**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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





**For
      the quarterly period ended March 31, 2007**





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


For
      the
      transition period from __________ to __________





Commission
      File Number: 0-24796





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


(Exact
      name of registrant as specified in its charter)





**BERMUDA**
                    **98-0438382**(State
                        or other jurisdiction of incorporation and organization)
                    (IRS
                        Employer Identification No.)**Clarendon
                        House, Church Street, Hamilton**
                    **HM
                        11 Bermuda**(Address
                        of principal executive offices)
                    (Zip
                        Code)





Registrant's
      telephone number, including area code: 441-296-1431





Indicate
      by check mark whether 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 each shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.  Yes  S  No  £





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
      Act.





Large
                        accelerated filer  S
                    Accelerated
                        filer  £
                    Non-accelerated
                        filer  £





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





Indicate
      the number of shares outstanding of each of the issuer's classes of common
      stock, as of the latest practicable date.





Class
                        Outstanding
                            as of April 27, 2007Class
                            A Common Stock, par value $0.08
                        34,622,338Class
                            B Common Stock, par value $0.08
                        6,312,839







*Index*




THIS
      PAGE
      INTENTIONALLY LEFT BLANK










**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**





**FORM
      10-Q**





**For
      the quarterly period ended March 31, 2007**





**INDEX**





Page**Part
                            I. Financial information****Item
                            1. Financial Statements**Condensed
                            consolidated Balance Sheets as at March 31, 2007
                            and December 31, 2006
                        2Condensed
                            consolidated Statements of Operations for the Three
                            Months Ended March 31, 2007 and 2006
                        4Condensed
                            consolidated Statements of Shareholders'
                            Equity for the Three Months Ended March 31, 2007
                        6Condensed
                            consolidated Statements of Cash Flows for the
                            Three Months Ended March 31, 2007 and 2006
                        7Notes
                            to the condensed consolidated Financial
                            Statements
                        8**Item
                            2. Management's Discussion and Analysis of Financial
                            Condition and Results of Operations**
                        38**Item
                            3. Quantitative and Qualitative Disclosures About
                            Market Risk**
                        67**Item
                            4. Controls and Procedures**
                        68**Part
                            II. Other Information****Item
                            1. Legal Proceedings**
                        69**Item
                            1A. Risk Factors**
                        72**Item
                            6. Exhibits**
                        80**Signatures**
                        80**Exhibit
                            Index**
                        81


Page
            1
 *Index*




**Part
      I. Financial Information**





**Item
      1.  Financial Statements**





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(US$
      000’s)**


**(Unaudited)**





**March
                                            31,**
                                          **2007**
                                        
                                        
                                        **December
                                            31,**
                                          **2006****ASSETS****Current
                                            assets**Cash
                                            and cash equivalents
                                        
                                        $
                                        157,340
                                        
                                        
                                        $
                                        145,904Restricted
                                            cash (Note 6)
                                        
                                        
                                        5,485
                                        
                                        
                                        
                                        4,954Accounts
                                            receivable (net of allowance) (Note 7)
                                        
                                        
                                        144,412
                                        
                                        
                                        
                                        152,505Income
                                            taxes receivable
                                        
                                        
                                        3,831
                                        
                                        
                                        
                                        3,053Program
                                            rights
                                        
                                        
                                        63,943
                                        
                                        
                                        
                                        59,645Other
                                            current assets (Note 8)
                                        
                                        
                                        49,704
                                        
                                        
                                        
                                        47,555**Total
                                            current assets**
                                        
                                        ****
                                        **424,715**
                                        
                                        
                                        ****
                                        **413,616****Non-current
                                            assets**Investments
                                        
                                        
                                        16,563
                                        
                                        
                                        
                                        19,214Property,
                                            plant and equipment (Note 9)
                                        
                                        
                                        122,004
                                        
                                        
                                        
                                        115,805Program
                                            rights
                                        
                                        
                                        84,198
                                        
                                        
                                        
                                        76,638Goodwill
                                            (Note 4)
                                        
                                        
                                        903,597
                                        
                                        
                                        
                                        905,580Broadcast
                                            licenses (Note 4)
                                        
                                        
                                        202,409
                                        
                                        
                                        
                                        198,730Other
                                            intangible assets (Note 4)
                                        
                                        
                                        76,038
                                        
                                        
                                        
                                        71,942Other
                                            non-current assets (Note 8)
                                        
                                        
                                        18,767
                                        
                                        
                                        
                                        17,475**Total
                                            non-current assets**
                                        
                                        ****
                                        **1,423,576**
                                        
                                        
                                        ****
                                        **1,405,384****Total
                                            assets**
                                        
                                        **$**
                                        **1,848,291**
                                        
                                        
                                        **$**
                                        **1,819,000**




*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*





Page
            2
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS (continued)**


**(US$
      000’s)**


**(Unaudited)**





**March
                          31,**
                        **2007**
                      
                      
                      **December
                          31,**
                        **2006****LIABILITIES
                          AND SHAREHOLDERS’ EQUITY****Current
                          liabilities**Accounts
                          payable and accrued liabilities (Note 10)
                      
                      $
                      141,232
                      
                      
                      $
                      119,717Duties
                          and other taxes payable
                      
                      
                      41,480
                      
                      
                      
                      31,707Income
                          taxes payable
                      
                      
                      10,043
                      
                      
                      
                      12,434Credit
                          facilities and obligations under capital leases (Note 11)
                      
                      
                      12,650
                      
                      
                      
                      13,057Deferred
                          consideration – Croatia (Note 6)
                      
                      
                      4,055
                      
                      
                      
                      4,010Deferred
                          consideration – Ukraine
                      
                      
                      -
                      
                      
                      
                      200Deferred
                          tax
                      
                      
                      4,268
                      
                      
                      
                      1,836**Total
                          current liabilities**
                      
                      ****
                      **213,728**
                      
                      
                      ****
                      **182,961****Non-current
                          liabilities**Credit
                          facilities and obligations under capital leases (Note 11)
                      
                      
                      5,795
                      
                      
                      
                      6,359Senior
                          Notes (Note 5)
                      
                      
                      492,742
                      
                      
                      
                      487,291Income
                          taxes payable
                      
                      
                      5,515
                      
                      
                      
                      3,000Deferred
                          tax
                      
                      
                      59,310
                      
                      
                      
                      58,092Other
                          non-current liabilities
                      
                      
                      14,777
                      
                      
                      
                      19,342**Total
                          non-current liabilities**
                      
                      ****
                      **578,139**
                      
                      
                      ****
                      **574,084**Commitments
                          and contingencies (Note 18)**Minority
                          interests in consolidated subsidiaries**
                      
                      ****
                      **25,949**
                      
                      
                      ****
                      **26,189****SHAREHOLDERS'
                          EQUITY:**Nil
                          shares of Preferred Stock of $0.08 each (December 31, 2006
–
                          nil)
                      
                      
                      -
                      
                      
                      
                      -34,622,338
                          shares of Class A Common Stock of $0.08 each (December
                          31, 2006 –
                          34,412,138)
                      
                      
                      2,770
                      
                      
                      
                      2,7536,312,839
                          shares of Class B Common Stock of $0.08 each (December
                          31, 2006 –
                          6,312,839)
                      
                      
                      505
                      
                      
                      
                      505Additional
                          paid-in capital
                      
                      
                      934,904
                      
                      
                      
                      931,108Accumulated
                          deficit
                      
                      
                      (35,199
                      )
                      
                      
                      (31,730
                      )Accumulated
                          other comprehensive income
                      
                      
                      127,495
                      
                      
                      
                      133,130**Total
                          shareholders’ equity**
                      
                      ****
                      **1,030,475**
                      
                      
                      ****
                      **1,035,766****Total
                          liabilities and shareholders’ equity**
                      
                      **$**
                      **1,848,291**
                      
                      
                      **$**
                      **1,819,000**




*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*





Page
            3
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
      INCOME**


**(US$
      000’s, except share and per share data)**


**(Unaudited)**





**For
                                the Three Months Ended March 31,****2007**
                            
                            
                            **2006****Net
                                revenues**
                            
                            **$**
                            **147,912**
                            
                            
                            **$**
                            **119,754****Operating
                                expenses:**Operating
                                costs
                            
                            
                            25,657
                            
                            
                            
                            22,972Cost
                                of programming
                            
                            
                            66,353
                            
                            
                            
                            48,418Depreciation
                                of station property, plant and equipment
                            
                            
                            6,899
                            
                            
                            
                            5,702Amortization
                                of broadcast licenses and other intangibles (Note
                                4)
                            
                            
                            5,162
                            
                            
                            
                            4,332**Cost
                                of revenues**
                            
                            ****
                            **104,071**
                            
                            
                            ****
                            **81,424**Station
                                selling, general and administrative expenses
                            
                            
                            15,781
                            
                            
                            
                            14,166Corporate
                                operating costs
                            
                            
                            8,804
                            
                            
                            
                            7,981**Operating
                                income**
                            
                            ****
                            **19,256**
                            
                            
                            ****
                            **16,183**Interest
                                income
                            
                            
                            1,414
                            
                            
                            
                            1,453Interest
                                expense
                            
                            
                            (11,396
                            )
                            
                            
                            (10,518
                            )Foreign
                                currency exchange loss, net
                            
                            
                            (3,136
                            )
                            
                            
                            (10,862
                            )Change
                                in fair value of derivatives (Note 12)
                            
                            
                            4,524
                            
                            
                            
                            -Other
                                expense
                            
                            
                            (6,213
                            )
                            
                            
                            (548
                            )**Income
                                / (loss) before provision for income taxes, minority
                                interest, equity in
                                income of unconsolidated affiliates and discontinued
                                operations**
                            
                            ****
                            **4,449**
                            
                            
                            ****
                            **(4,292**
                            **)**Provision
                                for income taxes
                            
                            
                            (5,059
                            )
                            
                            
                            (3,994
                            )**Loss
                                before minority interest, equity in income of unconsolidated
                                affiliates
                                and discontinued operations**
                            
                            ****
                            **(610**
                            **)**
                            
                            ****
                            **(8,286**
                            **)**Minority
                                interest in (loss) / income of consolidated subsidiaries
                            
                            
                            360
                            
                            
                            
                            (5,441
                            )Equity
                                in income / (loss) of unconsolidated affiliates
                            
                            
                            -
                            
                            
                            
                            (730
                            )**Net
                                loss from continuing operations**
                            
                            ****
                            **(250**
                            **)**
                            
                            ****
                            **(14,457**
                            **)****Discontinued
                                operations (Note 17):**Tax
                                on disposal of discontinued operations (Czech Republic)
                            
                            
                            -
                            
                            
                            
                            (3,807
                            )**Net
                                loss from discontinued operations**
                            
                            ****
                            **-**
                            
                            
                            ****
                            **(3,807**
                            **)****Net
                                loss**
                            
                            **$**
                            **(250**
                            **)**
                            
                            **$**
                            **(18,264**
                            **)**Currency
                                translation adjustment, net
                            
                            
                            (5,635
                            )
                            
                            
                            32,459**Total
                                comprehensive (loss) / income**
                            
                            **$**
                            **(5,885**
                            **)**
                            
                            **$**
                            **14,195**




*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*





Page
            4
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
      (continued)**


**(US$
      000’s, except share and per share data)**


**(Unaudited)**





**For
                          the Three Months Ended March 31,****2007**
                      
                      
                      **2006****PER
                          SHARE DATA (Note 15):***Net
                          loss per share:*Continuing
                          operations – Basic
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.38
                      )Continuing
                          operations – Diluted
                      
                      
                      (0.01
                      )
                      
                      
                      (0.38
                      )Discontinued
                          operations – Basic
                      
                      
                      -
                      
                      
                      
                      (0.10
                      )Discontinued
                          operations – Diluted
                      
                      
                      -
                      
                      
                      
                      (0.10
                      )Net
                          loss – Basic
                      
                      
                      (0.01
                      )
                      
                      
                      (0.48
                      )Net
                          loss – Diluted
                      
                      $
                      (0.01
                      )
                      
                      $
                      (0.48
                      )*Weighted
                          average common shares used in computing per share amounts
                          (000’s):*Basic
                      
                      
                      40,793
                      
                      
                      
                      38,100Diluted
                      
                      
                      40,793
                      
                      
                      
                      38,100




*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*





Page
            5
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES
      LTD.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**


**(US$
      000’s)**


**(Unaudited)**





**Class
                                A Common Stock**
                            
                            
                            **Class
                                B Common Stock****Number
                                of shares**
                            
                            
                            **Par
                                value**
                            
                            
                            **Number
                                of shares**
                            
                            
                            **Par
                                value**
                            
                            
                            **Additional
                                Paid-In Capital**
                            
                            
                            **Accumulated
                                Deficit**
                            
                            
                            **Accumulated
                                Other Comprehensive Income / (Loss)**
                            
                            
                            **Total
                                Shareholders' Equity****BALANCE,
                                December 31, 2006**
                            
                            ****
                            **34,412,138**
                            
                            
                            **$**
                            **2,753**
                            
                            
                            ****
                            **6,312,839**
                            
                            
                            **$**
                            **505**
                            
                            
                            **$**
                            **931,108**
                            
                            
                            **$**
                            **(31,730**
                            **)**
                            
                            **$**
                            **133,130**
                            
                            
                            **$**
                            **1,035,766**Impact
                                of adoption of FIN 48
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (3,219
                            )
                            
                            
                            -
                            
                            
                            
                            (3,219
                            )BALANCE,
                                upon the adoption of FIN 48
                            
                            ****
                            **34,412,138**
                            
                            
                            **$**
                            **2,753**
                            
                            
                            ****
                            **6,312,839**
                            
                            
                            **$**
                            **505**
                            
                            
                            **$**
                            **931,108**
                            
                            
                            **$**
                            **(34,949**
                            **)**
                            
                            **$**
                            **133,130**
                            
                            
                            **$**
                            **1,032,547**Stock-based
                                compensation
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,797
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,797Stock
                                options exercised
                            
                            
                            210,200
                            
                            
                            
                            17
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,999
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,016Net
                                loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (250
                            )
                            
                            
                            -
                            
                            
                            
                            (250
                            )Currency
                                translation adjustment
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (5,635
                            )
                            
                            
                            (5,635
                            )**BALANCE,
                                March 31, 2007**
                            
                            ****
                            **34,622,338**
                            
                            
                            **$**
                            **2,770**
                            
                            
                            ****
                            **6,312,839**
                            
                            
                            **$**
                            **505**
                            
                            
                            **$**
                            **934,904**
                            
                            
                            **$**
                            **(35,199**
                            **)**
                            
                            **$**
                            **127,495**
                            
                            
                            **$**
                            **1,030,475**











**Class
                                          A Common Stock**
                                      
                                      
                                      **Class
                                          B Common Stock****Number
                                          of shares**
                                      
                                      
                                      **Par
                                          value**
                                      
                                      
                                      **Number
                                          of shares**
                                      
                                      
                                      **Par
                                          value**
                                      
                                      
                                      **Additional
                                          Paid-In Capital**
                                      
                                      
                                      **Accumulated
                                          Deficit**
                                      
                                      
                                      **Accumulated
                                          Other Comprehensive Income / (Loss)**
                                      
                                      
                                      **Total
                                          Shareholders' Equity****BALANCE,
                                          December 31, 2005**
                                      
                                      
                                      **31,032,994**
                                      
                                      
                                      **$**
                                      **2,482**
                                      
                                      
                                      
                                      **6,966,533**
                                      
                                      
                                      **$**
                                      **558**
                                      
                                      
                                      **$**
                                      **754,061**
                                      
                                      
                                      **$**
                                      **(52,154**
                                      **)**
                                      
                                      **$**
                                      **(24,394**
                                      **)**
                                      
                                      **$**
                                      **680,553**Stock-based
                                          compensation
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      688
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      688Stock
                                          options exercised
                                      
                                      
                                      63,000
                                      
                                      
                                      
                                      5
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      911
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      916Shares
                                          issued, net of fees
                                      
                                      
                                      2,530,000
                                      
                                      
                                      
                                      202
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      168,397
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      168,599Net
                                          loss
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (18,264
                                      )
                                      
                                      
                                      -
                                      
                                      
                                      
                                      (18,264
                                      )Currency
                                          translation adjustment
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      32,459
                                      
                                      
                                      
                                      32,459**BALANCE,
                                          March 31, 2006 as restated (see note 2)**
                                      
                                      
                                      **33,625,994**
                                      
                                      
                                      **$**
                                      **2,689**
                                      
                                      
                                      
                                      **6,966,533**
                                      
                                      
                                      **$**
                                      **558**
                                      
                                      
                                      **$**
                                      **924,057**
                                      
                                      
                                      **$**
                                      **(70,418**
                                      **)**
                                      
                                      **$**
                                      **8,065**
                                      
                                      
                                      **$**
                                      **864,951**


*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*





Page
            6
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(US$
      000’s)**


**(Unaudited)**





**For
                              the Three Months Ended March 31,****2007**
                          
                          
                          **2006****CASH
                              FLOWS FROM OPERATING ACTIVITIES:****Net
                              loss**
                          
                          **$**
                          **(250**
                          **)**
                          
                          **$**
                          **(18,264**
                          **)**Adjustments
                              to reconcile net loss to net cash generated from operating
                              activities:Loss
                              from discontinued operations (Note 17)
                          
                          
                          -
                          
                          
                          
                          3,807Equity
                              in (income) / loss of unconsolidated affiliates, net
                              of dividends
                              received
                          
                          
                          -
                          
                          
                          
                          730Depreciation
                              and amortization
                          
                          
                          51,762
                          
                          
                          
                          36,764Loss
                              on disposal of fixed asset
                          
                          
                          7
                          
                          
                          
                          821Interest
                              receivable, net
                          
                          
                          -
                          
                          
                          
                          (47
                          )Stock-based
                              compensation (Note 14)
                          
                          
                          1,262
                          
                          
                          
                          688Minority
                              interest in (loss) / income of consolidated subsidiaries
                          
                          
                          (360
                          )
                          
                          
                          5,441Change
                              in fair value of derivatives (Note 12)
                          
                          
                          (4,524
                          )
                          
                          
                          -Foreign
                              currency exchange loss, net
                          
                          
                          3,136
                          
                          
                          
                          10,861Net
                              change in (net of effects of acquisitions and disposals
                              of
                              businesses):Accounts
                              receivable
                          
                          
                          10,226
                          
                          
                          
                          7,567Program
                              rights
                          
                          
                          (48,123
                          )
                          
                          
                          (40,104
                          )Other
                              assets
                          
                          
                          (3,973
                          )
                          
                          
                          2,901Settlement
                              liability
                          
                          
                          -
                          
                          
                          
                          (10,007
                          )Other
                              accounts payable and accrued liabilities
                          
                          
                          14,540
                          
                          
                          
                          12,373Income
                              taxes payable
                          
                          
                          (2,299
                          )
                          
                          
                          2,300Deferred
                              taxes
                          
                          
                          766
                          
                          
                          
                          3,574VAT
                              and other taxes payable
                          
                          
                          9,743
                          
                          
                          
                          12,288**Net
                              cash generated from continuing operating
                              activities**
                          
                          ****
                          **31,913**
                          
                          
                          ****
                          **31,693****CASH
                              FLOWS FROM INVESTING ACTIVITIES:**Net
                              change in restricted cash
                          
                          
                          (440
                          )
                          
                          
                          (4,068
                          )Purchase
                              of property, plant and equipment
                          
                          
                          (11,995
                          )
                          
                          
                          (10,397
                          )Disposal
                              of property, plant and equipment
                          
                          
                          19
                          
                          
                          
                          -Investments
                              in subsidiaries and unconsolidated affiliates
                          
                          
                          (8,585
                          )
                          
                          
                          (53,153
                          )Repayment
                              of loans and advances to related parties
                          
                          
                          100
                          
                          
                          
                          100**Net
                              cash used in continuing investing activities**
                          
                          ****
                          **(20,901**
                          **)**
                          
                          ****
                          **(67,518**
                          **)****CASH
                              FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                              from credit facilities
                          
                          
                          200
                          
                          
                          
                          28,491Payment
                              of credit facilities and capital leases
                          
                          
                          (1,255
                          )
                          
                          
                          (508
                          )Proceeds
                              from issuance of stock options
                          
                          
                          -
                          
                          
                          
                          916Issuance
                              of shares of Class A Common Stock
                          
                          
                          2,016
                          
                          
                          
                          168,599Dividends
                              paid to minority shareholders
                          
                          
                          (152
                          )
                          
                          
                          (517
                          )**Net
                              cash received from continuing financing
                              activities**
                          
                          ****
                          **809**
                          
                          
                          ****
                          **196,981**NET
                              CASH USED IN DISCONTINUED OPERATING ACTIVITIES
                          
                          
                          (1,624
                          )
                          
                          
                          (1,690
                          )**Impact
                              of exchange rate fluctuations on cash**
                          
                          ****
                          **1,239**
                          
                          
                          ****
                          **1,817**Net
                              increase in cash and cash equivalents
                          
                          
                          11,436
                          
                          
                          
                          161,283**CASH
                              AND CASH EQUIVALENTS, beginning of period**
                          
                          ****
                          **145,904**
                          
                          
                          ****
                          **71,658****CASH
                              AND CASH EQUIVALENTS, end of period**
                          
                          **$**
                          **157,340**
                          
                          
                          **$**
                          **232,941**




*The
      accompanying notes are an integral part of these condensed consolidated
      financial statements.*





Page
            7
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**1.  ORGANIZATION
      AND BUSINESS**





Central
      European Media Enterprises Ltd., a Bermuda corporation, was formed in June
      1994.  Our assets are held through a series of Dutch and Netherlands
      Antilles holding companies.  We invest in, develop and operate
      national and regional commercial television stations and channels in Central
      and
      Eastern Europe.  At March 31, 2007, we have operations in Croatia, the
      Czech Republic, Romania, the Slovak Republic, Slovenia and Ukraine.





Our
      principal subsidiaries, equity-accounted affiliates and cost investments as
      at
      March 31, 2007 were:





**Company
                          Name**
                      **Effective**
                        **Voting
                          Interest**
                      **Jurisdiction
                          of**
                        **Organization**
                      **Type
                          of Affiliate (1)**Nova
                          TV d.d. (“Nova TV (Croatia)”)
                      100.0%
                      Croatia
                      SubsidiaryMedia
                          House d.o.o.
                      100.0%
                      Croatia
                      SubsidiaryCME
                          Media Investments s r.o.
                      100.0%
                      Czech
                          Republic
                      SubsidiaryVILJA
                          a.s. (“Vilja”)
                      100.0%
                      Czech
                          Republic
                      SubsidiaryCET
                          21 spol. S r.o. (“CET 21”)
                      100.0%
                      Czech
                          Republic
                      SubsidiaryERIKA,  a.s.
                      100.0%
                      Czech
                          Republic
                      SubsidiaryMEDIA
                          CAPITOL, a.s.
                      100.0%
                      Czech
                          Republic
                      SubsidiaryNOVA-V.I.P.,
                          a.s.
                      100.0%
                      Czech
                          Republic
                      Subsidiary
                          (in liquidation)HARTIC
                          a.s.
                      100.0%
                      Czech
                          Republic
                      SubsidiaryGalaxie
                          sport, s r.o. (“Galaxie Sport”)
                      100.0%
                      Czech
                          Republic
                      SubsidiaryMedia
                          Pro International S.A.  (“MPI”)
                      90.0%
                      Romania
                      SubsidiaryMedia
                          Vision SRL. (“Media Vision”)
                      75.0%
                      Romania
                      SubsidiaryMPI
                          Romania B.V.
                      90.0%
                      Netherlands
                      SubsidiaryPro
                          TV S.A. (“Pro TV”)
                      90.0%
                      Romania
                      SubsidiarySport
                          Radio TV Media SRL (“TV Sport”)
                      90.0%
                      Romania
                      SubsidiaryMediapro
                          B.V.
                      10.0%
                      Netherlands
                      Cost
                          investmentMedia
                          Pro Management S.A.
                      10.0%
                      Romania
                      Cost
                          investmentA.R.J.,
                          a.s. (“ARJ”)
                      100.0%
                      Slovak
                          Republic
                      SubsidiaryMARKIZA-SLOVAKIA,
                          spol. S r.o. (“Markiza”)
                      80.0%
                      Slovak
                          Republic
                      SubsidiaryGAMATEX,
                          spol. S r.o.
                      80.0%
                      Slovak
                          Republic
                      Subsidiary
                          (in liquidation)A.D.A.M.
                          a.s.
                      80.0%
                      Slovak
                          Republic
                      Subsidiary
                          (in liquidation)MMTV
                          1 d.o.o.
                      100.0%
                      Slovenia
                      SubsidiaryProdukcija
                          Plus d.o.o. (“Pro Plus”)
                      100.0%
                      Slovenia
                      SubsidiaryPOP
                          TV d.o.o. (“Pop TV”)
                      100.0%
                      Slovenia
                      SubsidiaryKanal
                          A d.o.o. (“Kanal A”)
                      100.0%
                      Slovenia
                      SubsidiaryEuro
                          3 TV d.o.o
                      42.0%
                      Slovenia
                      Equity-Accounted
                          AffiliateMTC
                          Holding d.o.o.
                      24.0%
                      Slovenia
                      Equity-Accounted
                          Affiliate (in
                          liquidation)




Page
            8
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**Company
                          Name**
                      **Effective**
                        **Voting
                          Interest**
                      **Jurisdiction
                          of**
                        **Organization**
                      **Type
                          of Affiliate (1)**International
                          Media Services Ltd. (“IMS”)
                      60.0%
                      Bermuda
                      SubsidiaryInnova
                          Film GmbH (“Innova”)
                      60.0%
                      Germany
                      SubsidiaryForeign
                          Enterprise “Inter-Media”  (“Inter-Media”)
                      60.0%
                      Ukraine
                      SubsidiaryTV
                          Media Planet Ltd.
                      60.0%
                      Cyprus
                      SubsidiaryStudio
                          1+1 LLC (“Studio 1+1”)
                      18.0%
                      Ukraine
                      Consolidated
                          Variable Interest EntityUkrainian
                          Media Services LLC
                      99.0%
                      Ukraine
                      SubsidiaryUkrpromtorg
                          -2003 LLC (“Ukrpromtorg”)
                      65.5%
                      Ukraine
                      SubsidiaryGravis
                          LLC
                      60.4%
                      Ukraine
                      SubsidiaryDelta
                          JSC
                      60.4%
                      Ukraine
                      SubsidiaryNart
                          LLC
                      65.5%
                      Ukraine
                      SubsidiaryTV
                          Stimul LLC
                      49.1%
                      Ukraine
                      Equity-Accounted
                          AffiliateCME
                          Media Enterprises B.V.
                      100.0%
                      Netherlands
                      SubsidiaryCME
                          Czech Republic II B.V.
                      100.0%
                      Netherlands
                      SubsidiaryCME
                          Romania B.V.
                      100.0%
                      Netherlands
                      SubsidiaryCentral
                          European Media Enterprises N.V.
                      100.0%
                      Netherlands
                          Antilles
                      SubsidiaryCentral
                          European Media Enterprises II B.V.
                      100.0%
                      Netherlands
                          Antilles
                      SubsidiaryCME
                          SR d.o.o.
                      100.0%
                      Serbia
                      SubsidiaryCME
                          Ukraine Holding GmbH
                      100.0%
                      Austria
                      SubsidiaryCME
                          Cyprus Holding Ltd.
                      100.0%
                      Cyprus
                      SubsidiaryCME
                          Development Corporation
                      100.0%
                      Delaware
                      Subsidiary








(1)
            All
                subsidiaries have been consolidated in our Consolidated Financial
                Statements. All equity-accounted affiliates have been accounted for
                using
                the equity method. All cost investments have been accounted for using
                the
                cost method.





Page
            9
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**












Page
            10
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





*Croatia*





We
      own
      100% of Nova TV (Croatia), which holds a national terrestrial broadcast license
      for Croatia that expires in April 2010.





*Czech
      Republic*





We
      own
      100% of CET 21, which holds the national terrestrial broadcast license for
      TV
      NOVA (Czech Republic) that expires in 2017.





*Romania*





We
      have a
      90% interest in Pro TV, TV Sport and MPI and a 75% interest in Media Vision,
      a
      production, dubbing and subtitling company.  In addition, Pro TV holds
      the licenses for the ACASA, PRO TV INTERNATIONAL, PRO CINEMA and TV SPORT (now
      Sport.ro) channels.  These licenses expire on various dates from
      August 2007 until February 2016.





We
      have a
      10% interest in each of Media Pro BV and Media Pro Management S.A., the parent
      companies of the Media Pro group of companies (“Media Pro”). Substantially all
      of the remaining shares of Media Pro are owned directly or indirectly by Adrian
      Sarbu, the General Director of our Central and Eastern Europe region. Media
      Pro
      comprises a number of Romanian companies with operations in the fields of
      publishing, information, printing, cinema, entertainment and radio.





*Slovak
      Republic*





We
      own
      80% of Markiza, which holds a national terrestrial broadcast license for the
      Slovak Republic that expires in September 2019.





*Slovenia*





We
      own
      100% of Pro Plus, the operating company for our Slovenia
      operations.  Pro Plus has a 100% voting and economic interest in each
      of Pop TV, which holds the licenses for the POP TV network, and Kanal A, which
      holds the licenses for the KANAL A network.  All such licenses expire
      in August 2012.





*Ukraine
      (Studio 1+1)*





The
      Studio 1+1 Group is comprised of several entities in which we hold direct or
      indirect interests.  We hold a 60% ownership and economic interest in
      each of Innova, IMS and TV Media Planet.  Innova owns 100% of
      Inter-Media, a Ukrainian company, which in turn holds a 30% voting and economic
      interest in Studio 1+1, holder of the licenses for the STUDIO 1+1
      network.  The license which covers fifteen hours including prime time
      expires in December 2016.  The second license for the remaining nine
      hours expires in 2014.





Our
      indirect ownership interest in Studio 1+1 is only 18%.  We entered
      into an additional agreement on December 30, 2004 with Boris Fuchsmann,
      Alexander Rodnyansky and Studio 1+1 which re-affirms our entitlement to 60%
      of
      any distribution from Studio 1+1 to its shareholders until such time as
      Ukrainian legislation allows us to increase our ownership interest in Studio
      1+1
      to 60%.  Following amendments to the Ukrainian Media Law in March 2006
      that permit majority indirect foreign ownership, our partners entered into
      agreements with us to restructure the ownership of Studio 1+1 in order to permit
      CME to hold a 60% indirect interest in Studio 1+1 (see Note 18).





*Ukraine
      (KINO, CITI)*





We
      hold a
      65.5% interest in Ukrpromtorg 2003 LLC (“Ukrpromtorg”), which owns (i) 92.2% of
      Gravis LLC, which operates the local channels, KINO and CITI; (ii) 100% of
      Nart
      LLC, which holds a satellite broadcasting license; and (iii) 75% of Stimul
      LLC,
      which operates TV STIMUL.  The licenses held by Ukrpromtorg expire on
      dates ranging from November 2008 to July 2016.





Page
            11
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**2.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





The
      interim financial statements for the three months ended March 31, 2007 should
      be
      read in conjunction with the Notes to the Consolidated Financial Statements
      contained in our Annual Report on Form 10-K for the period ended December 31,
      2006.  Our significant accounting policies have not changed since
      December 31, 2006, except as noted below.





In
      the
      opinion of management, the accompanying interim unaudited financial statements
      reflect all adjustments, consisting only of normal recurring items, necessary
      for their fair presentation in conformity with accounting principles generally
      accepted in the United States of America (“US GAAP”).  The
      consolidated results of operations for interim periods are not necessarily
      indicative of the results to be expected for a full year.





The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting year.  Actual results could differ from
      those estimates and assumptions.





The
      condensed consolidated financial statements include the accounts of Central
      European Media Enterprises Ltd. and our subsidiaries, after the elimination
      of
      intercompany accounts and transactions.  We consolidate the financial
      statements of entities in which we hold at least a majority voting interest
      and
      also those entities which are deemed to be a Variable Interest Entity of which
      we are the primary beneficiary as defined by FASB Interpretation No. 46 (revised
      December 2003), “Consolidation of Variable Interest Entities” ("FIN
      46(R)").  Entities in which we hold less than a majority voting
      interest but over which we have the ability to exercise significant influence
      are accounted for using the equity method.  Other investments are
      accounted for using the cost method.





We,
      like
      other television operators, experience seasonality, with advertising sales
      tending to be lower during the first and third quarters of each calendar year,
      particularly during the summer holiday period (typically July and August) and
      higher during the second and fourth quarters of each calendar year, particularly
      toward the end of the year.





The
      terms
“Company”, “we”, “us”, and “our” are used in this Form 10-Q to refer
      collectively to the parent company and the subsidiaries through which our
      various businesses are actually conducted.  Unless otherwise noted,
      all statistical and financial information presented in this report has been
      converted into US dollars using appropriate exchange rates.  All
      references to “US$” or “dollars” are to US dollars, all references to “HRK” are
      to Croatian kuna, all references to “CZK” are to Czech korunas, all references
      to “RON” are to the New Romanian lei, all references to “SKK” are to Slovak
      korunas, all references to “UAH” are to Ukrainian hryvna, all references to
“Euro” or “EUR” are to the European Union Euro and all references to “GBP” are
      to British pounds.





**Income
      Taxes**





We
      account for income taxes under the asset and liability method as set out in
      FAS
      No. 109, “Accounting for Income Taxes” (“FAS 109”).  Deferred tax
      assets and liabilities are recognized for the expected tax consequences of
      temporary differences between the tax bases of assets and liabilities and their
      reported amounts.  Valuation allowances are established when necessary
      to reduce deferred tax assets to amounts which are more likely than not to
      be
      realized.





Page
            12
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





On
      January 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN
      48”), which clarifies the accounting for uncertainty in tax
      positions.  The evaluation of a tax position under FIN 48 is a
      two-step process.  The first step is recognition: Tax positions taken
      or expected to be taken in a tax return should be recognized only if those
      positions are more likely than not to be sustained upon examination, based
      on
      the technical merits of the position.  In evaluating whether a tax
      position has met the more likely than not recognition threshold, it should
      be
      presumed that the position will be examined by the relevant taxing authority
      and
      that they would have full knowledge of all relevant information.  The
      second step is measurement: Tax positions that meet the recognition criteria
      are
      measured at the largest amount of benefit that is greater than 50 percent likely
      of being recognized upon ultimate settlement.





As
      a
      result of the implementation of FIN 48, we recognized a liability of
      approximately US$ 2.0 million for unrecognized tax benefits, of which US$1.7
      million was accounted for as a reduction to retained deficit as at January
      1,
      2007.  The total amount of unrecognized benefits that, if recognized,
      would affect the effective tax rate amounts to US$ 2.0 million, all of which
      would reduce the effective tax rate accordingly.





We
      recognize interest accrued and penalties related to unrecognized tax benefits
      within the provision for income taxes. As at January 1, 2007, we accrued US$
      1.8
      million in respect of interest and penalties, of which US$1.5m was accounted
      for
      as a reduction to retained deficit.





Our
      subsidiaries file income tax returns in the Netherlands and various other tax
      jurisdictions including the United States.  As at January 1, 2007,
      analyzed by major tax jurisdictions, the Company’s subsidiaries are no longer
      subject to income tax examinations for years before:





**Jurisdiction**
                            **Year**Croatia
                            2003Czech
                                Republic
                            2003Germany
                            2000Netherlands
                            2004Romania
                            2002Slovak
                                Republic
                            2001Slovenia
                            2001Ukraine
                            2003United
                                States
                            2001








**Recent
      Accounting Pronouncements**





In
      September 2006, the FASB issued FASB Statement No. 157, “Fair Value
      Measurements” (“FAS 157”).  FAS 157 addresses the need for increased
      consistency in fair value measurements, defining fair value as the price that
      would be received to sell an asset or paid to transfer a liability in an orderly
      transaction between market participants at the measurement date.  It
      also establishes a framework for measuring fair value and expands disclosure
      requirements.  FAS 157 is effective for us beginning January 1,
      2008.  We are currently evaluating the impact of the adoption of FAS
      157 on our financial position and results of operations.





In
      February 2007, the FASB issued FASB Statement No. 159, "The Fair Value Option
      for Financial Assets and Financial Liabilities" ("FAS 159"). FAS 159 gives
      entities the option to prospectively measure many financial instruments and
      certain other items at fair value in the balance sheet with changes in the
      fair
      value recognized in the income statement. FAS 159 is effective for fiscal years
      beginning after November 15, 2008, although entities may elect to adopt the
      statement early. We are currently evaluating the impact of adoption on our
      financial position and results of operations.





Page
            13
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**Restatement**





Subsequent
      to the issuance of our financial statements as of and for the period ended
      June
      30, 2006 we initiated a voluntary review of our historical stock option granting
      practices for the period from 1994 to 2002. Our Audit Committee conducted the
      review with the assistance of independent legal counsel and an independent
      accounting firm. The Audit Committee found certain instances of administrative
      and procedural deficiencies that resulted in incorrect accounting measurement
      dates and other incorrect accounting, but found no evidence from which it could
      be concluded that the errors were the result of deliberate or intentional
      misconduct. These accounting errors resulted from grants made to grantees where
      the list of grantees and/or shares allocated to them were not sufficiently
      definitive for the grant to be deemed final as of the reported measurement
      date
      as well as from a small number of grants made to employees and non-employees
      that had been accounted for incorrectly. Errors were discovered in the
      accounting for grants made in the period between 1994 and 1998; we believe
      the
      impact of these instances to be immaterial for each prior year and they neither
      relate to nor have an impact on the current period.





However,
      we concluded that correcting the error in the financial statements for the
      year
      ended December 31, 2006 would be material; therefore, in accordance with Staff
      Accounting Bulletin No. 108 Section N to Topic 1 “Considering the Effects of
      Prior Year Misstatements in Current Year Financial Statements”, we restated our
      historical financial statements.





The
      restatement above had the impact on our previously presented financial
      information as set out below. All amounts are in US$ 000’s.





**As
                          reported**
                        **previously**
                      
                      
                      **Adjustment**
                      
                      
                      **As
                          restated****Balance
                          Sheet (as of March 31, 2006)**Additional
                          paid-in capital at March 31, 2006
                      
                      
                      916,876
                      
                      
                      
                      7,181
                      
                      
                      
                      924,057Accumulated
                          deficit at March 31, 2006
                      
                      
                      (63,237
                      )
                      
                      
                      (7,181
                      )
                      
                      
                      (70,418
                      )





Page
            14
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**3.  ACQUISITIONS
      AND DISPOSALS**





**Romania**





*Acquisition
      of additional interest – TV Sport*





On
      December 14, 2006 we acquired 20.0% of TV Sport from Silviu Prigoana for cash
      consideration of EUR 2.0 million (US$ 2.6 million).  TV Sport operated
      a sports-oriented channel focusing on local and international football,
      international boxing and a number of local Romanian sports.





On
      February 20, 2007 we acquired control of TV Sport by acquiring an additional
      50.0% interest from Nolsom Limited for cash consideration of EUR 4.2 million
      (approximately US$ 5.3 million).  We acquired the remaining 30.0% of
      TV Sport, also from Nolsom Limited, on March 15, 2007 for cash consideration
      of
      EUR 2.5 million (approximately US$ 3.1 million).





We
      performed a fair value exercise to allocate the purchase price to the acquired
      assets and liabilities and identified separately identifiable
      assets.  The following table summarizes the preliminary fair values of
      the assets acquired and liabilities assumed at the date of
      acquisition:





**Fair
                            Value on**
                          **Acquisition**Property,
                            plant and equipment
                        
                        $
                        35Intangible
                            assets subject to amortization (1)
                        
                        
                        4,784Intangible
                            assets not subject to amortization (2)
                        
                        
                        8,974Other
                            assets
                        
                        
                        2,904Goodwill
                        
                        
                        2,311Deferred
                            tax liability
                        
                        
                        (1,575
                        )Other
                            liabilities
                        
                        
                        (6,398
                        )**Total
                            purchase price**
                        
                        **$**
                        **11,035**





(1)
      The
      intangible assets subject to amortization comprise customer relationships,
      which
      are being amortized over one to twenty years (weighted average: 15.5 years)
      and
      trademarks, which are being amortized over two years.





(2)
      Intangible assets not subject to amortization represent television broadcast
      licenses.





Page
            15
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**4.  GOODWILL
      AND INTANGIBLE ASSETS**





Our
      goodwill and intangible asset additions are the result of acquisitions in
      Croatia, the Czech Republic, Romania, the Slovak Republic, Slovenia and
      Ukraine.  No goodwill is expected to be deductible for tax
      purposes.





*Goodwill:*





Goodwill
      by operating segment as at March 31, 2007 and December 31, 2006 is summarized
      as
      follows:





**Balance**
                            **December****31,**
                            **2006**
                          
                          
                          **Additions**
                          
                          
                          **Foreign**
                            **Currency**
                            **movement**
                          
                          
                          **Balance**
                            **March
                              31,**
                            **2007**Croatia
                          
                          **$**
                          **-**
                          
                          
                          **$**
                          **-**
                          
                          
                          **$**
                          **-**
                          
                          
                          **$**
                          **-**Czech
                              Republic
                          
                          ****
                          **823,786**
                          
                          
                          
                          -
                          
                          
                          
                          (5,760
                          )
                          
                          ****
                          **818,026**Romania
                          
                          ****
                          **31,130**
                          
                          
                          
                          2,311
                          
                          
                          
                          -
                          
                          
                          ****
                          **33,441**Slovak
                              Republic
                          
                          ****
                          **25,483**
                          
                          
                          
                          -
                          
                          
                          
                          1,284
                          
                          
                          ****
                          **26,767**Slovenia
                          
                          ****
                          **16,458**
                          
                          
                          
                          -
                          
                          
                          
                          182
                          
                          
                          ****
                          **16,640**Ukraine
                              (STUDIO 1+1)
                          
                          ****
                          **4,096**
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          ****
                          **4,096**Ukraine
                              (KINO, CITI)
                          
                          ****
                          **4,627**
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          ****
                          **4,627****Total**
                          
                          **$**
                          **905,580**
                          
                          
                          **$**
                          **2,311**
                          
                          
                          **$**
                          **(4,294**
                          **)**
                          
                          **$**
                          **903,597**





*Broadcast
      licenses:*





The
      net
      book value of our broadcast licenses as at March 31, 2007 and December 31,
      2006
      is summarized as follows:





**Indefinite-Lived**
                        **Broadcast**
                        **Licenses**
                      
                      
                      **Amortized**
                        **Broadcast**
                        **Licenses**
                      
                      
                      **Total****Balance,
                          December 31, 2006**
                      
                      **$**
                      **26,344**
                      
                      
                      **$**
                      **172,386**
                      
                      
                      **$**
                      **198,730**Additions
                      
                      
                      8,974
                      
                      
                      
                      -
                      
                      
                      
                      8,974Amortization
                      
                      
                      -
                      
                      
                      
                      (4,198
                      )
                      
                      
                      (4,198
                      )Foreign
                          currency movements
                      
                      
                      99
                      
                      
                      
                      (1,196
                      )
                      
                      
                      (1,097
                      )**Balance,
                          March 31, 2007**
                      
                      **$**
                      **35,417**
                      
                      
                      **$**
                      **166,992**
                      
                      
                      **$**
                      **202,409**





With
      the
      exception of our broadcast licenses in the Czech Republic, the Slovak Republic
      and Ukraine, our broadcast licenses primarily have indefinite lives and are
      subject to annual impairment reviews.  The licenses in Ukraine have
      economic useful lives of, and are amortized on a straight-line basis
      over,  between seven and ten years.  The license in the
      Czech Republic has an economic useful life of, and is amortized on a
      straight-line basis over, twelve years.  The license in the Slovak
      Republic has an economic useful life of, and is amortized on a straight-line
      basis over, thirteen years.





Page
            16
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





The
      gross
      value and accumulated amortization of amortized broadcast licenses was as
      follows at March 31, 2007 and December 31, 2006:





**March 31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**Gross
                          value
                      
                      $
                      200,655
                      
                      
                      $
                      201,994Accumulated
                          amortization
                      
                      
                      (33,663
                      )
                      
                      
                      (29,608
                      )**Total
                          net book value**
                      
                      **$**
                      **166,992**
                      
                      
                      **$**
                      **172,386**





*Other
      intangible assets:*





The
      net
      book value of our other intangible assets as at March 31, 2007 and December
      31,
      2006 is summarized as follows:





**Trademarks**
                      
                      
                      **Customer**
                        **Relationships**
                      
                      
                      **Other**
                      
                      
                      **Total****Balance,
                          December 31, 2006**
                      
                      **$**
                      **44,026**
                      
                      
                      **$**
                      **27,213**
                      
                      
                      **$**
                      **703**
                      
                      
                      **$**
                      **71,942**Additions
                      
                      
                      637
                      
                      
                      
                      4,147
                      
                      
                      
                      -
                      
                      
                      
                      4,784Amortization
                      
                      
                      (26
                      )
                      
                      
                      (925
                      )
                      
                      
                      (13
                      )
                      
                      
                      (964
                      )Foreign
                          currency movements
                      
                      
                      (75
                      )
                      
                      
                      329
                      
                      
                      
                      22
                      
                      
                      
                      276**Balance,
                          March 31, 2007**
                      
                      **$**
                      **44,562**
                      
                      
                      **$**
                      **30,764**
                      
                      
                      **$**
                      **712**
                      
                      
                      **$**
                      **76,038**





Customer
      relationships are deemed to have an economic useful life of, and are amortized
      on a straight-line basis over, five to fourteen years.  Other than the
      trademark acquired with TV Sport, which has an economic life of, and is being
      amortized on a straight line basis over, two years, trademarks have an
      indefinite life.




The
      gross
      value and accumulated amortization of other intangible assets was as follows
      at
      March 31, 2007 and December 31, 2006:





**March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**Gross
                          value
                      
                      $
                      81,780
                      
                      
                      $
                      76,695Accumulated
                          amortization
                      
                      
                      (5,742
                      )
                      
                      
                      (4,753
                      )**Total
                          net book value**
                      
                      **$**
                      **76,038**
                      
                      
                      **$**
                      **71,942**






**5.  SENIOR
      NOTES**





Our
      Senior Notes consist of the following:





**Carrying
                          Value**
                      
                      
                      **Fair
                          Value****March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**
                      
                      
                      **March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**EUR
                          245.0 million 8.25% Senior Notes
                      
                      $
                      326,275
                      
                      
                      $
                      322,666
                      
                      
                      $
                      355,640
                      
                      
                      $
                      353,722EUR
                          125.0 million floating rate Senior Notes
                      
                      
                      166,467
                      
                      
                      
                      164,625
                      
                      
                      
                      171,253
                      
                      
                      
                      170,181**$**
                      **492,742**
                      
                      
                      **$**
                      **487,291**
                      
                      
                      **$**
                      **526,893**
                      
                      
                      **$**
                      **523,903**




Page
            17
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





On
      May 5,
      2005, we issued Senior Notes in the aggregate principal amount of EUR 370.0
      million consisting of EUR 245.0 million of 8.25% Senior Notes due May 2012
      and
      EUR 125.0 million of floating rate Senior Notes due May 2012, which bear
      interest at six-month Euro Inter-Bank Offered Rate (“EURIBOR”) plus 5.50% (9.23%
      was applicable at March 31, 2007).  Interest is payable semi-annually
      in arrears on each May 15 and November 15.  The fair value of the
      Senior Notes as at March 31, 2007 was calculated by multiplying the outstanding
      debt by the traded market price.





The
      Senior Notes are secured senior obligations and rank pari passu with all
      existing and future senior indebtedness and are effectively subordinated to
      all
      existing and future indebtedness of our subsidiaries.  The amounts
      outstanding are guaranteed by certain of our subsidiaries and are secured by
      a
      pledge of shares of those subsidiaries and an assignment of certain contractual
      rights.  The terms of our indebtedness restrict the manner in which
      our business is conducted, including the incurrence of additional indebtedness,
      the making of investments, the payment of dividends or the making of other
      distributions, entering into certain affiliate transactions and the sale of
      assets.





In
      the
      event that (A) there is a change in control by which (i) any party other than
      our present shareholders becomes the beneficial owner of more than 35.0% of
      our
      total voting power; (ii) we agree to sell substantially all of our operating
      assets; or (iii) there is a change in the composition of a majority of our
      Board
      of Directors; and (B) on the 60thday following
      any such change of control the rating of the Senior Notes is either withdrawn
      or
      downgraded from the rating in effect prior to the announcement of such change
      of
      control, we can be required to repurchase the Senior Notes at a purchase price
      in cash equal to 101.0% of the principal amount of the Senior Notes plus accrued
      and unpaid interest to the date of purchase.





The
      Senior Notes are redeemable at our option, in whole or in part, at the
      redemption prices set forth below:





**From:**
                        **EUR
                            245.0 Million 8.25%**
                          **Senior
                            Notes**
                          **Redemption
                            Price**
                        **From:**
                        **EUR
                            125.0 Million Floating**
                          **Rate
                            Senior Notes**
                          **Redemption
                            Price**May
                            15, 2009 to May 14, 2010
                        104.125%
                        May
                            15, 2007 to May 14, 2008
                        102.000%May
                            15, 2010 to May 14, 2011
                        102.063%
                        May
                            15, 2008 to May 14, 2009
                        101.000%May
                            15, 2011 and thereafter
                        100.000%
                        May
                            15, 2009 and thereafter
                        100.000%





On
      April
      11, 2007 we issued a notice to redeem the floating rate Senior Notes on May
      15,
      2007.





At
      any
      time prior to May 15, 2008, we may redeem up to 35.0% of the fixed rate notes
      with the proceeds of any public equity offering at a price of 108.250% of the
      principal amount of such notes, plus accrued and unpaid interest, if any, to
      the
      redemption date.





In
      addition, prior to May 15, 2009, we may redeem all or a part of the fixed rate
      notes at a redemption price equal to 100.0% of the principal amount of such
      notes, plus a “make-whole” premium and accrued and unpaid interest to the
      redemption date.





Certain
      derivative instruments, including redemption call options and change of control
      and asset disposition put options, have been identified as being embedded in
      the
      Senior Notes; but as they are considered clearly and closely related to the
      Senior Notes, they are not accounted for separately.





Page
            18
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**6.  RESTRICTED
      CASH**





Restricted
      cash consists of the following at March 31, 2007 and December 31,
      2006:





**March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**Croatia
                          – held in escrow
                      
                      $
                      4,265
                      
                      
                      $
                      4,183Other
                      
                      
                      1,220
                      
                      
                      
                      771**Total
                          restricted cash**
                      
                      **$**
                      **5,485**
                      
                      
                      **$**
                      **4,954**





The
      amount held in escrow is payable to certain former owners of our Croatia
      operations.








**7.  ACCOUNTS
      RECEIVABLE**





Accounts
      receivable consist of the following at March 31, 2007 and December 31,
      2006:





**March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006****Trading:**Third-party
                          customers
                      
                      $
                      149,105
                      
                      
                      $
                      156,701Less:
                          allowance for bad debts and credit notes
                      
                      
                      (12,093
                      )
                      
                      
                      (11,472
                      )Related
                          parties
                      
                      
                      7,246
                      
                      
                      
                      7,655Less:
                          allowance for bad debts and credit notes
                      
                      
                      (345
                      )
                      
                      
                      (798
                      )**Total
                          trading**
                      
                      **$**
                      **143,913**
                      
                      
                      **$**
                      **152,086****Other:**Third-party
                          customers
                      
                      $
                      437
                      
                      
                      $
                      359Less:
                          allowance for bad debts and credit notes
                      
                      
                      (104
                      )
                      
                      
                      (103
                      )Related
                          parties
                      
                      
                      456
                      
                      
                      
                      454Less:
                          allowance for bad debts and credit notes
                      
                      
                      (290
                      )
                      
                      
                      (291
                      )**Total
                          other**
                      
                      **$**
                      **499**
                      
                      
                      **$**
                      **419****Total
                          accounts receivable**
                      
                      **$**
                      **144,412**
                      
                      
                      **$**
                      **152,505**





At
      March
      31, 2007, CZK 360.2 million (approximately US$ 17.1 million) (December 31,
      2006:
      CZK 600.0 million, approximately US$ 28.7 million) of receivables in the Czech
      Republic were pledged as collateral subject to a factoring agreement (see Note
      11).





Page
            19
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**8.  OTHER
      ASSETS**





Other
      current and non-current assets consist of the following at March 31, 2007 and
      December 31, 2006:





**March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006****Current:**Prepaid
                          programming
                      
                      $
                      22,210
                      
                      
                      $
                      23,072Other
                          prepaid expenses
                      
                      
                      15,793
                      
                      
                      
                      13,177Deferred
                          tax
                      
                      
                      2,094
                      
                      
                      
                      2,124VAT
                          recoverable
                      
                      
                      2,516
                      
                      
                      
                      2,562Loan
                          to related party
                      
                      
                      600
                      
                      
                      
                      600Capitalized
                          debt costs
                      
                      
                      2,809
                      
                      
                      
                      2,908Other
                      
                      
                      3,682
                      
                      
                      
                      3,112**Total
                          other current assets**
                      
                      **$**
                      **49,704**
                      
                      
                      **$**
                      **47,555****Non-current:**Capitalized
                          debt costs
                      
                      $
                      10,567
                      
                      
                      $
                      11,264Loan
                          to related party
                      
                      
                      1,548
                      
                      
                      
                      1,603Deferred
                          tax
                      
                      
                      4,738
                      
                      
                      
                      3,443Advances
                      
                      
                      109
                      
                      
                      
                      102Capitalized
                          development costs
                      
                      
                      703
                      
                      
                      
                      294Other
                      
                      
                      1,102
                      
                      
                      
                      769**Total
                          other non-current assets**
                      
                      **$**
                      **18,767**
                      
                      
                      **$**
                      **17,475**





Capitalized
      debt costs primarily comprise the costs incurred in connection with the issuance
      of our Senior Notes in May 2005 (see Note 5), and are being amortized over
      the
      term of the Senior Notes using the effective interest method.





Page
            20
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**9.  PROPERTY,
      PLANT AND EQUIPMENT**





Property,
      plant and equipment consists of the following at March 31, 2007 and December
      31,
      2006:





**March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**Land
                          and buildings
                      
                      $
                      53,093
                      
                      
                      $
                      56,212Station
                          machinery, fixtures and equipment
                      
                      
                      108,988
                      
                      
                      
                      115,238Other
                          equipment
                      
                      
                      17,586
                      
                      
                      
                      21,980Software
                          licenses
                      
                      
                      16,880
                      
                      
                      
                      15,495Construction
                          in progress
                      
                      
                      10,431
                      
                      
                      
                      4,070**Total
                          cost**
                      
                      ****
                      **206,978**
                      
                      
                      ****
                      **212,995**Less:  Accumulated
                          depreciation
                      
                      
                      (84,974
                      )
                      
                      
                      (97,190
                      )**Total
                          net book value**
                      
                      **$**
                      **122,004**
                      
                      
                      **$**
                      **115,805****Assets
                          held under capital leases (included above)**Land
                          and buildings
                      
                      $
                      5,078
                      
                      
                      $
                      5,541Station
                          machinery, fixtures and equipment
                      
                      
                      2,019
                      
                      
                      
                      2,330**Total
                          cost**
                      
                      ****
                      **7,097**
                      
                      
                      ****
                      **7,871**Less:
                          Accumulated depreciation
                      
                      
                      (1,458
                      )
                      
                      
                      (1,877
                      )**Net
                          book value**
                      
                      **$**
                      **5,639**
                      
                      
                      **$**
                      **5,994**








**10.  ACCOUNTS
      PAYABLE AND ACCRUED LIABILITIES**





Accounts
      payable and accrued liabilities consist of the following at March 31, 2007
      and
      December 31, 2006:





**March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**Accounts
                          payable
                      
                      $
                      28,439
                      
                      
                      $
                      47,447Programming
                          liabilities
                      
                      
                      36,265
                      
                      
                      
                      32,316Accrued
                          interest payable
                      
                      
                      16,102
                      
                      
                      
                      5,375Deferred
                          income
                      
                      
                      19,030
                      
                      
                      
                      3,212Accrued
                          staff costs
                      
                      
                      10,402
                      
                      
                      
                      12,947Accrued
                          production costs
                      
                      
                      11,067
                      
                      
                      
                      7,435Accrued
                          legal costs
                      
                      
                      8,947
                      
                      
                      
                      3,619Accrued
                          rent costs
                      
                      
                      1,124
                      
                      
                      
                      1,163Authors’
                          rights
                      
                      
                      1,663
                      
                      
                      
                      943Onerous
                          contracts
                      
                      
                      1,620
                      
                      
                      
                      -Other
                          accrued liabilities
                      
                      
                      6,573
                      
                      
                      
                      5,260**Total
                          accounts payable and accrued liabilities**
                      
                      **$**
                      **141,232**
                      
                      
                      **$**
                      **119,717**





The
      accrued interest payable balance relates primarily to interest calculated on
      our
      Senior Notes.





Page
            21
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**11.  CREDIT
      FACILITIES AND OBLIGATIONS UNDER CAPITAL LEASES**





Group
      loan obligations and overdraft facilities consist of the following at March
      31,
      2007 and December 31, 2006:





**March
                                                              31,**
                                                            **2007**
                                                          
                                                          
                                                          **December 31,**
                                                            **2006****Credit
                                                              facilities:**Corporate
                                                          (a)
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -Croatia
                                                          (b)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          847Czech
                                                              Republic
                                                          (c)
                                                              – (e)
                                                          
                                                          
                                                          11,892
                                                          
                                                          
                                                          
                                                          11,975Romania
                                                          (f)
                                                          
                                                          
                                                          94
                                                          
                                                          
                                                          
                                                          -Slovenia
                                                          (g)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Ukraine
                                                              (KINO, CITI)
                                                          (h)
                                                          
                                                          
                                                          1,705
                                                          
                                                          
                                                          
                                                          1,703**Total
                                                              credit facilities**
                                                          
                                                          
                                                          **$**
                                                          **13,691**
                                                          
                                                          
                                                          **$**
                                                          **14,525****Capital
                                                              leases:**Croatia
                                                              operations, net of
                                                              interest
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          19Romania
                                                              operations, net of
                                                              interest
                                                          
                                                          
                                                          
                                                          408
                                                          
                                                          
                                                          
                                                          495Slovak
                                                              Republic operations,
                                                              net of interest
                                                          
                                                          
                                                          
                                                          146
                                                          
                                                          
                                                          
                                                          154Slovenia
                                                              operations, net of
                                                              interest
                                                          
                                                          
                                                          
                                                          4,200
                                                          
                                                          
                                                          
                                                          4,223**Total
                                                              capital leases**
                                                          
                                                          
                                                          **$**
                                                          **4,754**
                                                          
                                                          
                                                          **$**
                                                          **4,891****Total
                                                              credit facilities and
                                                              capital leases**
                                                          
                                                          
                                                          **$**
                                                          **18,445**
                                                          
                                                          
                                                          **$**
                                                          **19,416**Less
                                                              current maturities
                                                          
                                                          
                                                          
                                                          (12,650
                                                          )
                                                          
                                                          
                                                          (13,057
                                                          )**Total
                                                              non-current maturities**
                                                          
                                                          
                                                          **$**
                                                          **5,795**
                                                          
                                                          
                                                          **$**
                                                          **6,359**





**Corporate**




(a)
      On
      July 21, 2006, we entered into a five-year revolving loan agreement for EUR
      100.0 million (approximately US$ 133.2 million) arranged by the European Bank
      for Reconstruction and Development (the “Loan”).  ING Bank N.V.
      (“ING”) and Ceska Sporitelna, a.s. (“CS”) are participating in the facility for
      up to EUR 50.0 million in aggregate.




The
      Loan
      bears interest at a rate of three-month EURIBOR plus 2.75% on the drawn
      amount.  The available amount of the Loan amortizes by 7.5% every six
      months from May 2008 to November 2009, then by 15% in May 2010 and November
      2010, and by 40% in May 2011.





Covenants
      contained in the Loan are in line with those contained in our Senior Notes
      (see
      Note 5).  In addition, the Loan’s covenants restrict us from making
      principal repayments on other debt of greater than US$ 20.0 million per year
      for
      the life of the Loan.  This restriction is not applicable to our
      existing facilities with ING or CS or to any refinancing of our Senior
      Notes.





The
      Loan
      is a secured senior obligation and ranks pari passu with all existing and future
      senior indebtedness, including the Senior Notes, and is effectively subordinated
      to all existing and future indebtedness of our subsidiaries.  The
      amount drawn is guaranteed by certain of our subsidiaries and is secured by
      a
      pledge of shares of those subsidiaries and an assignment of certain contractual
      rights.  The terms of the Loan restrict the manner in which our
      business is conducted, including the incurrence of additional indebtedness,
      the
      making of investments, the payment of dividends or the making of other
      distributions, entering into certain affiliate transactions and the sale of
      assets.





Page
            22
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





There
      were no drawings under this facility as at March 31, 2007, however the full
      amount of EUR 100.0 million was drawn on April 18, 2007 (see Note
      19).





**Croatia**





(b)
      On
      March 28, 2007, we repaid EUR 0.6 million (approximately US$ 0.8 million) which
      had been drawn by our Croatia operations under two loan agreements with Hypo
      Alpe-Adria Bank d.d. The security held by the Bank was also
      released.





**Czech
      Republic**




(c)
      As at
      March 31, 2007, there were no drawings by CET 21 under a four-year credit
      facility of CZK 1.2 billion (approximately US$ 57.1 million) available until
      October 31, 2009 with Ceska Sporitelna, a.s. (“CS”).  This facility
      may, at the option of CET 21, be drawn in CZK, US$ or EUR and bears interest
      at
      the three-month, six-month or twelve-month London Inter-Bank Offered Rate
      (“LIBOR”), EURIBOR or Prague Inter-Bank Offered Rate (“PRIBOR”) rate plus
      1.95%.  This facility is secured by a pledge of receivables, which are
      also subject to a factoring arrangement with Factoring Ceska Sporitelna, a.s.,
      a
      subsidiary of CS.




(d)
      CZK
      250.0 million (approximately US$ 11.9 million), the full amount of the facility,
      had been drawn by CET 21 under a working capital facility agreement with CS
      with
      a maturity date of April 30, 2007 and bearing interest at the three-month PRIBOR
      plus 1.65% (three-month PRIBOR relevant to drawings under this facility at
      March
      31, 2007 was 2.57%). On April 7, 2007 the term of  this facility was
      extended to April 30, 2008. This facility is secured by a pledge of receivables,
      which are also subject to a factoring arrangement with Factoring Ceska
      Sporitelna, a.s.





(e)
      As at
      March 31, 2007, there were no drawings under a CZK 600.0 million (approximately
      US$ 28.5 million) factoring facility with Factoring Ceska Sporitelna, a.s.
      available until March 31, 2010.  The facility bears interest at
      one-month PRIBOR plus 1.40% for the period that actively assigned accounts
      receivable are outstanding. On April 11, 2007 the size of the facility was
      reduced from CZK 600.0 million to CZK 300.0 million.





**Romania**





(f)
      As at
      March 31, 2007, an amount of RON 242,739 (approximately US$ 0.1 million) was
      outstanding under a loan agreement from one of the founding shareholders of
      TV
      Sport. The loan is interest free and is repayable in equal monthly instalments
      by August 31, 2007.





**Slovenia**





(g)
      On
      July 29, 2005, Pro Plus entered into a revolving facility agreement for up
      to
      EUR 37.5 million (approximately US$ 49.9 million) in aggregate principal amount
      with ING Bank N.V., Nova Ljubljanska Banka d.d., Ljubljana and Bank Austria
      Creditanstalt d.d., Ljubljana.  The facility amortizes by 10.0% each
      year for four years commencing one year after signing, with 60.0% repayable
      after five years.  This facility is secured by a pledge of the bank
      accounts of Pro Plus, the assignment of certain receivables, a pledge of our
      interest in Pro Plus and a guarantee of our wholly-owned subsidiary CME Media
      Enterprises B.V.  Loans drawn under this facility will bear interest
      at a rate of EURIBOR for the period of drawing plus a margin of between 2.10%
      and 3.60% that varies according to the ratio of consolidated net debt to
      consolidated broadcasting cash flow for Pro Plus.  As at March 31,
      2007, EUR 33.8 million (approximately US$ 45.0 million) was available for
      drawing under this revolving facility and there were no drawings
      outstanding.





**Ukraine
      (KINO, CITI)**





(h)
      Our
      Ukraine (KINO, CITI) operations have entered into a number of three-year
      unsecured loans with Glavred-Media, LLC, the minority shareholder in
      Ukrpromtorg.  As at March 31, 2007, the total value of loans drawn was
      US$ 1.7 million.  The loans are repayable between August 2009 and
      December 2009 and bear interest at 9.0%.





Page
            23
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





*Total
      Group*





At
      March
      31, 2007, the maturity of our debt (including our Senior Notes) is as
      follows:





2007
                      
                      $
                      11,9912008
                      
                      
                      -2009
                      
                      
                      1,7002010
                      
                      
                      -2011
                      
                      
                      -2012
                          and thereafter
                      
                      
                      492,742**Total**
                      
                      **$**
                      **506,433**





In
      accordance with the terms of the floating rate Senior Notes, we have notified
      holders of these Senior Notes that we will redeem them on May 15, 2007 (see
      Note
      5).





*Capital
      Lease Commitments*





We
      lease
      certain of our office and broadcast facilities as well as machinery and
      equipment under various leasing arrangements.  The future minimum
      lease payments from continuing operations, by year and in the aggregate, under
      capital leases with initial or remaining non-cancelable lease terms in excess
      of
      one year, consisted of the following at March 31, 2007:





2007
                      
                      $
                      8672008
                      
                      
                      8602009
                      
                      
                      5932010
                      
                      
                      5942011
                      
                      
                      5932012
                          and thereafter
                      
                      
                      3,035****
                      **6,542**Less:
                          amount representing interest
                      
                      
                      (1,788
                      )**Present
                          value of net minimum lease payments**
                      
                      **$**
                      **4,754**








**12.  FINANCIAL
      INSTRUMENTS**





On
      April
      27, 2006, we entered into currency swap agreements with two counterparties
      whereby we swapped a fixed annual coupon interest rate (of 9.0%) on notional
      principal of CZK 10.7 billion (approximately US$ 509.0 million), payable on
      July
      15, October 15, January 15, and April 15, to the termination date of April
      15,
      2012, for a fixed annual coupon interest rate (of 9.0%) on notional principal
      of
      EUR 375.9 million (approximately US$ 500.6 million) receivable on July 15,
      October 15, January 15, and April 15, to the termination date of April 15,
      2012.





The
      fair
      value of these financial instruments as at March 31, 2007 was a US$ 8.0 million
      liability.





These
      currency swap agreements reduce our exposure to movements in foreign exchange
      rates on a part of the CZK-denominated cash flows generated by our Czech
      Republic operations that is approximately equivalent in value to the
      Euro-denominated interest payments on our Senior Notes (see Note
      5).  They are financial instruments that are used to minimize currency
      risk and are considered an economic hedge of foreign exchange
      rates.  These instruments have not been designated as hedging
      instruments as defined under FASB Statement No. 133, “Accounting for Derivative
      Instruments and Hedging Activities”, and so changes in their fair value are
      recorded in the consolidated statement of operations and in the consolidated
      balance sheet in other non-current liabilities**.**





Page
            24
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





The
      redemption of the floating rate Senior Notes will be financed mainly by other
      Euro-denominated loans and therefore the integrity of the economic hedge will
      be
      largely preserved.








**13.  SHAREHOLDERS’
      EQUITY**





*Preferred
      Stock*





5,000,000
      shares of Preferred Stock, with a US$ 0.08 par value, were authorized as at
      March 31, 2007 and December 31, 2006.  None were issued and
      outstanding as at March 31, 2007, and December 31, 2006.





*Class
      A and B Common Stock*





100,000,000
      shares of Class A Common Stock and 15,000,000 shares of Class B Common Stock
      were authorized as at March 31, 2007 and December 31, 2006.  The
      rights of the holders of Class A Common Stock and Class B Common Stock are
      identical except for voting rights.  The shares of Class A Common
      Stock are entitled to one vote per share and the shares of Class B Common Stock
      are entitled to ten votes per share.  Class B Common Stock is
      convertible into Class A Common Stock for no additional consideration on a
      one-for-one basis.  Holders of each class of shares are entitled to
      receive dividends and upon liquidation or dissolution are entitled to receive
      all assets available for distribution to shareholders.  The holders of
      each class have no preemptive or other subscription rights and there are no
      redemption or sinking fund provisions with respect to such shares.








**14.  STOCK-BASED
      COMPENSATION**





The
      charge for stock-based compensation in our condensed consolidated statements
      of
      operations is as follows:





**For
                                  the Three Months**
                                **Ended
                                  March 31,****2007**
                              
                              
                              **2006**Stock-based
                                  compensation charged under SFAS 123(R)
                              
                              $
                              1,262
                              
                              
                              $
                              688




Under
      the
      provisions of SFAS 123(R), the fair value of stock options is estimated on
      the
      grant date using the Black-Scholes option-pricing model and recognized ratably
      over the requisite service period. No options were granted in the three months
      ended March 31, 2007.





Page
            25
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





A
      summary
      of option activity for the three months ended March 31, 2007 is presented
      below:





**Shares**
                      
                      
                      **Weighted**
                        **Average
                          Exercise**
                        **Price
                          per Share**
                      
                      
                      **Weighted**
                        **Average**
                        **Remaining**
                        **Contractual
                          Term**
                        **(years)**
                      
                      
                      **Aggregate**
                        **Intrinsic
                          Value**Outstanding
                          at January 1, 2007
                      
                      
                      1,288,575
                      
                      
                      $
                      35.51
                      
                      
                      
                      7.45
                      
                      
                      $
                      44,443Granted
                      
                      
                      -
                      
                      
                      
                      -Exercised
                      
                      
                      (210,200
                      )
                      
                      
                      9.59Forfeited
                      
                      
                      (5,000
                      )
                      
                      
                      47.36**Outstanding
                          at March 31, 2007**
                      
                      ****
                      **1,073,375**
                      
                      
                      **$**
                      **40.53**
                      
                      
                      ****
                      **7.46**
                      
                      
                      **$**
                      **51,435**Vested
                          or expected to vest at March 31, 2007
                      
                      
                      1,015,647
                      
                      
                      
                      39.52
                      
                      
                      
                      7.39
                      
                      
                      
                      49,697**Exercisable
                          at March 31, 2007**
                      
                      ****
                      **364,200**
                      
                      
                      **$**
                      **21.92**
                      
                      
                      ****
                      **6.50**
                      
                      
                      **$**
                      **24,230**





The
      exercise of stock options is expected to generate a net operating loss
      carryforward in our Delaware corporation of US$ 11.8 million.  No tax
      benefit has been recognized in respect of this loss, which will be recorded
      as
      an addition to additional paid-in capital when it reduces income taxes
      payable.




The
      aggregate intrinsic value (the difference between the stock price on the last
      day of trading of the first quarter of 2007 and the exercise prices multiplied
      by the number of in-the-money options) represents the total intrinsic value
      that
      would have been received by the option holders had all option holders exercised
      their options as of March 31, 2007.  This amount changes based on the
      fair value of our Common Stock.  The total intrinsic value of options
      exercised during the three months ended March 31, 2007 and 2006, respectively,
      was US$ 14.7 million and US$ 3.3 million, respectively.  As of March
      31, 2007, there was US$ 13.5 million of total unrecognized compensation expense
      related to options.  The expense is expected to be recognized over a
      weighted average period of 3.90 years.  Proceeds received from the
      exercise of stock options were US$ 2.0 million and US$ 0.9 million for the
      three
      months ended March 31, 2007 and 2006, respectively.




**15.  EARNINGS
      PER SHARE**





The
      components of basic and diluted earnings per share are as follows:





**For
                                    the Three Months Ended March 31,****2007**
                                
                                
                                **2006****Net
                                    loss available for common shareholders**
                                
                                **$**
                                **(250**
                                **)**
                                
                                **$**
                                **(18,264**
                                **)****Weighted
                                    average outstanding shares of common stock
                                    (000’s)**
                                
                                ****
                                **40,793**
                                
                                
                                ****
                                **38,100**Dilutive
                                    effect of employee stock options (000’s)
                                
                                
                                -
                                
                                
                                
                                -**Common
                                    stock and common stock equivalents (000’s)**
                                
                                ****
                                **40,793**
                                
                                
                                ****
                                **38,100****Loss
                                    per share:**Basic
                                
                                $
                                (0.01
                                )
                                
                                $
                                (0.48
                                )Diluted
                                
                                $
                                (0.01
                                )
                                
                                $
                                (0.48
                                )




Page
            26
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





At
      March
      31, 2007, 258,500 (2006: 319,453) stock options were antidilutive to income
      from
      continuing operations and excluded from the calculation of earnings per share.
      These may become dilutive in the future.






**16.  SEGMENT
      DATA**





We
      manage
      our business on a geographic basis and review the performance of each business
      segment using data that reflects 100% of operating and license company
      results.  Our business segments are comprised of Croatia, the Czech
      Republic, Romania, the Slovak Republic, Slovenia and our two businesses in
      Ukraine.





We
      evaluate the performance of our business segments based on Segment Net Revenues
      and Segment EBITDA.  Segment Net Revenues and Segment EBITDA include
      our operations in the Slovak Republic which were not consolidated prior to
      January 23, 2006.





Our
      key
      performance measure of the efficiency of our business segments is EBITDA
      margin.  We define Segment EBITDA margin as the ratio of Segment
      EBITDA to Segment Net Revenue.





Segment
      EBITDA is determined as segment net income / (loss), which includes program
      rights amortization costs, before interest, taxes, depreciation and amortization
      of intangible assets.  Items that are not allocated to our business
      segments for purposes of evaluating their performance and therefore are not
      included in Segment EBITDA, include:





·
            expenses
                presented as corporate operating costs in our condensed consolidated
                statements of operations and comprehensive
                income;





·
            stock-based
                compensation charges;





·
            foreign
                currency exchange gains and losses;





·
            changes
                in fair value of derivatives; and





·
            certain
                unusual or infrequent items (e.g., extraordinary gains and losses,
                impairments of assets or
                investments).





Below
      are
      tables showing our Segment Net Revenues, Segment EBITDA, segment depreciation
      and segment asset information by operation, including a reconciliation of these
      amounts to our consolidated results for the three months ended March 31, 2007
      and 2006 for condensed consolidated statement of operations data and as at
      March
      31, 2007 and December 31, 2006 for condensed consolidated balance sheet
      data:





Page
            27
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**For
                                                                      the Three Months
                                                                      Ended March
                                                                      31,****Segment
                                                                      Net Revenues
                                                                      (1)**
                                                                  
                                                                  
                                                                  **Segment
                                                                      EBITDA****2007**
                                                                  
                                                                  
                                                                  **2006**
                                                                  
                                                                  
                                                                  **2007**
                                                                  
                                                                  
                                                                  **2006****Country:**Croatia
                                                                      (NOVA TV)
                                                                  
                                                                  $
                                                                  7,232
                                                                  
                                                                  
                                                                  $
                                                                  3,810
                                                                  
                                                                  
                                                                  $
                                                                  (4,652
                                                                  )
                                                                  
                                                                  $
                                                                  (4,442
                                                                  )Czech
                                                                      Republic (TV
                                                                      NOVA, GALAXIE
                                                                      SPORT)
                                                                  
                                                                  
                                                                  51,519
                                                                  
                                                                  
                                                                  
                                                                  40,549
                                                                  
                                                                  
                                                                  
                                                                  25,667
                                                                  
                                                                  
                                                                  
                                                                  12,826Romania
                                                                      (2)
                                                                  
                                                                  
                                                                  39,342
                                                                  
                                                                  
                                                                  
                                                                  29,871
                                                                  
                                                                  
                                                                  
                                                                  15,136
                                                                  
                                                                  
                                                                  
                                                                  11,613Slovak
                                                                      Republic (MARKIZA
                                                                      TV)
                                                                  
                                                                  
                                                                  18,677
                                                                  
                                                                  
                                                                  
                                                                  11,206
                                                                  
                                                                  
                                                                  
                                                                  5,756
                                                                  
                                                                  
                                                                  
                                                                  (977
                                                                  )Slovenia
                                                                      (POP TV and
                                                                      KANAL A)
                                                                  
                                                                  
                                                                  12,669
                                                                  
                                                                  
                                                                  
                                                                  10,227
                                                                  
                                                                  
                                                                  
                                                                  3,001
                                                                  
                                                                  
                                                                  
                                                                  3,033Ukraine
                                                                      (STUDIO 1+1)
                                                                  
                                                                  
                                                                  18,075
                                                                  
                                                                  
                                                                  
                                                                  25,478
                                                                  
                                                                  
                                                                  
                                                                  (2,370
                                                                  )
                                                                  
                                                                  
                                                                  10,988Ukraine
                                                                      (KINO, CITI)
                                                                      (3)
                                                                  
                                                                  
                                                                  398
                                                                  
                                                                  
                                                                  
                                                                  374
                                                                  
                                                                  
                                                                  
                                                                  (2,417
                                                                  )
                                                                  
                                                                  
                                                                  (126
                                                                  )**Total
                                                                      segment data**
                                                                  
                                                                  **$**
                                                                  **147,912**
                                                                  
                                                                  
                                                                  **$**
                                                                  **121,515**
                                                                  
                                                                  
                                                                  **$**
                                                                  **40,121**
                                                                  
                                                                  
                                                                  **$**
                                                                  **32,915****Reconciliation
                                                                      to condensed
                                                                      consolidated
                                                                      statement of
                                                                      operations:****Consolidated
                                                                      net revenues
                                                                      / income /
                                                                      (loss) before
                                                                      provision for
                                                                      income taxes,
                                                                      minority
                                                                      interest, equity
                                                                      in income of
                                                                      unconsolidated
                                                                      affiliates
                                                                      and discontinued
                                                                      operations**
                                                                  
                                                                  **$**
                                                                  **147,912**
                                                                  
                                                                  
                                                                  **$**
                                                                  **119,754**
                                                                  
                                                                  
                                                                  **$**
                                                                  **4,449**
                                                                  
                                                                  
                                                                  **$**
                                                                  **(4,292**
                                                                  **)**Corporate
                                                                      operating costs
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  8,804
                                                                  
                                                                  
                                                                  
                                                                  7,981Unconsolidated
                                                                      equity affiliates
                                                                      (4)
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  1,761
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (1,283
                                                                  )Depreciation
                                                                      of station
                                                                      property, plant
                                                                      and equipment
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  6,899
                                                                  
                                                                  
                                                                  
                                                                  5,702Amortization
                                                                      of broadcast
                                                                      licenses and
                                                                      other intangibles
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  5,162
                                                                  
                                                                  
                                                                  
                                                                  4,332Interest
                                                                      income
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (1,414
                                                                  )
                                                                  
                                                                  
                                                                  (1,453
                                                                  )Interest
                                                                      expense
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  11,396
                                                                  
                                                                  
                                                                  
                                                                  10,518Change
                                                                      in fair value
                                                                      of derivatives
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  (4,524
                                                                  )
                                                                  
                                                                  
                                                                  -Foreign
                                                                      currency exchange
                                                                      loss, net
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  3,136
                                                                  
                                                                  
                                                                  
                                                                  10,862Other
                                                                      expense
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  6,213
                                                                  
                                                                  
                                                                  
                                                                  548**Total
                                                                      segment data**
                                                                  
                                                                  **$**
                                                                  **147,912**
                                                                  
                                                                  
                                                                  **$**
                                                                  **121,515**
                                                                  
                                                                  
                                                                  **$**
                                                                  **40,121**
                                                                  
                                                                  
                                                                  **$**
                                                                  **32,915**





(1)
      All
      net revenues are derived from external customers.  There are no
      inter-segmental revenues.


(2)
      Romanian networks are PRO TV, PRO CINEMA, ACASA, PRO TV INTERNATIONAL and
      Sport.ro..


(3)
      We
      acquired our Ukraine (KINO, CITI) operations in January 2006.


(4)
      Our
      Slovak Republic operations were accounted for as an equity affiliate until
      January 23, 2006.





Page
            28
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**For
                            the Three Months Ended March 31,****Depreciation
                            of station property, plant and equipment and amortization
                            of broadcast
                            licenses and other intangibles:**
                        
                        **2007**
                        
                        
                        **2006**Croatia
                        
                        $
                        785
                        
                        
                        $
                        529Czech
                            Republic
                        
                        
                        6,461
                        
                        
                        
                        5,525Romania
                        
                        
                        1,747
                        
                        
                        
                        1,227Slovak
                            Republic
                        
                        
                        1,187
                        
                        
                        
                        1,471Slovenia
                        
                        
                        986
                        
                        
                        
                        730Ukraine
                            (STUDIO 1+1)
                        
                        
                        745
                        
                        
                        
                        572Ukraine
                            (KINO, CITI)
                        
                        
                        150
                        
                        
                        
                        157**Total**
                        
                        **$**
                        **12,061**
                        
                        
                        **$**
                        **10,211****Reconciliation
                            to condensed consolidated statement of
                            operations:**Unconsolidated
                            equity affiliates
                        
                        
                        -
                        
                        
                        
                        (177
                        )**Total
                            consolidated depreciation and amortization**
                        
                        **$**
                        **12,061**
                        
                        
                        **$**
                        **10,034**Represented
                            as follows:Depreciation
                            of station property, plant & equipment
                        
                        
                        6,899
                        
                        
                        
                        5,702Amortization
                            of broadcast licenses and other intangibles
                        
                        
                        5,162
                        
                        
                        
                        4,332





**Total
                          assets (1):**
                      
                      **March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**Croatia
                      
                      $
                      35,179
                      
                      
                      $
                      30,394Czech
                          Republic
                      
                      
                      1,182,875
                      
                      
                      
                      1,200,894Romania
                      
                      
                      235,736
                      
                      
                      
                      206,850Slovak
                          Republic
                      
                      
                      100,943
                      
                      
                      
                      86,872Slovenia
                      
                      
                      73,941
                      
                      
                      
                      67,919Ukraine
                          (STUDIO 1+1)
                      
                      
                      71,297
                      
                      
                      
                      75,020Ukraine
                          (KINO, CITI)
                      
                      
                      17,844
                      
                      
                      
                      13,293**Total
                          segment assets**
                      
                      **$**
                      **1,717,815**
                      
                      
                      **$**
                      **1,681,242****Reconciliation
                          to condensed consolidated balance sheets:**Corporate
                      
                      
                      130,476
                      
                      
                      
                      137,758**Total
                          assets**
                      
                      **$**
                      **1,848,291**
                      
                      
                      **$**
                      **1,819,000**





(1)
      Segment assets exclude any inter-company investments, loans, payables and
      receivables.





Page
            29
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





**Long-lived
                          assets (1):**
                      
                      **March
                          31,**
                        **2007**
                      
                      
                      **December 31,**
                        **2006**Croatia
                      
                      $
                      8,484
                      
                      
                      $
                      6,804Czech
                          Republic
                      
                      
                      29,943
                      
                      
                      
                      28,002Romania
                      
                      
                      34,057
                      
                      
                      
                      32,312Slovak
                          Republic
                      
                      
                      20,140
                      
                      
                      
                      19,498Slovenia
                      
                      
                      16,379
                      
                      
                      
                      15,595Ukraine
                          (STUDIO 1+1)
                      
                      
                      7,551
                      
                      
                      
                      7,965Ukraine
                          (KINO, CITI)
                      
                      
                      3,657
                      
                      
                      
                      3,674**Total
                          long-lived assets**
                      
                      **$**
                      **120,211**
                      
                      
                      **$**
                      **113,850****Reconciliation
                          to condensed consolidated balance sheets:**Corporate
                      
                      
                      1,793
                      
                      
                      
                      1,955**Total
                          long-lived assets**
                      
                      **$**
                      **122,004**
                      
                      
                      **$**
                      **115,805**





(1)
      Reflects property, plant and equipment





We
      do not
      rely on any single major customer or group of major customers








**17.  DISCONTINUED
      OPERATIONS**





**For
                          the Three Months Ended March 31,****2007**
                      
                      
                      **2006**Tax
                          on disposal of discontinued operations
                      
                      
                      -
                      
                      
                      
                      (3,807
                      )**Net
                          loss from discontinued operations**
                      
                      **$**
                      **-**
                      
                      
                      **$**
                      **(3,807**
                      **)**





On
      May
      19, 2003, we received US$ 358.6 million from the Czech Republic in final
      settlement of our UNCITRAL arbitration in respect of our former operations
      in
      the Czech Republic.





On
      June
      19, 2003, our Board of Directors decided to withdraw from operations in the
      Czech Republic. The revenues and expenses of our former Czech Republic
      operations and the award income and related legal expenses have therefore all
      been accounted for as discontinued operations for all periods
      presented.





On
      February 9, 2004, we entered into an agreement with the Dutch tax authorities
      to
      settle all tax liabilities outstanding for the years up to and including 2003,
      including receipts in respect of our 2003 award in the arbitration against
      the
      Czech Republic, for a payment of US$ 9.0 million.  We expected to
      continue to pay tax in the Netherlands of between US$ 1.0 and US$ 2.5 million
      for the foreseeable future and therefore agreed to a minimum payment of US$
      2.0
      million per year for the years 2004 - 2008 and US$ 1.0 million for
      2009.





We
      have
      re-evaluated our forecasts of the amount of taxable income we expect to earn
      in
      the Netherlands in the period to 2009.  As the tax payable on this
      income is lower than the minimum amounts agreed with the Dutch tax authorities,
      we have provided for the shortfall.  In our condensed consolidated
      statement of operations, we recognized a charge of US$ nil through discontinued
      operations for the three months ended March 31, 2007 (2006: US$ 3.8
      million).





Page
            30
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





The
      settlement with the Dutch tax authorities also provides that if any decision
      is
      issued at any time prior to December 31, 2008 exempting awards under Bilateral
      Investment Treaties from taxation in the Netherlands, we will be allowed to
      recover losses previously used against the 2003 arbitration award, which could
      be up to US$ 195.0 million, to offset other income within the applicable carry
      forward rules. This would not reduce the minimum amount of tax agreed payable
      under the settlement agreement.  At this time there is no indication
      that the Dutch tax authorities will issue such a decision.





The
      settlement with the Dutch tax authorities has also resulted in a deductible
      temporary difference in the form of a ruling deficit against which a full
      valuation allowance has been recorded.








**18.  COMMITMENTS
      AND CONTINGENCIES**





**Commitments**





*a)
      Station Programming Rights Agreements*





At
      March
      31, 2007, we had the following commitments in respect of future programming,
      including contracts signed with license periods starting after the balance
      sheet
      date:





**March 31,**
                              **2007**Croatia
                            
                            $
                            6,492Czech
                                Republic
                            
                            
                            30,923Romania
                            
                            
                            19,704Slovak
                                Republic
                            
                            
                            19,709Slovenia
                            
                            
                            4,695Ukraine
                                (STUDIO 1+1)
                            
                            
                            18,895Ukraine
                                (KINO, CITI)
                            
                            
                            777**Total**
                            
                            **$**
                            **101,195**





Of
      the
      amount shown in the table above, US$ 93.9 million is payable within one
      year.





Page
            31
 *Index*





CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





*b)
      Operating Lease Commitments*





For
      the
      three months ended March 31, 2007 and 2006 we incurred aggregate rent on all
      facilities of US$ 2.9 million and US$ 3.6 million,
      respectively.  Future minimum operating lease payments at March 31,
      2007 for non-cancellable operating leases with remaining terms in excess of
      one
      year (net of amounts to be recharged to third parties) are payable as
      follows:





**March
                          31,**
                        **2007**2007
                      
                      $
                      2,8492008
                      
                      
                      1,4212009
                      
                      
                      1,1552010
                      
                      
                      8242011
                      
                      
                      3942012
                          and thereafter
                      
                      
                      -**Total**
                      
                      **$**
                      **6,643**





*c)
      Acquisition of Minority Shareholdings in Romania*





Adrian
      Sarbu, the general director of our Romania operations, has the right to sell
      his
      10.0% shareholding in Pro TV and MPI to us under a put option agreement entered
      into in July 2004 at a price to be determined by an independent valuation,
      subject to a floor price of US$ 1.45 million for each 1.0% interest
      sold.  A put option of 5.21% of this 10.0% shareholding is exercisable
      from November 12, 2009 for a twenty-year period thereafter.  Mr.
      Sarbu’s right to put the remaining 4.79% is also exercisable from November 12,
      2009, provided that we have not enforced a pledge over this 4.79% shareholding
      which Mr. Sarbu granted as security for our right to put to him our 10.0%
      shareholding in Media Pro. As at March 31, 2007, we consider the fair value
      of
      this put option to be approximately US$ nil.





*d)
      Other*





*Dutch
      Tax*





On
      February 9, 2004 we entered into an agreement with the Dutch tax authorities
      to
      settle all tax liabilities outstanding for the period through 2003, including
      receipts in respect of our 2003 award in the arbitration against the Czech
      Republic, for a payment of US$ 9.0 million.  We expected to continue
      to pay tax in the Netherlands of between US$ 1.0 and US$ 2.5 million for the
      foreseeable future and therefore also agreed to a minimum tax payable of US$
      2.0
      million per year for the years 2004 - 2008 and US$ 1.0 million for
      2009.





The
      settlement with the Dutch tax authorities also provides that if any decision
      is
      issued at any time prior to December 31, 2008 exempting awards under Bilateral
      Investment Treaties from taxation in the Netherlands, we will be allowed to
      recover losses previously used against the 2003 arbitration award, which could
      be up to US$ 195.0 million, to offset other income within the applicable carry
      forward rules. This would not reduce the minimum amount of tax agreed payable
      under the settlement agreement.  At this time there is no indication
      that the Dutch tax authorities will issue such a decision.





As
      at
      March 31, 2007 we provided US$ 3.9 million (US$ 2.5 million in non-current
      liabilities and US$ 1.4 million in current liabilities) and as at December
      31,
      2006 we provided US$ 5.5 million (US$ 3.0 million in non-current liabilities
      and
      US$ 2.5 million in current liabilities) of tax in the Netherlands as the
      difference between our obligation under this agreement and our estimate of
      tax
      in the Netherlands that may fall due over this period from business operations,
      based on current business structures and economic conditions.





Page
            32
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





*Czech
      Republic - Factoring of Trade Receivables*





CET
      21
      has a working capital credit facility of CZK 250 million (approximately US$
      11.9
      million) with Ceska Sporitelna, a.s.  This facility is secured by a
      pledge of receivables under the factoring agreement with Factoring Ceska
      Sporitelna.





The
      transfer of the receivables is accounted for as a secured borrowing under FASB
      Statement No. 140, *‘Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities’,* with the proceeds received
      recorded in the Condensed Consolidated Balance Sheet as a liability and included
      in current credit facilities and obligations under capital
      leases.  The corresponding receivables are a part of accounts
      receivable, as we retain the risks of ownership.





**Contingencies**





*a)
      Litigation*





We
      are,
      from time to time, a party to litigation that arises in the normal course of
      our
      business operations.  Other than those claims discussed below, we are
      not presently a party to any such litigation which could reasonably be expected
      to have a material adverse effect on our business or operations. Unless
      otherwise disclosed, no provision has been made against any potential losses
      that could arise.





We
      present below a summary of our more significant proceedings by
      country.





*Croatia*





*Global
      Communications Disputes*





On
      October 29, 2004, Operativna Kompanija d.o.o. (“OK”), our former operating
      company in Croatia, filed suit against Global Communications d.o.o. claiming
      approximately HRK 53.0 million (approximately US$ 9.6 million) in
      damages.  Global Communications is a company controlled by Ivan
      Caleta, who had previously operated Nova TV (Croatia) through
      OK.  Global Communications, together with GRP Media d.o.o., another
      company controlled by Mr. Caleta, had provided certain goods and services to
      OK
      and Nova TV (Croatia) in exchange for advertising time pursuant to an agreement
      dated April 10, 2001 (the “Global Agreement”).  Global Communications
      and GRP Media were functionally managing the advertising inventory of Nova
      TV
      (Croatia).  On December 31, 2003, Global Communications entered into a
      reconciliation agreement by which OK acknowledged that Global Communications
      was
      entitled to approximately 375,000 seconds of advertising time for goods and
      services previously provided.  Following our acquisition of Nova TV
      (Croatia) and OK in July 2004, OK concluded that Global Communications had
      used
      all of its seconds by June 2004 based on a substantial discrepancy discovered
      between the utilization of advertising time recorded by Global Communications
      and that recorded by AGB Puls, an independent television audience measurement
      service operating in Croatia.  In the course of its investigation of
      the usage of seconds by Global Communications, OK discovered that computer
      records of advertising seconds kept for OK may have been altered.  OK
      brought a suit to recover amounts for advertising time used by Global
      Communications in excess of the 375,000 seconds agreed.  Global
      Communications filed a counterclaim in January 2005 for HRK 68.0 million
      (approximately US$ 12.3 million), claiming that the AGB data is unreliable
      and
      that it is entitled to additional seconds under the previous agreement. The
      lower commercial court issued a judgment on July 12, 2006 in favor of Global
      Communications for the full amount of the counterclaim, and we have appealed
      this decision on the basis of false and inadequate disclosure, wrongful
      application of substantive law and procedural error.  Global
      Communications separately brought a claim against Nova TV (Croatia), on the
      same
      basis as the OK counterclaim.  Both Global Communications and Nova TV
      (Croatia) requested the court to join this claim with the OK counterclaim but
      this request was denied.  The lower commercial court issued a judgment
      on August 1, 2006 in favor of Global Communications for the full amount of
      the
      claim, after having denied submission of evidence supporting our
      defense.  We have also appealed this decision. We have accrued for the
      amounts we expect to be ultimately payable as a result of having commenced
      settlement negotiations with Global Communications. Any such settlement would
      also include a settlement of the former shareholder dispute described
      below.





Page
            33
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





On
      January 25, 2007, Nova TV (Croatia) filed suit against Global Communications.
      The facts underlying the claim are substantially the same as those of the
      abovementioned claims, but Nova TV (Croatia) is claiming that the Global
      Agreement and the two reconciliation agreements dated April 30, 2004 and June
      30, 2004 (the “Reconciliation Agreements”), by which OK acknowledged the number
      of seconds of advertising time to which Global Communications was purportedly
      entitled, should be declared null and void under Article 141 of the Croatian
      Obligations Act. This provision is intended to protect a contractual party
      which
      has entered into unfair bargaining terms due to its dependency on the other
      contractual party.  Global Communications, OK and Nova TV (Croatia)
      were all related parties (controlled by Ivan Caleta) and the contractual terms
      provided for the provision of 1,340,280 seconds by OK to Global Communications
      in exchange for certain transmitters. These seconds were valued at an aggregate
      of DEM 5 million (or DEM 3.73 per second; HRK 3.91 per second at the time)
      whereas the rate card price was DEM 97.18 or HRK 380.00 per second (i.e. a
      price
      that was 26 times higher). Other clients (unrelated parties) sampled from this
      period were paying between 382.50 HRK to 491.85 HRK per second. Nova TV
      (Croatia) is arguing for voidance of this contract because of its unconscionable
      terms which were detrimental to OK and Nova TV (Croatia) and beneficial solely
      to Global Communications (which, in its capacity as an advertising agency,
      on-sold these seconds to its clients at market rates, thereby reaping an
      extraordinary profit).  Nova TV (Croatia) is further claiming
      restitution for advertising seconds appropriated by Global Communications under
      the Global Agreement. The restitution amount is HRK 586.5 million (approximately
      US$ 105.8 million). Given that the resolution of the issues posed by this
      lawsuit constitutes a preliminary question on which appellate review of the
      two
      lawsuits previously mentioned above should depend, we have requested suspension
      of those two reviews until this question has been finally
      adjudicated.





*Former
      Shareholder Dispute*





On
      July
      21, 2005, Narval A.M. d.o.o. (a company wholly-owned by Ivan Caleta), Studio
      Millenium d.o.o. and Richard Anthony Sheldon, three of the former shareholders
      of OK, filed suit against Nova TV (Croatia) for rescission of the sale and
      purchase contract pursuant to which they sold 75% of OK to Nova TV (Croatia)
      in
      July 2004 (the “OK Sale Contract”).  Nova TV (Croatia) acquired OK
      immediately prior to our acquiring Nova TV (Croatia).  The provisions
      of the OK Sale Contract required Nova TV (Croatia) to make payment to the four
      shareholders of OK by September 1, 2004, upon receipt of appropriate invoices
      and bank account details.  The fourth shareholder, Pitos d.o.o.,
      issued an invoice that was duly received by Nova TV (Croatia) and payment was
      made thereunder.  The other three shareholders claim that they
      hand-delivered a joint invoice to one of the former directors of Nova TV
      (Croatia), but we continue to dispute this.  Under the Croatian
      Obligations Act, one party to a contract who has performed may unilaterally
      rescind a contract if the other party fails to perform after receipt of a
      written warning.  On May 24, 2006, the lower commercial court decided
      in favor of the plaintiffs to rescind the OK Sale Contract and ordered the
      defendant to pay court costs.  We have appealed the decision on the
      basis that evidence supporting our position was not allowed to be presented
      to
      the court and we continue to challenge the validity of the power of attorney
      purportedly issued by Richard Anthony Sheldon (a resident of the United Kingdom)
      to legal counsel representing the other plaintiffs.





On
      August
      28, 2006, we received a lower court decision of an injunction against us
      (decided without a hearing) that, inter alia, prohibits a sale or encumbrance
      of
      75% of the shares of OK.  Although we appealed this decision, the
      appellate commercial court upheld the lower court’s judgment on November 21,
      2006.  On November 6, 2006, we were notified of a request for a
      further injunction that would, inter alia, prohibit us from taking any actions
      to decrease the value of OK and require the management of OK to report to a
      delegate of the former shareholders. We have unsuccessfully sought the removal
      of the presiding judge, Raul Dubravec (who also presided over the Global
      Communications lawsuit against Nova TV (Croatia)). Mr. Dubravec ruled against
      us
      on December 18, 2006, requiring imposition of a temporary director for OK,
      which
      is not a remedy available under Croatian law under the facts of this action.
      Further, the temporary director who has been appointed is one of the former
      directors of OK who countersigned the Reconciliation Agreements and is an
      associate of Ivan Caleta. We have appealed this decision. While we continue
      to
      vigorously contest all these actions in the face of serious concerns as to
      the
      impartiality of the Croatian judicial system, we have commenced settlement
      negotiations with the former shareholders of OK.





Page
            34
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





*Czech
      Republic*





There
      are
      no significant outstanding legal actions that relate to our business in the
      Czech Republic.





*Romania*





There
      are
      no significant outstanding legal actions that relate to our business in
      Romania.





*Slovenia*





On
      November 20, 2002, we received notice of a claim filed by Mrs. Zdenka Meglic,
      the founder and a former shareholder of MMTV 1 d.o.o (MMTV), against MMTV,
      a
      subsidiary of CME Media Enterprises B.V.  In her claim against MMTV,
      Mrs. Meglic is seeking an amount equal to EUR 0.8 million (approximately US$
      1.1
      million) for repayment of monies advanced to MMTV from 1992 to 1994 (in the
      amount of approximately EUR 0.1 million (approximately US$ 0.2 million))
      plus accrued interest.  On September 9, 2004, the court of first
      instance found against MMTV and issued a judgment requiring MMTV to pay an
      amount equal to EUR 0.8 million (approximately US$ 1.1 million) plus
      interest as well as costs.  On September 24, 2004, MMTV filed an
      appeal against the judgment.  On December 15, 2004, the appellate
      court vacated the judgment of the lower court and returned the case for further
      proceedings.  We do not believe that Mrs. Meglic will prevail and will
      continue to defend the claim.





*Slovak
      Republic*





There
      are
      no significant outstanding legal actions that relate to our business in the
      Slovak Republic.





*Ukraine*





On
      October 11, 2005, Igor Kolomoisky filed a lawsuit against Alexander Rodnyansky
      and Studio 1+1 in a district court in Kiev.  Our Ukrainian affiliate
      Intermedia has been joined in the proceedings as a “third
      party”.  Igor Kolomoisky is attempting to enforce what he alleges was
      a binding oral agreement with Alexander Rodnyansky to purchase the latter’s
      70.0% interest in Studio 1+1 for consideration of US$ 70.0 million and to
      transfer that interest to Igor Kolomoisky on receipt of a prepayment of US$
      2.0
      million.  The lawsuit arises from abortive negotiations among Igor
      Kolomoisky, Alexander Rodnyansky and Boris Fuchsmann for the acquisition by
      Igor
      Kolomoisky of the totality of interests in the Studio 1+1 Group held by
      Alexander Rodnyansky and Boris Fuchsmann, subject to Igor Kolomoisky assuming
      all of their obligations under our existing partnership
      arrangements.  On August 16, 2006, the district court in Kiev ruled in
      favor of Igor Kolomoisky and found that he is entitled to the 70% interest
      in
      Studio 1+1 held by Alexander Rodnyansky. Our Ukrainian affiliate Intermedia
      and
      Alexander Rodnyansky filed appeals against this decision.





At
      a
      hearing on October 31, 2006, the appellate court overturned the decision of
      the
      court of first instance and denied Igor Kolomoisky’s claim that he is entitled
      to a 70% interest in Studio 1+1 held by Alexander Rodnyansky.  On
      November 3, 2006, Igor Kolomoisky filed an appeal with the Supreme Court of
      Ukraine, the highest court in Ukraine.  At a hearing on February 28,
      2007, the Supreme Court rejected this appeal.





On
      April
      4, 2007 the Supreme Court of Ukraine accepted an extraordinary appeal from
      Igor
      Kolomoisky against the decision made on February 28, 2007 and the decision
      of
      the Court of Appeals of the city of Kiev made on October 31,
      2006.  Under Ukrainian law, such extraordinary appeals to the Supreme
      Court can be made on the basis (1) that an international judicial institution
      (whose jurisdiction has been recognized by Ukraine) determines that an appellate
      decision violates the international obligations of Ukraine or (2) that the
      decision is not consistent with prior practice of the Supreme
      Court.  Igor Kolomoisky has based his appeal on the latter grounds. No
      hearing on this appeal has been scheduled to date.  The Supreme Court
      may in its discretion either reject the appeal or vacate the earlier decisions
      of the Supreme Court and the appellate court and return the case to the
      appellate court for new consideration.  However, in the absence of a
      decision on this extraordinary appeal, the decision of the Supreme Court of
      February 28, 2007 and the decision of the Court of Appeals of the city of Kiev
      of October 31, 2006 remain in force.





Page
            35
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





On
      December 23, 2005, we initiated proceedings against our partners Alexander
      Rodnyansky and Boris Fuchsmann in order to enforce our contractual rights and
      compel a restructuring of the ownership of Studio 1+1 in order to permit us
      to
      hold a 60% interest in Studio 1+1 through a subsidiary organized in
      Ukraine.  Initiation of this proceeding followed protracted
      negotiations with our partners to restructure following confirmation from the
      Ukraine Media Council that our proposed ownership structure would not be in
      violation of restrictions on foreign ownership contained in the Ukraine Media
      Law, which restricts direct (but not indirect) investment by foreign persons
      in
      Ukrainian broadcasters to 30%.  On January 12, 2006, the Ukraine
      parliament adopted an amended version of the Ukraine Media Law that clarifies
      the absence of any restriction on indirect foreign ownership of television
      broadcasters.  This amended Ukraine Media Law came into force in March
      2006.  Our partners have acknowledged an obligation to restructure
      upon the entry into force of these amendments. On September 5, 2006, our
      partners entered into certain agreements to implement the
      restructuring.  Following the completion of the transactions reflected
      in these agreements and the registration of the charter of Studio 1+1 amended
      to
      reflect the new ownership of Studio 1+1, we will own 60% of Studio 1+1. Upon
      successful completion of the restructuring, we will terminate the proceedings
      initiated against our partners in December 2005.





Because
      of ongoing ancillary litigation to enjoin transactions related to the ownership
      of Studio 1+1 that have been initiated by Igor Kolomoisky, by our partners
      and
      by third parties who are not direct parties in interest to legal proceedings
      initiated by Igor Kolomoisky against Alexander Rodnyansky, the state registrar
      in the district administration in Kiev where such charter amendments are
      registered is presently enjoined from registering any amendments to the charter
      of Studio 1+1, including in respect of the restructured ownership agreed with
      our partners (see Note 1 “Organisation and Business”, Ukraine (Studio 1+1)). Our
      partners are no longer seeking to enforce the injunction filed at their
      initiative; however, because of an intervention in this case by Igor Kolomoisky,
      it has not been possible for our partners to remove this
      injunction.





*b) Licenses*





Regulatory
      bodies in each country in which we operate control access to available
      frequencies through licensing regimes. We believe that the licenses for our
      license companies will be renewed prior to expiry. In Romania, the Slovak
      Republic, Slovenia and Ukraine local regulations contain a qualified presumption
      for extensions of broadcast licenses, according to which a broadcast license
      may
      be renewed if the licensee has operated substantially in compliance with the
      relevant licensing regime. To date, all expiring licenses have been renewed;
      however, there can be no assurance that any of the licenses will be renewed
      upon
      expiration of their current terms. The failure of any such license to be renewed
      could adversely affect the results of our operations.





Page
            36
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except per share data)**


**(Unaudited)**





The
      following summarizes the expiry dates of our licenses:





**Croatia**
                    The
                        license of NOVA TV (Croatia) expires in April 2010.**Czech
                        Republic**
                    The
                        license of TV NOVA (Czech Republic) expires in January 2017.
                        The GALAXIE
                        SPORT license expires in March 2014.**Romania**
                    Licenses
                        expire on dates ranging from August 2007 to February
                        2016.**Slovak
                        Republic**
                    The
                        license of MARKIZA TV in the Slovak Republic expires in September
                        2019.**Slovenia**
                    The
                        licenses of POP TV and KANAL A expire in August 2012.**Ukraine**
                    The
                        15-hour prime time and off prime time license of STUDIO 1+1
                        expires in
                        December 2016. The license to broadcast for the remaining
                        nine hours in
                        off prime expires in August 2014.  Licenses held by Ukrpromtorg
                        expire on dates ranging from November 2008 to July
                        2016.





*c)
      Restrictions on dividends from Consolidated Subsidiaries and Unconsolidated
      Affiliates*





Corporate
      law in the Central and Eastern European countries in which we have operations
      stipulates generally that dividends may be declared by shareholders, out of
      yearly profits, subject to the maintenance of registered capital and required
      reserves after the recovery of accumulated losses. The reserve requirement
      restriction generally provides that before dividends may be distributed, a
      portion of annual net profits (typically 5%) be allocated to a reserve, which
      reserve is capped at a proportion of the registered capital of a company
      (ranging from 5% to 25%).  The restricted net assets of our
      consolidated subsidiaries and equity in earnings of investments accounted for
      under the equity method together are less than 25% of consolidated net
      assets.








**19.  SUBSEQUENT
      EVENTS**





*Redemption
      of floating rate notes*





On
      April
      11, 2007 we issued a notice to redeem our floating rate Senior Notes on May
      15,
      2007.  Redemption will involve payment of a premium of 2% of the
      amount outstanding, or EUR 2.5 million (approximately US$ 3.3
      million).





We
      will
      also record a non-cash charge of approximately US$ 3.5 million at the time
      of
      redemption to write off unamortized debt issuance costs on the floating rate
      Senior Notes.





*Drawing
      of EBRD facility*




On
        April
        18, 2007, we drew down the entire EUR 100.0 million available under our facility
        with the European Bank of Reconstruction and Development.




Page
            37
 *Index*





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





***Contents***





***I.***
            ***Forward-looking
                Statements***


***II.***
            ***Executive
                Summary***


***III.***
            ***Analysis
                of Segment Results***


***IV.***
            ***Analysis
                of the Results of Consolidated
                Operations***


***V.***
            ***Liquidity
                and Capital Resources***


***VI.***
            ***Critical
                Accounting Policies and
                Estimates***








***I.
      Forward-looking Statements***





*This
      report contains forward-looking statements, including the impact of legal
      proceedings in Croatia and Ukraine, the results of additional investment in
      Croatia and Ukraine, the implementation of an advertising sales strategy in
      the
      Czech Republic and cost reductions in the Czech and Slovak Republics, our
      ability to develop and implement multi-channel strategies generally, the growth
      of television advertising in our markets, the future economic conditions in
      our
      markets, future investments in television broadcast operations, the growth
      potential of advertising spending in our markets, and other business strategies
      and commitments.  For these statements and all other forward-looking
      statements, we claim the protection of the safe harbor for forward-looking
      statements contained in the Private Securities Litigation Reform Act of
      1995.  Forward-looking statements are inherently subject to risks and
      uncertainties, many of which cannot be predicted with accuracy or are otherwise
      beyond our control and some of which might not even be
      anticipated.  Future events and actual results, affecting our
      strategic plan as well as our financial position, results of operations and
      cash
      flows, could differ materially from those described in or contemplated by the
      forward-looking statements.  Important factors that contribute to such
      risks include, but are not limited to, the general regulatory environments
      where
      we operate and application of relevant laws and regulations, the renewals of
      broadcasting licenses, our ability to implement strategies regarding sales
      and
      multi-channel distribution, the rate of development of advertising markets
      in
      countries where we operate, our ability to acquire necessary programming and
      the
      ability to attract audiences, our ability to obtain additional frequencies
      and
      licenses, and general market and economic conditions in these countries as
      well
      as in the United States and Western Europe.*





The
      following discussion should be read in conjunction with the section entitled
      "Risk Factors" in Part II, Item 1A, in addition to our interim financial
      statements and notes included elsewhere in this report.








***II.
      Executive Summary***





*Continuing
      Operations*





The
      following table provides a summary of our consolidated results for the three
      months ended March 31, 2007 and 2006:





**For
                                      the Three Months Ended March 31,**
                                    **(US$
                                      000's)****2007**
                                  
                                  
                                  **2006**
                                  
                                  
                                  ***Movement***Net
                                      revenues
                                  
                                  $
                                  147,912
                                  
                                  
                                  $
                                  119,754
                                  
                                  
                                  $
                                  *28,158*Operating
                                      income
                                  
                                  
                                  19,256
                                  
                                  
                                  
                                  16,183
                                  
                                  
                                  
                                  *3,073*Net
                                      loss from continuing operations
                                  
                                  
                                  (250
                                  )
                                  
                                  
                                  (14,457
                                  )
                                  
                                  
                                  *14,207***Net
                                      loss**
                                  
                                  **$**
                                  **(250**
                                  **)**
                                  
                                  **$**
                                  **(18,264**
                                  **)**
                                  
                                  **$**
                                  ***18,014***





Page
            38
 *Index*





The
      principal events for the three months ended March 31, 2007 are as
      follows:




·
              In
                  the three months ended March 31, 2007, we reported growth in both
                  Segment
                  Net Revenues and Segment EBITDA of 22% compared to the three months
                  ended
                  March 31, 2006, delivering a Segment EBITDA margin of 27%, in line
                  with
                  that reported in the three months ended March 31, 2006 (Segment
                  EBITDA is
                  defined and reconciled to our consolidated results in Item 1, Note
                  16).
 
 ·
              Other
                  than our operations in Ukraine each of our stations reported revenue
                  growth in excess of 20% compared to the three months ended March
                  31, 2006,
                  with particularly strong growth reported in Croatia and the Slovak
                  Republic. Our operations in Ukraine experienced a decline in Segment
                  Net
                  Revenues and Segment EBITDA because the results for the three months
                  ended
                  March 31, 2006 reflected a windfall from the level of political
                  advertising ahead of the Ukrainian parliamentary elections in March
                  2006.
 
 ·
              On
                  February 20,  2007, we acquired control of TV Sport, an
                  operator of a sports-oriented channel focusing on local and international
                  football, international boxing and a number of local Romanian sports
                  (see
                  Item 1, Note 3). In April 2007 we rebranded TV SPORT as
                  Sport.ro.




Subsequent
      to the quarter-end:





·
            On
                April 11, 2007 we issued a notice to redeem our floating rate Senior
                Notes
                on May 15, 2007 at a cost of EUR 127.5 million (see Item 1, Note
                19).





·
            On
                April 18, 2007 we drew down the entire EUR 100.0 million available
                under
                our facility with the European Bank of Reconstruction and Development
                (see
                Item 1, Note 19).




*Future
      Developments*





As
      our
      markets mature, we anticipate more intense competition for audience share and
      advertising spending from other incumbent terrestrial broadcasters and, to
      a
      lesser extent, from local cable and satellite broadcasters.  We
      believe we are in a solid position to manage increased
      competition.  In the near term we intend to continue to pursue further
      improvements in the performance of our existing operations in order to maximize
      the potential for organic growth.





Our
      priorities in this regard include:





·
            Pursuing
                sub-regional efficiencies, especially in the area of local programming
                between Slovenia and Croatia and between the Czech and Slovak
                Republics;





·
            Supporting
                the growth of television advertising in our markets through increased
                development and through the launch or acquisition of additional channels
                to expand our advertising inventory and target niche
                audiences;





·
            Leveraging
                our existing brands and assets to develop new revenue opportunities,
                including in the creation and distribution of programming and in
                the new
                media sectors; and





·
            Continuing
                to expand our footprint into additional Central and Eastern European
                markets when financially prudent opportunities
                arise.





In
      particular, we are planning the following during 2007:





·
            Continuing
                to improve the effectiveness of our operations in the Czech Republic
                and
                the Slovak Republic.





·
            Continuing
                the development of our new Ukraine channels KINO and CITI which were
                launched in 2006.





Page
            39
 *Index*




·
            Further
                development of our non-broadcast activities, particularly in new
                media,
                which is being coordinated across our
                markets.




·
              Acquisition
                  of additional shares in our operations in Romania, the Slovak Republic
                  and
                  Ukraine if the opportunity arises;
                  and


·
            Continuing
                to invest in the development of our Croatia
                operations.








***III.
      Analysis of Segment Results***





**OVERVIEW**





We
      manage
      our business on a geographic basis and review the performance of each business
      segment using data that reflects 100% of operating and license company
      results.  We also consider how much of our total revenues and earnings
      are derived from our broadcast and non-broadcast operations. Our business
      segments are comprised of Croatia, the Czech Republic, Romania, the Slovak
      Republic, Slovenia and our two businesses in Ukraine.





We
      evaluate the performance of our business segments based on Segment Net Revenues
      and Segment EBITDA.  Segment Net Revenues and Segment EBITDA include
      our operations in the Slovak Republic which were not consolidated prior to
      January 23, 2006.





Our
      key
      performance measure of the efficiency of our business segments is EBITDA
      margin.  We define Segment EBITDA margin as the ratio of Segment
      EBITDA to Segment Net Revenues.





Segment
      EBITDA is determined as segment net income/loss, which includes program rights
      amortization costs, before interest, taxes, depreciation and amortization of
      intangible assets.  Items that are not allocated to our segments for
      purposes of evaluating their performance, and therefore are not included in
      Segment EBITDA, include:





·
            expenses
                presented as corporate operating costs in our condensed consolidated
                statement of operations and comprehensive
                income;





·
            stock-based
                compensation charges;





·
            foreign
                currency exchange gains and losses;





·
            change
                in fair value of derivatives; and





·
            certain
                unusual or infrequent items (e.g., extraordinary gains and losses,
                impairments of assets or
                investments).





EBITDA
      may not be comparable to similar measures reported by other
      companies.  Non-GAAP measures should be evaluated in conjunction with,
      and are not a substitute for, US GAAP financial measures.





We
      believe Segment EBITDA is useful to investors because it provides a more
      meaningful representation of our performance as it excludes certain items that
      either do not impact our cash flows or the operating results of our
      stations.  Segment EBITDA is also used as a component in determining
      management bonuses.





For
      a
      full reconciliation of our Segment Net Revenues and Segment EBITDA by operation
      to our consolidated results for the three months ended March 31, 2007 and 2006
      see Part I, Item 1, Note 16.





A
      summary
      of our total Segment Net Revenues, Segment EBITDA and Segment EBITDA margin
      showing the relative contribution of each Segment, is as follows:





Page
            40
 *Index*




**SEGMENT
                          FINANCIAL INFORMATION**
                        **For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      ****
                      **(1**
                      **)**
                      
                      **2006**
                      
                      
                      ****
                      **(1**
                      **)****Segment
                          Net Revenues**Croatia
                          (NOVA TV)
                      
                      $
                      7,232
                      
                      
                      
                      5
                      %
                      
                      $
                      3,810
                      
                      
                      
                      3
                      %Czech
                          Republic (TV NOVA, GALAXIE SPORT)
                      
                      
                      51,519
                      
                      
                      
                      34
                      %
                      
                      
                      40,549
                      
                      
                      
                      34
                      %Romania
                          (2)
                      
                      
                      39,342
                      
                      
                      
                      27
                      %
                      
                      
                      29,871
                      
                      
                      
                      25
                      %Slovak
                          Republic (MARKIZA TV) (3)
                      
                      
                      18,677
                      
                      
                      
                      13
                      %
                      
                      
                      11,206
                      
                      
                      
                      9
                      %Slovenia
                          (POP TV and KANAL A)
                      
                      
                      12,669
                      
                      
                      
                      9
                      %
                      
                      
                      10,227
                      
                      
                      
                      8
                      %Ukraine
                          (STUDIO 1+1)
                      
                      
                      18,075
                      
                      
                      
                      12
                      %
                      
                      
                      25,478
                      
                      
                      
                      21
                      %Ukraine
                          (KINO, CITI) (4)
                      
                      
                      398
                      
                      
                      
                      -
                      %
                      
                      
                      374
                      
                      
                      
                      -
                      %**Total
                          Segment Net Revenues**
                      
                      **$**
                      **147,912**
                      
                      
                      ****
                      **100**
                      **%**
                      
                      **$**
                      **121,515**
                      
                      
                      ****
                      **100**
                      **%****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      147,422
                      
                      
                      
                      100
                      %
                      
                      $
                      121,073
                      
                      
                      
                      100
                      %Non-broadcast
                          operations
                      
                      
                      490
                      
                      
                      
                      -
                      %
                      
                      
                      442
                      
                      
                      
                      -
                      %**Total
                          Segment Net Revenues**
                      
                      **$**
                      **147,912**
                      
                      
                      ****
                      **100**
                      **%**
                      
                      **$**
                      **121,515**
                      
                      
                      ****
                      **100**
                      **%****Segment
                          EBITDA**Croatia
                          (NOVA TV)
                      
                      $
                      (4,652
                      )
                      
                      
                      (12
                      )%
                      
                      $
                      (4,442
                      )
                      
                      
                      (13
                      )%Czech
                          Republic (TV NOVA)
                      
                      
                      25,667
                      
                      
                      
                      65
                      %
                      
                      
                      12,826
                      
                      
                      
                      39
                      %Romania
                          (2)
                      
                      
                      15,136
                      
                      
                      
                      38
                      %
                      
                      
                      11,613
                      
                      
                      
                      35
                      %Slovak
                          Republic (MARKIZA TV) (3)
                      
                      
                      5,756
                      
                      
                      
                      14
                      %
                      
                      
                      (977
                      )
                      
                      
                      (3
                      )%Slovenia
                          (POP TV and KANAL A)
                      
                      
                      3,001
                      
                      
                      
                      7
                      %
                      
                      
                      3,033
                      
                      
                      
                      9
                      %Ukraine
                          (STUDIO 1+1)
                      
                      
                      (2,370
                      )
                      
                      
                      (6
                      )%
                      
                      
                      10,988
                      
                      
                      
                      33
                      %Ukraine
                          (KINO, CITI) (4)
                      
                      
                      (2,417
                      )
                      
                      
                      (6
                      )%
                      
                      
                      (126
                      )
                      
                      
                      -
                      %**Total
                          Segment EBITDA**
                      
                      **$**
                      **40,121**
                      
                      
                      ****
                      **100**
                      **%**
                      
                      **$**
                      **32,915**
                      
                      
                      ****
                      **100**
                      **%****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      40,714
                      
                      
                      
                      101
                      %
                      
                      $
                      32,947
                      
                      
                      
                      100
                      %Non-broadcast
                          operations
                      
                      
                      (593
                      )
                      
                      
                      (1
                      )%
                      
                      
                      (32
                      )
                      
                      
                      -
                      %**Total
                          Segment EBITDA**
                      
                      **$**
                      **40,121**
                      
                      
                      ****
                      **100**
                      **%**
                      
                      **$**
                      **32,915**
                      
                      
                      ****
                      **100**
                      **%****Segment
                          EBITDA Margin (5)**
                      
                      ****
                      **27**
                      **%**
                      
                      
                      
                      
                      
                      ****
                      **27**
                      **%**





(1)
      Percentage of Total Segment Net Revenues and Total Segment EBITDA.


(2)
      Romania networks are PRO TV, PRO CINEMA, ACASA, PRO TV INTERNATIONAL and
      Sport.ro.


(3)
      Our
      Slovak Republic operations were accounted for as an equity affiliate until
      January 23, 2006.


(4)
      We
      acquired our Ukraine (KINO, CITI) operations on January 11, 2006.


(5)
      We
      define Segment EBITDA margin as the ratio of Segment EBITDA to Segment Net
      Revenues.





Page
            41
 *Index*





**ANALYSIS
      BY GEOGRAPHIC SEGMENT**





In
      the
      countries in which we operate, advertisers tend to allocate their television
      advertising budgets among channels based on each channel's audience share,
      audience demographic profile and pricing policy.  We generally offer
      two different bases of pricing to our advertising customers.  The
      first basis is cost per gross rating point (which we refer to as
“GRP”).  A GRP represents the percentage of audience (from the
      population over the age of four) reached by a television advertisement and
      the
      number of GRPs achieved for a defined time period is the product of the
      proportion of that total viewing population watching that television
      advertisement and the frequency that it is viewed (as measured by international
      measurement agencies using peoplemeters).  The second basis is
      rate-card, which reflects the timing and duration of an
      advertisement.  Whether advertising is sold on a GRP basis or a
      rate-card basis depends on the dynamics of a particular market and our relative
      audience share.





*Cost
      per GRP pricing*: Advertising priced on a cost per GRP basis allows an
      advertiser to specify the number of gross ratings points that it wants to
      achieve with an advertisement within a defined period of time.  We
      schedule the timing of the airing of the advertisements during such defined
      period of time in a manner that enables us both to meet the advertiser's GRP
      target and to maximize the use and profitability of our available advertising
      programming time.  The price per GRP package varies depending on the
      demographic group that the advertisement is targeting, the flexibility given
      to
      us by advertisers in scheduling their advertisements and the rebates offered
      by
      us to advertising agencies and their clients.  GRP package sales
      generally allow for better inventory control than rate-card pricing and optimize
      the net price per GRP achieved.





*Rate-card
      pricing*: Advertising priced on a rate-card basis is applied to
      advertisements scheduled at a specific time.  Consistent with industry
      practice, we provide an incentive rebate on rate-card prices to a number of
      advertising agencies and their clients.  We recognize our advertising
      revenue at the time the relevant advertisement is broadcast net of
      rebates.





The
      majority of our advertising customers commit to annual minimum spending
      levels.  We usually schedule specific advertisements one month in
      advance of broadcasting them.  Prices paid by advertisers, whether
      they purchase advertising time on a GRP package or rate-card basis, tend to
      be
      higher during peak viewing months, particularly during the fourth quarter,
      than
      during off-peak months such as July and August.





When
      describing relative performance against other competitors in attracting audience
      we refer to ratings share, which represents the number of people watching a
      channel as a proportion of the total population, and audience share, which
      represents the share attracted by a channel of the total audience watching
      television.





Our
      goal
      is to increase revenues from advertising in local currency year-on-year in
      every
      market through disciplined management of our advertising
      inventory.  In any given period, revenue increases can be attributable
      to combinations of price increases, higher inventory sales, seasonal or
      time-of-day incentives, target-audience delivery of specific campaigns,
      introductory pricing for new clients or audience movements based on our
      competitors’ program schedule.





For
      the
      purposes of our management discussion and analysis, total television advertising
      revenue net of rebates is referred to as “spot revenues”.  Non-spot
      revenues refers to all other revenues, including those from sponsorship, game
      shows, program sales, text messaging, cable subscriptions and barter
      transactions.  The total of spot revenues and non-spot revenues is
      equal to Segment Net Revenues.




**(A)
      CROATIA**





**Market
      Background:**We estimate that the television advertising
      market in Croatia experienced local currency growth of approximately 2% - 5%
      in
      2006 and expect it to show single digit growth during 2007.





In
      the
      three months ended March 31, 2007, national all day audience share for NOVA
      TV
      (Croatia) grew to 17.7% compared to 13.7% in the three months ended March 31,
      2006.  The major competitors are the two state-owned channels HRT1 and
      HRT2, with national all day audience shares for the three months ended March
      31,
      2007 of 28.7% and 18.2%, respectively, and privately owned broadcaster RTL
      with
      26.1%.





Page
            42
 *Index*





Prime
      time audience share for NOVA TV (Croatia), which is our principal focus, grew
      from 16.0% in the three months ended March 31, 2006 to 19.5% in the three months
      ended March 31, 2007.  Our average prime time ratings increased from
      7.6% to 8.4% over comparable periods, while prime time ratings for the whole
      market decreased from 50.0% in the three months ended March 31, 2006, when
      viewership increased during the Winter Olympics, to 42.7% in the three months
      ended March 31, 2007.





**Three
      months ended March 31, 2007 compared to three months ended March 31,
      2006**





**CROATIA
                              SEGMENT FINANCIAL INFORMATION**
                            **For
                              the Three Months Ended March 31, (US$ 000's)****2007**
                          
                          
                          **2006**
                          
                          
                          ***Movement***Spot
                              revenues
                          
                          $
                          5,020
                          
                          
                          $
                          3,053
                          
                          
                          $
                          *1,967*Non-spot
                              revenues
                          
                          
                          2,212
                          
                          
                          
                          757
                          
                          
                          
                          *1,455***Segment
                              Net Revenues**
                          
                          **$**
                          **7,232**
                          
                          
                          **$**
                          **3,810**
                          
                          
                          **$**
                          ***3,422*****Represented
                              by:**Broadcast
                              operations
                          
                          $
                          7,227
                          
                          
                          $
                          3,810
                          
                          
                          $
                          *3,417*Non-broadcast
                              operations
                          
                          
                          5
                          
                          
                          
                          -
                          
                          
                          
                          *5***Segment
                              Net Revenues**
                          
                          **$**
                          **7,232**
                          
                          
                          **$**
                          **3,810**
                          
                          
                          **$**
                          ***3,422*****Segment
                              EBITDA**
                          
                          **$**
                          **(4,652**
                          **)**
                          
                          **$**
                          **(4,442**
                          **)**
                          
                          **$**
                          ***(210***
                          ***)*****Represented
                              by:**Broadcast
                              operations
                          
                          $
                          (4,623
                          )
                          
                          $
                          (4,442
                          )
                          
                          $
                          *(181*
                          *)*Non-broadcast
                              operations
                          
                          
                          (29
                          )
                          
                          
                          -
                          
                          
                          
                          *(29*
                          *)***Segment
                              EBITDA**
                          
                          **$**
                          **(4,652**
                          **)**
                          
                          **$**
                          **(4,442**
                          **)**
                          
                          **$**
                          ***(210***
                          ***)*****Segment
                              EBITDA Margin**
                          
                          ****
                          **(64**
                          **)%**
                          
                          ****
                          **(117**
                          **)%**
                          
                          ****
                          ***53***
                          ***%***





·
            **Segment
                Net Revenues** for the three months ended March 31, 2007 increased
                by US$ 3.4 million, or 90%, compared to the three months ended March
                31,
                2006.  In local currency, Segment Net Revenues increased by
                73%.  Spot revenues increased by US$ 2.0 million, or 64%, as a
                result of a significant increase in the volume of GRPs sold, particularly
                in prime time, augmented by increased prices.  Non-spot revenues
                increased by US$ 1.5 million, or 192%, as a result of increased levels
                of
                sponsorship.





·
            **Segment
                EBITDA**for the three months ended March 31, 2007 was a loss of
                US$ 4.7 million compared to a loss of US$ 4.4 million in the three
                months
                ended March 31, 2006.





Costs
      charged in arriving at Segment EBITDA for the three months ended March 31,
      2007
      increased by US$ 3.6 million, or 44%, compared to the three months ended March
      31, 2006.  Cost of programming increased by US$ 3.8 million, or 92%,
      due to increased investment in local productions.  Other operating
      costs decreased by US$ 0.4 million, or 14%, primarily due to lower salary and
      wage costs, partially offset by higher transmission costs as a result of
      increased transmitter coverage.  Selling, general and administrative
      expenses increased by US$ 0.2 million, or 12%.





Page
            43
 *Index*





**(B)
      CZECH REPUBLIC**





**Market
      Background:**We estimate that the television advertising
      market in the Czech Republic remained stable in local currency during
      2006.  We expect the television advertising market to show high single
      digit growth in 2007.





The
      national all day audience share of our channel, TV NOVA (Czech Republic), for
      the three months ended March 31, 2007 was 40.8% compared to 42.0% for the three
      months ended March 31, 2006.  The major competitors are the two
      state-owned channels CT1 and CT2, with national all day audience shares for
      the
      three months ended March 31, 2007 of 22.6% and 8.2% respectively, and privately
      owned broadcaster TV Prima with a national all day audience share of
      20.0%.





Prime
      time audience share grew from 43.0% in the three months ended March 31, 2006
      to
      45.2% in the three months ended March 31, 2007.  Our average prime
      time ratings decreased from 18.7% to 18.3% over comparable periods, while prime
      time ratings for the whole market decreased from 43.5% in the three months
      ended
      March 31, 2006 to 40.5% in the three months ended March 31, 2007, reflecting
      the
      relatively mild weather enjoyed by much of Europe in 2007.





During
      the first quarter of 2006, we announced a new advertising sales strategy based
      on our belief that growth in the television advertising market in the Czech
      Republic has been impeded over the past several years due to broadcasters
      focusing on obtaining an increased share of revenues committed to television
      advertising rather than fostering market growth by focusing on maximizing value
      received from the sale of GRPs.  The focus of the TV Nova (Czech
      Republic) group is now on the development of advertising revenues over the
      medium term by supporting and then capturing market growth through a more
      sophisticated pricing policy.  In conjunction with this advertising
      strategy, the TV Nova (Czech Republic) group initiated a series of measures
      to
      reduce the costs of its operations, including the cancellation of poorly
      performing formats and reductions in operational costs.  Our results
      in the first quarter of 2007 reflect the success of these initiatives to
      date.





**Three
      months ended March 31, 2007 compared to three months ended March 31,
      2006**





**CZECH
                          REPUBLIC SEGMENT FINANCIAL INFORMATION**
                        **For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Spot
                          revenues
                      
                      $
                      46,664
                      
                      
                      $
                      33,443
                      
                      
                      $
                      *13,221*Non-spot
                          revenues
                      
                      
                      4,855
                      
                      
                      
                      7,106
                      
                      
                      
                      *(2,251*
                      *)***Segment
                          Net Revenues**
                      
                      **$**
                      **51,519**
                      
                      
                      **$**
                      **40,549**
                      
                      
                      **$**
                      ***10,970*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      51,480
                      
                      
                      $
                      40,402
                      
                      
                      $
                      *11,078*Non-broadcast
                          operations
                      
                      
                      39
                      
                      
                      
                      147
                      
                      
                      
                      *(108*
                      *)***Segment
                          Net Revenues**
                      
                      **$**
                      **51,519**
                      
                      
                      **$**
                      **40,549**
                      
                      
                      **$**
                      ***10,970*****Segment
                          EBITDA**
                      
                      **$**
                      **25,667**
                      
                      
                      **$**
                      **12,826**
                      
                      
                      **$**
                      ***12,841*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      25,937
                      
                      
                      $
                      12,856
                      
                      
                      $
                      *13,081*Non-broadcast
                          operations
                      
                      
                      (270
                      )
                      
                      
                      (30
                      )
                      
                      
                      *(240*
                      *)***Segment
                          EBITDA**
                      
                      **$**
                      **25,667**
                      
                      
                      **$**
                      **12,826**
                      
                      
                      **$**
                      ***12,841*****Segment
                          EBITDA Margin**
                      
                      ****
                      **50**
                      **%**
                      
                      ****
                      **32**
                      **%**
                      
                      ****
                      ***18***
                      ***%***





Page
            44
 *Index*





·
            **Segment
                Net Revenues** for the three months ended March 31, 2007 increased
                by US$ 11.0 million, or 27%, compared to the three months ended March
                31,
                2006.  In local currency, Segment Net Revenues increased by
                14%.  Spot revenues increased by $13.2 million, or 40%,
                primarily due to an increase in the volume of GRPs sold, particularly
                in
                off-prime time, as well as increased average revenue per rating point
                sold. Non-spot revenue decreased by US$ 2.3 million, or 32%, primarily
                due
                to a reduction in the number of shows generating voting revenue in
                the
                three months ended March 31, 2007 compared to those programs broadcast
                in
                the three months ended March 31,
                2006.





·
            **Segment
                EBITDA**for the three months ended March 31, 2007 increased by US$
                12.8 million, or 100%, compared to the three months ended March 31,
                2006,
                resulting in an EBITDA margin of 50% compared to 32% in the three
                months
                ended March 31, 2006.  Costs charged in arriving at Segment
                EBITDA for the three months ended March 31, 2007 decreased by US$
                1.9
                million, or 7%, compared to the three months ended March 31,
                2006.  Cost of programming decreased by US$ 2.2 million, or 14%,
                due to better cost control in production and the cancellation of
                several
                expensive one-off programs broadcast during the three months ended
                March
                31, 2006 as part of TV Nova’s operational restructuring.  Other
                operating costs increased by US$ 1.0 million, or 16%, primarily due
                to
                exchange rate movements.  Selling, general and administrative
                expenses decreased by US$ 0.7 million, or 10%, primarily due to reductions
                in marketing and research costs.





**(C)
      ROMANIA**





**Market
      Background:**We estimate that the television advertising
      market grew by approximately 32% - 37% in US dollars during 2006.  We
      expect the television advertising market to show continued growth in the range
      of 20% to 25% in 2007.





The
      combined national all day audience share of our three existing channels (PRO
      TV,
      ACASA and PRO CINEMA) for the three months ended March 31, 2007 was 22.7%
      compared to 25.6% for the three months ended March 31, 2006.  On March
      1, 2007 we were granted the license to broadcast TV SPORT, which had an all
      day
      audience share of 1.5% in the three months ended March 31, 2007.  In
      April we rebranded TV SPORT as Sport.ro, while retaining the same focus and
      target demographic. The major competitors are the two state-owned channels
      TVR1
      and TVR2, with national all day audience shares for the three months ended
      March
      31, 2007 of 14.5% and 4.8%, respectively, and privately owned broadcaster Antena
      1 with 13.5%.





Prime
      time audience share for our three existing channels decreased from 28.6% in
      the
      three months ended March 31, 2006 to 24.1% in the three months ended March
      31,
      2007.  ACASA suffered a decline in share, as the popularity of our
      successful telenovellas has diminished following the decision by other competing
      stations to produce similar programs, while our other channels both enjoyed
      increases in share.  Our average prime time ratings decreased from
      13.6% to 10.6% over comparable periods, while prime time ratings for the whole
      market decreased from 47.3% in the three months ended March 31, 2006 to 43.8%
      in
      the three months ended March 31, 2007.





Page
            45
 *Index*





**Three
      months ended March 31, 2007 compared to three months ended March 31,
      2006**





**ROMANIA
                          SEGMENT FINANCIAL INFORMATION**
                        **For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Spot
                          revenues
                      
                      $
                      36,535
                      
                      
                      $
                      28,135
                      
                      
                      $
                      *8,400*Non-spot
                          revenues
                      
                      
                      2,807
                      
                      
                      
                      1,736
                      
                      
                      
                      *1,071***Segment
                          Net Revenues**
                      
                      **$**
                      **39,342**
                      
                      
                      **$**
                      **29,871**
                      
                      
                      **$**
                      ***9,471*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      39,342
                      
                      
                      $
                      29,871
                      
                      
                      $
                      *9,471*Non-broadcast
                          operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      *-***Segment
                          Net Revenues**
                      
                      **$**
                      **39,342**
                      
                      
                      **$**
                      **29,871**
                      
                      
                      **$**
                      ***9,471*****Segment
                          EBITDA**
                      
                      **$**
                      **15,136**
                      
                      
                      **$**
                      **11,613**
                      
                      
                      **$**
                      ***3,523*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      15,274
                      
                      
                      $
                      11,613
                      
                      
                      $
                      *3,661*Non-broadcast
                          operations
                      
                      
                      (138
                      )
                      
                      
                      -
                      
                      
                      
                      *(138*
                      )**Segment
                          EBITDA**
                      
                      **$**
                      **15,136**
                      
                      
                      **$**
                      **11,613**
                      
                      
                      **$**
                      ***3,523*****Segment
                          EBITDA Margin**
                      
                      ****
                      **38**
                      **%**
                      
                      ****
                      **39**
                      **%**
                      
                      ****
                      ***(1***
                      ***)%***





·
            **Segment
                Net Revenues** for the three months ended March 31, 2007 increased
                by US$ 9.5 million, or 32%, compared to the three months ended March
                31,
                2006. Spot revenues increased by US$ 8.4 million, or 30%, driven
                primarily
                by increases in the average revenue per rating point sold in each
                of our
                three existing channels, which more than offset a slight decline
                in the
                volume of GRPs sold. Non-spot revenues increased by US$ 1.1 million,
                or
                62%, primarily due to increased cable tariff revenue. The acquisition
                of
                TV Sport added approximately US$ 0.4 million to our revenues for
                the three
                months ended March 31, 2007.





·
            **Segment
                EBITDA**for the three months ended March 31, 2007 increased by US$
                3.5 million, or 30%, compared to the three months ended March 31,
                2006,
                with an EBITDA margin of 38% compared to 39% in the three months
                ended
                March 31, 2006.  Costs charged in arriving at Segment EBITDA for
                the three months ended March 31, 2007 increased by US$ 5.9 million,
                or
                33%, compared to the three months ended March 31, 2006.  Cost of
                programming grew by US$ 5.8 million, or 50%, due partially to the
                inclusion of the salary-related costs of production staff within
                cost of
                programming rather than operating costs; excluding the impact of
                this
                change in classification, cost of programming increased by US$ 4.0
                million, or 34%, as a result of increased market competition and
                investment in quality programming.  Other operating costs
                decreased by US$ 0.1 million, or 2%, after the difference in
                classification described above; excluding the impact of this change
                in
                classification, other operating costs increased by US$ 1.7 million,
                or
                38%, primarily due to increased staffing costs.  Selling,
                general and administrative expenses increased by US$ 0.2 million,
                or 13%,
                primarily due to increased office running costs.  The
                acquisition of TV Sport did not have a significant impact on our
                Segment
                EBITDA for the three months ended March 31,
                2007.





Page
            46
 *Index*





**D)
      SLOVAK REPUBLIC**





**Market
      Background:**  We estimate that the television advertising
      market in the Slovak Republic experienced local currency growth of approximately
      5% - 7% in 2006.  We expect the television advertising market will
      show high single digit growth in 2007.





MARKIZA
      TV is the leading channel in the Slovak Republic.  National all day
      audience share for the three months ended March 31, 2007 was 34.1% compared
      to
      31.0% for the three months ended March 31, 2006.  The major competitor
      is the state-owned channel STV1, with a national all day audience share of
      17.6%
      for the three months ended March 31, 2007.  The national all day
      audience share of TV JOJ, the only other significant privately owned channel,
      was 16.7% for the three months ended March 31, 2007.





Our
      prime
      time audience share increased from 33.3% in the three months ended March 31,
      2006 to 38.1% in the three months ended March 31, 2007 primarily due
      to  a series of strong programs.  Our average prime time
      ratings increased from 14.6% to 15.9% over comparable periods, while prime
      time
      ratings for the whole market decreased from 43.8% in the three months ended
      March 31, 2006 to 41.6% in the three months ended March 31, 2007, reflecting
      the
      impact of the Winter Olympics on viewing habits in the three months ended March
      31, 2006.




**Three
      months ended March 31, 2007 compared to three months ended March 31,
      2006**





**SLOVAK
                          REPUBLIC SEGMENT FINANCIAL INFORMATION**
                        **For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Spot
                          revenues
                      
                      $
                      18,075
                      
                      
                      $
                      10,314
                      
                      
                      $
                      *7,761*Non-spot
                          revenues
                      
                      
                      602
                      
                      
                      
                      892
                      
                      
                      
                      *(290*
                      *)***Segment
                          Net Revenues**
                      
                      **$**
                      **18,677**
                      
                      
                      **$**
                      **11,206**
                      
                      
                      **$**
                      ***7,471*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      18,662
                      
                      
                      $
                      11,206
                      
                      
                      $
                      *7,456*Non-broadcast
                          operations
                      
                      
                      15
                      
                      
                      
                      -
                      
                      
                      
                      *15***Segment
                          Net Revenues**
                      
                      **$**
                      **18,677**
                      
                      
                      **$**
                      **11,206**
                      
                      
                      **$**
                      ***7,471*****Segment
                          EBITDA**
                      
                      **$**
                      **5,756**
                      
                      
                      **$**
                      **(977**
                      **)**
                      
                      **$**
                      ***6,733*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      5,859
                      
                      
                      $
                      (951
                      )
                      
                      $
                      *6,810*Non-broadcast
                          operations
                      
                      
                      (103
                      )
                      
                      
                      (26
                      )
                      
                      
                      *(77*
                      )**Segment
                          EBITDA**
                      
                      **$**
                      **5,756**
                      
                      
                      **$**
                      **(977**
                      **)**
                      
                      **$**
                      ***6,733*****Segment
                          EBITDA Margin**
                      
                      ****
                      **31**
                      **%**
                      
                      ****
                      **(9**
                      **)%**
                      
                      ****
                      ***40***
                      ***%***





·
            **Segment
                Net Revenues** for the three months ended March 31, 2007 increased
                by US$ 7.5 million, or 67%, compared to the three months ended March
                31,
                2006.  In local currency, Segment Net Revenues increased by
                61%.  The increase in Segment Net Revenues was due to an
                increase of US$ 7.8 million, or 75%, in spot revenues partially offset
                by
                a decline of US$ 0.3 million, or 33%, in non-spot revenues.  The
                increase in spot revenues is mainly due to increases in the average
                revenue per rating point sold, particularly in prime time, as well
                as an
                increase in the volume of advertising spots sold .  Our
                advertising revenues benefited from the launch of a new mobile phone
                operator during the three months ended March 31, 2007, as well as
                increased spending from existing customers, particularly in the
                pharmaceutical sector.  Segment Net Revenues for the three
                months ended March 31, 2006 included approximately US$ 1.8 million
                in
                respect of the period prior to acquisition on January 23, 2006 when
                Markiza was accounted for as an equity
                affiliate.





Page
            47
 *Index*





·
            **Segment
                EBITDA**for
                the
                three months ended March 31, 2007 increased by US$ 6.7 million, or
                689%,
                compared to the three months ended March 31, 2006, resulting in an
                EBITDA
                margin of 31% compared to (9)% in the three months ended March 31,
                2006.  Costs charged in arriving at Segment EBITDA for the three
                months ended March 31, 2007 increased by US$ 0.7 million, or 6%,
                compared
                to the three months ended March 31, 2006.  Cost of programming
                decreased by US$ 0.4 million, or 6%; the amount charged in the three
                months ended March 31, 2006 included a charge of US$ 0.7 million
                to write
                off an unsuccessful show.  Other operating costs increased by
                US$ 0.6 million, or 16%, primarily due to increased staff costs of
                US$ 0.4
                million and increased broadcast and operating expenses of US$ 0.2
                million.  Selling, general and administrative expenses increased
                by US$ 0.5 million, or 36%, primarily due to increased office running
                costs and increased marketing and research costs.  Costs charged
                in arriving at Segment EBITDA for the three months ended March 31,
                2006
                included US$ 1.7 million of programming costs, US$ 0.9 million of
                other
                operating costs and US$ 0.4 million of selling, general and administrative
                expenses in respect of the period prior to acquisition on January
                23,
                2006.





**(E)
      SLOVENIA**





**Market
      Background:**  We estimate that the television advertising
      market in Slovenia experienced local currency growth of approximately 6% -
      8% in
      2006.  We expect the television advertising market to show low single
      digit growth in 2007.





The
      combined national all day audience share of our two channels increased from
      36.3% for the three months ended March 31, 2006 to 37.1% for the three months
      ended March 31, 2007.  The major competitors are state-owned channels
      SLO1 and SLO2, with national all day audience shares for the three months ended
      March 31, 2007 of 22.7% and 10.6%, respectively.





Our
      prime
      time audience share decreased from 44.7% in the three months ended March 31,
      2006 to 43.3% in the three months ended March 31, 2007, with an increased share
      in KANAL A, partially offsetting a decreased share in POP TV.  Our
      average prime time ratings decreased from 16.4% to 15.7% over comparable
      periods, while prime time ratings for the whole market decreased from 36.5%
      in
      the three months ended March 31, 2006 to 36.3% in the three months ended March
      31, 2007.





On
      January 1, 2007 Slovenia adopted the Euro and we adopted the Euro as the
      functional currency of our Slovenia operations in place of the Slovenian
      Tolar.





Page
            48
 *Index*





**Three
      months ended March 31, 2007 compared to three months ended March 31,
      2006**





**SLOVENIA
                          SEGMENT FINANCIAL INFORMATION**
                        **For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Spot
                          revenues
                      
                      $
                      11,325
                      
                      
                      $
                      9,741
                      
                      
                      $
                      *1,584*Non-spot
                          revenues
                      
                      
                      1,344
                      
                      
                      
                      486
                      
                      
                      
                      *858***Segment
                          Net Revenues**
                      
                      **$**
                      **12,669**
                      
                      
                      **$**
                      **10,227**
                      
                      
                      **$**
                      ***2,442*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      12,238
                      
                      
                      $
                      9,932
                      
                      
                      $
                      *2,306*Non-broadcast
                          operations
                      
                      
                      431
                      
                      
                      
                      295
                      
                      
                      
                      *136***Segment
                          Net Revenues**
                      
                      **$**
                      **12,669**
                      
                      
                      **$**
                      **10,227**
                      
                      
                      **$**
                      ***2,442*****Segment
                          EBITDA**
                      
                      **$**
                      **3,001**
                      
                      
                      **$**
                      **3,033**
                      
                      
                      **$**
                      ***(32***
                      ***)*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      3,022
                      
                      
                      $
                      3,009
                      
                      
                      $
                      *13*Non-broadcast
                          operations
                      
                      
                      (21
                      )
                      
                      
                      24
                      
                      
                      
                      *(45*
                      *)***Segment
                          EBITDA**
                      
                      **$**
                      **3,001**
                      
                      
                      **$**
                      **3,033**
                      
                      
                      **$**
                      ***(32***
                      ***)*****Segment
                          EBITDA Margin**
                      
                      ****
                      **24**
                      **%**
                      
                      ****
                      **30**
                      **%**
                      
                      ****
                      ***(6***
                      ***)%***








·
            **Segment
                Net Revenues** for the three months ended March 31, 2007 increased
                by US$ 2.4 million, or 24%, compared to the three months ended March
                31,
                2006.  Spot revenues increased by US$ 1.6 million, or 16%, as
                our operations benefited from an increase in the average revenue
                per
                thirty-second advertising spot, particularly in prime time, which
                more
                than offset a decline in the volume of GRPs sold.  Non-spot
                revenues increased by US$ 0.9 million, or 177%, due to an increased
                level
                of sponsorship and an increase in non-broadcast advertising
                revenue.





·
            **Segment
                EBITDA**for the three months ended March 31, 2007 was in line with
                the three months ended March 31, 2006, resulting in an EBITDA margin
                of
                24% compared to 30% in the three months ended March 31,
                2006.  Costs charged in arriving at Segment EBITDA for the three
                months ended March 31, 2007 increased by US$ 2.5 million, or 34%,
                compared
                to the three months ended March 31, 2006.  Cost of programming
                grew by US$ 2.3 million, or 75%, due to increased investment in
                programming in a more competitive market environment.  Other
                operating costs decreased by US$ 0.3 million, or 10%, primarily due
                to
                lower salary and freelance costs, partially offset by higher transmitter
                and associated maintenance costs.  Selling, general and
                administrative expenses increased by US$ 0.5 million, or 41%, primarily
                due to higher marketing and promotion
                costs.





**(F)
      UKRAINE (STUDIO 1+1)**





**Market
      Background:**  We estimate that the television advertising
      market in Ukraine, where sales are denominated primarily in US dollars,
      experienced growth of approximately 28% - 31% in 2006.  It is expected
      that the television advertising market will grow between 30% and 35% during
      2007.





STUDIO
      1+1 had a national all day audience share of 16.1% for the three months ended
      March 31, 2007 compared to 18.5% for the three months ended March 31,
      2006.  Our competitors include: Inter, with a national all day
      audience share of 18.8%, Novy Kanal with 8.0%, ICTV with 7.0% and STB with
      7.8%.





Page
            49
 *Index*





Our
      prime
      time audience share decreased from 23.1% in the three months ended March 31,
      2006 to 18.8% in the three months ended March 31, 2007, at a time when most
      major channels experienced a similar decline in share to new niche
      channels.  Our share in the three months ended March 31, 2006
      reflected the outstanding success of a show called Ugly Betty.  Our
      average prime time ratings decreased from 9.5% to 7.2% over comparable periods,
      while prime time ratings for the whole market decreased from 41.1% in the three
      months ended March 31, 2006 to 38.6% in the three months ended March 31,
      2007.




**Three
      months ended March 31, 2007 compared to three months ended March 31,
      2006**





**UKRAINE
                            (STUDIO 1+1) SEGMENT FINANCIAL INFORMATION**
                          **For
                            the Three Months Ended March 31, (US$
                            000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Spot
                          revenues
                      
                      $
                      14,821
                      
                      
                      $
                      22,887
                      
                      
                      $
                      *(8,066*
                      *)*Non-spot
                          revenues
                      
                      
                      3,254
                      
                      
                      
                      2,591
                      
                      
                      
                      *663***Segment
                          Net Revenues**
                      
                      **$**
                      **18,075**
                      
                      
                      **$**
                      **25,478**
                      
                      
                      **$**
                      ***(7,403***
                      ***)*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      18,075
                      
                      
                      $
                      25,478
                      
                      
                      $
                      *(7,403*
                      *)*Non-broadcast
                          operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      *-***Segment
                          Net Revenues**
                      
                      **$**
                      **18,075**
                      
                      
                      **$**
                      **25,478**
                      
                      
                      **$**
                      ***(7,403***
                      ***)*****Segment
                          EBITDA**
                      
                      **$**
                      **(2,370**
                      **)**
                      
                      **$**
                      **10,988**
                      
                      
                      **$**
                      ***(13,358***
                      ***)*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      (2,338
                      )
                      
                      $
                      10,988
                      
                      
                      $
                      *(13,326*
                      *)*Non-broadcast
                          operations
                      
                      
                      (32
                      )
                      
                      
                      -
                      
                      
                      
                      *(32*
                      *)***Segment
                          EBITDA**
                      
                      **$**
                      **(2,370**
                      **)**
                      
                      **$**
                      **10,988**
                      
                      
                      **$**
                      ***(13,358***
                      ***)*****Segment
                          EBITDA Margin**
                      
                      ****
                      **(13**
                      **)%**
                      
                      ****
                      **43**
                      **%**
                      
                      ****
                      ***(56***
                      ***)%***





·
            **Segment
                Net Revenues** for the three months ended March 31, 2007 decreased
                by US$ 7.4 million, or 29%, compared to the three months ended March
                31,
                2006. Spot revenues decreased by US$ 8.1 million, or 35%.  There
                was an increase in the volume of GRPs sold in the three months ended
                March
                31, 2007 compared to the three months ended March 31, 2006. This
                was
                offset by a decrease in the average revenue per thirty-second
                advertising.  Non-spot revenues increased by US$ 0.7 million, or
                26%, primarily due to the sale of surplus programming and increased
                gameshow and short message service (“SMS”)
                revenues.





Sales
      phasing was unusual in 2006. In the three months ended March 31, 2006 we
      benefited from US$ 8.4 million of political advertising revenue ahead of the
      parliamentary elections in March 2006 as well as the extraordinary ratings
      success of the Russian series Ugly Betty. The advertising market in the three
      months ended March 31, 2007 has been slow due to the ongoing disagreements
      between the Ukrainian President and Prime Minister that resulted in the
      dissolution of parliament. Advertisers have been cautious in applying their
      budgets, leading all broadcasters to reduce prices in an attempt to maintain
      revenues. Despite our relatively weak financial results for the quarter, we
      have
      maintained our position as the highest rated channel among our target
      demographic group of 18 – 49; and our prime time series Kadets was the highest
      rated prime time series in that group.  While our major clients have
      purchased less advertising in the three months ended March 31, 2007 than we
      had
      anticipated, our sales house Video International has reported that they have
      not
      reduced their annual budgets.  Our present view is that although the
      Ukrainian television advertising market may remain uncertain for a period,
      we
      believe that it will grow this year in line with our expectations, subject
      to
      stabilization of the political situation.





Page
            50
 *Index*





·
            **Segment
                EBITDA**for
                the
                three months ended March 31, 2007 decreased by US$ 13.4 million,
                or 122%,
                compared to the three months ended March 31, 2006, resulting in an
                EBITDA
                margin of (13)% compared to 43% in the three months ended March 31,
                2006.  Costs charged in arriving at Segment EBITDA for the three
                months ended March 31, 2007 increased by US$ 6.0 million, or 41%,
                compared
                to the three months ended March 31, 2006.  Cost of programming
                grew by US$ 5.3 million, or 63%, due to price inflation for Russian
                programming, which is essential to maintaining strong ratings, as
                well as
                improvements to our programming schedule.  Other operating costs
                increased by US$ 0.5 million, or 14%, due to increased broadcast
                operating
                expenses and increased salary costs.  Selling, general and
                administrative expenses increased by US$ 0.1 million, or
                6%.





**(G)
      UKRAINE (KINO, CITI)**





On
      January 11, 2006, we acquired a 65.5% interest in Ukrpromtorg 2003 LLC, owner
      of
      92.2% of Gravis LLC, which operated the local channels, CHANNEL 35 and CHANNEL
      7.  In July 2006, we ceased operating CHANNEL 7 and launched a new
      entertainment channel, KINO, targeted at a younger demographic.  On
      December 1, 2006, we ceased operating CHANNEL 35 and launched a new
      youth-oriented channel, CITI, with a Kiev-wide reach.





KINO
      and
      CITI, both of which target a youthful market have as their main competitors
      ICTV, TONIS and NTN. As at March 31, 2007, KINO had a technical reach of
      approximately 46.7% of the Ukraine population and in the three months ended
      March 31, 2007 achieved an average share in the Kiev region of 2.4%. CITI had
      a
      technical reach of approximately 87.5% of the population of the city of Kiev
      and
      the Kiev region. CITI began broadcasting in December 2006 and in the three
      months ended March 31, 2007 achieved a 4+ prime time audience share of 2.1%
      in
      the Kiev region.





**Three
      months ended March 31, 2007 compared to three months ended March 31,
      2006**





**UKRAINE
                          (KINO, CITI) SEGMENT FINANCIAL INFORMATION**
                        **For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006(1)**
                      
                      
                      ***Movement***Spot
                          revenues
                      
                      $
                      143
                      
                      
                      $
                      215
                      
                      
                      $
                      *(72*
                      *)*Non-spot
                          revenues
                      
                      
                      255
                      
                      
                      
                      159
                      
                      
                      
                      *96***Segment
                          Net Revenues**
                      
                      **$**
                      **398**
                      
                      
                      **$**
                      **374**
                      
                      
                      **$**
                      ***24*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      398
                      
                      
                      $
                      374
                      
                      
                      $
                      *24*Non-broadcast
                          operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      *-***Segment
                          Net Revenues**
                      
                      **$**
                      **398**
                      
                      
                      **$**
                      **374**
                      
                      
                      **$**
                      ***24*****Segment
                          EBITDA**
                      
                      **$**
                      **(2,417**
                      **)**
                      
                      **$**
                      **(126**
                      **)**
                      
                      **$**
                      ***(2,291***
                      ***)*****Represented
                          by:**Broadcast
                          operations
                      
                      $
                      (2,417
                      )
                      
                      $
                      (126
                      )
                      
                      $
                      *(2,291*
                      *)*Non-broadcast
                          operations
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      *-***Segment
                          EBITDA**
                      
                      **$**
                      **(2,417**
                      **)**
                      
                      **$**
                      **(126**
                      **)**
                      
                      **$**
                      ***(2,291***
                      ***)*****Segment
                          EBITDA Margin**
                      
                      ****
                      **(607**
                      **)%**
                      
                      ****
                      **(34**
                      **)%**
                      
                      ****
                      ***(573***
                      ***)%***





(1)
      From
      acquisition on January 11, 2006 only





Page
            51
 *Index*





·
            **Segment
                Net Revenues** for the three months ended March 31, 2007 were in
                line with the three months ended March 31, 2006. Spot revenues decreased
                by US$ 0.1 million, or 33%, primarily due to the level of political
                advertising aired in 2006 ahead of the parliamentary elections on
                March
                26, 2006.  Non-spot revenues increased by US$ 0.1 million, or
                60%, primarily due to increased program
                sponsorship.





·
            **Segment
                EBITDA**for the three months ended March 31, 2007 decreased by US$
                2.3 million, or 1,818%, compared to the three months ended March
                31, 2006,
                resulting in an EBITDA margin of (607)% compared to (34)% in the
                three
                months ended March 31, 2006.  Costs charged in arriving at
                Segment EBITDA for the three months ended March 31, 2007 increased
                by US$
                2.3 million, or 462%, compared to the three months ended March 31,
                2006.  Cost of programming grew by US$ 1.7 million, or
                3162%.  Other operating costs increased by US$ 0.4 million, or
                165%.  Selling, general and administrative expenses increased by
                US$ 0.2 million, or 107%.





**PROGRAMMING
      PAYMENTS AND PROGRAM AMORTIZATION**





Our
      consolidated cost of programming for the three months ended March 31, 2007
      and
      2006 was as follows:





**For
                          the Three Months Ended**
                        **March
                          31, (US$ 000's)****2007**
                      
                      
                      **2006**Production
                          expenses
                      
                      $
                      27,558
                      
                      
                      $
                      22,975Program
                          amortization
                      
                      
                      38,795
                      
                      
                      
                      25,443**Cost
                          of programming**
                      
                      **$**
                      **66,353**
                      
                      
                      **$**
                      **48,418**





Production
      expenses represent the cost of in-house productions as well as locally
      commissioned programming, such as news, current affairs and game
      shows.  The cost of broadcasting all other purchased programming is
      recorded as program amortization.





Total
      consolidated programming costs (including amortization of programming rights
      and
      production costs) increased by US$ 17.9 million, or 37%, in the three months
      ended March 31, 2007 compared to the three months ended March 31, 2006 primarily
      due to:





·
            US$
                5.8 million of additional programming costs from our Romania
                operations;





·
            US$
                5.3 million of additional programming costs from our Ukraine (STUDIO
                1+1)
                operations;





·
            US$
                3.8 million of additional programming costs from our Croatia
                operations;





·
            US$
                2.3 million of additional programming costs from our Slovenia
                operations;





·
            US$
                1.7 million of additional programming costs from our Ukraine (KINO,
                CITI)
                operations;




·
              US$
                  1.2 million of additional programming costs from our Slovak Republic
                  operations, which have been consolidated for the entire three-month
                  period
                  in 2007.  Programming costs incurred in  the three
                  months ended March 31, 2006, including the pre-acquisition period
                  prior to
                  January 23, 2006, were US$ 1.7 million;
                  and,


·
            US$
                2.2 million of reduced programming costs from our Czech Republic
                operations.





The
      amortization of acquired programming for each of our consolidated operations
      for
      the three months ended March 31, 2007 and 2006, including our operations in
      the
      Slovak Republic (MARKIZA TV) for the period prior to January 23, 2006 when
      they
      were accounted for as an equity affiliate is set out in the table
      below.  For comparison, the table also shows the cash paid for
      programming by each of our operations in the respective periods.  The
      cash paid for programming by our operations in Croatia, the Czech Republic,
      Romania, Slovenia, Ukraine and the Slovak Republic (for the period from January
      23, 2006) is reflected within net cash provided by continuing operating
      activities in our consolidated statement of cash flows.





Page
            52
 *Index*




**For
                              the Three Months Ended March 31,**
                            **(US$
                              000's)****2007**
                          
                          
                          **2006**Program
                              amortization:Croatia
                              (NOVA TV)
                          
                          $
                          5,399
                          
                          
                          $
                          3,418Czech
                              Republic (TV NOVA)
                          
                          
                          6,556
                          
                          
                          
                          7,383Romania
                              (PRO TV, ACASA, PRO CINEMA, PRO TV INTERNATIONAL and
                              Sport.ro)
                          
                          
                          9,429
                          
                          
                          
                          6,716Slovak
                              Republic (MARKIZA TV) (post-acquisition)
                          
                          
                          3,207
                          
                          
                          
                          436Slovenia
                              (POP TV and KANAL A)
                          
                          
                          2,196
                          
                          
                          
                          1,417Ukraine
                              (STUDIO 1+1)
                          
                          
                          10,927
                          
                          
                          
                          6,046Ukraine
                              (KINO, CITI)
                          
                          
                          1,081
                          
                          
                          
                          27**$**
                          **38,795**
                          
                          
                          **$**
                          **25,443**Cash
                              paid for programming:Croatia
                              (NOVA TV)
                          
                          $
                          905
                          
                          
                          $
                          4,366Czech
                              Republic (TV NOVA)
                          
                          
                          6,579
                          
                          
                          
                          11,936Romania
                              (PRO TV, ACASA, PRO CINEMA, PRO TV INTERNATIONAL)
                          
                          
                          10,046
                          
                          
                          
                          6,606Slovenia
                              (POP TV and KANAL A)
                          
                          
                          2,172
                          
                          
                          
                          1,819Ukraine
                              (STUDIO 1+1)
                          
                          
                          10,484
                          
                          
                          
                          7,972Ukraine
                              (KINO, CITI)
                          
                          
                          742
                          
                          
                          
                          115**$**
                          **30,928**
                          
                          
                          **$**
                          **32,814**Slovak
                              Republic (MARKIZA TV)
                          
                          
                          3,699
                          
                          
                          
                          3,279**$**
                          **34,627**
                          
                          
                          **$**
                          **36,093**








***IV.
      Analysis of the Results of Consolidated Operations***





**IV
      (a) Net Revenues for the three months ended March 31, 2007 compared to the
      three
      months ended March 31, 2006**





**Consolidated
                          Net Revenues****For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Croatia
                      
                      $
                      7,232
                      
                      
                      $
                      3,810
                      
                      
                      $
                      *3,422*Czech
                          Republic
                      
                      
                      51,519
                      
                      
                      
                      40,549
                      
                      
                      
                      *10,970*Romania
                      
                      
                      39,342
                      
                      
                      
                      29,871
                      
                      
                      
                      *9,471*Slovak
                          Republic
                      
                      
                      18,677
                      
                      
                      
                      9,445
                      
                      
                      
                      *9,232*Slovenia
                      
                      
                      12,669
                      
                      
                      
                      10,227
                      
                      
                      
                      *2,442*Ukraine
                          (Studio 1+1)
                      
                      
                      18,075
                      
                      
                      
                      25,478
                      
                      
                      
                      *(7,403*
                      *)*Ukraine
                          (KINO, CITI)
                      
                      
                      398
                      
                      
                      
                      374
                      
                      
                      
                      *24***Total
                          Consolidated Net Revenues**
                      
                      **$**
                      **147,912**
                      
                      
                      **$**
                      **119,754**
                      
                      
                      **$**
                      ***28,158***





Page
            53
 *Index*





Our
      consolidated net revenues for the three months ended March 31, 2007 increased
      by
      US$ 28.2 million, or 24%, compared to the three months ended March 31,
      2006.  See discussion in Item 2, III. “Analysis of Segment
      Results”.





**IV
      (b) Cost of Revenues for the three months ended March 31, 2007 compared to
      the
      three months ended March 31, 2006**





**Consolidated
                          Cost of Revenues****For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Operating
                          costs
                      
                      $
                      25,657
                      
                      
                      $
                      22,972
                      
                      
                      $
                      *2,685*Cost
                          of programming
                      
                      
                      66,353
                      
                      
                      
                      48,418
                      
                      
                      
                      *17,935*Depreciation
                          of station property, plant and equipment
                      
                      
                      6,899
                      
                      
                      
                      5,702
                      
                      
                      
                      *1,197*Amortization
                          of broadcast licenses and other intangibles
                      
                      
                      5,162
                      
                      
                      
                      4,332
                      
                      
                      
                      *830***Total
                          Consolidated Cost of Revenues**
                      
                      **$**
                      **104,071**
                      
                      
                      **$**
                      **81,424**
                      
                      
                      **$**
                      ***22,647***





Total
      cost of revenues for the three months ended March 31, 2007 increased by US$
      22.6
      million, or 28%, compared to the three months ended March 31, 2006.





**Operating
      costs:**Total consolidated operating costs (excluding
      programming costs, depreciation of station property, plant and equipment,
      amortization of broadcast licenses and other intangibles as well as station
      selling, general and administrative expenses) for the three months ended March
      31, 2007 increased by US$ 2.7 million, or 12%, compared to the three months
      ended March 31, 2006.  See discussion in Item 2, III. “Analysis of
      Segment Results”.





**Cost
      of programming:**Consolidated programming costs (including
      amortization of programming rights and production costs) for the three months
      ended March 31, 2007 increased by US$ 17.9 million, or 37%, compared to the
      three months ended March 31, 2006.  See discussion in Item 2, III.
“Analysis of Segment Results”.





**Depreciation
      of property, plant and equipment:**  Total consolidated
      depreciation of property, plant and equipment for the three months ended March
      31, 2007 increased by US$ 1.2 million, or 21%, compared to the three months
      ended March 31, 2006 primarily due to depreciation of newly acquired production
      equipment assets across each of our operations.





**Amortization
      of broadcast licenses and other intangibles**:  Total
      consolidated amortization of broadcast licenses and other intangibles for the
      three months ended March 31, 2007 increased by US$ 0.8 million, or 19%, compared
      to the three months ended March 31, 2006 primarily due to the amortization
      of
      the broadcast licenses and customer relationships of our Slovak Republic
      operations that were acquired on January 23, 2006 for a full three-month period
      rather than for the period from acquisition in the prior year.





Page
            54
 *Index*





**IV
      (c) Station Selling, General and Administrative Expenses for the three months
      ended March 31, 2007 compared to the three months ended March 31,
      2006**





**Consolidated
                          Station Selling, General and Administrative
                          Expenses****For
                          the Three Months Ended March 31, (US$ 000's)****2007**
                      
                      
                      **2006**
                      
                      
                      ***Movement***Croatia
                      
                      $
                      1,726
                      
                      
                      $
                      1,542
                      
                      
                      $
                      *184*Czech
                          Republic
                      
                      
                      5,093
                      
                      
                      
                      5,682
                      
                      
                      
                      *(589*
                      *)*Romania
                      
                      
                      2,425
                      
                      
                      
                      2,164
                      
                      
                      
                      *261*Slovak
                          Republic
                      
                      
                      1,939
                      
                      
                      
                      1,020
                      
                      
                      
                      *919*Slovenia
                      
                      
                      1,704
                      
                      
                      
                      1,213
                      
                      
                      
                      *491*Ukraine
                          (Studio 1+1)
                      
                      
                      2,467
                      
                      
                      
                      2,324
                      
                      
                      
                      *143*Ukraine
                          (KINO, CITI)
                      
                      
                      427
                      
                      
                      
                      221
                      
                      
                      
                      *206***Total
                          Consolidated Station Selling, General and Administrative
                          Expenses**
                      
                      **$**
                      **15,781**
                      
                      
                      **$**
                      **14,166**
                      
                      
                      **$**
                      ***1,615***





Consolidated
      station selling, general and administrative expenses for the three months ended
      March 31, 2007 increased by US$ 1.6 million, or 11%, compared to the three
      months ended March 31, 2006.  See discussion in Item 2, III. “Analysis
      of Segment Results”.








**IV
      (d) Corporate Operating Costs for the three months ended March 31, 2007 compared
      to the three months ended March 31, 2006**





**For
                            the Three Months Ended March 31, (US$ 000's)****2007**
                        
                        
                        **2006**
                        
                        
                        ***Movement***Corporate
                            operating costs (excluding non-cash stock-based
                            compensation)
                        
                        $
                        7,542
                        
                        
                        $
                        7,293
                        
                        
                        $
                        *249*Non-cash
                            stock-based compensation
                        
                        
                        1,262
                        
                        
                        
                        688
                        
                        
                        
                        *574***Corporate
                            Operating Costs (including non-cash stock-based
                            compensation)**
                        
                        **$**
                        **8,804**
                        
                        
                        **$**
                        **7,981**
                        
                        
                        **$**
                        ***823***





Corporate
      operating costs (excluding non-cash stock-based compensation) for the three
      months ended March 31, 2007 increased by US$ 0.2 million, or 3%, compared to
      the
      three months ended March 31, 2006, primarily due to:





·
            Increased
                staff related costs; and





·
            Increased
                business development expenses incurred in researching potential
                acquisition targets.





·
            Included
                within corporate operating costs is a lease-exit charge of approximately
                US$ 1.6 million (including additional depreciation of US$ 0.3 million)
                incurred following relocation of our London office during the first
                quarter of 2006.





The
      increase in the charge for non-cash stock-based compensation for the three
      months ended March 31, 2007 compared to the three months ended March 31, 2006
      reflects an increase in the number of stock options granted in 2006 compared
      to
      prior years as well as an increase in the fair value of stock options as our
      stock price increased in recent years.  For more details, see Item 1,
      Note 14.





Page
            55
 *Index*





**IV
      (e) Operating Income for the three months ended March 31, 2007 compared to
      the
      three months ended March 31, 2006**





**For
                            the Three Months Ended March 31, (US$ 000's)****2007**
                        
                        
                        **2006**
                        
                        
                        ***Movement*****Operating
                            Income**
                        
                        **$**
                        **19,256**
                        
                        
                        **$**
                        **16,183**
                        
                        
                        **$**
                        ***3,073***





Operating
      income for the three months ended March 31, 2007 increased by US$ 3.1 million,
      or 19%, compared to the three months ended March 31, 2006.  Operating
      margin was 13%, in line with the operating margin for the three months ended
      March 31, 2006.








**IV
      (f) Other income / (expense) items for the three months ended March 31, 2007
      compared to the three months ended March 31, 2006**





**For
                            the Three Months Ended March 31, (US$ 000's)****2007**
                        
                        
                        **2006**
                        
                        
                        ***Movement***Interest
                            income
                        
                        $
                        1,414
                        
                        
                        $
                        1,453
                        
                        
                        $
                        *(39*
                        *)*Interest
                            expense
                        
                        
                        (11,396
                        )
                        
                        
                        (10,518
                        )
                        
                        
                        *(878*
                        *)*Foreign
                            currency exchange loss, net
                        
                        
                        (3,136
                        )
                        
                        
                        (10,862
                        )
                        
                        
                        *7,726*Change
                            in fair value of derivatives
                        
                        
                        4,524
                        
                        
                        
                        -
                        
                        
                        
                        *4,524*Other
                            expense
                        
                        
                        (6,213
                        )
                        
                        
                        (548
                        )
                        
                        
                        *(5,665*
                        *)*Provision
                            for income taxes
                        
                        
                        (5,059
                        )
                        
                        
                        (3,994
                        )
                        
                        
                        *(1,065*
                        *)*Minority
                            interest in loss / (income) of consolidated subsidiaries
                        
                        
                        360
                        
                        
                        
                        (5,441
                        )
                        
                        
                        *5,801*Equity
                            in income / (loss) of unconsolidated affiliates
                        
                        
                        -
                        
                        
                        
                        (730
                        )
                        
                        
                        *730*Discontinued
                            operations
                        
                        
                        -
                        
                        
                        
                        (3,807
                        )
                        
                        
                        *3,807*





**Interest
      income** for the three months ended March 31, 2007 was in line with that
      recognized in the three months ended March 31, 2006.





**Interest
      expense** for the three months ended March 31, 2007 increased by US$ 0.9
      million compared to the three months ended March 31, 2006, primarily as a result
      of an increase in interest rates.





**Foreign
      currency exchange loss, net:**  For the three months ended
      March 31, 2007 we recognized a US$ 3.1 million loss primarily as a result of
      the
      strengthening of the Euro against the dollar during the three-month
      period.  Our fixed and floating rate Senior Notes are denominated in
      Euros, and we incurred a transaction loss of approximately US$ 5.5 million
      due
      to movements in the spot rate between December 31, 2006 and March 31,
      2007.  For the three months ended March 31, 2006, we recognized a
      transaction loss of US$ 10.9 million.





**Change
      in fair value of derivatives**: For the three months ended March 31, 2007
      we recognized a US$ 4.5 million gain as a result of the change in the fair
      value
      of the currency swaps entered into on April 27, 2006.  For further
      information, see Item 1, Note 12.




**Other
      expense:**  For the three months ended March 31, 2007 we
      incurred other expenses of US$ 6.2 million compared to US$ 0.5 million for
      the
      three months ended March 31, 2006. The amount for March 31, 2007 includes
      accruals in anticipation of the settlement of all outstanding disclosed
      litigation surrounding our Croatia operations.




Page
            56
 *Index*





**Provision
      for income taxes:**  The provision for income taxes was US$ 5.1
      million for the three months ended March 31, 2007 compared to US$ 4.0 million
      for the three months ended March 31, 2006.  Our stations pay income
      taxes at rates ranging from 16.0% in Romania to 25.0% in Ukraine.





**Minority
      interest in income of consolidated subsidiaries:**  For the
      three months ended March 31, 2007, we recognized a gain of US$ 0.4 million
      in
      respect of the minority interest in the income of consolidated subsidiaries,
      compared to a charge of US$ 5.4 million for the three months ended March 31,
      2006.  This movement primarily reflects the fact that our Ukraine
      (STUDIO 1+1) operations reported a net loss in the three months ended March
      31,
      2007 compared to a significant net profit in the three months ended March 31,
      2006 as a result of the level of political advertising ahead of the March 2006
      Parliamentary elections.





**Equity
      in income / (loss) of unconsolidated affiliates**:  Some of our
      broadcasting licenses were held by unconsolidated affiliates over which we
      had
      minority blocking rights but not majority control.  These affiliates
      were accounted for using the equity method.





Equity
      in
      income / (loss) of unconsolidated affiliates for the three months ended March
      31, 2007 decreased by US$ 0.7 million compared to the three months ended March
      31, 2006 as detailed below:





**For
                            the Three Months Ended March 31, (US$ 000's)****2007**
                        
                        
                        **2006**
                        
                        
                        ***Movement***Markiza
                            (Slovak Republic)
                        
                        $
                        -
                        
                        
                        $
                        (737
                        )
                        
                        $
                        *737*Radio
                            Pro (Romania)
                        
                        
                        -
                        
                        
                        
                        7
                        
                        
                        
                        *(7*
                        *)***Equity
                            in Income / (Loss) of Unconsolidated Affiliates**
                        
                        **$**
                        **-**
                        
                        
                        **$**
                        **(730**
                        **)**
                        
                        **$**
                        ***(730***
                        ***)***








**Discontinued
      operations:**  The amounts charged to the condensed
      consolidated statement of operations in respect of discontinued operations
      for
      the three months ended March 31, 2007 compared to the three months ended March
      31, 2006 are as follows:





**For
                            the Three Months Ended March 31, (US$ 000's)****2007**
                        
                        
                        **2006**
                        
                        
                        ***Movement***Tax
                            on disposal of discontinued operations
                        
                        $
                        -
                        
                        
                        $
                        (3,807
                        )
                        
                        $
                        3,807**Discontinued
                            operations**
                        
                        **$**
                        **-**
                        
                        
                        **$**
                        **(3,807**
                        **)**
                        
                        **$**
                        **3,807**





On
      June
      19, 2003, our Board of Directors decided to withdraw from operations in the
      Czech Republic.  On October 23, 2003, we sold our 93.2% interest in
      CNTS our former Czech Republic operating company, for US$ 53.2
      million.





The
      revenues and expenses of our former Czech Republic operations and the award
      income and related legal expenses have therefore all been treated as
      discontinued operations.  For the three months ended March 31, 2006,
      the amounts charged to discontinued operations largely represented revised
      estimates of additional payments we expect to make to the Dutch tax authorities
      pursuant to the agreement we entered into on February 9, 2004 (see also Part
      I,
      Item 1, Note 17).





Page
            57
 *Index*





**IV
      (e) Condensed consolidated balance sheet as at March 31, 2007 compared to
      December 31, 2006**





**Summarized
                            Condensed Consolidated Balance Sheet (US$ 000’s)****March
                            31, 2007**
                        
                        
                        **December
                            31, 2006**
                        
                        
                        ***Movement***Current
                            assets
                        
                        $
                        424,715
                        
                        
                        $
                        413,616
                        
                        
                        $
                        *11,099*Non-current
                            assets
                        
                        
                        1,423,576
                        
                        
                        
                        1,405,384
                        
                        
                        
                        *18,192*Current
                            liabilities
                        
                        
                        213,728
                        
                        
                        
                        182,961
                        
                        
                        
                        *30,767*Non-current
                            liabilities
                        
                        
                        578,139
                        
                        
                        
                        574,084
                        
                        
                        
                        *4,055*Minority
                            interests in consolidated subsidiaries
                        
                        
                        25,949
                        
                        
                        
                        26,189
                        
                        
                        
                        *(240*
                        *)*Shareholders’
                            equity
                        
                        $
                        1,030,475
                        
                        
                        $
                        1,035,766
                        
                        
                        $
                        *(5,291*
                        *)*




**Current
      assets:**  Current assets at March 31, 2007 increased US$ 11.1
      million compared to December 31, 2006, primarily as a result of an increase
      in
      cash and cash equivalents and an increase in program rights.





**Non-current
      assets:**  Non-current assets at March 31, 2007 increased US$
      18.2 million compared to December 31, 2006, primarily as a result of increased
      investments in programming and the recognition of goodwill and other intangible
      assets following our acquisition of TV Sport.





**Current
      liabilities:**  Current liabilities at March 31, 2007 increased
      US$ 30.8 million compared to December 31, 2006, reflecting increases in deferred
      income, accrued interest and payroll taxes.





**Non-current
      liabilities:**  Non-current liabilities at March 31, 2007
      increased US$ 4.1 million compared to December 31, 2006, after recognition
      of a
      liability of approximately US$ 3.0 million following adoption of FIN
      48.  The remaining movement reflects a US$ 5.5 million increase in the
      value of our Senior Notes as a result of the movement in the spot rate between
      December 31, 2006 and March 31, 2007, partially offset by a USS 4.5 million
      reduction in our liability on the revaluation of the currency swaps entered
      into
      in April 2006.  .





**Minority
      interests in consolidated subsidiaries:**  Minority interests
      in consolidated subsidiaries at March 31, 2007 decreased US$ 0.2 million
      compared to December 31, 2006, primarily as a result of reduced profitability
      of
      our Ukraine (STUDIO 1+1) operations.





**Shareholders’
      equity:**  Total shareholders’ equity at March 31, 2007
      decreased US$ 5.3 million compared to December 31, 2006, primarily as a result
      of the decrease in Other Comprehensive Income (US$ 5.6 million), impact of
      the
      adoption of FIN 48 (US$ 3.2 million), and the net loss of US$ 0.3 million for
      the three months ended March 31, 2007. Included in the total shareholders’
equity were proceeds from the exercise of stock options (US$ 2.0 million) and
      a
      stock-based compensation charge of US$ 1.8 million.





Page
            58
 *Index*





***V.
      Liquidity and Capital Resources***





**V
      (a) Summary of cash flows**





Cash
      and
      cash equivalents increased by US$ 11.4 million during the three months ended
      March 31, 2007.  The change in cash and cash equivalents is summarized
      as follows:





**For
                            the Three Months Ended March 31, (US$ 000's)****2007**
                        
                        
                        **2006**Net
                            cash generated from continuing operating activities
                        
                        $
                        31,913
                        
                        
                        $
                        31,693Net
                            cash used in continuing investing activities
                        
                        
                        (20,901
                        )
                        
                        
                        (67,518
                        )Net
                            cash received from financing activities
                        
                        
                        809
                        
                        
                        
                        196,981Net
                            cash used in discontinued operations – operating
                            activities
                        
                        
                        (1,624
                        )
                        
                        
                        (1,690
                        )**Net
                            increase in cash and cash equivalents**
                        
                        **$**
                        **11,436**
                        
                        
                        **$**
                        **161,283**





*Operating
      Activities*





Cash
      generated from continuing operations in the three months ended March 31, 2007
      increased from US$ 31.7 million to US$ 31.9 million, reflecting the level of
      cash generated by our Czech Republic, Romania, Slovak Republic and Slovenia
      operations, partially offset by negative cash flows of our Croatia and Ukraine
      operations.





*Investing
      Activities*





Cash
      used
      in investing activities in the three months ended March 31, 2007 decreased
      from
      US$ 67.5 million to US$ 20.9 million.  Our investing cash flows in the
      three months ended March 31, 2007 were primarily comprised of:





·
            Payments
                of EUR 6.7 million (approximately US$ 8.4 million) in connection
                with our
                acquisition of TV Sport (for further information, see Part I, Item
                1, Note
                3);


·
            Payment
                of the final US$ 0.2 million of deferred consideration due on our
                acquisition of a 65.5% stake in Ukrpromtorg;
                and


·
            Capital
                expenditure of US$ 12.0 million.





*Financing
      Activities*





Net
      cash
      received from financing activities in the three months ended March 31, 2007
      was
      US$ 0.8 million compared to US$ 197.0 million in the three months ended March
      31, 2006.  The amount of cash received in the three months ended March
      31, 2006 reflects proceeds of US$ 168.6 million from the issuance of Class
      A Common Stock and a net amount of US$ 28.0 million of cash received
      from credit facilities.





*Discontinued
      Operations*





In
      the
      three months ended March 31, 2007, we paid taxes of US$ 1.6 million to the
      Dutch
      tax authorities pursuant to the agreement we entered into with them on February
      9, 2004, compared to US$ 1.7 million in the three months ended March 31,
      2006.








**V
      (b) Sources and Uses of Cash**





We
      believe that our current cash resources are sufficient to allow us to continue
      operating for at least the next 12 months and we do not anticipate additional
      cash requirements in the near future, subject to the matters disclosed under
      “Contractual Obligations, Commitments and Off-Balance Sheet Arrangements” and
“Cash Outlook” below.





Page
            59
 *Index*





Our
      ongoing source of cash at the operating stations is primarily the receipt of
      payments from advertisers and advertising agencies. This may be supplemented
      from time to time by local borrowing. Surplus cash generated in this manner,
      after funding the ongoing station operations, may be remitted to us, or to
      other
      shareholders where appropriate.  Surplus cash is remitted to us in the
      form of debt interest payments and capital repayments, dividends, and other
      distributions and loans from our subsidiaries.





Corporate
      law in the Central and Eastern European countries in which we operate stipulates
      generally that dividends may be declared by the partners or shareholders out
      of
      yearly profits subject to the maintenance of registered capital, required
      reserves and after the recovery of accumulated losses. Except as set forth
      below, our voting power is sufficient to compel the making of
      distributions.





In
      the
      case of Nova TV (Croatia), distributions may be paid from net profits subject
      to
      a reserve of 5% of annual profits until the aggregate reserves equal 5% of
      the
      registered capital of Nova TV (Croatia). In the case of CET 21, distributions
      may be paid from net profits subject to a reserve of 5% of net profits until
      the
      aggregate reserves equal 10% of the registered capital of CET 21. In the case
      of
      Pro TV, distributions may be paid from the profits of Pro TV subject to a
      reserve of 5% of annual profits until the aggregate reserves equal 20% of Pro
      TV's registered capital. A majority vote is required in order for Pro TV to
      make
      distributions and we have sufficient voting power to compel distributions of
      dividends.  In the case of Markiza, distributions may be paid from net
      profits subject to an initial reserve requirement of 10% of net profits until
      the reserve fund equals 5% of registered capital. Subsequently, the reserve
      requirement is equal to 5% of net profits until the reserve fund equals 10%
      of
      registered capital. In the case of Pro Plus, distributions may be paid from
      the
      profits of Pro Plus, subject to a reserve equal to 10% of registered capital
      being established from accumulated profits. In the case of Studio 1+1,
      distributions may be paid from net profits subject to a reserve of 5% of net
      profits until the aggregate reserves equals 25% of the registered capital of
      Studio 1+1.  We do not have a sufficient majority in Studio 1+1 to
      compel the distribution of dividends. In the case of Intermedia, Innova and
      IMS,
      distributions may be paid from their profits and there is no reserve requirement
      for these companies. Our voting power in Innova and IMS is sufficient to compel
      the distribution of dividends.





As
      at
      March 31, 2007 and December 31, 2006 the operations had the following unsecured
      balances owing to their respective holding companies:





**Operating
                            segment (US$ 000’s)**
                        
                        **March
                            31, 2007**
                        
                        
                        **December
                            31, 2006**Croatia
                        
                        $
                        77,998
                        
                        
                        $
                        67,623Czech
                            Republic
                        
                        
                        418,446
                        
                        
                        
                        434,897Romania
                        
                        
                        39,053
                        
                        
                        
                        25,620Slovak
                            Republic
                        
                        
                        24,069
                        
                        
                        
                        23,670Slovenia
                        
                        
                        -
                        
                        
                        
                        -Ukraine
                            (STUDIO 1+1)
                        
                        
                        87
                        
                        
                        
                        -Ukraine
                            (KINO, CITI)
                        
                        
                        9,368
                        
                        
                        
                        4,621**Total**
                        
                        **$**
                        **569,021**
                        
                        
                        **$**
                        **556,431**





Page
            60
 *Index*





**V
      (c) Contractual Obligations, Commitments and Off-Balance Sheet
      Arrangements**





Our
      future contractual obligations as of March 31, 2007 are as follows:





**Contractual
                            Obligations**
                        
                        **Payments
                            due by period (US$ 000’s)****Total**
                        
                        
                        **Less
                            than 1**
                          **year**
                        
                        
                        **1-3
                            years**
                        
                        
                        **3-5
                            years**
                        
                        
                        **More
                            than 5**
                          **years**Long-Term
                            Debt – principal
                        
                        $
                        506,433
                        
                        
                        $
                        11,991
                        
                        
                        $
                        1,700
                        
                        
                        $
                        -
                        
                        
                        $
                        492,742Long-Term
                            Debt – interest
                        
                        
                        231,268
                        
                        
                        
                        42,473
                        
                        
                        
                        84,862
                        
                        
                        
                        84,556
                        
                        
                        
                        19,377Capital
                            Lease Obligations
                        
                        
                        6,542
                        
                        
                        
                        943
                        
                        
                        
                        1,377
                        
                        
                        
                        1,187
                        
                        
                        
                        3,035Operating
                            Leases
                        
                        
                        6,643
                        
                        
                        
                        3,218
                        
                        
                        
                        2,473
                        
                        
                        
                        952
                        
                        
                        
                        -Unconditional
                            Purchase Obligations
                        
                        
                        103,170
                        
                        
                        
                        95,240
                        
                        
                        
                        7,784
                        
                        
                        
                        -
                        
                        
                        
                        146Other
                            Long-Term Obligations
                        
                        
                        18,023
                        
                        
                        
                        15,459
                        
                        
                        
                        2,564
                        
                        
                        
                        -
                        
                        
                        
                        -Total
                            Contractual Obligations
                        
                        **$**
                        **872,079**
                        
                        
                        **$**
                        **169,324**
                        
                        
                        **$**
                        **100,760**
                        
                        
                        **$**
                        **86,695**
                        
                        
                        **$**
                        **515,300**





On
      April
      11, 2007, the holders of the floating rate Senior Notes received notice of
      our
      intention to redeem all of these Senior Notes on May 15, 2007 (See Part I,
      Item
      1, Note 5).





*Long-Term
      Debt*





As
      at
      March 31, 2007 we had the following debt outstanding:





**March
                                31, 2007**
                              **(US$
                                000’s)**Corporate
                            
                            
                            (1
                            )–(2)
                            
                            $
                            492,742Croatia
                                operations
                            
                            
                            
                            (3)
                            
                            
                            -Czech
                                Republic operations
                            
                            
                            (4
                            )–(6)
                            
                            
                            11,892Romania
                                operations
                            
                            
                            
                            (7)
                            
                            
                            94Slovenia
                                operations
                            
                            
                            
                            (8)
                            
                            
                            -Ukraine
                                (KINO, CITI) operations
                            
                            
                            
                            (9)
                            
                            
                            1,705**Total**
                            
                            
                            
                            
                            
                            $
                            506,433





(1)
            In
                May 2005, we issued Senior Notes in the aggregate principal amount
                of EUR
                370.0 million consisting of EUR 245.0 million of 8.25% Senior Notes
                due
                May 2012 and EUR 125.0 million of floating rate Senior Notes due
                May 2012,
                which bear interest at six-month Euro Inter-Bank Offered Rate (“EURIBOR”)
                plus 5.50% (9.23% was applicable at March 31, 2007).  Interest
                is payable semi-annually in arrears on each May 15 and November
                15.





The
      Senior Notes are secured senior obligations and rank pari passu with all
      existing and future senior indebtedness and are effectively subordinated to
      all
      existing and future indebtedness of our subsidiaries.  The amounts
      outstanding are guaranteed by certain of our subsidiaries and are secured by
      a
      pledge of shares of these subsidiaries and an assignment of certain contractual
      rights.  The terms of our indebtedness restrict the manner in which
      our business is conducted, including the incurrence of additional indebtedness,
      the making of investments, the payment of dividends or the making of other
      distributions, entering into certain affiliate transactions and the sale of
      assets.





In
      the
      event that (A) there is a change in control by which (i) any party other than
      our present shareholders becomes the beneficial owner of more than 35.0% of
      our
      total voting power; (ii) we agree to sell substantially all of our operating
      assets; or (iii) there is a change in the composition of a majority of our
      Board
      of Directors; and (B) on the 60th day following any such change of control
      the
      rating of the Senior Notes is either withdrawn or downgraded from the rating
      in
      effect prior to the announcement of such change of control, we can be required
      to repurchase the Senior Notes at a purchase price in cash equal to 101.0%
      of
      the principal amount of the Senior Notes plus accrued and unpaid interest to
      the
      date of purchase.





Page
            61
 *Index*





At
      any
      time prior to May 15, 2008, we may redeem up to 35.0% of the fixed rate Senior
      Notes with the proceeds of any public equity offering at a price of 108.250%
      of
      the principal amount of such notes, plus accrued and unpaid interest, if any,
      to
      the redemption date.  In addition, prior to May 15, 2009, we may
      redeem all or a part of the fixed rate Senior Notes at a redemption price equal
      to 100.0% of the principal amount of such notes, plus a “make-whole” premium and
      accrued and unpaid interest, if any, to the redemption date.





On
      April
      11, 2007 we issued a notice to redeem the floating rate Senior Notes on May
      15,
      2007.





As
      of
      March 31, 2007, Standard & Poor’s senior unsecured debt rating for our
      Senior Notes remained unchanged from December 31, 2006 at B+, with a corporate
      credit rating of BB- / positive, up from BB- / stable at December 31,
      2006.  At March 31, 2007, Moody’s Investors Service’s rating of both
      our corporate credit rating and our Senior Notes due 2012 was Ba3
      stable.





(2)
            On
                July 21, 2006, we entered into a five-year revolving loan agreement
                for
                EUR 100.0 million (approximately US$ 133.2 million) arranged by the
                European Bank for Reconstruction and Development (the
                “Loan”).  ING Bank N.V. (“ING”) and Ceska Sporitelna, a.s.
                (“CS”) are participating in the facility for up to EUR 50.0 million in
                aggregate.





The
      Loan
      bears interest at a rate of three-month EURIBOR plus 2.75% on the drawn
      amount.  The available amount of the Loan amortizes by 7.5% every six
      months from May 2008 to November 2009, then by 15% in May 2010 and November
      2010, and by 40% in May 2011. There were no drawings under this facility as
      at
      March 31, 2007, however the entire EUR 100.0 million was drawn on April 18,
      2007.





Covenants
      contained in the Loan are in line with those contained in our Senior
      Notes.  In addition, the Loan’s covenants restrict us from making
      principal repayments on other debt of greater than US$ 20.0 million per year
      for
      the life of the Loan.  This restriction is not applicable to our
      existing facilities with ING or CS or to any refinancing of our Senior
      Notes.





The
      Loan
      is a secured senior obligation and ranks pari passu with all existing and future
      senior indebtedness, including the Senior Notes, and is effectively subordinated
      to all existing and future indebtedness of our subsidiaries.  The
      amount drawn is guaranteed by certain of our subsidiaries and is secured by
      a
      pledge of shares of those subsidiaries and an assignment of certain contractual
      rights.  The terms of the Loan restrict the manner in which our
      business is conducted, including the incurrence of additional indebtedness,
      the
      making of investments, the payment of dividends or the making of other
      distributions, entering into certain affiliate transactions and the sale of
      assets.





(3)
            On
                March 28, 2007, we repaid EUR 0.6 million (approximately US$ 0.8
                million)
                which had been drawn by our Croatia operations under two loan agreements
                with Hypo Alpe-Adria Bank d.d. The security held by the bank was
                also
                released.





(4)
            CET
                21 has a four-year credit facility of CZK 1.2 billion (approximately
                US$
                57.1 million) with Ceska Sporitelna, a.s. (“CS”).  The final
                repayment date is October 31, 2009.  This facility may, at the
                option of CET 21, be drawn in CZK, US$ or EUR and bears interest
                at the
                three-month, six-month or twelve-month London Inter-Bank Offered
                Rate
                (“LIBOR”), EURIBOR or Prague Inter-Bank Offered Rate (“PRIBOR”) rate plus
                1.95%.  This facility is secured by a pledge of receivables,
                which are also subject to a factoring arrangement with Factoring
                Ceska
                Sporitelna, a.s., a subsidiary of CS.  As at March 31, 2007,
                there were no drawings under this
                facility.





Page
            62
 *Index*





(5)
            CET
                21 has a working capital credit facility of CZK 250.0 million
                (approximately US$ 11.9 million) with CS, which matures on April
                30,
                2007.  This working capital facility bears interest at the
                three-month PRIBOR rate plus 1.65%. On April 7, 2007 this facility
                was
                extended to April 30, 2008. This facility is secured by a pledge
                of
                receivables, which are also subject to a factoring arrangement with
                Factoring Ceska Sporitelna, a.s.  As at March 31, 2007, the full
                CZK 250.0 million (approximately US$ 11.9 million) was drawn under
                this
                facility bearing interest at an aggregate 4.22% (the applicable
                three-month PRIBOR rate at March 31, 2007 was
                2.57%).





(6)
            As
                at March 31, 2007, there were no drawings under a CZK 600.0 million
                (approximately US$ 28.5 million) factoring facility with Factoring
                Ceska
                Sporitelna, a.s., a subsidiary of CS.  This facility is
                available until March 31, 2010 and bears interest at the rate of
                one-month
                PRIBOR plus 1.40% for the period that actively assigned accounts
                receivable are outstanding. On April 11, 2007 the size of this facility
                was reduced from CZK 600.0 million to CZK 300.0
                million.





(7)
            As
                at March 31, 2007, an amount of RON 242,739 (approximately US$ 0.1
                million) was outstanding under a loan agreement from one of the founding
                shareholders of TV Sport. The loan is interest free and is repayable
                in
                equal monthly instalments by August 31,
                2007.





(8)
            A
                revolving five-year facility agreement was entered into by Pro Plus
                for up
                to EUR 37.5 million (approximately US$ 49.9 million) in aggregate
                principal amount with ING Bank N.V., Nova Ljubljanska Banka d.d.,
                Ljubljana and Bank Austria Creditanstalt d.d., Ljubljana.  The
                facility availability amortizes by 10.0% each year for four years
                commencing one year after signing, with 60.0% repayable after five
                years.  This facility is secured by a pledge of the bank
                accounts of Pro Plus, the assignment of certain receivables, a pledge
                of
                our interest in Pro Plus and a guarantee of our wholly-owned subsidiary
                CME Media Enterprises B.V.  Loans drawn under this facility will
                bear interest at a rate of EURIBOR for the period of drawing plus
                a margin
                of between 2.10% and 3.60% that varies according to the ratio of
                consolidated net debt to consolidated broadcasting cash flow for
                Pro
                Plus.  As at March 31, 2007, EUR 33.8 million (approximately US$
                45.0 million)  was available for drawing under this revolving
                facility; there were no drawings
                outstanding.





(9)
            Our
                Ukraine (KINO, CITI) operations have entered into a number of three-year
                unsecured loans with Glavred-Media, LLC, the minority shareholder
                in
                Ukrpromtorg.  As at March 31, 2007, the total value of loans
                drawn was US$ 1.7 million.  The loans are repayable between
                August 2009 and December 2009 and bear interest at
                9.0%.





*Capital
      Lease Obligations*





Capital
      lease obligations include future interest payments of US$ 1.8
      million.  For more information on our capital lease obligations see
      Part I, Item 1, Note 11.





*Operating
      Leases*





For
      more
      information on our operating lease commitments see Part I, Item 1, Note
      18.





*Unconditional
      Purchase Obligations*





Unconditional
      purchase obligations largely comprise future programming
      commitments.  At March 31, 2007, we had commitments in respect of
      future programming US$ 90.8 million (December 31, 2006: US$ 98.0
      million).  This includes contracts signed with license periods
      starting after March 31, 2007.  For more information on our
      programming commitments see Part I, Item 1, Note 18.





*Other
      Long-Term Obligations*





Included
      in Other Long-Term Obligations are our commitments to the Dutch tax authorities
      of US$ 3.9 million (see Part I, Item 1, Note 18).





In
      addition to the amounts disclosed above, Mr. Sarbu has the right to sell his
      remaining 10.0% shareholding in Pro TV and MPI to us under a put option
      agreement entered into in July 2004 at a price to be determined by an
      independent valuation, subject to a floor price of US$ 1.45 million for each
      1.0% interest sold.  A put option of 5.21% of this 10.0% shareholding
      is exercisable from November 12, 2009 for a twenty-year period thereafter.
      Mr.
      Sarbu’s right to put the remaining 4.79% shareholding is also exercisable from
      November 12, 2009, provided that we have not enforced a pledge over this 4.79%
      shareholding which Mr. Sarbu granted as security for our right to put our 10.0%
      in Media Pro. As at March 31 2007, we consider the fair value of this put option
      to be approximately US$ nil (2006: US$ nil).





Page
            63
 *Index*





**V
      (d) Cash Outlook**





The
      issuance of the EUR 370.0 million (approximately US$ 480.0 million at the time
      of issuance) Senior Notes for the acquisition of the TV Nova (Czech Republic)
      group in May 2005 increased our leverage and we have significant debt service
      obligations in respect of the Senior Notes.  In addition, the terms of
      our indebtedness restrict the manner in which our business is conducted,
      including the incurrence of additional indebtedness, the making of investments,
      the payment of dividends or the making of other distributions, entering into
      certain affiliate transactions and the sale of assets.  Net cash
      proceeds from the issuance of new shares of our Class A Common Stock of US$
      168.6 million in March 2006 significantly reduced our net debt and provides
      a
      useful source of funds to allow investment flexibility, including acquisitions
      better suited to equity rather than debt financing.  On July 21, 2006,
      we entered into a five-year EUR 100.0 million revolving loan facility (the
      EBRD
      Loan Agreement), which, once fully drawn, can be used for general corporate
      purposes to further increase our financing flexibility, and will reduce our
      average cost of debt.  This amount was drawn on April 18,
      2007.





Our
      future cash needs will depend on our overall financial performance, debt service
      requirements under the Senior Notes, the EBRD Loan Agreement as well as under
      other indebtedness incurred by us as well as any future acquisition, investment
      and development decisions.  Our ability to raise further funds through
      external debt facilities depends on our satisfaction of a leverage ratio under
      the Senior Notes, which is also incorporated into the drawing conditions of
      the
      EBRD Loan Agreement.  In the short-term we are able to fund our
      operations from cash generated from operations, our current cash resources
      (US$
      157.3 million, at March 31, 2007) and available undrawn credit facilities (US$
      235.3 million, at March 31, 2007).




We
      expect
      to invest US$ 70-75 million on capital expenditure in 2007, and approximately
      US$ 10 million furthering the development of our non-broadcast operations.
      Any
      further significant acquisitions could be financed through the issues of
      additional external debt or equity depending on prevailing market conditions
      at
      the time.


Our
        Croatia operations continue to require funding to improve our ratings
        performance and increase our market share.  We expect the funding
        required to support Nova TV (Croatia) to be in excess of US$ 26.0 million
        during
        2007, and have provided US$ 7.9 million in cash funding to Nova TV (Croatia)
        in
        the three months ended March 31, 2007. Our Ukraine (KINO, CITI) operations
        continue to require funding in order to achieve improved ratings and market
        share.  We expect the funding required to support KINO and CITI to be
        in excess of US$ 7.0 million during 2007, and have provided US$ 3.0 million
        in
        cash funding to KINO and CITI in the three months ended March 31,
        2007.  Our partners will provide a pro rata amount of financing to
        KINO and CITI on the same terms.


We
      expect
      that, taken together, our current cash balances, internally generated cash
      flow,
      committed bank facilities, and local financing of broadcast operations should
      result in us having adequate cash resources to meet our debt service and other
      existing financial obligations for the next 12 months.  The
      acquisition of additional shareholdings in our current operations, further
      investment in the expansion of existing operations, acquisitions, or other
      investments in the development of new revenue opportunities may require further
      financing.  To the extent we will need additional financing, we would
      expect to raise such financing through issuing additional debt or
      equity.





Page
            64
 *Index*





**V
      (e) Tax Inspections**





Pro
      Plus
      has been the subject of an income tax inspection by the Republic of Slovenia
      tax
      authorities for the years 1995 to 1998.  As a result of these
      inspections the Slovenian tax authorities had levied an assessment seeking
      unpaid income taxes, customs duties and interest charges of an amount equivalent
      to EUR 4.5 million  (approximately US$ 6.0 million). The Slovenian
      authorities have asserted that capital contributions and loans made by us to
      Pro
      Plus in 1995 and 1996 should be extraordinary revenue to Pro Plus.  On
      this basis, the Slovenian authorities claim that Pro Plus made a profit in
      1995
      and 1996 for which it owes income taxes and interest.  Additionally,
      the Slovenian tax authorities claim that the fixed assets imported as capital
      contributions were subject to customs duties, which were not paid.  On
      February 9, 2001, the Slovenian tax authorities concluded that the cash capital
      contributions for 1995 and 1996 were not extraordinary income. This has reduced
      the assessment to an amount equivalent to EUR 2.7 million (approximately US$
      3.5
      million) in aggregate principal amount.  Pro Plus appealed this
      decision to the Administrative Court in Ljubljana and requested the tax
      authorities to defer the demand for payment until a final judgment has been
      issued, and the tax authorities have so agreed.  On April 18, 2005,
      the Administrative Court issued a decision in favor of Pro Plus and dismissed
      the claims of the tax authorities.  The tax authorities filed an
      appeal with the Slovenian Supreme Court in May 2005.  We do not have a
      provision in our financial statements in relation to this legal
      action.








**V
      (f) Off-Balance Sheet Arrangements**





None.








***VI.  Critical
      Accounting Policies and Estimates***





Our
      accounting policies affecting our financial condition and results of operations
      are more fully described in Part II, Item 8 of our Annual Report on Form 10-K
      for the year ended December 31, 2006.  The preparation of these
      financial statements requires us to make judgments in selecting appropriate
      assumptions for calculating financial estimates, which inherently contain some
      degree of uncertainty.  We base our estimates on historical experience
      and on various other assumptions that we believe to be reasonable under the
      circumstances, the results of which form the basis of making judgments about
      the
      carrying values of assets and liabilities and the reported amounts of revenues
      and expenses that are not readily apparent from other sources.  Actual
      results may differ from these estimates under different assumptions or
      conditions.





We
      believe our critical accounting policies are as follows: program rights,
      goodwill and intangible assets, impairment or disposal of long-lived assets,
      revenue recognition, income taxes, foreign exchange and
      contingencies.  These critical accounting policies affect our more
      significant judgments and estimates used in the preparation of our condensed
      consolidated financial statements.  There have been no significant
      changes in our critical accounting policies since December 31,
      2006.





*Recently
      adopted accounting principles*





On
      January 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for
      Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN
      48”), which clarifies the accounting for uncertainty in tax
      positions.  The evaluation of a tax position under FIN 48 is a
      two-step process.  The first step is recognition: Tax positions taken
      or expected to be taken in a tax return should be recognized only if those
      positions are more likely than not to be sustained upon examination, based
      on
      the technical merits of the position.  In evaluating whether a tax
      position has met the more likely than not recognition threshold, it should
      be
      presumed that the position will be examined by the relevant taxing authority
      and
      that they would have full knowledge of all relevant information.  The
      second step is measurement: Tax positions that meet the recognition criteria
      are
      measured at the largest amount of benefit that is greater than 50 percent likely
      of being recognized upon ultimate settlement.





As
      a
      result of the implementation of FIN 48, we recognized a liability of
      approximately US$ 2.0 million for unrecognized tax benefits, of which US$ 1.7
      million was accounted for as a reduction to retained deficit as at January
      1,
      2007.  The total amount of unrecognized benefits that, if recognized,
      would affect the effective tax rate amounts to US$ 2.0 million, all of which
      would reduce the effective tax rate accordingly.





Page
            65
 *Index*




We
      recognize interest accrued and penalties related to unrecognized tax benefits
      within the provision for income taxes. As at January 1, 2007, we accrued US$
      1.8
      million in respect of interest and penalties, of which US$ 1.5m was accounted
      for as a reduction to retained deficit.


Our
        subsidiaries file income tax returns in the Netherlands and various other tax
        jurisdictions including the United States.  As at January 1, 2007,
        analyzed by major tax jurisdictions, the Company’s subsidiaries are no longer
        subject to income tax examinations for years before:


**Jurisdiction**
                      **Year**Croatia
                      2003Czech
                          Republic
                      2003Germany
                      2000Netherlands
                      2004Romania
                      2002Slovak
                          Republic
                      2001Slovenia
                      2001Ukraine
                      2003United
                          States
                      2001





Page
            66
 *Index*





**Item3.  Quantitative
      and Qualitative Disclosures about
      Market Risk**





We
      engage
      in activities that expose us to various market risks, including the effects
      of
      changes in foreign currency exchange rates and interest rates.  We do
      not regularly engage in speculative transactions, nor do we regularly hold
      or
      issue financial instruments for trading purposes.





**Foreign
      Currency Exchange Risk Management**




We
        conduct business in a number of foreign currencies, although our functional
        currency is the US Dollar, and our Senior Notes are denominated in
        Euros.  As a result, we are subject to foreign currency exchange rate
        risk due to the effects that foreign exchange rate movements of these currencies
        have on our costs and on the cash flows we receive from certain
        subsidiaries.  In limited instances, we enter into forward foreign
        exchange contracts to minimize foreign currency exchange rate
        risk.





We
      have
      not attempted to hedge the Senior Notes and therefore may continue to experience
      significant gains and losses on the translation of the Senior Notes into US
      dollars due to movements in exchange rates between the Euro and the US
      dollar.





On
      April
      27, 2006, we entered into currency swap agreements with two counterparties
      whereby we swapped a fixed annual coupon interest rate (of 9.0%) on notional
      principal of CZK 10.7 billion (approximately US$ 509.0 million), payable on
      July
      15, October 15, January 15, and April 15, to the termination date of April
      15,
      2012, for a fixed annual coupon interest rate (of 9.0%) on EUR 375.9 million
      (approximately US$ 500.6 million) receivable on July 15, October 15, January
      15,
      and April 15, to the termination date of April 15, 2012.





The
      fair
      value of these financial instruments as at March 31, 2007 was a US$ 8.0 million
      liability.





These
      currency swap agreements reduce our exposure to movements in foreign exchange
      rates on a part of the CZK-denominated cash flows generated by our Czech
      Republic operations that is approximately equivalent in value to the
      EUR-denominated interest payments on our Senior Notes (see Item 1, Note
      5).  They are financial instruments that are used to minimize currency
      risk and are considered an economic hedge of foreign exchange
      rates.  These instruments have not been designated as hedging
      instruments as defined under SFAS No. 133, “Accounting for Derivative
      Instruments and Hedging Activities”, and so changes in their fair value are
      recorded in the consolidated statement of operations and in the consolidated
      balance sheet in other non-current liabilities.





The
      redemption of the floating rate Senior Notes will be financed mainly by other
      Euro-denominated loans and therefore the integrity of the economic hedge will
      be
      largely preserved.





Page
            67
 *Index*





**Interest
      Rate Risk Management**





As
      at
      March 31, 2007, we have six tranches of debt that provide for interest at a
      spread above a base rate EURIBOR or PRIBOR, and four tranches of debt, which
      were maintained with a fixed interest rate.  A significant rise in the
      EURIBOR or PRIBOR base rate would have an adverse effect on our business and
      results of operations.





*Interest
      Rate Table as at March 31, 2007*





**Expected
                          Maturity Dates**
                      
                      **2007**
                      
                      
                      **2008**
                      
                      
                      **2009**
                      
                      
                      **2010**
                      
                      
                      **2011**
                      
                      
                      **Thereafter****Total
                          debt in Euro (000's)**Fixed
                          rate
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      245,000Average
                          interest rate (%)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      8.25
                      %Variable
                          rate
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      125,000Average
                          interest rate (%)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      9.23
                      %**Total
                          debt in US$ (000's)**Fixed
                          rate
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,700
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Average
                          interest rate (%)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      9.00
                      %
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -**Total
                          debt in CZK (000's)**Fixed
                          rate
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Average
                          interest rate (%)
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Variable
                          rate
                      
                      
                      250,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Average
                          interest rate (%)
                      
                      
                      4.22
                      %
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -





*Variable
      Interest Rate Sensitivity as at March 31, 2007*





**Yearly
                          interest charge if interest rates increase by**
                        **(US$
                          000s):****Value
                          of Debt as at**
                        **March
                          31, 2007 (US$**
                        **000's)**
                      **Interest
                          Rate**
                        **as
                          at March**
                        **31,
                          2007**
                      **Yearly
                          Interest**
                        **Charge**
                        **(US$
                          000’s)**
                      **1%**
                      **2%**
                      **3%**
                      **4%**
                      **5%**166,467
                        (EUR
                          125.0 million)
                      9.23%
                      15,360
                      17,025
                      18,689
                      20,354
                      22,019
                      23,68311,892
                        (CZK
                          250.0 million)
                      4.22%
                      502
                      621
                      740
                      859
                      978
                      1,096**Total**
                      
                      **15,862**
                      **17,645**
                      **19,429**
                      **21,212**
                      **22,996**
                      **24,780**








**Item
      4.  Controls and Procedures**





Our
      Chief
      Executive Officer and Chief Financial Officer evaluated the effectiveness of
      the
      design and operation of our disclosure controls and procedures as of the end
      of
      the period covered by this report. Based upon this evaluation, the Chief
      Executive Officer and Chief Financial Officer concluded that the disclosure
      controls and procedures are effective.  There has been no change in
      our internal control over financial reporting during the quarter ended March
      31,
      2007 that has materially affected, or is reasonably likely to materially affect,
      our internal control over financial reporting.





Page
            68
 *Index*





**PART
      II**





**OTHER
      INFORMATION**





**Item
      1.  Legal Proceedings**





*General*





We
      are,
      from time to time, a party to litigation that arises in the normal course of
      our
      business operations.  Other than those claims discussed below, we are
      not presently a party to any such litigation which could reasonably be expected
      to have a material adverse effect on our business or operations. Unless
      otherwise disclosed, no provision has been made against any potential losses
      that could arise.





We
      present below a summary of our more significant proceedings by
      country.





*Croatia*





*Global
      Communications Disputes*





On
      October 29, 2004, OK filed suit against Global Communications d.o.o. claiming
      approximately HRK 53.0 million (approximately US$ 9.6 million) in
      damages.  Global Communications is a company controlled by Ivan
      Caleta, who had previously operated Nova TV (Croatia) through
      OK.  Global Communications, together with GRP Media d.o.o., another
      company controlled by Mr. Caleta, had provided certain goods and services to
      OK
      and Nova TV (Croatia) in exchange for advertising time pursuant to an agreement
      dated April 10, 2001 (the “Global Agreement”).  Global Communications
      and GRP Media were functionally managing the advertising inventory of Nova
      TV
      (Croatia).  On December 31, 2003, Global Communications entered into a
      reconciliation agreement by which OK acknowledged that Global Communications
      was
      entitled to approximately 375,000 seconds of advertising time for goods and
      services previously provided.  Following our acquisition of Nova TV
      (Croatia) and OK in July 2004, OK concluded that Global Communications had
      used
      all of its seconds by June 2004 based on a substantial discrepancy discovered
      between the utilization of advertising time recorded by Global Communications
      and that recorded by AGB Puls, an independent television audience measurement
      service operating in Croatia.  In the course of its investigation of
      the usage of seconds by Global Communications, OK discovered that computer
      records of advertising seconds kept for OK may have been altered.  OK
      brought a suit to recover amounts for advertising time used by Global
      Communications in excess of the 375,000 seconds agreed.  Global
      Communications filed a counterclaim in January 2005 for HRK 68.0 million
      (approximately US$ 12.3 million), claiming that the AGB data is unreliable
      and
      that it is entitled to additional seconds under the previous agreement. The
      lower commercial court issued a judgment on July 12, 2006 in favor of Global
      Communications for the full amount of the counterclaim, and we have appealed
      this decision on the basis of false and inadequate disclosure, wrongful
      application of substantive law and procedural error.  Global
      Communications separately brought a claim against Nova TV (Croatia), on the
      same
      basis as the OK counterclaim.  Both Global Communications and Nova TV
      (Croatia) requested the court to join this claim with the OK counterclaim but
      this request was denied.  The lower commercial court issued a judgment
      on August 1, 2006 in favor of Global Communications for the full amount of
      the
      claim, after having denied submission of evidence supporting our
      defense.  We have also appealed this decision. We have accrued for the
      amounts we expect to be ultimately payable as a result of having commenced
      settlement negotiations with Global Communications. Any such settlement would
      also include a settlement of the former shareholder dispute described
      below.





On
      January 25, 2007, Nova TV (Croatia) filed suit against Global Communications.
      The facts underlying the claim are substantially the same as those of the
      abovementioned claims, but Nova TV (Croatia) is claiming that the Global
      Agreement and the two reconciliation agreements dated April 30, 2004 and June
      30, 2004 (the “Reconciliation Agreements”), by which OK acknowledged the number
      of seconds of advertising time to which Global Communications was purportedly
      entitled, should be declared null and void under Article 141 of the Croatian
      Obligations Act. This provision is intended to protect a contractual party
      which
      has entered into unfair bargaining terms due to its dependency on the other
      contractual party.  Global Communications, OK and Nova TV (Croatia)
      were all related parties (controlled by Ivan Caleta) and the contractual terms
      provided for the provision of 1,340,280 seconds by OK to Global Communications
      in exchange for certain transmitters. These seconds were valued at an aggregate
      of DEM 5 million (or DEM 3.73 per second; HRK 3.91 per second at the time)
      whereas the rate card price was DEM 97.18 or HRK 380.00 per second (i.e. a
      price
      that was 26 times higher). Other clients (unrelated parties) sampled from this
      period were paying between 382.50 HRK to 491.85 HRK per second. Nova TV
      (Croatia) is arguing for voidance of this contract because of its unconscionable
      terms which were detrimental to OK and Nova TV (Croatia) and beneficial solely
      to Global Communications (which, in its capacity as an advertising agency,
      on-sold these seconds to its clients at market rates, thereby reaping an
      extraordinary profit).  Nova TV (Croatia) is further claiming
      restitution for advertising seconds appropriated by Global Communications under
      the Global Agreement. The restitution amount is HRK 586.5 million (approximately
      US$ 105.8 million). Given that the resolution of the issues posed by this
      lawsuit constitutes a preliminary question on which appellate review of the
      two
      lawsuits previously mentioned above should depend, we have requested suspension
      of those two reviews until this question has been finally
      adjudicated.





Page
            69
 *Index*





*Former
      Shareholder Dispute*





On
      July
      21, 2005, Narval A.M. d.o.o. (a company wholly-owned by Ivan Caleta), Studio
      Millenium d.o.o. and Richard Anthony Sheldon, three of the former shareholders
      of OK, filed suit against Nova TV (Croatia) for rescission of the sale and
      purchase contract pursuant to which they sold 75% of OK to Nova TV (Croatia)
      in
      July 2004 (the “OK Sale Contract”).  Nova TV (Croatia) acquired OK
      immediately prior to our acquiring Nova TV (Croatia).  The provisions
      of the OK Sale Contract required Nova TV (Croatia) to make payment to the four
      shareholders of OK by September 1, 2004, upon receipt of appropriate invoices
      and bank account details.  The fourth shareholder, Pitos d.o.o.,
      issued an invoice that was duly received by Nova TV (Croatia) and payment was
      made thereunder.  The other three shareholders claim that they
      hand-delivered a joint invoice to one of the former directors of Nova TV
      (Croatia), but we continue to dispute this.  Under the Croatian
      Obligations Act, one party to a contract who has performed may unilaterally
      rescind a contract if the other party fails to perform after receipt of a
      written warning.  On May 24, 2006, the lower commercial court decided
      in favor of the plaintiffs to rescind the OK Sale Contract and ordered the
      defendant to pay court costs.  We have appealed the decision on the
      basis that evidence supporting our position was not allowed to be presented
      to
      the court and we continue to challenge the validity of the power of attorney
      purportedly issued by Richard Anthony Sheldon (a resident of the United Kingdom)
      to legal counsel representing the other plaintiffs.





On
      August
      28, 2006, we received a lower court decision of an injunction against us
      (decided without a hearing) that, inter alia, prohibits a sale or encumbrance
      of
      75% of the shares of OK.  Although we appealed this decision, the
      appellate commercial court upheld the lower court’s judgment on November 21,
      2006.  On November 6, 2006, we were notified of a request for a
      further injunction that would, inter alia, prohibit us from taking any actions
      to decrease the value of OK and require the management of OK to report to a
      delegate of the former shareholders. We have unsuccessfully sought the removal
      of the presiding judge, Raul Dubravec (who also presided over the Global
      Communications lawsuit against Nova TV (Croatia)). Mr. Dubravec ruled against
      us
      on December 18, 2006, requiring imposition of a temporary director for OK,
      which
      is not a remedy available under Croatian law under the facts of this action.
      Further, the temporary director who has been appointed is one of the former
      directors of OK who countersigned the Reconciliation Agreements and is an
      associate of Ivan Caleta. We have appealed this decision. While we continue
      to
      vigorously contest all these actions in the face of serious concerns as to
      the
      impartiality of the Croatian judicial system, we have commenced settlement
      negotiations with the former shareholders of OK.





*Czech
      Republic*





There
      are
      no significant outstanding legal actions that relate to our business in the
      Czech Republic.





*Romania*





There
      are
      no significant outstanding legal actions that relate to our business in
      Romania.





Page
            70
 *Index*





*Slovenia*





On
      November 20, 2002, we received notice of a claim filed by Mrs. Zdenka Meglic,
      the founder and a former shareholder of MMTV 1 d.o.o (MMTV), against MMTV,
      a
      subsidiary of CME Media Enterprises B.V.  In her claim against MMTV,
      Mrs. Meglic is seeking an amount equal to EUR 0.8 million (approximately US$
      1.1
      million) for repayment of monies advanced to MMTV from 1992 to 1994 (in the
      amount of approximately SIT 29.0 million (approximately US$ 0.2 million)) plus
      accrued interest.  On September 9, 2004, the court of first instance
      found against MMTV and issued a judgment requiring MMTV to pay an amount equal
      to EUR 0.8 million (approximately US$ 1.1 million) plus interest as well as
      costs.  On September 24, 2004, MMTV filed an appeal against the
      judgment.  On December 15, 2004, the appellate court vacated the
      judgment of the lower court and returned the case for further
      proceedings.  We do not believe that Mrs. Meglic will prevail and will
      continue to defend the claim.





*Slovak
      Republic*





There
      are
      no significant outstanding legal actions that relate to our business in the
      Slovak Republic.





*Ukraine*





On
      October 11, 2005, Igor Kolomoisky filed a lawsuit against Alexander Rodnyansky
      and Studio 1+1 in a district court in Kiev.  Our Ukrainian affiliate
      Intermedia has been joined in the proceedings as a “third
      party”.  Igor Kolomoisky is attempting to enforce what he alleges was
      a binding oral agreement with Alexander Rodnyansky to purchase the latter’s
      70.0% interest in Studio 1+1 for consideration of US$ 70.0 million and to
      transfer that interest to Igor Kolomoisky on receipt of a prepayment of US$
      2.0
      million.  The lawsuit arises from abortive negotiations among Igor
      Kolomoisky, Alexander Rodnyansky and Boris Fuchsmann for the acquisition by
      Igor
      Kolomoisky of the totality of interests in the Studio 1+1 Group held by
      Alexander Rodnyansky and Boris Fuchsmann, subject to Igor Kolomoisky assuming
      all of their obligations under our existing partnership
      arrangements.  On August 16, 2006, the district court in Kiev ruled in
      favor of Igor Kolomoisky and found that he is entitled to the 70% interest
      in
      Studio 1+1 held by Alexander Rodnyansky. Our Ukrainian affiliate Intermedia
      and
      Alexander Rodnyansky filed appeals against this decision.





At
      a
      hearing on October 31, 2006, the appellate court overturned the decision of
      the
      court of first instance and denied Igor Kolomoisky’s claim that he is entitled
      to a 70% interest in Studio 1+1 held by Alexander Rodnyansky.  On
      November 3, 2006, Igor Kolomoisky filed an appeal with the Supreme Court of
      Ukraine, the highest court in Ukraine.  At a hearing on February 28,
      2007, the Supreme Court rejected this appeal.




On
      April
      4, 2007 the Supreme Court of Ukraine accepted an extraordinary appeal from
      Igor
      Kolomoisky against the decision made on February 28, 2007 and the decision
      of
      the Court of Appeals of the city of Kiev made on October 31,
      2006.  Under Ukrainian law, such extraordinary appeals to the Supreme
      Court can be made on the basis (1) that an international judicial institution
      (whose jurisdiction has been recognized by Ukraine) determines that an appellate
      decision violates the international obligations of Ukraine or (2) that the
      decision is not consistent with prior practice of the Supreme
      Court.  Igor Kolomoisky has based his appeal on the latter grounds. No
      hearing on this appeal has been scheduled to date.  The Supreme Court
      may in its discretion either reject the appeal or vacate the earlier decisions
      of the Supreme Court and the appellate court and return the case to the
      appellate court for new consideration.  However, in the absence of a
      decision on this extraordinary appeal, the decision of the Supreme Court of
      February 28, 2007 and the decision of the Court of Appeals of the city of Kiev
      of October 31, 2006 remain in force.




On
      December 23, 2005, we initiated proceedings against our partners Alexander
      Rodnyansky and Boris Fuchsmann in order to enforce our contractual rights and
      compel a restructuring of the ownership of Studio 1+1 in order to permit us
      to
      hold a 60% interest in Studio 1+1 through a subsidiary organized in
      Ukraine.  Initiation of this proceeding followed protracted
      negotiations with our partners to restructure following confirmation from the
      Ukraine Media Council that our proposed ownership structure would not be in
      violation of restrictions on foreign ownership contained in the Ukraine Media
      Law, which restricts direct (but not indirect) investment by foreign persons
      in
      Ukrainian broadcasters to 30%.  On January 12, 2006, the Ukraine
      parliament adopted an amended version of the Ukraine Media Law that clarifies
      the absence of any restriction on indirect foreign ownership of television
      broadcasters.  This amended Ukraine Media Law came into force in March
      2006.  Our partners have acknowledged an obligation to restructure
      upon the entry into force of these amendments. On September 5, 2006, our
      partners entered into certain agreements to implement the
      restructuring.  Following the completion of the transactions reflected
      in these agreements and the registration of the charter of Studio 1+1 amended
      to
      reflect the new ownership of Studio 1+1, we will own 60% of Studio 1+1. Upon
      successful completion of the restructuring, we will terminate the proceedings
      initiated against our partners in December 2005.





Page
            71
 *Index*





Because
      of ongoing ancillary litigation to enjoin transactions related to the ownership
      of Studio 1+1 that have been initiated by Igor Kolomoisky, by our partners
      and
      by third parties who are not direct parties in interest to legal proceedings
      initiated by Igor Kolomoisky against Alexander Rodnyansky, the state registrar
      in the district administration in Kiev where such charter amendments are
      registered is presently enjoined from registering any amendments to the charter
      of Studio 1+1, including in respect of the restructured ownership agreed with
      our partners (see Part 1, Item 1, Note 1, Ukraine (Studio 1+1)). Our partners are no
      longer
      seeking to enforce the injunction filed at their initiative; however, because
      of
      an intervention in this case by Igor Kolomoisky, it has not been possible for
      our partners to remove this injunction.








**Item
      1A.  Risk Factors**





This
      Report on Form 10-Q for the period ended March 31, 2007, contains
      forward-looking statements that involve risks and uncertainties See
“Forward-looking Statements” in Part I, Item 2.  Our actual results in
      the future could differ materially from those anticipated in these
      forward-looking statements  as a result of certain factors, including
      the risks described below and elsewhere in this Report on Form
      10-Q.





**Risks
      Relating to our Operations**





*Our
      operations are in developing markets where there is a risk of economic
      uncertainty, biased treatment and loss of business*





Our
      revenue generating operations are located in Central and Eastern
      Europe.  These markets pose different risks from those posed by
      investments in more developed markets and the impact in our markets of
      unforeseen circumstances on economic, political or social life is
      greater.  Countries in this region have economic and political
      systems, legal and tax regimes, standards of corporate governance and business
      practices that continue to develop.  Government policies may be
      subject to significant adjustments, especially in the event of a change in
      leadership, which may result in social or political instability or disruptions,
      potential political influence on the media, inconsistent application of tax
      and
      legal regulations, arbitrary treatment before judicial or other regulatory
      authorities and other general business risks.  Other potential risks
      inherent in markets such as ours with changing economic and political
      environments include exchange controls, higher tariffs and other levies, as
      well
      as longer payment cycles.





The
      relative level of development of our markets and the influence of local parties
      also presents a potential for biased treatment of us before regulators or courts
      in our markets in the event of disputes involving our investments.  If
      such a dispute occurs, those regulators or courts might favor local interests
      over our interests.  Ultimately, this could lead to loss of our
      business operations, as occurred in the Czech Republic in 1999.  We
      are involved in certain disputes with some of the former shareholders of our
      Croatia operations and some of these shareholders may also challenge a
      restructuring that we have undertaken in response to a request from the Croatian
      Media Council.  The ability of certain of these shareholders to exert
      influence on local institutions may create a potential for biased treatment
      of
      us.  An adverse outcome in the Global Communications lawsuit (see Part
      II, Item I Item 3, “Legal Proceedings, Croatia”) or a successful challenge to
      the restructuring could have an adverse impact on our financial position,
      results of operations and cash flows.





Page
            72
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*Our
      broadcasting licenses may not be renewed and may be subject to
      revocation*





We
      require broadcasting and, in some cases, other operating licenses as well as
      other authorizations from national regulatory authorities in our markets in
      order to conduct our broadcasting business.  We cannot guarantee that
      our current licenses or other authorizations will be renewed or extended, or
      that they will not be subject to revocation, particularly in Ukraine, where
      there is relatively greater political risk as a result of less developed
      political and legal institutions.  The failure to comply in all
      material respects with the terms of broadcasting licenses or other
      authorizations or with applications filed in respect thereto may result in
      such
      licenses or other authorizations not being renewed or otherwise being
      terminated.  Furthermore, no assurances can be given that renewals or
      extensions of existing licenses will be issued on the same terms as existing
      licenses or that further restrictions or conditions will not be imposed in
      the
      future.





Our
      current broadcasting licenses expire at various times between 2007 and
      2017.  Any non-renewal or termination of any other broadcasting or
      operating licenses or other authorizations or material modification of the
      terms
      of any renewed licenses may have a material adverse effect on our financial
      position, results of operations and cash flows.





*We
      do
      not have management control of our affiliate in Ukraine*





We
      own
      our operations in Ukraine jointly with our partners through subsidiaries and
      affiliates.  In Studio 1+1, we hold only an indirect 18% ownership
      interest. As a result, we do not have an ownership interest that is sufficient
      to allow us to assert management control or unilaterally direct the strategies,
      operations and financial decisions of this company.  Therefore, our
      ability to implement all financial reporting and management processes that
      exist
      in our other operations requires the active cooperation of our partners. Their
      consent is also required for decisions affecting the acquisition of programming,
      investment in production, retention and dismissal of key employees as well
      as
      other operational issues, including ensuring compliance with relevant tax and
      other obligations of Studio 1+1. Our inability to obtain any required consent
      may result in Studio 1+1 being in breach of such tax or other obligations or
      may
      result in decisions being adopted that do not fully reflect our strategic
      objectives, which may have an adverse impact on our financial position, results
      of operations and cashflows.





In
      addition, the 70% ownership interest in Studio 1+1 that is held by our partner
      Alexander Rodnyansky is the subject of litigation in Ukraine (see Item 1, “Legal
      Proceedings, Ukraine”). In the event of a judgment which results in the
      ownership of 70% of Studio 1+1 being transferred from Mr. Rodnyansky to the
      claimant Igor Kolomoisky, we may not be able to secure and enforce our
      contractual rights to a 60% economic interest in Studio 1+1 or rights related
      to
      the governance of Studio 1+1 against Mr. Kolomoisky. A reduction in our right
      to
      future distributable cash from Studio 1+1 would have an adverse impact on our
      financial position and results of operations.





*We
      may not be aware of all related party transactions; such transactions may
      involve risks of conflicts of interest and of concluding transactions on less
      favorable terms than could be obtained in arms length
      transactions*





In
      Romania, the Slovak Republic and Ukraine, the local shareholders and/or general
      directors of our television operating companies are individuals with other
      business interests in those countries, including interests in television and
      other media related companies.  Our local operating companies’
transactions with the businesses, whether or not we are aware that our local
      shareholders and general directors have an interest therein, may present
      conflicts of interests that may in turn result in the conclusion of transactions
      on terms that are not arms length. Experience has shown that some related party
      receivables have been collected more slowly than unrelated third party
      receivables, which has resulted in slower cash flow to our operating companies
      to the detriment of our shareholders. It is likely that our subsidiaries will
      continue to enter into related party transactions in the future. As a result,
      there is a risk that related party transactions may be entered into on terms
      that are not arms length, which may result in a negative impact on earnings
      or
      cash flows. In the event there are transactions with persons who subsequently
      are determined to be related parties, we may be required to make additional
      disclosure and, if such contracts are material, may not be in compliance with
      certain covenants under the Senior Notes and the EBRD Loan
      Agreement.





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            73
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*We
      may not be able to prevent our general directors from entering into transactions
      that are outside their authority and not in the best interests of
      shareholders*





The
      general directors of our operating companies have significant management
      authority on a local level, subject to the overall supervision by the
      corresponding company board of directors.  In the past, our internal
      controls have detected transactions that have been concluded by a general
      director acting outside his authority.  Internal controls are not able
      to prevent a general director from acting outside his authority, particularly
      if
      a related party relationship remains undisclosed to us.  There is
      therefore a risk that a general director may act outside his authority and
      that
      our operating companies will enter into transactions that are not duly
      authorized.  Unauthorized transactions may not be in the best
      interests of our shareholders and may have an adverse impact on our results
      of
      operations.





*We
      may seek to make acquisitions of other stations, networks, content providers
      or
      other companies in the future, and we may fail to acquire them on acceptable
      terms or successfully integrate them or we may fail to identify suitable
      targets*





Our
      business and operations continue to experience rapid growth, including through
      acquisition. The acquisition and integration of new businesses pose significant
      risks to our existing operations, including:





·
            Additional
                demands placed on our senior management, who are also responsible
                for
                managing our existing operations;





·
            Increased
                overall operating complexity of our business, requiring greater personnel
                and other resources;





·
            Difficulties
                of expanding beyond our core expertise, in the event that we acquire
                content providers or other ancillary
                businesses;





·
            Significant
                initial cash expenditures to acquire and integrate new businesses;
                and





·
            In
                the event that debt is incurred to finance acquisitions, additional
                debt
                service costs related thereto as well as limitations that may arise
                under
                our Senior Notes and the EBRD Loan
                Agreement.





To
      effectively manage our growth and achieve pre-acquisition performance
      objectives, we will need to integrate any new acquisitions, implement financial
      and management controls and produce required financial statements in those
      operations.  The integration of new businesses may also be difficult
      for a variety of reasons, including differing cultures or management styles,
      poor internal controls and an inability to establish control over cash
      flows.  If any acquisition and integration is not implemented
      successfully, our ability to manage our growth will be impaired and we may
      have
      to make significant additional expenditures to address these issues, which
      could
      harm our financial position, results of operations and cash
      flows.   Furthermore, even if we are successful in integrating
      new businesses, expected synergies and cost savings may not materialize,
      resulting in lower than expected profit margins.





*Our
      operating results depend on our ability to generate advertising sales generally
      and, in the Czech Republic, to fully implement our advertising sales
      strategy*





We
      generate almost all of our revenues from the sale of advertising airtime on
      our
      television channels.  Our advertising revenues in general depend on
      the pricing of our advertising time as well as other factors, including
      television viewing levels, changes in audience preferences, our stations’
technical reach, technological developments relating to media and broadcasting,
      competition from other broadcasters and other media operators, seasonal trends
      in the advertising market in the countries in which we operate, and shifts
      in
      population and other demographics.  Advertisers generally use gross
      ratings points to measure television viewing levels.  Our ability to
      generate gross ratings points depends on our offering programming which appeals
      to our target audiences, responding to technological developments in media,
      competing effectively with other broadcasters seeking to attract similar
      audiences and managing the impact of any seasonal trends.





Page
            74
 *Index*





In
      the
      Czech Republic we are continuing to implement an advertising sales strategy
      adopted during the first quarter of 2006 to capture market growth through a
      more
      sophisticated pricing policy (see Part I, Item 2, “Analysis of Segment Results,
      Czech Republic”). There can be no assurance that we will be successful in fully
      implementing this advertising sales strategy in the Czech Republic or to respond
      successfully to changes in other factors affecting advertising sales generally
      in order to maintain and increase our advertising sales. Any decline in
      advertising sales due to a failure to respond to such changes or to successfully
      implement the advertising sales strategies, particularly in the Czech Republic,
      could have a material adverse effect on our financial position, results of
      operations and cash flows.





*Our
      operating results are dependent on the importance of television as an
      advertising medium*





We
      generate almost all of our revenues from the sale of advertising airtime on
      television channels in our markets.  In the advertising market,
      television competes with various other advertising media, such as print, radio,
      the internet and outdoor advertising.  In all of the countries in
      which we operate, television constitutes the single largest component of all
      advertising spending.  There can be no assurances that the television
      advertising market will maintain its current position among advertising media
      in
      our markets or that changes in the regulatory environment or technology will
      not
      favor other advertising media or other television
      broadcasters.  Increases in competition among advertising media
      arising from the development of new forms of advertising media and distribution
      could result in a decline in the appeal of television as an advertising medium
      generally or of our channels specifically.  A decline in television
      advertising spending in any period or in specific markets could have an adverse
      effect on our results of operations and cash flows.





*Our
      operating results are dependent on general economic conditions*





The
      results of our operations rely heavily on advertising revenue and demand for
      advertising is affected by prevailing general economic
      conditions.  Adverse economic conditions generally and downturns in
      the economies of our operating countries specifically are likely to negatively
      impact the advertising industries in those countries and, consequently, the
      results of our operations.  In addition, disasters, acts of terrorism,
      civil or military conflicts or general political uncertainty may create economic
      uncertainty that reduces advertising spending.  Although recently
      there has been growth in the economies of our operating countries, there can
      be
      no assurance that this trend will continue or that any such improvement in
      general economic conditions will generate increased advertising revenue for
      our
      group.  Global and local downturns in the general economic environment
      may cause our customers to reduce the amounts they spend on advertising, which
      could result in a decrease in demand for our advertising
      airtime.  This would adversely affect our business, financial
      condition, results of operations and cash flow.





*Our
      programming content may become more expensive to produce or acquire or we may
      not be able to develop or acquire programming content that is attractive to
      our
      audiences*





Television
      programming is one of the most significant components of our operating
      costs.  The commercial success of our channels depends substantially
      on our ability to develop, produce or acquire syndicated television programming
      content that matches audience tastes, attracts high audience shares and
      generates advertising revenues.  Our programming costs or requirements
      may increase in response to increased competition from existing and new
      television broadcasting channels for such programming or related
      talent.  The costs of acquiring programming content attractive to our
      viewers, such as feature films and popular television series and formats, may
      increase as a result of such competition.  In addition, our
      expenditure in respect of locally produced programming content may increase
      due
      to the implementation of new laws and regulations mandating the broadcast of
      a
      greater number of locally produced programs, changes in audience tastes in
      our
      markets in favor of locally produced content, and competition for
      talent.  In addition, we typically acquire syndicated programming
      rights under multi-year commitments before we can predict whether such
      programming will perform.  In the event any such programming does not
      attract adequate audience share, it may be necessary to write down the value
      of
      such programming.  Any such increase in programming costs or
      write-downs could have a material adverse effect on our business, financial
      condition, results of operations and cash flow.





Page
            75
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*Our
      operations are subject to significant changes in technology that could adversely
      affect our business*





Countries
      in which we have operations have plans to migrate from analogue terrestrial
      broadcasting to digital terrestrial broadcasting.  Each country has
      independent plans with differing time frames and regulatory
      regimes.  The specific timing and approach to implementing such plans
      to be employed in our markets is not fully known and we cannot predict the
      timing or effect of such migration on our existing operations or predict our
      ability to receive any additional rights or licenses to broadcast if such
      additional rights or licenses should be required under any relevant regulatory
      regime.  We may be required to commit substantial financial and other
      resources to the implementation of new technologies.  We may be
      required to make substantial additional capital investment in order to implement
      digital terrestrial broadcasting and the use of alternative distribution systems
      may require us to acquire additional distribution and content
      rights.  In light of our increased leverage position following the
      issuance of the Senior Notes and drawing of the facility under the EBRD loan
      agreement, we may not have access to resources sufficient to make such
      investments.





The
      television broadcasting industry may be affected by rapid innovations in
      technology.  The implementation of new technologies and the
      introduction of broadcasting distribution systems other than analogue
      terrestrial broadcasting, such as digital broadcasting, cable and satellite
      distribution systems, the internet, video-on-demand and the availability to
      television programming on portable digital devices, have fragmented television
      audiences in more developed markets and could adversely affect our
      businesses.  In addition, compression techniques and other
      technological developments allow for expanded programming offerings to be
      offered to highly targeted audiences.  Reductions in the cost of
      creating additional channel capacity could lower entry barriers for new channels
      and encourage the development of increasingly targeted niche programming on
      various distribution platforms.  Our television broadcasting
      operations may be required to expend substantial financial and managerial
      resources on the implementation of new broadcasting technologies or distribution
      systems.  In addition, an expansion in competition due to
      technological innovation may increase competition for audiences and advertising
      revenue as well as the competitive demand for programming.  Any
      requirement for substantial further investment for digitalization or to address
      competition that arises on account of technological innovations in broadcasting
      may have an adverse effect on our business, financial condition, results of
      operations and cash flows.





*Our
      success depends on attracting and retaining key personnel*





Our
      success depends partly upon the efforts and abilities of our key personnel
      and
      our ability to attract and retain key personnel.  Our management teams
      have significant experience in the media industry and have made an important
      contribution to our growth and success.  The loss of the services of
      any of these individuals could have an adverse effect on our business, results
      of operations and cash flow.  Although we have been successful in
      attracting and retaining such people in the past, competition for highly skilled
      individuals is intense.  There can be no assurance that we will
      continue to be successful in attracting and retaining such individuals in the
      future.





**Risks
      Relating to our Financial Position**





*Our
      increased debt service obligations following the issuance of the Senior Notes
      may adversely affect our business*




Our
      leverage has been significantly increased with the issuance of the Senior Notes
      (see Part I, Item 1, Note 5) in connection with the acquisition of the TV Nova
      (Czech Republic) group and the drawing of EUR 100 million under the EBRD Loan
      Agreement. As a result, we have significant debt service obligations and we
      are
      restricted in the manner in which our business is conducted.  We
      anticipate that our high leverage will continue for the foreseeable future
      even
      after we repay the EUR 125.0 million floating Senior Notes.  Our high
      leverage could have important consequences to our business and results of
      operations, including but not limited to the following: our vulnerability to
      a
      downturn in our business or economic and industry conditions has increased;
      our
      ability to obtain additional financing to fund future working capital, capital
      expenditures, business opportunities and other corporate requirements has been
      limited.  We may have a higher level of debt than certain of our
      competitors, which may put us at a competitive disadvantage; a substantial
      portion of our cash flow from operations is required to be dedicated to the
      payment of principal of, and interest on, our indebtedness, which means that
      this cash flow is not available to fund our operations, capital expenditures
      or
      other corporate purposes; and our flexibility in planning for, or reacting
      to,
      changes in our business, the competitive environment and the industry in which
      we operate has been limited. Any of these or other consequences or events could
      have a material adverse effect on our ability to satisfy our debt obligations
      and would therefore have potentially harmful consequences for the development
      of
      our business and strategic plan.




Page
            76
 *Index*





*We
      may require additional external sources of capital, which may not be available
      on acceptable terms*





The
      acquisition, ownership and operation of television broadcasting operations
      requires substantial capital investment.  Our total capital
      requirements are based on our estimates of future operating results, which
      are
      based on a variety of assumptions that may prove to be inaccurate.  If
      our assumptions prove to be inaccurate, if our assumptions or plans change,
      or
      if our costs increase due to competitive pressures or other unanticipated
      developments, we may need to obtain additional financing.  Sources of
      financing may include public or private debt or equity financings, proceeds
      from
      the sale of assets or other financing arrangements.  Any additional
      equity or equity-linked financings may dilute the economic interest of the
      holders of our Common Stock.  In addition, it is not possible to
      ensure that such financings will be available within the limitations on the
      incurrence of additional indebtedness contained in the Indenture pursuant to
      which our Senior Notes were issued or pursuant to the terms of the EBRD Loan
      Agreement (see Part I, Item 1, Notes 5 and 11).  Furthermore, such
      financings may not be available on acceptable terms, or may be subject to limits
      on the incurrence of indebtedness under the Indenture.





*Under
      the Senior Notes and the EBRD Loan Agreement, we have pledged shares in our
      subsidiaries that hold substantially all of our assets and a default on our
      obligations could result in our inability to continue to conduct our
      business*





Pursuant
      to the terms of our Indenture and the EBRD Loan Agreement, we have pledged
      shares in our two principal subsidiary holding companies, which own
      substantially all of our interests in our operating companies, including the
      TV
      Nova (Czech Republic) group, Pro TV, Markiza, Pro Plus and Studio
      1+1.  If we were to default on the Indenture or the EBRD Loan
      Agreement, the Indenture trustee or the EBRD would have the ability to sell
      all
      or a portion of all of these assets in order to pay amounts outstanding under
      the Indenture or the EBRD Loan Agreement.





*Our
      cash flow and capital resources may not be sufficient for future debt service
      obligations*





Our
      ability to make debt service payments under our Senior Notes and other
      indebtedness depends on our future operating performance and our ability to
      generate sufficient cash, which in turn depends in part on factors that are
      not
      within our control, including general economic, financial, competitive, market,
      legislative, regulatory and other factors.  If our cash flow and
      capital resources are insufficient to fund our debt service obligations, we
      would face substantial liquidity problems and we may be obliged to reduce or
      delay capital or other material expenditures at our stations, restructure our
      debt, obtain additional debt or equity capital (if available on acceptable
      terms), or dispose of material assets or businesses to meet our debt service
      and
      other obligations. It may not be possible to accomplish any of these
      alternatives on a timely basis or on satisfactory terms, if at all.





*We
      are subject to risks relating to fluctuations in exchange
      rates*





Our
      reporting currency is the US dollar but a significant portion of our
      consolidated revenues and costs, including programming rights expenses and
      interest on debt, are in other currencies.  Furthermore, the
      functional currency of our operations in Romania and Ukraine is the US
      dollar.  This is subject to annual review and new circumstances that
      may be identified during these annual reviews may result in use of functional
      currencies in these markets that differ from our reporting
      currency.  In addition, our Senior Notes are denominated in
      Euros.  We have not attempted to hedge the Senior Notes; we have in
      the past and may therefore in the future continue to experience significant
      gains and losses on the translation of the Senior Notes into US dollars due
      to
      movements in exchange rates between the Euro and the US dollar.





Page
            77
 *Index*





*If
      our goodwill or amortizable intangible assets become impaired we may be required
      to record a significant charge to earnings*





We
      review
      our amortizable intangible assets for impairment when events or changes in
      circumstances indicate the carrying value may not be
      recoverable.  Goodwill and indefinite-lived intangible assets are
      required to be tested for impairment at least annually.  Factors that
      may be considered a change in circumstances indicating that the carrying value
      of our goodwill or amortizable intangible assets may not be recoverable include
      a decline in stock price and market capitalization, future cash flows, and
      slower growth rates in our industry.  We may be required to record a
      significant charge to earnings in our financial statements during the period
      in
      which any impairment of our goodwill or amortizable intangible assets is
      determined resulting in a negative impact on our results of
      operations.





*Our
      holding company structure may limit our access to cash*





We
      are a
      holding company and we conduct our operations through subsidiaries and
      affiliates.  The primary internal source of our cash to fund our
      operating expenses as well as service our existing and future debt depends
      on
      debt repayments from our subsidiaries, the earnings of our operating
      subsidiaries, earnings generated from our equity interest in certain of our
      affiliates and distributions of such earnings to us.  Substantially
      all of our assets consist of ownership of and loans to our subsidiaries and
      affiliates.  We currently rely on the repayment of inter-company
      indebtedness and the declaration of dividends to receive distributions of cash
      from our operating subsidiaries and affiliates.  The distribution of
      dividends is generally subject to conformity with requirements of local law,
      including the funding of a reserve account and, in certain instances, the
      affirmative vote of our partners.  If our operating subsidiaries or
      affiliates are unable to distribute to us funds to which we are entitled, we
      may
      be unable to cover our operating expenses.  Such inability would have
      a material adverse effect on our results of operations.





**Risks
      Relating to Enforcement Rights**





*We
      may not be able to enforce our indemnification rights in a timely
      manner*





Under
      the
      purchase agreement for the TV Nova (Czech Republic) group, PPF and certain
      of
      its affiliates have agreed to indemnify us for a limited period of time up
      to
      the full amount of the purchase price paid by us for the TV Nova (Czech
      Republic) group for a series of events and circumstances, including claims
      relating to taxes and claims brought by certain former shareholders of the
      TV
      Nova (Czech Republic) group.  If we make an indemnification claim and
      we do not receive an indemnification payment or if such payment is delayed
      or
      contested, it may have a material adverse effect on our ability to make any
      required repayments under the terms of the Senior Notes or other indebtedness
      or
      may adversely affect our results of operations.





*Enforcement
      of civil liabilities and judgments may be difficult*





Central
      European Media Enterprises Ltd. is a Bermuda company, and substantially all
      of
      our assets and all of our operations are located, and all of our revenues are
      derived, outside the United States of America.  In addition, several
      of our directors and officers are non-residents of the United States of America,
      and all or a substantial portion of the assets of such persons are or may be
      located outside the United States of America.  As a result, investors
      may be unable to effect service of process within the United States of America
      upon such persons, or to enforce against them judgments obtained in the United
      States of America courts, including judgments predicated upon the civil
      liability provisions of the United States of America federal and state
      securities laws.  There is uncertainty as to whether the courts of
      Bermuda and the countries in which we operate would enforce (i) judgments of
      United States of America courts obtained against us or such persons predicated
      upon the civil liability provisions of the United States of America federal
      and
      state securities laws or (ii) in original actions brought in such countries,
      as
      applicable, liabilities against us or such persons predicated upon the United
      States of America federal and state securities laws.





Page
            78
 *Index*





**Risks
      Relating to Our Common Stock**





*CME
      Holdco L.P. is in a position to decide corporate actions that require
      shareholder approval and may have interests that differ from those of other
      shareholders*





CME
      Holdco L.P. owns all our outstanding shares of Class B Common Stock, each of
      which carries 10 votes per share.  Ronald Lauder, the chairman of our
      Board of Directors, is the majority owner of CME Holdco L.P. and, subject to
      certain limitations described below, is entitled to vote those shares on behalf
      of CME Holdco L.P.  The shares over which Ronald Lauder has voting
      power represent 64.8% of the aggregate voting power of our Common
      Stock.  On September 1, 2006, Adele (Guernsey) L.P., a fund affiliated
      with Apax Partners, acquired 49.7% of CME Holdco L.P.  Under the terms
      of the limited partnership agreement of CME Holdco L.P., Adele (Guernsey) L.P.
      has certain consent rights in respect of the voting and disposition of the
      shares of Class B Common Stock.  CME Holdco L.P. is in a position to
      control the outcome of corporate actions requiring shareholder approval, such
      as
      the election of directors, including two recommended by Adele (Guernsey) L.P.,
      and transactions involving a change of control.  The interests of CME
      Holdco L.P. may not be the same as those of other shareholders, and such
      shareholders will be unable to affect the outcome of such corporate actions
      for
      so long as CME Holdco L.P. retains voting control.





*The
      price of our Class A Common Stock is likely to remain volatile*





The
      market price of shares of our Class A Common Stock may be influenced by many
      factors, some of which are beyond our control, including those described above
      under “Risks Relating to our Business and Operations” and including the
      following: license renewals, general economic and business trends, variations
      in
      quarterly operating results, regulatory developments in our operating countries
      and the EU, the condition of the media industry in our operating countries,
      the
      volume of trading in shares of our Class A Common Stock, future issuances of
      shares of our Class A Common Stock, investor and securities analyst perception
      of us and other companies that investors or securities analysts deem comparable
      in the television broadcasting industry.  In addition, the stock
      market in general has experienced extreme price and volume fluctuations that
      have often been unrelated to and disproportionate to the operating performance
      of broadcasting companies.  These broad market and industry factors
      may materially reduce the market price of our Class A Common Stock, regardless
      of our operating performance.





*Our
      share price may be adversely affected by potential future issuances and sales
      of
      our shares*





As
      at
      March 31, 2007, we have a total of 1.0 million options to purchase Class A
      Common Stock outstanding and 0.1 million options to purchase Class B Common
      Stock outstanding.  An affiliate of PPF holds 3,500,000 unregistered
      shares of Class A Common Stock and has the right to demand a registration of
      up
      to 100% of such shares for a thirty day period from May 2, 2007.  We
      cannot predict what effect, if any, the issuance of shares underlying options,
      the registration of such unregistered shares or any future sales of our shares
      will have on the market price of our shares.  However, if more shares
      are issued, the economic interest of current shareholders may be diluted and
      the
      price of our shares may be adversely affected.





The
      risks
      described here are not the only risks facing the Company.  Additional
      risks and uncertainties not currently known to us or that we currently deem
      to
      be immaterial also may materially adversely affect our business, financial
      condition and / or operating results.





Page
            79
 *Index*





**Item
      6.  Exhibits**





a)
      The
      following exhibits are attached:





31.01
                    Sarbanes-Oxley
                        Certification s. 302 CEO, dated May 3, 200731.02
                    Sarbanes-Oxley
                        Certification s. 302 CFO, dated May 3, 200732.01
                    Sarbanes-Oxley
                        Certification – CEO and CFO, dated May 3, 2007 (furnished
                        only)














**SIGNATURES**





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





Date:
                            May 3, 2007
                        /s/
                            Michael GarinMichael
                            GarinChief
                            Executive Officer(Duly
                            Authorized Officer)Date:
                            May 3, 2007
                        /s/
                            Wallace MacmillanWallace
                            MacmillanVice
                            President – Finance(Principal
                            Financial Officer and Accounting
                            Officer)





Page
            80
 *Index*





**EXHIBIT
      INDEX**





31.01
                    s.
                        302 Sarbanes-Oxley Certification - CEO, dated May 3,
                        200731.02
                    s.
                        302 Sarbanes-Oxley Certification - CFO, dated May 3,
                        200732.01
                    s.
                        906 Sarbanes-Oxley Certification - CEO and CFO, dated May
                        3, 2007
                        (furnished
                        only)






Page
      81