The following discussion should be read in conjunction with the sections entitled "Forward-looking Statements" on page 2 and "Risk Factors" in Part I, Item 1A. Unless the context otherwise requires, references in this report to the "Company", "CME", "we", "us" or "our" refer to Central European Media Enterprises Ltd. ("CME Ltd.") or CME Ltd. and its consolidated subsidiaries listed in Exhibit 21.01 hereto.

As used herein, the term "2014 Floating Rate Notes" refers to our floating rate senior notes due 2014; the term "2016 Fixed Rate Notes" refers to our 11.625% senior notes due 2016; the term "2017 Fixed Rate Notes" refers to the 9.0% senior secured notes due 2017 issued by our wholly owned subsidiary, CET 21 spol. s r.o. ("CET 21"); the term "Senior Notes" refers collectively to the 2014 Floating Rate Notes, 2016 Fixed Rate Notes and 2017 Fixed Rate Notes; the term "2015 Convertible Notes" refers to our 5.0% senior convertible notes due 2015, the term "2013 Convertible Notes" refers to our 3.5% senior convertible notes due 2013 and the term "Convertible Notes" refers collectively to the 2013 Convertible Notes and the 2015 Convertible Notes. The term "Secured Revolving Credit Facility" refers to the five-year CZK 1.5 billion secured revolving credit facility entered into on October 21, 2010 by CET 21 with BNP Paribas, S.A., J.P. Morgan plc, Citigroup Global Markets Limited, ING Bank N.V. and Ceska Sporitelna a.s. ("CSAS") as mandated lead arrangers and original lenders, BNP Paribas, S.A. as agent, BNP Paribas Trust Corporation UK Limited as security agent, and Central European Media Enterprises Ltd. ("CME Ltd.") and our wholly-owned subsidiaries Central European Media Enterprises N.V. ("CME NV"), CME Media Enterprises B.V. ("CME BV"), CME Investments B.V., CME Slovak Holdings B.V. and MARKΝZA-SLOVAKIA, spol. s r.o., as the original guarantors. The term "TW Loans" refers to amounts drawn under the Term Loan Facilities Credit Agreement dated April 30, 2012 with Time Warner Inc. ("Time Warner"). The term "Preferred Share" refers to the one share of our Series A Convertible Preferred Stock, par value US$ 0.08 per share, held by Time Warner Media Holdings B.V. ("TW Investor") on July 3, 2012. The term "Equity Commitment Agreement" refers to the Subscription and Equity Commitment Agreement by and between TW Investor and the Company, dated as of April 30, 2012.

Contents

I. Executive Summary

II. Analysis of Results of Operations and Financial Position

III. Liquidity and Capital Resources

IV. Critical Accounting Policies and Estimates

V. Related Party Matters

I. Executive Summary

CME Strategy

We enjoy very strong positions in our markets based on brand strength, audience leadership, the depth and experience of local management and our expertise in the production of local content. Historically, these strengths have supported price leadership, high margins, and strong operating cash flows. These competitive advantages have permitted our operations some measure of resilience in the current economic downturn and should provide the opportunity for us to benefit as and when growth resumes.

Our strategy for the future is based on our assets: people, brands, audience and market leadership, own content and growing new distribution platforms. We are focused on enhancing the performance of the business over the short and medium term. Our priorities in this regard include:

• developing and producing our own content on a larger scale and distributing this content on multiple distribution platforms and devices in our region and internationally;

• maintaining or increasing our audience and market shares in all of our markets;

• driving growth in advertising revenues through our pricing strategies;

• diversifying our revenues with an increased focus on pay and subscription TV channels and subscription video-on-demand ("VOD");

• maintaining our operating leverage, with a strong focus on cost control to protect both profitability and liquidity, while safeguarding our brands and competitive strengths;

• generating positive free cash flows; and

• optimizing our capital structure.

We are prepared to face new challenges and adjust our strategy when new opportunities or threats arise.

Structure of Operations

During 2012 we managed our business on a divisional basis with three operating segments: Broadcast, Media Pro Entertainment, our production and distribution business, and New Media. These operating segments, which were also our reportable segments, reflect how our operations were managed by segment managers, how our operating performance was evaluated by senior management and the structure of our internal financial reporting. We provide supplemental geographic information on the performance of our Broadcast operating segment due to the significance of our broadcast operations to CME Ltd. and management believes this provides users of the financial statements with useful information.

We evaluate the performance of our segments based on Net Revenues and OIBDA.

OIBDA, which includes program rights amortization costs, is determined as operating income / (loss) before depreciation, amortization of intangible assets and impairments of assets. Items that are not allocated to our segments for purposes of evaluating their performance and therefore are not included in their OIBDA, include stock-based compensation and certain other items.

Our key performance measure of the efficiency of our segments is OIBDA margin. We define OIBDA margin as the ratio of OIBDA to Net Revenues. We believe OIBDA is useful to investors because it provides a meaningful representation of our performance as it excludes certain items that either do not impact our cash flows or the operating results of our operations. OIBDA is also used as a component in determining management bonuses. Intersegment revenues and profits have been eliminated on consolidation.

OIBDA, as defined above, and free cash flow, as defined below, may not be comparable to similar measures reported by other companies. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, US GAAP financial measures. For additional information regarding our business segments, including a reconciliation to US GAAP financial measures, see Part II, Item 8, Note 18, "Segment Data".

Starting in the first quarter of 2013, the Broadcast, Media Pro Entertainment and New Media operating segments have been reorganized to streamline central resources and create six new operating segments: Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and Slovenia. Operating our businesses through these geographic segments will enable us to better execute our strategy of distributing our content on multiple distribution platforms and devices in a number of windows in each market. As a result, from January 1, 2013 we will change our segment reporting to reflect the way the businesses are now managed and presented in results reviewed by the chief operating decision maker when allocating resources and assessing performance.

Summary of Results

The following sections contain 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.

The following tables provide a summary of our consolidated results for the years ended December 31, 2012, 2011 and 2010:

                                       For the Years Ending December 31, (US$ 000's)
                                                    Movement                                            Movement
                       2012          2011      % Act       % Lfl           2011          2010      % Act       % Lfl
Net revenues     $  772,085     $ 864,782      (10.7 )%     (1.6 )%   $ 864,782     $ 737,134       17.3  %     10.2  %
OIBDA               125,422       167,002      (24.9 )%    (16.2 )%     167,002       107,323       55.6  %     40.2  %
Operating (loss)

(1) Number is not meaningful.

Our financial results for 2012 were affected by the the performance of the economies in our region. After adjusting for inflation, we estimate that GDP in our territories remained flat overall during 2012, and was down from the 2% growth rate reported in 2011 following the combination of a slowdown in export growth and ongoing restrictive fiscal measures in some of the countries in our region. Real private consumption is estimated to have declined by 1% overall during 2012. This continued general lack of growth of the economies in our region has led to a decrease in advertising spending. On a constant currency basis, television advertising spending in our markets declined overall by 6% in 2012 while overall internet advertising spending in our markets increased by 2%. Furthermore, our anticipated recovery in the demand for television advertising in our markets in the fourth quarter did not materialize when a number of advertisers indicated they no longer intended to honor their previous spending commitments. A full recovery in our region continues to be hampered by continuing concerns surrounding the general lack of confidence about economic growth in our countries. These concerns contributed to the reluctance of advertisers to spend in 2012, negatively impacting advertising revenues in the Broadcast division, and may continue to do so into 2013.

Overall, on a constant currency basis, our consolidated net revenues declined only slightly compared to the corresponding period in 2011 as we maintained our audience and market shares in difficult market conditions. The lower consolidated net revenues was attributable to the decline in spending in the television advertising markets which was partially offset by the growth in revenues in our Media Pro Entertainment ("MPE") and New Media divisions.

Costs charged in arriving at OIBDA decreased by 7% in 2012 compared to 2011. On a constant currency basis costs increased 2% in 2012 compared to 2011, and included costs associated with launching five new channels to protect our audience leadership and market share in our broadcast operations, the full year effect of Bontonfilm, acquired on June 30, 2011, in our MPE segment and the accelerated programming amortization in the amount of US$ 18.6 million in our Broadcast operations. We continued to focus on optimizing our costs charged in arriving at OIBDA.
We recognized impairment charges in respect of goodwill, tangible and intangible assets amounting to US$ 522.5 million. Due to the lack of recovery in the fourth quarter, our outlook for future periods is less certain and we made significant downward revisions in our estimates of the cash flows that our operations will generate in future periods. In connection with our 2012 goodwill impairment analysis, we have concluded that the total estimated fair values used for purposes of the test are reasonable by comparing the market capitalization of the Company to the results of the discounted cash flows analysis of our reporting units, as adjusted for unallocated corporate assets and liabilities. This impairment charge, lower OIBDA, and overall flat depreciation and amortization resulted in an operating loss for 2012 compared to operating income in 2011.

                                             For the Years Ending December 31, (US$ 000's)
                                 2012         2011     Movement          2011          2010     Movement
Net cash (used in) /
generated from operating
activities                  $ (30,027 )   $ 29,638       Nm (2)      $ 29,638     $ (49,614 )     Nm (2)
Capital expenditures, net     (32,426 )    (33,101 )       (2.0 )%    (33,101 )     (45,872 )      (27.8 )%
Free cash flow(1)           $ (62,453 )   $ (3,463 )     Nm (2)      $ (3,463 )   $ (95,486 )       96.4  %



                                                  As at           As at
                                               December        December
                                               31, 2012        31, 2011       Movement
Cash and cash equivalents                       140,393         186,386          (24.7 )%

(1) Free cash flow is defined as cash flows from operating activities less purchases of property, plant and equipment, net of disposals of property, plant and equipment and is useful as a measure of our ability to generate cash.
(2) Number is not meaningful.

Our negative free cash flow in 2012 was US$ 62.5 million, compared to negative free cash flow of US$ 3.5 million in 2011. This decline is largely due to lower revenues as a result of the year-on-year decline of the television advertising spending in our regions and consequent decrease in cash receipts in 2012 compared to 2011. In addition, on a constant currency basis, an increase in payments relating to foreign programming and additional investment in our local content production also contributed to our negative free cash flow in 2012. We ended the year with cash of US$ 140.4 million.

We continue to take steps to conserve cash, including targeted reductions to our operating cost base through cost optimization programs. In addition, we are exploring further options to improve our liquidity, including new equity financings, asset sales and continuing the renegotiation of payment obligations with a number of major suppliers. In this respect, we are in discussion with Time Warner regarding its possible participation in a public or private equity offering.
Capital Transactions
We reduced our long-term debt and improved our debt maturity profile during 2012 (see Item 8, Note 5, "Long-term Debt and Other Financing Obligations"). As a result, the nearest principal repayment obligation on the Company's long-term debt is November 2015. During the year, we undertook the following actions:
• On April 30, 2012, we entered into a series of agreements with our major shareholders, Time Warner and RSL Capital LLC ("RSL Capital" an affiliate of Ronald Lauder), to enable us to fund tender offers to purchase up to an aggregate of US$ 300 million of our 2013 Convertible Notes, 2014 Floating Rate Notes and 2016 Fixed Rate Notes.

• On May 31, 2012, we completed the purchase of US$ 109.0 million in aggregate principal of 2013 Convertible Notes for cash consideration of US$ 109.0 million plus accrued interest.

• On June 14, 2012, we completed the purchase of EUR 60.5 million (approximately US$ 75.8 million at the date of repurchase) aggregate principal amount of 2014 Floating Rate Notes for EUR 56.7 million (approximately US$ 71.1 million at the date of repurchase) plus accrued interest.

• On June 15, 2012, we issued 2,000,000 shares of Class A common stock to RSL Capital and 9,901,260 shares of Class A common stock to TW Investor, each at a price of US$ 7.51 per share, for aggregate proceeds to the Company of approximately US$ 89.4 million. The proceeds were applied to repay amounts drawn under the TW Loans to repurchase the 2013 Convertible Notes and the 2014 Floating Rate Notes.

• On June 15, 2012, Time Warner and Ronald Lauder converted their shares of Class B common stock into an equivalent number of shares of Class A common stock for no additional consideration. Following these conversions, there are no shares of Class B common stock outstanding.

• On July 3, 2012, we issued 874,819 shares of our Class A common stock and one Preferred Share (collectively, the "Option Shares"), at a price per share of Class A common stock (including those underlying the Preferred Share) of US$ 7.51, to TW Investor for aggregate consideration of approximately US$ 90.8 million, each pursuant to the Equity Commitment Agreement. The consideration was applied to repay in full the TW Loans. Following the issuance, TW Investor owns 42.6% of the outstanding shares of Class A common stock and has a 49.9% economic interest in the Company.

• On August 16, 2012, CET 21, a wholly-owned subsidiary of CME Ltd., issued and sold EUR 70.0 million (approximately US$ 92.4 million) of its 2017 Fixed Rate Notes at an issue price of 108.25% for net proceeds of approximately EUR 73.8 million (approximately US$ 97.4 million) and approximately EUR 1.8 million (approximately US$ 2.4 million) of accrued interest from May 1, 2012. CET 21 used the net proceeds from the 2012 offering to fully repay outstanding amounts under and cancel its five-year CZK 1.5 billion (approximately US$ 73.0 million on the date of repayment) Secured Revolving Credit Facility.

• On September 7, 2012, we completed the issuance and sale of EUR 104.0 million (approximately US$ 137.2 million) of 2016 Fixed Rate Notes at an issue price of 103.00% for net proceeds of approximately EUR 104.8 million (approximately US$ 138.3 million) and approximately EUR 5.8 million (approximately US$ 7.6 million) of accrued interest from March 15, 2012.

• Additionally, on September 7, 2012, we made an irrevocable deposit of US$ 21.0 million with the trustee for the 2013 Convertible Notes, which represents the aggregate principal amount plus all interest that will be payable when the 2013 Convertible Notes mature on March 15, 2013.

• On October 7, 2012, we redeemed the remaining EUR 87.5 million (approximately US$ 115.4 million) aggregate principal amount of 2014 Floating Rate Notes outstanding at a price of 100.0%, plus EUR 0.9 million (approximately US$ 1.2 million) of interest payable at redemption, using a portion of the proceeds from the sale of the 2016 Fixed Rate Notes on September 7, 2012.

Segment Performance
                                                             NET REVENUES
                                             For the Years Ending December 31, (US$ 000's)
                                                   Movement                                            Movement
                      2012          2011      % Act       % Lfl           2011          2010      % Act       % Lfl
Broadcast        $ 665,355     $ 774,978      (14.1 )%     (5.5 )%   $ 774,978     $ 690,727       12.2  %      5.4  %
Media Pro
Entertainment      205,064       187,224        9.5  %     21.5  %     187,224       140,797       33.0  %     26.3  %
New Media           18,690        15,764       18.6  %     30.3  %      15,764        11,193       40.8  %     32.5  %
Intersegment
revenues          (117,024 )    (113,184 )     (3.4 )%    (14.2 )%    (113,184 )    (105,583 )     (7.2 )%     (1.7 )%
Total Net
Revenues         $ 772,085     $ 864,782      (10.7 )%     (1.6 )%   $ 864,782     $ 737,134       17.3  %     10.2  %

                                                                 OIBDA
                                             For the Years Ending December 31, (US$ 000's)
                                                   Movement                                            Movement
                      2012          2011      % Act       % Lfl           2011          2010      % Act       % Lfl
Broadcast        $ 147,729     $ 211,090      (30.0 )%    (22.9 )%   $ 211,090     $ 164,415       28.4  %     19.1  %
Media Pro
Entertainment       15,912         3,996      298.2  %    328.1  %       3,996        (3,005 )   Nm (1)      Nm (1)
New Media           (4,225 )      (2,558 )    (65.2 )%    (82.6 )%      (2,558 )      (6,542 )     60.9  %     62.6  %
Central            (27,531 )     (41,851 )     34.2  %     31.6  %     (41,851 )     (44,062 )      5.0  %      6.3  %
Intersegment
elimination         (6,463 )      (3,675 )    (75.9 )%   (100.2 )%      (3,675 )      (3,483 )     (5.5 )%     (8.5 )%
Consolidated
OIBDA            $ 125,422     $ 167,002      (24.9 )%    (16.2 )%   $ 167,002     $ 107,323       55.6  %     40.2  %

(1) Number is not meaningful.

Broadcast

Our Broadcast segment comprises our broadcast channel operations in primarily
Bulgaria, Croatia, the Czech Republic, Romania, the Slovak Republic and
Slovenia.

The following table sets out our estimates of television advertising spending by
market (in US$ millions) for the years set forth below:
Country             2012      2011       2010
Bulgaria          $ 108    $   116    $   121
Croatia              98        111        113
Czech Republic      349        369        355
Romania*            188        203        215
Slovak Republic     134        135        134
Slovenia             76         82         79
Total CME Markets $ 953    $ 1,016    $ 1,017
Growth rate          (6 )%       -  %      (4 )%

Market sizes are quoted using the average 2012 dollar exchange rate for all the years presented above.
* Romania market excludes Moldova. Source: CME estimates

Television advertising spending in the fourth quarter of 2012 continued to decline year on year, with a number of advertisers spending less than their annual commitments. Due to the failure of advertisers to meet their annual commitment targets, we issued significantly lower agency volume bonuses than anticipated, and much lower than the prior year. This partially mitigated the lower spending. We maintained our overall share of the television advertising markets for the full year compared to 2011, despite the continuing difficult market conditions.
We are committed to maintaining our leadership in audience and market shares across all of our Broadcast operations, which provides us with a unique competitive advantage and is essential to achieving high operating leverage when our television advertising markets recover. To support this strategy, we launched five new channels in 2012: FANDA and SMICHOV in the Czech Republic, ACASA GOLD in Romania, DAJTO in Slovakia and BTV LADY in Bulgaria. Additionally, we launched two more channels in the first two months of 2013: TELKA in the Czech Republic and FOOOR in the Slovak Republic.
The Broadcast segment reported net revenues of US$ 665.4 million compared to US$ 775.0 million in 2011, a decrease of 14%, or 6% on a constant currency basis, in line with the decrease in overall television advertising spending in our region.

Costs charged in arriving at OIBDA decreased by 8% in 2012 compared to 2011. On a constant currency basis costs increased 1% in 2012 compared to 2011, and included accelerated programming amortization of US$ 18.6 million in our Broadcast operations primarily relating to expiring foreign programming content for which we were unable to agree on extensions to the license periods before year-end. We continued to focus on optimizing our costs charged in arriving at OIBDA, even while launching five new channels.
Our Broadcast segment generated OIBDA of US$ 147.7 million in 2012 compared to US$ 211.1 million in 2011, a decrease of 30%. On a constant currency basis, OIBDA decreased 23% compared to 2011.

Media Pro Entertainment

Our Media Pro Entertainment ("MPE") segment comprises our production and distribution businesses.

MPE's revenues predominantly represent sales of finished content to our broadcasters and revenues from third parties from our production and distribution operations. The MPE segment delivered a 10% increase in net revenues in 2012, or an increase of 22% on a constant currency basis.

We generated approximately US$ 91.3 million (45% of total MPE segment revenues) of our revenues from third parties during 2012, compared to US$ 75.2 million (40% of total MPE segment revenues) during 2011. The increase in our revenues and the increase in the proportion of our third party revenues primarily reflects the full year impact of the revenues from Bontonfilm, which we acquired in the second quarter of 2011.

The Media Pro Entertainment segment reported OIBDA of US$ 15.9 million in 2012, compared to US$ 4.0 million in 2011, an improvement of US$ 11.9 million. On a constant currency basis, OIBDA improved US$ 12.2 million compared to 2011.

During 2012, we delivered 1,065 hours of fiction programming to our Broadcast operations compared to 886 hours in 2011. This programming comprised telenovellas, soap opera shows and comedy series such as 'Lara's Choice' in Croatia, 'Top Notch' in Slovenia, 'Second Chance' in the Slovak Republic, 'The Street' in the Czech Republic and 'Las Fierbinti' in Romania; and drama series such as 'Rose Garden Clinic' in the Czech Republic and the Slovak Republic, 'Gympl' in the Czech Republic and 'Bet With Life' in Romania.

We delivered a total of 1,837 hours of reality and entertainment programming to our Broadcast operations in 2012 compared to 1,483 hours in 2011, with shows such as 'Got Talent', 'Master Chef', 'The Voice' and 'Dancing with Stars' in Romania, and 'X Factor' in Slovenia, 'The Voice' and 'Wife Swap' in the Czech Republic and the Slovak Republic and 'The Farm' in the Slovak Republic.

Following the integration of Bontonfilm, we now have distribution operations in the Czech Republic, the Slovak Republic, Hungary and Romania. During 2012 our theatrical distribution units in the Czech and Slovak Republics remained the market leaders with an estimated 41% market share and Romania maintained its strong position, achieving a market share of 27%. Our home video distribution units maintained their leadership positions, with an estimated 65% market share in Romania and an estimated market share of 49% in the Czech Republic and the Slovak Republic.

New Media

Our New Media segment comprises a video-on-demand distribution and internet content business in each of our markets.

During 2012 we completed the introduction of Voyo, our subscription video-on-demand distribution service, into all of our territories. Voyo delivers premium, locally-produced content as well as many local and foreign feature films. Following our actions to improve the library of available content and to increase distribution, we reached 101,600 subscriptions as at December 31, 2012, an increase from 20,000 subscriptions as at December 31, 2011. We believe that Voyo is now the leading video-on-demand distribution platform in our territories, based on the number of subscribers.

Our internet content business comprises a website portfolio in each of our markets that distributes locally-produced content and operates as an efficient marketing tool for our Broadcast operations. We currently operate over 70 websites and we continue to launch new targeted products to establish and grow our online presence and market share and ultimately provide our products on multiple distribution platforms. Our target is to achieve consistent growth of monthly and daily visitors in order to increase revenues and the number of advertising clients and as a result, to outperform the local internet . . .