Contents

I. Forward-looking Statements
II. Executive Summary
III. Analysis of the Results of Consolidated Operations
IV. Analysis of Segment Results
V. Condensed Consolidated Balance Sheet
VI. Liquidity and Capital Resources
VII. Critical Accounting Policies and Estimates

I. Forward-looking Statements

This report contains forward-looking statements, including those relating to our plans, objectives, future performance and business. Statements that use the terms "may", "believe", "anticipate", "expect", "plan", "estimate", "intend" and similar expressions of a future or forward-looking nature identify forward-looking statements for purposes of the U.S. federal securities laws or otherwise. For these statements and all other forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or are otherwise beyond our control and some of which might not even be anticipated. Forward-looking statements reflect our current views with respect to future events and because our business is subject to such risks and uncertainties, actual results, our strategic plan, our financial position, results of operations and cash flows could differ materially from those described in or contemplated by the forward-looking statements contained in this report.

Important factors that contribute to such risks include, but are not limited to, those factors set forth under "Risk Factors" as well as the following: the effect of the credit crisis and economic downturn in our markets as well as in the United States and Western Europe; decreases in television advertising spending and the rate of development of the advertising markets in the countries in which we operate; the timing and sustainability of any stabilization and economic recovery in the markets in which we operate; the timing and impact of any additional investments we make in our Bulgaria and Ukraine operations; our effectiveness in implementing our strategic plan for our Ukraine operations or our Bulgaria operations; our ability to make future investments in television broadcast operations; our ability to develop and implement strategies regarding sales and multi-channel distribution; changes in the political and regulatory environments where we operate and application of relevant laws and regulations; the timely renewal of broadcasting licenses and our ability to obtain additional frequencies and licenses; and our ability to acquire necessary programming and attract audiences. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in this report. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

II. Executive Summary

The following analysis includes references to "Core Markets", which are Croatia, Romania, the Czech and Slovak Republics and Slovenia, and to "Core Operations", which means our operations in those countries. We also refer to "Developing Markets," which are Bulgaria and Ukraine, and to "Developing Operations", which means our operations in those countries.

The global financial and economic crisis significantly impacted our results in the nine months ended September 30, 2009. The three most significant obstacles affecting us were the year-on-year decline in the Gross Domestic Product ("GDP") in each of our markets, the decline of advertising markets and the significant appreciation of the dollar against the currencies in our markets in the first nine months of 2009 compared to the same period in 2008. We believe that we have reached the bottom of the cycle; year-on-year declines in net advertising revenue, on a constant currency basis, have remained relatively constant over the first three quarters of this year. We expect recovery to begin in all of our countries some time in 2010, with significant variation among countries in the timing and pace of the recovery. We currently assume that the rate of GDP growth between 2009 and 2010 will be in low single digits and that advertising markets will grow at a multiple of the rate of GDP growth.

Continuing Operations

The following table provides a summary of our consolidated results for the three
and nine months ended September 30, 2009 and 2008:

                                                          For the Three Months Ended September 30,
                                                                2009                2008        % Act(1)

Net revenues                                         $       134,482       $     200,601           (33.0 ) %
Operating (loss) / income                                    (33,450 )             7,155           Nm(2)
Net (loss) /income                                   $       (24,294 )     $     (19,595 )         (24.0 )%
Net cash (used in) / generated by continuing
operating activities                                 $       (28,438 )     $      44,027          (164.6 ) %

                                                           For the Nine Months Ended September 30,
                                                                2009                2008        % Act(1)
Net revenues                                         $       461,888       $     728,433           (36.6 )%
Operating (loss) / income                                   (106,229 )           151,372          (170.2 )%
Net (loss) / income                                  $       (49,128 )     $      60,088          (181.8 )%
Net cash (used in) / generated by continuing
operating activities                                 $       (22,434 )     $     172,202          (113.0 ) %

(1) Actual ("%Act") reflects the percentage change between two periods
(2) Number is not meaningful

Net revenues in the nine months ended September 30, 2009 declined US$ 266.5 million or 36.6% compared to the same period in 2008. Our costs declined at a slower rate than revenues and we recognized a non-cash impairment charge of US$ 81.8 million in respect of our operations in Bulgaria in the first quarter of 2009 (see Item 1, Note 4, "Goodwill and Intangible Assets"). Consequently, we suffered a very significant decline in operating income in the first nine months of this year.

Operating Performance

Commencing January 1, 2009, we describe our operating performance in terms of Consolidated EBITDA, which is equal to the EBITDA for each of our segments less corporate costs (which include non-cash stock-based compensation as shown in Item 1, Note 15, "Stock-based Compensation"). Prior to January 1, 2009, we described our operating performance in terms of Segment EBITDA, which reflects our station operating performance but excludes corporate costs. Comparative numbers reflect this change (EBITDA is defined in Item 1, Note 18, "Segment Data").

The following analysis contains references to like-for-like ("% Lfl") or constant currency percentage movements. These references reflect the impact of applying the current period average exchange rates to the prior period revenues and costs. Given the significant movement of the currencies in the markets in which we operate against the dollar, we believe that it is useful to provide percentage movements based on like-for-like or constant currency percentage movements as well as actual ("% Act") percentage movements (which includes the effect of foreign exchange). Unless otherwise stated, all percentage increases or decreases in the following analysis refer to year-on-year percentage changes,
i.e. changes between the third quarter or nine months of 2009 and the same quarter or nine months of 2008.

Demand for advertising has fallen precipitously in all our markets. We currently estimate that television advertising spending in our five Core Markets will decline in 2009 by between 12% and 30% in constant currency terms. While the total TV advertising market has declined, our market share has increased in all of our Core Markets by 1% to 7%. The increase in our market share did not compensate for the overall decline in the television advertising market or the relative strength of the dollar. Consequently, our reported total Core Market dollar revenues in the first nine months of this year declined by 32% compared to the same period last year, of which 14% was attributable to the appreciation of the dollar against our local currencies.

Cost optimization programs and the decline in the value of our functional currencies against the dollar have reduced our costs in dollar terms and diminished the impact of the decline in dollar revenues on our EBITDA. With the exception of our Croatia operations, EBITDA has declined in each of our Core Operations as lower revenues have substantially outweighed the reduction in costs.

As a result of these market conditions, our Core Operations delivered Net Revenues of US$ 445.1 million in the nine months ended September 30, 2009, compared to US$ 652.5 million in the nine months ended September 30, 2008, a decrease of 32%, and Core Operations' EBITDA was US$ 100.7 million in the nine months ended September 30, 2009, compared to US$ 233.1 million in the nine months ended September 30, 2008, a decrease of 57%. In constant currency terms, we have seen a decline in Net Revenues in our Core Operations of 18% and a decline in Consolidated EBITDA of 46%.

Losses in our Developing Operations in Ukraine and Bulgaria have contributed significantly to the decline in Consolidated EBITDA. In Ukraine, where the local currency television advertising market fell by an estimated 42% in the nine months to September 30, 2009 compared to the same period in 2008, we generated EBITDA losses of US$ 40.2 million, compared to losses of US$ 12.9 million in the nine months to September 30, 2008. Our new operations in Bulgaria generated EBITDA losses of US$ 29.7 million. Approximately US$ 14.2 million of these losses is attributable to accelerated amortization of the cost of acquired programming in accordance with our accounting policies.

Our Net Revenues for the nine months ended September 30, 2009 were US$ 461.9 million, compared to US$ 728.4 million in the nine months ended September 30, 2008, a decrease of 37%. We generated Consolidated EBITDA of US$ 30.8 million in the nine months ended September 30, 2009, compared to US$ 217.1 million in the nine months ended September 30, 2008, a decrease of 86%. In constant currency terms, we have seen declines in Net Revenues and Consolidated EBITDA of 25% and 82% respectively.

Our net cash used in continuing operations was US$ 22.4 million in the nine months ended September 30, 2009, compared to net cash generated from continuing operations of US$ 172.2 million in the same period in 2008.

Key Events

The following key events occurred since December 31, 2008:

Financing and liquidity

· On May 18, 2009, we issued 14.5 million shares of Class A common stock at a price of US$ 12.00 per share and 4.5 million shares of Class B common stock at a price of US$ 15.00 per share (an average price of US$ 12.71 per share) to Time Warner Media Holdings B.V., an affiliate of Time Warner Inc. ("Time Warner") for an aggregate offering price, net of fees, of US$ 234.4 million.

· During the second quarter, our Board of Directors approved the designation of the subsidiaries of our Bulgaria and Ukraine operations as well as the Development Finance Holding Company as Unrestricted Subsidiaries (all as defined in Item 1, Note 22, "Restricted and Unrestricted Subsidiaries"). All of our other subsidiaries remain Restricted Subsidiaries. Our compliance with the incurrence covenants for the Floating Rate Notes and the 2009 Fixed Rate Notes is based on the performance of the Restricted Subsidiaries. Our ability to fund the Unrestricted Subsidiaries with cash from the Restricted Subsidiaries is limited.

· During the quarter ended September 30, 2009 we issued EUR 440.0 million (approximately US$ 644.3 million) fixed rate senior notes in two tranches (the "2009 Fixed Rate Notes") and used the majority of the proceeds to repay existing debt including all of the 2005 Notes which were due in 2012, in aggregate principal of EUR 372.5 million (approximately US$ 545.4 million). We received net cash proceeds of EUR 45.7 million (approximately US$ 66.9 million) from the offering. As a result of the repayment of the 2005 Notes which would have matured in 2012, our ability to issue new debt at the holding company level is no longer governed by the ratio of Gross Debt to EBITDA but by the Coverage Ratio as defined in the indenture of the 2007 Notes which mature in 2014.

Business Development

· On July 2, 2009, we entered into an agreement with Igor Kolomoisky, a shareholder and member of our Board of Directors, pursuant to which Mr. Kolomoisky will become a 49% beneficial owner in our Ukraine operations following an investment of US$100.0 million in cash and the contribution of 100.0% of the TET TV channel in Ukraine into the Studio 1+1 group. The US$100.0 million cash investment will be used to finance the activities of STUDIO 1+1, KINO and TET TV. The addition of TET TV will enhance our multichannel strategy in Ukraine. See Item 1, Note 20, "Commitments and Contingencies, Ukraine Transaction" for more details.

· On July 27, 2009, we entered into a framework agreement (the "Framework Agreement") with Adrian Sarbu, our President and Chief Executive Officer and certain parties connected to him pursuant to which we will acquire the Media Pro Entertainment business. See Item 1, Note 20, "Commitments and Contingencies, Media Pro Transaction" for more details.

Management changes

· On July 1, 2009, Wallace Macmillan resigned as our Chief Financial Officer and has been replaced on an interim basis by Charles Frank, Jr. Mr. Frank served as an independent director of CME from November 2001 until his appointment as Interim CFO and was previously a member of our Audit, Related Party Transactions and Treasury Committees.

· On July 27, 2009, Adrian Sarbu was appointed as our President and Chief Executive Officer. Mr. Sarbu was previously our President and Chief Operating Officer from December 2008 and Chief Operating Officer from October 2007.

Future Trends

As a result of the economic recession this year, advertising expenditure has declined in all of our territories at a faster rate than the decline in GDP. Year-on-year declines in GDP and advertising expenditure in the third quarter were not substantially different to the previous two quarters. Although it is difficult to predict the timing of the recovery, both GDP and the advertising market appear to have hit bottom.

In light of the economic conditions, advertisers have been spending less and are not confirming their commitments beyond the current quarter. As a result, forward visibility on sales continues to remain poor and shows few signs of improvement. We currently expect that local currency television advertising spending will decline in 2009 in Ukraine by between 27% and 32%, although there are some indications of advertising market growth in the fourth quarter. We expect the decline in the other markets to be between 12% and 30%. We are providing clients with incentives aimed at increasing our market share and supporting television advertising spending within each of our markets. We will continue to incentivize our clients until the television advertising markets recover.

In the first nine months of 2009, local currencies were on average much weaker against the dollar compared to the first nine months of 2008. To date, in the fourth quarter of this year the situation is reversed: local currencies have been stronger against the dollar than they were in the fourth quarter of 2008. If this recent trend continues to the end 2009, fourth quarter dollar revenues will benefit as a result.

We have taken actions to reduce costs in order to protect profits and conserve liquidity. These steps include staff reductions in our operations and our headquarters, pay constraints, the deferral of certain operating expenditures, the deferral or cancellation of capital expenditures and managing our broadcast schedules to reduce the rate of programming cost growth. Notwithstanding these cost reductions, our goal continues to be to maintain the high audience shares and the strength of our brands that we currently enjoy in our Core Markets, and to increase our audience share in the Developing Markets, as we believe this is essential to the long term value of our operations. We intend to maintain sufficient investment in programming to protect these strengths. Taking all these factors into account, we expect that we will see a decline in Net Revenues and EBITDA for the full year 2009 in local currency in all of our markets except Croatia.

We expect low single-digit GDP growth in 2010 in most or all of our markets, with variation from country to country in the timing and strength of recovery. We expect that advertising and TV advertising market growth will again outpace GDP growth. We are confident that we will continue to enjoy a high TV advertising market share in our Core Markets and an increasing share in our Developing Markets. We plan to continue to control our costs and anticipate that much of the revenue growth will flow immediately to our bottom line in terms of EBITDA. After 2010, we believe that we will see a return to higher levels of GDP growth and general advertising and television advertising spending growth in our markets. We expect our growth rates will be higher than in Western European or U.S. markets. As a result of increasing revenues and strict cost control over the medium term, we expect to return to the high levels of EBITDA growth that we enjoyed in the years before the current economic crisis hit.

Broadcast

The large audience share that we enjoy in most of our markets is due both to the commercial strength of our brands and channels and to the constraints on bandwidth that limit the number of free-to-air broadcasters in our markets.

As our markets mature, we anticipate more intense competition for audience share and advertising spending from other incumbent terrestrial broadcasters and from cable, satellite and digital terrestrial broadcasters as the coverage of these technologies grows. The advent of digital terrestrial broadcasting as well as the introduction of alternative distribution platforms for content (including additional direct-to-home ("DTH") services, the internet, internet protocol TV ("IPTV"), mobile television and video-on-demand services) will cause audience fragmentation and change the competitive dynamics in our operating countries in the medium term. Due to our integrated multichannel and internet business model, we do not expect that the impact on our advertising share will be significant.

We believe that our leading position in our Core Markets and the strength of our existing brands place us in a solid position to face increased competition, including by launching new niche channels to target niche audiences as these new technologies develop.

Internet

Internet broadband penetration remains low in most of our markets in comparison to Western European and U.S. markets. We anticipate broadband penetration and internet usage will increase significantly over the medium term and will foster the development of significant new opportunities for generating advertising and other revenues in new media. We operate a complex internet business in each of our markets and expect to continue to launch targeted services in order to support or achieve leading positions in terms of unique visitors and page impressions, and video downloads. We believe that the strength of our brands, our news programming and other locally produced content, our relationships with advertisers and the opportunities for cross promotion afforded by the large audiences of our broadcast operations put us in a strong position to achieve leading positions in these new forms of media as they develop and to monetize those assets over time. We intend to continue the development of our non-broadcast activities in order to create offerings and launch services on the internet and mobile platforms that complement our broadcast schedules and generate additional revenues.

Content

The acquisition of the Media Pro Entertainment business provides a unique opportunity for us to become a vertically integrated media company. Once we complete the acquisition, we will combine our production units with those of Media Pro to create a dedicated Content Division.

The creation of the Content Division is a reflection of the increasing importance of local content within our broadcast operations. With secured access to programming, we believe that we will be able to generate significant synergies through shared creative and production resources, and equipment and facilities. We will be better able to protect ourselves against price inflation of acquired programming.

The acquisition of the Media Pro Entertainment business will generate additional third party revenues from the sale of production services, own-produced content, and third party content rights not usable by our CME stations. It is our intention to expand third party sales from production of our newly constituted Content Division and to offer a full range of production services to other content producers.

Financial Position

We believe our financial resources are sufficient to meet our current financial obligations. The recent refinancing of the EBRD Loan and our 2005 Fixed Rate Notes which would have matured in 2012 and the investment by Time Warner have enhanced our financial position. Further deterioration in the advertising markets or strengthening of the dollar against the currencies of the markets in which our cash flow is generated could reduce our liquidity reserves. The anticipated transaction with Mr. Kolomoisky will also further strengthen our liquidity and provide a significant proportion of the cash required to develop our operations in Ukraine.

During September 2009, we issued 2009 Fixed Rate Notes in two tranches. The majority of the proceeds was used to repay the EUR 245.0 million (approximately US$ 355.8 million) principal amount outstanding on the 2005 Fixed Rate Notes and the EUR 127.5 million (approximately US$ 187.3 million at the date of repayment) principal amount outstanding under the EBRD Loan. We also received net cash proceeds of EUR 45.7 million (approximately US$ 66.9 million). Although the interest cost associated with the 2009 Fixed Rate Notes which are due in 2016 is substantially higher than the debt it replaces, we have significantly improved the maturity profile of our debt; the earliest maturity date of our senior debt is now in 2013.

Our only scheduled repayments of debt before 2013 are local facilities in the Czech Republic and Slovenia of US$ 117.4 million, which are due to be repaid in 2010. We are currently in discussions regarding replacement credit facilities which would extend the maturity of these facilities and allow us to raise an incremental US$ 80.0 million to US$ 90.0 million. We will continue to consider any opportunity to refinance our outstanding obligations on more favorable terms but we remain constrained by the indentures governing our Senior Notes and Convertible Notes.

We are unable to incur any additional debt at the holding company level beyond "baskets" set out in the indentures governing the Senior Notes unless the ratio of our Restricted Subsidiaries' EBITDA to their Interest Expense (the "Coverage Ratio" and both as defined in the indenture to the Floating Rate Notes, which mature in 2014) is above 2.0 times; provided that any such additional debt incurrence would not cause our coverage ratio to fall below 2.0 times. Our Coverage Ratio was 1.9 times at September 2009. Notwithstanding this, we are able to incur debt at either the Restricted Subsidiary or the holding company level, of up to EUR 250.0 million (approximately US$ 366.1 million) pursuant to "baskets" set out in the indentures governing our Senior Notes. Our local facilities in the Czech Republic and Slovenia account for US$ 117.4 million of this amount, and the potential incremental borrowings of US$ 80 to US$ 90 million described above would also be borrowed under these baskets, leaving approximately US$ 158.7 to US$ 168.7 million of additional borrowing capacity available to us. Irrespective of these restrictions, there are no significant constraints on our ability to refinance existing debt. We will continue to search for equity and debt opportunities to finance the development of our Bulgaria operations in order to preserve and further enhance our overall cash position.

CME Strategy

We enjoy very strong positions in our Core Markets. This is based on brand strength, audience share leadership, the depth and experience of local management and local content production. Historically, these strengths have supported price leadership, high margins, and strong cash flows. We expect these strengths will give our operations resilience in the current economic downturn and the opportunity to benefit significantly as and when growth resumes.

We are taking a number of steps to enhance the performance of the business over the medium term. Our priorities in this regard include:

· enhancing our operating structure by creating three new divisions - broadcast operations, internet and content - to provide for greater vertical integration of the company;

· capitalizing on our core strengths and expanding our revenue base into five main sources: advertising, subscription, content distribution, internet and management services;

· exploring various options to bring our operations in Ukraine and Bulgaria to profitability in the shortest possible time; and

· assessing opportunities arising from current economic conditions to launch, acquire or operate additional channels and internet operations in our region in order to expand our offerings, target niche audiences and increase our advertising inventory when financially prudent.

In the near term, while current difficult economic conditions continue, we will maintain a strong focus on cost control to protect both profitability and liquidity, while protecting our brands and competitive strength. Building on the increase in our market share, we are poised to respond swiftly and strongly as soon as growth returns.

III. Analysis of the Results of Consolidated Operations

III (a) Net Revenues for the three months ended September 30, 2009 compared to the three months ended September 30, 2008