For the transition period from __________ to __________

Commission File Number 0-24796

(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock of registrant held by non-affiliates of the registrant as of March 21, 2002 was approximately $44.4 million

Number of shares of Class A Common Stock outstanding as of March 21, 2002 : 2,314,221

Number of shares of Class B Common Stock outstanding as of March 21, 2002 : 991,842

Central European Media Enterprises Ltd. ("CME") is a Bermuda corporation. All references to the "Company" include CME and its direct and indirect Subsidiaries, and all references to "Subsidiaries" include each corporation or partnership in which CME has a direct or indirect equity or voting interest.

CME, together with its subsidiaries and affiliates, invests in, develops and operates national and regional commercial television stations and networks in Central and Eastern Europe.

The Company's registered offices are located at Clarendon House, Church Street, Hamilton HM CX Bermuda, and its telephone number is 441-296-1431. Certain of the Subsidiaries maintain offices at, 8^th Floor, Aldwych House, 71-91 Aldwych, London, WC2B 4HN, England, telephone number 44-20-7430-5430/1.

Unless otherwise noted, all statistical and financial information presented in this report has been converted into United States dollars using exchange rates as of December 31, 2001. All references to '$' or 'dollars' are to United States dollars, all references to 'Kc' are to Czech korunas, all references to 'ROL' are to Romanian lei, all references to 'SIT' are to Slovenian tolar, all references to 'Sk' are to Slovak korunas, all references to 'Hrn' are to Ukrainian hryvna, all references to 'DM' are to German marks and all references to Euros are to European Euro. The exchange rates as of December 31, 2001 used in this report are 31,597 ROL/$; 250.95 SIT/$; 48.47 Sk/$; 5.30 Hrn/$; 2.20 DM/$ 36.27 Kc/$, and 0.89 Euro/$.

CME was incorporated on June 15, 1994 under the laws of Bermuda. CME's assets are held through a series of Dutch and Netherlands Antilles holding companies.

Laws, regulations and policies in CME's markets generally restrict the level of direct or indirect interests that any non-local investor such as CME may hold in companies holding broadcast licenses. As a result, broadcast licenses are generally held by companies majority owned by CME's local partners and CME owns controlling interests in service companies which provide programming, advertising and other services to the license holding companies. References to POP TV, Kanal A, PRO TV, Acasa, Markiza TV and Studio 1+1 in this report may be to either the license company or the service companies or both, as the case may be. The Company does not own a controlling voting interest in its Slovakian operations but is entitled to and obligated for 70% of the economics.

See Part I, Item 3, "Legal Proceedings" for a discussion on the ongoing dispute between the Company's subsidiary in the Czech Republic CNTS and CET in connection with Nova TV. The outcome of these legal proceedings will have a significant impact on the Company's ability to continue operating.

The following table shows the key license companies, license expiration date, service companies, economic and voting interests of the Company in each of its operations.

The Company's television stations and networks reach an aggregate of approximately 71 million people in four countries. The Company's national private television stations and networks in the Slovak Republic and Slovenia had the leading nationwide audience shares for 2001 and the Company's television network in Romania had the leading average audience share within its area of broadcast reach for 2001. In Ukraine, for 2001, the Company's national private television station and network had the leading nationwide average audience share for television stations broadcasting in the Ukrainian language.

The market ratings of the Company's stations in their respective markets are reflected below.

The following table sets forth the population, technical reach, number of TV households, per capita GDP and cable penetration for those countries of Central and Eastern Europe where the Company has broadcast operations.

 Note: All figures are current Company estimates and are in $US millions.

In Romania, strong sales competition between the television stations appears to have caused the television advertising market to decline in 2001 from $69 million to $63 million. In the Slovak Republic and Slovenia, television advertising revenues increased by 5% and 8%, expressed in local currency terms, respectively. However the Slovak koruna depreciated by 4% and the Slovenian tolar depreciated by 8% against the dollar. Therefore television advertising expenditures remained flat in these two countries. In Ukraine, television advertising revenues experienced a significant increase of 43% from the very low levels recorded in 2000 and 1999.

If any Central or Eastern European country in which the Company operates becomes a member of the European Union (the "EU"), the Company's broadcast operations in such country would be subject to relevant legislation of the EU, including programming content regulations. Romania, the Slovak Republic, the Czech Republic and Slovenia have entered into or signed Association Agreements with the EU and some or all of these countries may be admitted to the EU in the first wave of the enlargement process.

The EU's Television Without Frontiers directive (the "EU Directive") sets forth the legal framework for television broadcasting in the EU. It requires broadcasters, where "practicable and by appropriate means," to reserve a majority proportion of their broadcast time for "European works." Such works are defined as originating from an EU member state or a signatory to the Council of Europe's Convention on Transfrontier Television, as well as written and produced mainly by residents of the EU or Council of Europe member states. In addition, the EU Directive provides for a 10% quota of either broadcast time or programming budget for programs made by European producers who are independent of broadcasters. News, sports, games, advertising, teletext services and teleshopping are excluded from the calculation of these quotas. Further, the EU Directive provides for regulations on advertising, including limits on the amount of time that may be devoted to advertising spots, including direct sales ad vertising. Member states are free to introduce stricter content requirements than those in the EU Directive for broadcasters within their jurisdiction. The Company intends to align its broadcast operations with any applicable EU legislation. The Company believes that the EU Directive, as currently drafted, will not have a material adverse effect on its operations.

The Company's broadcast operations are all located in countries which are members of the Council of Europe, a supranational body through which international conventions are negotiated. In 1990, the Council of Europe adopted a Convention on Transfrontier Television, which provides for European programming content quotas similar to those in the EU Directive. This Convention has been ratified by some of the countries in which the Company operates, but all countries in which the Company operates have already implemented its principles into their national media legislation.

Romania is a parliamentary democracy of approximately 22.4 million people. Per capita GDP was an estimated $1,704 in 2001 ($1,637 in 2000). Approximately 87% of Romanian households have one or more television sets, and cable penetration is approximately 48%. According to the Company's estimates, television advertising totalled approximately $63 million in 2001.

The Company's interest in its Romanian operation is governed by a Co-operation Agreement (the "Romanian Agreement") among the Company, Adrian Sarbu and Ion Tiriac, forming Media Pro International S.A. ("MPI"), through which PRO TV, Acasa and PRO TV International are operated. MPI provides programming to and sells advertising for the stations which comprise the PRO TV, Acasa and Pro TV International networks.

Pursuant to the Romanian Agreement, the Company owns 66% of the equity of MPI. Interests in profits of MPI are equal to the partners' equity interests. The Company has the right to appoint three of the five members of the Council of Administration which directs the affairs of MPI. Although the Company has majority voting power in MPI, with respect to certain fundamental financial and corporate matters, the affirmative vote of either Mr. Sarbu or Mr. Tiriac is required.

With specific reference to MPI, the "certain fundamental financial and corporate matters" which require approval of the minority shareholders are in the nature of "protective" rights which are not an impediment to consolidation for accounting purposes.

In addition, in Romania, the Company owns 70% of Media Vision SRL ("Media Vision"), a production and dubbing company. On November 22, 2001 the Company sold its 70% interest in Video Vision International SRL ("Video Vision"), a Romanian post-production company and the gain recognized on this sale was $1.8 million.

The Company owns 49% of the equity of PRO TV, Srl which holds 20 of the 23 licenses for the stations which comprise the PRO TV, Acasa and Pro TV International network. Messrs. Sarbu and Tiriac own substantially all of the remainder of PRO TV, Srl. The remaining three licenses for the PRO TV network together with the licenses for the PRO FM and PRO AM radio networks are held by Media Pro Srl, in which the Company holds 44% of the equity. The remainder is owned by Messrs. Sarbu and Tiriac.

PRO TV is a national television broadcast network in Romania which was launched in December 1995. PRO TV reaches approximately 77% of the Romanian population of 22.4 million, including 100% of the urban population. PRO TV broadcasts from studios located in Bucharest via digitally encoded satellite signals which deliver programming to terrestrial broadcast facilities and to approximately 490 cable systems throughout Romania. Independent research from CSOP Gallup/Taylor Nelson Sofres (peoplemeter) in Romania shows that PRO TV is currently the top-rated television station in its broadcast area, with an average television viewer share for December 2001 of 22% for the whole day and 23% for prime time.

In February 1998, MPI launched Acasa, a station reaching approximately 63% of the Romanian population, including approximately 100% of the urban population via satellite and cable distribution. For September to December 2001, Acasa had an average television viewer share in its broadcast area of approximately 10% for the whole day and 14% for prime time, making it the fourth ranked station in Romania.

PRO TV International rebroadcasts PRO TV and Acasa programming throughout Europe and in Israel, using the existing PRO TV and Acasa satellite infrastructure. In 2002 MPI entered into an agreement under which PRO TV International will provide Romanian language program content for broadcast in the US at no direct cost to PRO TV International. The agreement is for four years and broadcast in the US is expected to commence in April 2002.

Media Vision is the leading television production company in Romania and produces a significant portion of PRO TV's entertainment programming, performs dubbing and produces advertising spots for third party clients such as Coca Cola, Procter & Gamble and Unilever.

MPI also operates PRO FM, a radio network which is broadcast through owned and affiliate stations to approximately 9.5 million people in Romania. In 2001, PRO FM had an average audience share of 24% in the Bucharest area.

PRO TV's programming strategy is to appeal to a mass market audience through a wide range of programming, including movies and series, news, sitcoms, telenovellas, soap operas and game shows. PRO TV broadcasts 24 hours of programming daily by means of cable and satellite. Approximately 40% of PRO TV's programming is comprised of locally produced programming, including news and news related programs, sports, a breakfast show, talk shows, entertainment and comedy shows.

PRO TV has secured exclusive broadcast rights in Romania to a large number of quality American and Western European programs and films produced by such companies as Warner Bros. and Twentieth Century Fox. PRO TV also receives foreign news reports and film footage from Reuters, APTN and ENEX to integrate into its news programs. All foreign language programs and films are subtitled in Romanian.

Acasa broadcasts 24 hours of programming daily by means of cable and satellite. Its programming strategy is to target a female audience with programming including telenovellas, films and soap operas as well as news, daily local production for women and family, talk shows and entertainment. Acasa's viewer demographics are complementary to PRO TV's, providing an attractive advertising medium for small to medium sized companies that would not otherwise advertise on television. Approximately 40% of Acasa's total programming is locally produced.

PRO TV is permitted to broadcast advertising for up to 20% of its broadcast time in any hour, subject to an overall daily limit of 15% of broadcast time. An additional 5% of broadcast time may be used for direct sales advertising. There are also restrictions on the frequency of advertising breaks (for example, news and children's programs shorter than 30 minutes cannot be interrupted). These restrictions are the same for public and private broadcasters.

Prior to the launch of PRO TV, TVR 1, a public station, was the dominant broadcaster in Romania. In December 2001, PRO TV achieved an average audience share of 23% in its coverage area, while TVR 1's December 2001 average audience share in PRO TV's coverage area was approximately 13%. TVR 1 reaches 99% of the Romanian population. Other competitors include the second public national station, TVR 2, with a 70% broadcast reach, and privately owned Antena 1, Tele 7 ABC and Prima TV, which reach approximately 72%, 60% and 65% of the population respectively.

Additional competitors include cable and satellite stations. Cable and satellite currently penetrate approximately 46% and 2%, respectively, of the Romanian market. PRO TV competes for advertising revenues with other media such as newspapers, radio, magazines, outdoor advertising, telephone directory advertising and direct mail.

Licenses for the television stations which show programming provided by PRO TV and which broadcast advertising sold by PRO TV are regulated by Romania's National Audio-Visual Commission. PRO TV's television licenses have been granted for nine-year periods. Licenses which cover 19% of the Romanian population, including the license for Bucharest, expire in 2003. The remaining licenses expire on dates ranging from 2004 to 2008. Under regulations established by the National Audio-Visual Commission and the various licenses of stations which broadcast PRO TV, programming and advertising provided by PRO TV is required to comply with certain restrictions. These restrictions include a requirement that at least 40% of programming be "own" produced.

Regulations relating to advertising content include (i) a ban on tobacco and restrictions on alcohol advertising, (ii) advertising targeted at children or during children's programming must account for the overall sensitivity of that age group and (iii) members of the news department of PRO TV are prohibited from appearing in advertisements.

The PRO TV licenses consist of many local licenses, with varying expiry dates. The licensing procedure in Romania is governed by the 1992 Audiovisual Law ("Audiovisual Law"). According to the Audiovisual Law, the National Council of Audiovisual ("Audiovisual Council") is in charge of issuing and renewing licenses. Renewal, as a separate procedure is not described in the Audiovisual Law and therefore expired licenses are subject to bidding procedures similar to those applicable to new licenses. A decision of the Audiovisual Council, however, provides that past broadcasting experience, is a deciding factor in the renewal procedure. All renewal applications have been granted so far by the Audiovisual Council. However there is no assurance that PRO TV's licence will be renewed. A local PRO TV license, covering certain parts of Bucharest, will expire in 2003.

The Company's interest in Produkcija Plus d.o.o. (Pro Plus) is governed by a Partnership Agreement among the Company, MMTV 1 d.o.o. Ljubljana ("MMTV") and Tele 59 d.o.o. Maribor ("Tele 59"), forming Pro Plus. Pro Plus provides programming to and sells advertising for the broadcast licenseholders POP TV d.o.o and Kanal A as well as additional affiliates. The Company currently owns 78% of the equity in Pro Plus, but has an effective economic interest of 85.5% as a result of its right to 33% of the profits of Tele 59. Tele 59 currently owns a 21% equity interest in Pro Plus and MMTV currently owns a 1% equity interest in Pro Plus.

Voting power and interests in profits of Pro Plus are equal to the partners' equity interests. All major decisions concerning the affairs of Pro Plus are made by the general meeting of partners and require a 70% affirmative vote. Certain fundamental financial and corporate matters require an 85% affirmative vote of the partners. In January 2001, Pro Plus entered into an agreement with Kanal A, under which Pro Plus provides all programming to Kanal A and sells its advertising

The Company's interest in POP TV d.o.o. is governed by a Partnership Agreement between MMTV and Tele 59. As a result of two share transfers in December 2001, Tele 59 owns 49% and MMTV 51% in POP TV d.o.o. This transfer means that the Company controls 51% of POP TV d.o.o. through the Company's ownership interests in Tele 59 and MMTV, as described below which holds all the licenses for the Slovenian operations apart from those effectively held by Kanal A. These transfers are still subject to registration with the Slovenian Commercial Registry. Voting power and interests in profits of POP TV d.o.o. are equal to the partners' equity interests. All decisions concerning the affairs of POP TV d.o.o. are made by the general meeting of partners and require a 51% affirmative majority vote. The Company owns 10% of the equity of both Tele 59 and MMTV. The Company also owns a 20% equity interest in MTC Holding d.o.o. ("MTC") which owns the remaining 90% equity interest in MMTV. A Slovene holds 76% of MTC's equity in trust for the Company.

In December 2001, following the consolidation of POP TV licences into the POP TV d.o.o. licence company, Pro Plus entered into an agreement with POP TV d.o.o., under which Pro Plus provides all programming to POP TV d.o.o. and sells its advertising.

The Company controls the operations, economics and the programming of Kanal A, which is the second leading commercial television broadcaster in Slovenia. 90% of the equity interest in Kanal A is being held by Superplus Holding d.d. ("Superplus") which is owned by individuals who are holding the share of Superplus in trust for the Company.

POP TV is the leading national commercial television broadcaster in Slovenia which reaches approximately 85% of the population of Slovenia, including Ljubljana, the capital of Slovenia, and Maribor, Slovenia's second largest city. Independent research shows that in the areas of Slovenia in which POP TV can be seen, the network had an average television viewer share of approximately 32.5% for 2001, the largest share of television viewers in Slovenia.

Kanal A, a national television broadcaster reaches approximately 80% of the population of Slovenia, including Ljubljana and Maribor. Independent research shows that in the areas of Slovenia in which Kanal A can be seen, the network had an average television viewer share of approximately 11.5% for 2001, making it the third most watched television channel in Slovenia.

POP TV's programming strategy is to appeal to a mass market audience through a wide variety of programming including series, movies, news, variety shows and features. POP TV broadcasts 18 hours of programming daily, of which approximately 25% is locally produced programming, including news, game shows, music shows and variety shows.

Pro Plus, the broadcast servicing company for POP TV, has secured exclusive program rights in Slovenia to a number of successful American and Western European programs and films produced by studios such as Warner Bros., Twentieth Century Fox and Paramount. POP TV currently holds exclusive rights for the Slovenian version of "Who Wants to be a Millionaire". Pro Plus has agreements with CNN, Reuters and APTN to receive foreign news reports and film footage to integrate into news programs. All foreign language programs and films are subtitled in Slovenian.

Kanal A's programming strategy is to complement the programming strategy of POP TV with a mixture of locally produced and acquired foreign programs including films and series. Kanal A broadcasts for 16 hours daily, including locally produced formats for Blind Date, the Newlywed game show, music shows and basketball.

Kanal A derives revenues principally from the sale of commercial advertising time and has clients similar to those of POP TV.

Historically, the television market in Slovenia has been dominated by SLO 1, a national public television station. The other national public station, SLO 2 provides programming which is complementary to SLO 1. SLO 1 reaches nearly all of Slovenia's TV households, and SLO 2 reaches 97% of Slovenia's TV households. No national private television frequency has been made available in Slovenia. One other private television station, TV3, competes with POP TV and Kanal A in Slovenia. It has achieved a relatively small audience share, less than 1.2%, due primarily to its low budget programming and lack of extensive news programming.

POP TV and Kanal A also compete with foreign television stations, particularly Croatian, Italian, German and Austrian stations. Cable penetration at 52% is relatively high compared with other countries in Central and Eastern Europe and approximately 12% of households have satellite dishes. In addition, POP TV and Kanal A compete for revenues with other media, such as newspapers, radio, magazines, outdoor advertising, telephone directory advertising and direct mail.

The POP TV and Kanal A network stations operate under licenses regulated pursuant to the Law on Media adopted in 2001 and pursuant to the Law on Telecommunications adopted in 2001. The licenses granted to POP TV's affiliate stations have been granted for 10-year terms expiring in 2003 with respect to licenses reaching 53% of the population and in 2006 and 2007 with respect to the remaining licenses. The licenses granted to Kanal A expire between 2003 and 2010.

Under Slovenian television regulations, POP TV, its affiliate stations and Kanal A are required to comply with a number of restrictions on programming and advertising. These restrictions include that 20% of the station's daily broadcast time must be internally produced programming (or programming produced on order and on behalf of the broadcaster itself), of which at least 60 minutes must be broadcast between 6:00 p.m. and 10:00 p.m.; and 2% of the station's annual broadcast time must be Slovenian origin films (or other works from the field of literature, science and art). In the future a majority (at present at least 20%) of the station's annual broadcast time will required to be European origin films (or other works from the field of literature, science and art); of which at least 10% of the station's annual broadcast time will be required to be works produced by independent producers, (a broadcaster presently not broadcasting such percentage of works produced by independent European pro ducers, must increase its present percentage each year), of which at least 50% has to be produced in the last 5 years. Certain films and other programs may only be broadcast between 12:00 p.m. and 5:00 am, and POP TV or Kanal A news editors, journalists and correspondents must not reflect a biased approach toward news reporting.

In addition to the restrictions discussed above and under the sub-heading "Advertising," advertising is not permitted during news, documentary or children's programming and programming with religious content under 30 minutes in duration, or during religious ceremonials and state celebrations. Advertising is not permitted during individual programming units, unless such units are divided into independent parts (advertising is allowed between such independent parts). Restrictions on advertising content include a prohibition on tobacco advertising and on the advertising of alcoholic beverages other than low alcohol content beer.

The Pop TV and the Kanal A licenses each consist of several local licenses, which have various expiry dates. The Company has regularly applied for and obtained renewals. Two of the local licenses will be subject to renewal in 2003. The Slovenian Telecommunications Act stipulates that a license may be prolonged after the expiry of its original term, provided, that all conditions for obtaining such license, as such conditions are in force at the time of the expiry date, are met. A licensee seeking the prolongation of the license shall submit an application 30 days before the expiry date. Such application is considered as an application for the change of the license term, and not as an application for a new license. Therefore, no public bidding procedure is involved. The licensing authority reviews only whether the applicant meets all conditions necessary to obtain a broadcasting license and may grant the prolongation for up to 10 years. However, there is no assurance that the POP TV broa dcast licences will be renewed.

The Slovak Republic is a parliamentary democracy with a population of 5.4 million where nearly 99% of households have television. Per capita GDP was an estimated $3,589 in 2001 ($3,478 in 2000). Television advertising was approximately $42 million in 2001, according to the Company's estimates.

The Company's interest in Slovenska Televizna Spolocnost, s.r.o.("STS") is governed by a Participants Agreement (the "Slovak Agreement") between the Company and Markiza-Slovakia s.r.o. ("Markiza") forming STS. Pursuant to the Slovak Agreement, the Company is required to fund all of the capital requirements of, and holds a 49% voting interest and a 70% economic interest in, STS. Markiza, which holds the television broadcast license, and STS have entered into an agreement under which STS is entitled to conduct television broadcast operations pursuant to the license. On an ongoing basis, the Company is entitled to 70% of the profits of STS, except that the Company's share in STS' profit shall be increased by 3% for every additional $1 million invested in STS by the Company. A Board of Representatives directs the affairs of STS, the composition of which includes two designees of the Company and three designees (two of whom have been named) of Markiza; however, all significant financial and operational decisions of the Board of Representatives require a vote of 80% of its members. In addition, certain fundamental corporate matters are reserved for decision by a general meeting of partners and require a 67% affirmative vote of the partners.

On January 18, 2002, the Company entered into an interest participation transfer agreement to acquire a 34% interest in Markiza. As a result of this acquisition, the Company will generally be entitled to 70% of STS' profits as opposed to 80% prior to the acquisition. The Company now has the right to appoint one of three authorized co-signatories of Markiza, which gives CME a blocking control over Markiza's significant activities. The ownership transfer to the Company was approved by the Slovak Media Council at its meeting on February 11, 2002. The transfer was registered with the Slovak Commercial Registry on March 13, 2002.

As a result of the change in the Company's entitlement to distribution of profits, the Company will charge the Consolidated Statement of Operations with approximately $2.7 million in the first quarter 2002, to reflect the reduction in the economic interest based on the Company's value of the investment as at December 31, 2001.

Markiza TV was launched as a national television station in the Slovak Republic in August 1996. Markiza TV reaches approximately 94% of the Slovak Republic's population, including virtually all of its major cities. According to independent research, Markiza TV had an average national television viewer share for 2001 of approximately 50% versus 16% for its nearest competitor, STV 1.

Markiza TV's programming strategy is to appeal to a broad audience with specific groups targeted in marginal broadcasting hours. Markiza TV provides an average of 21 hours of programming daily, including news, movies, entertainment programs and sport (including coverage of European Champion's League soccer, Formula One racing and Ice Hockey World Championships). Approximately 40% of Markiza TV's programming is locally produced, including a daily breakfast show, game shows, talk shows and news.

Markiza TV has secured exclusive broadcast rights in the Slovak Republic to a large number of popular United States and European series, films and telenovellas produced by major international studios including Warner Bros., Universal, IFD, MGM, Carey-Werner, Paramount Pictures, Twentieth Century Fox, Walt Disney Television International and RTL Television. Markiza TV currently holds exclusive rights for the Slovakian version of "Who Wants to be a Millionaire". All foreign language programming (other than that in the Czech language) is dubbed into the Slovak language. Markiza TV also receives foreign news reports and film footage from CNN, Reuters, APTN and SNTV, which it integrates into news programs.

Markiza TV derives revenues principally from the sale of commercial advertising time through media buying groups and independent agencies. Advertisers include large multinational firms such as Procter & Gamble, Henkel, Unilever, Wrigley, Kraft Jacobs, Ferrero, Suchard, Danone Group, Nestle and Benckiser, though no one advertiser dominates the market. Television stations are permitted to broadcast advertising for up to 15% of total daily broadcast time and up to 20% of broadcast time in any single hour.

The Slovak Republic is served by two national public television stations, STV1 and STV2, which dominated the ratings until Markiza TV began broadcasting in 1996. STV1 and STV2 reach nearly all of the Slovak population. The Czech Republic based Nova TV had an approximate 10% audience share in the Slovak Republic for 2001. Markiza TV also competes with the private broadcasters Global TV (launched April 2000) and TA3 (launched September 2001). Global TV and TA3 reach 33% and 42% of the population respectively. Markiza TV also competes with public television stations located in Austria, the Czech Republic and Hungary with signals that reach the Slovak Republic, additional foreign private television stations and foreign satellite stations.

On October 23, 2001, the Slovak Media Council awarded a TV transmission license to TV Global, a company controlled by Ceska Produckcni 2000 and managed by Vladimir Zelezny, with whom the Company is in dispute in connection with Nova TV in the Czech Republic. TV Global has launched the station, "Joj", which began broadcasting in March 2002. Should "Joj" capture a significant portion of the advertising market it will adversely affect the results of the Company's Slovak operations.

Markiza TV's broadcast operations are subject to regulations imposed by a new Act on Broadcasting and Retransmission, the Act on Advertising and conditions contained in the license granted by the Council of the Slovak Republic for Broadcasting and Television Transmission (the "Slovak Broadcasting and Retransmission Council"). The Slovak Television Council granted the license to operate Markiza TV to the Company's local partner in STS for a period of 12 years, expiring in September 2007, under terms requiring the Company's local partner to enter into a partnership with the Company to found STS. The license granted to the Company's local partner remains valid under the new Act on Broadcasting and Retransmission.

Under the license pursuant to which Markiza TV operates and the new legal regulatory framework, Markiza TV is required to comply with several restrictions on programming, including but not limited to the origin of the programming content. These restrictions include the following broadcast rules: a minimum of 40% must be Slovak production; 10% must be programming for children or youth; broadcasts of first run films and series must have a minimum of 50% European production; and no more than 20% of foreign first run films and series may be in the Czech language.

In addition to the restrictions discussed above and under "Advertising", there are additional regulations that relate to advertising content. These include, but are not limited to, (a) a ban on tobacco advertising, and (b) a ban on advertisements of alcoholic beverages between 6.00am and 10.00pm, save for beer. There are also restrictions as to the frequency of advertising breaks both during and between programs.

The Markiza license will expire in 2007. According to the 2000 Act on Broadcasting and Retransmission, a license can be extended once, for an additional 12 years. The Council for Broadcasting and Retransmission ("Media Council") decides on the extension. Applications for extension must be filed 19 months prior to the expiry date. The Media Council has discretion to grant an extension following its observation of the performance of the station in the preceding license period, including, in particular, the station's contribution to Slovak culture and the development of the Slovak media market.

Ukraine, a parliamentary democracy of 49.6 million people, is the most populous market served by the Company. Nearly 100% of Ukrainian households have television, and cable penetration is approximately 27% in cities with a population over 50,000. An estimated per capita GDP of $673 in 2001 ($650 in 2000) is the lowest of all the Company's markets. After a decade of negative growth, 2001 saw a recovery with GDP rising by approximately 5%. However, economic, political and privatization programs have lagged behind schedule.

The Key Agreement among Boris Fuchsmann, Alexander Rodniansky, Studio 1+1 Ltd, Innova Film GmbH, International Media Services Ltd, Ukraine Advertising B.V. CME Ukraine Holding GmbH and CME Ukraine B.V., entered into as of December 23, 1998, permits the Company 60% of the economics of the Studio 1+1 Group.

In addition to its ownership in the Studio 1+1 Group, the Company also has a passive 30% interest in Gravis, a local television station. No value is currently ascribed to this ownership interest.

The Studio 1+1 Group consists of several entities in which the Company holds direct or indirect interests. The Company owns a 60% equity interest in each of Innova Film GmbH ("Innova"), Ukraine Advertising Holding B.V. ("UAH") and International Media Services ("IMS"). Innova holds 100% of Intermedia, a Ukrainian company, which in turn holds a 30% equity interest in Studio 1+1, the license holding company in the Ukraine. UAH held a 50% interest in Prioritet, the main vehicle for advertising sales up until January 1, 2001. UAH will be dissolved in 2002 following the registration of the sale of its shares in Prioritet.

Innova and IMS provide programming and production services to Studio 1+1 Ltd, the license holding company. UAH was responsible for selling Studio 1+1 Ltd advertising air time until January 2001 when this function was out-sourced to Video International ("VI").

Current Ukrainian legislation limits direct foreign equity holdings in broadcasting companies to 30%. At present the Company's interest in Studio 1+1 Ltd is, indirectly, 18%. Existing agreements commit all the shareholders of Studio 1+1 to increase the direct holding of the Company, or one of its subsidiaries, when legislation permits this.

Studio 1+1 Group entered into an agreement with VI to sell advertising for Studio 1+1 on an exclusive basis from January 1, 2001 for the remaining term of the license. On July 15, 2001, it was agreed with VI that it would also be permitted to sell advertising on behalf of ICTV, a minor television station based in Kiev. The Company believes that this will enhance the overall ability of VI to increase advertising revenue for the Ukraine operation.

All significant decisions of the entities in the Studio 1+1 Group are taken by the shareholders, requiring a majority vote (other than decisions of the shareholders of the Studio 1+1 Ltd, the license holding company, which require a 75% vote). Certain fundamental corporate matters of the other entities require 61% shareholder approval.

Studio 1+1 broadcasts programming and sells advertising on Ukrainian National Channel Two ("UT-2"), one of Ukraine's state-owned television channels. UT-2 reaches approximately 95% of Ukraine's population. Television advertising revenue continued to recover in 2001 to approximately $50 million. Studio 1+1 attained 22% average prime time audience share during 2001 (32% in the target under 45 age group). Studio 1+1 began broadcasting on UT-2 in January 1997.

Studio 1+1's programming strategy is to appeal to a mass market audience with an emphasis on the below aged 45 target audience. The rating success of Studio 1+1 has been achieved through a new programming strategy that has resulted in a balanced combination of both United States originated programming and new, popular, local programs, including Russian criminal and action series and self-produced Ukrainian shows, programs and news scheduled in prime-time. The station broadcasts for 14 hours per day during the week and 15 hours per day on the weekend, including locally produced news, variety shows, game shows and magazine programs as well as a broad range of popular and high quality films from international distributors. Studio 1+1 broadcasts a Ukrainian version of "Who Wants to be a Millionaire". In 2001, Studio 1+1 produced and co-produced approximately 1,500 hours of programming, which primarily consists of a daily breakfast show, news broadcasts and news related programs, talk shows , criminal investigations, game shows, sport and lifestyle magazine shows and comedy shows. In 2001, such original local programming together with other Ukrainian programming considered local programming by Ukrainian laws comprised approximately 55% of Studio 1+1's total broadcast time.

Studio 1+1 has secured exclusive territorial or local language broadcast rights in Ukraine to a large number of successful high quality American, Russian and Western European programs and films from many of the major studios, including Twentieth Century Fox, Warner Bros., Paramount Pictures, Walt Disney, Universal Pictures and CBS. Special events aired include coverage of the Pope's visit to Ukraine, an anniversary program remembering the atrocities at Baba Yar, a documentary on Osama Bin Laden and a terrorism related special broadcast. Studio 1+1 has agreements with Reuters for foreign news packages and other footage to be integrated into its programming. All foreign language programs and films (other than those in the Russian language) are dubbed into the Ukrainian language. Studio 1+1 broadcasts more than 80% of its total air time in the Ukrainian language.

Studio 1+1 derives revenues principally from the sale of commercial advertising time through both media buying groups and independent agencies. Advertisers include large multinational firms such as Wrigley, Procter & Gamble, Colgate - Palmolive, Coca-Cola, Unilever, Nestle, Mars and Kraft Jacobs. Studio 1+1 is permitted to sell 15% of its overall broadcast time for advertising and is subject to restrictions on the frequency of advertising breaks. The advertising restrictions are the same for public and private broadcasters.

An agreement was signed to transfer UAH's 50% interest in Prioritet to Video International ("VI"), a Russian based company. This transfer forms part of an overall agreement signed with VI on March 14, 2001, for VI to sell advertising for Studio 1+1 on an exclusive basis up until the end of the broadcasting license in 2006.

Ukraine is served by six television channels: UT-1, UT-2 (on which Studio 1+1 broadcasts) and UT-3 (all with effective national coverage), which are state owned, and ICTV, STB and Novi Canal, which are private broadcasters. Studio 1+1, through UT-2, has a broadcast reach of 95% of the Ukrainian population. The state run station UT-1 has a broadcast reach of approximately 98% of the Ukrainian population. ICTV and STB, both private stations, reach approximately 32% of Ukraine's population. The private station Inter, through UT-3, has a broadcast reach of approximately 78% of the Ukrainian population. Inter, Studio 1+1's main competitor, has a program schedule which consists primarily of rebroadcasts of the Russian-language ORT network. In addition, there are numerous cable and satellite stations that provide pirate broadcasting of European and US networks.

Studio 1+1 provides programming to UT-2 pursuant to a ten-year television broadcast license contract expiring in 2006. Broadcasts of Studio 1+1's programming and advertising on UT-2 are regulated by the State Committee on Television and Radio of Ukraine and the National Council on Television and Radio of Ukraine. These agencies enforce Ukraine's media laws, which include restrictions on the content of programming and advertising and limitations on the amount and placement of advertising in programs. All advertising of alcohol and tobacco on TV is banned in Ukraine. Programming produced in Ukraine must account for at least 70% of all programming (including dubbing of purchased programming into the Ukrainian language) and programming produced by Studio 1+1 must account for 49% of all programming.

The Studio 1+1 license expires in 2006. Licenses in Ukraine are renewed by the National Council for Television and Radio Broadcasting ("Media Council") in accordance with the terms of the 1995 Act on Television and Radio Broadcasting ("Media Act"). The Media Council may extend the license term in an administrative procedure. The license must be extended for another 7 years, if the applicant meets all conditions set forth for a broadcaster in the Media Act.

The Company's London based central service organization provides each television operation with a central resource. The service functions provided include sales, financial and legal services, including financial planning and analysis, cost control and network management.

The Company, like other television operators, experiences seasonality, with advertising sales tending to be lowest during the third quarter of each calendar year, which includes the summer holiday period (typically July and August), and highest during the fourth quarter of each calendar year. See Item 6, "Quarterly Results and Seasonality" for further discussion.

As of March 1, 2002, CME had a corporate operations staff of 18 employees (compared to 19 as of December 31, 2000) and its Subsidiaries had a total of approximately 1,796 employees (compared to 1,910 as of December 31, 2000). None of CME's employees or the employees of any of its Subsidiaries are covered by a collective bargaining agreement. The Company believes that its relations with its employees are good.

For additional information with regard to Segment Data see Part II, Item 8, Note 13 "Segment Data".

CME Development Corporation leases office space in London in one location. The lease, for 3,958 square feet of office space, expires in 2015.

The Company has previously entered into an agreement on behalf of MPI which gives the Company the option to acquire the facility in Bucharest which contains some of PRO TV's studios. The purchase price is currently being negotiated. The Company owns a portion of a building in Ljubljana which contains POP TV and Kanal A's studios and offices. STS owns its principal office facility near Bratislava. Studio 1+1 leases offices in central Kiev and studio space outside Kiev.

The Company's Czech Republic operation owns a building of approximately 65,000 square feet which contains modern studios in Prague, Czech Republic.

In 1996 and 1997, however, under compulsion resulting from proceedings initiated by the Media Council, the Company and CET amended the Memorandum of Association and entered into other contracts to reflect the change in the Memorandum of Association. One such contract (the "Cooperation Contract") expressly identified CET as the license holder and the "television broadcasting operator" of TV Nova. Pursuant to the Cooperation Contract CNTS prepared, completed and delivered television programming that was then distributed by CET, which broadcast the Nova TV signal. CNTS also collected all of Nova TV's advertising and other revenues, and retained the balance of those revenues net of Nova TV's operating expenses less Kc 100,000 ($2,600) per month payable to CET.

On August 5, 1999, CET pre-empted CNTS's transmission and began broadcasting a substitute signal for Nova TV from a site other than CNTS's studios. In addition, on the same day, CNTS received notification from CET that CET was withdrawing from the Cooperation Contract due to CNTS's alleged failure to supply CET with the daily program log for Nova TV on August 4, 1999. CET representatives also stated publicly that, in future, CET would not use CNTS to provide services for Nova TV. CET has continued to pre-empt all of CNTS's programming for Nova TV. CET carried out these actions with the active support and encouragement of the Media Council. CNTS believes that CET's withdrawal from the Cooperation Contract was not legally effective since CNTS did not materially breach the Cooperation Contract and that the Cooperation Contract therefore remains in effect.

On August 9, 1999, CNTS filed a motion in the Regional Commercial Court in Prague for an injunction enjoining CET from entering into service relationships with other companies and further requested the court to declare the Cooperation Contract to be in full force and effect. The Regional Commercial Court issued a favorable ruling on May 4, 2000 which was subsequently reversed by a December 14, 2000 ruling from the High Court. On November 14, 2001, the Czech Supreme Court cancelled the High Court's decision and remanded the case to the trial court for a fuller development of the record.

As a result of CET's actions, CNTS has been unable to generate revenues and its operations have been suspended. On September 9, 1999, the Company announced the suspension of technical and production operations at CNTS and CNTS has since dismissed a majority of its employees.

The Company believes that the Memorandum of Association, the Cooperation Contract and the course of dealing over the life of Nova TV establish that CNTS is legally entitled and authorized to operate Nova TV in cooperation with CET.

On April 19, 1999, CNTS dismissed Dr. Vladimir Zelezny from his position as Executive and General Director of CNTS, for taking actions that exceeded his authority, breached his fiduciary duties and were against the interests of CNTS. After an internal investigation, it was learned that Dr. Zelezny had executed an unlimited CNTS guarantee for the liabilities of a Czech television program acquisition company, AQS a.s. ("AQS"), without any authorization. The investigation also indicated that Dr. Zelezny had reassigned the program acquisition department of CNTS to AQS, had notified international providers of television programming that AQS would replace CNTS as the program service provider to Nova TV, and had taken other serious and substantial actions contrary to the interests of CNTS.

On April 26, 1999, a wholly-owned subsidiary of the Company filed an arbitration claim against Dr. Vladimir Zelezny before the International Chamber of Commerce Court of Arbitration in Paris, France (the "ICC Arbitration"). The Company sought the return of $23,350,000 paid to Dr. Zelezny, plus interest, and other unspecified damages, based on breaches by Dr. Zelezny of a share purchase agreement entered into in 1997 under which the Company purchased from Dr. Zelezny, Nova Consulting, a company owned by him whose sole asset was a 5.8% interest in CNTS. The Company also sought the forgiveness of the $5,188,000 unpaid balance of the purchase price under the 1997 share purchase agreement.

On February 9, 2001, the ICC Arbitration Tribunal issued a final award in this proceeding, finding that Dr. Zelezny had breached the share purchase agreement and that the share purchase agreement was a valid and enforceable contract. In light of those holdings, the Tribunal ordered Dr. Zelezny to immediately refund to the Company the $23,350,000 it had paid him pursuant to the share purchase agreement, plus interest (a total of approximately $27,100,000, accruing further interest at approximately $3,200 per day) and costs of $250,000. On March 24, 2002 the total amount was $28,388,000. The Tribunal ordered the Company to return the Nova Consulting shares to Dr. Zelezny, but only after receipt of the money owed by Dr. Zelezny. The Tribunal also rejected Dr. Zelezny's claim for the balance of the purchase price of $5,188,000. The Czech courts have ruled that the Amsterdam award against Dr. Zelezny is valid and enforceable in the Czech Republic. The Com pany is aggressively pursuing enforcement and collection of the award in several legal actions in several jurisdictions and will continue to do so until the award is satisfied. As of March 18, 2002 the Company has not been able to collect any part of the award. There can be no assurance that the Company will be able to collect all or any significant part of the award plus accrued interest.

On June 30, 1999, CNTS filed an action with the Regional Commercial Court of Prague requesting that the court declare invalid an agreement between CET and another Czech company, Produkce, a.s. under which CET purported to transfer CET's 1% participation interest in CNTS to Produkce, a.s., since that transfer did not comply with the CNTS Memorandum of Association. The Court determined that the transfer was invalid; CET and Produkce have appealed and the appeal is pending.

On August 9, 1999, CNTS filed a motion in the Regional Commercial Court of Prague for an injunction enjoining CET from entering into service relationships with other companies and further requested the court to declare Cooperation Contract to be in full force and effect. The Regional Commercial Court issued a favorable ruling on May 4, 2000, which was subsequently reversed by a December 14, 2000 ruling from the High Court. CNTS then appealed the High Court ruling to the Supreme Court which subsequently referred the case back to a first instance court. The litigation before the first instance court is currently pending.

On July 24, 2001, CNTS filed an action against CET with the Municipal Court of Prague seeking the refund by CET of certain payments in an aggregate amount of approximately $4.5 million. The hearing on this action is currently pending.

In December 1999, the Media Council approved CET's request for a share capital increase, which was subsequently approved by CET. As a result of the CET share capital increase, Dr. Zelezny's participation interest in CET was reduced from 60% to 11.8% since he did not subscribe to any of the additional share capital. CME believes that the reduction of Dr. Zelezny's participation interest in CET was designed to frustrate the enforcement of the preliminary order issued in the arbitration, as well as any final award of damages against Dr. Zelezny. CME, CEDC and CNTS filed an action and an administration complaint with the Municipal Court in Prague requesting the Court to cancel the decision of the Media Council. Both actions were denied and CME, CEDC and CNTS will file an appeal.

On August 23, 1999, Ronald S. Lauder, the non-Executive Chairman of the Company's Board of Directors, instituted arbitration proceedings against the Czech Republic under the 1992 Bilateral Investment Treaty between the United States and the Czech Republic. Mr. Lauder initiated the proceedings in his personal capacity as a U.S. national who owns or controls (by virtue of his voting control over the Company) an investment in the Czech Republic. The claim asserted that the Czech Republic harmed Mr. Lauder's investment in CNTS by, among other things, taking unfair and discriminatory actions by reversing its initial approval of an exclusive relationship between CNTS and CET, and by failing to act to remedy the effects of the improper actions of Dr. Zelezny. Mr. Lauder sought monetary damages arising from harm caused to CNTS by the Czech Republic's actions.

On September 3, 2001, the UNCITRAL Tribunal in Mr. Lauder's arbitration issued a final award, finding that the Czech Republic committed a breach of its obligation under the U.S.-Czech Bilateral Investment Treaty to refrain from arbitrary and discriminatory measures when, in early 1993, the Czech Media Council changed its original position allowing Mr. Lauder to make an equity investment in the television license holder (CET) and insisted that Mr. Lauder's participation could be made only through a joint venture company (CNTS). However, the Tribunal denied Mr. Lauder's claim for a declaration that the Czech Republic committed further breaches of the Treaty and denied all of Mr. Lauder's claims for damages. The Tribunal ordered that each party should bear its own legal costs and that the costs of the arbitration should be borne equally by the parties.

On February 22, 2000, a wholly owned subsidiary of the Company instituted arbitration proceedings against the Czech Republic under the 1991 Bilateral Investment Treaty between The Netherlands and the Czech Republic. The claims asserted, remedies sought and procedure followed are substantially similar to those in the arbitration proceedings initiated by Mr. Lauder against the Czech Republic.

On September 13, 2001, the Tribunal in this arbitration issued a final partial award on liability, finding that, by the actions and inactions of the Czech Media Council in 1996 and 1999, the Czech Republic violated several provisions of the Netherlands-Czech Bilateral Investment Treaty, including the obligation not to deprive an investor of its investment. The Tribunal ruled that the Czech Republic is obligated to remedy the injury that CME suffered as a result of its violations of the Treaty by payment of the fair market value of CME's investment as it was before consummation of the Czech Republic's breach of the Treaty in 1999, in an amount to be determined at a second phase of the arbitration. The Tribunal further ordered the Czech Republic immediately to pay $1,008,000 to CME as a refund to CME of its legal costs and expenditures and of its payments of the Tribunal's fees and disbursements. The Czech Republic has filed a collateral challenge of the final partial award in the

Swedish courts. The Czech Republic alleges in their collateral challenge that their party appointed arbitrator was not allowed to fully participate in the deliberations leading to the Partial Final Award, that Czech law was not given precedence and should have been, and that the entire matter had already been dealt with by the London based tribunal in the Lauder arbitration and should not have been heard again on the basis of the principal of res judicata. The Czech Republic also argues in its pleadings that the Tribunal acted beyond its mandate in a number of ways including by declaring that in the upcoming quantum phase of the hearings CME's damages should correspond with the fair market value of the destroyed CNTS investment, instead of just finding the Czech Republic liable and leaving all other questions for this upcoming phase. All of these claims are in the Company's opinion incorrect as matters of fact or law and have been raised by the Czech Republic solely for the purpose of atte mpting to delay enforcement of any award. The Company will file its response to the collateral challenge on April 1, 2002 and anticipates that this matter will be heard in the fourth quarter of 2002.

The hearings to quantify CME's damages will take place from June 24 to July 5, 2002, and it is expected that a final award will be issued by the Tribunal later in 2002. CME has submitted to the Tribunal evidence claiming $526.9 million plus interest at 12.5% from August 1999 as the amount of damages due from the Czech Republic. The Czech Republic's response to the Company's $526.9 million dollar claim is due to be filed not later than May 1, 2002.

The Company believes that CET's actions violate the Cooperation Contract and CET's obligations under the CNTS Memorandum of Association, as well as Czech media laws, and that the actions of the Czech republic violate its obligations with respect to foreign investments under international law. The continued suspension of CNTS's operations has had a material adverse effect on the Company.

In our Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2000, we reported that AITI, a television station in Ukraine, commenced a court action in Ukraine against the National Council for TV and Radio Broadcasting (the "Ukraine TV Council") challenging certain aspects of the granting to Studio 1+1 of its television broadcast license in Ukraine. Studio 1+1 was involved in this litigation as a third party acting together with the Ukraine TV Council. After the appeal process was completed, the challenge to the Studio 1+1 license was dismissed on April 5, 2001 by Ukraine's Supreme Arbitration Court.

Subsequent to that, AITI commenced another action, this time in the Arbitration Court in the City of Kiev, a lower court to the Ukraine Supreme Arbitration Court, making almost identical allegations. These were that Studio 1+1 has, in effect, been granted two licenses by the Ukraine TV Council, entitling it to in excess of 24 hours of broadcast time a day on Ukraine's nationwide Channel N2 (UT-2). Further, AITI alleged that Studio 1+1 never paid the required license fee. On February 1, 2002, the Arbitration Court of the City of Kiev ruled in AITI's favor. The Ukraine TV Council, and Studio 1+1, acting as an interested third party, have appealed the Arbitration Court's decision to the Court of Appeal. The judgement of this appeal court is ultimately subject to any party obtaining leave to appeal to the Court of Cassation (previously called Supreme Arbitration Court), the same court that ruled in favor of Studio 1+1 on April 5, 2001 in relation to the almost identical claim also brought by A ITI.

The Public Prosecutor's Office of the City of Kiev is also involved in the appeal of this decision. The reason for this is that the Prosecutor's Office acts on behalf of the State of Ukraine when a State institution is a defendant in a court action and there is a claim against funds in the State budget. Pending a decision of the Court of Appeal (and ultimately the Supreme Arbitration Court if leave is granted to appeal to it) the decision of the Arbitration Court of the City of Kiev has been stayed and Studio 1+1 continues to broadcast without interruption. The Company believes that the decision of the Arbitration Court of the City of Kiev is wrong on both its facts and its determination of law and wholly inconsistent with the previous decision of the Ukraine Supreme Arbitration Court, and will assist in the pursuit of the appeal vigorously. Should the Courts find against the Ukraine Media Council and the Studio 1+1 licence is withdrawn, Studio 1+1 would have to cease broadcasting immediat ely.

The Company is involved in ongoing disputes with a minority shareholder in MPI, including disputes relating to administration, operational and share ownership issues and related party transactions. As part of this dispute, Mr Tiriac or his representatives have commenced three court actions against MPI, one of which it withdrew, a second that continues but it is not believed by the Company to have any merit.

The third action was brought on December 20, 2001, by Rootland Trading Limited ("Rootland"), the vehicle through which Mr. Tiriac holds his stake in MPI. It was brought in the Bucharest Commercial Court against MPI and its remaining shareholders, including the Company. The basis of the claim is that due to Rootland contributing to a share capital increase in advance of the remaining MPI shareholders, it has been uniquely allotted additional shares in MPI, thereby increasing its stake from 19% to a controlling 64.9%. The Company believes that this claim was initiated as part of a partnership dispute involving Mr. Tiriac and Mr Sarbu. The Company believes that Rootland's claim is without merit and will defend the claim vigorously.

On February 11, 2002, the Securities and Exchange Commission requested that the Company voluntarily allow the Commission's Staff to inspect certain documents and records, related primarily to actual or potential liabilities payable by the Company or Media Pro International SA (the Romanian operating company in which the Company has a 66% interest) to any government entity in Romania. The Company believes that it has fully disclosed all its liabilities (actual and potential) in relation to all the jurisdictions within which it operates, including liabilities to governmental entities, in its filings with the Securities and Exchange Commission. The Company has and will continue to cooperate fully with the Commission's staff in the conduct of its inquiry.

The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. The Company is not presently a party to any such litigation which could reasonably be expected to have a material adverse effect on its business or operations.

None.

On March 21, 2002 the last reported sales price for the Class A Common Stock was $18.80.

The following table sets forth the high and low sales prices for the Class A Common Stock for each quarterly period during the last two fiscal years of the Company and for the first quarter of 2002.

At March 21, 2002, there were 29 holders of record (including brokerage firms and other nominees) of the Class A Common Stock and five holders of record of the Class B Common Stock. There is no established public trading market for the Class B Common Stock.

The Company has not declared or paid and has no present intention to declare or pay in the foreseeable future any cash dividends in respect to any class of its Common Stock. The Company's ability to pay cash dividends is primarily dependent upon receipt of dividends or distributions from its Subsidiaries over some of which it has limited control. In addition, the indentures which govern the Company's 9⅜% Senior Notes Due 2004 and 8⅛% Senior Notes Due 2004 restrict the ability of CME to declare and pay cash dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."

(Selected Financial Data begins on the following page and ends on the page immediately preceding Item 7).

(dollars in thousands, except per share data)

The selected financial information presented below for the five years ended December 31, 2001 is derived from the audited Consolidated Financial Statements of the Company. The following selected financial information should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto for the years ended December 31, 2001, 2000 and 1999, included elsewhere herein.

The Company, like other television operators, experiences seasonality, with advertising sales tending to be lowest during the third quarter of each calendar year, which includes the summer holiday period (typically July and August), and highest during the fourth quarter of each calendar year.

The operating results for the twelve months ended December 31, 2001 in the Slovak Republic, Slovenia and Ukraine exceeded the Company's expectations. The results of the Company's Romanian operations for the twelve months ended December 31, 2001 are significantly below expectations.

The results of the Company's Slovenian operations have improved considerably compared to 2000 as a result of the Company acquiring control over the economics and programming of Kanal A on October 11, 2000.

The results of the Ukrainian operations have improved compared to 2000, due to the continued recovery of the Ukrainian advertising market, a restructured sales force at Studio 1+1 and improved annual average prime time audience share compared to 2000. In 2002, the Company expects further growth in net revenues for Ukraine, where the television advertising market grew by 43% in 2001. The Company has significantly increased its investment in programming for 2002 as a response to the competitive environment and on the basis of expected and budgeted revenue growth.

Inter, the main competitor in Ukraine market has extended its co-operation agreement with ORT, the dominant Russian Broadcaster, allowing Inter to add to its schedule a significant amount of very successful Russian series. Inter now has the opportunity to increase its average audience share and change its programming structure to appeal to a younger audience, the target audience of Studio 1+1.

The Ukraine operations are a third party to litigation involving the Ukraine TV Council which challenges the validity of the modifications made to certain licenses, including the license granted to Studio 1+1. The Company believes that this action has no merit and will be rejected by the higher Ukraine courts. On April 5, 2001 the Supreme Arbitration Court of Ukraine found in favor of the Ukraine TV Council in an almost identical action by AITI in January 2001. Should the courts find against the Ukraine TV Council and the Studio 1+1 license is withdrawn, Studio 1+1 would be compelled to immediately cease broadcasting and this would materially adversely affect the operating results of the Company. (See Part I, Item 3, "Legal Proceedings" for a further discussion.)

The results of the Company's Slovak operations are in line with the continued general economic recovery in the Slovak Republic. On January 18, 2002, the Company entered into an interest participation transfer agreement to acquire a 34% interest in Markiza and to re-adjust CME's share in STS' profits. As a result of this acquisition, the Company will generally be entitled to 70% of STS' distribution of profits as opposed to 80% prior to the acquisition. The Company also has the right to appoint one of three authorized co-signatories of Markiza, which give CME a blocking control over Markiza's significant activities. The ownership transfer to the Company was approved by the Slovak Media Council at its meeting on February 11, 2002. The transfer was registered with the Slovak Commercial Registry on March 13, 2002.

On October 23, 2001, the Slovak Media Council awarded a TV transmission license to TV Global, a company controlled by Ceska Produckcni 2000, managed by Dr Vladimir Zelezny. TV Global has launched the station, "Joj" which began broadcasting in March 2002. Should "Joj" capture a significant portion of the advertising market it will adversely affect the results of the Company's Slovak operations.

On November 1, 2001, the Slovak Media Council announced it would monitor the political content of Markiza TV's news coverage as a result of Mr. Rusko, a shareholder in Markiza-Slovakia s.r.o., launching the ANO political party. Should the actions of Mr Rusko be found to be in violation of the Slovak Media Act, significant financial or non-financial penalties may be imposed on Markiza-Slovakia s.r.o.

In Romania, despite positive national economic statistics, strong sales competition between the local stations appears to have caused the TV advertising market to decline from $69 million in 2000 to $63 million in 2001. The increasingly competitive market appears to have allowed major advertisers to either reallocate or reduce their advertising budgets in Romania during 2001. The Company has restructured its Romanian subsidiary's operations and implemented controls to reduce costs in line with the declining revenues. The Romanian operation has experienced difficulties generating sufficient cash funds to continue operations and it is anticipated that

this will continue unless the collection of accounts receivable is accelerated. MPI has requested a re-scheduling of its tax liabilities. Should such re-scheduling fail to be granted and the Romanian tax authorities demand immediate payment in full of all potential tax liabilities, the Romanian operation would experience difficulties in continuing to operate.

As at December 31, 2001, 35% of the Romanian subsidiary's accounts receivable balance was more than 360 days old. Accordingly, Management increased the Company's bad debt provision by an additional $2,183,000 in the fourth quarter. On the Company's balance sheet, the total provision for bad debt is $8,219,000 of which the provision for Romanian bad debts is $6.5 million. Unless the collection of accounts receivable improves, a further provision could be required in 2002.

On February 11, 2002, the Securities and Exchange Commission requested that the Company voluntarily allow the Commission's Staff to inspect certain documents and records, related primarily to actual or potential liabilities payable by the Company or MPI (the Romanian operating company in which the Company has a 66% interest) to any government entity in Romania. The Company believes that it has fully disclosed all its liabilities (actual and potential) in relation to all the jurisdictions within which it operates, including liabilities to governmental entities, in its filings with the Commission. The Company has and will continue to cooperate fully with the Commission's staff in the conduct of its inquiry.

The Company is involved in ongoing disputes with a minority shareholder in MPI including disputes relating to administration, operational and share ownership issues and related party transactions. As part of this dispute, the minority shareholder has commenced three court actions against MPI, one of which it withdrew, a second that continues but it is not believed by the Company to have any merit, and a third under which the minority shareholder is claiming that its stake has increased to a controlling interest in MPI following an alleged unilateral share capital increase (see Part I, Item 3 "Legal Proceedings" for a more detailed description of this third claim).

PRO TV International rebroadcasts PRO TV and Acasa programming throughout Europe and Israel, using the existing PRO TV and Acasa satellite infrastructure. In 2002 MPI entered into an agreement under which PRO TV International will provide program content for broadcast in the USA at no direct cost to Pro TV International. The agreement is for four years and broadcast in the USA is expected to commence in April 2002. PRO TV International should be profitable by April 2002, two years after its launch.

On November 22, 2001 the Company sold its 70% interest in Video Vision International Srl ("Video Vision"), a Romanian post-production company, for the initial price that CME paid for its 70% stake. The gain on sale of the subsidiary, Video Vision, was $1,802,000 which reflects a write back of prior years losses from this subsidiary. This has been disclosed in the Consolidated Statements of Operations.

Following the dispute between CNTS and CET, the Company minimized its operations in the Czech Republic during 2001. On July 31, 2001, 47 of the 56 remaining staff at CNTS had their employment terminated. The Company intends to sell its building and all of its remaining assets in the Czech Republic, as required to mitigate the Company's damages claim. CNTS will continue to operate and pursue the outstanding legal claims against Dr Zelezny and the Czech Government. (See Part I, Item 3, "Legal Proceedings" for a further discussion).

The Company's revenues are derived principally from the sale of television advertising to local, national and international advertisers. At this time, the slowdown in the US and Western European appears to have had limited impact on the economies in the markets in which the Company operates. Should the major fast-moving consumer goods multinationals decide to restrict their European expenditures, there may be an adverse material effect on the Company's financial position, results of operations and cash flows. To date there has been no indication that this will occur.

The Company, through a wholly-owned subsidiary, is still party to arbitration proceedings against the Czech Republic. See Part I, Item 3, "Legal Proceedings". On September 13, 2001, the Tribunal in this arbitration issued a partial final award, finding the Czech Republic liable for breaches of the Netherlands-Czech Bilateral Investment Treaty. This partial final award establishes a second round of hearings to quantify damages. CME has submitted to the Tribunal evidence claiming $526.9

million plus interest as the amount of damages due from the Czech Republic. Should the Company receive and collect a substantial award, the Company may be in a position to refinance or otherwise satisfy its Senior Notes, which currently have $163,563,000 of principal outstanding (the "Senior Notes"), on or before August 15, 2004. There can be no assurance that the Company will be awarded substantial damages in the second round of hearings, and if awarded such damages, that the Company will be able to collect the award. If substantial damages are not awarded and collected, the Company is likely to experience difficulties in refinancing the Senior Notes without additional external investment. If the Company is unsuccessful in refinancing the Senior Notes, the Company is likely to be unable to continue operations. See "Liquidity and Capital Resources".

The Company's future cash needs, over and above working capital requirements, will depend on the Company's overall financial performance and its future acquisition and development decisions. The Company believes that, taken together, its current cash balances, internally generated cash flow, the sale of Czech Republic assets and local financing of broadcast operations should result in the Company having adequate cash resources to meet its debt service and other financial obligations for the next 12 months. However, the Company is dependent on cash flows which are outside its direct control and the Company has little margin for error in its twelve month cash flow projections. Under the Senior Notes covenants, the Company's subsidiaries are permitted to raise up to $100 million of secured debt, to which the Senior Notes are structurally subordinate. The Company is currently utilizing less than $15 million of this permission. The Company is currently attempting to secure a line of credit in a n effort to improve liquidity. There can be no certainty that this line of credit will be secured.

The Company, like other television operators, experiences seasonality (seen Item 6 "Quarterly Results and Seasonality"), with advertising sales tending to be lowest during the third quarter of each calendar year, which includes the summer holiday period, and highest during the fourth quarter of each calendar year. The primary expenses incurred in television operations are programming and production costs, employee salaries, broadcast transmission expenses and selling, general and administrative expenses. The Company has incurred and might in the future incur expenses conducting pre-operating activities, as well as reorganizing existing affiliate entities which hold the broadcast licenses. The Company also engages in barter transactions in which its stations exchange commercial advertising time for goods and services.

Although the Company conducts operations largely in foreign currencies, the Company prepares its consolidated financial statements in United States dollars and in accordance with US GAAP. The results of Markiza TV and certain entities of the Studio 1+1 Group have been accounted for using the equity method such that CME's interests in net earnings or losses of those operations are included in the consolidated earnings and an adjustment is made to the carrying value at which the investment is recorded on the Consolidated Balance Sheet. The Company records other investments at the lower of cost or market value.

Business Combinations and Goodwill and Other Intangible Assets

In July 2001, the Financial Accounting Standards Board (FASB) issued Statements of Financial Accounting Standards No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible Assets". FAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under FAS 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. Separable intangible assets that are not deemed to have indefinite lives will continue to be amortized over their useful lives (but with no maximum life). The amortization provisions of FAS 142 apply to goodwill and intangible assets acquired after June 30, 2001. With respect to goodwill and

intangible assets acquired prior to July 1, 2001, the Company is required to adopt FAS 142 effective January 1, 2002. The Company has evaluated the effect of implementing FAS 142 on its total goodwill of $16.8 million and does not believe that any material impact will occur.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

Pursuant to SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 - An Amendment of FASB Statement No. 133", which was issued in June 1999, SFAS No. 133 became effective for fiscal years beginning after June 15, 2000 (January 1, 2001 for CME).

The Company occasionally enters into forward foreign exchange contracts. As of January 1, 2001, the Company adopted SFAS No. 133. The application of SFAS No 133 resulted in no impact on adoption and the Company's 2001 interest rate swap transaction with the Royal Bank of Scotland resulted in the Company recognizing a charge of $1,576,000 in 2001.

In August 2001, the Financial Accounting Standards Board issued SFAS No 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 will be effective for financial statements of fiscal years beginning after December 15, 2001. The Company expects to adopt this statement for our fiscal year ending December 31, 2002, and does not anticipate that it will have a material impact on the consolidated financial results.

The Company generates revenues primarily in Romanian lei ("ROL"), Slovak korunas ("Sk"), Slovenian tolar ("SIT"), Ukrainian hryvna ("Hrn") and Czech korunas ("Kc") and incurs expenses in those currencies as well as German marks, British pounds, United States dollars and Euros. The Romanian lei, Slovak koruna, Slovenian tolar and Ukrainian hryvna are managed currencies with limited convertibility. The Company incurs operating expenses for acquired programming in United States dollars and other foreign currencies. For entities operating in economies considered non-highly inflationary, including operations in Slovenia, the Slovak Republic and certain entities in Ukraine, balance sheet accounts are translated from foreign currencies into United States dollars at the relevant period end exchange rate, while statement of operations accounts are translated from foreign currencies into United States dollars at the weighted average exchange rates for the respective periods. The resulting transl ation adjustments are reflected as a component of shareholders' equity with no effect on the consolidated statements of operations.

Operations in Romania operate in economies considered highly inflationary. Accordingly, non-monetary assets are translated at historical exchange rates, monetary assets are translated at current exchange rates and translation adjustments are included in the determination of net income. Currency translation adjustments relating to transactions of the Company in currencies other than the functional currency of the entity involved are reflected in the operating results of the Company.

The exchange rates at the end of and for the periods indicated are shown in the table below.

The Company's results of operations and financial position during 2001 were impacted by changes in foreign currency exchange rates.

The Company's consolidated net revenues decreased by $3,575,000 or 5%, to $73,238,000 for 2001 from $76,813,000 for 2000. This decrease was primarily attributable to a decrease in the net revenues of its Romanian operations. This decrease was partially offset by increases in the net revenues of the Company's Ukrainian and Slovenian operations.

The net revenues of the Romanian operations declined by $7,038,000 or 18% from $39,591,000 in 2000 to $32,553,000 in 2001. This appears to be due to strong sales competition between the TV stations operating in Romania.

The net revenues of the Company's Slovenian operations increased by $4,296,000 or 18% for 2001 compared to 2000 primarily as a result of the Company acquiring control over the operations, economics and programming of Kanal A on October 11, 2000. Kanal A accounted for $6,512,000 of the Slovenian operation's net revenue, an increase of $3,995,000 over the 2000 results. This increase was principally due to Kanal A results being included for a full year in 2001 compared with three months in 2000. The net revenue increase would have been greater had the US Dollar not continued to appreciate against the Slovenian tolar (SIT) during 2001. In local currency terms, net revenues increased by SIT 1,713,974 or 31%.

The net revenues of the consolidated entities of the Company's Ukrainian operations (which includes IMS and Innova but excludes Studio 1+1 Ltd) increased by $556,000, or 6%, from $9,795,000 in 2000 to $10,351,000 in 2001. This increase was a result of the continued recovery in the Ukraine advertising market and outsourcing of the sales force at Studio 1+1 to Video International. The strong market recovery in Ukraine is expected to continue in 2002.

Total station operating costs and expenses (including amortization of program rights and depreciation of fixed assets and other intangibles) decreased by $17,339,000 or 22%, from $77,808,000 in 2000 to $60,469,000 in 2001. The decrease in total station operating costs was primarily attributable to reductions at the Company's Romanian and Ukrainian operations, partially offset by an increase at the Company's Slovenian operations.

The station operating costs of the Company's Slovenian operations increased by $2,133,000 or 12% to $19,424,000 in 2001 from $17,291,000 in 2000. This is the result of the Company acquiring control over the operations, economics and programming of Kanal A on October 11, 2000.

The Romanian operations recorded a decrease in station operating costs of $8,863,000 or 25% from $35,513,000 in 2000 to $26,650,000 in 2001. This is a result of reducing the operations and implementing cost control measures which have reduced costs in all operating categories, in particular reductions in the depreciation of

station fixed assets and acquired programming costs. As a result of improved program library management, in particular the renegotiation of licence contracts, a corporate provision of $2,100,000 was reversed, reducing program syndication charges for the year.

The Ukrainian operations recorded a decrease of $9,837,000 in operating costs from $21,275,000 in 2000 to $11,438,000 in 2001, a result of the Company's decision to write down $9,836,000 of the carrying value of the goodwill relating to the Studio 1+1 assets in 2000. The review of goodwill was conducted according to SFAS 121 "Accounting for the Impairment of Long Lived Assets and for Long Lived Assets Disposed of." Partially offsetting the decrease in depreciation and amortization charges, are increased salaries, production costs and acquired programming charges.

Station selling, general and administrative expenses were $19,992,000 in 2001 compared with $19,402,000 in 2000, an increase of $590,000. The increase in selling, general and administrative expenses was attributable to a $5,185,000 increase in the bad debt expense at the Romanian operations, and an increase in Ukraine across all categories, offset by savings at CNTS. CNTS has achieved a decrease of $3,643,000 to $225,000 in 2001 from $3,868,000 in 2000 as a result of a reversal of a provision for legal costs which were not subsequently incurred, based on legal progress in 2001. See Part I Item 3" Legal Proceedings" for further discussion on the ongoing dispute between CNTS and CET.

The Romanian operations had an increase in selling, general and administrative costs of $3,392,000 to $13,359,000 in 2001 from $9,967,000 in 2000. This is a result of the increase of $5,185,000 in the bad debt expense to $6,241,000 in 2001 from $1,056,000 in 2000, partially offsetting savings in all other cost categories.

The Ukraine operation had an increase in selling, general, and administrative costs of $927,000 to $3,466,000 in 2001 from $2,539,000 in 2001 as a result of increases in all cost categories. The Slovenian operations decreased selling, general and administrative costs by $43,000 to $2,946,000 in 2001 from $2,989,000 in 2000 primarily as a result of decrease in marketing and consulting costs.

Corporate operating costs and development expenses increased by $1,640,000, or 14%, to $13,057,000 in 2001 from $11,417,000 in 2000. This increase was primarily a result of a $4,484,000 charge for legal costs relating to the Czech Republic litigation and arbitration. See Part I Item 3, "Legal Proceedings".

Amortization of goodwill and allowance for development costs increased by $77,000, or 5%, to $1,747,000 in 2001 from $1,670,000 in 2000 mainly due to a full year amortization charge against the purchase cost of Kanal A being included in 2001 compared to three months in 2000.

As a result of the above factors, the Company generated an operating loss of $22,027,000 in 2001 compared to an operating loss of $33,484,000 in 2000.

Equity in income of unconsolidated affiliates increased by $7,651,000 to an income of $7,137,000 in 2001 compared to a loss of $514,000 in 2000. The increase is a result of the Slovak operation recording a net income of $1,832,000 compared to a $1,773,000 loss in 2000 and certain entities of the Ukraine operations that are not consolidated recording a net income of $5,305,000 compared to $1,259,000 in 2000. For a further discussion of Slovak and Ukraine operations in total see the section "EBITDA of Combined Operations for the twelve months to December 31,2001 - Non US GAAP"

Net interest and other expense decreased by $486,000 to $17,759,000 in 2001 compared to an expense of $18,245,000 in 2000.

The 2001 change in the fair value of the derivative was a provision for a net loss of $1,576,000 due to the mark to market revaluation of the Royal Bank of Scotland interest rate swap transaction which has been valued in accordance with FAS 133. See "Liquidity and Capital Resources" for a further discussion.

A gain on the sale of a subsidiaries of $1,802,000 was realized in 2001, relating to the sale of Video Vision. On November 22, 2001 the Company sold its 70% interest in Video Vision for the initial price that the Company paid for its 70% stake. The gain on sale of the subsidiary, Video Vision, was $1,802,000 which reflects a write back of prior year's losses from this subsidiary.

Net foreign currency exchange gain of $1,651,000 in 2001 compares to a net foreign exchange loss of $2,286,000 in 2000. The increase in the foreign currency exchange gain is a result of the effect of a weaker US Dollar on the Deutsche mark denominated portion of CME's Senior Notes obligations partially offset by the effect of a weaker Czech koruna on the outstanding Czech koruna denominated debt of the Company incurred in connection with the Company's 1996 purchase of an additional economic interest in CNTS, and by losses on non-US dollar denominated assets and the re-translation of US dollar denominated obligations held by the Company's non-US Subsidiaries. In addition, the Company recorded a foreign exchange loss as a result of a dividend paid by CNTS in February 2000 and a foreign exchange loss on the CNTS dividend declared (but not paid) in the second quarter of 2000.

Gain on sale of investment of $17,186,000 in 2000 relates to the sale by the Company of a note that it received in connection with the Company's sale of a subsidiary in Poland.

A gain on resolution of a disputed investment of $5,188,000 was recorded in the first quarter of 2001. This represents a debt the Company owed Dr. Vladimir Zelezny, the former General Director of CNTS, which is no longer payable following the ICC Arbitration Tribunal award of $27,100,000 on February 9, 2001. See Part I Item 3 "Legal Proceedings".

Provision for income taxes was $1,381,000 in 2001 compared to $96,000 in 2000, due to increases in the income tax provision for Ukraine ($592,000), the Czech Republic ($374,000) and at corporate ($415,000).

Minority interest in the loss of consolidated subsidiaries was $2,138,000 in 2001 compared to a minority interest in income of $59,000 in 2000. Under US GAAP the controlling shareholder normally consolidates all losses on the basis that other shareholders cannot be compelled to and are not expected to be able to fund the company's losses. A cash contribution of $2,070,000 by the minority shareholders of MPI has allowed the Company to recoup a like amount of previously recognised losses. Other small movements reflect changes in the minority interest in other group companies.

As a result of these factors, the net loss from the continuing operations of the Company was $24,827,000 in 2001 compared to $37,498,000 in 2000.

The operating gain of $2,716,000 on discontinued operations in Hungary relates to the release of provisions no longer deemed necessary as the company is in liquidation.

The Company's consolidated net revenues decreased by $52,510,000, or 41%, to $76,813,000 for 2000 from $129,323,000 for 1999. The decrease was primarily attributable to the suspension of the broadcast operations of CNTS and partially due to decreases in the net revenues of the Slovenian, Romanian and the consolidated entities of the Ukraine operations. CNTS suspended broadcast operations on August 5, 1999 and has not generated any material revenues since that time. See Part I Item 3 "Legal Proceedings" and below for a further discussion on Nova TV and the ongoing dispute between CNTS and CET.

The Slovenia operations, US dollar net revenues declined for 2000 compared to 1999; however in local currency terms, net revenues increased by 14%. The net revenues of the Romanian operations declined year over year as a result of increased competition in an advertising market which showed no growth year over year. The Romanian advertising market was adversely affected by the elections at the end of 2000 and a lack of Government reforms.

Total station operating costs and expenses (including amortization of program rights and depreciation of fixed assets and other intangibles) decreased by $61,597,000, or 44%, to $77,808,000 for 2000 from $139,405,000 for 1999. The decrease in total station operating costs and expenses was primarily due to the cessation of broadcasting by CNTS and partially attributable to reductions in total station operating costs and expenses at the Romanian and Slovenian operations. See Part I Item 3, "Legal Proceedings" for a further discussion of Nova TV and the on-going dispute between CNTS and CET.

The decrease at the Romanian operations was a result of a reduction in amortization of programming rights of $5,984,000 and a reduction in depreciation of station fixed assets and other intangibles of $1,053,000. This reduction was partially off-set by an increase in other operating costs and expenses of $475,000 as a result of an increase in production expenses relating to new show formats.

The decrease at the Slovenian operations was a result of a reduction in amortization of programming rights of $879,000, other operating costs and expenses of $735,000 and depreciation of station fixed assets and other intangibles of $377,000 for 2000 compared to 1999.

The consolidated entities of the Ukrainian operations recorded a decrease in amortization of programming rights of $2,716,000 and a decrease in other operating costs and expenses of $1,080,000 for 2000 compared to 1999. These decreases were off-set by an increase in depreciation of station fixed assets and other intangibles of $9,235,000. This increase was primarily the result of a Company review of the carrying value of the goodwill relating to the Studio 1+1 asset and the subsequent determination to write the goodwill down. This review was conducted according to SFAS 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of", and the remaining goodwill relating to the Studio 1+1 asset is $4,916,000.

Station selling, general and administrative expenses decreased by $6,496,000, or 25%, to $19,402,000 for 2000 from $25,898,000 for 1999. The decrease is primarily attributable the cessation of broadcasting by CNTS and partially attributable to reductions in total station selling, general and administrative expenses at the Romanian and Slovenian operations. See Part I Item 3 , "Legal Proceedings" for a further discussion of Nova TV and the on-going dispute between CNTS and CET.

The Romanian operations recorded a reduction in station selling, general and administrative expenses of $78,000. The Slovenian operations recorded a reduction in station selling, general and administrative expenses of $381,000 primarily due to a reduction in taxes. The consolidated entities of the Ukraine operations recorded an increase in station selling, general and administrative expenses of $62,000.

Corporate operating costs and development expenses decreased by $7,336,000, or 39%, to $11,417,000 in 2000 from $18,753,000 in 1999, mainly due to lower corporate operating expenses.

Amortization of goodwill and allowance for development costs decreased by $47,421,000, or 97%, to $1,670,000 in 2000 from $49,091,000 in 1999. This decrease is primarily attributable to the charge of $40,511,000 recorded in 1999 which resulted from a write-down of the goodwill relating to the purchases of additional equity interests in CNTS made by the Company in August 1996 and August 1997. No such charge was recorded in 2000. See Part I Item 3, "Legal Proceedings" for a further discussion of Nova TV and the on-going dispute between CNTS and CET.

As a result of the above factors, the Company generated an operating loss of $33,484,000 in 2000 compared to an operating loss of $103,824,000 in 1999.

Equity in loss of unconsolidated affiliates decreased by $10,507,000 to a loss of $514,000 in 2000 compared to a loss of $11,021,000 in 1999. This decrease was a result of the Slovakia operation recording a loss of $1,773,000 in 2000 compared to a loss of $4,611,000 in 1999 and certain entities of the Ukraine operations that are not consolidated recording net income of $1,259,000 in 2000 compared to a loss of $6,410,000 in 1999.

Net interest and other income changed by $4,216,000 to an expense of $18,245,000 in 2000 compared to an expense of $14,029,000 in 1999. This increase was a result of a Company review of the potential interest and penalties relating to outstanding tax obligations of the Romanian operations and a determination to provide for these charges in the amount of $4,000,000.

Net foreign currency exchange loss of $2,286,000 in 2000 compares to a net foreign exchange gain of $12,983,000 in 1999. In 1999 the Company recorded a large foreign exchange gain due to the significant weakening of the German mark and the Czech koruna. In 2000, the Company recorded a loss on the dividends declared by CNTS due to weakening of the Czech Koruna against the Dollar between the date of declaration and the date the income was recorded.

Gain on sale of investment of $17,186,000 in 2000 relates to the sale by the Company of a note that it received in connection with the Company's sale of a subsidiary in Poland.

Provision for income taxes was $96,000 in 2000 compared to $1,518,000 in 1999. This decrease is due to the suspension of the broadcasting operations of CNTS and the resulting decrease in net income. See Part I Item 3, "Legal Proceedings" for a further discussion on Nova TV and the ongoing dispute between CNTS and CET.

Minority interest in income of consolidated subsidiaries was $59,000 in 2000 compared to a minority interest in loss of $213,000 in 1999. This change was due to the losses incurred by CNTS off-set by income of Kanal A. See Part I Item 3, "Legal Proceedings" for a further discussion on Nova TV and the ongoing dispute between CNTS and CET and see Item 8, Consolidated Financial Statements".

As a result of these factors, the net loss of the Company was $37,498,000 in 2000 compared to $89,870,000 in 1999.

Net cash used in operating activities was $15,004,000 in 2001 compared to $15,529,000 in 2000. The decrease of $525,000 was primarily the result of a lower consolidated net loss being recorded in 2001 and the Czech tax authorities returning Kc 281,790,000 ($7,256,000) in cash to the Company in February 2001, partially offset by a decrease in accounts payable and accrued liabilities, and an increase in program payments.

Net cash provided by investing activities was $5,550,000 in 2001 compared to $19,516,000 in 2000. The decrease of $13,966,000 was primarily attributable to the cash proceeds received during 2000 as a result of the sale by the Company of a note it received in connection with the Company's sale of its operations in Poland offset by increase in 2001 cash proceeds from the disposals of fixed assets and loans and advances from affiliates.

The Company had cash and cash equivalents of $22,053,000 at December 31, 2001 compared to $37,510,000 at December 31, 2000.

Included in accounts payable and accrued liabilities, and Duties and other taxes payable as stated in the Company's Consolidated Balance Sheet are the following amounts relating to current tax liabilities and estimated interest and penalties on overdue tax liabilities :

A significant portion of these balances relates to the outstanding tax liability at the Company's Romanian subsidiaries. The Romanian subsidiaries have applied to the tax authorities for rescheduling of its outstanding tax liability and the associated penalties and interest. Media Vision has received approval for restructuring of its tax liability and the MPI application is still being considered by the Romanian tax authorities. Should such re-scheduling fail to be granted and the Romanian tax authorities demand full payment of all potential tax liabilities the Romanian operation would experience difficulties in continuing to operate.

The Company has three main tranches of debt. (1) Senior Notes which are denominated in United States dollar, in part, and in German marks, in part. The principal amount of the Senior Notes ($163,563,000) is repayable on their maturity date, August 15, 2004. (2) A loan agreement with CS which had an outstanding principal balance at December 31, 2001 of Kc 249,764,513 ($7,028,000), maturing November 2005, the payment of which is secured by an assignment of a dividend receivable by the Company from CNTS and a first mortgage on the Company's owned building in the Czech Republic. This agreement provides for the Company paying

approximately $150,000 in interest payments each quarter with a balloon payment on the outstanding principal in November 2005. (3) Pro TV's borrowing facility with Tiriac Bank in Romania, include a loan for $4,000,000 maturing in December 2002 and an over draft facility for $3,000,000 maturing October 2002. At December 31, 2001, $989,000 was borrowed under the loan facility and a further $2,660,000 was drawn under the overdraft facility. The $3,000,000 overdraft facility which was due to mature in October 2001 has been extended to October 2002.

In August 1997, CME issued two tranches of Senior Notes (the "Senior Notes") the principal of which becomes due in August 2004. The United States dollar tranche totals $100,000,000 in principal amount and bears interest at a rate of 9⅜% per annum. The German mark tranche totals DM 140,000,000 ($63,621,000) in principal amount and bears interest at a rate of 8⅛% per annum. The Senior Notes raised net proceeds of approximately $170,000,000. The Senior Notes are denominated in United States dollars, in part, and in German marks, in part. The indentures governing the Senior Notes contain certain restrictions relating to the ability of CME and its Subsidiaries and affiliates to incur additional indebtedness, incur liens on assets, make investments in unconsolidated companies, declare and pay dividends (in the case of CME), sell assets and engage in extraordinary transactions.

Under the Senior Notes covenants, the Company's subsidiaries are permitted to raise up to $100 million of secured debt, to which the Senior Notes are structurally subordinate. The Company is currently utilizing less than $15 million of this permission.

In April 1998, the Slovenia operations, Pro Plus, entered into a multicurrency $5,000,000 loan agreement with Creditanstalt AG which matures in May 2005. As at December 31, 2000, the loan was fully drawn. This loan secured by the land, buildings and equipment of POP TV and guaranteed by CME was fully repaid in 2001.

CNTS was the subject of a VAT inspection by the Czech Republic tax authorities for the years 1997 and 1998. As a result of this inspection the Czech tax authorities had levied an assessment seeking VAT payments of Kc 232,777,000 ($6,418,000). The Czech authorities asserted that CNTS was providing certain services to CET and that these services should have been subject to VAT. On February 28, 2001, CNTS received notification from the Czech Republic tax authorities that all tax investigations and assessments had been cancelled. The Czech tax authorities had previously frozen CNTS' 1998 and 1999 income tax prepayments in the amount of Kc 281,790,000 ($7,256,000). These income tax prepayments were returned to CNTS on February 20, 2001.

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 Slovene tax authorities had levied an assessment seeking unpaid income taxes, customs duties and interest charges of SIT 1,073,000,000 ($4,276,000). The Slovene authorities have asserted that capital contributions and loans made by CME in the years 1995 and 1996 to Pro Plus should be extraordinary revenue to Pro Plus. On this basis, the Slovene authorities claim that Pro Plus made a profit in 1995 and 1996 for which it owes income taxes and interest. Additionally, the Slovene 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 Slovene tax authorities approved the cash capital contributions for 1995 and 1996. This has reduced the assessment to SIT 636,800,000 ($2,538,000). The Administrative Court of Ljubljana has issued an i njunction to prevent the tax authorities from demanding payment until a hearing on the matter has been concluded. There is currently no date set for this hearing.

In November 2001, the Company entered into an interest rate swap transaction through the Royal Bank of Scotland plc (RBS) to exchange its 9⅜% $100 million fixed rate debt for floating rate debt. The transaction has an expiration date of August 10, 2004 and has two phases. Until August 10, 2002, RBS has guaranteed an interest rate of 8⅜%, thereafter the interest rate is determined by the Dollar (USD) 6 month LIBOR rate plus 5.69%. Therefore on its $100 million of fixed rate debt, the Company receives 9⅜% from RBS, but only pays 8⅜% until August 10, 2002. Thereafter the Company will continue to receive 9⅜%, but will pay the USD 6 month LIBOR rate plus 5.69%. To cover the bank's risk, the Company was required to place on a restricted deposit $3,270,000, and this will remain on deposit until the swap transaction is cancelled or the term is completed.

On August 10, 2002 and every six months thereafter, the swap counterparty (RBS) has an option to terminate the swap at no cost. If the counterparty cancels the swap on August 10, 2002, a $645,000 cash benefit will have been received by the Company. If the counterparty does not exercise this right and unless the Company exercises its option to unwind the transaction at the cost of the market value of the swap, the Company automatically enters into a new swap for the next six months.

Below is a table showing the fair value of this transaction as prescribed by FAS 133. It represents the total cash cost to the Company through August 2004, based on the futures market rates as at December 31, 2001.

The Company has an option to unwind the transaction at any time by paying RBS the market valuation of the transaction based on the prevailing profile of the yield curve through to August 2004. As at December 31, 2001, the estimate of the cost to unwind the transaction was $1,576,000, as described in the above table. As at February 28, 2002, the estimate of this cost was $862,000.

As at December 31, 2001, the Company held Euro 4,000,000 and Euro 2,600,000 (a total of US$ 5,877,000) with RBS on dual currency deposit. This form of deposit is designed to enhance the yield on a given deposit. The Company contracts to a strike rate in an alternative currency at the time of maturity of the deposit. On the day of maturity, if the spot rate is less favorable than the contracted strike rate, the Company will receive its money in the alternative currency. Consequently, should there be a favorable exchange rate fluctuation between the contract date and the maturity date, the Company would not be in a position to take advantage of this. The Company uses this form of deposit to enhance the interest rate on its deposits because it makes payments in US Dollars, Euros and British Pounds which means that the Company is relatively indifferent if the deposit is returned in an alternative currency.

The primary internal sources of cash available for corporate operating costs and development expenses are debt repayment, dividends and other distributions from its Subsidiaries.

The laws under which CME's operating Subsidiaries are organized provide 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. In the case of the Company's Dutch and Netherlands Antilles Subsidiaries, the Company's voting power is sufficient to compel the making of distributions. 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 can compel PRO TV to make distributions. There are no legal reserve requirements in Slovenia. In the case of Markiza TV, 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. The Company cannot compel the distributions of dividends by Markiza TV. The Company's voting power in the Studio 1+1 Group is sufficient to compel the distribution of dividends. To date, the only Subsidiary to distribute dividends has been CNTS which suspended operations on August 5, 1999.

Cash (including CNTS dividends, inter-company charges, repayment of related party personal loans and net advances) received from the Company's subsidiaries and partners for 2001 was $17,018,000 compared to $16,241,000 for 2000. During 2001, the Company received the following amounts from its operations: Ukraine $2,167,000 Romania $4,846,000 Slovenia $2,210,000 Slovakia $2,646,000, and the Czech Republic $5,149,000.

The Company's cash flow relies on cash generated by its subsidiary operations. In 2002, the Company will depend on receiving cash from the Slovak operations, a non-controlled entity from which the Company cannot compel the making of distributions, and from the sale of its building in the Czech Republic. Cash is mainly repatriated to the Company by the operations making payments on their inter company payables, loans and accrued interest. As at December 31, 2001 the operations had the following unsecured balances owing to the Company :

The Company's future cash needs, over and above working capital requirements, will depend on the Company's overall financial performance and its future acquisition and development decisions. The Company believes that, taken together, its current cash balances, internally generated cash flow, the sale of Czech Republic assets and local financing of broadcast operations should result in the Company having adequate cash resources to meet its debt service and other financial obligations for the next 12 months. However, the Company is dependent on cash flows which are outside its direct control and the Company has little margin for error in its twelve month cash flow projections. Under the Senior Notes covenants, the Company's subsidiaries are permitted to raise up to $100 million of secured debt, to which the Senior Notes are structurally subordinate. The Company is currently utilizing less than $15 million of this permission. The Company is currently attempting to secure a line of credit in a n effort to improve liquidity. There can be no certainty that this line of credit will be secured.

As discussed above, the Senior Notes mature in August 2004. The Company's ability to refinance or repay the Senior Notes or to attract an equity investor or investors will depend upon market conditions, pending litigation (see Part I, Item 3, "Legal Proceedings"), renewals of broadcasting licenses, the financial performance of the Company and other factors through August 2004. If the Company is unsuccessful in refinancing or repaying the Senior Notes, the Company is likely to be unable to continue operations.

The following two tables are neither required by United States generally accepted accounting principles ("GAAP") nor intended to replace the Consolidated Financial Statements prepared in accordance with GAAP. The tables set forth certain combined and attributable financial information for the years ended December 31, 2001, 2000 and 1999 for the Company's operating entities. This financial information departs materially from GAAP.

In the table "Selected Combined Financial Information," revenues and operating expenses of the Slovak and Ukraine operations not consolidated in the Consolidated Statements of Operations during the periods shown, are aggregated with those of the Company's consolidated operations. Certain entities of the Ukraine operations not consolidated in the Consolidated Statements of Operations during the periods shown, are aggregated with those of the Company's consolidated operations. In the table "Selected Attributable Financial Information", combined information is adjusted for CME's economic interest in each entity, which economic interest is the basis used for consolidation and equity method accounting in the Company's GAAP Consolidated Financial Statements as of December 31, 2001.

The tables are presented solely for additional analysis and not as a presentation of results of operations of each component, nor as combined or consolidated financial data presented in accordance with GAAP. See "Application of Accounting Principles". The following supplementary unaudited combined and attributable information includes certain financial information of the Slovakia operations on a line-by-line basis, similar to that of the Company's consolidated entities. Intercompany transactions such as management service charges are not reflected in the tables. The Company believes that this unaudited combined and attributable information provides useful disclosure.

Total Stations refer to the Company's operations in Romania, Slovenia, Slovakia and Ukraine. The Romanian and Slovenian operations began in December 1995, the Slovakian operation began in August 1996, and the Ukrainian operations began to generate significant revenue during the second quarter of 1997. Kanal A, the second of the Slovenian stations was acquired on October 11, 2000.

EBITDA consists of earnings before interest, income taxes, depreciation and amortization of intangible assets (which does not include programming rights). EBITDA is provided because it is a measure of operating performance commonly used in the television industry. It is presented to enhance an understanding of the Company's operating results and is not intended to represent results of operations or cash flows in accordance with GAAP for the periods indicated, both of which are discussed elsewhere in Management's Discussion and Analysis of Financial Conditions and Results of Operations.

The term "station expenses" used in the discussion of EBITDA immediately following the tables refers to the total of a station's (i) other operating costs and expenses, (ii) amortization of programming rights and (iii) selling, general and administrative expenses.

"Broadcast cash flow", a broadcasting industry measure of performance, is defined as net broadcast revenues, less (i) station operating costs and expenses (excluding depreciation and amortization of acquired programming and of intangible assets), (ii) broadcast selling, general and administrative expenses, and (iii) cash program rights costs. Cash program rights costs are included in the period in which payment is made, which may not necessarily correspond to the timing of program use or amortization. Broadcast cash flow should not be considered as a substitute measure of operating performance or liquidity prepared in accordance with GAAP (see the accompanying Consolidated Financial Statements).

The Company's Ukrainian operations' EBITDA increased by $3,838,000 to $4,613,000 for 2001 compared to $775,000 for 2000. This improvement was achieved as a result of an increase of $5,934,000 in Studio 1+1's net revenues, partially offset by an increase of $2,096,000 in costs. The increase in net revenues was as a result of the continuing recovery of the Ukrainian advertising market and outsourcing the sales force to Video International.

The Company's Romanian operations' EBITDA decreased by $3,571,000 to negative $2,007,000 for 2001 compared to positive $1,564,000 for 2000. This decrease was a result of a net revenue decrease of $7,038,000 partially offset by a decrease of $3,467,000 in costs, including an increase of $5,185,000 in the bad debt expense year on year. The reduction in net revenues appears to be a result of strong sales competition between the television station which has allowed major advertisers to reallocate or reduce their advertising budgets during 2001. In response, the Company has reduced operations and has implemented cost control measures to reduce costs in line with the decline in revenues.

The Company's Slovak operations' EBITDA increased by $1,665,000 to $6,033,000 for 2001 compared to $4,368,000 for 2000. This improvement was as a result of an increase in net revenues of $1,541,000 and a decrease in costs of $124,000 for 2001 compared to 2000. The decrease in costs was primarily as a result of lower program syndication charges and lower depreciation of fixed and intangible assets.

The Company's Slovenian operations' EBITDA increased by $2,343,000 to $8,367,000 for 2001 compared to $6,024,000 for 2000. The improvement was primarily a result of additional revenues of $4,297,000, partially offset by additional costs of $1,954,000. Net revenues and costs of $6,512,000 and $3,812,000, respectively, were attributable to Kanal A. POP TV's net revenues increased by $301,000. The flat growth in POP TV revenues was primarily the result of the continued depreciation of the Tolar against the US Dollar. In local currency terms, the net revenues of the Company's Slovenian operations increased by approximately 1,713,974 Slovenian tolars (SIT), or 31%, for 2001 compared to 2000.

For the reasons described above total combined EBITDA increased by $4,275,000 to $17,006,000 in 2001 compared to $12,731,000 in 2000.

Differences between EBITDA and broadcast cash flow are the result of timing differences between programming use and programming payments. See "Liquidity and Capital Resources" for a complete discussion of cash flows from operating, investing and financing activities.

As part of the European Economic and Monetary Union (EMU), a single currency, the euro, replaced the national currencies of many of the member countries of the European Union on January 1, 2002. Although the Company does not currently conduct business in any of the countries which are adopting the euro, it holds debt denominated in German marks, one of the currencies replaced by the euro. Additionally, it is expected that the countries in which the Company operates are likely to join EMU at some point in the future.

The Company's program to address the adoption of the single euro currency was successful in that our business activities have continued without disruption since its introduction and the associated costs were not significant.

This report contains forward-looking statements, including statements regarding the potential damages to be awarded to the Company in connection with the arbitration tribunal's decision finding that the Czech Republic violated the Netherlands - Czech Republic Bilateral Investment Treaty, the Company's operations in the Czech Republic, the ongoing dispute between CNTS and CET, the future economic climate in the Company's markets, the Company's anticipated 2002 results, future investments in existing television broadcast operations, business strategies and commitments, anticipated corporate cash expenditures, the repayment of the Senior Notes and the timing of the need for additional cash resources. For these statements and all other forward-looking statements, the Company claims 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, m any of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, affecting the financial position, results of operations and cash flows of the Company, 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 renewals of broadcasting licenses, the regulatory environment and compliance, the relationship with our operating partners, the ability to acquire programming, the ability to attract audiences, the rate of development of advertising markets in countries where the Company currently operates and general market and economic conditions in these countries, the US and Western Europe. Important factors with respect to the ongoing dispute between CNTS and CET, include, but are not limited to, legal, political and regulatory conditions and developments in the Czech Republic. Important factors with regard to re payment of the Senior Notes include, but are not limited to, the ability to attract an equity investor or investors and the ability to collect on the Czech Republic arbitration award.

The Company engages in activities that expose it to various market risks, including the effects of changes in foreign currency exchange rates and interest rates. The Company does not regularly engage in speculative transactions, nor does it regularly hold or issue financial instruments for trading purposes.

The Company conducts business in a number of foreign currencies. As a result, it is subject to foreign currency exchange rate risk due to the effects that foreign exchange rate movements of these currencies have on the Company's costs and on the cash flows it receives from certain Subsidiaries. In limited instances the Company enters into forward foreign exchange contracts to hedge foreign currency exchange rate risk. At December 31, 2001 the Company held no foreign exchange contracts.

As at December 31, 2001, the Company held Euro 4,000,000 and Euro 2,600,000 (a total of US$ 5,877,000) with RBS on dual currency deposit. This form of deposit is designed to enhance the yield on a given deposit. The Company contracts to a strike rate in an alternative currency at the time of maturity of the deposit. On the day of maturity, if the spot rate is less favourable than the contracted strike rate, the Company will receive its money in the alternative currency. Consequently, should there be a favorable exchange rate fluctuation between the contract date and the maturity date, the Company would not be in a position to take advantage of this. The Company uses this form of deposit to enhance the interest rate on its deposits and because it makes payments in US Dollars, Euros and British Pounds the Company is relatively indifferent if the deposit is returned in an alternative currency.

In November 2001, the Company entered into an interest rate swap transaction through the Royal Bank of Scotland plc (RBS) to exchange its 9⅜% $100 million fixed rate debt for floating rate debt. The transaction has an expiry date of August 10, 2004 and has two phases. Until August 10, 2002, RBS has guaranteed an interest rate of 8⅜%, thereafter the interest rate is determined by the USD 6 month LIBOR rate plus 5.69%. Therefore on its $100 million of fixed rate debt, the Company receives 9⅜% from RBS, but only pays 8⅜% until August 10, 2002, thereafter the Company will continue to receive 9⅜%, but will pay the USD 6 month LIBOR rate plus 5.69%.

On August 10, 2002 and every six months thereafter, the swap counterparty (RBS) has an option to terminate the swap at no cost. If the counterparty cancels the swap on August 10, 2002, a $645,000 cash benefit will have been received by the Company. If the counterparty does not exercise this right and unless the Company exercises its option to unwind the transaction at a cost of the market value of the swap, the Company automatically enters into a new swap for the next six months.

Below is a table showing the fair value of this transaction as prescribed by FAS 133. It represents the total cash cost to the Company through to August 2004, based on the futures market rates as at December 31, 2001.

The Company has an option to unwind the transaction at any time by paying RBS the market valuation of the transaction based on the prevailing profile of the yield curve through to August 2004. As at December 31, 2001, the estimate of the cost to unwind the transaction was $1,576,000. As at February 28, 2002, the estimate of the cost to unwind the transaction was $862,000, the USD 6 month LIBOR rate was 2.03% and the 2.5 year spot rate was 3.97%.

Following the interest rate swap transaction which the Company entered into with RBS in November 2001, approximately 37% of the Company's debt was maintained with a fixed interest rate as at December 31, 2001 compared to 96% as at December 31, 2000. The Company has two tranches of debt that provide for interest at a spread above a basis rate (such as LIBOR) and the RBS interest rate swap transaction which expose the Company to interest rate fluctuations. A significant rise in these base rates would materially adversely affect the Company's business, financial condition or results of operations.

To Central European Media Enterprises Ltd:

We have audited the accompanying consolidated balance sheets of Central European Media Enterprises Ltd. (a Bermuda corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of Produkcija Plus d.o.o. and Super Plus Holding d.d. (acquired on October 11, 2000) which statements reflect total assets of 21 percent and total revenues of 39 percent in 2001, and 18 percent and 31 percent, respectively in 2000, of the related consolidated totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for those entities, is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Central European Media Enterprises Ltd. as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

The Company's financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses and in its cash flow projections is relying on cash inflows that are outside the Company management's direct control. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

ARTHUR ANDERSEN

Hamilton, Bermuda

March 27, 2002

To the Board of Directors and Partners of Produkcija Plus d.o.o.

Ljubljana, Slovenia

We have audited the accompanying balance sheets of Produkcija Plus d.o.o. as of December 31, 2001 and 2000, and related statements of operations and cash flows for the years ended December 31, 2001 and 2000 (not presented separately herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of the Produkcija Plus d.o.o. at December 31, 2001 and 2000, and the results of its operations and cash flows for the years ended December 31, 2001 and 2000 in conformity with United States generally accepted accounting principles.

Deloitte & Touche

Ljubljana, Slovenia

February 15, 2002

To the Board of Directors and Partners of Super Plus Holding d.d.

Ljubljana, Slovenia

We have audited the accompanying consolidated balance sheets of Super Plus Holding d.d. and its subsidiary (the Company), as of December 31, 2001 and 2000, and the related consolidated statements of operations and cash flows for the year ended December 31, 2001 and for the period from October 11, 2000 to December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements, referred to in the first paragraph above, present fairly, in all material respects, the financial position of the Company at December 31, 2001 and 2000, and the consolidated results of operations and cash flows for the year ended December 31, 2001 and for the period from October 11, 2000 until December 31, 2000 in conformity with United States generally accepted accounting principles.

The consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses and in its cash flow projections is relying on cash inflows that are outside the Company's management's control and depend on the Company's parent company's ability to continue as a going concern. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Deloitte & Touche

Ljubljana, Slovenia

March 27, 2002