**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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





**For
      the quarterly period ended September 30, 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 T 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  T
            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
T-





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 October 30, 2007Class
                A Common Stock, par value $0.08
            35,961,948Class
                B Common Stock, par value $0.08
            6,312,839













THIS
      PAGE
      INTENTIONALLY LEFT BLANK











**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**





**FORM
      10-Q**





**For
      the quarterly period ended September 30, 2007**





**INDEX**





Page**Part
                I. Financial information****Item
                1. Financial Statements**Condensed
                consolidated Balance Sheets as at September 30, 2007
                and December 31, 2006
            2Condensed
                consolidated Statements of Operations for the Three
                and Nine Months Ended September 30, 2007 and 2006
            4Condensed
                consolidated Statements of Shareholders' Equity for
                the Nine Months Ended September 30, 2007 and 2006
            6Condensed
                consolidated Statements of Cash Flows for the Nine
                Months Ended September 30, 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**
            41**Item
                3. Quantitative and Qualitative Disclosures About
                Market Risk**
            84**Item
                4. Controls and Procedures**
            85**Part
                II. Other Information****Item
                1. Legal Proceedings**
            86**Item
                1A. Risk Factors**
            89**Item
                5. Other Information**
            97**Item
                6. Exhibits**
            97**Signatures**
            98**Exhibit
                Index**
            99





*Page
            1*
 *Index*





**Part
      I.  Financial Information**





**Item
      1.  Financial Statements**





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(US$
      000’s)**


**(Unaudited)**




**September 30,**
              **2007**
            
            
            **December 31,**
              **2006****ASSETS****Current
                assets**Cash
                and cash equivalents
            
            $
            192,569
            
            
            $
            145,904Restricted
                cash (Note 6)
            
            
            1,246
            
            
            
            4,954Accounts
                receivable (net of allowance) (Note 7)
            
            
            149,540
            
            
            
            152,505Income
                taxes receivable
            
            
            3,222
            
            
            
            3,053Program
                rights, net
            
            
            72,533
            
            
            
            59,645Other
                current assets (Note 8)
            
            
            70,288
            
            
            
            47,555**Total
                current assets**
            
            ****
            **489,398**
            
            
            ****
            **413,616****Non-current
                assets**Investments
            
            
            16,563
            
            
            
            19,214Property,
                plant and equipment, net (Note 9)
            
            
            154,996
            
            
            
            115,805Program
                rights, net
            
            
            100,222
            
            
            
            76,638Goodwill
                (Note 4)
            
            
            1,025,544
            
            
            
            905,580Broadcast
                licenses, net (Note 4)
            
            
            230,224
            
            
            
            198,730Other
                intangible assets, net (Note 4)
            
            
            131,170
            
            
            
            71,942Other
                non-current assets (Note 8)
            
            
            19,420
            
            
            
            17,475**Total
                non-current assets**
            
            ****
            **1,678,139**
            
            
            ****
            **1,405,384****Total
                assets**
            
            **$**
            **2,167,537**
            
            
            **$**
            **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)**




**September 30,**
              **2007**
            
            
            **December 31,**
              **2006****LIABILITIES
                AND SHAREHOLDERS’ EQUITY****Current
                liabilities**Accounts
                payable and accrued liabilities (Note 10)
            
            $
            169,624
            
            
            $
            119,717Duties
                and other taxes payable
            
            
            42,921
            
            
            
            31,707Income
                taxes payable
            
            
            12,531
            
            
            
            12,434Credit
                facilities and obligations under capital leases (Note 11)
            
            
            13,371
            
            
            
            13,057Dividends
                payable to minority shareholders in subsidiaries
            
            
            2,983
            
            
            
            -Deferred
                consideration – Croatia
            
            
            -
            
            
            
            4,010Deferred
                consideration – Ukraine
            
            
            -
            
            
            
            200Deferred
                tax
            
            
            4,213
            
            
            
            1,836**Total
                current liabilities**
            
            ****
            **245,643**
            
            
            ****
            **182,961****Non-current
                liabilities**Credit
                facilities and obligations under capital leases (Note 11)
            
            
            5,886
            
            
            
            6,359Senior
                Notes (Note 5)
            
            
            560,045
            
            
            
            487,291Income
                taxes payable
            
            
            4,719
            
            
            
            3,000Deferred
                tax
            
            
            76,614
            
            
            
            58,092Other
                non-current liabilities
            
            
            11,819
            
            
            
            19,342**Total
                non-current liabilities**
            
            ****
            **659,083**
            
            
            ****
            **574,084**Commitments
                and contingencies (Note 18)**Minority
                interests in consolidated subsidiaries**
            
            ****
            **15,780**
            
            
            ****
            **26,189****SHAREHOLDERS'
                EQUITY:**Nil
                shares of Preferred Stock of $0.08 each (December 31, 2006 –
                nil)
            
            
            -
            
            
            
            -35,916,948
                shares of Class A Common Stock of $0.08 each (December 31, 2006 –
                34,412,138)
            
            
            2,877
            
            
            
            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
            
            
            1,048,924
            
            
            
            931,108Accumulated
                deficit
            
            
            (19,372
            )
            
            
            (31,730
            )Accumulated
                other comprehensive income
            
            
            214,097
            
            
            
            133,130**Total
                shareholders’ equity**
            
            ****
            **1,247,031**
            
            
            ****
            **1,035,766****Total
                liabilities and shareholders’ equity**
            
            **$**
            **2,167,537**
            
            
            **$**
            **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**
              **September
                30,**
            
            
            **For
                the Nine Months Ended**
              **September
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Net
                revenues**
            
            **$**
            **174,836**
            
            
            **$**
            **112,482**
            
            
            **$**
            **539,032**
            
            
            **$**
            **388,825**Operating
                costs
            
            
            27,166
            
            
            
            22,073
            
            
            
            83,767
            
            
            
            71,087Cost
                of programming
            
            
            65,909
            
            
            
            47,920
            
            
            
            215,035
            
            
            
            149,188Depreciation
                of station property, plant and equipment
            
            
            8,768
            
            
            
            6,080
            
            
            
            23,347
            
            
            
            17,841Amortization
                of broadcast licenses and other intangibles (Note 4)
            
            
            6,595
            
            
            
            5,015
            
            
            
            16,922
            
            
            
            13,967**Cost
                of revenues**
            
            ****
            **108,438**
            
            
            ****
            **81,088**
            
            
            ****
            **339,071**
            
            
            ****
            **252,083**Station
                selling, general and administrative expenses
            
            
            17,609
            
            
            
            16,481
            
            
            
            49,089
            
            
            
            45,188Corporate
                operating costs
            
            
            13,839
            
            
            
            8,342
            
            
            
            30,087
            
            
            
            24,019Impairment
                charge
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            748**Operating
                income**
            
            ****
            **34,950**
            
            
            ****
            **6,571**
            
            
            ****
            **120,785**
            
            
            ****
            **66,787**Interest
                income
            
            
            1,180
            
            
            
            1,554
            
            
            
            4,326
            
            
            
            4,748Interest
                expense
            
            
            (11,883
            )
            
            
            (11,066
            )
            
            
            (42,717
            )
            
            
            (32,921
            )Foreign
                currency exchange (loss) / gain, net
            
            
            (23,300
            )
            
            
            6,018
            
            
            
            (28,552
            )
            
            
            (25,469
            )Change
                in fair value of derivatives (Note 12)
            
            
            (8,555
            )
            
            
            (881
            )
            
            
            3,497
            
            
            
            (2,757
            )Other
                expense
            
            
            (6,513
            )
            
            
            (412
            )
            
            
            (13,272
            )
            
            
            (793
            )**(Loss)
                / income before provision for income taxes, minority interest, equity
                in
                loss of unconsolidated affiliates and discontinued
                operations**
            
            ****
            **(14,121**
            **)**
            
            ****
            **1,784**
            
            
            ****
            **44,067**
            
            
            ****
            **9,595**Provision
                for income taxes
            
            
            (131
            )
            
            
            (1,235
            )
            
            
            (18,609
            )
            
            
            (8,811
            )**(Loss)
                / income before minority interest, equity in loss of unconsolidated
                affiliates and discontinued operations**
            
            ****
            **(14,252**
            **)**
            
            ****
            **549**
            
            
            ****
            **25,458**
            
            
            ****
            **784**Minority
                interest in income of consolidated subsidiaries
            
            
            (4,511
            )
            
            
            (461
            )
            
            
            (9,881
            )
            
            
            (7,178
            )Equity
                in loss of unconsolidated affiliates
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (730
            )Gain
                on sale of unconsolidated affiliate
            
            
            -
            
            
            
            6,179
            
            
            
            -
            
            
            
            6,179**Net
                (loss) / income  from continuing
                operations**
            
            ****
            **(18,763**
            **)**
            
            ****
            **6,267**
            
            
            ****
            **15,577**
            
            
            ****
            **(945**
            **)****Discontinued
                operations (Note 17):**Tax
                on disposal of discontinued operations (Czech Republic)
            
            
            -
            
            
            
            (2,333
            )
            
            
            -
            
            
            
            (4,863
            )**Net
                loss from discontinued operations**
            
            ****
            **-**
            
            
            ****
            **(2,333**
            **)**
            
            ****
            **-**
            
            
            ****
            **(4,863**
            **)****Net
                (loss) / income**
            
            **$**
            **(18,763**
            **)**
            
            **$**
            **3,934**
            
            
            **$**
            **15,577**
            
            
            **$**
            **(5,808**
            **)**Currency
                translation adjustment, net
            
            
            100,470
            
            
            
            3,507
            
            
            
            80,967
            
            
            
            80,672**Total
                comprehensive income**
            
            **$**
            **81,707**
            
            
            **$**
            **7,441**
            
            
            **$**
            **96,544**
            
            
            **$**
            **74,864**




*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 per share data)**


**(Unaudited)**




**For
                the Three Months Ended**
              **September 30,**
            
            
            **For
                the Nine Months Ended**
              **September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****PER
                SHARE DATA (Note 15):***Net
                income / (loss) per share:*Continuing
                operations – Basic
            
            $
            (0.45
            )
            
            $
            0.15
            
            
            $
            0.38
            
            
            $
            (0.02
            )Continuing
                operations – Diluted
            
            
            (0.45
            )
            
            
            0.15
            
            
            
            0.37
            
            
            
            (0.02
            )Discontinued
                operations – Basic
            
            
            0.00
            
            
            
            (0.06
            )
            
            
            0.00
            
            
            
            (0.12
            )Discontinued
                operations – Diluted
            
            
            0.00
            
            
            
            (0.06
            )
            
            
            0.00
            
            
            
            (0.12
            )Net
                income / (loss) – Basic
            
            
            (0.45
            )
            
            
            0.09
            
            
            
            0.38
            
            
            
            (0.14
            )Net
                income / (loss) – Diluted
            
            $
            (0.45
            )
            
            $
            0.09
            
            
            $
            0.37
            
            
            $
            (0.14
            )*Weighted
                average common shares used in computing per share amounts
                (000’s):*Basic
            
            
            41,489
            
            
            
            40,651
            
            
            
            41,077
            
            
            
            39,792Diluted
            
            
            41,489
            
            
            
            41,188
            
            
            
            41,553
            
            
            
            39,792




*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
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4,610
            
            
            
            -
            
            
            
            -
            
            
            
            4,610Shares
                issued, net of fees
            
            
            1,275,227
            
            
            
            102
            
            
            
            -
            
            
            
            -
            
            
            
            109,751
            
            
            
            -
            
            
            
            -
            
            
            
            109,853Stock
                options exercised
            
            
            274,583
            
            
            
            22
            
            
            
            -
            
            
            
            -
            
            
            
            3,455
            
            
            
            -
            
            
            
            -
            
            
            
            3,477Net
                income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            15,577
            
            
            
            -
            
            
            
            15,577Currency
                translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            80,967
            
            
            
            80,967**BALANCE,**
              **September 30,
                2007**
            
            ****
            **35,961,948**
            
            
            **$**
            **2,877**
            
            
            ****
            **6,312,839**
            
            
            **$**
            **505**
            
            
            **$**
            **1,048,924**
            
            
            **$**
            **(19,372**
            **)**
            
            **$**
            **214,097**
            
            
            **$**
            **1,247,031**








**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
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,385
            
            
            
            -
            
            
            
            -
            
            
            
            2,385Stock
                options exercised
            
            
            95,450
            
            
            
            8
            
            
            
            100,000
            
            
            
            8
            
            
            
            3,608
            
            
            
            -
            
            
            
            -
            
            
            
            3,624Shares
                issued, net of fees
            
            
            2,530,000
            
            
            
            202
            
            
            
            -
            
            
            
            -
            
            
            
            168,397
            
            
            
            -
            
            
            
            -
            
            
            
            168,599Conversion
                of Class B to Class A Common Shares
            
            
            753,694
            
            
            
            61
            
            
            
            (753,694
            )
            
            
            (61
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Net
                loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (5,808
            )
            
            
            -
            
            
            
            (5,808
            )Currency
                translation adjustment
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            80,672
            
            
            
            80,672**BALANCE,**
              **September 30,
                2006**
            
            ****
            **34,412,138**
            
            
            **$**
            **2,753**
            
            
            ****
            **6,312,839**
            
            
            **$**
            **505**
            
            
            **$**
            **928,451**
            
            
            **$**
            **(57,962**
            **)**
            
            **$**
            **56,278**
            
            
            **$**
            **930,025**




*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 Nine Months Ended**
              **September****30,****2007**
            
            
            **2006****CASH
                FLOWS FROM OPERATING ACTIVITIES:****Net
                income / (loss)**
            
            **$**
            **15,577**
            
            
            **$**
            **(5,808**
            **)**Adjustments
                to reconcile net income / (loss) to net cash generated from operating
                activities:Loss
                from discontinued operations (Note 17)
            
            
            -
            
            
            
            4,863Equity
                in loss of unconsolidated affiliates, net of dividends
                received
            
            
            -
            
            
            
            730Gain
                on sale of unconsolidated affiliate
            
            
            -
            
            
            
            (6,179
            )Depreciation
                and amortization
            
            
            165,889
            
            
            
            111,443Impairment
                charge
            
            
            -
            
            
            
            748Loss
                on disposal of fixed asset
            
            
            -
            
            
            
            1,503Stock-based
                compensation (Note 14)
            
            
            4,098
            
            
            
            2,385Minority
                interest in income of consolidated subsidiaries
            
            
            9,881
            
            
            
            7,178Change
                in fair value of derivative instruments
            
            
            (3,497
            )
            
            
            2,757Foreign
                currency exchange loss, net
            
            
            28,552
            
            
            
            25,469Net
                change in (net of effects of acquisitions and disposals of
                businesses):Accounts
                receivable
            
            
            11,616
            
            
            
            15,248Program
                rights
            
            
            (170,610
            )
            
            
            (110,315
            )Other
                assets
            
            
            (7,430
            )
            
            
            (987
            )Accounts
                payable and accrued liabilities
            
            
            27,319
            
            
            
            8,371Income
                taxes payable
            
            
            557
            
            
            
            (5,663
            )Deferred
                taxes
            
            
            4,202
            
            
            
            4,600VAT
                and other taxes payable
            
            
            9,735
            
            
            
            11,564**Net
                cash generated from continuing operating
                activities**
            
            ****
            **95,889**
            
            
            ****
            **67,907****CASH
                FLOWS FROM INVESTING ACTIVITIES:**Purchase
                of property, plant and equipment
            
            
            (46,277
            )
            
            
            (31,767
            )Proceeds
                from disposal of property, plant and equipment
            
            
            123
            
            
            
            19Investments
                in subsidiaries and unconsolidated affiliates
            
            
            (142,709
            )
            
            
            (69,470
            )Repayment
                of loans and advances to related parties
            
            
            400
            
            
            
            400**Net
                cash used in continuing investing activities**
            
            ****
            **(188,463**
            **)**
            
            ****
            **(100,818**
            **)****CASH
                FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                from credit facilities
            
            
            177,515
            
            
            
            35,878Payment
                of credit facilities and capital leases
            
            
            (182,391
            )
            
            
            (74,773
            )Net
                proceeds from issuance of Senior Notes
            
            
            199,400
            
            
            
            -Redemption
                of Senior Notes
            
            
            (169,010
            )
            
            
            -Proceeds
                from exercise of stock options
            
            
            3,477
            
            
            
            3,624Issuance
                of shares of Class A Common Stock
            
            
            109,853
            
            
            
            168,599Excess
                tax benefits from share-based payment arrangements
            
            
            512
            
            
            
            -Dividends
                paid to minority shareholders
            
            
            (2,910
            )
            
            
            (1,101
            )**Net
                cash received from continuing financing
                activities**
            
            ****
            **136,446**
            
            
            ****
            **132,227**NET
                CASH USED IN DISCONTINUED OPERATIONS – OPERATING
                ACTIVITIES
            
            
            (2,164
            )
            
            
            (1,690
            )**Impact
                of exchange rate fluctuations on cash**
            
            ****
            **4,957**
            
            
            ****
            **(4,782**
            **)**Net
                increase in cash and cash equivalents
            
            
            46,665
            
            
            
            92,844**CASH
                AND CASH EQUIVALENTS, beginning of period**
            
            ****
            **145,904**
            
            
            ****
            **71,658****CASH
                AND CASH EQUIVALENTS, end of period**
            
            **$**
            **192,569**
            
            
            **$**
            **164,502**




*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 share and 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 September 30, 2007, we had television operations
      in Croatia, the Czech Republic, Romania, the Slovak Republic, Slovenia and
      Ukraine.





Our
      principal subsidiaries, equity-accounted affiliates and cost investments as
      at
      September 30, 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
            SubsidiaryInternet
                Dnevnik d.o.o.
            76.0%
            Croatia
            SubsidiaryCME
                Media Investments, s.r.o.
            100.0%
            Czech
                Republic
            SubsidiaryVILJA,
                a.s.
            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
            SubsidiaryHARTIC,
                a.s.
            100.0%
            Czech
                Republic
            SubsidiaryGalaxie
                sport s r.o. (“Galaxie Sport”)
            100.0%
            Czech
                Republic
            SubsidiaryMedia
                Pro International S.A.  (“MPI”)
            95.0%
            Romania
            SubsidiaryMedia
                Vision SRL (“Media Vision”)
            95.0%
            Romania
            SubsidiaryMPI
                Romania B.V.
            95.0%
            Netherlands
            SubsidiaryPro
                TV S.A. (“Pro TV”)
            95.0%
            Romania
            SubsidiarySport
                Radio TV Media SRL (“Sport.ro”)
            95.0%
            Romania
            SubsidiaryMedia
                Pro B.V.
            10.0%
            Netherlands
            Cost
                investmentMedia
                Pro Management S.A.
            8.7%
            Romania
            Cost
                investmentA.R.J.
                a.s.
            100.0%
            Slovak
                Republic
            SubsidiaryMedia
                Invest s.r.o. (“Media Invest”)
            100.0%
            Slovak
                Republic
            SubsidiaryMARKIZA-SLOVAKIA
                spol. s r.o. (“Markiza”)
            100.0%
            Slovak
                Republic
            SubsidiaryGAMATEX
                spol. s r.o.
            100.0%
            Slovak
                Republic
            Subsidiary
                (in liquidation)A.D.A.M.,
                a.s.
            100.0%
            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 share and per share data)**


**(Unaudited)**





**Company
                Name**
            **Effective
                Voting Interest**
            **Jurisdiction
                of Organization**
            **Type
                of Affiliate (1)**Ukrainian
                Media Services LLC (“UMS”)
            99.9%
            Ukraine
            SubsidiaryInternational
                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”)
            60.0%
            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
                AffiliateTor
                LLC (“Tor”)
            60.4%
            Ukraine
            SubsidiaryZhysa
                LLC (“Zhysa”)
            60.4%
            Ukraine
            SubsidiaryCME
                Media Enterprises B.V.
            100.0%
            Netherlands
            SubsidiaryCME
                Czech Republic II B.V.
            100.0%
            Netherlands
            SubsidiaryCME
                Romania B.V.
            100.0%
            Netherlands
            SubsidiaryCME
                Slovak Holdings 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
            Subsidiary
                (in liquidation)CME
                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 share and 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 share and per share data)**


**(Unaudited)**





*Croatia*





We
      own
      100.0% of Nova TV (Croatia), which holds a national terrestrial broadcast
      license for Croatia that expires in April 2010.





*Czech
      Republic*





We
      own
      100.0% of CET 21, which holds the national terrestrial broadcast license for
      TV
      NOVA (Czech Republic) that expires in 2017.





*Romania*





We
      own a
      95.0% interest in each of Pro TV, MPI and Media Vision, a production, dubbing
      and subtitling company.  The remaining shares of each of these
      companies are owned by companies, or individuals associated with, Adrian Sarbu,
      our Chief Operating Officer.  Pro TV holds the licenses for the PRO
      TV, ACASA, PRO TV INTERNATIONAL, PRO CINEMA and SPORT.RO channels. These
      licenses expire on various dates between November 2007 and September
      2016.





We
      own
      10.0% of Media Pro BV and 8.7% of 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 Mr.
      Sarbu. Media Pro comprises a number of companies with operations in the fields
      of publishing, information, printing, cinema, entertainment and radio in
      Romania.





*Slovak
      Republic*





We
      own
      100.0% of Markiza, which holds a national terrestrial broadcast license for
      the
      Slovak Republic that expires in September 2019.





*Slovenia*





We
      own
      100.0% of Pro Plus, the operating company for our Slovenia
      operations.  Pro Plus has a 100.0% 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 60.0% voting and economic interest in
      each of Studio 1+1, Innova, IMS and TV Media Planet.  Innova owns
      100.0% of Inter-Media, a Ukrainian company, which in turn holds a 30.0% voting
      and economic interest in Studio 1+1. In addition, we hold a 99.9% interest
      in
      UMS, which owns a 42.0% direct voting and economic interest in Studio 1+1,
      the
      license holder for the STUDIO 1+1 channel.  The license covering
      fifteen hours including prime time expires in December 2016.  The
      second license for the remaining nine hours expires in 2014.





*Ukraine
      (KINO, CITI)*





We
      hold a
      65.5% interest in Ukrpromtorg. Ukrpromtorg owns (i) 92.2% of Gravis, which
      operates the local channels KINO and CITI; (ii) 100.0% of Nart LLC, which holds
      a satellite broadcasting license; and (iii) 75.0% of TV Stimul LLC, which
      operates TV STIMUL.  We also own a 60.4% interest in each of Zhysa and
      Tor, two regional broadcasters. Licenses used for the KINO and CITI channels
      expire on dates ranging from June 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 share and per share data)**


**(Unaudited)**





**2.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





The
      interim financial statements for the three and nine months ended September
      30,
      2007 should be read in conjunction with 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 condensed 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 year-end condensed
      balance sheet data was derived from audited financial statements, but does
      not
      include all disclosures required by US GAAP.





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.





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.





*Page
            12*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





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 accumulated 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$ 1.5 million was
      accounted for as a reduction to accumulated 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
            2002Germany
            2000Netherlands
            2004Romania
            2002Slovak
                Republic
            2001Slovenia
            2001Ukraine
            2003United
                States
            2001





Since January
      1, 2007, the German tax authorities concluded an income tax audit of our
      German subsidiary covering the years up to and including 2004, and determined
      that no material additional amounts of income tax were payable for
      such periods.  Therefore, years before 2005 are no longer subject to income
      tax examination in Germany.





**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 the adoption of
      FAS
      159 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 share and per share data)**


**(Unaudited)**





**3.  ACQUISITIONS
      AND DISPOSALS**





**Romania**





*Acquisition
      of additional interest – Sport.ro*





On
      December 14, 2006, we acquired 20.0% of Sport.ro from Silviu Prigoana for cash
      consideration of EUR 2.0 million (approximately US$ 2.6
      million).  Sport.ro 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 Sport.ro 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
      Sport.ro, 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.





*Acquisition
      of additional interest –Media Vision, MPI and Pro TV*





On
      May
      16, 2007, we acquired an additional 20.0% of Media Vision and subsequently
      on
      June 1, 2007 we acquired an additional 5.0% of Pro TV and MPI from companies
      owned by, or individuals associated with, Adrian Sarbu, for aggregate
      consideration of US$ 51.6 million including acquisition costs. The purchase
      price was based upon an independent valuation report.  We now own
      95.0% voting and economic interests in Pro TV, MPI and Media
      Vision.  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 fair values
      of the assets acquired and liabilities assumed at the date of
      acquisition:





*Page
            14*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**Fair
                Value on**
              **Acquisition**Intangible
                assets subject to amortization (1)
            
            $
            4,517Intangible
                assets not subject to amortization (2)
            
            
            23,597Goodwill
            
            
            23,974Deferred
                tax liability
            
            
            (4,498
            )Minority
                interests
            
            
            4,029**Total
                purchase price**
            
            **$**
            **51,619**





(1)
      The
      intangible assets subject to amortization comprise customer relationships,
      which
      are being amortized over one to ten years (weighted average: 8.3
      years).





(2)
      Intangible assets not subject to amortization comprise approximately US$ 9.2
      million in trademarks and US$ 14.4 million relating to television broadcast
      licenses.





Mr.
      Sarbu
      has the right to sell the remaining shareholding in Pro TV and
      MPI  that he holds personally 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.  Mr. Sarbu’s right to put his remaining shareholding to us is
      exercisable from November 12, 2009, provided, that we have not enforced a pledge
      over this shareholding which Mr. Sarbu granted as security for our right to
      put
      to him our shareholding in Media Pro. As at September 30, 2007, we consider
      the
      fair value of Mr. Sarbu’s put option to be approximately US$ nil.





**Slovak
      Republic**





*Acquisition
      – Media Invest*





On
      July
      13, 2007 we purchased 100% of Media Invest from Jan Kovacik for cash
      consideration of SKK 1.9 billion (approximately US$ 78.5 million). Media Invest
      owns a 20.0% voting and economic interest in Markiza. Following this
      acquisition, we now have a 100.0% voting and economic interest in
      Markiza.





We
      performed a preliminary fair value exercise to allocate the purchase price
      to
      the acquired assets and liabilities, and identified separately identifiable
      assets as at July 13, 2007 which is complete subject to the completion of
      detailed analysis of potential tax liabilities in Media Invest.  The
      following table summarizes the fair values of the assets acquired and
      liabilities assumed at the date of acquisition:





*Page
            15*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**Fair
                Value on**
              **Acquisition**Property
                Plant and Equipment
            
            
            2,590Intangible
                assets subject to amortization (1)
            
            
            46,906Intangible
                assets not subject to amortization (2)
            
            
            2,405Goodwill
                (3)
            
            
            26,334Deferred
                tax liability
            
            
            (9,860
            )Minority
                interest
            
            
            10,268**Total
                purchase price (4)**
            
            **$**
            **78,643**





(1)
      The
      intangible assets subject to amortization comprises US$ 8.7 million relating
      to
      television broadcasting licenses which are being amortized over 13 years
      and  US$ 37.9 million in  customer relationships, which are
      being amortized over one to fourteen years (weighted average: 13.8
      years).





(2)
      Intangible assets not subject to amortization comprise trademarks.





(3)
      No
      goodwill is expected to be deductible for tax purposes.





(4)
      Total
      purchase price includes US$ 0.1 million of capitalized acquisition
      costs.








**Croatia**





*Acquisition-
      Internet Dnevnik*





On
      June
      6, 2007, we purchased 76.0% of Internet Dnevnik d.o.o from Zeljko Anderlon
      and
      Dario Markus for cash consideration of EUR 0.5 million (US$ 0.7 million).
      Internet Dnevnik d.o.o operates the largest blogging website in Croatia,
      Blog.hr.





**Ukraine
      (KINO, CITI)**





*Acquisition-
      Tor and Zhysa*





On
      June
      21, 2007, we completed the acquisition of a 60.4% interest in each of Tor and
      Zhysa from Dertus Finance Group Limited for total consideration of US$ 3.1
      million including acquisition costs. Zhysa and Tor are regional broadcasters
      in
      Ukraine.





We
      have
      completed a preliminary fair value exercise to allocate the purchase price
      to
      the acquired assets and liabilities and have allocated US $ 0.3 million to
      broadcast licenses and US $ 3.0 million to goodwill. Professional estimates
      of
      the fair value of land and buildings are still outstanding and the value of
      goodwill may be adjusted in future periods to reflect this.





*Page
            16*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except share and 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 September 30, 2007 and December 31, 2006 is
      summarized as follows:





**Balance**
              **December**
              **31,
                2006**
            
            
            **Additions**
            
            
            **Foreign**
              **currency**
              **movement**
            
            
            **Balance**
              **September**
              **30,
                2007**Croatia
            
            **$**
            **-**
            
            
            $
            712
            
            
            $
            40
            
            
            **$**
            **752**Czech
                Republic
            
            ****
            **823,786**
            
            
            
            -
            
            
            
            59,398
            
            
            ****
            **883,184**Romania
            
            ****
            **31,130**
            
            
            
            26,285
            
            
            
            -
            
            
            ****
            **57,415**Slovak
                Republic
            
            ****
            **25,483**
            
            
            
            26,335
            
            
            
            2,928
            
            
            ****
            **54,746**Slovenia
            
            ****
            **16,458**
            
            
            
            -
            
            
            
            1,257
            
            
            ****
            **17,715**Ukraine
                (STUDIO 1+1)
            
            ****
            **4,096**
            
            
            
            -
            
            
            
            -
            
            
            ****
            **4,096**Ukraine
                (KINO, CITI)
            
            ****
            **4,627**
            
            
            
            3,009
            
            
            
            -
            
            
            ****
            **7,636****Total**
            
            **$**
            **905,580**
            
            
            **$**
            **56,341**
            
            
            **$**
            **63,623**
            
            
            **$**
            **1,025,544**








*Broadcast
      licenses:*





The
      net
      book value of our broadcast licenses as at September 30, 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
            
            
            23,321
            
            
            
            8,974
            
            
            ****
            **32,295**Amortization
            
            
            -
            
            
            
            (12,982
            )
            
            ****
            **(12,982**
            **)**Foreign
                currency movements
            
            
            705
            
            
            
            11,476
            
            
            ****
            **12,181****Balance,
                September 30, 2007**
            
            **$**
            **50,370**
            
            
            **$**
            **179,854**
            
            
            **$**
            **230,224**





Our
      broadcast licenses in Croatia, Romania and Slovenia have indefinite
      lives because we expect the cash flows generated by those assets to continue
      indefinitely. These licenses are subject to annual impairment
      reviews.  Our licenses in Ukraine have economic useful lives of, and
      are amortized on a straight-line basis over, between two and ten years. Our
      license in the Czech Republic has an economic useful life of, and is
      amortized on a straight-line basis over, twelve years.  Our license in
      the Slovak Republic has an economic useful life of, and is amortized on a
      straight-line basis over thirteen years.





*Page
            17*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





The
      gross
      value and accumulated amortization of amortized broadcast licenses was as
      follows at September 30, 2007 and December 31, 2006:





**September 30,**
              **2007**
            
            
            **December 31,**
              **2006**Gross
                value
            
            $
            225,336
            
            
            $
            201,994Accumulated
                amortization
            
            
            (45,482
            )
            
            
            (29,608
            )**Total
                net book value**
            
            **$**
            **179,854**
            
            
            **$**
            **172,386**





*Other
      intangible assets:*





The
      net
      book value of our other intangible assets as at September 30, 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
            
            
            12,192
            
            
            
            46,554
            
            
            
            425
            
            
            ****
            **59,171**Amortization
            
            
            (186
            )
            
            
            (3,363
            )
            
            
            (391
            )
            
            ****
            **(3,940**
            **)**Foreign
                currency movements
            
            
            2,010
            
            
            
            1,938
            
            
            
            49
            
            
            ****
            **3,997****Balance,
                September 30, 2007**
            
            **$**
            **58,042**
            
            
            **$**
            **72,342**
            
            
            **$**
            **786**
            
            
            **$**
            **131,170**








Customer
      relationships are deemed to have an economic useful life of, and are amortized
      on a straight-line basis over, one to fourteen years.  Other than the
      trademark acquired with Sport.ro, 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
      September 30, 2007 and December 31, 2006:





**September 30,**
              **2007**
            
            
            **December 31,**
              **2006**Gross
                value
            
            $
            140,429
            
            
            $
            76,695Accumulated
                amortization
            
            
            (9,259
            )
            
            
            (4,753
            )**Total
                net book value**
            
            **$**
            **131,170**
            
            
            **$**
            **71,942**





*Page
            18*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**5.  SENIOR
      NOTES**





Our
      Senior Notes consist of the following:





**Carrying
                Value**
            
            
            **Fair
                Value****September 30,**
              **2007**
            
            
            **December 31,**
              **2006**
            
            
            **September 30,**
              **2007**
            
            
            **December 31,**
              **2006**EUR
                245.0 million 8.25% Senior Notes
            
            $
            347,370
            
            
            $
            322,666
            
            
            $
            363,002
            
            
            $
            353,722EUR
                125.0 million Floating Rate Senior Notes
            
            
            -
            
            
            
            164,625
            
            
            
            -
            
            
            
            170,181EUR
                150.0 million Floating Rate Senior Notes
            
            
            212,675
            
            
            
            -
            
            
            
            202,042
            
            
            
            -**$**
            **560,045**
            
            
            **$**
            **487,291**
            
            
            **$**
            **565,044**
            
            
            **$**
            **523,903**





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
      (the
“Fixed Rate Notes”) and EUR 125.0 million of floating rate senior notes due May
      2012 (the “2012 Floating Rate Notes”), which bore interest at six-month Euro
      Inter-Bank Offered Rate (“EURIBOR”) plus 5.50%.





On
      May
      15, 2007 we redeemed the 2012 Floating Rate Notes. Upon redemption we recorded
      a
      loss of US$ 6.9 million within interest expense comprising US$ 3.4 million
      of
      redemption premium and US$ 3.5 million to write off unamortized debt
      costs.





On
      May
      16, 2007 we issued floating rate senior notes due May 2014 (the “2014 Floating
      Rate Notes”, and collectively with the Fixed Rate Notes, the “Senior Notes”) in
      the aggregate principal amount of EUR 150.0 million, which bear interest at
      six-month EURIBOR plus 1.625% (5.80% was applicable at September 30,
      2007).





**Fixed
      Rate Notes**





Interest
      is payable semi-annually in arrears on each May 15 and November
      15.  The fair value of the Fixed Rate Notes as at September 30, 2007
      was calculated by multiplying the outstanding debt by the traded market
      price.





The
      Fixed
      Rate 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 two subsidiary holding companies and are secured by a pledge
      of shares of those subsidiaries as well as 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 Fixed Rate 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 Fixed Rate Notes
      at
      a purchase price in cash equal to 101.0% of the principal amount of the Fixed
      Rate Notes plus accrued and unpaid interest to the date of
      purchase.





*Page
            19*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





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





**From:**
            **Fixed
                Rate Notes**
              **Redemption
                Price**May
                15, 2009 to May 14, 2010
            104.125%May
                15, 2010 to May 14, 2011
            102.063%May
                15, 2011 and thereafter
            100.000%





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
      Fixed Rate Notes; but as they are considered clearly and closely related to
      those notes, they are not accounted for separately.





**2014
      Floating Rate Notes**





Interest
      is payable semi-annually in arrears on each May 15 and November
      15.  The fair value of the 2014 Floating Rate Notes as at September
      30, 2007 was calculated by multiplying the outstanding debt by the traded market
      price.





The
      2014
      Floating Rate 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 two subsidiary holding companies and are secured
      by a pledge of shares of those subsidiaries as well as 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 2014 Floating Rate 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 2014 Floating
      Rate
      Notes at a purchase price in cash equal to 101.0% of the principal amount of
      the
      2014 Floating Rate Notes plus accrued and unpaid interest to the date of
      purchase.





The
      2014
      Floating Rate Notes are redeemable at our option, in whole or in part, at the
      redemption prices set forth below:





*Page
            20*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**From:**
            **2014
                Floating Rate Notes**
              **Redemption
                Price**November
                15, 2007 to May 14, 2008
            102.000%May
                15, 2008 to May 14, 2009
            101.000%May
                15, 2009 and thereafter
            100.000%





Certain
      derivative instruments, including redemption call options and change of control
      and asset disposition put options, have been identified as being embedded in
      the
      2014 Floating Rate Notes; but as they are considered clearly and closely related
      to those notes, they are not accounted for separately.








**6.  RESTRICTED
      CASH**





Restricted
      cash consists of the following at September 30, 2007 and December 31,
      2006:





**September 30,**
              **2007**
            
            
            **December 31,**
              **2006**Croatia
            
            $
            417
            
            
            $
            4,183Slovenia
            
            
            780
            
            
            
            724Ukraine
                (STUDIO 1+1)
            
            
            49
            
            
            
            47**Total
                restricted cash**
            
            **$**
            **1,246**
            
            
            **$**
            **4,954**





Restricted
      cash held in escrow in Croatia was paid out to the former owners of our Croatia
      operations on May 11, 2007.





*Page
            21*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**7.  ACCOUNTS
      RECEIVABLE**





Accounts
      receivable consist of the following at September 30, 2007 and December 31,
      2006:


**September 30,**
              **2007**
            
            
            **December 31,**
              **2006****Trading:**Third-party
                customers
            
            $
            158,020
            
            
            $
            156,701Less:
                allowance for bad debts and credit notes
            
            
            (13,860
            )
            
            
            (11,472
            )Related
                parties
            
            
            5,522
            
            
            
            7,655Less:
                allowance for bad debts and credit notes
            
            
            (266
            )
            
            
            (798
            )**Total
                trading**
            
            **$**
            **149,416**
            
            
            **$**
            **152,086****Other:**Third-party
                customers
            
            $
            240
            
            
            $
            359Less:
                allowance for bad debts and credit notes
            
            
            (116
            )
            
            
            (103
            )Related
                parties
            
            
            61
            
            
            
            454Less:
                allowance for bad debts and credit notes
            
            
            (61
            )
            
            
            (291
            )**Total
                other**
            
            **$**
            **124**
            
            
            **$**
            **419****Total
                accounts receivable**
            
            **$**
            **149,540**
            
            
            **$**
            **152,505**




At
      September 30, 2007, CZK 294 million (approximately US$ 15.1 million) (December
      31, 2006: CZK 600.0 million, approximately US$ 30.8 million) of receivables
      in
      the Czech Republic were pledged as collateral subject to a factoring agreement
      (see Note 11).





**8.  OTHER
      ASSETS**





Other
      current and non-current assets consist of the following at September 30, 2007
      and December 31, 2006:




**September 30,**
              **2007**
            
            
            **December 31,**
              **2006****Current:**Prepaid
                programming
            
            $
            40,832
            
            
            $
            23,072Other
                prepaid expenses
            
            
            14,737
            
            
            
            13,177Deferred
                tax
            
            
            1,966
            
            
            
            2,124VAT
                recoverable
            
            
            3,600
            
            
            
            2,562Loan
                to related party
            
            
            600
            
            
            
            600Capitalized
                debt costs
            
            
            3,077
            
            
            
            2,908Other
            
            
            5,476
            
            
            
            3,112**Total
                other current assets**
            
            **$**
            **70,288**
            
            
            **$**
            **47,555****Non-current:**Capitalized
                debt costs
            
            $
            11,023
            
            
            $
            11,264Loan
                to related party
            
            
            1,334
            
            
            
            1,603Deferred
                tax
            
            
            4,557
            
            
            
            3,443Other
            
            
            2,506
            
            
            
            1,165**Total
                other non-current assets**
            
            **$**
            **19,420**
            
            
            **$**
            **17,475**





*Page
            22*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





Capitalized
      debt costs primarily comprise the costs incurred in connection with the issuance
      of our Senior Notes in May 2005 and May 2007 (see Note 5) and are being
      amortized over the terms of the Senior Notes.





**9.  PROPERTY,
      PLANT AND EQUIPMENT**





Property,
      plant and equipment consists of the following at September 30, 2007 and December
      31, 2006:





**September 30,**
              **2007**
            
            
            **December 31,**
              **2006**Land
                and buildings
            
            $
            74,753
            
            
            $
            56,212Station
                machinery, fixtures and equipment
            
            
            140,644
            
            
            
            115,238Other
                equipment
            
            
            28,580
            
            
            
            21,980Software
                licenses
            
            
            18,581
            
            
            
            15,495Construction
                in progress
            
            
            19,487
            
            
            
            4,070**Total
                cost**
            
            ****
            **282,045**
            
            
            ****
            **212,995**Less:  Accumulated
                depreciation
            
            
            (127,049
            )
            
            
            (97,190
            )**Total
                net book value**
            
            **$**
            **154,996**
            
            
            **$**
            **115,805****Assets
                held under capital leases (included above)**Land
                and buildings
            
            $
            5,965
            
            
            $
            5,541Station
                machinery, fixtures and equipment
            
            
            1,344
            
            
            
            2,330**Total
                cost**
            
            ****
            **7,309**
            
            
            ****
            **7,871**Less:
                Accumulated depreciation
            
            
            (1,698
            )
            
            
            (1,877
            )**Net
                book value**
            
            **$**
            **5,611**
            
            
            **$**
            **5,994**





**10.  ACCOUNTS
      PAYABLE AND ACCRUED LIABILITIES**





Accounts
      payable and accrued liabilities consist of the following at September 30, 2007
      and December 31, 2006:




**September 30,**
              **2007**
            
            
            **December 31,**
              **2006**Accounts
                payable
            
            $
            24,155
            
            
            $
            47,447Programming
                liabilities
            
            
            40,111
            
            
            
            32,316Accrued
                interest payable
            
            
            15,902
            
            
            
            5,375Deferred
                income
            
            
            26,368
            
            
            
            3,212Accrued
                staff costs
            
            
            21,950
            
            
            
            12,947Accrued
                production costs
            
            
            5,385
            
            
            
            7,435Accrued
                legal costs
            
            
            15,769
            
            
            
            3,619Accrued
                rent costs
            
            
            1,184
            
            
            
            1,163Authors’
                rights
            
            
            4,767
            
            
            
            943Onerous
                contracts
            
            
            1,804
            
            
            
            -Other
                accrued liabilities
            
            
            12,229
            
            
            
            5,260**Total
                accounts payable and accrued liabilities**
            
            **$**
            **169,624**
            
            
            **$**
            **119,717**





*Page
            23*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





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





Group
      loan obligations and overdraft facilities consist of the following at September
      30, 2007 and December 31, 2006:




**September 30,**
              **2007**
            
            
            **December 31,**
              **2006****Credit
                facilities:**Corporate
            (a)
            
            $
            -
            
            
            $
            -Croatia
            (b)
            
            
            -
            
            
            
            847Czech
                Republic
            (c)
                – (e)
            
            
            12,839
            
            
            
            11,975Romania
            (f)
            
            
            -
            
            
            
            -Slovenia
            (g)
            
            
            -
            
            
            
            -Ukraine
                (KINO, CITI)
            (h)
            
            
            1,700
            
            
            
            1,703**Total
                credit facilities**
            
            
            **$**
            **14,539**
            
            
            **$**
            **14,525****Capital
                leases:**Croatia
                operations, net of interest
            
            
            $
            -
            
            
            $
            19Romania
                operations, net of interest
            
            
            
            300
            
            
            
            495Slovak
                Republic operations, net of interest
            
            
            
            96
            
            
            
            154Slovenia
                operations, net of interest
            
            
            
            4,322
            
            
            
            4,223**Total
                capital leases**
            
            
            **$**
            **4,718**
            
            
            **$**
            **4,891****Total
                credit facilities and capital leases**
            
            
            **$**
            **19,257**
            
            
            **$**
            **19,416**Less
                current maturities
            
            
            
            (13,371
            )
            
            
            (13,057
            )**Total
                non-current maturities**
            
            
            **$**
            **5,886**
            
            
            **$**
            **6,359**





**Corporate**





(a)
      On
      July 21, 2006, we entered into a five-year revolving loan agreement for EUR
      100.0 million (approximately US$ 141.8 million) arranged by the European Bank
      for Reconstruction and Development (“EBRD”)  and on August 22, 2007,
      we entered into a second revolving loan agreement for EUR 50.0 million
      (approximately US$ 70.9 million) also arranged by EBRD (together with the EUR
      100.0 million facility, the “EBRD Loan”).  ING Bank N.V. (“ING”) and
      Ceska Sporitelna, a.s. (“CS”) are participating in the EBRD Loan for EUR 75.0
      million in the aggregate.





We
      also
      entered into a supplemental agreement with EBRD on August 22, 2007 to amend
      the
      interest rate payable on the EUR 100.0 million facility, as a result of
      which  the EBRD Loan bears interest at a rate of three-month EURIBOR
      plus 1.625% on the drawn amount.  The available amount of the EBRD
      Loan amortizes by 15% every six months from May 2009 to November 2010 and by
      40%
      in May 2011.





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





The
      EBRD
      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 two subsidiary
      holding companies and is secured by a pledge of shares of those subsidiaries
      as
      well as an assignment of certain contractual rights.  The terms of the
      EBRD 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
            24*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





There
      were no drawings under this facility as at December 31, 2006 or September 30,
      2007.





**Croatia**





(b)
      On
      March 28, 2007, we repaid EUR 0.6 million (approximately US$ 0.9 million) which
      was the total amount outstanding to our Croatia operations under two loan
      agreements with Hypo Alpe-Adria Bank d.d. Following repayment of this loan,
      the
      security held by the bank was released.





**Czech
      Republic**





(c)
      As at
      September 30, 2007, there were no drawings by CET 21 under a four-year credit
      facility of CZK 1.2 billion (approximately US$ 61.6 million) available until
      October 31, 2009 with 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. On July
      10, 2007, CZK 860.0 million (approximately US$ 44.2 million) was drawn down
      under this facility, of which CZK 260.0 million (approximately US$ 13.4 million)
      was repaid on July 31, 2007, and CZK 600.0 million (approximately US$ 30.8
      million) was repaid on September 14, 2007.





(d)
      CZK
      250.0 million (approximately US$ 12.8 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, 2008 and bearing interest at the three-month PRIBOR
      plus 1.65% (three-month PRIBOR relevant to drawings under this facility at
      September 30, 2007 was 3.5%, and was outstanding at December 31, 2006 and
      September 30, 2007. 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
      September 30, 2007, there were no drawings under a CZK 300.0 million
      (approximately US$ 15.4 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.





**Romania**





(f)
      The
      interest-free loan provided by one of the founding shareholders of Sport.ro
      was
      repaid on 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$ 53.2 million) in aggregate principal amount
      with ING, 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 2.1% and 3.6% that
      varies according to the ratio of consolidated net debt to consolidated
      broadcasting cash flow for Pro Plus.  As at September 30, 2007, EUR
      30.0 million (approximately US$ 42.5 million) was available for drawing under
      this revolving facility and there were no drawings outstanding.





*Page
            25*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**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 September 30, 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%.





*Total
      Group*





At
      September 30, 2007, the maturity of our debt (including our Senior Notes) is
      as
      follows:





2007
            
            $
            12,8392008
            
            
            -2009
            
            
            1,7002010
            
            
            -2011
            
            
            -2012
                and thereafter
            
            
            560,045**Total**
            
            **$**
            **574,584**





*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 September 30, 2007:





2007
            
            $
            6792008
            
            
            1,0932009
            
            
            6792010
            
            
            4712011
            
            
            9492012
                and thereafter
            
            
            2,967**$**
            **6,838**Less:
                amount representing interest
            
            
            (2,120
            )**Present
                value of net minimum lease payments**
            
            **$**
            **4,718**








**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$ 549.5 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$ 533.0 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 September 30, 2007 was a US$ 9.0
      million liability, an increase of US$ 8.5 million from the liability as at
      June
      30, 2007.





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
            26*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**13.  SHAREHOLDERS’
      EQUITY**





*Preferred
      Stock*





5,000,000
      shares of Preferred Stock, with a $0.08 par value, were authorized as at
      September 30, 2007 and December 31, 2006.  None were issued and
      outstanding as at September 30, 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 September 30, 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
                September 30,**
            
            
            **For
                the Nine Months**
              **Ended
                September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Stock-based
                compensation charged under SFAS 123(R)
            
            $
            1,494
            
            
            $
            967
            
            
            $
            4,098
            
            
            $
            2,385





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.





**2007
      Option Grants**





Pursuant
      to the Amended and Restated 1995 Stock Incentive Plan, the Compensation
      Committee of our Board of Directors awarded grants of options to executives
      to
      purchase 12,500 shares of our Class A Common Stock, with a vesting period of
      four years and a contractual life of ten years, on April 2, 2007.





Pursuant
      to the Amended and Restated 1995 Stock Incentive Plan, the Compensation
      Committee of our Board of Directors awarded grants of options to non-executive
      directors to purchase an aggregate of 35,000 shares of our Class A Common Stock
      and 5,000 shares of our Class B Common Stock with a vesting period of one year
      and a contractual life of five years on June 5, 2007.





*Page
            27*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





The
      exercise price of the granted options ranges from US$ 87.91 to US$ 94.28 per
      share.  The fair value of the option grants was estimated on the date
      of the grant using the Black-Scholes option-pricing model, with the following
      assumptions used:





**Date
                of Option Grant**
            
            **Number
                of Options**
              **Granted**
            
            
            **Risk-free
                interest rate**
              **(%)**
            
            
            **Expected
                term**
              **(years)**
            
            
            **Expected
                volatility**
              **(%)**
            
            
            **Dividend
                yield**
              **(%)**
            
            
            **Weighted-average
                fair value**
              **($/share)**April
                2, 2007
            
            
            12,500
            
            
            
            4.57
            %
            
            
            6.25
            
            
            
            41.29
            %
            
            
            0
            %
            
            $
            42.25June
                5, 2007 (Class A)
            
            
            35,000
            
            
            
            4.92
            %
            
            
            3.00
            
            
            
            32.38
            %
            
            
            0
            %
            
            $
            25.19June
                5, 2007 (Class B)
            
            
            5,000
            
            
            
            4.92
            %
            
            
            3.00
            
            
            
            32.38
            %
            
            
            0
            %
            
            $
            23.35





The
      expected stock price volatility was calculated based on an analysis of the
      historical stock price volatility of our shares and shares of our peers for
      the
      preceding 6.25 or 3.00-year period.  We consider this basis to
      represent the best indicator of expected volatility over the life of the
      option.  The expected dividend yield for these grants was assumed to
      be 0%.  The weighted average fair value of all the grants made in the
      nine months ended September 30, 2007 was US$ 29.08 per option.  In
      accordance with SFAS 123(R), the fair value of the option grants made in the
      nine months ended September 30, 2007 less expected forfeitures of US$ 1.5
      million is being recognized as an expense in the consolidated statement of
      operations over the requisite service period of the award.





A
      summary
      of option activity for the nine months ended September 30, 2007 is presented
      below:





**Shares**
            
            
            **Weighted
                Average Exercise Price per Share**
            
            
            **Weighted
                Average Remaining Contractual Term (years)**
            
            
            **Aggregate
                Intrinsic Value**Outstanding
                at December 31, 2006
            
            
            1,288,575
            
            
            $
            35.51
            
            
            
            7.45
            
            
            $
            44,443Granted
            
            
            52,500
            
            
            
            89.77Exercised
            
            
            (274,583
            )
            
            
            12.66Forfeited
            
            
            (21,625
            )
            
            
            50.85Expired
            
            
            (20,000
            )
            
            
            23.00**Outstanding
                at September 30, 2007**
            
            ****
            **1,024,867**
            
            
            **$**
            **44.33**
            
            
            ****
            **7.06**
            
            
            **$**
            **48,569**Vested
                or expected to vest at September 30, 2007
            
            
            954,951
            
            
            
            43.63
            
            
            
            9.38
            
            
            
            45,914**Exercisable
                at September 30, 2007**
            
            ****
            **440,325**
            
            
            **$**
            **24.68**
            
            
            ****
            **6.56**
            
            
            **$**
            **27,102**





The
      exercise of stock options is expected to generate a net operating loss
      carryforward in our Delaware subsidiary of US$ 12.2 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 tax payable.





The
      aggregate intrinsic value (the difference between the stock price on the last
      day of trading of the third 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 September 30, 2007.  This amount changes based on
      the fair value of our Common Stock.  The total intrinsic value of
      options exercised during the nine months ended September 30, 2007 and 2006,
      respectively, was US$ 19.2 million and US$ 8.4 million,
      respectively.  As of September 30, 2007, there was US$ 12.0 million of
      total unrecognized compensation expense related to options.  The
      expense is expected to be recognized over a weighted average period of 1.5
      years.  Proceeds received from the exercise of stock options was US$
      3.5 million and US$ 3.6 million for the nine months ended September 30, 2007
      and
      2006, respectively.





*Page
            28*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**15.  EARNINGS
      PER SHARE**





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





**For
                the Three Months**
              **Ended
                September 30,**
            
            
            **For
                the Nine Months**
              **Ended
                September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Net
                income / (loss) available for common shareholders**
            
            $
            (18,763
            )
            
            $
            3,934
            
            
            $
            15,577
            
            
            $
            (5,808
            )**Weighted
                average outstanding shares of common stock
                (000’s)**
            
            
            41,489
            
            
            
            40,651
            
            
            
            41,077
            
            
            
            39,792Dilutive
                effect of employee stock options (000’s)
            
            
            -
            
            
            
            537
            
            
            
            476
            
            
            
            -**Common
                stock and common stock equivalents (000’s)**
            
            
            41,489
            
            
            
            41,188
            
            
            
            41,553
            
            
            
            39,792**Net
                income / (loss) per share:**Basic
            
            $
            (0.45
            )
            
            $
            0.09
            
            
            $
            0.38
            
            
            $
            (0.14
            )Diluted
            
            $
            (0.45
            )
            
            $
            0.09
            
            
            $
            0.37
            
            
            $
            (0.14
            )





At
      September 30, 2007, 228,500 (2006: 407,000) 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 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 on assets or
                investments).





*Page
            29*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





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 and nine months ended
      September 30, 2007 and 2006 for condensed consolidated statement of operations
      data and as at September 30, 2007 and December 31, 2006 for condensed
      consolidated balance sheet data:








**For
                the Three Months Ended September 30,****Segment
                Net Revenues (1)**
            
            
            **Segment
                EBITDA****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Country:**Croatia
                (NOVA TV)
            
            $
            7,055
            
            
            $
            4,288
            
            
            $
            (2,981
            )
            
            $
            (4,558
            )Czech
                Republic (TV NOVA, GALAXIE SPORT)
            
            
            51,140
            
            
            
            40,141
            
            
            
            25,989
            
            
            
            17,234Romania
                (2)
            
            
            44,412
            
            
            
            29,298
            
            
            
            19,486
            
            
            
            11,719Slovak
                Republic (MARKIZA TV)
            
            
            20,286
            
            
            
            13,895
            
            
            
            5,544
            
            
            
            2,408Slovenia
                (POP TV, KANAL A)
            
            
            11,545
            
            
            
            9,101
            
            
            
            854
            
            
            
            1,225Ukraine
                (STUDIO 1+1)
            
            
            39,582
            
            
            
            15,578
            
            
            
            16,599
            
            
            
            (838
            )Ukraine
                (KINO, CITI)
            
            
            816
            
            
            
            181
            
            
            
            (1,339
            )
            
            
            (1,182
            )**Total
                segment data**
            
            **$**
            **174,836**
            
            
            **$**
            **112,482**
            
            
            **$**
            **64,152**
            
            
            **$**
            **26,008**





**Reconciliation
      to condensed consolidated statement of operations:**




**Consolidated
                net revenues / (loss) / income before provision for income taxes,
                minority
                interest and discontinued operations**
            
            **$**
            **174,836**
            
            
            **$**
            **112,482**
            
            
            **$**
            **(14,121**
            **)**
            
            **$**
            **1,784**Corporate
                operating costs
            
            
            -
            
            
            
            -
            
            
            
            13,839
            
            
            
            8,342Depreciation
                of station property, plant and equipment
            
            
            -
            
            
            
            -
            
            
            
            8,768
            
            
            
            6,080Amortization
                of broadcast licenses and other intangibles
            
            
            -
            
            
            
            -
            
            
            
            6,595
            
            
            
            5,015Interest
                income
            
            
            -
            
            
            
            -
            
            
            
            (1,180
            )
            
            
            (1,554
            )Interest
                expense
            
            
            -
            
            
            
            -
            
            
            
            11,883
            
            
            
            11,066Foreign
                currency exchange loss/(gain), net
            
            
            -
            
            
            
            -
            
            
            
            23,300
            
            
            
            (6,018
            )Change
                in fair value of derivatives
            
            
            -
            
            
            
            -
            
            
            
            8,555
            
            
            
            881Other
                income
            
            
            -
            
            
            
            -
            
            
            
            6,513
            
            
            
            412**Total
                segment data**
            
            **$**
            **174,836**
            
            
            **$**
            **112,482**
            
            
            **$**
            **64,152**
            
            
            **$**
            **26,008**





(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.





*Page
            30*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**For
                the Nine Months Ended September 30,****Segment
                Net Revenues (1)**
            
            
            **Segment
                EBITDA****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Country:**Croatia
                (NOVA TV)
            
            $
            24,701
            
            
            $
            13,745
            
            
            $
            (9,800
            )
            
            $
            (11,639
            )Czech
                Republic (TV NOVA, GALAXIE SPORT)
            
            
            183,203
            
            
            
            137,002
            
            
            
            99,251
            
            
            
            59,569Romania
                (2)
            
            
            135,978
            
            
            
            96,938
            
            
            
            57,152
            
            
            
            39,756Slovak
                Republic (MARKIZA TV)
            
            
            68,615
            
            
            
            45,147
            
            
            
            23,012
            
            
            
            9,258Slovenia
                (POP TV, KANAL A)
            
            
            44,309
            
            
            
            34,883
            
            
            
            12,243
            
            
            
            10,688Ukraine
                (STUDIO 1+1)
            
            
            80,358
            
            
            
            62,117
            
            
            
            14,794
            
            
            
            16,183Ukraine
                (KINO, CITI) (3)
            
            
            1,868
            
            
            
            754
            
            
            
            (5,511
            )
            
            
            (1,736
            )**Total
                segment data**
            
            **$**
            **539,032**
            
            
            **$**
            **390,586**
            
            
            **$**
            **191,141**
            
            
            **$**
            **122,079**





**Reconciliation
      to condensed consolidated statement of operations:**




**Consolidated
                net revenues / income before provision for income taxes, minority
                interest, equity in income of unconsolidated affiliates and discontinued
                operations**
            
            **$**
            **539,032**
            
            
            **$**
            **388,825**
            
            
            **$**
            **44,067**
            
            
            **$**
            **9,595**Corporate
                operating costs
            
            
            -
            
            
            
            -
            
            
            
            30,087
            
            
            
            24,019Depreciation
                of station property, plant and equipment
            
            
            -
            
            
            
            -
            
            
            
            23,347
            
            
            
            17,841Amortization
                of broadcast licenses and other intangibles
            
            
            -
            
            
            
            -
            
            
            
            16,922
            
            
            
            13,967Impairment
                charge
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            748Unconsolidated
                equity affiliates (4)
            
            
            -
            
            
            
            1,761
            
            
            
            -
            
            
            
            (1,283
            )Interest
                income
            
            
            -
            
            
            
            -
            
            
            
            (4,326
            )
            
            
            (4,748
            )Interest
                expense
            
            
            -
            
            
            
            -
            
            
            
            42,717
            
            
            
            32,921Foreign
                currency exchange loss, net
            
            
            -
            
            
            
            -
            
            
            
            28,552
            
            
            
            25,469Change
                in fair value of derivatives
            
            
            -
            
            
            
            -
            
            
            
            (3,497
            )
            
            
            2,757Other
                expense
            
            
            -
            
            
            
            -
            
            
            
            13,272
            
            
            
            793**Total
                segment data**
            
            **$**
            **539,032**
            
            
            **$**
            **390,586**
            
            
            **$**
            **191,141**
            
            
            **$**
            **122,079**





(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
            31*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**For
                the Three Months**
              **Ended
                September 30,**
            
            
            **For
                the Nine Months**
              **Ended
                September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****Depreciation
                of station property, plant and equipment and amortization of broadcast
                licenses and other intangibles:**Croatia
            
            $
            918
            
            
            $
            793
            
            
            $
            2,650
            
            
            $
            2,224Czech
                Republic
            
            
            7,187
            
            
            
            5,957
            
            
            
            20,337
            
            
            
            17,365Romania
            
            
            2,703
            
            
            
            1,659
            
            
            
            6,630
            
            
            
            4,023Slovak
                Republic
            
            
            2,350
            
            
            
            791
            
            
            
            4,484
            
            
            
            3,139Slovenia
            
            
            1,212
            
            
            
            952
            
            
            
            3,308
            
            
            
            2,492Ukraine
                (STUDIO 1+1)
            
            
            792
            
            
            
            821
            
            
            
            2,336
            
            
            
            2,323Ukraine
                (KINO, CITI)
            
            
            201
            
            
            
            122
            
            
            
            524
            
            
            
            419**Total**
            
            **$**
            **15,363**
            
            
            **$**
            **11,095**
            
            
            **$**
            **40,269**
            
            
            **$**
            **31,985**





**Reconciliation
      to condensed consolidated statement of operations:**




Unconsolidated
                equity affiliates
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (177
            )**Total
                consolidated depreciation and amortization**
            
            **$**
            **15,363**
            
            
            **$**
            **11,095**
            
            
            **$**
            **40,269**
            
            
            **$**
            **31,808**Represented
                as follows:Depreciation
                of station property, plant & equipment
            
            
            8,768
            
            
            
            6,080
            
            
            
            23,347
            
            
            
            17,841Amortization
                of broadcast licenses and other intangibles
            
            
            6,595
            
            
            
            5,015
            
            
            
            16,922
            
            
            
            13,967








**Total
                assets (1):**
            
            **September 30,**
              **2007**
            
            
            **December 31,**
              **2006**Croatia
            
            $
            35,640
            
            
            $
            30,394Czech
                Republic
            
            
            1,290,692
            
            
            
            1,200,894Romania
            
            
            301,132
            
            
            
            206,850Slovak
                Republic
            
            
            190,542
            
            
            
            86,872Slovenia
            
            
            79,168
            
            
            
            67,919Ukraine
                (STUDIO 1+1)
            
            
            89,442
            
            
            
            75,020Ukraine
                (KINO, CITI)
            
            
            18,481
            
            
            
            13,293**Total
                segment assets**
            
            **$**
            **2,005,097**
            
            
            **$**
            **1,681,242****Reconciliation
                to condensed consolidated balance sheets:**Corporate
            
            
            162,440
            
            
            
            137,758**Total
                assets**
            
            **$**
            **2,167,537**
            
            
            **$**
            **1,819,000**





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





*Page
            32*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





**Long-lived
                assets (1):**
            
            **September 30,**
              **2007**
            
            
            **December 31,**
              **2006**Croatia
            
            $
            9,215
            
            
            $
            6,804Czech
                Republic
            
            
            51,440
            
            
            
            28,002Romania
            
            
            38,493
            
            
            
            32,312Slovak
                Republic
            
            
            24,699
            
            
            
            19,498Slovenia
            
            
            17,788
            
            
            
            15,595Ukraine
                (STUDIO 1+1)
            
            
            7,402
            
            
            
            7,965Ukraine
                (KINO, CITI)
            
            
            4,459
            
            
            
            3,674**Total
                long-lived assets**
            
            **$**
            **153,496**
            
            
            **$**
            **113,850****Reconciliation
                to condensed consolidated balance sheets:**Corporate
            
            
            1,500
            
            
            
            1,955**Total
                long-lived assets**
            
            **$**
            **154,996**
            
            
            **$**
            **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
                September 30,**
            
            
            **For
                the Nine Months**
              **Ended
                September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Tax
                on disposal of discontinued operations
            
            
            -
            
            
            
            (2,333
            )
            
            
            -
            
            
            
            (4,863
            )**Net
                loss from discontinued operations**
            
            **$**
            **-**
            
            
            **$**
            **(2,333**
            **)**
            
            **$**
            **-**
            
            
            **$**
            **(4,863**
            **)**





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
      September 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 (charge of US$ 2.3
      million for the three months ended September 30, 2006), and a charge of US$
      nil
      (charge of US$ 4.9 million for the nine months ended September 30, 2006) through
      discontinued operations for the three months and nine months ended September
      30,
      2007, respectively.





*Page
            33*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except share and 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
      September 30, 2007 we had the following commitments in respect of future
      programming, including contracts signed with license periods starting after
      the
      balance sheet date:





**September 30,**
              **2007**Croatia
            
            $
            12,245Czech
                Republic
            
            
            46,697Romania
            
            
            36,489Slovak
                Republic
            
            
            10,497Slovenia
            
            
            4,221Ukraine
                (STUDIO 1+1)
            
            
            13,077Ukraine
                (KINO, CITI)
            
            
            192**Total**
            
            **$**
            **123,418**





Of
      the
      amount shown in the table above, US$ 106.6 million is payable within one
      year.





*Page
            34*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





*b)
      Operating Lease Commitments*





For
      the
      nine months ended September 30, 2007 and 2006 we incurred aggregate rent on
      all
      facilities of US$ 8.7 million and US$ 7.0 million,
      respectively.  Future minimum operating lease payments at September
      30, 2007 for non-cancelable operating leases with remaining terms in excess
      of
      one year (net of amounts to be recharged to third parties) are payable as
      follows:





**September 30,**
              **2007**2007
            
            $
            5932008
            
            
            2,0882009
            
            
            1,1592010
            
            
            9252011
            
            
            3942012
                and thereafter
            
            
            -**Total**
            
            **$**
            **5,159**





*c)
      Acquisition of Minority Shareholdings in Romania*





Mr.
      Sarbu
      has the right to sell to us the remaining shareholding in Pro TV and
      MPI  that he holds personally 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.  Mr. Sarbu’s right to put his remaining shareholding to us is
      exercisable from November 12, 2009, provided that we have not enforced a pledge
      over this shareholding which Mr. Sarbu granted as security for our right to
      put
      to him our shareholding in Media Pro. As at September 30, 2007, we consider
      the
      fair value of Mr. Sarbu’s 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
      September 30, 2007, we provided US$ 3.3 million (US$ 1.5 million in non-current
      liabilities and US$ 1.8 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
            35*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





*Czech
      Republic - Factoring of Trade Receivables*





CET
      21
      has a working capital credit facility of CZK 250 million (approximately US$
      12.8
      million) with CS. This facility is secured by a pledge of receivables under
      the
      factoring agreement with Factoring Ceska Sporitelna a.s.





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. (“Global
      Communications”) claiming approximately HRK 53.0 million (approximately US$ 10.3
      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 (“AGB”), 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$ 13.2 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
      engaging in settlement negotiations with Global Communications. Any such
      settlement would also include a settlement of the former shareholder dispute
      described below.





*Page
            36*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except share and 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$ 114.2 million). The first hearing was held on September 24, 2007, and the
      judge denied the claim without permitting any arguments, evidence or witnesses.
      We await the issuance of the written decision.





*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. Our appeal against this decision was denied on May
      8,
      2007. 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
      are
      engaged in settlement negotiations with the former shareholders of
      OK.





*Page
            37*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Tabular
      amounts in US$ 000’s, except share and 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$ 0.1 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. At a hearing on September 4, 2007, the lower court denied the
      claim
      of Mrs. Meglic and ordered her to pay MMTV’s costs of litigation. Mrs. Meglic
      filed an appeal on September 24, 2007.





*Slovak Republic*





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





*Ukraine*





On
      December 23, 2005, we initiated international arbitration proceedings against
      our partners Alexander Rodnyansky and Boris Fuchsmann to enforce our contractual
      rights and compel a restructuring of the ownership of Studio 1+1 in order to
      permit us to hold a 60.0% interest in Studio 1+1.  Following the
      adoption of an amendment to the Ukraine Media Law in March 2006, our partners
      acknowledged their obligation to structure had ripened; and in September 2006,
      they entered into agreements to effect a restructuring. On November 9, 2006,
      the
      arbitration proceedings were suspended by mutual consent to permit the parties
      to implement the restructuring.   On August 30, 2007, we
      succeeded in registering our Ukrainian subsidiary UMS as the owner of 42.0%
      of
      Studio 1+1.  Together with our 18.0% indirect interest in Studio 1+1
      held through Inter-Media, we now have a 60% interest in Studio 1+1.





On
        September 4, 2007, Mr. Fuchsmann and Mr. Rodnyansky sought to file a cross
        action in these international arbitration proceedings to compel the transfer
        by
        us of an interest in Ukrpromtorg to Mr. Fuchsmann and Mr.Rodnyansky. They
        allege
        that they are entitled to participate on a pro rata basis in our investment
        in
        Ukrpromtorg. This claim is based on the terms of our shareholders’ agreement
        pursuant to which we and our partners have a limited right to participate
        on a
        pro rata basis in  investment opportunities in the Ukrainian media
        sector undertaken by the other.   In our response to this cross
        action, we intend to deny any breach of our shareholders’ agreement and request
        that the tribunal hold the cross action inadmissible in the current arbitration
        proceedings, whose subject matter is the restructuring, and terminate these
        proceedings.
  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
            38*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





The
      following summarizes the expiry dates of our television broadcasting
      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 November 2007 to March
                  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 used for the KINO
                  and CITI channels expire on dates ranging from June 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**





On
      October 5, 2007, we entered into a framework agreement with Igor Kolomoisky
      and
      certain parties related to him.  Under the framework agreement, Mr.
      Kolomoisky has represented to CME that he has secured a valid right to purchase
      a 21.665% interest in each of IMS and Innova from Boris Fuchsmann and a 15.164%
      interest in Studio 1+1 from Alexander Rodnyansky (collectively, the “Optioned
      Interests”).  We currently hold, directly and indirectly, a 60%
      interest in each of IMS, Innova and Studio 1+1, which are the principal entities
      through which the operations of Studio 1+1 are conducted.





This
      framework agreement establishes a procedure by which we consent to the exercise
      of such rights by Mr. Kolomoisky in order to permit Torcensta Holding Ltd
      (“Torcensta”) to acquire, directly or indirectly, the Optioned Interests. Mr.
      Kolomoisky is the sole beneficial owner of Torcensta. Following the exercise
      of
      these option rights by Mr. Kolomoisky and the acquisition of the Optioned
      Interests by Torcensta, we will have the right to acquire Torcensta from
      Mr. Kolomoisky for consideration in cash or shares of our Class A Common
      Stock in an amount that will not exceed US$ 140 million (as described below).
      We
      have granted such consent and Mr. Kolomoisky has sought to exercise his purchase
      rights. It is our understanding that our partners have not formally acknowledged
      the exercise by Mr. Kolomoisky of this purchase right. Accordingly, the timing
      of the acquisition of the Optioned Interests by Torcensta is very
      uncertain.





*Page
            39*
 *Index*





**CENTRAL
      EUROPEAN MEDIA ENTERPRISES LTD.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


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


**(Unaudited)**





On
      October 30, 2007, we entered into a purchase agreement with Mr. Kolomoisky
      and
      Torcensta and a pledge agreement with Mr. Kolomoisky and the two nominee
      shareholders of Torcensta in order to implement certain terms of the framework
      agreement.





Under
      the
      purchase agreement, we will acquire 100% of Torcensta following its becoming
      the
      owner of the Optioned Interests and the satisfaction of other conditions to
      closing .  In the event we exercise such option, the consideration
      shall be an amount equal to the lesser of (i) US$ 140.0 million and (ii) 4%
      of
      the number of our outstanding shares of Class A Common Stock at the time the
      Optioned Interests are acquired by Torcensta (using a weighted average trading
      price), provided, that in the event the lesser amount is US$ 140.0 million,
      Mr.
      Kolomoisky will have the option of receiving his consideration in cash or shares
      of our Class A Common Stock (using the weighted average trading
      price).





Under
      the
      pledge agreement, Mr. Kolomoisky has pledged his beneficial interest in
      Torcensta and the two nominee shareholders will pledge their shares in Torcensta
      as security for the obligation under the purchase agreement to transfer
      Torcensta to us.





*Page
            40*
 *Index*





**Item
      2.  Management'sDiscussion 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 the
      competitive market dynamics and political environment in Ukraine, the impact
      of
      legal proceedings in Croatia, 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, regulatory, political 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.





*Page
            41*
 *Index*





***II.
      Executive Summary***





*Continuing
      Operations*





The
      following table provides a summary of our consolidated results for the three
      and
      nine months ended September 30, 2007 and 2006:





**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Net
                revenues
            
            $
            174,836
            
            
            $
            112,482
            
            
            *$*
            *62,354*Operating
                income
            
            
            34,950
            
            
            
            6,571
            
            
            **
            *28,379*Net
                (loss) / income from continuing operations
            
            
            (18,763
            )
            
            
            6,267
            
            
            **
            *(25,030*
            *)***Net
                (loss) / income**
            
            **$**
            **(18,763**
            **)**
            
            **$**
            **3,934**
            
            
            ***$***
            ***(22,697***
            ***)*****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Net
                revenues
            
            $
            539,032
            
            
            $
            388,825
            
            
            *$*
            *150,207*Operating
                income
            
            
            120,785
            
            
            
            66,787
            
            
            **
            *53,998*Net
                income / (loss) from continuing operations
            
            
            15,577
            
            
            
            (945
            )
            
            **
            *16,522***Net
                income / (loss)**
            
            **$**
            **15,577**
            
            
            **$**
            **(5,808**
            **)**
            
            ***$***
            ***21,385***





The
      principal events for the three months ended September 30, 2007 are as
      follows:





·
            In
                the three months ended September 30, 2007, we reported growth in
                Segment
                Net Revenues of 55% and Segment EBITDA of 147% compared to the three
                months ended September 30, 2006, delivering a Segment EBITDA margin
                of 37%
                compared to the 23% margin reported in the three months ended September
                30, 2006 (Segment EBITDA is defined and reconciled to our consolidated
                results in Part I, Item 1, Note
                16).





·
            Each
                of our stations reported revenue growth in excess of 25% compared
                to the
                three months ended September 30, 2006, with particularly strong growth
                reported in Ukraine as a result of the level of political advertising
                ahead of the parliamentary elections on September 30,
                2007.





·
            On
                July 13, 2007, we acquired an additional 20.0% interest in Markiza
                for
                aggregate consideration of SKK 1.9 billion (approximately US$ 78.5
                million) and now own 100.0% of our Slovak Republic
                operations.





·
            On
                August 22, 2007, we entered into a new facility with EBRD, ING and
                CS in
                the amount of EUR 50.0 million, while at the same time reducing the
                interest payable on our existing EUR 100.0 facility to EURIBOR
                +1.625% from the previous EURIBOR +
                2.75%.





·
            On
                August 30, 2007 we issued 1,275,227 shares of our Class A Common
                Stock to
                Igor Kolomoisky for cash consideration of US$ 110.0
                million.  In connection with this investment,
                Mr. Kolomoisky was appointed to our Board of
                Directors.





·
            On
                August 30, 2007 we completed the registration of a 42% direct ownership
                interest in Studio 1+1  via a Ukrainian subsidiary company,
                thereby securing control over the Studio 1+1 broadcasting
                licenses.





*Page
            42*
 *Index*





·
            On
                September 10, 2007, Standard & Poor’s upgraded our corporate credit
                rating from BB- to BB.





Events
      that occurred subsequent to September 30, 2007 have been as
      follows:





·
            On
                October 17, 2007, we appointed Adrian Sarbu as our Chief Operating
                Officer.




*Future
      Developments*





As
      our
      markets mature and move towards digitalization, we anticipate more intense
      competition for audience share and advertising spending from other incumbent
      terrestrial broadcasters and, to a lesser extent, from local cable, satellite
      and digital terrestrial broadcasters as these develop.  We believe the
      strength of our brands and prudent investments in production programming and
      technology will allow us to manage effectively such increased
      competition.  In the near term we intend to continue to pursue further
      improvements in the performance of our existing operations, including through
      increased investment in local production, in order to maximize the potential
      for
      organic growth. In Croatia, we believe that our strategy and investments are
      beginning to bring consistent positive results, creating a solid foundation
      for
      Nova TV (Croatia) to reach break even before the end of 2008 and in 2009 on
      a
      full year basis. In Ukraine, we expect continued strong market growth over
      the
      medium term. Our performance in the fourth quarter of 2007 will depend on our
      ability to generate GRPs and sustained advertising spending following the
      September parliamentary elections.





Our
      priorities include:





·
            supporting
                the growth of television advertising spending in our markets through
                our
                existing operations and through the launch or acquisition of additional
                channels to expand our advertising inventory and target niche
                audiences;





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





·
            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 the remainder of
      2007:





·
            additional
                investment in Russian series and local programming by STUDIO 1+1,
                which
                have driven ratings historically, and in our other Ukraine channels
                KINO
                and CITI, which were launched in
                2006;





·
            further
                development of our non-broadcast activities, particularly in new
                media;





·
            acquisition
                of additional shares in our operations in Ukraine if the opportunity
                arises; and





·
            continuing
                to invest in our Croatia
                operations.





*Page
            43*
 *Index*





***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-US 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 and nine months ended September 30,
      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
            44*
 *Index*





**SEGMENT
      FINANCIAL INFORMATION**





**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            ****
            **(1**
            **)**
            
            **2006**
            
            
            ****
            **(1**
            **)****Segment
                Net Revenue**Croatia
                (NOVA TV)
            
            $
            7,055
            
            
            
            4
            %
            
            $
            4,288
            
            
            
            4
            %Czech
                Republic (TV NOVA, GALAXIE SPORT)
            
            
            51,140
            
            
            
            29
            %
            
            
            40,141
            
            
            
            36
            %Romania
                (2)
            
            
            44,412
            
            
            
            25
            %
            
            
            29,298
            
            
            
            26
            %Slovak
                Republic (MARKIZA TV)
            
            
            20,286
            
            
            
            12
            %
            
            
            13,895
            
            
            
            12
            %Slovenia
                (POP TV, KANAL A)
            
            
            11,545
            
            
            
            7
            %
            
            
            9,101
            
            
            
            8
            %Ukraine
                (STUDIO 1+1)
            
            
            39,582
            
            
            
            23
            %
            
            
            15,578
            
            
            
            14
            %Ukraine
                (KINO, CITI)
            
            
            816
            
            
            
            -
            
            
            
            181
            
            
            
            -**Total
                Segment Net Revenues**
            
            **$**
            **174,836**
            
            
            ****
            **100**
            **%**
            
            **$**
            **112,482**
            
            
            ****
            **100**
            **%****Represented
                by:**Broadcast
                operations
            
            $
            173,991
            
            
            
            100
            %
            
            $
            111,931
            
            
            
            100
            %Non-broadcast
                operations
            
            
            845
            
            
            
            -
            
            
            
            551
            
            
            
            -**Total
                Segment Revenues**
            
            **$**
            **174,836**
            
            
            ****
            **100**
            **%**
            
            **$**
            **112,482**
            
            
            ****
            **100**
            **%****Segment
                EBITDA**Croatia
                (NOVA TV)
            
            $
            (2,981
            )
            
            
            (5
            )%
            
            $
            (4,558
            )
            
            
            (17
            )%Czech
                Republic (TV NOVA, GALAXIE SPORT)
            
            
            25,989
            
            
            
            41
            %
            
            
            17,234
            
            
            
            66
            %Romania
                (2)
            
            
            19,486
            
            
            
            30
            %
            
            
            11,719
            
            
            
            45
            %Slovak
                Republic (MARKIZA TV)
            
            
            5,544
            
            
            
            9
            %
            
            
            2,408
            
            
            
            9
            %Slovenia
                (POP TV, KANAL A)
            
            
            854
            
            
            
            1
            %
            
            
            1,225
            
            
            
            5
            %Ukraine
                (STUDIO 1+1)
            
            
            16,599
            
            
            
            26
            %
            
            
            (838
            )
            
            
            (3
            )%Ukraine
                (KINO, CITI)
            
            
            (1,339
            )
            
            
            (2
            )%
            
            
            (1,182
            )
            
            
            (5
            )%**Total
                Segment EBITDA**
            
            **$**
            **64,152**
            
            
            ****
            **100**
            **%**
            
            **$**
            **26,008**
            
            
            ****
            **100**
            **%****Represented
                by:**Broadcast
                operations
            
            $
            65,805
            
            
            
            103
            %
            
            $
            26,119
            
            
            
            100
            %Non-broadcast
                operations
            
            
            (1,653
            )
            
            
            (3
            )%
            
            
            (111
            )
            
            
            -**Total
                Segment EBITDA**
            
            **$**
            **64,152**
            
            
            ****
            **100**
            **%**
            
            **$**
            **26,008**
            
            
            ****
            **100**
            **%****Segment
                EBITDA Margin (3)**
            
            ****
            **37**
            **%**
            
            
            
            
            
            ****
            **23**
            **%**





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





*Page
            45*
 *Index*





**SEGMENT
      FINANCIAL INFORMATION**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            ****
            **(1**
            **)**
            
            **2006**
            
            
            ****
            **(1**
            **)****Segment
                Net Revenue**Croatia
                (NOVA TV)
            
            $
            24,701
            
            
            
            5
            %
            
            $
            13,745
            
            
            
            3
            %Czech
                Republic (TV NOVA)
            
            
            183,203
            
            
            
            34
            %
            
            
            137,002
            
            
            
            35
            %Romania
                (2)
            
            
            135,978
            
            
            
            25
            %
            
            
            96,938
            
            
            
            25
            %Slovak
                Republic (MARKIZA TV) (3)
            
            
            68,615
            
            
            
            13
            %
            
            
            45,147
            
            
            
            12
            %Slovenia
                (POP TV, KANAL A)
            
            
            44,309
            
            
            
            8
            %
            
            
            34,883
            
            
            
            9
            %Ukraine
                (STUDIO 1+1)
            
            
            80,358
            
            
            
            15
            %
            
            
            62,117
            
            
            
            16
            %Ukraine
                (KINO, CITI) (4)
            
            
            1,868
            
            
            
            -
            
            
            
            754
            
            
            
            -**Total
                Segment Net Revenues**
            
            **$**
            **539,032**
            
            
            ****
            **100**
            **%**
            
            **$**
            **390,586**
            
            
            ****
            **100**
            **%****Represented
                by:**Broadcast
                operations
            
            $
            536,964
            
            
            
            100
            %
            
            $
            388,906
            
            
            
            100
            %Non-broadcast
                operations
            
            
            2,068
            
            
            
            -
            
            
            
            1,680
            
            
            
            -**Total
                Segment Revenues**
            
            **$**
            **539,032**
            
            
            ****
            **100**
            **%**
            
            **$**
            **390,586**
            
            
            ****
            **100**
            **%****Segment
                EBITDA**Croatia
                (NOVA TV)
            
            $
            (9,800
            )
            
            
            (5
            )%
            
            $
            (11,639
            )
            
            
            (10
            )%Czech
                Republic (TV NOVA)
            
            
            99,251
            
            
            
            52
            %
            
            
            59,569
            
            
            
            49
            %Romania
                (2)
            
            
            57,152
            
            
            
            30
            %
            
            
            39,756
            
            
            
            32
            %Slovak
                Republic (MARKIZA TV) (3)
            
            
            23,012
            
            
            
            12
            %
            
            
            9,258
            
            
            
            8
            %Slovenia
                (POP TV, KANAL A)
            
            
            12,243
            
            
            
            6
            %
            
            
            10,688
            
            
            
            9
            %Ukraine
                (STUDIO 1+1)
            
            
            14,794
            
            
            
            8
            %
            
            
            16,183
            
            
            
            13
            %Ukraine
                (KINO, CITI) (4)
            
            
            (5,511
            )
            
            
            (3
            )%
            
            
            (1,736
            )
            
            
            (1
            )%**Total
                Segment EBITDA**
            
            **$**
            **191,141**
            
            
            ****
            **100**
            **%**
            
            **$**
            **122,079**
            
            
            ****
            **100**
            **%****Represented
                by:**Broadcast
                operations
            
            $
            193,538
            
            
            
            101
            %
            
            $
            122,035
            
            
            
            100
            %Non-broadcast
                operations
            
            
            (2,397
            )
            
            
            (1
            )%
            
            
            44
            
            
            
            -**Total
                Segment EBITDA**
            
            **$**
            **191,141**
            
            
            ****
            **100**
            **%**
            
            **$**
            **122,079**
            
            
            ****
            **100**
            **%****Segment
                EBITDA Margin (5)**
            
            ****
            **35**
            **%**
            
            
            
            
            
            ****
            **31**
            **%**





(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
      Revenue.





*Page
            46*
 *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 (“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 GRPs 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 net of rebates at the time the relevant advertisement is
      broadcast.





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 changes can be attributable
      to combinations of price fluctuations, different 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.





*Page
            47*
 *Index*





**(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
      nine months ended September 30, 2007, national all day audience share for NOVA
      TV (Croatia) grew to 18.7% compared to 14.4% in the nine months ended September
      30, 2006.  The major competitors are the two state-owned channels,
      HRT1 and HRT2, with national all day audience shares for the nine months ended
      September 30, 2007 of 26.3% and 18.1%, respectively, and privately owned
      broadcaster RTL with 27.6%.





Prime
      time audience share for NOVA TV (Croatia), which is our principal focus, grew
      from 16.2% in the nine months ended September 30, 2006 to 19.8% in the nine
      months ended September 30, 2007.  Our average prime time ratings
      increased from 6.8% to 7.1% over comparable periods, while prime time ratings
      for the whole market decreased from 42.3% in the nine months ended September
      30,
      2006, to 35.6% in the nine months ended September 30, 2007.





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006**





**CROATIA
                SEGMENT FINANCIAL INFORMATION****For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            5,308
            
            
            $
            3,022
            
            
            *$*
            *2,286*Non-spot
                revenues
            
            
            1,747
            
            
            
            1,266
            
            
            **
            *481***Segment
                Net Revenues**
            
            **$**
            **7,055**
            
            
            **$**
            **4,288**
            
            
            ***$***
            ***2,767*****Represented
                by:**Broadcast
                operations
            
            $
            6,976
            
            
            $
            4,284
            
            
            *$*
            *2,692*Non-broadcast
                operations
            
            
            79
            
            
            
            4
            
            
            **
            *75***Segment
                Net Revenues**
            
            **$**
            **7,055**
            
            
            **$**
            **4,288**
            
            
            ***$***
            ***2,767*****Segment
                EBITDA**
            
            **$**
            **(2,981**
            **)**
            
            **$**
            **(4,558**
            **)**
            
            ***$***
            ***1,577*****Represented
                by:**Broadcast
                operations
            
            $
            (3,002
            )
            
            $
            (4,512
            )
            
            *$*
            *1,510*Non-broadcast
                operations
            
            
            21
            
            
            
            (46
            )
            
            **
            *67***Segment
                EBITDA**
            
            **$**
            **(2,981**
            **)**
            
            **$**
            **(4,558**
            **)**
            
            ***$***
            ***1,577*****Segment
                EBITDA Margin**
            
            ****
            **(42**
            **)%**
            
            ****
            **(106**
            **)%**
            
            ******
            ***64***
            ***%***








·
            **Segment
                Net Revenues** for the three months ended September 30, 2007
                increased by US$ 2.8 million, or 65%, compared to the three months
                ended
                September 30, 2006.  In local currency, Segment Net Revenues
                increased by 52%.  Spot revenues increased by US$ 2.3 million,
                or 76%, as a result of significant increases in the volume of GRPs
                sold
                and the average revenue per rating point sold.  Non-spot
                revenues increased by US$ 0.5 million, or 38%, as a result of increased
                levels of sponsorship.





·
            **Segment
                EBITDA**for the three months ended September 30, 2007 was a loss
                of US$ 3.0 million compared to a loss of US$ 4.6 million in the three
                months ended September 30, 2006, an improvement of 35%.  In
                local currency, Segment EBITDA improved by
                40%.





*Page
            48*
 *Index*




Costs
      charged in arriving at Segment EBITDA for the three months ended September
      30,
      2007 increased by US$ 1.2 million, or 13%, compared to the three months ended
      September 30, 2006.  Cost of programming decreased by US$ 1.0 million,
      or 16%, due largely to the reclassification of the salary-related costs of
      production staff from cost of programming to operating costs in the three months
      ended September 30, 2006; excluding the impact of this change in classification,
      cost of programming increased by US$ 0.6 million, or 14%, primarily due to
      increased investment in programming to continue to grow
      ratings.  Other operating costs increased by US$ 1.7 million, or 316%,
      primarily due to the difference in classification described above; excluding
      the
      impact of this change in classification, other operating costs increased by
      US$
      0.1 million, or 4%.  Selling, general and administrative expenses
      increased by US$ 0.5 million, or 22%.





**Nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      2006**





**CROATIA
                SEGMENT FINANCIAL INFORMATION****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            18,812
            
            
            $
            10,773
            
            
            *$*
            *8,039*Non-spot
                revenues
            
            
            5,889
            
            
            
            2,972
            
            
            **
            *2,917***Segment
                Net Revenues**
            
            **$**
            **24,701**
            
            
            **$**
            **13,745**
            
            
            ***$***
            ***10,956*****Represented
                by:**Broadcast
                operations
            
            $
            24,592
            
            
            $
            13,741
            
            
            *$*
            *10,851*Non-broadcast
                operations
            
            
            109
            
            
            
            4
            
            
            **
            *105***Segment
                Net Revenues**
            
            **$**
            **24,701**
            
            
            **$**
            **13,745**
            
            
            ***$***
            ***10,956*****Segment
                EBITDA**
            
            **$**
            **(9,800**
            **)**
            
            **$**
            **(11,639**
            **)**
            
            ***$***
            ***1,839*****Represented
                by:**Broadcast
                operations
            
            $
            (9,769
            )
            
            $
            (11,593
            )
            
            *$*
            *1,824*Non-broadcast
                operations
            
            
            (31
            )
            
            
            (46
            )
            
            **
            *15***Segment
                EBITDA**
            
            **$**
            **(9,800**
            **)**
            
            **$**
            **(11,639**
            **)**
            
            ***$***
            ***1,839*****Segment
                EBITDA Margin**
            
            ****
            **(40**
            **)%**
            
            ****
            **(85**
            **)%**
            
            ******
            ***45***
            ***%***








·
            **Segment
                Net Revenues** for the nine months ended September 30, 2007
                increased by US$ 11.0 million, or 80%, compared to the nine months
                ended
                September 30, 2006.  In local currency, Segment Net Revenues
                increased by 67%.  Spot revenues increased by US$ 8.0 million,
                or 75%, as a result of a significant increase in the volume of GRPs
                sold,
                augmented by increased prices.  Non-spot revenues increased by
                US$ 2.9 million, or 98%, as a result of increased levels of
                sponsorship.





·
            **Segment
                EBITDA**for the nine months ended September 30, 2007 was a loss
                of
                US$ 9.8 million compared to a loss of US$ 11.6 million in the nine
                months
                ended September 30, 2006, an improvement of 16%.  In local
                currency, Segment EBITDA improved by
                22%.





Costs
      charged in arriving at Segment EBITDA for the nine months ended September 30,
      2007 increased by US$ 9.1 million, or 36%, compared to the nine months ended
      September 30, 2006.  Cost of programming increased by US$ 6.8 million,
      or 47%, due to increased investment in local productions and syndicated
      programming in line with our plan to grow audience share.  Other
      operating costs increased by US$ 0.9 million, or 15%, due to higher salary
      and
      wage costs, higher transmission costs as a result of increased transmitter
      coverage and also higher music rights costs.  Selling, general and
      administrative expenses increased by US$ 1.4 million, or 29%.





*Page
            49*
 *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.  State television has reduced the amount of
      airtime that can be devoted to commercial advertising to 0.5% in
      2007.





The
      national all day audience share of our channel, TV NOVA (Czech Republic), for
      the nine months ended September 30, 2007 was 39.8% compared to 41.5% for the
      nine months ended September 30, 2006.  The major competitors are the
      two state-owned channels CT1 and CT2, with national all day audience shares
      for
      the nine months ended September 30, 2007 of 22.6% and 8.2% respectively, and
      privately owned broadcaster TV Prima with a national all day audience share
      of
      19.8%.





Prime
      time audience share for the nine months ended September 30, 2007 remained in
      line with the nine months ended September 30, 2006 at 43.3%.  Our
      average prime time ratings decreased from 16.7% to 15.8% over comparable
      periods, while prime time ratings for the whole market decreased from 38.6%
      in
      the nine months ended September 30, 2006 to 36.4% in the nine months ended
      September 30, 2007, reflecting the extremely warm weather enjoyed by much of
      Europe in 2007.





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006**





**CZECH
                REPUBLIC SEGMENT FINANCIAL INFORMATION****For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            45,541
            
            
            $
            35,757
            
            
            *$*
            *9,784*Non-spot
                revenues
            
            
            5,599
            
            
            
            4,384
            
            
            **
            *1,215***Segment
                Net Revenues**
            
            **$**
            **51,140**
            
            
            **$**
            **40,141**
            
            
            ***$***
            ***10,999*****Represented
                by:**Broadcast
                operations
            
            $
            51,032
            
            
            $
            39,957
            
            
            *$*
            *11,075*Non-broadcast
                operations
            
            
            108
            
            
            
            184
            
            
            **
            *(76*
            *)***Segment
                Net Revenues**
            
            **$**
            **51,140**
            
            
            **$**
            **40,141**
            
            
            ***$***
            ***10,999*****Segment
                EBITDA**
            
            **$**
            **25,989**
            
            
            **$**
            **17,234**
            
            
            ***$***
            ***8,755*****Represented
                by:**Broadcast
                operations
            
            $
            26,258
            
            
            $
            17,202
            
            
            *$*
            *9,056*Non-broadcast
                operations
            
            
            (269
            )
            
            
            32
            
            
            **
            *(301*
            *)***Segment
                EBITDA**
            
            **$**
            **25,989**
            
            
            **$**
            **17,234**
            
            
            ***$***
            ***8,755*****Segment
                EBITDA Margin**
            
            ****
            **51**
            **%**
            
            ****
            **43**
            **%**
            
            ******
            ***8***
            ***%***








·
            **Segment
                Net Revenues** for the three months ended September 30, 2007
                increased by US$ 11.0 million, or 27%, compared to the three months
                ended
                September 30, 2006.  In local currency, Segment Net Revenues
                increased by 16%.  Spot revenues increased by US$ 9.8 million,
                or 27%, primarily due to increased average revenue per rating point
                sold,
                as well as small increase in the volume of GRPs sold. Non-spot revenue
                increased by US$ 1.2 million, or 28%, primarily due to increased
                sponsorship.





*Page
            50*
 *Index*





·
            **Segment
                EBITDA**for the three months ended September 30, 2007 increased
                by
                US$ 8.8 million, or 51%, compared to the three months ended September
                30,
                2006, resulting in an EBITDA margin of 51% compared to 43% in the
                three
                months ended September 30, 2006.  In local currency, Segment
                EBITDA increased by 36%.  Costs charged in arriving at Segment
                EBITDA for the three months ended September 30, 2007 increased by
                US$ 2.2
                million, or 10%, compared to the three months ended September 30,
                2006.  Cost of programming increased by US$ 2.6 million, or 23%,
                due to increased investment in both local productions and syndicated
                programming, particularly in July and August, in order to maintain
                market
                share.  Other operating costs decreased by US$ 0.7 million, or
                12%, due to lower salary and wage costs, partially offset by higher
                transmission costs as a result of increased transmitter coverage
                and also
                higher music rights costs.  Selling, general and administrative
                expenses increased by US$ 0.3 million, or 5%, primarily due to increased
                office running costs and marketing and research costs, partially
                offset by
                a reduction in consultancy fees.





**Nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      2006**





**CZECH
                REPUBLIC SEGMENT FINANCIAL INFORMATION****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            166,253
            
            
            $
            118,590
            
            
            *$*
            *47,663*Non-spot
                revenues
            
            
            16,950
            
            
            
            18,412
            
            
            **
            *(1,462*
            *)***Segment
                Net Revenues**
            
            **$**
            **183,203**
            
            
            **$**
            **137,002**
            
            
            ***$***
            ***46,201*****Represented
                by:**Broadcast
                operations
            
            $
            183,001
            
            
            $
            136,451
            
            
            *$*
            *46,550*Non-broadcast
                operations
            
            
            202
            
            
            
            551
            
            
            **
            *(349*
            *)***Segment
                Net Revenues**
            
            **$**
            **183,203**
            
            
            **$**
            **137,002**
            
            
            ***$***
            ***46,201*****Segment
                EBITDA**
            
            **$**
            **99,251**
            
            
            **$**
            **59,569**
            
            
            ***$***
            ***39,682*****Represented
                by:**Broadcast
                operations
            
            $
            100,017
            
            
            $
            59,521
            
            
            *$*
            *40,496*Non-broadcast
                operations
            
            
            (766
            )
            
            
            48
            
            
            **
            *(814*
            *)***Segment
                EBITDA**
            
            **$**
            **99,251**
            
            
            **$**
            **59,569**
            
            
            ***$***
            ***39,682*****Segment
                EBITDA Margin**
            
            ****
            **54**
            **%**
            
            ****
            **43**
            **%**
            
            ******
            ***11***
            ***%***








·
            **Segment
                Net Revenues** for the nine months ended September 30, 2007
                increased by US$ 46.2 million, or 34%, compared to the nine months
                ended
                September 30, 2006.  In local currency, Segment Net Revenues
                increased by 22%.  Spot revenues increased by US$ 47.7 million,
                or 40%, primarily due to an increase in the volume of GRPs sold,
                particularly in the first half as well as increased average revenue
                per
                rating point sold. Non-spot revenue decreased by US$ 1.5 million,
                or 8%,
                primarily due to a reduction in the number of shows generating voting
                revenue in the nine months ended September 30, 2007 compared to those
                programs broadcast in the nine months ended September 30, 2006 and
                a
                reduction in votes in the shows that were broadcast, partially offset
                by
                increased sponsorship.





*Page
            51*
 *Index*





·
            **Segment
                EBITDA**for the nine months ended September 30, 2007 increased by
                US$ 39.7 million, or 67%, compared to the nine months ended September
                30,
                2006, resulting in an EBITDA margin of 54% compared to 43% in the
                nine
                months ended September 30, 2006.  In local currency, Segment
                EBITDA increased by 52%.  Costs charged in arriving at Segment
                EBITDA for the nine months ended September 30, 2007 increased by
                US$ 6.5
                million, or 8%, compared to the nine months ended September 30,
                2006.  Cost of programming increased by US$ 2.7 million, or 6%,
                due to a combination of the impact of price inflation on foreign
                programming and increased investment in local
                productions.  Other operating costs increased by US$ 3.6
                million, or 19%, primarily due to increased accruals for
                performance-related bonus payments, as well as higher transmission
                costs
                as a result of increased transmitter coverage and also higher music
                rights
                costs.  Selling, general and administrative expenses increased
                by US$ 0.2 million, or 1%, due to increased office running costs
                and
                marketing and research costs, partially offset by a reduction in
                consultancy fees.








**(C)
      ROMANIA**





**Market
      Background:**We estimate that the television advertising
      market grew by approximately 32% - 37% in dollars during 2006.  We
      expect the television advertising market to show continued growth in the range
      of 30% to 40% in 2007.





The
      combined national all day audience share of PRO TV, ACASA and PRO CINEMA for
      the
      nine months ended September 30, 2007 was 22.2% compared to 24.6% for the nine
      months ended September 30, 2006.  On March 1, 2007, we acquired the
      license to broadcast SPORT.RO which had an all day audience share of 2.0% in
      the
      nine months ended September 30, 2007. We re-branded the channel SPORT.RO and
      re-launched it under its new name during April 2007.  The major
      competitors are TVR1 and ANTENNA, with national all day audience shares for
      the
      nine months ended September 30, 2007 of 12.3% and 4.6%, respectively, and
      privately owned broadcaster Antena 1 with 11.8%.





Prime
      time audience share for PRO TV, ACASA and PRO CINEMA decreased from 26.4% in
      the
      nine months ended September 30, 2006 to 23.4% in the nine months ended September
      30, 2007.  ACASA suffered a decline in share by 3.1%, as the
      popularity of our successful telenovellas has diminished following the decision
      by other competing stations to produce similar programs, while an increase
      in
      share for PRO CINEMA of 0.3% was offset by a 0.2% decrease in PRO
      TV.  Our average prime time ratings decreased from 9.9% to 8.2% over
      comparable periods, while prime time ratings for the whole market decreased
      from
      38.0% in the nine months ended September 30, 2006 to 35.0% in the nine months
      ended September 30, 2007, reflecting the unusually warm weather conditions
      as
      well as the increased popularity of other forms of entertainment.





*Page
            52*
 *Index*





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006**





**ROMANIA
                SEGMENT FINANCIAL INFORMATION****For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            41,146
            
            
            $
            27,239
            
            
            *$*
            *13,907*Non-spot
                revenues
            
            
            3,266
            
            
            
            2,059
            
            
            **
            *1,207***Segment
                Net Revenues**
            
            **$**
            **44,412**
            
            
            **$**
            **29,298**
            
            
            ***$***
            ***15,114*****Represented
                by:**Broadcast
                operations
            
            $
            44,326
            
            
            $
            29,298
            
            
            *$*
            *15,028*Non-broadcast
                operations
            
            
            86
            
            
            
            -
            
            
            **
            *86***Segment
                Net Revenues**
            
            **$**
            **44,412**
            
            
            **$**
            **29,298**
            
            
            ***$***
            ***15,114*****Segment
                EBITDA**
            
            **$**
            **19,486**
            
            
            **$**
            **11,719**
            
            
            ***$***
            ***7,767*****Represented
                by:**Broadcast
                operations
            
            $
            19,613
            
            
            $
            11,733
            
            
            *$*
            *7,880*Non-broadcast
                operations
            
            
            (127
            )
            
            
            (14
            )
            
            **
            *(113*
            *)***Segment
                EBITDA**
            
            **$**
            **19,486**
            
            
            **$**
            **11,719**
            
            
            ***$***
            ***7,767*****Segment
                EBITDA Margin**
            
            ****
            **44**
            **%**
            
            ****
            **40**
            **%**
            
            ******
            ***4***
            ***%***








·
            **Segment
                Net Revenues** for the three months ended September 30, 2007
                increased by US$ 15.1 million, or 52%, compared to the three months
                ended
                September 30, 2006. Spot revenues increased by US$ 13.9 million,
                or 51%,
                driven primarily by increases in the average revenue per rating point
                sold
                in each of our channels, which more than offset a decline in the
                volume of
                GRPs sold. Non-spot revenues increased by US$ 1.2 million, or 59%,
                primarily due to increased cable tariff revenue. The acquisition
                of
                Sport.ro added approximately US$ 1.9 million to our revenues for
                the three
                months ended September 30, 2007.





·
            **Segment
                EBITDA**for the three months ended September 30, 2007 increased
                by
                US$ 7.8 million, or 66%, compared to the three months ended September
                30,
                2006, resulting in an EBITDA margin of 44%, compared to 40% in the
                three
                months ended September 30, 2006.  Costs charged in arriving at
                Segment EBITDA for the three months ended September 30, 2007 increased
                by
                US$ 7.3 million, or 42%, compared to the three months ended September
                30,
                2006.  Cost of programming grew by US$ 4.4 million, or 41%, 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$ 1.7 million, or 16%, as a result of increased market competition
                and
                investment in quality programming.  Other operating costs
                increased by US$ 1.5 million, or 30%, after the difference in
                classification described above; excluding the impact of this change
                in
                classification, other operating costs increased by US$ 4.2 million,
                or
                83%, primarily due to the impact of a weaker dollar on local currency
                denominated staffing costs and an increase in social security
                costs.  Selling, general and administrative expenses increased
                by US$ 1.4 million, or 79%, primarily due to increased consultancy
                fees,
                increased office running costs and increased marketing and research
                costs.  The acquisition of Sport.ro added approximately US$ 0.3
                million to our Segment EBITDA for the three months ended September
                30,
                2007.





*Page
            53*
 *Index*





**Nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      2006**





**ROMANIA
                SEGMENT FINANCIAL INFORMATION****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            126,750
            
            
            $
            91,109
            
            
            *$*
            *35,641*Non-spot
                revenues
            
            
            9,228
            
            
            
            5,829
            
            
            **
            *3,399***Segment
                Net Revenues**
            
            **$**
            **135,978**
            
            
            **$**
            **96,938**
            
            
            ***$***
            ***39,040*****Represented
                by:**Broadcast
                operations
            
            $
            135,836
            
            
            $
            96,938
            
            
            *$*
            *38,898*Non-broadcast
                operations
            
            
            142
            
            
            
            -
            
            
            **
            *142***Segment
                Net Revenues**
            
            **$**
            **135,978**
            
            
            **$**
            **96,938**
            
            
            ***$***
            ***39,040*****Segment
                EBITDA**
            
            **$**
            **57,152**
            
            
            **$**
            **39,756**
            
            
            ***$***
            ***17,396*****Represented
                by:**Broadcast
                operations
            
            $
            57,512
            
            
            $
            39,770
            
            
            *$*
            *17,742*Non-broadcast
                operations
            
            
            (360
            )
            
            
            (14
            )
            
            **
            *(346*
            *)***Segment
                EBITDA**
            
            **$**
            **57,152**
            
            
            **$**
            **39,756**
            
            
            ***$***
            ***17,396*****Segment
                EBITDA Margin**
            
            ****
            **42**
            **%**
            
            ****
            **41**
            **%**
            
            ******
            ***1***
            ***%***





·
            **Segment
                Net Revenues** for the nine months ended September 30, 2007
                increased by US$ 39.0 million, or 40%, compared to the nine months
                ended
                September 30, 2006. Spot revenues increased by US$ 35.6 million,
                or 39%,
                driven primarily by increases in the average revenue per rating point
                sold
                in each of our channels, which more than offset a decline in the
                volume of
                GRPs sold, particularly in the first half. Non-spot revenues increased
                by
                US$ 3.4 million, or 58%, primarily due to increased cable tariff
                revenue.
                The acquisition of Sport.ro added approximately US$ 4.8 million to
                our
                revenues for the nine months ended September 30,
                2007.





**Segment
      EBITDA** for the nine months ended September 30, 2007 increased by US$
      17.4 million, or 44%, compared to the nine months ended September 30, 2006,
      resulting in an EBITDA margin of 42% compared to 41% in the nine months ended
      September 30, 2006.  Costs charged in arriving at Segment EBITDA for
      the nine months ended September 30, 2007 increased by US$ 21.6 million, or
      38%,
      compared to the nine months ended September 30, 2006.  Cost of
      programming grew by US$ 18.8 million, or 53%, 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$ 12.1 million, or 34%, as a result of
      increased market competition and investment in quality
      programming.  Other operating costs increased by US$ 0.9 million, or
      6%, after the difference in classification described above; excluding the impact
      of this change in classification, other operating costs increased by US$ 7.6
      million, or 50%, primarily due to the impact of a weaker dollar on local
      currency denominated staffing costs.  Selling, general and
      administrative expenses increased by US$ 1.9 million, or 30%, primarily due
      to
      increased consultancy fees, increased office running costs and increased
      marketing and research costs.  The acquisition of Sport.ro added
      approximately US$ 1.1 million to our Segment EBITDA for the nine months ended
      September 30, 2007.





*Page
            54*
 *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 to show
      growth in the range of 20% - 30% in 2007.





MARKIZA
      TV is the leading channel in the Slovak Republic.  National all day
      audience share for the nine months ended September 30, 2007 was 34.5% compared
      to 32.5% for the nine months ended September 30, 2006.  The major
      competitor is the state-owned channel STV1, with a national all day audience
      share of 17.8% for the nine months ended September 30, 2007.  The
      national all day audience share of TV JOJ, the only other significant privately
      owned channel, was 15.9% for the nine months ended September 30,
      2007.





Our
      prime
      time audience share increased from 34.0% in the nine months ended September
      30,
      2006 to 38.1% in the nine months ended September 30, 2007 primarily due to
      strong local programs such as Bailando and Neighbors.  Our average
      prime time ratings increased from 12.7% to 14.0% over comparable periods, while
      prime time ratings for the whole market decreased from 37.3% in the nine months
      ended September 30, 2006 to 36.6% in the nine months ended September 30,
      2007.





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006**





**SLOVAK
                REPUBLIC SEGMENT FINANCIAL INFORMATION****For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            19,344
            
            
            $
            12,735
            
            
            *$*
            *6,609*Non-spot
                revenues
            
            
            942
            
            
            
            1,160
            
            
            **
            *(218*
            *)***Segment
                Net Revenues**
            
            **$**
            **20,286**
            
            
            **$**
            **13,895**
            
            
            ***$***
            ***6,391*****Represented
                by:**Broadcast
                operations
            
            $
            20,183
            
            
            $
            13,880
            
            
            *$*
            *6,303*Non-broadcast
                operations
            
            
            103
            
            
            
            15
            
            
            **
            *88***Segment
                Net Revenues**
            
            **$**
            **20,286**
            
            
            **$**
            **13,895**
            
            
            ***$***
            ***6,391*****Segment
                EBITDA**
            
            **$**
            **5,544**
            
            
            **$**
            **2,408**
            
            
            ***$***
            ***3,136*****Represented
                by:**Broadcast
                operations
            
            $
            5,656
            
            
            $
            2,460
            
            
            *$*
            *3,196*Non-broadcast
                operations
            
            
            (112
            )
            
            
            (52
            )
            
            **
            *(60*
            *)***Segment
                EBITDA**
            
            **$**
            **5,544**
            
            
            **$**
            **2,408**
            
            
            ***$***
            ***3,136*****Segment
                EBITDA Margin**
            
            ****
            **27**
            **%**
            
            ****
            **17**
            **%**
            
            ******
            ***10***
            ***%***








·
            **Segment
                Net Revenues** for the three months ended September 30, 2007
                increased by US$ 6.4 million, or 46%, compared to the three months
                ended
                September 30, 2006.  In local currency, Segment Net Revenues
                increased by 19%.  The increase in Segment Net Revenues was due
                to an increase of US$ 6.6 million, or 52%, in spot revenues, offset
                by a
                decrease of US$ 0.2 million, or 19%, in non-spot revenues.  The
                increase in spot revenues is mainly due to an increase in the average
                revenue per rating point sold, as well as a slight increase in the
                volume
                of GRPs sold.





·
            **Segment
                EBITDA**for the three months ended September 30, 2007 increased
                by
                US$ 3.1 million, or 130%, compared to the three months ended September
                30,
                2006, resulting in an EBITDA margin of 27%, compared to 17% in the
                three
                months ended September 30, 2006.  In local currency, Segment
                EBITDA increased by 88%.  Costs charged in arriving at Segment
                EBITDA for the three months ended September 30, 2007 increased by
                US$ 3.3
                million, or 29%, compared to the three months ended September 30,
                2006.  Cost of programming increased by US$ 2.4 million, or 45%,
                primarily due to increased investment in local productions such as
                a local
                version of Pop Idol, which was launched in September 2007, and syndicated
                programming.  Other operating costs increased by US$ 0.9
                million, or 22%, primarily due to increased salary and wage costs
                and
                increased broadcast and operating expenses.  Selling, general
                and administrative expenses were in line with the three months ended
                September 30, 2006.





*Page
            55*
 *Index*





**Nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      2006**





**SLOVAK
                REPUBLIC SEGMENT FINANCIAL INFORMATION****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            65,913
            
            
            $
            42,231
            
            
            *$*
            *23,682*Non-spot
                revenues
            
            
            2,702
            
            
            
            2,916
            
            
            **
            *(214*
            *)***Segment
                Net Revenues**
            
            **$**
            **68,615**
            
            
            **$**
            **45,147**
            
            
            ***$***
            ***23,468*****Represented
                by:**Broadcast
                operations
            
            $
            68,408
            
            
            $
            45,126
            
            
            *$*
            *23,282*Non-broadcast
                operations
            
            
            207
            
            
            
            21
            
            
            **
            *186***Segment
                Net Revenues**
            
            **$**
            **68,615**
            
            
            **$**
            **45,147**
            
            
            ***$***
            ***23,468*****Segment
                EBITDA**
            
            **$**
            **23,012**
            
            
            **$**
            **9,258**
            
            
            ***$***
            ***13,754*****Represented
                by:**Broadcast
                operations
            
            $
            23,409
            
            
            $
            9,329
            
            
            *$*
            *14,080*Non-broadcast
                operations
            
            
            (397
            )
            
            
            (71
            )
            
            **
            *(326*
            *)***Segment
                EBITDA**
            
            **$**
            **23,012**
            
            
            **$**
            **9,258**
            
            
            ***$***
            ***13,754*****Segment
                EBITDA Margin**
            
            ****
            **34**
            **%**
            
            ****
            **21**
            **%**
            
            ******
            ***13***
            ***%***








·
            **Segment
                Net Revenues** for the nine months ended September 30, 2007
                increased by US$ 23.5 million, or 52%, compared to the nine months
                ended
                September 30, 2006.  In local currency, Segment Net Revenues
                increased by 31%.  The increase in Segment Net Revenues was due
                to an increase of US$ 23.7 million, or 56%, in spot revenues, partially
                offset by a decrease of US$ 0.2 million in non-spot
                revenues.  The increase in spot revenues is mainly due to an
                increase in the average revenue per rating point sold as well as
                an
                increase in the volume of GRPs sold.  Our advertising revenues
                benefited from the launch of a new mobile phone operator during the
                nine
                months ended September 30, 2007, as well as increased spending from
                existing customers, particularly in the pharmaceutical
                sector.  Segment Net Revenues for the nine months ended
                September 30, 2006 included approximately US$ 1.8 million in respect
                of
                the period prior to January 23, 2006 when Markiza was accounted for
                as an
                equity affiliate.





·
            **Segment
                EBITDA**for the nine months ended September 30, 2007 increased by
                US$ 13.8 million, or 149%, compared to the nine months ended September
                30,
                2006, resulting in an EBITDA margin of 34% compared to 21% in the
                nine
                months ended September 30, 2006.  In local currency, Segment
                EBITDA increased by 81%.  Costs charged in arriving at Segment
                EBITDA for the nine months ended September 30, 2007 increased by
                US$ 9.7
                million, or 27%, compared to the nine months ended September 30,
                2006.  Cost of programming increased by US$ 5.6 million, or 30%,
                due to increased investment in local productions and syndicated
                programming; the amount charged in the nine months ended September
                30,
                2006 included a charge of US$ 0.7 million to write off an unsuccessful
                show.  Other operating costs increased by US$ 3.2 million, or
                28%, due to increase salary and wage costs, increased accruals for
                performance-related bonus payments, increased broadcast and operating
                expenses and increased music right costs.  Selling, general and
                administrative expenses increased by US$ 0.9 million, or 16%, primarily
                due to increased consultancy and increased marketing and research
                costs,
                in addition to increased office running costs.  Costs charged in
                arriving at Segment EBITDA for the nine months ended September 30,
                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 January 23, 2006, when
                Markiza
                was accounted for as an equity
                affiliate.





*Page
            56*
 *Index*





**(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 decreased from
      37.7% for the nine months ended September 30, 2006 to 37.3% for the nine months
      ended September 30, 2007.  The major competitors are state-owned
      channels SLO1 and SLO2, with national all day audience shares for the nine
      months ended September 30, 2007 of 22.9% and 8.6%, respectively.





Our
      prime
      time audience share decreased from 44.5% in the nine months ended September
      30,
      2006 to 42.9% in the nine months ended September 30, 2007, with an increased
      share in KANAL A, partially offsetting a decreased share in POP
      TV.  Our average prime time ratings decreased from 14.2% to 13.8% over
      comparable periods, while prime time ratings for the whole market increased
      from
      31.8% in the nine months ended September 30, 2006 to 32.1% in the nine months
      ended September 30, 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
            57*
 *Index*





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006**





**SLOVENIA
                SEGMENT FINANCIAL INFORMATION****For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            10,413
            
            
            $
            8,637
            
            
            *$*
            *1,776*Non-spot
                revenues
            
            
            1,132
            
            
            
            464
            
            
            **
            *668***Segment
                Net Revenues**
            
            **$**
            **11,545**
            
            
            **$**
            **9,101**
            
            
            ***$***
            ***2,444*****Represented
                by:**Broadcast
                operations
            
            $
            11,076
            
            
            $
            8,753
            
            
            *$*
            *2,323*Non-broadcast
                operations
            
            
            469
            
            
            
            348
            
            
            **
            *121***Segment
                Net Revenues**
            
            **$**
            **11,545**
            
            
            **$**
            **9,101**
            
            
            ***$***
            ***2,444*****Segment
                EBITDA**
            
            **$**
            **854**
            
            
            **$**
            **1,225**
            
            
            ***$***
            ***(371***
            ***)*****Represented
                by:**Broadcast
                operations
            
            $
            1,869
            
            
            $
            1,256
            
            
            *$*
            *613*Non-broadcast
                operations
            
            
            (1,015
            )
            
            
            (31
            )
            
            **
            *(984*
            *)***Segment
                EBITDA**
            
            **$**
            **854**
            
            
            **$**
            **1,225**
            
            
            ***$***
            ***(371***
            ***)*****Segment
                EBITDA Margin**
            
            ****
            **7**
            **%**
            
            ****
            **13**
            **%**
            
            ******
            ***(6***
            ***)%***








·
            **Segment
                Net Revenues** for the three months ended September 30, 2007
                increased by US$ 2.4 million, or 27%, compared to the three months
                ended
                September 30, 2006.  Spot revenues increased by US$ 1.8 million,
                or 21%, as our operations benefited from an increase in the average
                revenue per GRP sold, which more than offset a slight decline in
                volume.  Non-spot revenues increased by US$ 0.7 million, or
                144%, due to increased short message service (“SMS”) revenues and also
                increased sponsorship.





·
            **Segment
                EBITDA** for the three months ended September 30, 2007 decreased
                by
                US$ 0.4 million, or 30%, compared to the three months September 30,
                2006,
                resulting in an EBITDA margin of 7% compared to 13% in the three
                months
                ended September 30, 2006.  Costs charged in arriving at Segment
                EBITDA for the three months ended September 30, 2007 increased by
                US$ 2.8
                million, or 36%, compared to the three months ended September 30,
                2006.  Cost of programming grew by US$ 2.7 million, or 83%, due
                to increased investment in programming in a more competitive market
                environment. We expect to continue to increase our investment in
                programming in order to maintain our market leading
                position.  Other operating costs decreased by US$ 0.4 million,
                or 13%, primarily due to lower salary and freelance
                costs.  Selling, general and administrative expenses increased
                by US$ 0.5 million, or 34%, primarily due to higher consultancy fees,
                in
                addition to higher office running
                costs.





*Page
            58*
 *Index*





**Nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      2006**





**SLOVENIA
                SEGMENT FINANCIAL INFORMATION****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            39,173
            
            
            $
            33,312
            
            
            *$*
            *5,861*Non-spot
                revenues
            
            
            5,136
            
            
            
            1,571
            
            
            **
            *3,565***Segment
                Net Revenues**
            
            **$**
            **44,309**
            
            
            **$**
            **34,883**
            
            
            ***$***
            ***9,426*****Represented
                by:**Broadcast
                operations
            
            $
            42,901
            
            
            $
            33,779
            
            
            *$*
            *9,122*Non-broadcast
                operations
            
            
            1,408
            
            
            
            1,104
            
            
            **
            *304***Segment
                Net Revenues**
            
            **$**
            **44,309**
            
            
            **$**
            **34,883**
            
            
            ***$***
            ***9,426*****Segment
                EBITDA**
            
            **$**
            **12,243**
            
            
            **$**
            **10,688**
            
            
            ***$***
            ***1,555*****Represented
                by:**Broadcast
                operations
            
            $
            12,752
            
            
            $
            10,561
            
            
            *$*
            *2,191*Non-broadcast
                operations
            
            
            (509
            )
            
            
            127
            
            
            **
            *(636*
            *)***Segment
                EBITDA**
            
            **$**
            **12,243**
            
            
            **$**
            **10,688**
            
            
            ***$***
            ***1,555*****Segment
                EBITDA Margin**
            
            ****
            **28**
            **%**
            
            ****
            **31**
            **%**
            
            ******
            ***(3***
            ***)%***








·
            **Segment
                Net Revenues** for the nine months ended September 30, 2007
                increased by US$ 9.4 million, or 27%, compared to the nine months
                ended
                September 30, 2006.  Spot revenues increased by US$ 5.9 million,
                or 18%, as our operations benefited from an increase in the average
                revenue per rating point sold, which more than offset a slight decline
                in
                the volume of GRPs sold.  Non-spot revenues increased by US$ 3.6
                million, or 227%, due to an increased level of sponsorship, and increased
                SMS revenues.





·
            **Segment
                EBITDA** for the nine months ended September 30, 2007 increased
                by
                US$ 1.6 million, or 15%, compared to the nine months ended September
                30,
                2006, resulting in an EBITDA margin of 28% compared to 31% in the
                nine
                months ended September 30, 2006.  Costs charged in arriving at
                Segment EBITDA for the nine months ended September 30, 2007 increased
                by
                US$ 7.9 million, or 33%, compared to the nine months ended September
                30,
                2006.  Cost of programming grew by US$ 7.5 million, or 71%, due
                to increased investment in programming in a more competitive market
                environment.  Other operating costs decreased by US$ 1.1
                million, or 12%, primarily due to lower salary and freelance costs,
                partially offset by higher music rights costs and higher transmitter
                and
                associated maintenance costs.  Selling, general and
                administrative expenses increased by US$ 1.5 million, or 38%, primarily
                due to higher marketing and research costs, higher consultancy fees
                and
                higher office running costs.





*Page
            59*
 *Index*





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





**Market
      Background:**  We estimate that the television advertising
      market in Ukraine, where sales are denominated primarily in dollars, experienced
      growth of approximately 35% - 45% in 2006. We anticipate market growth in the
      region of 20% - 30% in 2007.





STUDIO
      1+1 had a national all day audience share of 15.7% for the nine months ended
      September 30, 2007 compared to 18.5% for the nine months ended September 30,
      2006.  Our competitors include Inter, with a national all day audience
      share of 20.4%, Novy Kanal with 7.5%, ICTV with 6.9% and STB with
      6.9%.





Our
      prime
      time audience share decreased from 23.8% in the nine months ended September
      30,
      2006 to 17.7% in the nine months ended September 30, 2007.  Our
      average prime time ratings decreased from 8.4% to 5.9% over comparable periods,
      while prime time ratings for the whole market decreased from 35.5% in the nine
      months ended September 30, 2006 to 33.5% in the nine months ended September
      30,
      2007.  Our share in the nine months ended September 30, 2006 reflected
      the outstanding success of a show called *Ugly Betty*, which ran in the
      first half of the year. In 2007, our competitor, Inter, has taken significant
      share with another outstanding show, *Tatiana’s Day*, which will run
      through the first quarter of 2008. In addition. many larger major channels
      have
      lost audience share to new niche channels.





Our
      independent sales house Video International (Prioritet) lost many of its
      broadcasting clients to its major rival InterReklama, which now has
      approximately 70% of available advertising inventory at its disposal for
      advertising clients. According to Video International, in order to cover the
      cash costs of financial guarantees to new and existing broadcasting clients,
      InterReklama discounted prices dramatically in the early part of the year.
      Subsequently, they have continued to exercise strong negotiating leverage with
      their significant broadcaster base. However, we have seen a recovery in pricing
      during the second and third quarters from the heavy discounting in the first
      quarter.





The
      television advertising market has shown strong recovery in the third quarter
      as
      a result of the level of political advertising ahead of the parliamentary
      elections that took place on September 30, 2007. However since the elections,
      commercial advertisers, notably important local advertisers including mobile
      telephone operators, have continued to be cautious in spending their budgets
      in
      light of the continuing political uncertainty arising from the delay in
      formation of a government.





Following
      the launch of our autumn program schedule, which we delayed until October in
      order to avoid the pre-election period, we have experienced some ratings
      recovery. However, the caution of local advertisers has led to lower sell-out
      rates across the market than is typical in this important  advertising
      season. These factors can change substantially over the next few weeks and
      as a
      result there remains a wide range of possible outcomes for trading in the fourth
      quarter.





*Page
            60*
 *Index*





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006**





**UKRAINE
                (STUDIO 1+1) SEGMENT FINANCIAL INFORMATION****For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            34,461
            
            
            $
            14,413
            
            
            *$*
            *20,048*Non-spot
                revenues
            
            
            5,121
            
            
            
            1,165
            
            
            **
            *3,956***Segment
                Net Revenues**
            
            **$**
            **39,582**
            
            
            **$**
            **15,578**
            
            
            ***$***
            ***24,004*****Represented
                by:**Broadcast
                operations
            
            $
            39,582
            
            
            $
            15,578
            
            
            *$*
            *24,004*Non-broadcast
                operations
            
            
            -
            
            
            
            -
            
            
            **
            *-***Segment
                Net Revenues**
            
            **$**
            **39,582**
            
            
            **$**
            **15,578**
            
            
            ***$***
            ***24,004*****Segment
                EBITDA**
            
            **$**
            **16,599**
            
            
            **$**
            **(838**
            **)**
            
            ***$***
            ***17,437*****Represented
                by:**Broadcast
                operations
            
            $
            16,750
            
            
            $
            (838
            )
            
            *$*
            *17,588*Non-broadcast
                operations
            
            
            (151
            )
            
            
            -
            
            
            **
            *(151*
            *)***Segment
                EBITDA**
            
            **$**
            **16,599**
            
            
            **$**
            **(838**
            **)**
            
            ***$***
            ***17,437*****Segment
                EBITDA Margin**
            
            ****
            **42**
            **%**
            
            ****
            **(5**
            **)%**
            
            ******
            ***47***
            ***%***





·
            **Segment
                Net Revenues** for the three months ended September 30, 2007
                increased by US$ 24.0 million, or 154%, compared to the three months
                ended
                September 30, 2006. Spot revenues increased by US$ 20.0 million,
                or 139%,
                primarily due to an estimated US$ 16.5 million of political advertising
                generated from the elections held on September 30, 2007. We achieved
                a
                very strong increase in the average revenue per rating point sold
                as well
                as a slight increase in the volume of GRPs sold  Non-spot
                revenues increased by US$ 4.0 million, or 340%, primarily due to
                increased
                sponsorship, including US$ 1.5 million in political advertising,
                and the
                sale of surplus programming.





·
            **Segment
                EBITDA**for the three months ended September 30, 2007 increased
                by
                US$ 17.4 million, compared to the three months ended September 30,
                2006,
                resulting in an EBITDA margin of 42% compared to a (5)% Segment EBITDA
                margin loss in the three months ended September 30, 2006.  Costs
                charged in arriving at Segment EBITDA for the three months ended
                September
                30, 2007 increased by US$ 6.6 million, or 40%, compared to the three
                months ended September 30, 2006.  Cost of programming grew by
                US$ 6.5 million, or 67%, with the increase reflecting continued price
                inflation for Russian programming, which drives strong ratings in
                the
                market, as well as increased investment in such programming to improve
                our
                programming schedule and boost ratings following disappointing ratings
                earlier in the year.  Other operating costs increased by US$ 1.6
                million, or 45%, primarily due to increased salary costs in addition
                to
                increased broadcast operating expenses.  Selling, general and
                administrative expenses decreased by US$ 1.5 million, or 45%, primarily
                due to decreased taxes, partially offset by higher office running
                costs.





*Page
            61*
 *Index*





**Nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      2006**





**UKRAINE
                (STUDIO 1+1) SEGMENT FINANCIAL INFORMATION****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            67,567
            
            
            $
            54,988
            
            
            *$*
            *12,579*Non-spot
                revenues
            
            
            12,791
            
            
            
            7,129
            
            
            **
            *5,662***Segment
                Net Revenues**
            
            **$**
            **80,358**
            
            
            **$**
            **62,117**
            
            
            ***$***
            ***18,241*****Represented
                by:**Broadcast
                operations
            
            $
            80,358
            
            
            $
            62,117
            
            
            *$*
            *18,241*Non-broadcast
                operations
            
            
            -
            
            
            
            -
            
            
            **
            *-***Segment
                Net Revenues**
            
            **$**
            **80,358**
            
            
            **$**
            **62,117**
            
            
            ***$***
            ***18,241*****Segment
                EBITDA**
            
            **$**
            **14,794**
            
            
            **$**
            **16,183**
            
            
            ***$***
            ***(1,389***
            ***)*****Represented
                by:**Broadcast
                operations
            
            $
            15,128
            
            
            $
            16,183
            
            
            *$*
            *(1,055*
            *)*Non-broadcast
                operations
            
            
            (334
            )
            
            
            -
            
            
            **
            *(334*
            *)***Segment
                EBITDA**
            
            **$**
            **14,794**
            
            
            **$**
            **16,183**
            
            
            ***$***
            ***(1,389***
            ***)*****Segment
                EBITDA Margin**
            
            ****
            **18**
            **%**
            
            ****
            **26**
            **%**
            
            ******
            ***(8***
            ***)%***








·
            **Segment
                Net Revenues** for the nine months ended September 30, 2007
                increased by US$ 18.2 million, or 29%, compared to the nine months
                ended
                September 30, 2006. Spot revenues increased by US$ 12.6 million,
                or 23%,
                primarily due to an estimated US$ 16.5 million of political advertising
                generated from the elections held on September 30, 2007.  This
                offset a decline in revenues from a decrease in the volume of GRPs
                sold in
                the first half as our ratings declined due to the poor performance
                of
                certain series on Studio 1+1 and increased competition from other
                broadcasters.  In the nine months ended September 30, 2006, we
                received US$ 8.4 million of political advertising revenue ahead of
                the
                parliamentary elections in March 2006 and benefited from the extraordinary
                ratings success of the Russian series Ugly Betty, which ran until
                July
                2006. Non-spot revenues increased by US$ 5.7 million, or 79%, primarily
                due to the sale of surplus programming and increased sponsorship,
                including political advertising.





·
            **Segment
                EBITDA**for the nine months ended September 30, 2007 decreased by
                US$ 1.4 million, or 9%, compared to the nine months ended September
                30,
                2006, resulting in an EBITDA margin of 18% compared to an EBITDA
                margin of
                26% in the nine months ended September 30, 2006.  Costs charged
                in arriving at Segment EBITDA for the nine months ended September
                30, 2007
                increased by US$ 19.6 million, or 43%, compared to the nine months
                ended
                September 30, 2006.  Cost of programming grew by US$ 19.4
                million, or 72%, including a charge of US$ 2.7 million in the first
                half
                to write off poorly performing programming, principally second runs
                of
                American series.  The increase in cost of programming reflects
                continued price inflation for Russian programming, which drives strong
                ratings in the market, as well as increased investment in such programming
                to improve our programming schedule and boost ratings following
                disappointing ratings earlier in the year in comparison with unusually
                strong programming on Inter.  Other operating costs increased by
                US$ 3.1 million, or 30%, due to increased salary costs and increased
                broadcast operating expenses.  Selling, general and
                administrative expenses decreased by US$ 2.9 million, or 34%, primarily
                due to decreased taxes and reduced bad debt expense, partially offset
                by
                higher office running costs.





*Page
            62*
 *Index*





We
      plan
      continued investment in programming, particularly Russian series throughout
      the
      remainder of 2007 and 2008 as we seek to recover audience share and improve
      profitability.  The performance of our Ukraine operations remains
      subject both to political developments, which can have a significant impact
      on
      market development in the fourth quarter of 2007, and to the competitive
      dynamics of the market (See Part II, Item IA – “Risk Factors”).








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





On
      January 11, 2006, we acquired a 65.5% interest in Ukrpromtorg, owner of 92.2%
      of
      Gravis, 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 youth market, have as their main competitors ICTV,
      TONIS and NTN. As at September 30, 2007, KINO had a national technical reach
      of
      approximately 55.3% and in the nine months ended September 30, 2007 achieved
      a
      15-50 prime time audience share in the Kiev region of 2.3%. CITI had a technical
      reach of approximately 95.0% of the population of the city of Kiev and the
      Kiev
      region. In the nine months ended September 30, 2007 CITI achieved a 4+ prime
      time audience share of 1.6% in Kiev and the Kiev region.





**Three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006**





**UKRAINE
                (KINO, CITI) SEGMENT FINANCIAL INFORMATION****For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Spot
                revenues
            
            $
            305
            
            
            $
            41
            
            
            *$*
            *264*Non-spot
                revenues
            
            
            511
            
            
            
            140
            
            
            **
            *371***Segment
                Net Revenues**
            
            **$**
            **816**
            
            
            **$**
            **181**
            
            
            ***$***
            ***635*****Represented
                by:**Broadcast
                operations
            
            $
            816
            
            
            $
            181
            
            
            *$*
            *635*Non-broadcast
                operations
            
            
            -
            
            
            
            -
            
            
            **
            *-***Segment
                Net Revenues**
            
            **$**
            **816**
            
            
            **$**
            **181**
            
            
            ***$***
            ***635*****Segment
                   EBITDA**
            
            **$**
            **(1,339**
            **)**
            
            **$**
            **(1,182**
            **)**
            
            ***$***
            ***(157***
            ***)*****Represented
                by:**Broadcast
                operations
            
            $
            (1,339
            )
            
            $
            (1,182
            )
            
            *$*
            *(157*
            *)*Non-broadcast
                operations
            
            
            -
            
            
            
            -
            
            
            **
            *-***Segment
                EBITDA**
            
            **$**
            **(1,339**
            **)**
            
            **$**
            **(1,182**
            **)**
            
            ***$***
            ***(157***
            ***)*****Segment
                EBITDA Margin**
            
            ****
            **(164**
            **)%**
            
            ****
            **(653**
            **)%**
            
            ******
            ***489***
            ***%***








·
            **Segment
                Net Revenues** for the three months ended September 30, 2007
                increased by US$ 0.6 million, or 351%, compared to the three months
                ended
                September 30, 2006. Spot revenues increased by US$ 0.3 million, or
                644%.  Non-spot revenues increased by US$ 0.4 million, or 265%,
                primarily due to increased program
                sponsorship.





*Page
            63*
 *Index*





·
            **Segment
                EBITDA**for the three months ended September 30, 2007 decreased
                by
                US$ 0.2 million, or 13%, compared to the three months ended September
                30,
                2006.  Costs charged in arriving at Segment EBITDA for the three
                months ended September 30, 2007 increased by US$ 0.8 million, or
                57%,
                compared to the three months ended September 30, 2006 as we continued
                to
                develop the channels.  Cost of programming grew by US$ 0.2
                million, or 23%.  Other operating costs increased by US$ 0.6
                million.  Selling, general and administrative expenses were in
                line with the three months ended September 30,
                2006.





**Nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      2006**





**UKRAINE
                (KINO, CITI) SEGMENT FINANCIAL INFORMATION****For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006(1)**
            
            
            ***Movement***Spot
                revenues
            
            $
            783
            
            
            $
            362
            
            
            *$*
            *421*Non-spot
                revenues
            
            
            1,085
            
            
            
            392
            
            
            **
            *693***Segment
                Net Revenues**
            
            **$**
            **1,868**
            
            
            **$**
            **754**
            
            
            ***$***
            ***1,114*****Represented
                by:**Broadcast
                operations
            
            $
            1,868
            
            
            $
            754
            
            
            *$*
            *1,114*Non-broadcast
                operations
            
            
            -
            
            
            
            -
            
            
            **
            *-***Segment
                Net Revenues**
            
            **$**
            **1,868**
            
            
            **$**
            **754**
            
            
            ***$***
            ***1,114*****Segment
                EBITDA**
            
            **$**
            **(5,511**
            **)**
            
            **$**
            **(1,736**
            **)**
            
            ***$***
            ***(3,775***
            ***)*****Represented
                by:**Broadcast
                operations
            
            $
            (5,511
            )
            
            $
            (1,736
            )
            
            *$*
            *(3,775*
            *)*Non-broadcast
                operations
            
            
            -
            
            
            
            -
            
            
            **
            *-***Segment
                EBITDA**
            
            **$**
            **(5,511**
            **)**
            
            **$**
            **(1,736**
            **)**
            
            ***$***
            ***(3,775***
            ***)*****Segment
                EBITDA Margin**
            
            ****
            **(295**
            **)%**
            
            ****
            **(230**
            **)%**
            
            ******
            ***(65***
            ***)%***





(1)
      From
      acquisition on January 11, 2006 only








·
            **Segment
                Net Revenues** for the nine months ended September 30, 2007
                increased by US$ 1.1 million, or 148%, compared to the nine months
                ended
                September 30, 2006. Spot revenues increased by US$ 0.4 million, or
                116%.  Non-spot revenues increased by US$ 0.7 million, or 177%,
                primarily due to increased program
                sponsorship.





·
            **Segment
                EBITDA**for the nine months ended September 30, 2007 decreased by
                US$ 3.8 million, or 217%, compared to the nine months ended September
                30,
                2006.  Costs charged in arriving at Segment EBITDA for the nine
                months ended September 30, 2007 increased by US$ 4.9 million, or
                195%,
                compared to the nine months ended September 30, 2006 as we continued
                to
                develop the channels.  Cost of programming grew by US$ 3.2
                million, or 255%.  Other operating costs increased by US$ 1.2
                million, or 169%.  Selling, general and administrative expenses
                increased by US$ 0.5 million, or
                89%.





*Page
            64*
 *Index*





**PROGRAMMING
      PAYMENTS AND PROGRAM AMORTIZATION**





Our
      cost
      of programming for the three and nine months ended September 30, 2007 and 2006
      was as follows:





**COST
      OF PROGRAMMING**


**For
                the Three Months**
              **Ended
                September 30,**
              **(US$
                000’s)**
            
            
            **For
                the Nine Months**
              **Ended
                September 30,**
              **(US$
                000’s)****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Production
                expenses
            
            $
            27,257
            
            
            $
            22,932
            
            
            $
            95,590
            
            
            $
            71,952Program
                amortization
            
            
            38,652
            
            
            
            24,988
            
            
            
            119,445
            
            
            
            77,236**Cost
                of programming**
            
            **$**
            **65,909**
            
            
            **$**
            **47,920**
            
            
            **$**
            **215,035**
            
            
            **$**
            **149,188**





Production
      expenses represent the cost of in-house productions and locally commissioned
      programming that will not be repeated, such as news, current affairs and game
      shows.  The cost of broadcasting all other programming is recorded as
      program amortization.





Total
      consolidated programming costs (including amortization of programming rights
      and
      production costs) increased by US$ 18.0 million, or 37.5%, in the three months
      ended September 30, 2007 compared to the three months ended September 30, 2006
      primarily due to:





·
            US$
                1.0 million reduction in programming costs from our Croatia
                operations;





·
            US$
                2.7 million of additional programming costs from our Czech Republic
                operations.





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





·
            US$
                2.4 million of additional programming costs from our Slovak Republic
                operations;





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





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





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




Total
      consolidated programming costs (including amortization of programming rights
      and
      production costs) increased by US$ 65.9 million, or 44.1%, in the nine months
      ended September 30, 2007 compared to the nine months ended September 30, 2006
      primarily due to:





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





·
            US$
                2.8 million of additional programming costs from our Czech Republic
                operations;




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





·
            US$
                7.3 million of additional programming costs from our Slovak Republic
                operations, which have been consolidated for the entire nine-month
                period
                in 2007;





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





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





*Page
            65*
 *Index*





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








The
      amortization of acquired programming for each of our consolidated operations
      for
      the three and nine months ended September 30, 2007 and 2006, 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.





**PROGRAM
      AMORTIZATION AND CASH PAID FOR PROGRAMMING**


**For
                the Three Months**
              **Ended
                September 30,**
              **(US$
                000’s)**
            
            
            **For
                the Nine Months**
              **Ended
                September 30,**
              **(US$
                000’s)****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Program
                amortization: (1)Croatia
                (NOVA TV)
            
            $
            3,142
            
            
            $
            2,640
            
            
            $
            13,777
            
            
            $
            9,530Czech
                Republic (TV NOVA)
            
            
            6,730
            
            
            
            5,263
            
            
            
            20,581
            
            
            
            19,152Romania
                (PRO TV, ACASA, PRO CINEMA, PRO TV INTERNATIONAL and
                SPORT.RO)
            
            
            8,314
            
            
            
            5,809
            
            
            
            27,649
            
            
            
            19,599Slovak
                Republic (MARKIZA TV) (post-acquisition)
            
            
            4,391
            
            
            
            2,301
            
            
            
            10,567
            
            
            
            6,379Slovenia
                (POP TV and KANAL A)
            
            
            2,342
            
            
            
            1,418
            
            
            
            6,784
            
            
            
            4,623Ukraine
                (STUDIO 1+1)
            
            
            13,076
            
            
            
            7,139
            
            
            
            37,566
            
            
            
            19,149Ukraine
                (KINO, CITI)
            
            
            657
            
            
            
            418
            
            
            
            2,521
            
            
            
            539**$**
            **38,652**
            
            
            **$**
            **24,988**
            
            
            **$**
            **119,445**
            
            
            **$**
            **78,971**





(1)
      Includes the program amortization of 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








Cash
                paid for programming:Croatia
                (NOVA TV)
            
            $
            5,484
            
            
            $
            4,341
            
            
            $
            16,391
            
            
            $
            11,939Czech
                Republic (TV NOVA)
            
            
            6,814
            
            
            
            2,941
            
            
            
            17,662
            
            
            
            19,154Romania
                (PRO TV, ACASA, PRO CINEMA, PRO TV INTERNATIONAL and
                SPORT.RO)
            
            
            19,875
            
            
            
            15,786
            
            
            
            42,852
            
            
            
            33,181Slovak
                Republic (MARKIZA TV)
            
            
            3,585
            
            
            
            2,831
            
            
            
            11,750
            
            
            
            8,373Slovenia
                (POP TV and KANAL A)
            
            
            3,568
            
            
            
            2,373
            
            
            
            8,220
            
            
            
            5,872Ukraine
                (STUDIO 1+1)
            
            
            16,509
            
            
            
            13,241
            
            
            
            43,023
            
            
            
            26,923Ukraine
                (KINO, CITI)
            
            
            375
            
            
            
            273
            
            
            
            1,537
            
            
            
            388**$**
            **56,210**
            
            
            **$**
            **41,786**
            
            
            **$**
            **141,435**
            
            
            **$**
            **105,830**





*Page
            66*
 *Index*





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





**IV
      (a) Net Revenues for the three months ended September 30, 2007 compared to
      the
      three months ended September 30, 2006**





**CONSOLIDATED
      NET REVENUES**





**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Croatia
            
            $
            7,055
            
            
            $
            4,288
            
            
            *$*
            *2,767*Czech
                Republic
            
            
            51,140
            
            
            
            40,141
            
            
            **
            *10,999*Romania
            
            
            44,414
            
            
            
            29,298
            
            
            **
            *15,116*Slovak
                Republic
            
            
            20,284
            
            
            
            13,895
            
            
            **
            *6,389*Slovenia
            
            
            11,545
            
            
            
            9,101
            
            
            **
            *2,444*Ukraine
                (STUDIO 1+1)
            
            
            39,582
            
            
            
            15,578
            
            
            **
            *24,004*Ukraine
                (KINO, CITI)
            
            
            816
            
            
            
            181
            
            
            **
            *635***Total
                Consolidated Net Revenues**
            
            **$**
            **174,836**
            
            
            **$**
            **112,482**
            
            
            ***$***
            ***62,354***





Our
      consolidated net revenues increased by US$ 62.4 million, or 55%, for the three
      months ended September 30, 2007 compared to the three months ended September
      30,
      2006.  See discussion in Part I, Item 2, III. “Analysis of Segment
      Results”.





**IV
      (b) Net Revenues for the nine months ended September 30, 2007 compared to the
      nine months ended September 30, 2006**





**CONSOLIDATED
      NET REVENUES**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Croatia
            
            $
            24,701
            
            
            $
            13,745
            
            
            *$*
            *10,956*Czech
                Republic
            
            
            183,203
            
            
            
            137,002
            
            
            **
            *46,201*Romania
            
            
            135,978
            
            
            
            96,938
            
            
            **
            *39,040*Slovak
                Republic *
            
            
            68,615
            
            
            
            43,386
            
            
            **
            *25,229*Slovenia
            
            
            44,309
            
            
            
            34,883
            
            
            **
            *9,426*Ukraine
                (STUDIO 1+1)
            
            
            80,358
            
            
            
            62,117
            
            
            **
            *18,241*Ukraine
                (KINO, CITI)
            
            
            1,868
            
            
            
            754
            
            
            **
            *1,114***Total
                Consolidated Net Revenues**
            
            **$**
            **539,032**
            
            
            **$**
            **388,825**
            
            
            ***$***
            ***150,207***


*
      From
      January 23, 2006 only.





Our
      consolidated net revenues for the nine months ended September 30, 2007 increased
      by US$ 150.2 million, or 39%, compared to the nine months ended September 30,
      2006.  See discussion in Part I, Item 2, III. “Analysis of Segment
      Results”.





*Page
            67*
 *Index*





**IV
      (c) Cost of Revenues for the three months ended September 30, 2007 compared
      to
      the three months ended September 30, 2006**





**CONSOLIDATED
      COST OF REVENUES**





**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Operating
                costs
            
            $
            27,166
            
            
            $
            22,073
            
            
            *$*
            *5,093*Cost
                of programming
            
            
            65,909
            
            
            
            47,920
            
            
            **
            *17,989*Depreciation
                of station property, plant and equipment
            
            
            8,768
            
            
            
            6,080
            
            
            **
            *2,688*Amortization
                of broadcast licenses and other intangibles
            
            
            6,595
            
            
            
            5,015
            
            
            **
            *1,580***Total
                Consolidated Cost of Revenues**
            
            **$**
            **108,438**
            
            
            **$**
            **81,088**
            
            
            ***$***
            ***27,350***





Total
      consolidated cost of revenues increased by US$ 27.4 million, or 34%, in the
      three months ended September 30, 2007 compared to the three months ended
      September 30, 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
      September 30, 2007 increased by US$ 5.1 million, or 23%, compared to the three
      months ended September 30, 2006.  See discussion in Part I, 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 September 30, 2007 increased by US$ 18.0 million, or 38%, compared to
      the
      three months ended September 30, 2006.  See discussion in Part I, 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
      September 30, 2007 increased by US$ 2.7 million, or 44%, compared to the three
      months ended September 30, 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 September 30, 2007 increased by US$ 1.6 million, or 32%,
      compared to the three months ended September 30, 2006 primarily due to the
      amortization of the broadcast licenses and customer relationships of our Romania
      and Slovak Republic operations arising on our acquisition of increased stakes
      earlier in 2007.





**IV
      (d) Cost of Revenues for the nine months ended September 30, 2007 compared
      to
      the nine months ended September 30, 2006**





**CONSOLIDATED
      COST OF REVENUES**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Operating
                costs
            
            $
            83,767
            
            
            $
            71,087
            
            
            *$*
            *12,680*Cost
                of programming
            
            
            215,035
            
            
            
            149,188
            
            
            **
            *65,847*Depreciation
                of station property, plant and equipment
            
            
            23,347
            
            
            
            17,841
            
            
            **
            *5,506*Amortization
                of broadcast licenses and other intangibles
            
            
            16,922
            
            
            
            13,967
            
            
            **
            *2,955***Total
                Consolidated Cost of Revenues**
            
            **$**
            **339,071**
            
            
            **$**
            **252,083**
            
            
            ***$***
            ***86,988***





*Page
            68*
 *Index*





Total
      consolidated cost of revenues increased by US$ 87.0 million, or 35%, in the
      nine
      months ended September 30, 2007 compared to the nine months ended September
      30,
      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 nine months ended
      September 30, 2007 increased by US$ 12.7 million, or 18%, compared to the nine
      months ended September 30, 2006.  See discussion in Part I, Item 2,
      III. “Analysis of Segment Results”.





**Cost
      of programming:**Consolidated programming costs (including
      amortization of programming rights and production costs) for the nine months
      ended September 30, 2007 increased by US$ 65.8 million, or 44%, compared to
      the
      nine months ended September 30, 2006.  See discussion in Part I, Item
      2, III. “Analysis of Segment Results”.





**Depreciation
      of property, plant and equipment:**  Total consolidated
      depreciation of property, plant and equipment for the nine months ended
      September 30, 2007 increased by US$ 5.5 million, or 31%, compared to the nine
      months ended September 30, 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
      nine months ended September 30, 2007 increased by US$ 3.0 million, or 21%,
      compared to the nine months ended September 30, 2006 primarily due to the
      amortization of the broadcast licenses and customer relationships of our Romania
      and Slovak Republic operations arising on our acquisition of increased stakes
      earlier in 2007.





**IV
      (e) Station Selling, General and Administrative Expenses for the three months
      ended September 30, 2007 compared to the three months ended September 30,
      2006**





**CONSOLIDATED
      STATION SELLING, GENERAL AND ADMINISTRATIVE EXPENSES**


**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Croatia
            
            $
            2,691
            
            
            $
            2,202
            
            
            $
            489Czech
                Republic
            
            
            5,595
            
            
            
            5,317
            
            
            
            278Romania
            
            
            3,224
            
            
            
            1,806
            
            
            
            1,418Slovak
                Republic
            
            
            2,279
            
            
            
            2,303
            
            
            
            (24
            )Slovenia
            
            
            1,821
            
            
            
            1,356
            
            
            
            465Ukraine
                (STUDIO 1+1)
            
            
            1,814
            
            
            
            3,265
            
            
            
            (1,451
            )Ukraine
                (KINO, CITI)
            
            
            185
            
            
            
            232
            
            
            
            (47
            )**Total
                Consolidated Station Selling, General and Administrative
                Expenses**
            
            **$**
            **17,609**
            
            
            **$**
            **16,481**
            
            
            **$**
            **1,128**





Total
      consolidated station selling, general and administrative expenses increased
      by
      US$ 1.1 million, or 7%, in the three months ended September 30, 2007 compared
      to
      the three months ended September 30, 2006.  See discussion in Part I,
      Item 2, III. “Analysis of Segment Results”.





*Page
            69*
 *Index*





**IV
      (f) Station Selling, General and Administrative Expenses for the nine months
      ended September 30, 2007 compared to the nine months ended September 30,
      2006**





**CONSOLIDATED
      STATION SELLING, GENERAL AND ADMINISTRATIVE EXPENSES**


**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Croatia
            
            $
            6,430
            
            
            $
            4,991
            
            
            $
            1,439Czech
                Republic
            
            
            15,596
            
            
            
            15,383
            
            
            
            213Romania
            
            
            8,568
            
            
            
            6,616
            
            
            
            1,952Slovak
                Republic
            
            
            6,539
            
            
            
            5,216
            
            
            
            1,323Slovenia
            
            
            5,293
            
            
            
            3,840
            
            
            
            1,453Ukraine
                (STUDIO 1+1)
            
            
            5,698
            
            
            
            8,619
            
            
            
            (2,921
            )Ukraine
                (KINO, CITI)
            
            
            965
            
            
            
            523
            
            
            
            442**Total
                Consolidated Station Selling, General and Administrative
                Expenses**
            
            **$**
            **49,089**
            
            
            **$**
            **45,188**
            
            
            **$**
            **3,901**





Total
      consolidated station selling, general and administrative expenses increased
      by
      US$ 3.9 million, or 9%, in the nine months ended September 30, 2007 compared
      to
      the nine months ended September 30, 2006. See discussion in Part I, Item 2,
      III.
“Analysis of Segment Results”.








**IV
      (g) Corporate Operating Costs for the three months ended September 30, 2007
      compared to the three months ended September 30, 2006**





**CORPORATE
      OPERATING COSTS**





**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Corporate
                operating costs (excluding stock-based compensation)
            
            $
            12,345
            
            
            $
            7,375
            
            
            *$*
            *4,970*Stock-based
                compensation
            
            
            1,494
            
            
            
            967
            
            
            **
            *527***Total
                Corporate Operating Costs**
            
            **$**
            **13,839**
            
            
            **$**
            **8,342**
            
            
            ***$***
            ***5,497***





Corporate
      operating costs (excluding non-cash stock-based compensation) for the three
      months ended September 30, 2007 increased by US$ 5.0 million, or 67%, compared
      to the three months ended September 30, 2006, primarily due to increased
      accruals for performance-related bonus payments.





The
      increase in the charge for non-cash stock-based compensation for the three
      months ended September 30, 2007 compared to the three months ended September
      30,
      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 Part I Item 1, Note 14.





*Page
            70*
 *Index*





**IV
      (h) Corporate Operating Costs for the nine months ended September 30, 2007
      compared to the nine months ended September 30, 2006**





**CORPORATE
      OPERATING COSTS**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Corporate
                operating costs (excluding stock-based compensation)
            
            $
            25,989
            
            
            $
            21,634
            
            
            *$*
            *4,355*Stock-based
                compensation
            
            
            4,098
            
            
            
            2,385
            
            
            **
            *1,713***Total
                Corporate Operating Costs**
            
            **$**
            **30,087**
            
            
            **$**
            **24,019**
            
            
            ***$***
            ***6,068***





Corporate
      operating costs (excluding non-cash stock-based compensation) for the nine
      months ended September 30, 2007 increased by US$ 4.4 million, or 20%, compared
      to the nine months ended September 30, 2006, primarily due to:





·
            increased
                accruals for performance-related bonus
                payments;





·
            increased
                business development expenses incurred in researching potential
                acquisition targets, partly offset
                by;





·
            decreased
                property-related costs, as the expense incurred in the nine months
                ended
                September 30, 2006 included a lease exit charge of approximately
                US$ 1.6
                million (including additional depreciation of US$ 0.3 million) incurred
                following the relocation of our London office during the first quarter
                of
                2006; and





·
            decreased
                legal costs incurred in connection with legal proceedings in respect
                of
                our Ukraine operations.








**IV
      (i) Impairment charge for the three and nine months ended September 30, 2007
      compared to the three and nine months ended September 30,
      2006**





When
      we updated our medium-term forecast models at June 30, 2006, we
      determined that the forecast future cash flows of our Croatia operations
      had decreased compared to our previous forecast. We therefore reviewed
      the carrying value of the intangible assets with indefinite lives to determine
      whether the assets are impaired.  As a result of our analysis, we
      recognized an impairment charge of US$ 0.7 million to write down the
      carrying value of goodwill to US$ nil as at June 30, 2006.








**IV
      (j) Operating Income for the three months ended September 30, 2007 compared
      to
      the three months ended September 30, 2006**





**OPERATING
      INCOME**





**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement*****Operating
                Income**
            
            **$**
            **34,950**
            
            
            **$**
            **6,571**
            
            
            ***$***
            ***28,379***





Operating
      income for the three months ended September 30, 2007 increased by US$ 28.4
      million, or 432%, compared to the three months ended September 30,
      2006.  Operating margin was 20%, compared with 6%  for the
      three months ended September 30, 2006.





*Page
            71*
 *Index*





**IV
      (k) Operating Income for the nine months ended September 30, 2007 compared
      to
      the nine months ended September 30, 2006**





**OPERATING
      INCOME**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement*****Operating
                Income**
            
            **$**
            **120,785**
            
            
            **$**
            **66,787**
            
            
            ***$***
            ***53,998***





Operating
      income for the nine months ended September 30, 2007 increased by US$ 54.0
      million, or 81%, compared to the nine months ended September 30,
      2006.  Operating margin was 22%, compared with 17% for the nine months
      ended September 30, 2006.





**IV
      (l) Other income / (expense) items for the three months ended September 30,
      2007
      compared to the three months ended September 30, 2006**





**OTHER
      INCOME / (EXPENSE) ITEMS**





**For
                the Three Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Interest
                income
            
            $
            1,180
            
            
            $
            1,554
            
            
            *$*
            *(374*
            *)*Interest
                expense
            
            
            (11,883
            )
            
            
            (11,066
            )
            
            **
            *(817*
            *)*Foreign
                currency exchange (loss) / gain, net
            
            
            (23,300
            )
            
            
            6,018
            
            
            **
            *(29,318*
            *)*Change
                in fair value of derivatives
            
            
            (8,555
            )
            
            
            (881
            )
            
            **
            *(7,674*
            *)*Other
                expense
            
            
            (6,513
            )
            
            
            (412
            )
            
            **
            *(6,101*
            *)*Provision
                for income taxes
            
            
            (131
            )
            
            
            (1,235
            )
            
            **
            *1,104*Minority
                interest in income of consolidated subsidiaries
            
            
            (4,511
            )
            
            
            (461
            )
            
            **
            *(4,050*
            *)*Gain
                on sale of unconsolidated affiliate
            
            
            -
            
            
            
            6,179
            
            
            **
            *(6,179*
            *)*Discontinued
                operations
            
            $
            -
            
            
            $
            (2,333
            )
            
            *$*
            *2,333*





**Interest
      income** for the three months ended September 30, 2007 was broadly in
      line with that recognized in the three months ended September 30,
      2006.





**Interest
      expense** for the three months ended September 30, 2007 increased by US$
      0.8 million compared to the three months ended September 30, 2006, primarily
      as
      a result of our increased borrowings.





**Foreign
      currency exchange loss, net:**  For the three months ended
      September 30, 2007 we recognized a US$ 23.3 million loss primarily as a result
      of the strengthening of the Euro against the dollar during the three-month
      period.  Our Senior Notes are denominated in Euros, and we incurred a
      transaction loss of approximately US$ 26.6 million due to movements in the
      spot
      rate between June 30, 2007 and September 30, 2007.  For the three
      months ended September 30, 2006, we recognized a transaction gain of US$ 6.0
      million.





**Change
      in fair value of derivatives**: For the three months ended September 30,
      2007 we recognized a loss of US$ 8.6 million as a result of the change in the
      fair value of the currency swaps entered into on April 27, 2006 compared to
      a
      loss of US$ 0.9 million for the three months ended September 30,
      2006.  For further information, see Part I Item 1, Note
      12.





**Other
      expense:**  For the three months ended September 30, 2007 we
      incurred other expenses of US$ 6.5 million compared to expenses of US$ 0.4
      million for the three months ended September 30, 2006.  The amount for
      the three months ended September 30, 2007 includes additional accruals in
      anticipation of the settlement of all outstanding disclosed litigation
      surrounding our Croatia operations.





*Page
            72*
 *Index*





**Provision
      for income taxes:**  The provision for income taxes for the
      three months ended September 30, 2007 was US$ 0.1 million compared to US$ 1.2
      million for the three months ended September 30, 2006.  We incur a tax
      charge despite reporting a taxable loss primarily due to the fact that there
      is
      no tax benefit attributable to the foreign currency exchange transaction loss
      arising on the Senior Notes.





**Minority
      interest in income of consolidated subsidiaries:**  For the
      three months ended September 30, 2007, we recognized a charge of US$ 4.5 million
      in respect of the minority interest in the income of consolidated subsidiaries,
      compared to a charge of US$ 0.5 million for the three months ended September
      30,
      2006. This reflected the strong increase in profitability of our Ukraine (Studio
      1+1) operations.





**Discontinued
      operations:**  For the three months ended September 30, 2007 we
      recognized a charge of US$ nil in respect of discontinued operations compared
      to
      US$ 2.3 million for the three months ended September 30, 2006.





On
      June
      19, 2003, our Board of Directors decided to withdraw from our former operations
      in the Czech Republic.  On October 23, 2003, we sold our 93.2%
      interest in CNTS to 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 September 30,
      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).








**IV
      (m) Other income / (expense) items for the nine months ended September 30,
      2007
      compared to the nine months ended September 30, 2006**





**OTHER
      INCOME / (EXPENSE) ITEMS**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Interest
                income
            
            $
            4,326
            
            
            $
            4,748
            
            
            *$*
            *(422*
            *)*Interest
                expense
            
            
            (42,717
            )
            
            
            (32,921
            )
            
            **
            *(9,796*
            *)*Foreign
                currency exchange gain loss, net
            
            
            (28,552
            )
            
            
            (25,469
            )
            
            **
            *(3,083*
            *)*Change
                in fair value of derivatives
            
            
            3,497
            
            
            
            (2,757
            )
            
            **
            *6,254*Other
                expense
            
            
            (13,272
            )
            
            
            (793
            )
            
            **
            *(12,479*
            *)*Provision
                for income taxes
            
            
            (18,609
            )
            
            
            (8,811
            )
            
            **
            *(9,798*
            *)*Minority
                interest in income of consolidated subsidiaries
            
            
            (9,881
            )
            
            
            (7,178
            )
            
            **
            *(2,703*
            *)*Equity
                in income / (loss) of unconsolidated affiliates
            
            
            -
            
            
            
            (730
            )
            
            **
            *730*Gain
                on sale of unconsolidated affiliate
            
            
            -
            
            
            
            6,179
            
            
            **
            *(6,179*
            *)*Discontinued
                operations
            
            $
            -
            
            
            $
            (4,863
            )
            
            *$*
            *4,863*





**Interest
      income** for the nine months ended September 30, 2007 was broadly in line
      with that recognized in the nine months ended September 30, 2006.





**Interest
      expense** for the nine months ended September 30, 2007 increased by US$
      9.8 million compared to the nine months ended September 30, 2006, primarily
      as a
      result of US$ 6.9 million of costs associated the redemption of our 2012
      Floating Rate Notes as well as an increase in our average
      borrowings.





*Page
            73*
 *Index*





**Foreign
      currency exchange loss, net:**  For the nine months ended
      September 30, 2007 we recognized a US$ 28.6 million loss primarily as a result
      of the strengthening of the Euro against the dollar during the nine-month
      period. Our Senior Notes are denominated in Euros, and we incurred a transaction
      loss of approximately US$ 38.1 million due to movements in the spot rate between
      December 31, 2006 and September 30, 2007.  For the nine months ended
      September 30, 2006, we recognized a transaction loss of US$ 25.5
      million.





**Change
      in fair value of derivatives**: For the nine months ended September 30,
      2007 we recognized a US$ 3.5 million gain as a result of the change in the
      fair
      value of the currency swaps entered into on April 27, 2006 compared to a loss
      of
      US$ 2.8 million for the nine months ended September 30, 2006.  For
      further information, see Part I Item 1, Note 12.





**Other
      expense:**  For the nine months ended September 30, 2007 we
      incurred other expenses of US$ 13.3 million compared to US$ 0.8 million for
      the
      nine months ended September 30, 2006. The amount for the nine months ended
      September 30, 2007 includes accruals in anticipation of the settlement of all
      outstanding disclosed litigation surrounding our Croatia
      operations.





**Provision
      for income taxes:**  The provision for income taxes for the
      nine months ended September 30, 2007 was US$ 18.6 million compared to US$ 8.8
      million for the nine months ended September 30, 2006 as a result of our
      increased profitability.  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
      nine months ended September 30, 2007, we recognized a charge of US$ 9.9
      million in respect of the minority interest in the income of consolidated
      subsidiaries, compared to a charge of US$ 7.2 million for the nine months ended
      September 30, 2006.  This movement primarily reflects the increased
      profitability of our Slovak Republic and Romania operations.





**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 nine months ended September
      30, 2007 decreased by US$ 0.7 million compared to the nine months ended
      September 30, 2006 as detailed below:





**EQUITY
      IN INCOME / (LOSS) OF UNCONSOLIDATED AFFILIATES**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**
            
            
            ***Movement***Romania
                operations
            
            $
            -
            
            
            $
            7
            
            
            *$*
            *(7*
            *)*Slovak
                Republic operations
            
            
            -
            
            
            
            (737
            )
            
            **
            *737***Total
                Equity in Income / (Loss) of Unconsolidated
                Affiliates**
            
            **$**
            **-**
            
            
            **$**
            **(730**
            **)**
            
            ***$***
            ***730***





**Discontinued
      operations:** For the nine months ended September 30, 2007 we recognized
      a charge of US$ nil in respect of discontinued operations compared to US$ 4.9
      million for the nine months ended September 30. 2006.





On
      June
      19, 2003, our Board of Directors decided to withdraw from our former operations
      in the Czech Republic.  On October 23, 2003, we sold our 93.2%
      interest in CNTS to 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 nine months ended September 30,
      2006, the amounts charged to discontinued operations represent 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
            74*
 *Index*





**IV
      (n) Condensed consolidated balance sheet as at September 30, 2007 compared
      to
      December 31, 2006**





**SUMMARIZED
      CONDENSED CONSOLIDATED BALANCE SHEET (US$ 000’s)**





**September 30,**
              **2007**
            
            
            **December 31,**
              **2006**
            
            
            ***Movement***Current
                assets
            
            $
            489,398
            
            
            $
            413,616
            
            
            *$*
            *75,782*Non-current
                assets
            
            
            1,678,139
            
            
            
            1,405,384
            
            
            **
            *272,755*Current
                liabilities
            
            
            245,643
            
            
            
            182,961
            
            
            **
            *62,682*Non-current
                liabilities
            
            
            659,083
            
            
            
            574,084
            
            
            **
            *84,999*Minority
                interests in consolidated subsidiaries
            
            
            15,780
            
            
            
            26,189
            
            
            **
            *(10,409*
            *)*Shareholders’
                equity
            
            $
            1,247,031
            
            
            $
            1,035,766
            
            
            **
            *211,265*





**Current
      assets:**  Current assets at September 30, 2007 increased US$
      75.8 million compared to December 31, 2006, primarily as a result of increases
      in cash and program rights, including prepaid programming.





**Non-current
      assets:**  Non-current assets at September 30, 2007 increased
      US$ 272.8 million compared to December 31, 2006, primarily as a result of the
      recognition of goodwill and other intangible assets following our acquisition
      of
      Sport.ro and additional stakes in our Romania and Slovak Republic operations,
      as
      well as increased investment in station property, plant and equipment in the
      Czech Republic and Romania.





**Current
      liabilities:**  Current liabilities at September 30, 2007
      increased US$ 62.7 million compared to December 31, 2006, primarily reflecting
      increases in deferred income and interest payable, partially offset by a
      decrease in accounts payable.





**Non-current
      liabilities:**  Non-current liabilities at September 30, 2007
      increased US$ 85.0 million compared to December 31, 2006, primarily as a result
      of our issuance of EUR 150.0 million of 2014 Floating Rate Notes, partially
      offset by the redemption of EUR 125.0 million of 2012 Floating Rate Notes issued
      in May 2005.





**Minority
      interests in consolidated subsidiaries:**  Minority interests
      in consolidated subsidiaries at September 30, 2007 decreased US$ 10.4 million
      compared to December 31, 2006, primarily as a result of our acquisition of
      additional stakes in our Romania and Slovak Republic operations during
      2007.





**Shareholders’
      equity:**  Total shareholders’ equity at September 30, 2007
      increased US$ 211.2 million compared to December 31, 2006.  This
      increase reflects net proceeds of US$ 109.9 million from the issuance of shares
      of our Class A Common Stock to Igor Kolomoisky in August 2007, an increase
      in
      Other Comprehensive Income of US$ 81.0 million and net income of US$ 15.6
      million for the nine months ended September 30, 2007, partially offset by the
      impact of the adoption of FIN 48 (US$ 3.2 million). Included in the total
      shareholders’ equity were proceeds from the exercise of stock options (US$ 3.5
      million) and amounts of US$  4.6 million related to stock-based
      compensation.





*Page
            75*
 *Index*





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





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





Cash
      and
      cash equivalents increased by US$ 46.7 million during the nine months ended
      September 30, 2007.  The change in cash and cash equivalents is
      summarized as follows:





**SUMMARY
      OF CASH FLOWS**





**For
                the Nine Months Ended September 30, (US$ 000's)****2007**
            
            
            **2006**Net
                cash generated from continuing operating activities
            
            $
            95,889
            
            
            $
            67,907Net
                cash used in continuing investing activities
            
            
            (188,463
            )
            
            
            (100,818
            )Net
                cash received from financing activities
            
            
            136,446
            
            
            
            132,227Net
                cash used in discontinued operations – operating
                activities
            
            
            (2,164
            )
            
            
            (1,690
            )**Net
                increase in cash and cash equivalents**
            
            **$**
            **46,665**
            
            
            **$**
            **92,844**





*Operating
      Activities*





Cash
      generated from continuing operations increased from US$ 67.9 million in the
      nine
      months ended September 30, 2006 to US$ 95.9 million in the nine months ended
      September 30, 2007. The amount of cash generated by each of our stations other
      than Croatia and Ukraine (KINO, CITI) increased as a result of improved
      operational performance with particularly strong increases in the Czech
      Republic, Romania and the Slovak Republic. These increases more than offset
      our
      increased investment in programming, particularly in Ukraine, which is
      experiencing significant price inflation for popular Russian series and is
      making additional investments in such programming to boost ratings, and in
      Croatia, where we are improving the quality of our programming to drive ratings
      growth.  It is likely that the cost of acquired programming across all
      our markets will continue to grow in the future.





*Investing
      Activities*





Cash
      used
      in investing activities increased from US$ 100.8 million in the nine months
      ended September 30, 2006 to US$ 188.5 million in the nine months ended September
      30, 2007.  Our investing cash flows in the nine months ended September
      30, 2007 were primarily comprised of:





·
            Payment
                of SKK 1.9 billion (approximately US$ 78.5 million) in connection
                with our
                acquisition of the final 20% stake in our Slovak Republic operations
                (for
                further information, see Part I, Item 1, Note
                3);


·
            Payment
                of US$ 51.6 million in connection with our acquisition of an additional
                5%
                stake in our Romania broadcasting operations and a 20% stake in our
                Romanian production company (for further information, see Part I,
                Item 1,
                Note 3);


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


·
            Payments
                of US$ 3.1 million in connection with our acquisition of a 60.4%
                stake in
                each of Tor and Zhysa (for further information, see Part I, Item
                1, Note
                3); and


·
            Capital
                expenditure of US$ 46.3 million.





*Financing
      Activities*





Net
      cash
      received from financing activities in the nine months ended September 30, 2007
      was US$ 136.4 million compared to US$ 132.2 million in the nine months ended
      September 30, 2006.  Our financing cash flows in the nine months ended
      September 30, 2007 primarily comprised net proceeds of US$ 199.4 million from
      the issuance of EUR 150.0 million of 2014 Floating Rate Notes and US$ 110
      million from the issuance of approximately 1.275 million shares of Class
      A Common Stock to Igor Kolomoisky, partially offset by payment of EUR 127.5
      million (approximately US$ 169.0 million at the date of payment) to redeem
      our
      2012 Floating Rate Notes issued in May 2005.





*Page
            76*
 *Index*





The
      amount of cash received in the nine months ended September 30, 2006 reflects
      proceeds of US$ 168.6 million from the issuance of Class A Common Stock and
      a net payment of US$ 36.4 million to repay credit
      facilities.





*Discontinued
      Operations*





In
      the
      nine months ended September 30, 2007, we paid taxes of US$ 2.2 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 nine months ended September
      30, 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 for our existing operations, subject to
      the
      matters disclosed in “Cash Outlook” below.





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 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 equal 25% of the registered capital of
      Studio 1+1. In the case of Inter-Media, 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.





*Page
            77*
 *Index*





As
      at
      September 30, 2007 and December 31, 2006 the operations had the following
      unsecured balances owing to their respective holding companies:





**Operating
                segment (US$ 000’s)**
            
            **September 30,
                2007**
            
            
            **December 31,
                2006**Croatia
            
            $
            95,373
            
            
            $
            67,623Czech
                Republic
            
            
            420,814
            
            
            
            434,897Romania
            
            
            52,613
            
            
            
            25,620Slovak
                Republic
            
            
            10,186
            
            
            
            23,670Slovenia
            
            
            -
            
            
            
            -Ukraine
                (STUDIO 1+1)
            
            
            930
            
            
            
            -Ukraine
                (KINO, CITI)
            
            
            14,505
            
            
            
            4,621**Total**
            
            **$**
            **594,421**
            
            
            **$**
            **556,431**





**V
      (c) Contractual Obligations and Commitments**





Our
      future contractual obligations as of September 30, 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
            
            $
            574,584
            
            
            $
            12,839
            
            
            $
            1,700
            
            
            $
            -
            
            
            $
            560,045Long-Term
                Debt – interest
            
            
            229,995
            
            
            
            41,080
            
            
            
            82,280
            
            
            
            81,974
            
            
            
            24,661Capital
                Lease Obligations
            
            
            6,838
            
            
            
            860
            
            
            
            1,591
            
            
            
            1,420
            
            
            
            2,967Operating
                Leases
            
            
            5,160
            
            
            
            1,876
            
            
            
            2,368
            
            
            
            916
            
            
            
            -Unconditional
                Purchase Obligations
            
            
            132,794
            
            
            
            115,735
            
            
            
            9,254
            
            
            
            5,632
            
            
            
            2,173Other
                Long-Term Obligations
            
            
            6,867
            
            
            
            5,367
            
            
            
            1,500
            
            
            
            -
            
            
            
            -**Total
                Contractual Obligations**
            
            **$**
            **956,238**
            
            
            **$**
            **177,757**
            
            
            **$**
            **98,693**
            
            
            **$**
            **89,942**
            
            
            **$**
            **589,846**








*Long-Term
      Debt*





At
      September 30, 2007, we had the following debt outstanding:





**September 30,
                2007**
              **(US$
                000’s)**Corporate
            
            (1)–(2)
            
            $
            560,045Croatia
                operations
            
            (3)
            
            
            -Czech
                Republic operations
            
            (4)–(6)
            
            
            12,839Romania
                operations
            
            (7)
            
            
            -Slovenia
                operations
            
            (8)
            
            
            -Ukraine
                (KINO, CITI) operations
            
            (9)
            
            
            1,700**Total**
            
            
            
            **$**
            **574,584**





(1)
            In
                May 2005, we issued senior notes in the aggregate principal amount
                of EUR
                370.0 million (approximately US$ 524.6 million) consisting of
                EUR 245.0 million (approximately US$ 347.4 million) of Fixed
                Rate Notes, which bears interest at 8.25% and EUR 125.0 million
                (approximately US$ 177.2 million) of 2012 Floating Rate Notes,
                which bore interest at six-month Euro Inter-Bank Offered Rate (“EURIBOR”)
                plus 5.50%.  On May 15, 2007, we redeemed the 2012 Floating Rate
                Notes.





On
      May
      16, 2007 we issued our 2014 Floating Rate Notes in the aggregate principal
      amount of EUR 150.0 million (approximately US$ 212.7 million), which bears
      interest at EURIBOR plus 1.625% (5.80% was applicable at September 30,
      2007).   Interest is payable on the Senior Notes semi-annually in
      arrears on each May 15 and November 15.





*Page
            78*
 *Index*





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 two subsidiary holding companies and are secured
      by a pledge of shares of these subsidiaries as well as 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.





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 108.25% 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, if any, to the redemption date.





On
      September 10, 2007, Standard & Poor’s senior unsecured debt rating for our
      Senior Notes was upgraded to BB- from B+, with a corporate credit rating of
      BB/
      (stable), up from BB- / (positive).  At September 30, 2007, Moody’s
      Investors Service’s rating of both our corporate credit rating and our Senior
      Notes was Ba3 stable.





(2)
            On
                July 21, 2006, we entered into a five-year revolving loan agreement
                for
                EUR 100.0 million (approximately US$ 141.8 million) arranged by EBRD
                and
                on August 22, 2007, we entered into a second revolving loan agreement
                for
                EUR 50.0 million (approximately US$ 70.9 million) also arranged by
                EBRD.
                ING and CS are participating in the facility for EUR 75.0 million
                in
                aggregate.





We
      also
      entered into a supplemental agreement on August 22, 2007 to amend the interest
      rate payable on the EUR 100.0 million facility, as a result of which the EBRD
      Loan bears interest at a rate of three-month EURIBOR plus 1.625% on the drawn
      amount.  The available amount of the EBRD Loan amortizes by 15% every
      six months from May 2009 to November 2010 and by 40% in May 2011. There were
      no
      drawings under this facility as at September 30, 2007.





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





The
      EBRD
      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 two subsidiary
      holding companies and is secured by a pledge of shares of those subsidiaries
      as
      well as an assignment of certain contractual rights.  The terms of the
      EBRD 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
            79*
 *Index*





(3)
            On
                March 28, 2007, we repaid EUR 0.6 million (approximately US$ 0.9
                million),
                which was the total amount outstanding to our Croatia operations
                under two
                loan agreements with Hypo Alpe-Adria Bank d.d. Following this repayment,
                the security held by the bank was
                released.





(4)
            CET
                21 has a four-year credit facility of CZK 1.2 billion (approximately
                US$
                61.6 million) with 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 LIBOR, EURIBOR or 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 September 30, 2007, there were no
                drawings under this facility; however on July 10, 2007, CZK 860.0
                million
                (approximately US$ 44.2 million) was drawn down under this facility,
                of
                which CZK 260.0 million (approximately US$ 13.4 million) was repaid
                on
                July 31, 2007, and CZK 600.0 million (approximately US$ 30.8 million)
                was
                repaid on September 14, 2007.





(5)
            CET
                21 has a working capital credit facility of CZK 250.0 million
                (approximately US$ 12.8 million) with CS.  This working capital
                facility bears interest at the three-month PRIBOR rate plus 1.65%
                and is
                secured by a pledge of receivables, which are also subject to a factoring
                arrangement with Factoring Ceska Sporitelna, a.s. On September 30,
                2007,
                the full CZK 250.0 million (approximately US$ 12.8 million) was drawn
                under this facility bearing interest at an aggregate 4.65% (three-month
                PRIBOR effective for this loan was
                3.5%).





(6)
            As
                at September 30, 2007, there were no drawings under a CZK 300.0 million
                (approximately US$ 15.4 million) factoring facility with Factoring
                Ceska
                Sporitelna, a.s.  This facility is available until September 30,
                2010 and bears interest at the rate of one-month PRIBOR plus 1.40%
                for the
                period that actively assigned accounts receivable are
                outstanding.





(7)
            The
                interest-free loan provided by one of the founding shareholders of
                Sport.ro was repaid on August 31,
                2007.





(8)
            On
                July 29, 2005, Pro Plus entered into a revolving five-year facility
                agreement for up to EUR 37.5 million (approximately US$ 53.2 million)
                in
                aggregate principal amount with ING, Nova Ljubljanska Banka d.d.,
                Ljubljana and Bank Austria Creditanstalt d.d., Ljubljana.  The
                facility availability declines 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 2.1% and 3.6% that varies according to the ratio of
                consolidated net debt to consolidated broadcasting cash flow for
                Pro
                Plus.  As at September 30, 2007, EUR 30.0 million (approximately
                US$ 42.5 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 September 30, 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$ 2.1
      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 1, Item 1, Note
      18.





*Page
            80*
 *Index*





*Unconditional
      Purchase Obligations*





Unconditional
      purchase obligations largely comprise future programming
      commitments.  At September 30, 2007, we had commitments in respect of
      future programming of US$ 123.4 million (December 31, 2006: US$ 98.0
      million).  This includes contracts signed with license periods
      starting after September 30, 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$ 3.3 million (see Part I, Item 1, Note 18).





In
      addition to the amounts disclosed above, Mr. Sarbu has the right to sell his
      remaining 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.  Mr. Sarbu’s right to put his remaining shareholding is
      exercisable from November 12, 2009, provided that we have not enforced a pledge
      over this shareholding which Mr. Sarbu granted as security for our right to
      put
      our interest in Media Pro. As at September 30, 2007, we consider the fair value
      of Mr. Sarbu’s put option to be approximately US$ nil (2006: US$
      nil).








**V
      (d) Cash Outlook**





We
      issued
      EUR 370.0 million (approximately US$ 480.0 million at the time of issuance)
      Senior Notes in May 2005, consisting of EUR 245.0 million of Fixed Rate Notes
      and EUR 125.0 million of 2012 Floating Rate Notes. Our EUR 125 million 2012
      Floating Rate Notes were redeemed on May 15, 2007. On May 16, 2007 we issued
      our
      2014 Floating Rate Notes in the aggregate principal amount of EUR 150.0 million.
      We have significant debt service obligations in respect of the Senior Notes.
      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 addition, we have a  EUR 150.0 million revolving
      loan facility with EBRD. EUR 100.0 million of this facility is available for
      general corporate purposes; and the remaining EUR 50.0 million, once fully
      drawn
      for permitted projects, can thereafter be used for general corporate purposes,
      which further increases our financing flexibility and will reduce our average
      cost of debt.  As at September 30, 2007, there were no
      drawings.  We have also raised US$ 110.0 million from the issuance of
      approximately 1.275 million shares of Class A Common Stock to Igor Kolomoisky
      in
      August 2007, which will allow further flexibility in our investing and financing
      requirements.





Our
      future cash needs will depend on our overall financial performance, debt service
      requirements under the Senior Notes and the EBRD Loan 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 leverage ratios under
      the Senior Notes, which are also incorporated into the drawing conditions of
      the
      EBRD Loan.  In the short-term we are able to fund our operations from
      cash generated from operations, our current cash resources (US$ 192.6 million,
      at September 30, 2007) and available undrawn credit facilities (US$ 332.2
      million, at September 30, 2007), plus an unutilized, uncommitted EUR 10.0
      million (US$ 14.2 million) overdraft facility from ING.





We
      expect
      to invest US$ 75-80 million on capital expenditure in 2007 and approximately
      US$
      10 million in 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$ 37.0 million during
      2007, and have provided US$ 4.3 million in cash funding to Nova TV (Croatia)
      in
      the three months ended September 30, 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$ 11.0 million during 2007 and have provided US$ 2.2 million
      in
      cash funding to KINO and CITI in the three months ended September 30,
      2007.





*Page
            81*
 *Index*





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.






**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$ 6.4 million). The Slovenian tax
      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 tax 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$ 3.8 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 Slovenian
      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 Slovenian tax authorities filed an appeal with the
      Slovenian Supreme Court in May 2005. The Slovenian Supreme Court denied the
      appeal in June 2007 and remanded the case back to the Slovenian tax authorities.
      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 relate to 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.





*Page
            82*
 *Index*





*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.





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$ 1.5 million 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
            2002Germany
            2000Netherlands
            2004Romania
            2002Slovak
                Republic
            2001Slovenia
            2001Ukraine
            2003United
                States
            2001





Since January
      1, 2007, the German tax authorities concluded an income tax audit of our
      German subsidiary covering the years up to and including 2004 and authorities
      determined that no material additional amounts of income tax were
      payable for such periods.  Therefore, years before 2005 are no longer
      subject to income tax examination in Germany.





*Page
            83*
 *Index*





**Item
      3.  Quantitativeand 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 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 dollars
      due to movements in exchange rates between the Euro and the 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$ 549.5 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$ 533.0 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 September 30, 2007 was a US$ 9.0
      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 Part I, 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.





**Interest
      Rate Risk Management**





As
      at
      September 30, 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.





*Page
            84*
 *Index*





*Interest
      Rate Table as at September 30, 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
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            150,000Average
                interest rate (%)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5.80
            %**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 (%)
            
            
            5.15
            %
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -











*Variable
      Interest Rate Sensitivity as at September 30, 2007*





**Yearly
                interest charge if interest rates increase by**
              **(US$
                000s):****Value
                of Debt as at September 30, 2007**
              **(US$
                000's)**
            
            **Interest
                Rate as at September 30, 2007**
            
            
            **Yearly
                Interest Charge**
              **(US$
                000’s)**
            
            
            ****
            **1**
            **%**
            
            ****
            **2**
            **%**
            
            ****
            **3**
            **%**
            
            ****
            **4**
            **%**
            
            ****
            **5**
            **%**212,675
              (EUR
                150.0 million)
            
            
            5.80
            %
            
            
            12,329
            
            
            
            14,456
            
            
            
            16,582
            
            
            
            18,709
            
            
            
            20,836
            
            
            
            22,96312,839
              (CZK
                250.0 million)
            
            
            5.15
            %
            
            
            661
            
            
            
            790
            
            
            
            918
            
            
            
            1,046
            
            
            
            1,175
            
            
            
            1,303**Total**
            
            
            
            
            
            ****
            **12,990**
            
            
            ****
            **15,246**
            
            
            ****
            **17,500**
            
            
            ****
            **19,755**
            
            
            ****
            **22,011**
            
            
            ****
            **24,266**








**Item
      4.  Controlsand 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 September
      30, 2007 that has materially affected, or is reasonably likely to materially
      affect, our internal control over financial reporting.





*Page
            85*
 *Index*





**PART
      II  OTHER INFORMATION**





**Item
      1.  LegalProceedings**





*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 claiming
      approximately HRK 53.0 million (approximately US$ 10.3 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 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.  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$ 13.2
      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 engaging in 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 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$ 114.2 million). The first hearing was held on September 24, 2007, and the
      judge denied the claim without permitting any arguments, evidence or witnesses.
      We await the issuance of the written decision.





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*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 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. Our appeal against this decision was denied on May
      8,
      2007. 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
      are
      engaged in 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.





*Slovenia*





On
      November 20, 2002, we received notice of a claim filed by Mrs. Zdenka Meglic,
      the founder and a former shareholder of 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.
      At a
      hearing on September 4, 2007, the lower court denied the claim of Mrs.
      Meglic.   and ordered her to pay MMTV‘s costs of litigation.
      Mrs. Meglic filed an appeal on September 24, 2007.





*Page
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*Slovak Republic*





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





*Ukraine*




On
      December 23, 2005, we initiated international arbitration proceedings against
      our partners Alexander Rodnyansky and Boris Fuchsmann to enforce our contractual
      rights and compel a restructuring of the ownership of Studio 1+1 in order to
      permit us to hold a 60.0% interest in Studio 1+1.  Following the
      adoption of an amendment to the Ukraine Media Law in March 2006, our partners
      acknowledged their obligation to structure had ripened; and in September 2006,
      they entered into agreements to effect a restructuring. On November 9, 2006,
      the
      arbitration proceedings were suspended by mutual consent to permit the parties
      to implement the restructuring   On August 30, 2007, we succeeded
      in registering our Ukrainian subsidiary UMS as the owner of 42.0% of Studio
      1+1.  Together with our 18.0% indirect interest in Studio 1+1 held
      through Inter-Media, we now have a 60% interest in Studio 1+1.




On
        September 4, 2007, Mr. Fuchsmann and Mr. Rodnyansky sought to file a cross
        action in these international arbitration proceedings to compel the transfer
        by
        us of an interest in Ukrpromtorg to Mr. Fuchsmann and Mr.Rodnyansky. They
        allege
        that they are entitled to participate on a pro rata basis in our investment
        in
        Ukrpromtorg. This claim is based on a the terms of our shareholders’ agreement
        pursuant to which we and our partners have a limited right to participate
        on a
        pro rata basis in  investment opportunities in the Ukrainian media
        sector undertaken by the other.   In our response to this cross
        action, we intend to deny any breach of our shareholders’ agreement and request
        that the tribunal hold the cross action inadmissible in the current arbitration
        proceedings, whose subject matter is the restructuring, and terminate these
        proceedings.





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**Item
      1A.  RiskFactors**





This
      Report on Form 10-Q for the period ended September 30, 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**





*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 a direct 42% ownership interest
      and an indirect 18% ownership interest. As a result, we do not have an ownership
      interest directly in Studio 1+1 that is sufficient to allow us to unilaterally
      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 sale of advertising and
      sponsorship, acquisition of programming, investment in production, scheduling
      decisions, the 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.  In the absence of such consent, we may not be able to
      cause Studio 1+1 to adopt decisions in respect of advertising and sponsorship,
      programming, production, scheduling, personnel or otherwise that we believe
      are
      necessary in order to respond to competitive market dynamics in Ukraine for
      audience share and advertising, which may have an adverse impact on our
      financial position, results of operations and cash flows.








*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 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 operating companies’ transactions with such companies,
      whether or not we are aware that our local shareholders and general directors
      have an interest in such companies, may present conflicts of interests which
      may
      in turn result in the conclusion of transactions on terms that are not arms
      length. In addition, 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. 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 some related party transactions may be entered into on
      terms that are not arms length, which may result in a negative impact on results
      of operations and 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.





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*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 GRPs to
      measure television viewing levels.  Our ability to generate GRPs
      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.





In
      order
      to maintain and increase our advertising sales, it will be necessary to fully
      implement our advertising sales strategy in the Czech Republic (see Part I,
      Item
      2, “Analysis of Segment Results, Czech Republic”) and to respond successfully to
      changes in other factors affecting advertising sales generally, especially
      in
      Ukraine, 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 could have a material adverse effect
      on our financial position, results of operations and cash flows.








*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 1, “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.








*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,
      particularly in Ukraine.  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. Our expenditure in respect of
      locally produced programming content may also 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 financial condition, results of operations and cash
      flows.





*Page
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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 markets 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 November 2007
      and
      2019.  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
      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 and cash flows.








*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;





*Page
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·
            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.





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 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 financial position, 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, financial position, results
      of operations and cash flows.








*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 analog 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 subject to change and we cannot predict the
      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. We may
      not
      have access to resources sufficient to make such investments when
      required.





*Page
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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 analog terrestrial
      broadcasting, such as digital broadcasting, cable and satellite distribution
      systems, the internet, video-on-demand and the availability of 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
      financial position, 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). As a result, we have significant debt service
      obligations and we are restricted in the manner in which our business is
      conducted.  Our high leverage could have important consequences to our
      business and results of operations, including but not limited to: increasing
      our
      vulnerability to a downturn in our business or economic and industry conditions;
      and limiting our ability to obtain additional financing to fund future working
      capital, capital expenditures, business opportunities and other corporate
      requirements.  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.





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*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.  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
      Indentures pursuant to which our Senior Notes were issued in 2005 (the “2005
      Indenture”) and in 2007 (the “2007 Indenture” and collectively with the 2005
      Indenture the “Indentures”) or pursuant to the terms of the EBRD Loan (see Part
      I, Item 1, Notes 5 and 11).  Any additional equity or equity-linked
      financings may dilute the economic interest of the holders of our Common
      Stock.  Furthermore, such financings may not be available on
      acceptable terms.






*Under
      the Senior Notes and the EBRD Loan, we have pledged shares in our two principal
      subsidiary holding companies 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 the 2005 Indenture, the 2007 Indenture and the EBRD Loan, 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 2005 Indenture, the 2007 Indenture
      or the EBRD Loan , the trustees under our Indentures 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 our Indentures or the EBRD Loan.








*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 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 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 Dollars due to movements in exchange rates between the Euro and
      the
      dollar.





*Page
            94*
 *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  financial position,
      results of operations and cash flows.








*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 intercompany
      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 financial position, results of operations
      and
      cash flows.








**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 financial position, results of operations and cash
      flows.








*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, and all
      or
      a substantial portion of the assets of such persons are or may be located
      outside the United States.  As a result, investors may be unable to
      effect service of process within the United States upon such persons, or to
      enforce against them judgments obtained in the United States courts, including
      judgments predicated upon the civil liability provisions of the United States
      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 courts obtained against us or such persons predicated
      upon the civil liability provisions of the United States 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 federal and state securities laws.





*Page
            95*
 *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 Adele (Guernsey) L.P. is entitled
      to
      recommend for appointment, 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 European Union, 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 and 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
      September 30, 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 Igor Kolomoisky holds 1,275,227 unregistered
      shares of Class A Common Stock.  We cannot predict what effect, if
      any, the issuance of shares underlying options, the entry into trading of such
      unregistered shares or any future sales of our shares will have on the market
      price of our shares.  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
            96*
 *Index*





**Item
      5. OtherInformation**





On
      October 30, 2007, we entered into a purchase agreement with Mr. Kolomoisky
      and
      Torcensta and a pledge agreement with Mr. Kolomoisky and the two nominee
      shareholders of Torcensta in order to implement certain terms of the framework
      agreement (see Part I, Item 1, Note 19 “subsequent events”).





Under
      the
      purchase agreement, we will acquire 100% of Torcensta following its becoming
      the
      owner of the Optioned Interests and the satisfaction of other conditions to
      closing .  In the event we exercise such option, The consideration
      shall be an amount equal to the lesser of (i) US$ 140.0 million and (ii) 4%
      of
      the number of our outstanding shares of Class A Common Stock at the time the
      Optioned Interests are acquired by Torcensta (using a weighted average trading
      price), provided, that in the event the lesser amount is US$ 140.0 million,
      Mr.
      Kolomoisky will have the option of receiving his consideration in cash or shares
      of our Class A Common Stock (using the weighted average trading
      price).





Under
      the
      pledge agreement, Mr. Kolomoisky has pledged his beneficial interest in
      Torcensta and the two nominee shareholders will pledge their shares in Torcensta
      as security for the obligation under the purchase agreement to transfer
      Torcensta to us.








**Item
      6.  Exhibits**





a)
      The
      following exhibits are attached:





4.02
            Subscription
                Agreement between Central European Media Enterprises Ltd and Igor
                Kolomoisky, dated August 24, 20074.03
            Registration
                Rights Agreement between Central European Media Enterprises Ltd and
                Igor
                Kolomoisky, dated as of August 24, 200710.68
            Supplemental
                Agreement Relating to the Loan Agreement dated 21 July, 2006 (as
                amended
                by an amending Letter Agreement dated 16 November, 2006) between
                Central
                European Media Enterprises Ltd and the European Bank for Reconstruction
                and Development, dated August 22, 200710.69
            Loan
                Agreement between Central European Media Enterprises Ltd and the
                European
                Bank for Reconstruction and Development, dated August 22,
                200710.70
            Agreement
                on Transfer of Participation Interest in Media Invest, spol. s.r.o
                between
                Mr Jan Kovàčik
                and
                CME Slovak Holdings B.V., dated July 13, 200710.71
            Agreement
                on Consideration between Mr Jan Kovàčik
                and
                CME Slovak Holdings B.V., dated July 13, 200731.01
            Sarbanes-Oxley
                Certification s. 302 CEO, dated November 1, 200731.02
            Sarbanes-Oxley
                Certification s. 302 CFO, dated November 1, 200732.01
            Sarbanes-Oxley
                Certification – CEO and CFO, dated November 1, 2007 (furnished
                only)





*Page
            97*
 *Index*





**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:
                November 1, 2007
            /s/
                Michael GarinMichael
              GarinChief
              Executive Officer(Duly
              Authorized Officer)Date:
                November 1, 2007
            /s/
                Wallace MacmillanWallace
              MacmillanChief
              Financial Officer(Principal
              Financial Officer and Accounting
              Officer)





*Page
            98*
 *Index*





**EXHIBIT
      INDEX**





4.02
            Subscription
                Agreement between Central European Media Enterprises Ltd and Igor
                Kolomoisky, dated August 24, 20074.03
            Registration
                Rights Agreement between Central European Media Enterprises Ltd and
                Igor
                Kolomoisky, dated as of August 24, 200710.68
            Supplemental
                Agreement Relating to the Loan Agreement dated 21 July, 2006 (as
                amended
                by an amending Letter Agreement dated 16 November, 2006) between
                Central
                European Media Enterprises Ltd and the European Bank for Reconstruction
                and Development, dated August 22, 2007.10.69
            Loan
                Agreement between Central European Media Enterprises Ltd and the
                European
                Bank for Reconstruction and Development, dated August 22,
                2007.10.70
            Agreement
                on Transfer of Participation Interest in Media Invest, spol. s.r.o
                between
                Mr Jan Kovàčik
                and
                CME Slovak Holdings B.V., dated July 13, 2007.10.71
            Agreement
                on Consideration between Mr Jan Kovàčik
                and
                CME Slovak Holdings B.V., dated July 13, 2007.31.01
            Sarbanes-Oxley
                Certification s. 302 CEO, dated November 1, 2007.31.02
            Sarbanes-Oxley
                Certification s. 302 CFO, dated November 1, 2007.32.01
            Sarbanes-Oxley
                Certification – CEO and CFO, dated November 1, 2007 (furnished
                only).







Page
      99