.0 million and net income of $4.8 million from our interest in the Rainbow Media cable channels). Beginning April 1, 2003, we are no longer recording our 20 percent share of the operating results of the Rainbow Media cable channels as the book
value was written down to the net sales proceeds. We sold the cable channels to Cablevision on July 18, 2003 (the Bravo cable channel was sold on December 5, 2002).



In the 2002 Period, EBITDA from unconsolidated companies was $10.6 million, operating losses were $0.9 million and net
losses were $0.8 million (which included EBITDA of $13.4 million, operating income of $2.4 million and net income of $3.5 million, which included amortization of goodwill for one quarter of $9.5 million, from our interest in the Rainbow Media cable
channels).



Interest Expense, Net of Amounts
Capitalized.    Net interest expense in the 2003 Period decreased by $5.8 million, or 14 percent, to $36.8 million, as compared to the 2002 Period, primarily due to the refinancing of our credit arrangements in June 2002 as
well as reduced borrowing rates.



Interest and Other Income,
Net.    Interest and other income in the 2003 Period increased by $4.8 million, or 292 percent, to $6.4 million, as compared to the 2002 Period due to increased interest income earned on our short-term investments. We had
significantly higher average invested cash balances in the 2003 Period than in the 2002 Period, principally due to the refinancing of our credit facilities in June 2002 and the proceeds received from the sale of Bravo on December 5, 2002 for $250
million, as well as the receipt of $40 million in dividends from the Rainbow Media cable channels.



Income Tax Provision.    The provision for income taxes in the 2003 Period increased by $4.5 million, or 88 percent, to $9.6
million, as compared to the 2002 Period, principally due to foreign remittance taxes attributable to increased international distribution revenues.



Liquidity and Capital Resources



General.    Our operations are capital intensive. In recent years we have funded our operations primarily from (a) the sale of
equity securities, (b) bank borrowings and (c) internally generated funds. During the 2003 Period, the net cash provided by operating activities was $159.5 million, which included spending associated with film and television production and
distribution costs of $365.4 million; net cash used by investing activities was $30.6 million, which included the purchase of $28.3 million of short-term investments, $9.5 million in property and equipment purchases and $2.8 million in affiliate
advances, partially offset by the receipt of $10.0 million in dividends from affiliates; and net cash used by financing activities was $50.3 million, including the acquisition of treasury shares of $49.8 million under our repurchase program and net
repayments of bank borrowings of $0.6 million.



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Sales of Equity Interests in Rainbow Media cable channels.    On December 5,
2002, we sold our 20 percent ownership interest in Bravo to an affiliate of the National Broadcasting Company for $250.0 million cash.



On July 18, 2003 we sold our 20 percent ownership interest in American Movie Classics, the Independent Film Channel and WE: Womens Entertainment to
Cablevision Systems Corporation for $500.0 million. We received $250.0 million cash and a $250.0 million promissory note that matures five months from the closing date. The promissory note requires monthly payments of $2.5 million and bears interest
at LIBOR, as defined, plus 4 percent. At maturity, Cablevision has the option to pay the remaining balance of the note in cash or in Cablevision Class A common stock.



Treasury Stock.    On July 26, 2002, we announced a share repurchase program authorizing the
purchase of up to 10,000,000 shares of our common stock. We intend to fund the repurchase program from available cash on hand. As of June 30, 2003, we had repurchased 7,488,000 shares of common stock at an aggregate cost of $82.5 million.



Bank Borrowings.    On June 11,
2002, we successfully renegotiated our pre-existing credit facility with a syndicate of banks resulting in a $1.75 billion third amended and restated syndicated credit facility consisting of (a) a five-year $600.0 million revolving credit facility,
(b) a five-year $300.0 million term loan and (c) a six-year $850.0 million term loan. As of July 23, 2003, $579.9 million, including commercial letters of credit, was available under our credit facility. Additionally, as of July 23, 2003, we have
cash on hand of approximately $940 million.



Currently, the
revolving facility and the $300.0 million five-year term loan bear interest at 2.75 percent over the Adjusted LIBOR rate, as defined therein (3.85 percent at July 23, 2003), and the $850.0 million six-year term loan bears interest at 3.00 percent
over the Adjusted LIBOR rate (4.10 percent at July 23, 2003).



As of July 23, 2003, the term loans had an outstanding balance of $1.15 billion. Scheduled amortization of the term loans under our credit facility is as follows: $16.4 million in 2003, $65.6 million in each of 2004, 2005 and 2006, $122.9
million in 2007, and $813.9 million in 2008. The revolving facility matures on June 30, 2007.



Our credit facility contains various covenants, including limitations on indebtedness, dividends and capital expenditures, and maintenance of certain financial ratios. Our credit facility limits the amount of the
investment in MGM which may be made by Metro-Goldwyn-Mayer Studios Inc. and Orion Pictures Corporation, both of which are wholly-owned subsidiaries, in the form of loans or advances, or purchases of capital stock of MGM, up to a maximum aggregate
amount of $300 million. As of June 30, 2003, $86.5 million was loaned to MGM by MGM Studios to fund the purchase of treasury stock by MGM. Restricted net assets of Metro-Goldwyn-Mayer Studios Inc. and Orion Pictures Corporation at June 30, 2003 are
approximately $2.0 billion. Although we are in compliance with all terms of our credit facility, there can be no assurances that we will remain in compliance with such covenants or other conditions under our credit facility in the future. We
anticipate substantial continued borrowing under our credit facility.



Cash Provided by (Used in) Operating Activities.    In the 2003 Period, cash provided by operating activities was $159.5 million compared to cash used in operating activities of $67.7 million in the 2002 Period.
The improvement in operating cash flows in 2003 reflected increased theatrical and home entertainment distribution receipts, which were partially offset by film and television production and distribution costs, which aggregated $365.4 million in
2003 as compared to $367.5 million in 2002.



Cash Used in
Investing Activities.    In the 2003 Period, cash used in investing activities was $30.5 million, which included the purchase of short-term investments of $28.3 million, advances to affiliates of $2.8 million and property and
equipment purchases of $9.5 million, which were partially offset by cash dividends of $10.0



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million received from Rainbow Media. In the 2002 Period, cash used in investing activities was $12.9 million, which included advances to affiliates of $7.7
million and property and equipment purchases of $5.2 million.



Cash Provided by (Used in) Financing Activities.    In the 2003 Period, cash used in financing activities was $50.3 million, which included the cost of acquisition of treasury stock of $49.8 million and net
repayments of bank borrowings of $0.6 million. In the 2002 Period, cash provided by financing activities was $524.8 million, which included net advances under bank borrowings of $375.7 million and net proceeds from the sale of equity securities of
$165.9 million.



Commitments.    Future minimum annual commitments under bank and other debt agreements, non-cancelable operating leases, employment agreements, creative talent agreements and commercial letters of credit as of
June 30, 2003 are as follows (in thousands, unaudited):



|                           |  | 2003 |         | 2004 |   | 2005    |  | 2006 |        | 2007 |   | Thereafter |  | Total
|-------------------------- |  | ---- | ------- | ---- | - | ------- |  | ---- | ------ | ---- | - | ---------- |  | -----
|Bank and other debt        |  | $    | 17,448  |      | $ | 66,308  |  | $    | 65,643 |      | $ | 65,643     |  | $    
|Operating leases           |  |      | 13,383  |      |   | 26,187  |  |      | 25,627 |      |   | 26,186     |  |      
|Employment agreements      |  |      | 20,814  |      |   | 24,229  |  |      | 7,390  |      |   |           |  |      
|Creative talent agreements |  |      | 43,692  |      |   | 14,991  |  |      | 900    |      |   | 32         |  |      
|Letters of credit          |  |      | 19,643  |      |   | 485     |  |      |       |      |   |           |  |      
|                           |  |      |         |      |   |         |  |      |        |      |   |            |  |      
|Total                      |  | $    | 114,980 |      | $ | 132,200 |  | $    | 99,560 |      | $ | 91,861     |  | $    
|                           |  |      |         |      |   |         |  |      |        |      |   |            |  |      



We do not expect our
obligations for property and equipment expenditures, including the purchase of computer systems and equipment and leasehold improvements, to exceed $35.0 million per year.



We are obligated to fund 50 percent of the expenses of MGM Networks Latin America up to a maximum of approximately $25.25
million. We have funded approximately $24.8 million under such obligation as of June 30, 2003.



We are committed to fund our share of the operating expenses of certain joint ventures, as required.



Anticipated Needs.    Our current strategy and business plan call for substantial ongoing investments in the production of new
feature films and television programs. Furthermore, we may wish to continue to make investments in new distribution channels to further exploit our motion picture and television library. We plan to continue to evaluate the level of such investments
in the context of the capital available to us and changing market conditions. Currently, we would require additional sources of financing if we decided to make any additional significant investments in new distribution channels.



We believe that the amounts available under the revolving facility, from cash
on hand and from operating cash flow will be adequate for us to conduct our operations in accordance with our business plan for at least the next 12 months. This belief is based in part on the assumption that our future releases will perform as
planned. Any significant decline in the performance of our films could adversely impact our cash flows and require us to obtain additional sources of funds. In addition to the foregoing sources of liquidity, we are currently considering various film
financing alternatives.



If necessary in order to manage our
cash needs, we may also delay or alter production or release schedules or seek to reduce our aggregate investment in new film and television production costs. There can be no assurance that any such steps would be adequate or timely, or that
acceptable arrangements could be reached with third parties if necessary. In addition, although these steps would improve our short-term cash flow and, in the case of partnering, reduce our exposure should a motion picture perform below
expectations, such steps could adversely affect long-term cash flow and results of operations in subsequent periods.



We intend to continue to consider either growing into or becoming part of a larger, vertically integrated organization. In connection with our pursuit of
these options, we may consider various strategic alternatives, such



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as business combinations with companies with strengths complementary to those of ours, other acquisitions and joint ventures, as opportunities arise. The
nature, size and structure of any such transaction could require us to seek additional financing.



Item 3.    Quantitative and Qualitative Disclosures About Market Risk



We are exposed to the impact of interest rate changes as a result of our variable rate long-term debt. Historically, we have entered into interest rate
swap agreements whereby we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate amounts calculated by reference to an agreed notional principal amount. The swap agreements outstanding at
June 30, 2003 expired in July 2003. As of July 23, 2003, all $1.15 billion of our term debt was exposed to interest rate risk. We will continue to evaluate strategies to manage the impact of interest rate changes on earnings and cash flows.



The following table provides information about our interest
rate swaps outstanding at June 30, 2003:



|                                           |  | Amounts Scheduledfor Maturity for the Year EndingDecember 31, 2003 |         |   | EstimatedFair Value atMarch 31, 2003 |  
|------------------------------------------ |  | ------------------------------------------------------------------ | ------- | - | ------------------------------------ | -
|Interest Rate Swaps:                       |  |                                                                    |         |   |                                      |  
|Variable to fixed (expiring in July 2003): |  |                                                                    |         |   |                                      |  
|Notional value (in thousands)              |  | $                                                                  | 535,000 |   |                                      | $
|Average pay rate                           |  |                                                                    | 5.981   | % |                                      |  
|Spot rate                                  |  |                                                                    | 1.297   | % |                                      |  



We are subject to
market risks resulting from fluctuations in foreign currency exchange rates because approximately 25 percent of our revenues are denominated, and we incur certain operating and production costs, in foreign currencies. In certain instances, we enter
into foreign currency exchange contracts in order to reduce exposure to changes in foreign currency exchange rates that affect the value of our firm commitments and certain anticipated foreign currency cash flows. We currently intend to continue to
enter into such contracts to hedge against future material foreign currency exchange rate risks. The following table provides information about our foreign currency forward contracts outstanding at June 30, 2003:



|                                                               |  | Amounts Scheduled for Maturity for the Year Ending December 31, 2003 |        | Estimated Fair Value at June 30, 2003 |  
|-------------------------------------------------------------- |  | -------------------------------------------------------------------- | ------ | ------------------------------------- | -
|Foreign Currency Forward Contracts:                            |  |                                                                      |        |                                       |  
|Contract amount (in thousands) (receive CAD, pay $US)          |  | $                                                                    | 18,967 |                                       | $
|Spot rate                                                      |  |                                                                      | 1.3479 |                                       |  
|Forward rate                                                   |  |                                                                      | 1.4565 |                                       |  
|Contract amount (in thousands) (receive pds sterling, pay $US) |  | $                                                                    | 1,672  |                                       | $
|Spot rate                                                      |  |                                                                      | 1.6556 |                                       |  
|Forward rate                                                   |  |                                                                      | 1.6659 |                                       |  



Item 4.    Controls and Procedures



Based on their evaluation, as of a date within 90 days of the filing date of this Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as
defined in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent
to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



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PART II.    OTHER INFORMATION



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



At the Annual Meeting of Stockholders held on May 14, 2003, two proposals were submitted to the Companys stockholders. The Company nominees
for directors were elected and the other proposal was approved. A brief description of these proposals and the results of the voting are as follows:



Proposal OneElection of twelve directors to serve until the next Annual Meeting of Stockholders



|Nominee                |  | Votes For   |  | Votes Withheld
|---------------------- |  | ----------- |  | --------------
|James D. Aljian        |  | 215,049,490 |  | 22,048,017    
|                       |  |            
|Willie D. Davis        |  | 229,778,908 |  | 7,318,599     
|                       |  |            
|Alexander M. Haig, Jr. |  | 211,174,562 |  | 25,922,945    
|                       |  |            
|Michael R. Gleason     |  | 212,893,195 |  | 24,204,312    
|                       |  |            
|Kirk Kerkorian         |  | 215,047,491 |  | 22,050,016    
|                       |  |            
|Frank G. Mancuso       |  | 212,916,585 |  | 24,180,922    
|                       |  |            
|Christopher J. McGurk  |  | 214,600,450 |  | 22,497,042    
|                       |  |            
|A. N. Mosich           |  | 231,525,485 |  | 5,572,022     
|                       |  |            
|Priscilla Presley      |  | 231,515,108 |  | 5,582,399     
|                       |  |            
|Henry D. Winterstern   |  | 231,508,807 |  | 5,588,700     
|                       |  |            
|Alex Yemenidjian       |  | 214,524,549 |  | 22,572,958    
|                       |  |            
|Jerome B. York         |  | 229,747,358 |  | 7,350,149     



Proposal TwoRatification of
appointment of Ernst & Young LLP as independent auditors of the Company for the fiscal year ending December 31, 2003



|Voting Results   |  |            
|---------------- |  | -----------
|For              |  | 235,016,388
|                 | 
|Against          |  | 2,009,600  
|                 | 
|Abstain          |  | 71,519     
|                 | 
|Broker Non-Votes |  | 0          



Item 5.    Other Information



On June 27, 2003, we, Cablevision Systems Corporation and other parties named therein entered into a purchase agreement pursuant to which we agreed to sell and Cablevision agreed to purchase our 20 percent interest in
American Movie Classics Company, a New York general partnership, which is the owner of the programming channels American Movie Classics and WE: Womens Entertainment and (ii) our 20 percent interest in The Independent Film Channel LLC, a
Delaware limited liability company, which is the owner of the programming channel The Independent Film Channel. The transaction closed on July 18, 2003.



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Item 6.    Exhibits and Reports on Form 8-K



(a)  Exhibits



|Exhibit No. |  | Document Description                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|            | 
|2.1         |  | Purchase Agreement, dated June 27, 2003, by and among Rainbow Media Holdings, Inc., American Movie Classics III Holding
Corporation, American Movie Classics IV Holding Corporation, IFC II Holding Corporation, IFC III Holding Corporation, Metro-Goldwyn-Mayer Inc., MGM Networks U.S. Inc. and Cablevision Systems Corporation (incorporated herein by reference to Exhibit
2.1 to the Companys Amendment No. 1 to Current Report on Form 8-K/A filed on July 15, 2003).
|            | 
|10.1        |  | Indemnification Agreement dated as of May 14, 2003A. N. Mosich                                                                                                                                                                                                                                                                                                                                                                                                              
|            | 
|99.1        |  | Certification of CEO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                                                                                                                                                                                                                                                                                
|            | 
|99.2        |  | Certification of CFO Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                                                                                                                                                                                                                                                                                                



(b)  Reports on Form 8-K



|Date           |  | Relating to              
|-------------- |  | -------------------------
|April 24, 2003 |  | Item 5. Other Information



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SIGNATURES



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



|July 25, 2003 |  |  |  | METRO-GOLDWYN-MAYER INC.
|------------- |  |  |  | ------------------------
|              |  |  |  |                         
|              |  |  |  |                         
|              |  |  |  |                         
|              |  |  |  |                         
|              |  |  |  |                         
|              |  |  |  |                         



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CERTIFICATIONS



I, Alex Yemenidjian, certify
that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Metro-Goldwyn-Mayer Inc.;
| | -- |  | -------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date:    July 25, 2003



/s/    ALEX
YEMENIDJIANAlex YemenidjianChief Executive Officer




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I, Daniel J. Taylor, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Metro-Goldwyn-Mayer Inc.;
| | -- |  | -------------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the
Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent function):
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report
financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date:    July 25, 2003



/s/    DANIEL J.
TAYLORDaniel J. Taylor Chief Financial Officer




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