CENTRAL EUROPEAN MEDIA ENTERPRISES LTD, 424B1, 1996-10-30

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD
424B1, 1996-10-30
TELEVISION BROADCASTING STATIONS

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<PAGE>
Filed pursuant to Rule 424(b)(1)
Registration No. 333-12699
Registration No. 333-15051

4,800,000 SHARES

LOGO

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CLASS A COMMON STOCK

($.01 PAR VALUE)

------------------------

The shares of Class A Common Stock offered hereby are being issued and
sold by the Company. The Company's authorized capital stock includes Class A
Common Stock and Class B Common Stock. The rights of each class of Common Stock
are identical, except with respect to voting. Holders of shares of Class A
Common Stock are entitled to one vote per share and holders of shares of Class B
Common Stock are entitled to ten votes per share. Both classes vote together as
a single class on all matters, except when class voting is required by The
Companies Act 1981 of Bermuda and on certain 'going private' transactions.
Shares of Class B Common Stock are convertible into shares of Class A Common
Stock on a one-for-one basis at the option of the holder. Upon the consummation
of the Offering, the shares of Class B Common Stock will comprise 84.2% of the
total voting power of the Company.

The Class A Common Stock of the Company is traded on the Nasdaq National
Market under the symbol 'CETV.' On October 29, 1996, the last reported sale
price of the Class A Common Stock on the Nasdaq National Market was $27.50 per
share. See 'Price Range of Common Stock.'

FOR INFORMATION CONCERNING CERTAIN FACTORS RELATING TO THIS OFFERING, SEE
'RISK FACTORS' ON PAGE 9.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share...... $27.50 $1.35 $26.15
Total(3)....... $132,000,000 $6,480,000 $125,520,000
</TABLE>

(1) See 'Underwriting' for indemnification arrangements.
(2) Before deducting estimated expenses of $810,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 720,000 shares of Class A Common Stock at the Price to
Public, less the Underwriting Discounts and Commissions shown above, solely
to cover over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $151,800,000, $7,452,000 and $144,348,000, respectively.
See 'Underwriting.'
------------------------

The shares of Class A Common Stock offered hereby are being offered by the
several Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in part.
It is expected that the Class A Common Stock will be made available for delivery
on or about November 4, 1996 at the offices of Schroder Wertheim & Co.
Incorporated, New York, New York.

SCHRODER WERTHEIM & CO.
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.

October 30, 1996

<PAGE>

[ MAP OF CENTRAL AND
EASTERN EUROPE AND GERMANY,
HIGHLIGHTING THE COMPANY'S
AREAS OF OPERATIONS ]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE CLASS A
COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH
RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE 'UNDERWRITING.'

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, (i) all references to
the 'Company' include Central European Media Enterprises Ltd. ('CME'), its
predecessors and its direct and indirect Subsidiaries and (ii) all references to
'Subsidiaries' include each corporation or partnership in which Central European
Media Enterprises Ltd. has a direct or indirect equity or voting interest.
Except as otherwise noted, (i) the information in this Prospectus assumes that
the Underwriters' over-allotment option will not be exercised, and (ii) all
statistical and financial information presented in this Prospectus has been
converted into United States dollars using exchange rates as of June 30, 1996
(Kc27.61 = $1.00; DM1.52 = $1.00; ROL3,028 = $1.00; SIT136.61 = $1.00; Sk31.00 =
$1.00) with the exception of such information contained in or derived from the
Company's financial statements. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations--Foreign Currency.' All references
to '$ ' or 'dollars ' are to United States dollars, all references to 'Kc' are
to Czech korunas, all references to 'DM' are to German marks, all references to
'ROL' are to Romanian lei, all references to 'SIT' are to Slovenian tolar and
all references to 'Sk' are to Slovak korunas.

THE COMPANY

broadcast operations in the Slovak Republic and Ukraine and has television
broadcast operations under development in Poland and Hungary which potentially
could reach an additional 50 million people. The Company's strategy is to
continue to capitalize on the substantial market opportunities created by the
emergence of private commercial television and the corresponding significant
growth of television advertising expenditures in these markets.

The Company's television broadcast operations consist of the following:

<TABLE>
<CAPTION>
TELEVISION BROADCAST OPERATIONS TERRITORY BROADCAST REACH(1) ECONOMIC INTEREST
- ------------------------------- ------------------- ------------------ -----------------
<S> <C> <C> <C>
Nova TV Czech Republic 10.3 88.0%(2)
PRO TV Romania 11.1 77.5%(3)
POP TV Slovenia 1.5 72.0%
Markiza TV Slovak Republic 3.3 80.0%
Studio 1+1 Group Ukraine 50.9 50.0%
PULS Berlin-Brandenburg 6.0 55.9%
Nuremberg Station Nuremberg 1.1 37.4%
Leipzig Station Saxony 0.7 16.2%
Dresden Station Saxony 1.1 16.2%
-----
Total 86.0
-----
-----
</TABLE>
- ------------------
(1) Broadcast Reach measures the number of people in millions the Company's or
the Company's local partners' broadcast signal can reach.

(2) The Company is in the process of registering the Additional Nova TV Purchase
(as defined herein) pursuant to Czech law which purchase has raised its
economic interest in Nova TV from 66.0% to 88.0%.

(3) The Company's partners in Romania hold options to purchase equity in Media
Pro International from the Company which, if exercised, could reduce the
Company's equity interest to 66.0%

3
<PAGE>
Nova TV, the Company's television station in the Czech Republic, has
maintained a 65% to 70% audience share over the past two years, and the Company
estimates that in 1995, Nova TV accounted for over 80% of the Czech television
advertising market. Nova TV continues to benefit from the growing television
advertising market in the Czech Republic. Television advertising expenditures in
the Czech Republic grew from approximately $67 million in 1993 to $96 million in
1994 (Nova TV's first year of operations) to approximately $145 million in 1995,
as estimated by the Company. During the six months ended June 30, 1996, Nova TV
recorded $52.9 million in net revenues and $24.3 million in broadcast cash flow,
resulting in a 46.0% broadcast cash flow margin and an increase of 33.5% in
'same station' broadcast cash flow over the first six months of 1995. Nova TV
has achieved its success in part by providing a wide range of popular

programming designed to appeal to a mass market audience, including a mix of
locally produced news and entertainment formats and films and television series
acquired from major international distributors.

The Company has applied its experience with Nova TV to its broadcast
operations in Romania, Slovenia, the Slovak Republic and Ukraine and intends to
apply this operating strategy in new markets under development. In Romania and
Slovenia, the Company's broadcast operations, PRO TV and POP TV, which commenced
operations in December 1995, achieved the leading share in their areas of
broadcast within their first six months of operation. PRO TV and POP TV reach
approximately 48% and 75% of their national markets, respectively, including the
capital cities of Bucharest and Ljubljana. The Company commenced operations in
the Slovak Republic on August 31, 1996, broadcasting to 60% of the Slovak
population. In Ukraine, the Company has acquired a 50.0% economic interest in
the Studio 1+1 group of companies (the 'Studio 1+1 Group') which provides
programming and sells advertising for approximately 50 hours of broadcasting per
week on a Ukrainian public television station, UT-1, which reaches approximately
98% of Ukraine's population of 51.9 million. In each of these markets,
television advertising spending is growing rapidly. The Company seeks to further
expand its reach in these markets through investing in additional regional
licenses, affiliating with other broadcasters and reaching agreements with local
cable operators.

The Company continues to explore other development opportunities, including
in Poland and Hungary. In Poland, the Company has a 33.0% interest in TVN. In
October 1996, the Polish National Radio and Television Council announced its
intention to award nine television broadcast licenses for northern Poland and
television broadcast licenses covering the cities of Warsaw and Lodz in Poland
to TVN. It is anticipated that the administrative process which is a requirement
in order for the final awards of these television broadcast licenses will be
completed by the end of 1996. The Company estimates that these television
broadcast licenses have a potential broadcast reach of approximately 7 million
people. TVN also recently acquired a 3.0% interest in TV Wisla, a station with a
potential reach of approximately 8 million people in southern Poland. TVN has an
option to acquire a substantial interest in TV Wisla. The Company anticipates
that TV Wisla together with the operations to be developed in connection with
the television broadcast licenses in northern Poland, Warsaw and Lodz could form
a television broadcast network. In Hungary, the Company and its partners own a
dubbing and production studio and have been awarded a license to broadcast via
MMDS to the city of Budapest. The Company intends to apply for a national
broadcast license in Hungary with strategic partners as soon as the tender rules
are adopted by the local regulatory authorities. The Company believes that its
broadcast experience in the region, its proven programming strategy, its
extensive knowledge of the political and economic climates in Central and
Eastern Europe, and its proven ability to attract strategic local partners,
position it to capitalize on these opportunities.

The Company owns interests in four of the seven private regional television
stations currently operating in Germany, including PULS, which broadcasts to six
million people in the Berlin-Brandenburg area. These stations provide 'total
local' programming, which involves delivering in-depth coverage of local and
regional news and events, thereby distinguishing these stations from the
national networks by being uniquely responsive to the distinct regional tastes
of the respective local viewers. PULS, which has generated losses since its

operations commenced in late 1993, recently announced it is seeking investment
from a strategic partner which could bring additional broadcasting expertise,
programming

4
<PAGE>
and capital to the station. Such a strategic investment would be anticipated to
significantly dilute the Company's equity interest in PULS and to decrease the
Company's future funding obligations to PULS. Such investment also could result
in a reduction of the carrying value and a corresponding charge against earnings
related to the Company's equity investment in PULS.

The Company's strategic objective is to strengthen its position as the
leading broadcaster in Central and Eastern Europe by applying its broadcasting,
financial and political expertise to achieve profitability in all of its
existing broadcast operations and to develop and operate additional television
broadcast operations. Key elements of the Company's strategy include:

o Being an early market entrant and establishing national and regional
television broadcast operations in the emerging markets of Central and
Eastern Europe. These markets present opportunities for the Company to
compete where advertising expenditures have been experiencing high rates
of growth. The Company believes there are significant advantages to being
an early entrant into these markets, as there are limited frequencies
available to broadcasters, thus limiting competition. The Company also
believes early entrants have the opportunity to establish good
relationships with advertisers and build viewer loyalty and station
identity before other entrants commence operation. In the newly emerging
markets of Central and Eastern Europe, early entrants also have the
opportunity to acquire exclusive rights to attractive programming for
their respective markets.

o Broadcasting programming attractive to a mass market audience in Central
and Eastern Europe. Programming is a critical element in building
audience share, which is an extremely important factor in generating
advertising revenues. The Company's strategy is to broadcast a mix of
locally and internationally produced movies, series, talk shows, variety
shows, sports and news. The Company believes broadcasting a significant
amount of locally produced programming and developing a distinctive
independent news program give a strong local identity to its broadcast
operations, appeal to local tastes and are desired by the local
regulatory authorities. The Company complements its local programming by
building and maintaining an extensive library of exclusive programming
rights to popular films and television series produced by the world's
leading studios, including Warner Brothers, Paramount Pictures, Twentieth
Century Fox and Sony Pictures. The Company utilizes 'western style'
production techniques to provide high quality local language programming
to its television audiences. The Company employs modern equipment and
short, lively program formats and purchases state of the art equipment
for its studios in each location where it conducts broadcast operations.

o Creating investment alliances with local strategic partners in each
location where it seeks to establish broadcast operations. This approach
is consistent with the objectives of local licensing authorities, thereby

enhancing the likelihood that the Company or its local strategic partners
will be awarded such licenses. Additionally, creating local strategic
alliances helps ensure that the Company's broadcast operations will be
responsive to local tastes and interests.

o Maximizing broadcast reach within licensed territories to maximize its
potential audience share and therefore increase the attractiveness of its
programming to advertisers. In those areas where the Company's and its
partners' stations do not reach the entire population, the Company seeks
to create a network for its programming and seeks to distribute it
through local broadcasters and cable systems. The Company concentrates on
urban areas where advertising dollars are focused. The Company currently
employs satellite technology in Romania, which does not have a
well-developed terrestrial television distribution system, in order to
distribute its programming to a network of affiliate stations. In order
to serve Romania and other markets, the Company has obtained a 12 year
lease on a transponder on a Eutelsat HB3 Satellite (the 'Satellite
Transponder'), which is anticipated to be launched in March 1997. Using
existing digital compression technology, the Company will be able to use
the Satellite Transponder to simultaneously distribute five distinct
channels without the necessity of building a potentially costly
transmission infrastructure in those countries.

5
<PAGE>
o Leveraging critical mass among its operations. The Company currently
broadcasts to approximately 86.0 million people in six countries and is
developing operations in several other countries. The Company believes it
has reached a critical mass which will allow it to begin to benefit from
synergies among the Company's operations. For example, the Company
believes it will gain greater leverage in its purchasing, programming,
news gathering and production abilities and in developing related
businesses which can serve broadcasters not affiliated with the Company.
In addition, the Company intends to market certain lower cost production
services to producers and broadcasters in the higher cost countries of
Western Europe.

o Employing a dedicated team of experienced professionals who will continue
to lead the Company through the complex licensing processes, and seek
broadcast rights, in markets of Central and Eastern Europe. Leonard M.
Fertig, President and Chief Executive Officer of the Company, has been
active in obtaining broadcast licenses for the Company and its strategic
partners in Central and Eastern Europe since 1991. Ronald S. Lauder,
Chairman of the Company and former U.S. Ambassador to Austria, has been
involved actively in the region and plays an important role in the
Company's licensing activities. The Company believes its management and
dedicated licensing team provide a competitive advantage in obtaining
broadcast rights. The Company's success in obtaining broadcast rights
generally has been achieved after lengthy competition involving numerous
other parties, including major international media companies. The Company
also employs experienced operating and financial managers and accesses
international technology, programming and funding to promote the
successful development and management of its broadcast operations.

<PAGE>
THE OFFERING

Class A Common Stock Offered...... 4,800,000 shares

Common Stock to be outstanding
after the Offering:

Class A Common Stock(1)......... 15,092,504 shares

Class B Common Stock............ 8,029,797 shares
----------

Total(1)........................ 23,122,301 shares
==========

Use of Proceeds................... Net proceeds of approximately $124.7 million
will be used to fund expansion of operations
in Romania, Slovenia, the Slovak Republic,
Poland and Ukraine; to continue to fund
operations in Germany; to purchase long term
programming rights; to repay certain
indebtedness; and for general corporate
purposes.

Voting Rights..................... Each class of Common Stock has identical
rights, except with respect to voting. Each
share of Class A Common Stock is entitled to
one vote and each share of Class B Common
Stock is entitled to ten votes. The Class A
Common Stock and Class B Common Stock vote as
a single class with respect to all matters
submitted to a vote of the shareholders,
except with respect to any 'going private'
transaction between the Company and Ronald S.
Lauder and any matter requiring class voting
by The Companies Act of 1981 of Bermuda.

Nasdaq National Market Symbol..... CETV

The offering of shares of Class A Common Stock offered by the Underwriters
is referred to herein as the 'Offering.'
- ------------------

(1) Excludes 698,455 shares of Class A Common Stock issuable upon the exercise
of options granted pursuant to the Company's 1994 Stock Option Plan (the
'1994 Stock Option Plan'), 868,606 shares of Class A Common Stock issuable
upon the exercise of options granted pursuant to the Company's 1995 Stock
Option Plan (the '1995 Stock Option Plan'), 25,000 shares of Class A Common
Stock issuable upon the exercise of options granted to a director and
consultant of the Company, 250,000 shares of Class A Common Stock issuable
upon the exercise of warrants previously granted to Ronald S. Lauder and up

to 100,000 shares of Class A Common Stock issuable upon the exercise of
warrants to be granted to Mr. Lauder pursuant to the Lauder Loan (as herein
defined).

<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following data should be read in conjunction with 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' and the
Consolidated Financial Statements and the Notes thereto included herein. Data
for periods other than the six months ended June 30, 1996 and the six months
ended June 30, 1995 are derived from the Company's audited financial statements
and the footnotes thereto included herein.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues................. $ -- $53,566 $98,919 $47,238 $61,805
Operating (loss) income...... (5,321) 957 22,308 15,158 5,096
Equity in loss of
unconsolidated
affiliates................. (3,671) (13,677) (14,816) (6,766) (5,936)
Net loss..................... (8,360) (20,505) (18,736) (4,769) (12,380)
Net loss per common share.... -- -- (1.28) (0.34) (0.67)
OTHER DATA:
Broadcast cash flow(1):
Nova TV.................... $ -- $12,233 $44,789 $18,232 $24,341
PRO TV..................... -- -- (2,483) -- (5,519)
POP TV..................... -- -- (4,124) -- (3,528)
------- ------- ------- ------- -------
Total broadcast cash flow.... $ -- $12,233 $38,182 $18,232 $15,294
======= ======= ======= ======= =======

Net cash (used in) provided
by operating activities.... (3,826) (1,532) 1,943 3,863 5,464
Number of television
broadcast operations at the
end of period.............. 1 3 5 3 7
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
ACTUAL AS ADJUSTED(2)

-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets.......... $ 84,574 $170,284
Total assets............ 213,445 299,155
Total debt.............. 16,602 47,388
Shareholders' equity.... 125,751 250,461
</TABLE>

- ------------------

(1) 'Broadcast cash flow,' which is commonly used as a measure of performance
for broadcast companies, as used herein, is defined as net revenues, less
station operating expenses excluding depreciation and amortization, station
selling, general and administrative expenses, and cash program rights costs.
Cash program rights costs represent cash payments for current programs
payable and such payments do not necessarily correspond to program use.
Broadcast cash flow should not be considered as a substitute measure of
operating performance or liquidity prepared in accordance with generally
accepted accounting principles. Broadcast cash flow is only presented for
the periods in which broadcasting took place and only for the Company's
consolidated Subsidiaries, excluding Videovox. Videovox was acquired on May
1, 1996 and generated only limited revenues during the six months ended June
30, 1996. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations.'

(2) As adjusted to reflect (i) the Bridge Loan; (ii) the Lauder Loan; (iii) the
Additional Nova TV Purchase; and (iv) the issuance and sale of 4,800,000
shares of Class A Common Stock by the Company in the Offering and the
application of the net proceeds therefrom. See 'Use of Proceeds' and
'Capitalization.'

<PAGE>
RISK FACTORS

Investors in the shares of Class A Common Stock offered hereby should
consider carefully the following significant risk factors, in addition to all of
the other information appearing in this Prospectus, in connection with an
investment in the shares of Class A Common Stock.

HISTORY OF LOSSES. The Company, incorporated in Bermuda in June 1994, is
the successor to the television license acquisition and station development
activities conducted by its affiliates since 1991, and began generating revenues
in 1994. The Company's commercial television activities, begun at Nova TV in
February 1994, at PRO TV in December 1995, at POP TV in December 1995, at
Markiza TV in August 1996, in Ukraine in October 1996, at PULS in November 1993,
at the Nuremberg Station in April 1994 and at the Leipzig and Dresden Stations
in May 1996, represent new types of ventures in the Company's markets, and,
while Nova TV has generated net income, there can be no assurance that the
Company will be successful in achieving net profits in its other broadcast
operations. As anticipated, the Company has incurred net losses since inception,
and expects to incur additional net losses for at least the next several years,

particularly in light of its growth strategy. For the years ended December 31,
1995, 1994 and 1993, the Company incurred net losses of $18.7 million, $20.5
million and $8.4 million, respectively. As of June 30, 1996, the Company had an
accumulated deficit of $60.4 million. See 'The Company.'

DEPENDENCE ON ADDITIONAL CAPITAL. The ownership, development and operation
of television broadcast operations requires substantial capital investment. The
net proceeds of the Offering together with the Potential Revolving Loan Facility
(as defined herein), the Company's current cash balances, distributions from
Nova TV and local financing of broadcast operations and broadcast operations
under development should be adequate to satisfy the Company's operating and
capital requirements for approximately 12 to 18 months. There can be no
assurance that the Company will be able to obtain financing from the Potential
Revolving Loan Facility or local financing of broadcast operations or broadcast
operations under development on terms acceptable to the Company. Thereafter, the
Company anticipates it will require additional capital as it continues to pursue
its growth strategy. See 'Use of Proceeds.' Sources of additional capital may
include debt and equity financing at the Subsidiary level and additional debt
and equity financing by the Company. Any additional equity financing by the
Company may be dilutive to shareholders. The Company's ability to obtain
additional debt financing at other than the operating Subsidiary level may be
limited because it does not conduct operations directly and may have no
significant source of cash flow available for debt service. If such financing is
unavailable, the number of television broadcast operations which the Company can
develop in the future may be limited. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources.'

COMPETITIVE INDUSTRY. The Company encounters, and expects to continue to
encounter, intense competition in the television broadcasting industry. The
Company's television stations compete, and the Company's broadcast operations
under development will compete, for revenues, viewers and programming with other
private television stations, with government-owned and operated television
stations and with cable and direct broadcast satellite television systems in
their respective markets. The Company also competes for revenues with other
advertising media, such as newspapers, radio, magazines and outdoor advertising.
In addition, the Company is faced with numerous competitors, both strategic and
financial, in attempting to obtain television broadcast rights and programming
in Central and Eastern Europe. Many actual and potential competitors are part of
larger companies with substantially greater financial, marketing and other
resources than the Company, and there can be no assurance that the Company will
be able to compete effectively against its existing or future competitors. In
each of the markets in which the Company competes, additional licenses may be
granted by regulatory authorities. See 'Business--Operations in the Czech
Republic: Nova TV-- Competition,' 'Business--Operations in Romania: PRO
TV--Competition,' 'Business--Operations in Slovenia: POP TV--Competition,'
'Business--Operations in the Slovak Republic: Markiza TV-- Competition,'
'Business--Operations in Ukraine: Studio 1+1 Group--Competition,' 'Business--
Operations in Germany: The German Stations--Competition,' and
'Business--Broadcast Operations Under Development.'

9
<PAGE>
RISKS OF TELEVISION BROADCAST OPERATIONS. The Company's operating results

are dependent upon the sale of commercial advertising time and the ability to
control operating expenses. The sale of commercial advertising time is dependent
on the general economic conditions in the country and market where each
television broadcast operation is located, the relative popularity of the
programming of the Company's broadcast operations, the demographic
characteristics of the audiences of the Company's broadcast operations, the
activities of competitors and other factors which may be outside of the
Company's control. The cost of programming to the Company may increase as the
Company broadcasts a greater number of locally produced programs and as the
commercial television markets in which the Company operates continue to develop.
The Company intends to pursue aggressively license, investment and development
opportunities in additional broadcast operations in Central and Eastern Europe.
This growth strategy entails the risks inherent in assessing the value,
strengths and weaknesses of development opportunities, in evaluating the costs
and uncertain returns of building and expanding the facilities for operating
stations and in integrating and managing the operations of additional television
stations. In addition, the Company is in varying degrees dependent, in the
countries in which it operates, upon the availability and accessibility of
government-owned broadcast and transmission facilities for distribution of its
signal throughout its license areas.

FINANCIAL CONDITION OF PULS. PULS, in which the Company has a substantial
equity investment, continues to require additional cash funding to meet ongoing
operating deficits. The Company estimates total cash funding required for PULS
to be approximately $4 million through the end of 1996. See 'Use of Proceeds.'
None of the investors in PULS, including the Company, have further contractual
obligations to invest additional capital in this station. The partners of PULS
have retained a financial advisor to seek one or more strategic partners for
PULS. Such a strategic partner will be expected to acquire a significant equity
interest in PULS and assume responsibility for PULS' operations. Such a
strategic investment would be anticipated to significantly dilute the Company's
equity interest in PULS and to decrease the Company's future funding obligations
to PULS. Furthermore, such a strategic investment also could result in a
material reduction of the carrying value of the Company's equity investment in
PULS and a corresponding charge against the Company's earnings. If such
strategic partner is not obtained or if a determination is made not to further
fund the operations of PULS, insolvency of PULS may occur, requiring a sale or
cessation of its operations. Such action could result in the loss by the Company
of a part, or all, of its equity in PULS. As of June 30, 1996, the carrying
value of the Company's investment in PULS was approximately $8.9 million. In
addition, a reduction of the carrying value of PULS, or other factors, might
cause the Company to reduce all or part of the carrying value of the Company's
investments in FFF (the parent company of the Nuremberg Station) and SFF
(through which the Company owns its interests in the Leipzig Station and the
Dresden Station) which were $6.6 million and $1.0 million, respectively, as of
June 30, 1996. See 'The Company' and 'Business--Operations in Germany: The
German Stations--Recent Developments.'

POSSIBLE INABILITY TO CONTROL SUBSIDIARIES. The Company has invested in
its operating Subsidiaries with strategic and financial partners. Although the
Company is involved to varying degrees in the management of its Subsidiaries and
intends to invest in the future only in broadcast operations in which it will be
involved in management, the degree of its voting power in Subsidiaries in which
the Company owns less than a majority of the voting power, and the voting power

and veto rights of its strategic and financial partners in Subsidiaries in which
the Company owns a majority of the voting power, may preclude it from
controlling the operations, strategies and financial decisions of its
Subsidiaries or other entities in which it may acquire interests. The Company
may be unable, without the consent of the relevant partners, to cause its
Subsidiaries, whether or not majority owned, to make distributions, to implement
strategies or to make programming decisions that the Company may favor.
Moreover, the ability of the Company to sell equity interests in its
Subsidiaries is subject to equity holder or similar agreements and, in certain
cases, regulatory approvals that limit the ability of the parties (including the
Company) to transfer their equity interests. Therefore, there can be no
assurance of the Company's ability to realize economic benefits through the sale
of its assets. See 'The Company.'

EXPANSION INTO EARLY STAGE MARKETS. The Company is developing broadcast
operations, and is pursuing opportunities to expand broadcast operations, in
several Central and Eastern European

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markets where market economies only recently have begun to develop. The
Company's primary assets, its interests in over-the-air television licenses, are
government granted. Although the general trend in the markets in which the
Company operates and intends to operate has been toward more open markets and
trade policies and the fostering of private economic activity, no assurance can
be given that the governments in the region will continue to pursue such
policies or that such policies may not be altered significantly, especially in
the event of a change in leadership, social or political disruption or
unforeseen circumstances affecting economic, political or social life.
Accordingly, social unrest, political instability, economic distress or other
factors beyond the Company's control in any such Central or Eastern European
country could have a material adverse effect on the Company's business.
Moreover, to the extent that the Company expands its reach by utilizing
satellite facilities to transmit its signal to affiliates in a particular
country, it may become subject to governmental regulation restricting such
transmission. Furthermore, there can be no assurance that the Company will be
successful in developing and expanding broadcast operations in its prospective
new markets or that such operations can be operated profitably. See
'Business--Broadcast Operations Under Development.'

HOLDING COMPANY STRUCTURE; LIMITATIONS ON ACCESS TO CASH FLOW. CME
conducts all of its operations through Subsidiaries. Accordingly, CME's ability
to realize cash from its Subsidiaries, its ability to distribute dividends to
its holders of Common Stock and to service debt, are dependent upon the earnings
of its Subsidiaries and the distribution of those earnings to, or upon loans or
other payments of funds by those Subsidiaries to, CME. Currently, Nova TV is the
only Subsidiary which has sufficient earnings to make distributions to CME. CME
may not be able to compel its Subsidiaries to make distributions to CME. Because
CME is an equity holder or partner of each of its Subsidiaries, CME's claims as
such will generally rank junior to all other creditors of and claimants against
its Subsidiaries. In the event of a Subsidiary's liquidation, there may not be
assets sufficient for CME to recoup its investment therein. Each of the
Subsidiaries was formed under the laws of, and has its operations in, a country
other than Bermuda, the jurisdiction of CME's organization. In addition, each of

CME's operating Subsidiaries receives its revenues in the local currency of the
jurisdiction in which it is situated. As a consequence, CME's ability to obtain
dividends or other distributions is subject to, among other things, restrictions
on dividends under applicable local laws and foreign currency exchange
regulations of the jurisdictions in which its Subsidiaries operate. See
'Devaluation; Currency Risk.' The Subsidiaries' ability to make distributions to
CME are also subject to their having sufficient funds from their operations
legally available for the payment thereof which are not needed to fund their
operations, obligations or other business plans and, in some cases, the approval
of the other partners, stockholders or creditors of these entities. The laws
under which CME's currently operating Subsidiaries are organized provide
generally that dividends or other distributions may be declared by the partners
or shareholders out of yearly profits subject to the maintenance of registered
capital and required reserves and after the recovery of accumulated losses. If
CME's Subsidiaries are unable or unwilling to make distributions to CME, the
Company's growth may be inhibited unless it is able to obtain additional debt or
equity financing. The Company may not be able to obtain debt financing if it
cannot compel its Subsidiaries to service the debt financing or obtain upstream
guarantees from its Subsidiaries with respect to such debt financing.

RISKS INHERENT IN FOREIGN INVESTMENT. The Company has invested all of its
resources in operations outside of the United States and plans to make
additional international investments in the future. Risks inherent in foreign
operations include loss of revenues, property and equipment from expropriation,
nationalization, war, insurrection and other political risks, risks of increases
in taxes and governmental royalties and fees and involuntary renegotiation of
contracts with or licenses from foreign governments. The Company is also exposed
to the risk of changes in foreign and domestic laws and policies that govern
operations of overseas-based companies.

DEVALUATION; CURRENCY RISK. Although the Company's Subsidiaries have
attempted, and will continue to attempt, to match revenues and expenses and
borrowings and repayments in terms of their respective local currencies, the
Company and its Subsidiaries currently generate most of their revenues in Czech
korunas, German marks, Romanian lei, Slovenian tolar, Slovak korunas and
Ukrainian hryvna and incur expenses in those currencies as well as in British
pounds and United States dollars. Certain expenses, primarily for programming,
are incurred in United States dollars and other foreign currencies.

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Fluctuations in the value of foreign currencies may cause United States dollar
translated amounts to change in comparison with previous periods. Each of the
Slovenian, Romanian, Slovak and Ukrainian currencies is a managed currency with
limited convertibility. In addition, the Company in the future may acquire
interests in entities that operate in other countries where the removal or
conversion of currency is restricted. The Company currently does not hedge
against foreign currency exchange translation risks with respect to its
dollar-denominated financial statements but may hedge against specific foreign
currency transaction risks. Because of the number of currencies involved, the
constantly changing currency exposures and the fact that all foreign currencies
do not fluctuate in the same manner against the United States dollar, the
Company cannot quantify the effect of exchange rate fluctuations on its future
financial condition or results of operations. See 'Management's Discussion and

Analysis of Financial Condition and Results of Operations--Foreign Currency.'

GOVERNMENT REGULATORY RESTRICTIONS. Broadcast operations of the Company
are subject to extensive government regulation as to the issuance, renewal,
transfer and ownership of station licenses, as well as the timing and content of
programming and the timing, content and amount of commercial advertising
permitted. In many countries the regulatory systems as they apply to private
(and especially foreign) investors in broadcasting stations are relatively new
and untested. In certain countries the Company is restricted in the amount of
direct interests it may hold in television stations; in such cases station
licenses may be held by the Company's local partners, and the Company has
arrangements to provide programming, advertising and other services (including
management services) to the station. No assurance can be given that any
necessary regulatory approvals for these arrangements will be obtained or that
such arrangements will not be subject to regulatory review in the future which
may limit the influence the Company may have with respect to its local broadcast
partners. There are also regulations requiring that certain percentages of
programming be produced or originated in local markets. The cost of programming
could also increase as a result of political initiatives taken by the European
Union to increase the amount of European-produced programming broadcast. In
addition, broadcast regulations and license conditions in the Company's markets
impose operating conditions relating, for example, to required amounts of
broadcasting, use of locally produced programming and the content and quantity
of advertising which may be broadcast. While the Company believes that it and
its Subsidiaries are in compliance in all material respects with applicable
laws, rules, regulations, and licenses, there can be no assurance that more
restrictive laws, rules, regulations or enforcement policies will not be adopted
in the future which could make compliance more difficult or expensive or
otherwise adversely affect the Company's business or prospects. See
'Business--Operations in the Czech Republic: Nova TV--Regulation,'
'Business--Operations in Romania: PRO TV--Regulation,' 'Business--Operations in
Slovenia: POP TV--Regulation,' 'Business--Operations in the Slovak Republic:
Markiza TV--Regulation,' 'Business--Operations in Ukraine: Studio 1+1 Group--
Regulation,' 'Business--Operations in Germany: the German Stations--Regulation'
and 'Business-- Broadcast Operations Under Development.'

UNCERTAINTY OF LICENSE RENEWALS. The licenses to operate the Company's
broadcast operations are effective for the following periods: (i) the license to
operate Nova TV expires in 2005; (ii) the six licenses of the Company's partners
in Romania expire from 2001 to 2002; (iii) the licenses of the Company's two
partners in Slovenia expire in 2002; (iv) the license of the Company's partner
in the Slovak Republic expires in 2007; (v) the licenses to operate PULS and the
Nuremberg Station expire in 2000 and 2001, respectively; and (vi) the licenses
to operate the Leipzig and Dresden stations expire in 2003. With respect to the
Company's broadcast operations under development, the MMDS license of the
Company's Subsidiary in Hungary currently does not have an expiration date. All
of the licenses pursuant to which the Company's or its local partners'
television stations operate are by their terms renewable. The Company has no
reason to believe that these licenses will not be renewed. However, no statutory
or regulatory presumption exists for the current license holder, and there can
be no assurance that these licenses will be renewed by the local media
authorities upon expiration of their initial terms. The failure of any such
licenses to be renewed may have a material adverse effect on the Company.

RISKS INVOLVED IN USING SATELLITE TRANSPONDER. The Company intends to use
satellite technology to assist it in maximizing broadcast reach. There is a risk
(i) that the satellite on which the

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Company leases the Satellite Transponder will not be launched in March 1997 as
scheduled, (ii) that this satellite or the Satellite Transponder will not
function as expected and (iii) that this satellite will have a shorter useful
life than expected. The occurrence of any of these events could impair the
Company's ability to extend its broadcast reach in certain countries. Although
the Company intends to arrange suitable backup plans, there can be no assurance
that the occurrence of any of these events would not have a material adverse
effect on the Company's business and the results of its operations.

DEPENDENCE ON KEY PERSONNEL. The success of the Company is particularly
dependent upon the active involvement of Leonard M. Fertig, President and Chief
Executive Officer, and Ronald S. Lauder, Chairman. The loss of the services of
either of these individuals could have a material adverse effect on the Company.
The degree of Mr. Lauder's involvement in the activities of the Company varies
from time to time based on the then current needs of the Company. Mr. Lauder's
involvement has been greatest in connection with the acquisition of broadcast
rights and in locating local strategic partners. Mr. Lauder is not an employee
of the Company. The Company has an employment agreement with Mr. Fertig, which
expires on August 9, 1998. The employment agreement with Mr. Fertig contains a
non-compete covenant, with a term of two years after the termination of
employment. Because of the specialized nature of the Company's business, the
Company believes that its future success will depend in large part upon its
ability to attract and retain highly-skilled managerial, technical and marketing
personnel as well as experienced local managers. Although the Company has been
successful in attracting such personnel in the past, competition for such
personnel is intense, and there can be no assurance that the Company will
continue to be successful in attracting and retaining the personnel it requires
to grow. See 'Management.'

INVESTMENT COMPANY ACT CONSIDERATIONS. Were the Company to cease being
able to participate in the management of one or more of its Subsidiaries, its
interest in such Subsidiaries could be deemed an 'investment security' for
purposes of the Investment Company Act of 1940 (the 'Investment Company Act').
In general, a person is an 'investment company,' subject to the registration and
other requirements of the Investment Company Act, which would restrict the
Company's activities, if it owns investment securities having a value exceeding
40% of the value of its total assets. The Company intends to continue to conduct
its business in a manner designed to avoid being subject to the registration and
other requirements of the Investment Company Act.

CONTINUING CONCENTRATION OF SHARE OWNERSHIP AND VOTING CONTROL;
ANTI-TAKEOVER PROVISIONS. Following the Offering, the Company's officers and
directors, and certain of their affiliates and employees, will collectively own
beneficially approximately 30.5% of the outstanding capital stock and 70.6% of
the voting power of the Company. Following the Offering, Ronald S. Lauder will
own beneficially approximately 22.7% of the outstanding capital stock and 52.1%
of the voting power of the Company, except where a separate class vote is
required by Bermuda law. Mr. Lauder has the ability to control the election of

the Board of Directors of the Company and thus the direction and future
operations of the Company without the supporting vote of any other shareholder
of the Company, including decisions regarding acquisitions and other business
opportunities (except with respect to a 'going private' transaction between the
Company and Mr. Lauder), the declaration of dividends and the issuance of
additional shares of Class A Common Stock and other securities. Such
concentration of ownership may have the effect of delaying, deferring or
preventing a change of control of the Company, a transaction which might
otherwise be beneficial to shareholders. In addition, the Company's Memorandum
of Association and bye-laws contain provisions that could delay, defer or
prevent a change in control without the approval of the incumbent Board of
Directors. These provisions, among other things, create a class of common stock
with super voting rights and authorize the Board of Directors to issue preferred
stock in one or more classes or series without any action on the part of the
shareholders. Such provisions could limit the price that investors might be
willing to pay in the future for shares of Class A Common Stock and impede the
ability of the shareholders to replace management even if factors warrant such a
change. A change of control of the Company may result in a loss of the Company's
rights to certain television broadcast licenses which could have a material
adverse effect on the Company, and which, therefore, may impede a third party
from attempting to obtain control of the Company. See 'Description of Capital
Stock.'

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<PAGE>
ENFORCEMENT OF CIVIL LIABILITIES AND JUDGMENTS. The Company is a Bermuda
company, and substantially all of its assets and all of its operations are
located, and all of its revenues are derived, outside the United States. The
Company has appointed Prentice-Hall Corporation System, Inc. as its agent to
receive service of process with respect to any action brought against it in the
United States District Court for the Southern District of New York or any New
York State court under the securities laws of the United States or any state
thereof. However, it may not be possible for investors to enforce outside the
United States judgments against the Company obtained in the United States in any
civil actions, including actions predicated upon the civil liability provisions
of the United States federal securities laws. In addition, certain of the
directors and officers of the Company are non-residents of the United States,
and all or a substantial portion of the assets of such persons are or may be
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons, or to enforce against them judgments obtained in the United States
courts, including judgments predicated upon the civil liability provisions of
the United States federal securities laws. There is uncertainty as to whether
the courts of the countries in which the Company operates or plans to operate
would enforce (i) judgments of United States courts obtained against the Company
or such persons predicated upon the civil liability provisions of the United
States federal and state securities laws or (ii) in original actions brought in
such countries, as applicable, liabilities against the Company or such persons
predicated upon the United States federal and state securities laws. A final and
conclusive judgment in Federal or State courts of the United States under which
a sum of money is payable (not being a sum payable in respect of taxes or other
charges of a like nature or in respect of a fine or other penalty or multiple
damages) may be subject to enforcement proceedings as a debt in the Supreme
Court of Bermuda under the common law doctrine of obligation. Among other

things, it is necessary to demonstrate that the court which gave the judgment
was competent to hear the action in accordance with private international law
principles as applied in Bermuda and that the judgment is not contrary to public
policy in Bermuda, has not been obtained by fraud or in proceedings contrary to
natural justice and was not based on error in Bermuda law.

BERMUDA CORPORATE LAW. The Company is a Bermuda company and, accordingly,
is governed by The Companies Act 1981 of Bermuda. The Companies Act 1981 of
Bermuda differs in certain respects from laws generally applicable to United
States corporations and shareholders, including the provisions relating to
interested directors, mergers and similar arrangements, takeovers, shareholder's
suits, indemnification of directors and inspection of corporate records. See
'Description of Capital Stock--Differences in Corporate Law.'

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have a total of 23,122,301 shares of capital stock outstanding
(23,842,301 shares if the Underwriters' over-allotment option is exercised in
full.) Of the shares outstanding, 14,736,958 shares of Class A Common Stock
(15,456,958 shares of Class A Common Stock if the Underwriters' over-allotment
option is exercised in full) will be freely tradeable without restriction or
registration under the Securities Act of 1933 (the 'Securities Act'). 9,700
shares of Class A Common Stock are subject to volume restrictions under the
Securities Act. All of the remaining 8,375,643 shares of capital stock are
'restricted securities' as that term is defined by Rule 144 promulgated under
the Securities Act. Currently 7,261,779 shares of the capital stock which are
'restricted securities' (including shares of Class B Common Stock which would be
required to be converted into shares of Class A Common Stock in order to be
sold) may be sold under Rule 144 subject to the volume restrictions under Rule
144. In addition, the Compensation Committee of the Company's Board of Directors
has granted options to purchase substantially all of the 900,000 shares of Class
A Common Stock authorized to be granted pursuant to the 1994 Stock Option Plan
of which options to purchase 698,455 shares are outstanding and unexercised. The
Compensation Committee is authorized to grant options for up to 1,200,000 shares
of Class A Common Stock under the 1995 Stock Option Plan, of which options to
purchase 871,850 shares of Class A Common Stock have been granted and of which
options to purchase 868,606 shares are outstanding and unexercised. In addition,
the Compensation Committee has also granted one of the directors options in
connection with his duties as a consultant to purchase 25,000 shares of Class A
Common Stock, the Company previously granted Ronald S. Lauder warrants to
purchase 250,000 shares of Class A Common Stock and the Company will grant Mr.
Lauder up to 100,000 shares of Class A Common Stock pursuant to the

14
<PAGE>
Lauder Loan. The Company, its officers, directors, certain greater than 5%
shareholders, and certain other persons have agreed not to, directly or
indirectly, offer, sell, offer to sell, contract to sell or otherwise sell or
dispose (or announce any offer, sale, offer of sale or other sale or
disposition) of any shares of Class A Common Stock or Class B Common Stock or
any securities convertible into, or exercisable or exchangeable therefor, except
shares purchased in the public market and grants and exercises of options under
the 1994 Stock Option Plan and the 1995 Stock Option Plan, for a period of 120
days after the date of this Prospectus without the prior written consent of the
Representatives of the Underwriters, on behalf of the Underwriters. Sales of

substantial amounts of shares of the Class A Common Stock (including shares of
Class A Common Stock issuable upon the conversion of the Class B Common Stock or
the exercise of options or warrants) in the public market under Rule 144 or
otherwise, or the potential of such sales, could adversely affect the prevailing
market price of the Class A Common Stock and impair the Company's ability to
raise capital through the sale of equity securities. See 'Shares Eligible for
Future Sale' and 'Underwriting.'

FOREIGN PERSONAL HOLDING COMPANY AND PASSIVE FOREIGN INVESTMENT COMPANY
RULES. The Company seeks to manage its affairs and the affairs of its
Subsidiaries so that neither the Company nor any of its foreign corporate
Subsidiaries would be classified as a foreign personal holding company ('FPHC')
or a passive foreign investment company ('PFIC') under the United States
Internal Revenue Code of 1986, as amended. If the Company or any such
Subsidiaries were an FPHC, the undistributed foreign personal holding company
income (generally, the taxable income, with certain adjustments), if any, of the
Company or of its foreign corporate Subsidiaries would be included in the income
of the United States shareholders of the Company as a dividend, on a pro rata
basis. If the Company were a PFIC, then each United States shareholder of the
Company generally would, upon certain distributions by the Company or upon
disposition of the Class A Common Stock at a gain, be liable to pay tax at the
then prevailing rates on ordinary income plus an interest charge, as if the
distribution or gain had been recognized ratably over the United States
shareholder's holding period for the Class A Common Stock, or if a 'qualified
electing fund' election were made by the United States shareholder, a pro rata
share of the Company's ordinary income and net capital gain would be required to
be included in the United States shareholder's income each year. While the
Company intends to manage its affairs and the affairs of its Subsidiaries so as
to avoid FPHC and PFIC status, there can be no assurance that the Company will
be successful in this endeavor. See 'Certain Tax Considerations--United States
Federal Income Taxation--Foreign Personal Holding Companies' and 'Certain Tax
Considerations--United States Federal Income Taxation--Passive Foreign
Investment Companies.'

FORWARD-LOOKING STATEMENTS. This Prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included in this Prospectus that address
activities, events or developments that the Company expects, believes or
anticipates will or may occur in the future, including such matters as future
investments in existing television broadcast operations and the development of
new television broadcast operations (including the amount and nature thereof),
the use of proceeds of this Offering, business strategies and the future need
for additional funds from outside sources, are forward-looking statements.

Forward-looking statements are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of which
might not even be anticipated. Future events and actual results, financial and
otherwise, could differ materially from those set forth in or contemplated by
the forward-looking statements herein. Important factors that could contribute
to such differences are set forth herein under 'Risk Factors', including, but
not limited to, 'History of Losses,' 'Dependence on Additional Capital,'
'Competitive Industry,' 'Risks of Television Broadcast Operations,' 'Possible
Inability to Control Subsidiaries,' 'Expansion into Early Stage Markets,'

'Holding Company Structure; Limitations on Access to Cash Flow,' 'Risks Inherent
in Foreign Investment,' 'Devaluation; Currency Risk,' 'Government Regulatory
Restrictions,' 'Uncertainty of License Renewals,' and 'Risks Involved in Using
Satellite Transponder.'

<PAGE>
THE COMPANY

The Company is the leading television broadcaster in Central and Eastern
Europe, broadcasting to an aggregate of 77.1 million people in five countries in
the region and an additional 8.9 million people in Germany. The Company operates
the leading national television station in the Czech Republic and the Company's
television operations in Romania and Slovenia command the leading audience share
within their areas of broadcast reach. The Company recently commenced television
broadcast operations in the Slovak Republic and Ukraine and has television
broadcast operations under development in Poland and Hungary which potentially
could reach an additional 50 million people. The Company's strategy is to
continue to capitalize on the substantial market opportunities created by the
emergence of private commercial television and the corresponding significant
growth of television advertising expenditures in these markets.

Central European Media Enterprises Ltd. was incorporated in June 1994 under
the laws of Bermuda. The chart on the following page sets forth the functional
corporate structure of the Company.

The Company's ownership interest in Ceska Nezavisla Televizni Spolecnost
s.r.o. ('Nova TV') is governed by the terms of a Memorandum of Association and
Investment Agreement dated as of May 4, 1993 (the 'Nova Agreement') to which its
investment partners, Ceska Sporitelna Bank ('CS') and CET 21 s.r.o. ('CET 21'),
are also parties. In August 1996, the Company purchased CS's 22.0% economic
interest in Nova TV and virtually all of CS's voting power in Nova TV (the
'Additional Nova TV Purchase'). The Company is in the process of registering the
Additional Nova TV Purchase pursuant to Czech law. On an ongoing basis, after
giving effect to the Additional Nova TV Purchase, the Company is entitled to
88.0% of the total profits of Nova TV and has 86.0% of the voting power in Nova
TV. CET 21 has a 12.0% equity interest in Nova TV. CET 21 contributed the
exclusive right to use the broadcast license to Nova TV. The Company has the
right to appoint five of the seven members of Nova TV's Committee of
Representatives, which directs the affairs of Nova TV. With respect to certain
fundamental corporate decisions, including the declaration of dividends, a 67.0%
vote of the voting interest is required. A representative of CET 21 has certain
delay and veto rights on non-economic programming matters related directly to
the broadcast license. The Company has entered into an agreement to lend Dr.
Vladimir Zelezny, General Director of Nova TV, funds to finance his purchase of
shares in CET 21 in order to increase his ownership in CET 21 to 60.0%. This
loan will mature in five years. As part of this agreement, Dr. Zelezny has
agreed to vote such shares in accordance with the vote of the Company with
respect to certain matters, including dividends.

The Company's interest in PRO TV is governed by a Cooperation Agreement
(the 'Romanian Agreement') among CME Media Enterprises B.V. ('CME BV'), Adrian
Sarbu ('Sarbu') and Ion Tiriac ('Tiriac'), forming Media Pro International S.A.

('Media Pro International'). Pursuant to the Romanian Agreement, the Company
owns 77.5% of the equity of Media Pro International. Interests in profits of
Media Pro International are equal to the partners' equity interests. Sarbu and
Tiriac hold options (exercisable at a cost per unit equal to the cost per unit
of the Company's original investment in Media Pro International) on a portion of
the Company's equity which, if exercised, could reduce the Company's equity
interest to 66.0%. The Company has the right to appoint three of the five
members of the Council of Administration which direct the affairs of Media Pro
International. Although the Company has majority voting power in Media Pro
International, with respect to certain financial and fundamental corporate
matters the affirmative vote of either Sarbu or Tiriac is required. The Company
intends to exercise its option to purchase 49.0% of the equity of PRO TV, SRL,
an affiliate station of Media Pro International currently owned by Sarbu and
Tiriac on terms that have yet to be finalized. PRO TV, SRL holds many of the
licenses for the stations which comprise the PRO TV network. The Company also
owns a 95.0% equity interest in Unimedia SRL ('Unimedia'), which has agreed to
acquire a 10.0% equity interest in a consortium, MobilRom ('MobilRom'). MobilRom
has applied for a telecommunications license in Romania. Mr. Sarbu owns the
remaining 5.0% of Unimedia. It is anticipated that MobilRom will not have active
operations unless it is awarded such a license.

<PAGE>
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F:\WPDOCS\DOCUMENT\CEMECHRT.PPT

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The Company's interest in POP TV is governed by a Partnership Agreement
(the 'Slovenian Partnership Agreement') among CME BV, MMTV 1 d.o.o. Ljubljana
('MMTV') and Tele 59 d.o.o. Maribor ('Tele 59'), forming Produkcija Plus d.o.o.
('Pro Plus'). The Company owns 58.0% of the equity in Pro Plus, but has an
effective economic interest of 72.0%, as a result of its right to 33.0% of the
profits of MMTV and 33.0% of the profits of Tele 59 which, in turn each have
21.0% equity interests in Pro Plus. The Company owns 10.0% of the equity of each
of Tele 59 and MMTV. 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 70.0%
affirmative vote. Certain financial and fundamental corporate matters require an
85.0% affirmative vote of the partners. In July 1996, the Company, together with
MMTV and Tele 59 entered into an agreement to purchase a 66.0% equity interest
in Kanal A, a privately owned television station in Slovenia, which competes
with POP TV (the 'Kanal A Agreement'), which would increase POP TV's broadcast
reach to approximately 85% of the Slovenian population. There is currently an
injunction in effect preventing the completion of the Kanal A Agreement. See
'Business--Litigation.'

The Company's interest in Markiza TV is governed by a Participants
Agreement dated September 28, 1995 (the 'Slovak Agreement') between CME BV and
Markiza-Slovakia s.r.o. ('Markiza') forming Slovenska Televizna Spolecnost,
s.r.o. ('STS'). Pursuant to the Slovak Agreement, the Company is required to
fund all of the capital requirements of, and holds a 49.0% voting interest and

an 80.0% 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 80.0% of the profits of STS, except
that until the Company is repaid its capital contributions plus a priority
return at the rate of 6.0% per annum on such capital contributions, 50.0% of the
profits will be paid to the Company and the remaining 50.0% of the profits will
be paid pro rata to the partners based on their economic interests. A Board of
Representatives directs the affairs of STS, the composition of which includes
two designees of the Company and three designees of Markiza; however, all
decisions of the Board of Representatives require a vote of 80.0% of its
members. In addition, certain fundamental corporate matters are reserved for
decision by a general meeting of partners and require a 67.0% affirmative vote
of the partners.

The Company recently acquired a 50.0% economic interest in the Studio 1+1
Group, including Innova Film GmbH, through which the Studio 1+1 Group has the
right until August 2000 to broadcast programming and sell advertising on one of
Ukraine's public television stations for a specified number of hours per week,
including during prime time.

The Company's interest in its broadcast operations under development in
Hungary was acquired pursuant to a Share Transfer Agreement and a Modification
of the Articles of Association of 2002 Tanacsado es Szolgaltato Korlatolt
Felelosegu Tarsasag ('2002 Kft'). The Company owns 95.0% of the equity of 2002
Kft, the entity through which the Company intends to develop broadcast
operations in Hungary. The remaining 5.0% of the equity of 2002 Kft is owned by
a local strategic partner. Definitive governance provisions and capital
contribution requirements have not yet been formalized with respect to 2002 Kft.
The Company's business plan contemplates that its equity interest in 2002 Kft
will be diluted as local partners are added. In May 1996, 2002 Kft acquired a
97.4% indirect beneficial interest in Videovox Studio Limited Liability Company,
a Hungarian dubbing and production company ('Videovox').

The Company has an agreement with the Polish media group ITI, forming TVN
Sp.z.o.o. ('TVN'), to seek national and regional television broadcast licenses
in Poland. ITI holds 67.0% of the equity in TVN and the Company holds the
remaining 33.0%. In October 1996, the Polish National Radio and Television
Council announced its intention to award nine television broadcast licenses for
northern Poland and television broadcast licenses covering the cities of Warsaw
and Lodz in Poland to TVN. It is anticipated that the administrative process
which is a requirement in order for the final awards of these television
broadcast licenses will be completed by the end of 1996. The Company estimates
that these television broadcast licenses have a potential broadcast reach of
approximately 7 million people. TVN also recently entered into an agreement
pursuant to which it acquired a 3.0% interest in Televisja Wisla Sp.z.o.o. ('TV
Wisla'). TVN also acquired an option to acquire a substantial interest in TV
Wisla.

The Company's present 55.9% ownership interest in the German limited
partnership that operates PULS is held through wholly-owned intermediate
entities and limited partnerships (the 'CME Partnerships'). The Company's
interest in PULS is governed by a partnership agreement among the CME
Partnerships and their partners (the 'PULS Partnership Agreement'). Currently,

calls for capital contributions may be made by a 75.0% vote of the voting power
of the partners in PULS, but this capital

18
<PAGE>
call would be binding only upon partners who voted in favor. A partner who does
not make a contribution upon such a capital call will have its equity interest
diluted. Since September 1995, the partners have approved capital calls
aggregating DM34,500,000 ($22,697,000). The Company has agreed to fund
DM32,000,000 ($21,053,000), of which DM28,500,000 ($18,750,000) has been funded
to date.
The PULS Partnership Agreement provides that profits and losses of PULS are
shared as follows: net losses are allocated to the partners in proportion of
their capital contributions; cumulative net profits are allocated in the same
proportion until such losses are recovered. Thereafter, once certain priority
returns have been paid, the Company will be entitled to 55.9% of the profits of
PULS. Pursuant to the PULS Partnership Agreement, the Company currently has
effectively 47.5% of the voting power of PULS. In general, a 75% vote of the
voting power of the partners of PULS is required with respect to certain
financial matters and certain partnership matters, including, among other
things, amendments to the partnership agreement, mergers, reorganizations and a
transfer of all of PULS's assets and approval of the annual budget and financial
plans. The Company has the right to appoint two of the nine members of the
Supervisory Board of PULS.
The partners of PULS have retained a financial advisor to seek one or more
strategic partners for PULS. Such strategic partner would be expected to acquire
a significant equity interest in PULS and assume responsibility for PULS'
operations. Such a strategic investment would be anticipated to significantly
dilute the Company's equity investment in PULS and to decrease the Company's
future funding obligations to PULS. Such investment also could result in a
material reduction of the carrying value of the Company's equity investment in
PULS, which was $8.9 million as of June 1996, and a corresponding charge against
the Company's earnings in the period incurred. Regardless of whether a
transaction with a strategic investor is consummated, there is no assurance that
the Company may not have to take a reduction of all or a portion of the carrying
value of PULS. See 'Business--Operations in Germany: The German Stations--Recent
Developments.'
The Company's 37.4% equity interest in the Nuremberg Station was obtained
by acquiring a 50.0% non-voting equity interest in Franken Funk & Fernsehen GmbH
('FFF'), which owns 74.8% of the equity in NMF Neue Medien Franken GmbH & Co.
('NMF'), which directly owns the Nuremberg Station. The remaining 25.2% of NMF
is owned by an unaffiliated individual. The Company's interest in the Nuremberg
Station is governed by a so-called 'Silent Partner Agreement' under German law
between the Company, Dr. Dietmar Straube, who heads the Company's German
operations and the owner of the remaining 50.0% equity interest and 100% voting
interest in FFF, and FFF. A Silent Partner Agreement gives the silent partner
(the Company in this case) the economic benefits of an equity interest without a
voting interest and without a physical instrument evidencing the interest. While
the Company does not own shares of stock of FFF or have the right to elect any
of its directors, the prior approval of the Company is required for certain
significant transactions. The Company is entitled to 50.0% of FFF's profits and
losses and 50.0% of the proceeds upon liquidation of its assets. However, Dr.
Straube is entitled to a one-time preferred distribution of DM 1,860,000
($1,224,000) out of the cumulative profits.

The Company has a 49.0% equity and voting interest in Sachsen Funk &
Fernsehen ('SFF') and the Company is entitled to distributions of 50.0% of the
profits of SFF. Dr. Straube owns the remaining equity of SFF. SFF owns a 33.0%
interest in Leipzig Fernsehen and Dresden Fernsehen which operate regional
television stations in Leipzig (the 'Leipzig Station') and Dresden (the 'Dresden
Station'), respectively.
A reduction of the carrying value of PULS, or other factors, might cause
the Company to reduce all or part of the carrying value of the Company's
investments in FFF and SFF, which were $6.6 million and $1.0 million,
respectively, as of June 30, 1996.
CME Development Corporation is a wholly-owned subsidiary of the Company
which provides development services to the Company. CME Programming Services,
Inc. ('CMEPS') is a wholly-owned subsidiary of the Company which provides
programming and production services to the Company's television broadcast
operations in Central and Eastern Europe. CMEPS will also provide satellite
transmission services to the Company's television stations in Central and
Eastern Europe. See 'Business--Programming Services.'
The Company's registered offices are located at Clarendon House, Church
Street, Hamilton HM CX Bermuda and its telephone number is 441-296-1431. The
Central European Media Enterprises group of companies also maintains offices at
18 D'Arblay Street, London W1V 3FP England, telephone number 44-171-292-7900.

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the Offering are expected to be
approximately $124.7 million after deducting underwriting discounts and
commissions and estimated offering expenses. The Company intends to use the net
proceeds together with the Potential Revolving Loan Facility (as herein defined)
to (i) fund existing television broadcast operations in Romania, Slovenia, the
Slovak Republic and Ukraine (approximately $30 million); (ii) fund television
broadcast operations under development in Poland (approximately $30 million to
$40 million); (iii) fund existing television operations in Germany
(approximately $4 million to $8 million); (iv) fund the initial payment due with
respect to the Additional Nova TV Purchase (approximately $5.4 million); and (v)
repay the Bridge Loan (as herein defined) (approximately $25 million) and the
Lauder Loan (anticipated to be $14 million) which will have been incurred prior
to the Offering to fund existing broadcast operations and broadcast operations
under development. The balance of these funds may also be used for investment in
long term programming rights, additional broadcast development opportunities in
Poland, Hungary and Ukraine, and for general corporate purposes. In addition, if
MobilRom is awarded a telecommunications license in Romania, the Company will be
obligated to fund up to $10 million during the next twelve months. The Bridge
Loan bears interest at a per annum rate equal to LIBOR (as LIBOR fluctuates from
time to time) plus 1.6% and matures on November 30, 1996. The Lauder Loan bears
interest at a per annum rate equal to LIBOR (as LIBOR fluctuates from time to
time) plus 2.0% and matures on the earlier of (i) the consummation of the
Offering and (ii) October 1, 1998. Pending their application, the net proceeds
from the Offering will be invested in investment grade tax-exempt municipal
securities, other government securities and/or short term interest bearing
instruments. In the event that the Company is successful in developing certain
of the proposed markets, additional debt or equity will be required to finance

fully these operations. See 'Risk Factors--Dependence on Additional Capital' and
'Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'

PRICE RANGE OF COMMON STOCK

The Class A Common Stock began trading on the Nasdaq National Market on
October 13, 1994 under the trading symbol 'CETV.' On October 29, 1996, the last
reported sale price for the Class A Common Stock was $27.50. The following table
sets forth the high and low sale prices for the Class A Common Stock for each
quarterly period since the Class A Common Stock began trading, as reported by
the Nasdaq National Market:

HIGH LOW
------- -------
1994
Fourth Quarter (from October 13, 1994)....... $17.250 $12.875
1995
First Quarter................................ 14.125 7.750
Second Quarter............................... 16.000 9.875
Third Quarter................................ 27.250 13.750
Fourth Quarter............................... 25.750 17.750
1996
First Quarter................................ 24.500 19.750
Second Quarter............................... 30.000 22.000
Third Quarter................................ 32.000 20.750
Fourth Quarter (through October 29, 1996).... 29.500 27.000

At September 18, 1996, there were 28 holders of record (including brokerage
firms and other nominees) of the Class A Common Stock and 17 holders of record
of the Class B Common Stock. There is no established public trading market for
the Class B Common Stock.

DIVIDEND POLICY

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. See 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.' Moreover,

20
<PAGE>
the Potential Revolving Loan Facility prohibits the payment of dividends. In
addition, the Company's ability to pay cash dividends is primarily dependent
upon receipt of dividends or distributions from its Subsidiaries over which it
has limited control. See 'Risk Factors-Holding Company Structure; Limitations on
Access to Cash Flow.'

CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE DATA)

The following table sets forth the short-term debt and capitalization of
the Company at June 30, 1996, pro forma for the incurrence of short-term bank
debt, the Lauder Loan and the Additional Nova TV Purchase and pro forma as

adjusted to reflect the Offering. This table should be read in conjunction with
the Consolidated Financial Statements and Notes thereto included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA(1) ADJUSTED(2)
-------- -------- -----------
<S> <C> <C> <C>
Short-term debt:
Bank credit facility............................ $ 410 $ 25,410 $ 410
Capital lease obligation........................ 1,607 1,607 1,607
Shareholder loan................................ -- 14,000 --
-------- -------- -----------
Total short-term debt........................ $ 2,017 $ 41,017 $ 2,017
-------- -------- -----------
-------- -------- -----------
Long-term debt:
Bank credit facility............................ $ 6,519 $ 6,519 $ 6,519
Capital lease obligation........................ 8,066 8,066 8,066
Note payable to seller.......................... -- 30,786 30,786
-------- -------- -----------
Total long-term debt......................... 14,585 45,371 45,371
-------- -------- -----------
Shareholders' equity:
Preferred Stock, $.01 par value; authorized:
5,000,000 shares; issued and outstanding:
none......................................... -- -- --
Class A Common Stock, $.01 par value;
authorized: 30,000,000 shares; issued and
outstanding: 10,406,799 shares actual and pro
forma; 15,206,799 shares pro forma as
adjusted..................................... 104 104 152
Class B Common Stock, $.01 par value;
authorized: 15,000,000 shares; issued and
outstanding: 8,078,297 shares actual, pro
forma and pro forma as adjusted.............. 81 81 81
Additional paid-in capital...................... 188,785 188,785 313,447
176,872 Class A Treasury stock of $.01 par
value........................................ (2,476) (2,476) (2,476)
Accumulated deficit............................. (60,381) (60,381) (60,381)
Cumulative currency translation adjustment...... (362) (362) (362)
-------- -------- -----------
Total shareholders' equity................... 125,751 125,751 250,461
-------- -------- -----------
Total capitalization....................... $140,336 $171,122 $ 295,832
-------- -------- -----------
-------- -------- -----------
</TABLE>

- ------------------
(1) Pro forma to reflect the incurrence by the Company in the third quarter of
1996 of short-term bank debt of approximately $25.0 million, and, in the
fourth quarter of 1996, the Lauder Loan anticipated to be $14.0 million,
both of which will be repaid with the proceeds of the Offering, and the
incurrence of approximately $30.8 million of indebtedness in connection with
the Additional Nova TV Purchase. See 'The Company.'

(2) Pro forma as adjusted to reflect the issuance and sale of the 4,800,000
shares of Class A Common Stock by the Company in the Offering and the
application of the net proceeds therefrom. See 'Use of Proceeds.'

<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected financial information presented below for the five years ended
December 31, 1995 is derived from the audited Consolidated Financial Statements
of the Company. The selected information for the six month periods ended June
30, 1996 and 1995 is derived from unaudited financial statements of the Company.
In the opinion of the Company, such information reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such data on a basis consistent with that of the audited data
presented herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year. The
following selected financial information should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto as of December 31,
1995, 1994 and 1993, included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
---- ------ -------- --------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues................................................ $ -- $ -- $ -- $ 53,566 $ 98,919
---- ------ -------- --------- ----------
Station operating expenses.................................. -- -- 1,802 36,083 53,451
Selling, general and administrative expenses................ -- 20 811 6,009 6,816
Corporate operating and development expenses................ -- 171 2,708 4,684 14,111
Non-cash stock compensation charge.......................... -- -- -- 5,833 858
Dutch capital registration tax.............................. -- -- -- -- 1,375
---- ------ -------- --------- ----------
Total operating expenses.................................... -- 191 5,321 52,609 76,611
---- ------ -------- --------- ----------
Operating (loss) income..................................... -- (191) (5,321) 957 22,308
Equity in loss of unconsolidated affiliates................. (75) (141) (3,671) (13,677) (14,816)
Interest and other income................................... -- -- 64 179 1,238
Interest expense............................................ -- -- (140) (1,992) (4,959)
Foreign currency exchange gains (losses).................... -- -- (176) (245) 324
---- ------ -------- --------- ----------

(Loss) income before provision for income taxes............. (75) (332) (9,244) (14,778) 4,095
Provision for income taxes.................................. -- -- -- (3,331) (16,340)
---- ------ -------- --------- ----------
Loss before minority interest in consolidated
subsidiaries.............................................. (75) (332) (9,244) (18,109) (12,245)
Minority interest in loss (income) of consolidated
subsidiaries.............................................. -- 7 884 (2,396) (6,491)
---- ------ -------- --------- ----------
Net loss.................................................... $(75) $ (325) $ (8,360) $ (20,505) $ (18,736)
---- ------ -------- --------- ----------
---- ------ -------- --------- ----------
Net loss per common share................................... $ (1.28)
Weighted average shares outstanding......................... 14,678,000
Cash dividends declared..................................... $ -- $ -- $ -- $ -- $ --
OTHER DATA:
Broadcast cash flow(1)...................................... $ -- $ -- $ -- $ 12,233 $ 38,182
Net cash (used in) provided by operating activities......... -- (14) (3,826) (1,532) 1,943
Number of television broadcast operations at the end of
period.................................................... -- -- 1 3 5
BALANCE SHEET DATA:
Current assets.............................................. $ -- $ -- $ 4,773 $ 71,447 $ 116,728
Total assets................................................ -- -- 17,824 115,332 222,027
Total debt and advances from affiliates..................... -- -- 6,178 32,592 22,972
Shareholders' equity........................................ -- -- 3,464 62,631 138,936

<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
OPERATING DATA:
Net revenues................................................ $ 47,238 $ 61,805
----------- -----------
Station operating expenses.................................. 22,892 40,801
Selling, general and administrative expenses................ 2,939 8,735
Corporate operating and development expenses................ 5,439 7,173
Non-cash stock compensation charge.......................... 810 --
Dutch capital registration tax.............................. -- --
----------- -----------
Total operating expenses.................................... 32,080 56,709
----------- -----------
Operating (loss) income..................................... 15,158 5,096
Equity in loss of unconsolidated affiliates................. (6,766) (5,936)
Interest and other income................................... 959 1,079
Interest expense............................................ (2,134) (1,532)
Foreign currency exchange gains (losses).................... 115 (1,630)
----------- -----------
(Loss) income before provision for income taxes............. 7,332 (2,923)
Provision for income taxes.................................. (8,178) (8,313)
----------- -----------
Loss before minority interest in consolidated
subsidiaries.............................................. (846) (11,236)

Minority interest in loss (income) of consolidated
subsidiaries.............................................. (3,923) (1,144)
----------- -----------
Net loss.................................................... $ (4,769) $ (12,380)
----------- -----------
----------- -----------
Net loss per common share................................... $ (0.34) $ (0.67)
Weighted average shares outstanding......................... 14,020,500 18,447,000
Cash dividends declared..................................... $ -- $ --
OTHER DATA:
Broadcast cash flow(1)...................................... $ 18,232 $ 15,294
Net cash (used in) provided by operating activities......... 3,863 5,464
Number of television broadcast operations at the end of
period.................................................... 3 7
BALANCE SHEET DATA:
Current assets.............................................. $ 64,316 $ 84,574
Total assets................................................ 127,199 213,445
Total debt and advances from affiliates..................... 31,712 16,602
Shareholders' equity........................................ 60,822 125,751
</TABLE>

- ------------------
(1) 'Broadcast cash flow,' which is commonly used as a measure of performance
for broadcast companies, as used herein, is defined as net revenues, less
station operating expenses excluding depreciation and amortization, station
selling, general and administrative expenses, and cash program rights costs.
Cash program rights costs represent cash payments for current programs

(Footnotes continued on next page)

22
<PAGE>
(Footnotes continued from previous page)
payable and such payments do not necessarily correspond to program use.
Broadcast cash flow should not be considered as a substitute measure of
operating performance, or liquidity prepared in accordance with generally
accepted accounting principles. Broadcast cash flow is only presented for
the periods in which broadcasting took place and only for the Company's
consolidated Subsidiaries, excluding Videovox. Videovox was acquired on May
1, 1996 and generated only limited revenues during the six months ended June
30, 1996. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations.'

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The Company is the leading television broadcaster in Central and Eastern
Europe, broadcasting to an aggregate of 77.1 million people in five countries in
the region and additional 8.9 million people in Germany. The Company operates

the leading national television station in the Czech Republic and the Company's
operations in Romania and Slovenia command the leading audience share within
their areas of broadcast reach. The Company recently commenced operations in the
Slovak Republic and Ukraine and has operations under development in Poland and
Hungary which potentially could reach an additional 50 million people. The
Company's strategy is to continue to capitalize on the substantial market
opportunities created by the emergence of private commercial television and the
corresponding significant growth of television advertising expenditures in these
markets.

The Company's revenues are derived principally from the sale of television
advertising to local, national and international advertisers. To a limited
extent, the Company also engages in certain barter transactions in which its
broadcast operations exchange unsold commercial advertising time for goods and
services such as programming, broadcasting equipment, hotel rooms, car rentals
and newspaper advertising space. The Company experiences seasonality with
advertising sales tending to be lowest during the third quarter of each calendar
year, which includes the summer holiday schedule (typically July and August) and
highest during the fourth quarter of each calendar year.

The primary expenses incurred in operating broadcast stations are
programming costs, employee salaries, broadcast transmission expenses and
selling, general and administrative expenses. Certain of the Company's
operations do not require the direct incurrence of broadcast transmission
expenses. License fees payable to governmental entities in connection with
securing television licenses from government authorities, if any, are usually
minimal. However, the Company incurs significant development expenses, including
funding and negotiating with local partners, researching and preparing license
applications, preparing business plans and conducting pre-operating activities
as well as restructuring existing affiliate entities which hold the licenses.

The Company conducts all of its operations through Subsidiaries.
Accordingly, the primary internal sources of the Company's cash are dividends
and other distributions from its Subsidiaries. The Company's ability to obtain
dividends or other distributions is subject to, among other things, restrictions
on dividends under applicable local laws and foreign currency exchange
regulations of the jurisdictions in which its Subsidiaries operate. The
Subsidiaries' ability to make distributions to the Company are also subject to
the legal availability of sufficient operating funds which are not needed for
operations, obligations or other business plans and, in some cases, the approval
of the other partners, stockholders or creditors of these entities. The laws
under which the Company's currently 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 and required
reserves and after the recovery of accumulated losses.

The following table sets forth certain operating data for the years ended
December 31, 1994 and 1995 and for the six months ended June 30, 1995 and 1996
(dollars in thousands). For the year ended December 31, 1994 and the six months
ended June 30, 1995, Nova TV was the only operation included

24
<PAGE>
as a consolidated entity in the figures below. POP TV and PRO TV began

operations in December 1995 while Videovox was acquired on May 1, 1996.

YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------- -----------------
1994 1995 1995 1996(1)
------- ------- ------- -------
Operating Data:
Net revenues.......................... $53,566 $98,919 $47,238 $61,514
Less:
Station operating expenses............ (36,083) (53,451) (22,892) (40,426)
Station selling, general and
administrative expenses............ (6,009) (6,816) (2,939) (8,374)
------- ------- ------- -------
Station operating income.............. 11,474 38,652 21,407 12,714
Depreciation of assets................ 3,773 7,251 3,196 6,098
Amortization of programming rights.... 10,403 16,319 6,492 10,269
Cash program rights costs............. (13,417) (24,040) (12,863) (13,787)
------- ------- ------- -------
Broadcast cash flow................... $12,233 $38,182 $18,232 $15,294
------- ------- ------- -------
------- ------- ------- -------
Broadcast cash flow margin............ 22.8% 38.6% 38.6% 24.9%

SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- -----------------
1995 1996 1996
------- ------- -----------------
NOVA TV NOVA TV PRO TV POP TV
------- ------- ------- -------
Operating Data for Consolidated
Broadcast Operations (1):
Net revenues.......................... $47,238 $52,878 $4,980 $3,656
Less:
Station operating expenses............ (22,892) (26,421) (7,730) (6,275)
Station selling, general and
administrative expenses............ (2,939) (4,356) (2,253) (1,765)
------- ------- ------- -------
Station operating income (loss)....... 21,407 22,101 (5,003) (4,384)
Depreciation of assets................ 3,196 3,786 1,149 1,163
Amortization of programming rights.... 6,492 8,196 1,453 620
Cash program rights costs............. (12,863) (9,742) (3,118) (927)
------- ------- ------- -------
Broadcast cash flow................... $18,232 $24,341 $(5,519) $(3,528)
======= ======= ======= =======
Broadcast cash flow margin............ 38.6 % 46.0% -- --
Broadcast cash flow attributable to
the Company (66.0%, 77.5% and 72.0%
of broadcast cash flow for Nova TV,
PRO TV, and POP TV,
respectively)...................... $12,033 $16,065 $(4,277) $(2,541)
Pro forma broadcast cash flow
attributable to the Company from

Nova TV (88.0%(2))................. $16,044 $21,420

- ------------------

(1) Does not include the results of operations of Videovox, a Hungarian
production and dubbing studio, which was acquired on May 1, 1996.

(2) Pro forma broadcast cash flow for Nova TV includes the additional 22%
economic interest acquired by the Company pursuant to the Additional Nova TV
Purchase (which is in the process of being registered under Czech law) as if
such acquisition had been effective from January 1, 1995.

25
<PAGE>
'Broadcast cash flow' is a broadcasting industry measure of performance and
defined as net revenues, less station operating expenses excluding depreciation
and amortization, station selling, general and administrative expenses, and cash
program rights costs. 'Broadcast cash flow margin' is broadcast cash flow
divided by net revenues. 'Broadcast cash flow attributable to the Company' is
broadcast cash flow which is attributable to the Company based on the Company's
effective economic interest in PRO TV and POP TV, and a 66% economic interest in
Nova TV. 'Pro forma broadcast cash flow' includes the additional 22% economic
interest acquired by the Company pursuant to the Additional Nova TV Purchase
(which is in the process of being registered under Czech law) as if such
acquisition had been in effect from January 1, 1995. Cash program rights costs
represent cash payments for current programs payable and such payments do not
necessarily correspond to program use. The Company has included broadcast cash
flow because it is commonly used in the broadcast industry as a measure of
performance. Broadcast cash flow should not be considered as a substitute
measure of operating performance or liquidity prepared in accordance with
generally accepted accounting principles.

Broadcast cash flow for the Company was $15.3 million for the six months
ended June 30, 1996. For the six months ended June 30, 1996, Nova TV's broadcast
cash flow increased by 34% to $24.3 million over the same period in 1995. Nova
TV's stronger broadcast cash flow was driven by increased net revenues and
reduced programming costs. For the first six months of 1996 net revenues of Nova
TV increased $5.6 million or 12% over the same period in 1995. For the six month
period ended June 30, 1996, net revenues in local currency increased 16% over
the same period in 1995. In addition to stronger revenues, Nova TV has begun to
realize the financial benefits of its 1995 initiative to significantly increase
the size of its program library and lock in lower programming costs. For the
first six months of 1996, Nova TV's cash payments for programming decreased by
$3.2 million to $9.7 million from $12.9 million for the first six months of
1995. Nova TV's positive broadcast cash flow was offset by negative broadcast
cash flow from POP TV and PRO TV of $3.5 million and $5.5 million, respectively,
in the six month period ended June 30, 1996. Broadcast cash flow for the Company
was $38.2 million for 1995, a 212% increase over broadcast cash flow of $12.2
million in 1994. This increase was a result of the significant increase in
revenues experienced at Nova TV, partially offset by increases in station
operating expenses, station selling, general and administrative expenses, and
cash program rights costs.

On August 1, 1996, the Company agreed to the Additional Nova TV Purchase.

Had the Additional Nova TV Purchase been in effect since January 1, 1995,
broadcast cash flow attributable to the Company would have been increased by
approximately 33%, or $5.3 million, to $21.4 million from $16.1 million for the
six month period ended June 30, 1996 (see Note 5 of Notes to the Consolidated
Financial Statements on page F-36).

APPLICATION OF ACCOUNTING PRINCIPLES

Although its operations are conducted largely in foreign currencies, the
Company prepares its financial statements in United States dollars and in
accordance with generally accepted accounting principles in the United States.
The Company's consolidated operating statements include the results of Nova TV,
PRO TV, POP TV, and Videovox and separately set forth the minority interest
attributable to other owners of Nova TV, PRO TV, POP TV, and Videovox for the
six months ended June 30, 1996. POP TV and PRO TV began operations in December
1995 while Videovox was acquired in May 1996. Nova TV was the only consolidated
entity for the six months ended June 30, 1995 and all prior periods and Videovox
was included only for the six months ended June 30, 1996. The results of other
broadcast operations, PULS, FFF and SFF, are accounted for using the equity
method which reflects the Company's share of the net income or losses in those
operations. The Company's investments in broadcast operations under development
and other broadcast development opportunities are reflected on the balance sheet
as development costs.

26
<PAGE>
FOREIGN CURRENCY

The Company and its Subsidiaries generate revenues primarily in Czech
korunas ('Kc'), Romanian lei ('ROL'), Slovenian tolar ('SIT'), Slovak korunas
('Sk') and German marks ('DM'), and incur substantial operating expenses in
those currencies. The Romanian lei and Slovenian tolar and the Slovak koruna are
managed currencies with limited convertibility. The Company also incurs
operating expenses of programming in United States dollars and other foreign
currencies. For entities operating in economies that are considered non-highly
inflationary, which include Nova TV and POP TV, balance sheet accounts are
translated from foreign currencies into United States dollars at the relevant
period end exchange rate; 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 translation adjustments are
reflected in a component of shareholders' equity with no effect on the
consolidated statements of operations. PRO TV operates in an economy qualifying
as highly inflationary. Accordingly, non-monetary assets are translated at
historical exchange rates and monetary assets are translated at current exchange
rates. Translation adjustments are included in the determination of the 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 official exchange rates
for the Czech koruna, Romanian lei, Slovenian tolar and Slovak koruna and market
exchange rate for the German mark, at the end of, and during, the periods
indicated were as follows:

INCOME STATEMENT
BALANCE SHEET ------------------------------------
------------------------------------ SIX MONTHS SIX MONTHS
AT AT ENDED ENDED
DECEMBER 31, JUNE 30, MOVEMENT JUNE 30, JUNE 30, MOVEMENT
1995 1996 % 1995 1996 %
------------ -------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Czech koruna equivalent of $1.00........ 26.60 27.61 -3.80 26.44 27.46 -3.86
Romanian lei equivalent of $1.00........ 2,578 3,028 -17.46 2,402(1) 2,888 -20.23
Slovak koruna equivalent of $1.00....... 29.69 31.00 -4.23 29.68(2) 30.44(3) 2.50
Slovenian tolar equivalent of $1.00..... 126 136.61 -8.42 126(4) 134.34 -6.62
German mark equivalent of $1.00......... 1.43 1.52 -6.29 1.43 1.50 -4.90
</TABLE>
- ------------------

(1) Average exchange rate from December 1, 1995 through December 31, 1995 only.

(2) Average for 1995.

(3) Average for first six months of 1996.

(4) Average exchange rate from December 15, 1995 through December 31, 1995 only.

The Company's results of operations and financial position for the six
months ended June 30, 1996 have been impacted by changes in foreign currency
exchange rates since December 31, 1995. In the highly inflationary economy in
Romania, PRO TV indexes sales contracts to the United States dollar in order to
minimize the effects of Romanian lei devaluations. The Czech koruna, German
mark, Romanian lei, Slovenian tolar and the Slovak koruna have all weakened
against the United States dollar in the six months ended June 30, 1996 as shown
above.

As a result, the underlying Czech koruna and Slovenian tolar assets and
liabilities of Nova TV and POP TV, respectively, will have decreased by 3.8% and
8.4%, respectively, in dollar terms due to foreign exchange movements. Media Pro
International's monetary assets and liabilities will have decreased by up to
17.5% during the six month period ended June 30, 1996 depending on the time they
remained outstanding during the period. Likewise, investments in unconsolidated
affiliates (PULS and FFF, both in Germany) will have decreased 6.3% in United
States dollar terms.

Nova TV's operating income, together with interest costs and minority
interest, is approximately 4.0% lower than would be the case had the weighted
average exchange rate for the six months ended June 30, 1996 remained the same
as for the six months ended June 30, 1995.

27
<PAGE>
POP TV and PRO TV's operating losses, together with interest costs and
minority interest, are approximately 6.6% and 20.2%, respectively, lower than
would be the case had the weighted average exchange rate for the six months
ended June 30, 1996 remained the same as for the year ended December 31, 1995
(subject to certain adjustments to Media Pro International profit and loss items

which are derived from non-monetary assets and liabilities). Similarly, equity
in loss of unconsolidated affiliates was 4.9% lower than would have been the
case had weighted average exchange rates remained unchanged.

RESULTS OF OPERATIONS

Six months ended June 30, 1996 compared to the six months ended June 30, 1995

A comparison between the certain operating data for consolidated entities
in the six months ended June 30, 1996 and 1995 is shown below for reference
purposes:

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------------------------
CORPORATE
(IN $000S) NOVA TV PRO TV POP TV VIDEOVOX EXPENSES TOTAL
- ------------------------------ ------- -------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................. $52,878 $ 4,980 $ 3,656 $ 291 $ -- $61,805
Total station expenses........ (30,777) (9,983) (8,040) (736) -- (49,536)
Corporate expenses............ -- -- -- -- (7,173) (7,173)
------- -------- ------- -------- --------- -------
Net operating income (loss)... $22,101 $ (5,003) $(4,384) $ (445) $(7,173) $ 5,096
======= ======== ======= ======== ======== =======
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
------------------------------------------------------------------
CORPORATE
(IN $000S) NOVA TV PRO TV POP TV VIDEOVOX EXPENSES TOTAL
- ------------------------------ ------- -------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................. $47,238 $ -- $ -- $ -- $ -- $47,238
Total station expenses........ (25,831) -- -- -- -- (25,831)
Corporate expenses............ -- -- -- -- (6,249) (6,249)
------- -------- ------- -------- --------- -------
Net operating income (loss)... $21,407 $ -- $ -- $ -- $(6,249) $15,158
======= ======== ======= ======== ========= =======
</TABLE>

The Company's consolidated net revenues increased $14,567,000, or 31%, to
approximately $61,805,000 for the six months ended June 30, 1996 from
$47,238,000 for the same period in 1995. This increase was primarily
attributable to the increase in advertising revenues earned by Nova TV which
increased by $5,640,000 to $52,878,000 in the six months ended June 30, 1996,
and the Company's new operations, PRO TV and POP TV, which had net revenues of
$4,980,000 and $3,656,000, respectively, in the six months ended June 30, 1996.
Since the Company has a minority ownership or non-controlling interest in PULS
and FFF, losses incurred by PULS and FFF are accounted for under the equity
method and, therefore, no revenues are presented in respect of these entities.

Total station operating expenses increased $17,909,000 to $40,801,000 in
the six months ended June 30, 1996. As a percentage of net revenues, total
station operating costs and expenses increased from 48% in the six months ended
June 30, 1995 to 66% for the six months ended June 30, 1996. These expenses
represent the costs associated with the operations of Nova TV, PRO TV, POP TV
and Videovox, including amortization of programming rights of $10,269,000 and
$6,492,000, and depreciation of station assets and amortization of other
intangibles of $6,109,000 and $3,196,000 in the six months ended June 30, 1996
and 1995, respectively. The increase in station operating costs and expenses was
primarily attributable to the addition of the Company's new operations, PRO TV,
POP TV, and Videovox, which had total station expenses of $9,983,000, $8,040,000
and $736,000, respectively, and partially to increased scope of operations of
Nova TV and amortization on Nova TV's larger program library.

28
<PAGE>
Station selling, general and administrative expenses increased $5,796,000
to $8,735,000 in the six months ended June 30, 1996 from $2,939,000 for the same
period in 1995. As a percentage of net revenues, station selling, general and
administrative expenses increased from 6% for the six months ended June 30, 1995
to 14% for the six months ended June 30, 1996. This increase in station selling,
general and administrative expenses as a percentage of net revenues was
primarily the result of additional station selling, general and administrative
expenses from the Company's start up of PRO TV and POP TV.

Corporate operating costs and development expenses in the six months ended
June 30, 1996 and June 30, 1995 were $7,173,000 and $5,439,000, respectively,
increasing $1,734,000, or 32%. This increase was primarily due to the Company's
increased scope of operations.

Operating income decreased $10,062,000 as the Company generated operating
income of $5,096,000 in the six months ended June 30, 1996 compared to operating
income of $15,158,000 in the six months ended June 30, 1995. The overall
decrease in the Company's operating results was primarily attributable to
operating losses from the Company's new operations, PRO TV and POP TV, both
launched in December 1995, and partially to increased corporate and development
expenses.

Equity in loss of unconsolidated affiliates decreased $830,000 to
$5,936,000 for the six months ended June 30, 1996 from $6,766,000 for the six
months ended June 30, 1995. The Company's share of losses in PULS for the six
months ended June 30, 1996 was lower despite the Company's increase in ownership
from 43.3% at June 30, 1995 to 52.6% at June 30, 1996. PULS had begun a new
local programming format which reduced operating costs and slightly increased
net revenues. In addition, losses at FFF have also decreased as a result of a
similar change in its programming format and slightly increased net revenues.

Interest and other income increased $120,000, or 13%, to $1,079,000 for the
six months ended June 30, 1996.

Interest expense decreased $602,000, or 28%, to $1,532,000 during the six
months ended June 30, 1996 from $2,134,000 in the six months ended June 30,
1995. This was primarily due to lower debt levels at Nova TV, including the

early repayment of debt, during the six month period ended June 30, 1996
compared to the same period in 1995.

Provision for income taxes was $8,313,000 for the six months ended June 30,
1996 and $8,178,000 for the six months ended June 30, 1995. The income tax
provision in the six months ended June 30, 1996 and June 30, 1995 primarily
related to income taxes payable in the Czech Republic on Nova TV pre-tax profits
which increased due to increased net income at Nova TV, offset by a decline in
the income tax rate from 41% in the six months ended June 30, 1995 to 39% in the
six months ended June 30, 1996.

Minority interest in income of consolidated subsidiaries was $1,144,000 in
the six months ended June 30, 1996 and $3,923,000 in the six months ended June
30, 1995. This decrease was primarily the result of losses for the Company's new
operations PRO TV and POP TV launched in December 1995, which more than offset
increased profits at Nova TV.

As a result of these factors, the net loss of the Company was $12,380,000
and $4,769,000 for the six months ended June 30, 1996 and June 30, 1995,
respectively.

1995 compared to 1994

The Company's net revenues increased $45,353,000, or 85%, to $98,919,000 in
1995 from $53,566,000 in 1994. This increase was attributable primarily to the
increase in advertising revenues earned by Nova TV as a result of growth in the
television advertising market in the Czech Republic and, to a lesser extent,
increased market share in that market. In addition, the increase in the 1995
figure was partially attributable to the fact that PRO TV and POP TV commenced
broadcasting in December 1995. Since the Company has a minority ownership
interest in PULS and FFF, losses incurred by PULS and FFF are accounted for
under the equity method and, therefore, no revenues are presented in respect of
these entities.

Station operating expenses increased $17,368,000, or 48%, to $53,451,000 in
1995 from $36,083,000 in 1994. As a percentage of net revenues, station
operating costs and expenses decreased from 67% in 1994 to 54% in 1995. These
expenses represent the costs associated with the

29
<PAGE>
operations of Nova TV, PRO TV and POP TV, including amortization of programming
rights of $16,319,000 and $10,403,000 and depreciation of station assets and
amortization of other intangibles of $7,251,000 and $3,773,000 for the years
ended 1995 and 1994, respectively. The increase in station operating costs and
expenses was primarily attributable to the expanding Nova TV operations and Nova
TV broadcasting for the full year in 1995 compared with 11 months during 1994,
as well as the launches of PRO TV and POP TV at the end of 1995. Station
operating costs and expenses as a percentage of net revenues decreased due to
revenues growing at a faster rate than such costs and expenses.

Station selling, general and administrative expenses increased $807,000, or
13%, to $6,816,000 in 1995 from $6,009,000 in 1994. As a percentage of net
revenues, station selling, general and administrative expense decreased from 11%

in 1994 to 7% in 1995. This decrease in station selling, general and
administrative expenses as a percentage of net revenues was a result of fixed
costs being spread over a larger revenue base, certain start-up expenses
associated with Nova TV early in 1994 not recurring in 1995, and offset in part
by the operations of PRO TV and POP TV commencing in December 1995.

Corporate operating costs and development expenses in 1995 and 1994 were
$14,111,000 and $4,684,000 respectively, increasing $9,427,000, or 201%. The
increase was primarily attributable to the Company's increased scope of
operations and the increased number of development projects in 1995.

The non-cash stock compensation charge of $5,833,000 and $858,000
recognized in 1994 and in 1995, respectively, relates to shares and options
granted to officers and employees of the Company. Under the terms of the
Company's contracts with its former President, the Company issued 454,703 shares
of Class A Common Stock to a trust nominated by him. Upon his departure in
August 1995, 194,872 shares remained unvested. The Company and the former
President agreed that 18,000 of these unvested shares are eligible for vesting
on December 31, 1996. In 1995, $858,000 was recognized as expense to account for
the vesting of 64,958 shares under the original plan and the 18,000 unvested
shares which remain eligible for vesting.

Operating income increased $21,351,000 as the Company generated operating
income before minority interest of $22,308,000 in 1995 compared to $957,000 in
1994. The overall increase in the Company's operating results was attributable
to continued improved performance at Nova TV in the comparative periods.

Equity in loss of unconsolidated affiliates increased $1,139,000, or 8%, to
$14,816,000 in 1995 from $13,677,000 in 1994. The increase in losses was due to
an increase in the Company's share of losses in PULS as a result of increased
investment in PULS and the recognition of a full year of losses for FFF for 1995
compared to a partial year for 1994. The Company invested in FFF in April of
1994.

Interest and other income increased $1,059,000 to $1,238,000 in 1995 from
$179,000 in 1994. This increase was primarily attributable to the interest
earned on the proceeds of issuance of common stock of the Company on October 13,
1994 and November 9, 1995.

Interest expense increased $2,967,000 to $4,959,000 in 1995 from $1,992,000
in 1994. This increased interest expense was primarily due to interest on bank
loans and a capital lease on the building at Nova TV for a full year in 1995
compared to a partial year for 1994, and partially to interest payments related
to a loan from Ronald S. Lauder, the principal shareholder of the Company.

Provision for income taxes was $16,340,000 in 1995 and $3,331,000 in 1994.
The increase in 1995 income tax provision primarily relates to income taxes
payable in the Czech Republic on Nova TV pre-tax profits which were $39,050,000
in 1995 and $10,276,000 in 1994.

Minority interest in income of consolidated subsidiaries was $6,491,000 in
1995 and $2,396,000 in 1994. This increase reflected the increased profitability
of Nova TV, offset, in part, by losses for PRO TV and POP TV.

The net loss of the Company was $18,736,000 and $20,505,000 in 1995 and
1994, respectively. The decrease in losses was attributable to the increased
profits of Nova TV offset by increases in the Company's share of losses in PULS
and FFF, higher development costs and the effect of increased station operating
expenses and selling, general and administrative expenses from the recent
launches of PRO TV and POP TV.

30
<PAGE>
1994 compared to 1993

The Company had net revenues of $53,566,000 in 1994. No revenues were
generated from inception through December 31, 1993 as Nova TV commenced
broadcasting in February 1994. In April 1994, the Company obtained its interest
in FFF. Since the Company has a minority ownership interest in PULS and FFF,
losses incurred by PULS and FFF are accounted for under the equity method and,
therefore, no revenues are presented in respect of these entities.

Station operating expenses were $36,083,000 in 1994 and $1,802,000 in 1993.
These expenses represent the costs associated with the operations of Nova TV,
including depreciation of station assets of $3,773,000 (1993: $4,000) and
amortization of programming rights and other intangibles of $10,403,000 (1993:
$140,000). This increase in station operating expenses was attributable to the
commencement of broadcast operations by Nova TV in February 1994.

Station selling, general and administrative expenses were $6,009,000 and
$811,000 in 1994 and 1993 respectively. These expenses represent the costs
associated with Nova TV. These increases were attributable to the commencement
of broadcast operations by Nova TV in February 1994.

Corporate expenses were $10,517,000 (including a non-cash stock
compensation charge of $5,833,000) and $2,708,000 in 1994 and 1993,
respectively. These corporate expenses represent the cost of the Company's
management activities both in administering the affairs of the Company during
its development stage and in seeking additional television broadcast
opportunities in other markets of Central Europe and Germany. A compensation
expense of $5,833,000 was incurred in 1994 in relation to shares and options
granted to officers and employees of the Company.

The Company produced an operating profit of $957,000 in 1994 before
minority interests, compared to operating losses of $5,321,000 in 1993. This
favorable change in the Company's operating results is attributable to the
impact of profitable operations at Nova TV in 1994.

Equity in loss of unconsolidated affiliates was $13,677,000 and $3,671,000
in 1994 and 1993, respectively. Losses in 1994 were higher than 1993 because
1994 included a full year of PULS as an operating station, against only one
month in 1993. 1994 also included losses from FFF, in which the Company did not
invest until April 1994.

Interest and other income was $179,000 in 1994 and $64,000 in 1993. This
increase in interest and other income was attributable to the interest earned on
the proceeds from the issuance of stock during 1994. The Company invested the
proceeds in tax-exempt government securities.

Interest expense was $1,992,000 in 1994 and $140,000 in 1993, reflecting
interest on bank loans to Nova TV and loans from affiliates and Ronald S.
Lauder, the principal shareholder of the Company, in connection with the
expansion of the Company's operations.

Provision for income taxes was $3,331,000 for the year ended December 31,
1994 and $0 for the year ended December, 1993. This relates to income taxes
payable on Nova TV profits. In the year ended December 31, 1993, Nova TV
incurred losses.

Minority interest in the results of Nova TV was a $2,396,000 profit share
in 1994 and an $884,000 loss share in 1993.

The net loss of the Company was $20,505,000 and $8,360,000 in 1994 and
1993, respectively. The increase in losses is attributable to the Company's
share of losses in PULS and FFF, and higher corporate costs including a
$5,833,000 compensation charge, offset by profits from Nova TV in 1994, after
tax and minority interest totaling $4,649,000.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities was $5,464,000 for the six months
ended June 30, 1996 and $3,863,000 for the six months ended June 30, 1995. This
increase was due to increased sales and accounts receivable collections at Nova
TV, offset by cash used to fund the start-up of operations at POP TV and PRO TV.

Accounts receivable increased $12,022,000, or 51%, to $35,581,000, net of
currency fluctuations, at June 30, 1996, from $23,559,000 at June 30, 1995. This
is primarily due to increased sales at Nova TV and the addition of accounts
receivable from PRO TV and POP TV. Current liabilities increased $25,120,000, or
89%, to $53,236,000 at June 30, 1996 from $28,116,000 at June 30, 1995,
principally as a result of

31
<PAGE>
increased income and other taxes payable, programming contracts, and increased
accounts payable and accrued liabilities related to the Company's new
operations, PRO TV and POP TV.

Cash used in investing activities was $29,997,000 for the six months ended
June 30, 1996 and $22,066,000 for the six months ended June 30, 1995, primarily
due to fixed asset acquisition in the Company's new operations, PRO TV and POP
TV, and higher capitalized development costs for the six months ended June 30,
1996. In the six month period ended June 30, 1996 the Company invested
$10,670,000 in property, plant and equipment to continue the buildout of the POP
TV and PRO TV operations as well as to further strengthen the capital base of
Nova TV. Also during the six month period ended June 30, 1996, $14,349,000 was
invested in development activities related primarily to equipment and
programming for Markiza TV (launched in August 1996). During the six months
ended June 30, 1996, the Company sold $6,300,000 of marketable securities and
$2,000,000 of previously restricted cash was made unrestricted by action of the
Hungarian government subsequent to the privatization of Videovox, to partially
fund these investments.

The Company's investment in unconsolidated affiliates increased, net of
currency fluctuations, to $16,691,000 at June 30, 1996 from $12,433,000 at
December 31, 1995. This is a result of additional investments in PULS of DM
12,500,000 ($8,360,000) and FFF of DM 1,500,000 ($1,084,000), partially offset
by the Company's share of the losses in PULS of DM 7,491,000 ($4,994,000) and
FFF of DM 1,329,000 ($942,000) for the six months ended June 30, 1996. The
investments reflect an additional capital call of DM 10,000,000 ($6,570,302) for
PULS and an additional loan of DM 1,500,000 ($985,545) to FFF during the six
months ended June 30, 1996.

Cash used in financing activities was $2,826,000 and $3,077,000 for the six
months ended June 30, 1996 and 1995, respectively, principally consisting of the
repayment of bank loans, loans to affiliates and repayment of advances from
affiliates.

The Company's operations to date have been financed primarily through
public offerings of shares of Class A Common Stock in October 1994 (the 'IPO')
and November 1995 (the '1995 Offering') which raised net proceeds of $68.8
million and $86.5 million, respectively. Prior to the IPO, the Company relied on
certain affiliates for capital in the form of both debt and equity financing.

The Company was paid a dividend of approximately $1,400,000 in 1995 by Nova
TV. In March 1996, Nova TV declared a dividend of Kc 330,000,000 ($12,066,000)
of which Kc 116,325,000 ($4,153,000) was paid to the Company in May 1996 and of
which Kc 116,325,000 ($4,294,000) was paid to the Company in September 1996. As
part of the Additional Nova TV Purchase, the Company is entitled to receive CS's
remaining 1995 dividend payment from Nova TV of Kc 38,800,000 ($1,402,000)
scheduled to be paid in November 1996. After the receipt of the dividend payment
paid in September 1996, based on the Company's original investment for its 66%
interest in Nova TV, the Company has received 107% of its original United States
dollar investment in Nova TV made approximately two and one-half years earlier.

Primarily as a result of the 1995 Offering and the results of operations of
Nova TV in 1995 and 1996, the Company had cash of $25,348,000 at June 30, 1996
($53,210,000 at December 31, 1995) and marketable securities of $4,352,000 at
June 30, 1996 ($10,652,000 at December 31, 1995) available to finance its future
activities.

The Company has made and will continue to make investments to develop
broadcast operations in Central and Eastern Europe. The Company's cash needs for
those investment activities may exceed cash generated from operations, resulting
in external financing requirements that may be satisfied through bank debt
facilities or other means.

CME BV currently has a bridge loan facility (the 'Bridge Loan') for up to
$25.0 million with ING Bank N.V. ('ING'). As of October 29, 1996, $25.0 million
was outstanding on the Bridge Loan which matures on November 30, 1996 and bears
annual interest at a rate of 1.6% per annum above LIBOR. The shares of CME BV
have been pledged by CME NV as security for the Bridge Loan. Both CME and CME NV
have guaranteed repayment of the Bridge Loan. The Bridge Loan contains financial
covenants (such as limits on consolidated indebtedness to consolidated net worth
and consolidated indebtedness to consolidated broadcast cash flow). It is
anticipated that the Bridge Loan will be repaid with the proceeds of the

Offering.

CME, Central European Media Enterprises N.V., CME's Netherlands Antilles
Subsidiary ('CME NV'), and CME BV (collectively, the 'CME Borrowers') have
executed a term sheet with ING pursuant

32
<PAGE>
to which ING and a group of banks contemplate providing the CME Borrowers with a
revolving loan facility in the aggregate of up to $50.0 million (the 'Potential
Revolving Loan Facility'). The Potential Revolving Loan Facility would bear
interest at rates per annum ranging from 2.0% to 3.5% over LIBOR, depending on
the financial performance of the CME Borrowers and would mature on November 30,
2001, except that the maximum commitment would be reduced incrementally every
six months beginning on June 30, 1999. The outstanding principal amount at any
time on the Potential Revolving Loan Facility could not exceed the maximum
commitment at such time. Under the Potential Revolving Loan Facility, the CME
Borrowers would pay commitment, arrangement and underwriting fees. The Potential
Revolving Loan Facility would be secured by a pledge of CME BV's equity
interests in CME's operating Subsidiaries, a pledge of CME NV's equity interest
in CME BV, a security interest on all of the assets of CME, an assignment of all
distributions from CME's operating Subsidiaries and a lien on intercompany loans
and current account balances of the CME Borrowers. The Potential Revolving Loan
Facility also would contain affirmative and negative covenants, including
limitations on additional borrowing, financial covenants (such as limits on
consolidated indebtedness to consolidated net worth and consolidated
indebtedness to consolidated broadcast cash flow), a negative pledge on the
assets of the CME Borrowers, a prohibition on dividend payments to the holders
of the Common Stock of CME, and restrictions on mergers and sales and transfers
of assets. There can be no assurance that the Potential Revolving Loan Facility
will be consummated.

The Company has agreed to execute a Promissory Note in favor of Ronald S.
Lauder pursuant to which Mr. Lauder has agreed to make up to $20.0 million in
loans available (in increments of $2.0 million) to the Company (the 'Lauder
Loan'). The Lauder Loan is unsecured and subordinated to the Bridge Loan and the
Potential Revolving Loan Facility, bears interest at a rate per annum equal to
2.0% over LIBOR and matures at the earlier of (i) the consummation of the
Offering and (ii) October 1, 1998. As additional consideration for the Lauder
Loan, Mr. Lauder will be granted warrants exercisable for up to 100,000 shares
of Class A Common Stock, which grant will be made to the proportionate extent
that the aggregate principal amount actually borrowed by the Company bears to
$20.0 million. The warrants will be exercisable for five years commencing one
year after the date of grant of the warrants at an exercise price equal to the
lesser of (i) 110% of the Price to Public in the Offering per share and (ii)
$32.00 per share. As of October 29, 1996, the Company had borrowings of $14.0
million under the Lauder Loan.

On August 1, 1996, the Company entered into the Additional Nova TV Purchase
for the purchase of CS's 22% economic interest and virtually all of CS's voting
rights in Nova TV for a purchase price of Kc 1 billion ($36,218,000). The
Company has also entered into a loan agreement with CS to finance 85% of the
purchase price. The remainder of the purchase price Kc 150 million ($5,432,000)
will be paid by the Company on November 15, 1996 out of the Company's cash

balances. The loan from CS was drawn in August 1996 and will be drawn in April
1997 in the amounts of Kc 450,000,000 ($16,298,000) and Kc 400,000,000
($14,487,000), respectively to fund purchase payments due at those times, and
the loan bears an interest rate of 12.9% annually. Quarterly repayments on the
loan are required in the amount of Kc 22,500,000 ($815,000) during the period
from November 1997 through November 1998, Kc 42,500,000 ($1,539,000) during the
period from February 1999 through August 2002, and Kc 20,000,000 ($724,000)
during the period from November 2002 through November 2003.

The Company expects that Nova TV's future cash requirements will continue
to be satisfied through operating cash flows and available borrowing facilities.
Nova TV currently has two loan facilities with CS. The first facility consists
of a long term loan due on December 30, 1999 in the principal amount of Kc 300
million ($10,866,000) and currently bears interest at a rate of 14.5% per annum,
subject to change based on fluctuations in the lender's base rate, of which Kc
180,000,000 ($6,519,000) was outstanding at June 30, 1996. Principal payments of
Kc 60,000,000 ($2,173,000) are due each year on this facility. In January 1996
Nova TV paid the Kc 60,000,000 due on this facility for 1996. The second
facility is a line of credit loan, obtained in November 1995, for an amount up
to Kc 250,000,000 ($9,055,000) bearing interest at a rate of 12% per annum. This
facility was unutilized at June 30, 1996. These loans are secured by Nova TV's
equipment, vehicles and receivables.

Under the partnership agreement for PULS, the Company is not required to
contribute any additional capital to PULS; however, if any of the partners in
PULS, including the Company, do not fund future capital

33
<PAGE>
requirements their equity interest in PULS may be diluted. Since September 1995,
the partners have approved capital calls aggregating DM34,500,000 ($22,697,000).
The Company has agreed to fund DM32,000,000 ($21,053,000) of which DM28,500,000
($18,750,000) has been funded to date.

The Partners of PULS have retained a financial advisor to seek one or more
strategic partners for PULS. Such strategic partner would be expected to acquire
a significant equity interest in PULS and assume responsibility for PULS'
operations. Such a strategic investment would be anticipated to significantly
dilute the Company's equity interest in PULS and to decrease the Company's
future funding obligations to PULS. Such investment also could result in a
material reduction of the carrying value of the Company's equity investment in
PULS, which was $8.9 million as of June 1996, and a corresponding charge against
the Company's earnings in the period incurred. Regardless of whether a
transaction with a strategic investor is consummated, there is no assurance that
the Company may not have to take a reduction of all or a portion of the carrying
value of PULS. In addition, a reduction of the carrying value of PULS, or other
factors, might cause the Company to reduce all or part of the carrying value of
the Company's investments in FFF and SFF, which were $6.6 million and $1.0
million, respectively, as of June 30, 1996. See 'The Company,'
'Business--Operations in Germany: The German Stations--Recent Developments.'

Except for the Company's working capital requirements and completing the
funding of television broadcast operations in Romania, Slovenia, the Slovak
Republic and Ukraine, the Company's future cash needs will depend on

management's acquisition and development decisions. The Company is actively
engaged in the development of additional investment opportunities in broadcast
licenses and investments in existing broadcasting companies throughout Central
and Eastern Europe. The Company incurs limited expenses in identifying and
pursuing broadcast opportunities before any investment decision is made. The
Company anticipates making additional investments in other broadcast operations,
supplemented by capital raised from local financial strategic partners as well
as local debt and lease financing, to the extent that it is available and
appropriate for each project. If MobilRom is awarded a telecommunications
license in Romania, the Company will be obligated to fund MobilRom in the amount
of approximately $3.5 million within 15 days after such award and up to an
additional $6.5 million during the next 12 months. The Company's aggregate
funding commitment with respect to MobilRom is up to $16.0 million.

The laws under which the Company's currently operating subsidiaries and
affiliates 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. The Company's voting power is sufficient to compel Nova TV to
make 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. In the case of POP TV, the Company's voting
power is not sufficient to compel the payment of dividends. 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's voting power in Markiza TV is
not sufficient to compel the distribution of dividends. In the case of PULS, the
PULS Partnership Agreement provides that if profits are available for
distribution, 66 2/3% of the partnership interest may require that 40% of such
profits be placed in reserves until DM 16,700,000 are reserved. All profits in
excess thereof must be distributed. The agreement relating to FFF does not
contain restrictions on distributions out of available profits. See 'The
Company.' The laws of countries where the Company is developing operations
contain restrictions on the payment of dividends.

The Company believes that the net proceeds from the Offering, together with
the Company's current cash balances, cash generated from Nova TV, the Potential
Revolving Loan Facility, and local financing of broadcast operations and
broadcast operations under development should be adequate to satisfy the
Company's operating and capital requirements for approximately 12 to 18 months.

<PAGE>
BUSINESS

GENERAL

The Company is the leading television broadcaster in Central and Eastern

Europe, broadcasting to an aggregate of 77.1 million people in five countries in
the region and an additional 8.9 million people in Germany. The Company operates
the leading national television station in the Czech Republic and the Company's
operations in Romania and Slovenia command the leading audience share within
their areas of broadcast reach. The Company recently commenced operations in the
Slovak Republic and Ukraine and has operations under development in Poland and
Hungary which potentially could reach an additional 50 million people. The
Company's strategy is continue to capitalize on the substantial market
opportunities created by the emergence of private commercial television and the
corresponding significant growth of television advertising expenditures in these
markets.

The Company or its strategic and financial partners have been successful in
obtaining broadcast rights and then in turn transforming these rights into
operating television stations in a relatively short period of time. In many of
the Company's markets the Company's broadcast operations have become the top
rated stations within their broadcast reach in their first year of operation.
License fees, if any, payable to governmental entities in connection with
securing television licenses are usually minimal. A summary of the Company's
broadcast operations appears below.

<TABLE>
<CAPTION>
BROADCAST ECONOMIC
TELEVISION BROADCAST OPERATIONS TERRITORY REACH(1) INTEREST
- --------------------------------------- ------------------- --------- --------
<S> <C> <C> <C>
Nova TV Czech Republic 10.3 88.0%(2)
PRO TV Romania 11.1 77.5%(3)
POP TV Slovenia 1.5 72.0%
Markiza TV Slovak Republic 3.3 80.0%
Studio 1 + 1 Group Ukraine 50.9 50.0%
PULS Berlin-Brandenburg 6.0 55.9%
Nuremberg Station Nuremberg 1.1 37.4%
Leipzig Station Saxony 0.7 16.2%
Dresden Station Saxony 1.1 16.2%
---------
Totals 86.0
---------
---------
</TABLE>

- ------------------

(1) 'Broadcast Reach' measures the number of people in millions the Company's or
the Company's local partners' broadcast signal can reach.

(2) The Company is in the process of registering the Additional Nova TV Purchase
pursuant to Czech law which purchase raised its economic interest in Nova TV
from 66.0% to 88.0%.

(3) The Company's partners in Romania hold options to purchase equity in Media
Pro International from the Company which, if exercised, could reduce the
Company's equity interest to 66.0%.

OPERATING ENVIRONMENT

Private commercial television stations (those which derive the majority of
their revenues from the sale of advertising) generally began broadcasting in the
United States in the 1940s, in parts of Western Europe in the 1950s, but not
until the 1980s and 1990s in Germany, and in Central and Eastern Europe in the
1990s. Commercial television has become an important medium for advertisers in
the more developed advertising markets. For example, in 1995, television
advertising expenditures totaled $36 billion in the United States and an
aggregate of $22 billion in the 16 countries in Western Europe. The Company
believes that, over time, television advertising expenditures in Central and
Eastern European countries, which are relatively low, will follow a pattern of
development similar to that of Western Europe and the United States.

35
<PAGE>
The following table and chart set forth (i) the population and number of TV
households for the countries of Central and Eastern Europe where the Company is
focusing its expansion efforts and (ii) the recent growth in television
advertising expenditures in certain of those countries.

TV
COUNTRY POPULATION(1) HOUSEHOLDS(1)(2)
- ------------------- ------------- ----------------
Czech Republic..... 10,432,774 4,104,000
Hungary............ 10,318,838 3,772,846
Poland............. 38,792,442 11,779,600
Romania............ 23,198,330 7,080,000
Slovak Republic.... 5,432,383 1,881,000
Slovenia........... 2,051,522 620,989
Ukraine............ 51,867,828 16,793,000
------------- ----------------
Total......... 142,094,117 46,031,435
============= ================

- ------------------
(1) Source: U.S. Bureau of the Census.
(2) Source: Television 95: European Key Facts. A TV Household is a residential
dwelling with one or more television sets.

[INSERT UPDATED CHART ON ADVERTISING EXPENDITURES (P. 34 OF 1995 PROSPECTUS)]
(DISK TO COME FROM SCHRODER)

Note: Ukraine data not available for historic periods.
- ------------------
(1) Source: DDB Needham Worldwide A.S. Praha Advertising, IP Prague and Company
estimates and exchange rates from International Financial Statistics.
(2) Source: Plus Advertising and Company estimates and exchange rates from
International Financial Statistics.
(3) Source: DDB Needham Worldwide A.S. Praha Advertising, IP Bratislava and
Company estimates and exchange rates from International Financial
Statistics.
(4) Source: M & M Magazine and Mediana Research and exchange rates from
International Financial Statistics.

36
<PAGE>
The Regional Agreement for European Broadcasting Area of 1961 allocates
television broadcast frequencies to each country. Access to the available
frequencies is controlled by regulatory agencies in each country. New awards of
licenses to broadcast on these frequencies occur infrequently.

Czech Republic

The Company believes that the Czech Republic has developed a stable market
economy and is moving toward eventual membership in the European Union. Prior to
1992, television advertising in the Czech Republic was limited to the two public
channels. The television advertising market in the Czech Republic has expanded
rapidly since the onset of privatization activities in 1992, increasing to
approximately $145 million in 1995, as estimated by the Company. The Czech media
law originally adopted in 1991, and revised in 1996, allowed for the creation of
Nova TV and generally permits up to 10% of its broadcast time to be used for
advertising compared with 1% of broadcast time on each public channel.
Currently, there are four over-the-air television stations in the Czech
Republic: two public stations which reach 96% and 87% of the population,
respectively, and two private commercial stations, Nova TV and Premiera, which
reach 99% and 40% of the population, respectively. It is currently estimated
that at some point during prime time hours 60% to 70% of the Czech population
watches television, as compared with 60% of the population of the United States.

Romania

Romania is a parliamentary democracy of approximately 23.2 million people,
making it one of the largest potential markets in Central and Eastern Europe.
Approximately 97% of Romanian households have television, and cable penetration
is approximately 32%. According to the Company's estimates, television
advertising totaled approximately $25 million in 1995, restricted primarily to
public television stations, which may only broadcast advertising for up to 7% of
daily broadcast time. In 1992, the National Commission for Audio-Visual (the
'Romanian Media Commission') was established to grant broadcast licenses and
regulate television, radio and cable. Private broadcasters, such as PRO TV, are
permitted to use up to 15% to 20% of their broadcast time for advertising. PRO
TV has a broadcast reach of 48% of the Romanian population. Currently, there are
two public stations and two private stations competing with PRO TV. Of the

public stations, TVR1 reaches the entire Romanian population and TVR2 reaches
60%. The two primary private competitors, Antena 1 and Tele 7ABC, reach
approximately 15% and 9% of the population, respectively.

Slovenia

Slovenia is a parliamentary democracy of 2.1 million people and has a per
capita GDP of approximately $9,200 for 1995, the highest among the former
Eastern bloc countries. Approximately 97% of Slovenian households have
television. Television advertising increased 65% in 1995 to $38 million, and
represented approximately 31% of total advertising expenditures. The licenses
under which the stations operate and which constitute the POP TV network are
regulated pursuant to the Law on Public Media adopted in 1994 and pursuant to
the Law on Telecommunications adopted in 1988. Private broadcasters are
permitted to use up to 20% of their broadcast time for advertising compared to
15% on public stations. Currently, there are two public stations and two private
stations in Slovenia competing with the POP TV network. Historically, the
Slovenian television market has been dominated by one of the public stations,
SLO 1, which reaches 97% of the Slovenian population. In addition, cable
television penetration in Slovenia is at a relatively high 35%.

Slovak Republic

The Slovak Republic has a population of 5.4 million people and 99% of
households have television. The economy of the Slovak Republic has recently
begun to respond to economic reform, with GDP growth of 7.3% in the first
calendar quarter of 1996. The Company believes that as a market economy develops
in the Slovak Republic, television advertising spending has the potential to
grow significantly. Television advertising increased 20% in 1995 to $30 million,
according to the Company's estimates. For example, television advertising
spending per capita in the Slovak Republic in 1995 was less than half of that of
the Czech Republic. The license under which Markiza TV operates is regulated
pursuant to the

37
<PAGE>
Act on Radio and Television Broadcasting. Currently, there are two national
public stations which compete with Markiza TV.

Ukraine

Ukraine, a parliamentary democracy of 51.9 million people, is the largest
market served by the Company. Approximately 94% of Ukrainian households have
television, and cable penetration is approximately 6%. Although television
advertising in Ukraine was only $9 million in 1995, the Company expects that
Ukraine's television advertising market will grow rapidly as Ukraine develops an
economy that fosters competition among providers of goods and services. The
Studio 1 + 1 Group is permitted to use up to 10% of its broadcasting time for
advertising. The Studio 1 + 1 Group has a broadcast reach of 98% of Ukraine's
population.

Germany

Germany is currently Europe's largest television advertising market with

television advertising expenditures of approximately $4.4 billion in 1995. Prior
to 1984, television in Germany was dominated by two public broadcasters, one of
which is ARD, an association of 12 public regional broadcasting stations, the
other of which is ZDF, a national public broadcaster. In 1984, legislation was
enacted which permitted the expansion of private national television stations
and which reduced restrictions on advertising on private television stations.
Since that time, television broadcasting in Germany has been conducted primarily
by several well-established public and private national stations. Until 1993,
there were no privately owned regional television stations in Germany. Efforts
to broadcast television on a regional basis were limited to (i) ARD, one of the
major public broadcasters, which, in addition to their joint nationwide program
provide programs intended for regional reception and (ii) the inclusion on
certain national television broadcast stations of a program segment of 30 to 45
minutes in length in the early evening which focuses on a particular region's
news and events. As a result, television advertising was purchased and broadcast
primarily on a national basis.

In 1993, certain of the 16 German states began to award private regional
broadcasting licenses, such as those awarded to operate PULS, the Nuremburg
Station, the Leipzig Station and the Dresden Station (collectively, the 'German
Stations'). Licenses to broadcast regional television have been awarded to other
broadcasters in Munich, Hamburg and Berlin.

STRATEGY

The Company's objective is to strengthen its position as the leading
broadcaster in Central and Eastern Europe by applying its broadcasting,
financial and political expertise to achieve profitability in all of its
existing broadcast operations and to develop and operate additional television
broadcast operations.

Early Entry Into Attractive Television Markets

The Company's strategy is to establish national and regional television
broadcast operations in the emerging markets of Central and Eastern Europe. The
Company believes there are significant competitive advantages to being an early
entrant into these markets including: (i) the number of television broadcast
frequencies being made available is regulated by government licensing
authorities, thus limiting competition, and (ii) early entrants have the
opportunity to establish good relationships with advertisers and build viewer
loyalty and station identity before other entrants can commence operations. In
the case of the emerging markets of Central and Eastern Europe, early entrants
also have the opportunity to acquire exclusive rights to attractive programming
for their respective markets.

The Company believes that advertising expenditures in Central and Eastern
European countries generally will continue to increase rapidly as those
countries develop market-based economies and competition increases for goods and
services. For example, in the Czech Republic, total advertising expenditures
increased from approximately $64 million in 1991 to $342 million in 1995, and
television advertising expenditures increased from approximately $6 million in
1991 to $145 million in 1995. The Company believes that Nova TV, as an early
entrant with limited competition, has been able to successfully capitalize on
this market growth, having achieved net advertising revenues of $98 million

during 1995 and $53 million for the six months ended June 30, 1996. During
December 1995, the

38
<PAGE>
Company launched television broadcast operations in Romania and Slovenia which
have established themselves as the leading television broadcasters within their
broadcast reach. The Company recently commenced television broadcast operations
in the Slovak Republic and Ukraine. The Company intends to compete for
commercial television licenses in other Central and Eastern European markets
which it deems economically attractive, including Poland and Hungary.

Attractive Programming

The Company seeks to create and acquire programming which will appeal to a
mass market audience in the Central and Eastern European countries within which
the Company and its partners operate. Programming is a critical element in
building audience share, which is an extremely important factor in generating
advertising revenues. The Company's strategy is to broadcast a mix of locally
and internationally produced movies, series, talk shows, variety shows, sports
and news. The Company believes broadcasting a significant amount of locally
produced programming and developing a distinctive independent news program give
a strong local identity to its broadcast operations, appeal to local tastes and
are desired by the local regulatory authorities. The Company complements its
local programming by maintaining an extensive library of exclusive programming
rights to popular films and television series produced by the world's leading
studios, including Warner Brothers, Paramount Pictures, Twentieth Century Fox
and Sony Pictures. The Company utilizes 'western style' production techniques to
provide high quality local language programming to its television audiences. The
Company employs modern equipment and short, lively program formats and purchases
state of the art equipment for its studios in each location where it conducts
broadcast operations.

Investment Alliances

The Company's strategy is to form investment alliances with strategic local
partners in each country or region where it seeks to establish broadcast
operations. The Company believes that these alliances are essential to obtaining
television broadcast licenses. The Company seeks investment alliances with
strategic local partners who are known to local licensing authorities, are well
respected in their local media communities and are politically non-partisan. In
addition, the Company believes that having alliances with local partners
demonstrates to local licensing authorities that it has a strong commitment to
broadcast programming which is responsive to particular local interests. The
success of this strategy has been demonstrated by the Company's record of
obtaining broadcast rights in several markets in Central and Eastern Europe
under competitive conditions.

Maximize Broadcast Reach

The Company's strategy is to maximize its broadcast reach within its
markets in order to maximize its potential audience share and therefore increase
the attractiveness of its programming to advertisers. In those areas where the
Company and its partners' stations do not reach the entire population, the

Company seeks to create a network for its programming and seeks to distribute it
through other, unaffiliated local broadcasters and through local cable systems.
The Company concentrates on reaching urban areas where advertising dollars are
focused. The media laws in many of the countries where the Company operates
require cable operators to carry all over the air broadcasting within their
areas free of charge. The Company currently employs satellite technology in
Romania, which does not have a well-developed terrestrial television
distribution system, in order to distribute its programming to a network of
affiliate stations. In order to serve other markets, the Company has obtained a
12 year lease on a transponder on the Satellite Transponder, which is
anticipated to be launched in March 1997. The Satellite Transponder will allow
the Company's broadcast operations to distribute programming efficiently to a
disbursed network of terrestrial television transmitters and cable system
headends without the necessity of building a potentially costly transmission
infrastructure. Using existing digital compression technology, the Company will
be able to use the Satellite Transponder to simultaneously distribute
programming on up to five different channels emanating from five distinct
locations.

Leveraging Critical Mass Among Its Operations

The Company currently broadcasts to approximately 86.0 million people in
six countries and is developing operations in several other countries. The
Company believes it has reached a critical mass which will allow it to begin to
benefit from synergies among the Company's operations. For example, the

39
<PAGE>
Company believes it will gain greater leverage in its purchasing, programming,
news gathering and production abilities and in developing related businesses
which can serve broadcasters not affiliated with the Company. In addition, the
Company intends to market certain lower cost production services to producers
and broadcasters in the higher cost countries of Western Europe.

Employing a Dedicated Team of Experienced Professionals

License application procedures in Central and Eastern Europe and Germany
are complex and typically involve lengthy competition against numerous other
parties, including major media companies. The Company has assembled an
experienced team of professionals who have successfully led the Company through
complex licensing processes in several locations in Central and Eastern Europe
and who are seeking broadcast rights in other markets of Central and Eastern
Europe. Leonard M. Fertig, President and Chief Executive Officer of the Company,
has been active in obtaining broadcast licenses for the Company and its
strategic partners in Central and Eastern Europe since 1991. In addition, Ronald
S. Lauder, Chairman of the Company and former U.S. Ambassador to Austria, has
been actively involved in the affairs of Central and Eastern Europe for many
years and plays an active role in pursuing and maintaining licenses for the
Company's operations. The Company believes its management and dedicated
licensing team provide a competitive advantage in obtaining broadcast licenses.
The Company also employs experienced operating and financial managers and
accesses international technology, programming and funding to promote the
successful development and management of its broadcast operations.

OPERATIONS IN THE CZECH REPUBLIC: NOVA TV

General

Nova TV is the leading commercial television broadcaster in the Czech
Republic, broadcasting pursuant to a 12 year license awarded in February 1993.
Nova TV's signal reaches 99% of the Czech Republic's population of approximately
10.4 million, including 4.1 million TV households. Nova TV generated $98 million
in net advertising revenues in 1995.

As the first private national station serving the Czech Republic,
broadcasting a wide range of programming, including movies, comedies, dramatic
series, soap operas, news and sports, Nova TV has built and maintained
significant market share during its first two and one-half years of operations.
According to independent surveys undertaken by GFK/AISA, an independent polling
agency, for the period from January 1, 1996 through June 30, 1996, Nova TV
achieved an overall 65% to 70% audience share of the Czech Republic television
market. Audience share represents the percentage of televisions turned on at a
particular time which are tuned to a particular television station.

Programming

Nova TV's programming strategy is to appeal to a mass market audience. The
station broadcasts for 18 hours daily, including locally produced news, sports
(including exclusive coverage of the Czech Republic's national soccer league),
variety shows and other programming , as well as a broad range of popular films
and series from international distributors. In 1995, Nova TV produced
approximately 2,500 hours of original local programming, comprising
approximately 36% of its broadcast time per day. Local programming primarily
consists of the daily breakfast show, Breakfast with Nova, news broadcasts and
news related shows, sports, game shows and music videos. An additional 7% of
Nova TV's broadcast time was devoted to Czech films and Czech origin
programming, making the total of Nova TV's broadcast time devoted to Czech
programming equal to 43% of broadcast time.

Nova TV has acquired exclusive broadcasting rights in the Czech Republic or
in the Czech language, to a number of successful American and Western European
programs and films produced by such companies as Walt Disney, Sony Pictures,
Twentieth Century Fox, Warner Brothers, Canal+ and Paramount Pictures. Nova TV
has the rights to broadcast over 12,000 internationally released films and
television episodes during the next several years. Many of these films will not
have been released in the Czech Republic prior to being broadcast by Nova TV.
Nova TV has agreements with Reuters, CNN and WTN to receive foreign news reports
and film footage to integrate into its news programs. All foreign language
programs and films are dubbed into the Czech language.

40
<PAGE>
Advertising

Nova TV derives its revenues principally from the sale of commercial
advertising time. In the Czech Republic most television advertising is sold
through independent agencies and media buying groups. Nova TV currently serves
over 200 advertisers, including such large multi-national advertisers as Procter

& Gamble, Unilever, Jacobs Suchard and Colgate-Palmolive. For the six months
ended June 30, 1996, no single advertiser accounted for more than 10% of Nova
TV's revenues.

Nova TV is permitted to broadcast advertising for up to 20% of its
broadcast time in any one hour, subject to an overall daily limit of 10% of
broadcast time. In addition, up to 60 minutes per day of broadcast time may be
used for 'direct sales' advertising. Its primary competitor, CT1, a public
television station, is restricted to 1% of broadcast time for advertising. The
Council for Radio and Television Broadcasting in the Czech Republic (the 'Czech
Radio and Television Council') makes certain distinctions between private and
public broadcasters. For example, private broadcasters, such as Nova TV, are
permitted to interrupt programming with advertising and may advertise alcohol
products (subject to certain restrictions). Public broadcasters may not engage
in these activities. As the television advertising market in the Czech Republic
continues to develop, the Company believes Nova TV is well positioned to
capitalize on its much larger inventory of available advertising time.

Competition

Nova TV competes principally with CT1 for audience, programming and
advertising. Nova TV competes on a more limited basis with CT2, a public network
of regional frequencies which reaches approximately 87% of the Czech Republic's
population, and with Premiera, a privately owned and operated television station
serving Prague and several other metropolitan areas which comprise approximately
40% of the country's population. There are no other significant television
stations broadcasting Czech language programming to the Czech Republic. The
Company believes that, for various technical, political and financial reasons,
additional private national broadcast competition in the Czech Republic is
unlikely in the near future.

Limited competition for viewers also comes from foreign stations
transmitted through cable and satellite television. At the present time,
approximately 14% of all Czech Republic households have cable television and
approximately 17% receive direct-to-home satellite television. The media
authorities in the Czech Republic have licensed several companies to provide
cable television services to the Czech Republic. The two largest are Kabel Net
s.r.o., a subsidiary of United International Holdings, Inc., which operates a
wireless cable network in the cities of Prague and Brno, and Kable Plus, the
largest cable operator in the Czech Republic with over 400,000 subscribers.
Czech authorities have required cable operators to carry all over-the-air
broadcasting within their areas free of charge.

Nova TV competes for revenues with other media, such as newspapers, radio,
magazines, outdoor advertising, transit advertising, telephone directory
advertising and direct mail.

Regulation

Nova TV, and the terms of the license pursuant to which it operates, are
regulated by the Czech Radio and Television Council pursuant to legislation
which recently has been amended. The license was granted by the Czech Radio and
Television Council to CET 21, for 12 years under terms which require CET 21 to
cooperate with the Company in operating Nova TV. CET 21, a group of six Czech

and Slovak nationals that includes Dr. Vladimir Zelezny, General Director of
Nova TV, irrevocably contributed the use of the license as its capital
contribution to Nova TV.

Under Czech legislation or the license pursuant to which Nova TV operates,
Nova TV is required to comply with a number of restrictions on programming and
advertising, none of which the Company believes have had a material adverse
effect on Nova TV. These restrictions include that: 25% of Nova TV's broadcast
time (increasing to 40% in its fifth year of operations) must be programming of
Czech origin, which includes the station's news, breakfast show, sports and
other internally produced programming; 27% of its broadcast time (including
programming of Czech origin) must be produced by persons or groups independent
of Nova TV (one-half of which is required to be produced by Czech persons or
groups independent of Nova TV, provided that such programming is available at
competitive market rates); and the Company may not interfere with the
journalistic independence of Nova TV or its programming. Czech legislation also
prohibits programming that might offend public morals. If the

41
<PAGE>
Czech Republic becomes a member of the European Union, Nova TV may be subject to
additional program content regulation.

Regulations relating to the amount of advertising broadcast on television
in the Czech Republic provide that advertising on Nova TV cannot exceed 20% of
its broadcast time in any one hour subject to an overall limit on advertising of
10% of total daily broadcast time. In addition, up to 60 minutes per day of
broadcast time may be used for 'direct sales' advertising. Advertising is not
permitted during children's programming or the evening news. Restrictions on
advertising content include that (i) tobacco advertising is prohibited, (ii)
advertising targeted at children before or after children's programming is
prohibited if such advertising promotes behavior that would endanger the health,
physical or moral development of children, (iii) advertising of alcoholic
beverages is restricted but not prohibited and (iv) members of the news
department of Nova TV are prohibited from appearing in advertisements. There are
also restrictions on the frequency of advertising breaks within a program.

The Czech legislation pursuant to which CET 21 holds its license and
pursuant to which Nova TV operates contains certain provisions concerning the
relationship between the license holder and the broadcaster. In light of recent
amendments to such legislation, the Czech Radio and Television Council has
announced that it will commence administrative procedures to review these
relationships for all the private commercial broadcasting licenses granted
pursuant to Czech legislation. Nova TV has received a notification from the
Czech Radio and Television Council announcing such procedure, requesting
information from Nova TV, making inquiries concerning Nova TV's formal corporate
registry, and questioning whether certain agreements and activities should be
entered into and conducted by CET 21 instead of Nova TV. It is expected that the
Czech Radio and Television Council may develop recommendations on these topics.
The Czech Radio and Television Council has legal authority to impose fines in
the amounts of Kc10,000 ($362) to Kc2,000,000 ($72,438) for failure to comply
with this legislation or with recommendations of the Czech Radio and Television
Council. Nova TV believes that it is in compliance with the provisions of Czech
law and that compliance with anticipated recommendations, if any, of the Czech

Radio and Television Council or the imposition of such fines will not have a
material adverse effect on Nova TV or the Company.

OPERATIONS IN THE CZECH REPUBLIC: RADIO NOVA ALFA

In February 1995, the Company entered into the first of a series of loan
and consulting agreements with Radio Nova Alfa, one of two Czech Republic
national radio broadcasters. The Company has advanced a total of approximately
Kc 92,000,000 ($3,332,000) in loans to Radio Nova Alfa under these agreements.
In addition to receiving interest under these loans, the Company receives a
consulting fee equal to 60% of the pre-tax profits of Radio Nova Alfa and
provides management advisory services to the radio station. Subject to the
approval of the Czech Radio and Television Council, the Company's loans to, and
profit interest in, Radio Nova Alfa may be converted into an equity interest in
Radio Nova Alfa of up to 46%.

Radio Nova Alfa, which was awarded a license in January 1993, had been
operating as a 'news/information' station with an audience share of
approximately 5%. In October 1995, the Company re-launched Radio Nova Alfa with
a greater proportion of entertainment-driven programming. Audience share
increased to approximately 10.1% during the second quarter of 1996. Radio
competition in the Czech Republic is provided by Czech public radio and over 40
local radio stations.

OPERATIONS IN ROMANIA: PRO TV

General

PRO TV is a national television broadcast network in Romania which
broadcasts its programming on, and sells advertising for, regional television
stations operated under licenses held by entities currently controlled by Adrian
Sarbu and Ion Tiriac, the Company's partners in PRO TV. PRO TV reaches
approximately 48% of the Romanian population of 23.2 million, focusing primarily
on Romania's urban areas. The Company anticipates that PRO TV's reach will
expand to approximately 55% by the end of 1996. PRO TV broadcasts from Bucharest
through terrestrial broadcast facilities throughout Romania linked by a
digitally encoded satellite signal. The Company anticipates that PRO TV will be
able to increase its reach from current levels through additional regional
licenses which have

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been granted to entities currently controlled by Messrs. Sarbu and Tiriac and
through affiliations with other local broadcasters and agreements with cable
carriers.

PRO TV broadcasts a wide range of programming, including movies, comedies,
dramatic series, talk shows, news and reports. Independent research from Gallup
Media in Romania shows that in Bucharest, PRO TV is currently the top rated
television station, with an average television viewer share of approximately 40%
during prime time for the latest rating period.

Media Pro International, through which PRO TV is operated, also operates
PRO FM, a radio network which is broadcast to a population of approximately 2.4

million people in Romania.

Programming

PRO TV's programming strategy is to appeal to a mass market audience. PRO
TV broadcasts 24 hours of programming daily except Monday, when PRO TV
broadcasts for 18 hours. Approximately 30% of PRO TV's programming constitutes
locally produced programming, including, news, sports (including coverage of
Romania's Soccer League), a breakfast show and current affairs shows. Romanian
produced programming is expected to increase and constitute approximately 40% of
programming by the end of 1996 with the launch of a daily game show and a
Saturday evening variety/game show.

PRO TV has secured exclusive broadcast rights in Romania to a large number
of successful American and Western European programs and films produced by such
companies as Sony Pictures, Warner Brothers, Twentieth Century Fox, Paramount,
CBS, MCA, MGM and Granada. PRO TV's library includes over 1,500 feature films
and over 5,000 television episodes. Many of these films will not have been
released in Romania prior to their broadcast on PRO TV. All foreign language
programs and films are subtitled in Romanian. PRO TV also receives foreign news
reports and film footage from Reuters and WTN to integrate into its news
programs.

Advertising

PRO TV derives revenues principally from the sale of commercial advertising
time, most of which is sold through independent agencies. Advertisers include
large multinational firms such as Coca-Cola, Pepsi, Colgate Palmolive, Procter &
Gamble, Nestle, Wrigley, Philip Morris and Daewoo.

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. PRO
TV's primary competitor, TVR 1, a public broadcaster, is restricted to 7% of
broadcast time for advertising, and a maximum of 10% during any one hour. Both
private and public broadcasters are subject to restrictions on the frequency of
advertising breaks, as well as on the advertising of tobacco and alcohol, but
restrictions on public stations are more severe. For example, private
broadcasters can insert advertising during news programs while public
broadcasters cannot.

Competition

Prior to the launch of PRO TV, TVR 1 was the dominant television station in
Romania with its coverage of the entire population, a popular news show and
limited entertainment programming. Other local competitors include public TVR 2,
with a 60% reach, and privately-owned Antena 1 and Tele 7 ABC, covering about
15% and 9% of the population, respectively.

Additional competitors include cable and satellite stations. PRO TV
competes for advertising revenues with other media, such as newspapers, radio,
magazines, outdoor advertising, telephone directory advertising and direct mail.

Regulation

Licenses for the television stations which show programming provided by PRO
TV and which broadcast advertising sold by PRO TV are regulated by the Romanian
Media Commission. In addition to its terrestrial television licenses which have
been granted for seven year periods expiring in 2001 and 2002, PRO TV has been
granted a seven year license to broadcast via satellite.

Under regulation established by the Romanian Media Commission, PRO TV and
the stations which broadcast programming and advertising provided by PRO TV are
required to comply with certain restrictions on programming and advertising.
These restrictions include the establishment of a target of

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at least 40% of programming to be of Romanian origin for television operators
which use satellite transmission as is used by PRO TV.

Regulations relating to the amount of advertising broadcast on television
in Romania provide that advertising on PRO TV cannot exceed 20% of its broadcast
time in any one hour, subject to an overall limit on advertising of 15% of total
daily broadcast time. In addition, up to 5% of broadcast time may be used for
'direct sale' advertising. Restrictions on advertising content include that (i)
tobacco advertising is prohibited (ii) advertising targeted at children or
during children's programming must account for the overall sensitivity of that
age group, (iii) advertising of alcoholic beverages is restricted but not
prohibited and (iv) members of the news department of PRO TV are prohibited from
appearing in advertisements. There are also restrictions on the placement of
advertisements during programming.

Recent Developments

The Company owns a 95.0% equity interest in Unimedia which has agreed to
acquire a 10.0% equity interest in MobilRom. MobilRom has applied for a GSM
cellular telephone license in Romania. It is anticipated that the Romanian
Government will award two GSM cellular telephone licenses in late October 1996.
There are several other groups competing for these licenses. If a license is
awarded to MobilRom, the Company does not anticipate exercising any managerial
or operational control over MobilRom. It is anticipated that MobilRom will not
have active operations unless it is awarded such a license. See 'Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources.'

OPERATIONS IN SLOVENIA: POP TV

General

POP TV is a national television broadcast network in Slovenia which
provides its programming to, and sells advertising for, MMTV, Tele 59 and an
additional affiliate, TV Robin. POP TV reaches approximately 75% of the
population of Slovenia, including Ljubljana, the capital of Slovenia, and
Maribor, Slovenia's second largest city. POP TV currently is negotiating
affiliation agreements with other regional television broadcasters to expand its
broadcast reach in Slovenia.

POP TV broadcasts a wide range of programming, including movies, comedies,
dramatic series, talk shows, news and sports. Independent industry research
shows that in the areas of Slovenia in which POP TV can be seen POP TV had an
average television viewer share of approximately 45% for the latest ratings
period, the largest television market share in these areas.

Programming

POP TV's programming strategy is to appeal to a mass market audience. POP
TV provides an average of 16 hours of programming daily. Local programming
includes 24ur, a nightly news program, and Personality of the Week, a late-night
talk show.

POP TV has secured exclusive program rights in Slovenia to a large number
of successful American and Western European programs and films from many of the
major studios, including X-Files, ER, Friends, The Bodyguard, Forever Young and
Robin Hood: Prince of Thieves. Many of these films will not have been released
in Slovenia prior to their broadcast on POP TV. All foreign language programs
and films are subtitled in Slovenian.

Advertising

POP TV derives revenues principally from the sale of commercial advertising
time. Advertisers include large multinational firms such as Renault, Coca Cola,
Wrigley's, Ford and Daewoo. Private commercial television stations are permitted
to broadcast advertising for up to 20% of daily broadcast time compared with 15%
for public television stations in Slovenia. Both private and public television
broadcasters in Slovenia are subject to restrictions on the frequency of
advertising breaks, as well as on the advertising of tobacco and alcohol.

Competition

Historically, the television market in Slovenia has been dominated by SLO
1, a public television station. SLO 1 is entertainment oriented while the other
public station, SLO 2, focuses on information and culture. SLO 1 reaches 97% of
the Slovenian population, and SLO 2 reaches 96% of the Slovenian

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population. Two private television stations which compete with POP TV in
Slovenia have achieved a relatively small share of the market. In July 1996, the
Company, together with MMTV and Tele 59, entered into an agreement to purchase a
66% equity interest in Kanal A, a privately owned television station in Slovenia
in competition with POP TV which agreement would increase POP TV's broadcast
reach to 85%. There is currently an injunction in effect preventing the
completion of the Kanal A Agreement. See 'Litigation'.

POP TV also competes with foreign television stations, particularly
Croatian, Italian, German and Austrian stations. Cable penetration is relatively
high compared with other countries in Central Europe and approximately 32% of
households have satellite dishes. In addition, POP TV competes for revenues with
other media, such as newspapers, radio, magazines, outdoor advertising,
telephone directory advertising and direct mail.

Regulation

The licenses granted to MMTV and Tele 59 have been granted for 10 year
terms expiring in 2003. Under Slovenian television regulations, POP TV and its
affiliate stations are required to comply with a number of restrictions on
programming and advertising. These restrictions include that 10% of the
station's broadcast time must be internally produced programming, certain films
and other programs may only be broadcast between 11:00 pm and 6:00 am, and POP
TV news editors, journalists and correspondents must not reflect a biased
approach toward news reporting.

Regulations relating to the amount of advertising broadcast on television
in Slovenia provide that advertising on POP TV cannot exceed 20% of its daily
broadcast time. Advertising is not permitted during news, documentary and
children's programming which is not in excess of 30 minutes or during religious
programming. There are also restrictions on the frequency of advertising breaks
during films and other programs. Restrictions on advertising content include a
prohibition on tobacco advertising and on the advertising of alcoholic beverages
other than low alcohol content beer.

OPERATIONS IN THE SLOVAK REPUBLIC: MARKIZA TV

General

Markiza TV, in which the Company owns an 80% economic interest, was
launched as a national television station in the Slovak Republic on August 31,
1996. Markiza TV at launch reached approximately 60% of the Slovak Republic's
population of 5.4 million people including virtually all of its major cities.
The Company intends to increase Markiza TV's broadcast reach by adding
additional transmitters or affiliates.

Programming

Markiza TV's programming strategy is to appeal to a mass market audience.
Markiza TV provides an average of 18 hours of programming daily. Approximately
45% of Markiza TV's programming is locally produced, including news, current
affairs, game shows, variety shows and a weekly sitcom.

Markiza TV has secured exclusive broadcast rights in the Slovak Republic to
a large number of top rated United States and European programs produced by
major studios including Warner Brothers, Twentieth Century Fox, MCA, and BBC.
Markiza TV's library includes over 1,000 films and nearly 3,000 television
episodes. All foreign language programming is dubbed in either Slovak or Czech.
Markiza TV also receives foreign news reports and film footage from CNN, Reuters
and WTN, which are integrated into Markiza TV's news programs.

Advertising

Markiza TV derives revenues principally from the sale of commercial
advertising time. Advertisers include large multinational firms such as
Unilever, Johnson & Johnson, Pepsi, Nestle, Coca-Cola and Colgate-Palmolive.
Private commercial television stations are permitted to broadcast advertising
for up to 10% of total daily broadcast time and up to 20% of broadcast time in
any single hour.

Competition

The Slovak Republic is served by two public television stations, STV1 and
STV2, which dominated the ratings until Nova TV began broadcasting in 1994. Nova
TV's signal reaches a portion of the Slovak Republic and has a 21% audience
share in the Slovak Republic. Markiza TV also competes with VTV, a

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private satellite broadcaster, public television stations located in Austria,
the Czech Republic and Hungary, which stations' signals reach the Slovak
Republic, and additional foreign private television stations, and foreign
satellite stations.

Regulation

Markiza TV's broadcast operations are subject to regulations imposed by the
Act on Radio and Television Broadcasting, 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 Television Council'). The
license to operate Markiza TV was granted by the Slovak Television Council to
the Company's local partner in STS, for a period of 12 years under terms which
require the Company's local partner to enter into a partnership with the Company
to found STS.

Under the license pursuant to which Markiza TV operates, Markiza TV is
required to comply with several restrictions on programming, none of which the
Company believes will have a material adverse effect on Markiza TV. These
restrictions include that of Markiza TV's monthly broadcast time: 40% must be
Slovak production (increasing to a minimum of 51% within three years from
commencement of broadcasting); 10% must be programming for children; broadcasts
of first performance films and series must have a minimum of 51% European
production (of which there must be a minimum of 8% Slovak production) and no
more than 45% United States production; and no more than 40% of foreign first
performance films and series may be in the Czech language (decreasing to 20% by
the fourth year of broadcasting). Markiza TV's programming is required to be
consistent with the Slovak Constitution and not promote violence, hate,
intolerance, the intentional use of indecent language or immoral behavior.
Programming endangering the psychological or moral growth of children and youth
cannot be broadcast between 6:00 am and 10:00 pm Markiza TV's news broadcasts
must be objective and balanced and clearly differentiate between opinion and
news. If the Slovak Republic becomes a member of the European Union, Markiza TV
may be subject to additional program content regulation.

Under both the license pursuant to which Markiza TV operates and Slovak
statutes, Markiza TV must comply with certain limitations in its broadcast of
advertising, none of which the Company believes will have a material adverse
effect on Markiza TV. Regulations relating to the amount of advertising
broadcast on Markiza TV provide that advertising may not exceed 20% of broadcast
time in any single hour, subject to an overall advertising limit of 10% of total
daily broadcast time. In addition, up to one hour daily, not exceeding 20% in
any one hour, may be used for 'direct sales' advertising. The news may not be
sponsored and news staff may not appear in advertisements. Restrictions on

advertising content include that (a) tobacco advertising is prohibited, (b)
advertising for children or in which children perform which promotes behavior
endangering the health, psychological or moral development of children is
prohibited, and (c) advertising which endangers morals or consumer's interest in
health, safety and environmental protection are also prohibited. The
advertisement of beer is permitted, however, advertisement of other alcoholic
beverage remains prohibited. There are also restrictions on the frequency of
advertising breaks within a program.

OPERATIONS IN UKRAINE: STUDIO 1 + 1 GROUP

General

The Company recently acquired a 50% economic interest in the Studio 1 + 1
Group which has the right until August 2000 to broadcast programming and sell
advertising on Ukrainian National Channel One ('UT-1'), one of Ukraine's public
television stations, for a specified number of hours per week, including during
prime time. The Studio 1 + 1 Group currently provides approximately 50 hours of
programming on UT-1 per week. UT-1 reaches approximately 98% of Ukraine's
population. In addition, the Company, together with the Studio 1 + 1 Group, has
plans to apply for licenses in Ukraine to develop a new national television
station. The Company's initial financial commitment in Ukraine is anticipated to
be up to $12.0 million.

The Company continues to hold a 30% equity interest in Gravis, a company
which operates two terrestrial television stations in the capital city of Kiev.
Gravis currently generates only limited revenues. As previously disclosed, the
Company had been in negotiations in connection with the development of
television broadcast licenses in 16 cities in Ukraine. The Company has
determined that it is unlikely that

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the development of these television broadcast licenses would be economically
viable at the present time.

Programming

The Studio 1 + 1 Group's programming strategy is to appeal to a mass market
audience. The Studio 1 + 1 Group intends to secure exclusive broadcast rights in
Ukraine to a large number of successful American and Western European programs
and films from many of the major studios. All foreign language programs and
films (other than those in the Russian language) are dubbed into the Ukrainian
language. During its first year of broadcast operations, the Studio 1 + 1 Group
broadcast primarily foreign programming. During 1997, the Company intends to
increase the percentage of its programming that is locally produced, including
talk shows and entertainment shows.

Advertising

The Studio 1 + 1 Group derives revenues principally from the sale of
commercial advertising time. Advertisers include Nestle, MasterFoods, Wrigleys,
Coca-Cola and Procter & Gamble. The Studio 1 + 1 Group is permitted to sell 10%
of its overall broadcast time, and up to 15% in any one hour, for advertising.

UT-1, like other broadcasters, is subject to restrictions on the frequency of
advertising breaks, as well as on the advertising of tobacco and alcohol.
Although television advertising in Ukraine was only $9 million in 1995, the
Company expects that Ukraine's television advertising market will grow rapidly
as Ukraine develops an economy that fosters competition among providers of goods
and services.

Competition

Ukraine is served by four television stations, including UT-1 and UT-2,
which are Ukrainian public stations, and ICTV, a private network. The Studio 1 +
1 Group, through UT-1, has a broadcast reach of 98% of the Ukrainian population.
UT-2 and ICTV reach 95% and 50% of Ukraine's population, respectively. In the
anticipation of the privatization of UT-2, one of the partners of the Studio 1 +
1 Group is actively seeking rights to broadcast on UT-2. There can be no
assurance that UT-2 will be privatized or that the Studio 1 + 1 Group will
obtain such broadcast rights.

Regulation

The Studio 1 + 1 Group provides programming to UT-1 pursuant to a five-year
agreement expiring in August 2000. Broadcasts of the Studio 1 + 1 Group's
programming and advertising on UT-1 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 developing media laws, which
include restrictions on the content of programming and advertising and
limitations on the amount and placement of advertising in programs. The Company
does not expect these restrictions to have a material adverse impact on the
Studio 1 + 1 Group.

OPERATIONS IN GERMANY: THE GERMAN STATIONS

General

The Company owns interests in four of the seven private regional television
stations currently operating in Germany: PULS (formerly known as 1A Berlin), the
Nuremberg Station, the Leipzig Station and the Dresden Station. The German
Stations reach an aggregate of approximately 8.9 million people including the
capital city of Berlin. Germany is served on a nationwide basis by three major
over-the-air private commercial television stations and two major over-the-air
public television stations. German television broadcasters include several other
private television stations, regional members of the public network ARD,
providers of regional windows, and television stations delivered only by cable
or satellite.

Recent Developments

The partners of PULS have retained a financial advisor to seek one or more
strategic partners for PULS. Such strategic partner would be expected to acquire
a significant equity interest in PULS and assume responsibility for PULS'
operations. Such a strategic investment would be anticipated to significantly
dilute the Company's equity interest in PULS and to decrease the Company's
future funding obligations to PULS. Such investment also could result in a
material reduction of the carrying value of the Company's equity investment in

PULS, which was $8.9 million as of June 1996, and a

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corresponding charge against the Company's earnings in the period incurred.
Regardless of whether a transaction with a strategic investor is consummated,
there is no assurance that the Company may not have to take a reduction of all
or a portion of the carrying value of PULS. In addition, a reduction of the
carrying value of PULS, or other factors, might cause the Company to reduce all
or part of the carrying value of the Company's investments in FFF and SFF, which
were $6.6 million and $1.0 million, respectively, as of June 30, 1996.

Programming

The German Stations currently broadcast a 'total local' programming
schedule which consists of in-depth local coverage of news and events in their
respective regions. The objective of 'total local' is to provide an alternative
to the public and private national broadcasters by being uniquely responsive to
the distinct regional tastes of local viewers.

PULS's program schedule currently consists of 7 hours of original
programming per day. On most days, this 7 hour schedule is repeated once during
the day (with some news broadcasts repeated more than once). The Nuremberg
Station broadcasts original programming for 4.5 hours each day and repeats this
programming. The program schedules of the Leipzig Station and the Dresden
Station consist of 2.5 hours of original programming per day and repeats this
programming. In addition, there is a commercial videotext service which
broadcasts the remainder of the day on the Nuremberg Station and the Leipzig and
Dresden Stations.

Advertising

The German Stations have local sales forces which work closely with local
advertising agencies and customers in their regions. Advertisers on the German
Stations include area department stores, food chains, furniture stores and
automobile dealers.

Competition

The German Stations compete primarily with three over-the-air private
commercial national television stations, SAT.1, RTL and PRO 7, and two
over-the-air public national television stations, ZDF and ARD (an association of
regional public broadcasters). Under applicable regulations, the public
television stations may broadcast advertising only before 8:00 pm., Monday
through Saturday, and they are limited to an annual average of 20 minutes of
advertising per day. The German Stations also compete with approximately 25
stations delivered through cable or satellite.

Each of the German Stations also compete with other media, such as
newspapers, radio, magazines, outdoor advertising, transit advertising,
telephone directory advertising and direct mail. Some of their competitors are
public operations or are larger and have greater financial, marketing and other
resources than the Company.

Regulation

The German Stations, and the terms of the licenses pursuant to which they
operate, are regulated by the German states in which they are situated. These
regulations are based on an inter-state treaty and, therefore, generally are
similar in each state.

Under German regulations, the German Stations are required to comply with a
number of restrictions on programming and advertising, none of which the Company
believes has had a material adverse effect on these television stations. German
regulations prohibit programming that might offend public morals or that
violates measures designed to protect children. In addition, the majority of
programming consisting of films, series and documentary features is required to
be of European content. The license under which PULS operates requires that the
station broadcast at least 7 hours of non-repeated original programming each day
and that 30% of programming broadcast between 5:00 pm and 11:00 pm be of
regional character. In addition, PULS must cooperate with local independent
producers; it may not enter into arrangements favoring licensed productions over
programming produced or commissioned by the station. PULS also has agreed to
construct a second studio and establish further permanent and mobile facilities
in Potsdam, a city in the state of Brandenburg. Each of the licenses under which
the German Stations operates require regulatory approval to alter the overall
type and mix of programming broadcast on the stations.

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Regulations relating to the amount of advertising broadcast on the German
Stations provide that advertising may not interrupt religious services, shows
for children, or news or political features of less than 30 minutes. Advertising
may be shown only after program segments of at least 20 minutes and movies
exceeding 45 minutes may be interrupted by advertising only once for each
complete block of 45 minutes. The total amount of advertising may not exceed 20%
of daily broadcast time, and spot advertising may not exceed 15% of daily
broadcast time or 20% of a given one hour period. Restrictions on advertising
content include prohibitions on advertising contrary to health, consumer safety
or the environment, on political and religious advertising and on advertising
employing persons who regularly present news or political features.

BROADCAST OPERATIONS UNDER DEVELOPMENT

The Company continues to pursue and develop opportunities for television
broadcasting throughout Central and Eastern Europe and other areas. The Company,
together with local partners, has obtained television broadcast licenses and is
actively engaged in developing operations in the markets discussed below. The
Company continues to evaluate the economic viability of commencing broadcast
operations in each of these markets and there can be no assurance that the
Company will successfully pursue the development of these broadcast operations
or that these broadcast operations will generate profits in the future.

Hungary

In January 1996, the Hungarian Parliament passed a media law that provides
for the award of private television broadcasting licenses for two national
frequencies for 10 year terms. The Hungarian media law provides that

consortiums, consisting of at least three entities, can bid for the two
available frequencies. No entity will have the right to own greater than 49% of
any consortium and at least 26% of the ownership interests must be owned by
domestic entities. One frequency, which is currently used by the Hungarian
government as its secondary national television station, is anticipated to reach
approximately 95% of the population at launch. The other frequency is
anticipated to reach 70% of such population at launch and reach approximately
85% within one year of launch. The Company intends to join or form a consortium
in order to bid for a license. The Hungarian media board has not yet finalized
the licensing process and is expected to award the licenses in 1997.

The Company owns 95% of 2002 Kft, a broadcasting company in Hungary which
has been awarded a local microwave (MMDS) license. If developed, operations
under the license would have a potential broadcast reach of approximately
200,000 homes in Budapest. A subsidiary of 2002 Kft acquired Videovox, a company
engaged in the dubbing of foreign language programming, films, videos and
commercials into Hungarian which was privatized by the Hungarian government in
May 1996. The acquisition of Videovox is an integral component of the Company's
plans to develop broadcast operations in Hungary because (i) a significant
percentage of programming and films which the Company likely would broadcast in
Hungary will be of foreign origin and (ii) Videovox owns a facility which can be
converted into television studios.

Hungary has one of the more advanced economies in Central and Eastern
Europe with a relatively high GDP per capita of $4,278 in 1995. The Hungarian
television advertising market grew 14% from 1994 to 1995, in local terms based
on 1995 Hungarian television advertising spending of $160 million. Over 97% of
households in Hungary have television and approximately 40% of households have
cable television, the largest cable penetration in the region. Per capita
television advertising expenditures are significantly greater than the average
in Central and Eastern Europe, but are still relatively low when compared to
Western Europe. The Company believes that as a market economy continues to
develop in Hungary, television advertising expenditures will continue to grow.

Poland

The Company has an agreement with the Polish media group ITI, forming TVN,
to seek national and regional television broadcast licenses in Poland. ITI holds
67% of the equity in TVN and the Company holds the remaining 33%. The Company's
former partner in Poland, NTP Sp.z.o.o., has an option to purchase a 10% share
of TVN from ITI. On May 26, 1995, TVN applied for 20 regional licenses to
develop a television network in northern and central Poland. An initial capital
contribution by the Company of $1.65 million was made in May 1995. The capital
contribution will be refundable (after

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deducting certain expenses) in the event that TVN is not successful in obtaining
broadcast licenses in Poland.

In October 1996, the Polish National Radio and Television Council announced
its intention to award nine television broadcast licenses for northern Poland
and television broadcast licenses covering the cities of Warsaw and Lodz in
Poland to TVN. It is anticipated that the administrative process which is a

requirement in order for the final awards of these television broadcast licenses
will be completed by the end of 1996. The Company estimates that these
television broadcast licenses have a potential broadcast reach of approximately
7 million people.

TVN also recently entered into an agreement pursuant to which it acquired a
3% interest in TV Wisla. TVN also acquired an option to acquire a substantial
interest in TV Wisla. TV Wisla operates a television station in southern Poland
with a potential broadcast reach of approximately 8 million people. The Company
anticipates that TV Wisla together with the operations to be developed in
connection with the television broadcast licenses in northern Poland, Warsaw and
Lodz could form a television broadcast network.

Total television advertising expenditures for Poland's population of 38.8
million were approximately $330 million in 1995. TVN's competition would come
from the two national public broadcast channels, a public satellite channel, a
private commercial television station (Polsat, which currently reaches an
estimated 85% of Poland's population) and satellite and pay TV channels.

PROGRAMMING SERVICES

Through CMEPS, the Company provides an array of program-related services to
its television operations in Central and Eastern Europe, including program
acquisition, production, distribution (including satellite transmission),
promotion, schedule advisory services, and coordination of viewer research.
Currently, CMEPS assists the Company's broadcast operations and broadcast
operations under development in obtaining programming from American and Western
European film and television studios. As the Company expands its broadcast
operations in Central and Eastern Europe, the Company intends to use CMEPS to
reduce overall program costs by centralizing the purchase of rights to films and
programming. CMEPS will also create a program exchange service among the
Company's broadcast operations and will provide opportunities for co-production
and co-financing of programming among these broadcast operations. In addition,
CMEPS advises the Company's broadcast operations in connection with locally
produced programming.

SEASONALITY

The experience of the television industry is that advertising sales tend to
be lowest during the third quarter of each calendar year which includes the
summer holiday schedule (typically July and August) and highest during the
fourth quarter of each calendar year.

EMPLOYEES

As of September 1, 1996, (i) the Company had a central staff of 52
employees, (ii) Nova TV had 441 employees, (iii) PRO TV had approximately 578
employees, (iv) POP TV had approximately 147 employees, (v) PULS had
approximately 154 employees, (vi) the Nuremberg Station had approximately 74
employees, (vii) Markiza TV had approximately 346 employees, (viii) Videovox had
approximately 110 employees and (ix) Radio Nova Alfa had 29 employees. None of
the Company'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, and that its Subsidiaries' relations with their

employees are good.

PROPERTIES

The Central European Media Enterprises Ltd. group of companies leases
office space in London, in two separate locations. One lease covers
approximately 4,347 square feet of space and expires in 2004, except that the
Company can terminate the lease at its option in 1999, subject to penalty. The
other lease, for 2,205 square feet of office space in a nearby building, expires
in 2006.

Nova TV is party to a capitalized lease for a building in Prague for its
main studios and principal offices. The studios and offices total approximately
65,000 square feet. Modern studio facilities have been constructed in the
building. This capitalized lease provides for rental payments to be made by

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Nova TV as follows: $1,617,000 in 1996, $1,316,000 in 1997, $940,000 in 1998 and
$1,128,000 in 1999. In addition, additional payments in the aggregate of
approximately $9,626,000 through the end of 1999 may be made by Nova TV, which
payments would be applied to the purchase by Nova TV of this facility. The term
of the lease is for one year, but is renewable for additional one year periods
at the option of Nova TV. Nova TV has made a commitment to make the payments
aggregating $9,626,000, thereby enabling it to take ownership of the facility
after all such payments have been completed. PULS leases studios and offices,
totalling approximately 40,000 square feet, located at the base of Berlin's
government operated broadcasting tower. This lease expires in December 1999. The
Nuremberg Station leases studios and offices, totalling approximately 37,000
square feet, in an industrial center north of Nuremberg. This lease expires in
2001. CME BV has entered into an agreement on behalf of Media Pro International
for the purpose of acquiring the facility in Bucharest which contains PRO TV's
studios for a purchase price of approximately $1.8 million. The Company owns a
portion of a building in Ljubljana which contains POP TV's studios and offices
which occupy 2,000 square meters (approximately 21,528 square feet). Videovox
owns a significant portion of the building in Budapest in which its studios are
located and intends to purchase the remainder of the building. The building
contains 5,605 square meters (approximately 60,332 square feet). STS owns its
principal office facility in Bratislava which provides STS with 4,350 square
meters of office space (approximately 46,823 square feet).

In June 1995 the Company, through its wholly-owned subsidiary CMEPS,
obtained leasehold rights to a 33 Mhz transponder on the Eutelsat HB3 Satellite
which the Company anticipates will be launched in March 1997. The Satellite
Transponder, which has been leased through British Telecommunications plc for a
12 year period, will give the Company's stations the capability of distributing
programs to their terrestrial television transmitters as well as to cable
television systems throughout the Central and Eastern European region. The
Company paid a deposit of $850,000 toward future transponder lease obligations.
The annual charge for the lease is approximately $4.4 million, beginning after
the launch of the satellite. The obligations of CMEPS under the transponder
lease are guaranteed by CME.

LITIGATION

In July 1996, the Company, together with MMTV and Tele 59, entered into an
agreement to purchase a 66% equity interest in Kanal A, a privately owned
television station in Slovenia (the 'Kanal A Agreement'). Scandinavian
Broadcasting System SA ('SBS'), which claims to have certain rights to the
equity of Kanal A pursuant to various agreements, has challenged the validity of
the Kanal A Agreement in a United Kingdom court. Both the Company and SBS have
been granted injunctions by the United Kingdom courts preventing SBS, in the
case of the Company, and the Company, in the case of SBS, from taking certain
actions either to enforce such entity's claim to equity in Kanal A or to block
the claim of the other entity to equity in Kanal A. The Company has instituted
action in a Slovenian court requesting that courts in Slovenia resolve these
claims.

Various competitors of PULS and the Nuremberg Station have instituted legal
action against the media authorities for Berlin-Brandenburg and the Nuremberg
area seeking to overturn their decisions to award broadcast licenses to PULS and
the Nuremberg Station, respectively. These actions were instituted in 1993 and
1994, and there have been no decisions in relation thereto in the last 12
months. Similar action has been instituted by other applicants for the licenses
awarded to the Company's local partner in Leipzig and Dresden. An unfavorable
decision in any of these actions could have an adverse effect on the Company.

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.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Certain information concerning executive officers and directors of the
Company is set forth below:

NAME AGE POSITION WITH THE COMPANY
- ------------------------- --- ------------------------------------------------

Ronald S. Lauder......... 52 Chairman of the Board of Directors

Leonard M. Fertig........ 49 President, Chief Executive Officer and Director

John A. Schwallie........ 33 Vice President-Finance and Chief Financial
Officer

Andrew Gaspar............ 48 Vice President, Secretary and Director

Nicolas G. Trollope...... 49 Director

Herbert S. Schlosser..... 70 Director

Robert A. Rayne.......... 47 Director

All of the current directors of the Company have served as directors since
1994 except for Mr. Rayne who became a director in 1996.

Ronald S. Lauder, Chairman of the Board of Directors of the Company, has
served as Chairman of Central European Development Corporation Ltd. ('CEDC')
since 1990, Chairman of RSL Investments, Inc. and Chairman of RSL
Communications, Ltd. ('RSLC'), an international telecommunications company,
since 1994. Mr. Lauder has served as Chairman of Estee Lauder International
since 1992 and Chairman of Clinique Laboratories, Inc., an Estee Lauder
division, since 1992. From 1986 until 1987, Mr. Lauder served as U.S. Ambassador
to Austria, having previously served as Deputy Assistant Secretary of Defense
for European and NATO Policy. Mr. Lauder currently serves as a director of Estee
Lauder, Inc., The International Society for Yad Vashem and as Chairman of the
Board of Directors of The Museum of Modern Art.

Leonard M. Fertig, a Director of the Company, has served as President and
Chief Executive Officer of the Company since August 1995. Mr. Fertig served as
Vice President-Finance and Chief Financial Officer of the Company from its
inception in June 1994 until August 1995. Mr. Fertig is also President of CME
Programming and CME Development Corporation. Mr. Fertig was an independent
consultant to the media industry from 1989 to 1993. From 1985 until 1989, Mr.
Fertig was Executive Vice President and Chief Financial Officer of Reiss Media
Enterprises, a pay-per-view network. His experience includes over 20 years of
consulting, planning and management of businesses, including with American
Airlines and Capital Cities/ABC. Mr. Fertig also serves as a director of Nova
TV, PULS, Media Pro International, Pro Plus and STS.

John A. Schwallie has served as Vice President-Finance and Chief Financial
Officer of the Company since August 1995. Mr. Schwallie, a certified public
accountant, served as Financial Director of Nova TV from 1994 until August 1995.
From 1992 until 1993 Mr. Schwallie served as the Advisor to the Financial
Director of Prague Breweries, the second largest brewery in the Czech Republic.
During 1991, he served as the Assistant to the Regional Director of General
Atlantic, a London based multi-billion dollar privately held conglomerate,
operating retail outlets in Prague. Mr. Schwallie serves as a director of Media
Pro International and director of the audit committee of Nova TV.

Andrew Gaspar, a Director of the Company, directed the activities of the
Company from 1991 through June 1994. Since its incorporation in June 1994, Mr.
Gaspar has served as Vice President and Secretary of the Company. Mr. Gaspar
recently resigned from the Administrative Committee of the Company's Board of
Directors and Mr. Gaspar has indicated that he will resign as Vice President and
Secretary of the Company, effective December 31, 1996. Mr. Gaspar has been
President of the general partner of R.S. Lauder, Gaspar & Co., LP, a venture
capital company and Vice Chairman of CEDC

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since 1991. Mr. Gaspar has been a director and Vice Chairman of RSLC since 1994.
From 1982 until 1991, Mr. Gaspar was a partner of Warburg, Pincus & Co., a
venture capital firm, in which Mr. Gaspar specialized in start-up ventures in

the telecommunications industry. Mr. Gaspar is Chairman of the Board and a
director of Auto Info Inc., a financial services company.

Nicolas G. Trollope, a Director of the Company, has been a partner with the
law firm of Conyers, Dill & Pearman, Hamilton, Bermuda, since 1991. Mr. Trollope
serves as a director of RSLC.

Herbert S. Schlosser, a Director of the Company, has served as a Senior
Advisor, Broadcasting and Entertainment to Schroder Wertheim & Co. Incorporated
since 1986. Mr. Schlosser serves as a consultant to the Company and receives a
fee for such services. Mr. Schlosser was Executive Vice President of RCA
Corporation from 1978 until 1985 and President of the National Broadcasting
Company (NBC) from 1974 until 1978. Mr. Schlosser is a director of United States
Satellite Broadcasting Company, Inc. and Data Broadcasting Corporation.

Robert A. Rayne, a Director of the Company, has been a director of London
Merchant Securities plc, a U.K. investment firm, since 1983. Mr. Rayne also is
Investment Director of Westpool Investment Trust plc. Mr. Rayne serves as a
director for several U.K.-based companies and in addition, serves on the Board
of Directors of Energy Ventures Inc.

Mark Palmer resigned as Vice Chairman of the Board of Directors of the
Company on October 8, 1996.

OTHER MANAGEMENT

Vladimir Zelezny, 51, the General Director of Nova TV, has been associated
with Czech television for over 30 years. During this period, Dr. Zelezny was a
screenwriter for numerous television series and televised plays broadcast on
Czech television and served as an editor and a director for a government-owned
and operated Czech television station. Dr. Zelezny was involved actively in the
Velvet Revolution in 1989 in what was formerly Czechoslovakia.

<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized share capital of the Company is 50,000,000 shares, which
consists of (i) 30,000,000 shares of Class A Common Stock, par value $.01 per
share (the 'Class A Common Stock'), 15,000,000 shares of Class B Common Stock,
par value $.01 per share (the 'Class B Common Stock') and (ii) 5,000,000 shares
of preferred stock, par value $.01 per share (the 'Preferred Stock'). Upon the
consummation of the Offering, 15,092,504 shares of Class A Common Stock and
8,029,797 shares of Class B Common Stock will be outstanding and no shares of
Preferred Stock will be outstanding. The following statements are summaries of
certain provisions of the Company's Memorandum of Association, bye-laws and The
Companies Act 1981 of Bermuda. These summaries do not purport to be complete and
are qualified in their entirety by reference to the full Memorandum of
Association and bye-laws which have been incorporated by reference as exhibits
to the Company's Registration Statement of which this Prospectus is a part.

CLASS A COMMON STOCK

The holders of the Class A Common Stock are entitled to one vote per share
and are entitled to vote as a single class together with the holders of the
Class B Common Stock on all matters subject to shareholder approval, except that
the holders of the Class A Common Stock and the holders of the Class B Common
Stock will each vote as a separate class with respect to any proposed 'going
private' transactions between the Company and Ronald S. Lauder and any matter
requiring class voting by The Companies Act 1981 of Bermuda. The holders of the
outstanding shares of Class A Common Stock are entitled to receive dividends as
and when declared by the Board of Directors, pari passu with the holders of
Class B Common Stock, out of funds legally available therefor after the payment
of any dividends declared but unpaid on any shares of Preferred Stock then
outstanding. The holders of the Class A Common Stock have no preemptive or
cumulative voting rights and no rights to convert their shares of Class A Common
Stock into any other securities. All of the outstanding shares of the Class A
Common Stock and shares of Class A Common Stock issued by the Company in the
Offering, will be, fully paid and nonassessable. On liquidation, dissolution or
winding up of the Company, the holders of Class A Common Stock are entitled to
receive, pari passu with the holders of Class B Common Stock, pro rata the net
assets of the Company remaining after preferential distribution to holders of
Preferred Stock and the payment of all creditors and liquidation preferences, if
any.

The transfer agent and registrar for the Class A Common Stock is American
Stock Transfer and Trust Company.

CLASS B COMMON STOCK

The holders of the Class B Common Stock are entitled to ten votes per share
and are entitled to vote as a single class together with the holders of the
Class A Common Stock on all matters which are subject to shareholder approval,
except that the holders of the Class A Common Stock and the holders of the Class
B Common Stock will each vote as a separate class with respect to any proposed
'going private' transactions between the Company and Ronald S. Lauder and any
matter requiring class voting by The Companies Act 1981 of Bermuda. The holders
of the outstanding shares of Class B Common Stock are entitled to receive
dividends as and when declared by the Board of Directors, pari passu with the
holders of the Class A Common Stock, out of funds legally available therefor
after the payment of any dividends declared but unpaid on any shares of
Preferred Stock then outstanding. The holders of the Class B Common Stock have
no preemptive or cumulative voting rights. The holders of the Class B Common
Stock have the right to convert their shares of Class B Common stock into shares
of Class A Common Stock at their election and on a one to one basis, and all
shares of Class B Common Stock will automatically convert into shares of Class A
Common Stock on a one to one basis when the number of shares of Class B Common
Stock represent less than 10% of the combined total number of shares of Class A
Common Stock and Class B Common Stock outstanding. All of the outstanding shares
of the Class B Common Stock are fully paid and nonassessable. Shares of Class B
Common Stock may be transferred only to other original holders of Class B Common
Stock or to members of the family of the original holder by gift, devise or
otherwise through laws of inheritance,

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<PAGE>
descent, distribution or to a trust established by the holder for the holder's

family members, to corporations the majority of beneficial owners of which are
or will be owned by the holders of Class B Common Stock and from corporations or
partnerships which are the holders of Class B Common Stock, to their
shareholders or partners, as the case may be (each a 'Permitted Transferee').
Any other transfer of Class B Common Stock is void, although the Class B Common
Stock may be converted at any time into Class A Common Stock on a one to one
basis and then sold, subject to the conditions and restrictions of Rule 144. A
transfer by an original holder of Class B Common Stock which is either a
corporation or a partnership of more than 50% of the equity interest in such
corporation or partnership to other than a Permitted Transferee shall result in
an automatic conversion of all shares of Class B Common Stock held by such
corporation or partnership into an equal number of shares of Class A Common
Stock. The Company is entitled to seek specific enforcement of such conversion
of shares of Class B Common Stock into shares of Class A Common Stock upon the
failure of any holder and/or transferee of shares of Class B Common Stock to
comply with such conversion. In such event, the Company is entitled to recover
from the holder and the transferee who failed to comply with such conversion,
jointly and severally, the court costs, reasonable attorneys' fees and other
costs and expenses incurred by it in connection with the obtaining of such
specific enforcement. On liquidation, dissolution or winding up of the Company,
the holders of Class B Common Stock are entitled to receive, pari passu with the
holders of the Class A Common Stock, pro rata the net assets of the Company
remaining after preferential distribution to holders of Preferred Stock and the
payment of all creditors and liquidation preferences, if any.

A 'going private' transaction is any 'Rule 13e-3 Transaction,' as such term
is defined in Rule 13e-3 promulgated under the Securities Exchange Act between
the Company and (i) Ronald S. Lauder, (ii) any Affiliate of Mr. Lauder, as
defined below or (iii) any group consisting of Mr. Lauder or Affiliates of Mr.
Lauder.

An Affiliate of Ronald S. Lauder is (i) any individual or entity who or
that, directly or indirectly, controls, is controlled by, or is under common
control with, Mr. Lauder, (ii) any corporation or organization (other than the
Company or a majority-owned subsidiary of the Company) of which Mr. Lauder is an
officer or partner or is, directly or indirectly, the beneficial owner of 10% or
more of any class of voting securities, or in which Mr. Lauder has a substantial
beneficial interest, (iii) any trust or other estate in which the Mr. Lauder has
a substantial beneficial interest or as to which Mr. Lauder serves as trustee or
in a similar fiduciary capacity or (iv) any relative or spouse of Mr. Lauder, or
any relative of such spouse, who has the same residence as Mr. Lauder.

PREFERRED STOCK

The Preferred Stock may be issued from time to time as determined by the
Board of Directors of the Company, without shareholder approval. Such Preferred
Stock may be issued in such series and with such preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications or other provisions, as may be fixed by the Board of Directors.
It is intended that Preferred Stock be issued, among other reasons, for
financing acquisitions, for raising additional capital, or for similar corporate
purposes. While the Board of Directors has no current intention of doing so, the
Board of Directors, without shareholder approval, could issue Preferred Stock
with voting and conversion rights which could adversely affect the benefit of

any voting power and the benefit of other rights of the holders of the Class A
Common Stock and which could be used as an anti-takeover measure by the Company
without any further action by the holders of Class A Common Stock. This may have
the effect of delaying, deferring or preventing a change of control of the
Company by increasing the number of shares necessary to gain control of the
Company. At the date of this Prospectus, the Board of Directors has not
authorized the issuance of any shares of Preferred Stock and the Company has no
agreements or understanding for the issuance of any shares of Preferred Stock.

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<PAGE>
ANTI-TAKEOVER PROTECTIONS

The voting provisions of the Class A Common Stock and Class B Common Stock
and the broad discretion conferred upon the Board of Directors with respect to
the issuance of series of Preferred Stock (including with respect to voting
rights) could substantially impede the ability of one or more shareholders
(acting in concert) to acquire sufficient influence over the election of
directors and other matters to effect a change in control or management of the
Company, and the Board of Directors' ability to issue Preferred Stock could also
be utilized to change the economic and control structure of the Company. As a
result, such provisions, together with certain other provisions of the bye-laws
summarized in the succeeding paragraph, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that a
shareholder might consider in such shareholder's best interest, including
attempts that might result in a premium over the market price for the Class A
Common Stock held by shareholders.

The bye-laws establish an advance notice procedure for the nomination,
other than by or at the direction of the Board of Directors, of candidates for
election as directors, as well as for other shareholder proposals to be
considered at annual general meetings of shareholders. In general, notice of
intent to nominate a director or raise business at such meeting must be received
by the Company not less than 90 nor more than 120 days prior to the meeting, and
must contain certain specified information concerning the person to be nominated
or the matter to be brought before the meeting and concerning the shareholder
submitting the proposal.

DIFFERENCES IN CORPORATE LAW

The Companies Act 1981 of Bermuda differs in certain respects from laws
generally applicable to United States corporations and their shareholders. Set
forth below is a summary of certain significant provisions of The Companies Act
(including any modifications adopted pursuant to the Company's bye-laws)
applicable to the Company, which differ in certain respects from provisions of
Delaware corporate law. The following statements are summaries, and do not
purport to deal with all aspects of Bermuda law that may be relevant to the
Company and its shareholders.

Interested Directors. The bye-laws provide that any transaction entered
into by the Company in which a director has an interest is not voidable by the
Company nor can such director be liable to the Company for any profit realized
pursuant to such transaction provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing to the directors.

Under Delaware law no such transaction would be voidable if (i) the material
facts as to such interested director's relationship or interests are disclosed
or are known to the board of directors and the board in good faith authorizes
the transaction by the affirmative vote of a majority of the disinterested
directors, (ii) such material facts are disclosed or are known to the
stockholders entitled to vote on such transaction and the transaction is
specifically approved in good faith by vote of the stockholders or (iii) the
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified. Under Delaware law, such interested director could be held
liable for any transaction for which such director derived an improper personal
benefit.

Merger and Similar Arrangements. The Company may acquire the business of
another Bermuda company similarly exempt from Bermuda taxes or a company
incorporated outside Bermuda and carry on such business when it is within the
objects of its Memorandum. The Company may amalgamate with another Bermuda
company or with a company incorporated in another jurisdiction which permits
such a company to amalgamate with a Bermuda company, subject to shareholder
approval. A shareholder may apply to a Bermuda court for a proper valuation of
such shareholder's shares if such shareholder is not satisfied that fair value
has been paid for such shares. The court ordinarily would not disapprove the
transaction on that ground absent evidence of fraud or bad faith. Under Delaware
law, with certain exceptions, any merger, consolidation or sale of all or
substantially all the assets of a corporation must be approved by the board of
directors and a majority of the outstanding shares entitled to vote. Under
Delaware law, a stockholder of a corporation participating in certain major
corporate transactions may, under varying circumstances, be entitled to
appraisal rights pursuant to which such stockholder may

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receive cash in the amount of the fair market value of the shares held by such
stockholder (as determined by a court or by agreement of the corporation and the
stockholder) in lieu of the consideration such stockholder would otherwise
receive in the transaction. Delaware law does not provide stockholders of a
corporation with voting or appraisal rights when the corporation acquires
another business through the issuance of its stock or other consideration (i) in
exchange for the assets of the business to be acquired, (ii) in exchange for the
outstanding stock of the corporation to be acquired or (iii) in a merger of the
corporation to be acquired with a subsidiary of the acquiring corporation.

Takeovers. Bermuda law provides that where an offer is made for shares of
another company and, within four months of the offer the holders of not less
than 90% of the shares which are the subject of the offer accept, the offeror
may by notice require the nontendering shareholders to transfer their shares on
the terms of the offer. Dissenting shareholders may apply to the court within
one month of the notice objecting to the transfer. The burden is on the
dissenting shareholders to show that the court should exercise its discretion to
enjoin the required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion as between the offeror and
the holders of the shares who have accepted the offer as a means of unfairly
forcing out minority shareholders. Delaware law provides that a parent
corporation, by resolution of its board of directors and without any shareholder
vote, may merge with any 90% or more owned subsidiary. Upon any such merger,

dissenting stockholders of the subsidiary would have appraisal rights.

Shareholder's Suit. The rights of shareholders under Bermuda law are not
as extensive as the rights of shareholders under legislation or judicial
precedent in many United States jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda.
However, the Bermuda courts ordinarily would be expected to follow English case
law precedent, which would permit a shareholder to commence an action in the
name of the Company to remedy a wrong done to the Company where the act
complained of is alleged to be beyond the corporate power of the Company or is
illegal or would result in the violation of the Memorandum and bye-laws.
Furthermore, consideration would be given by the court to acts that are alleged
to constitute a fraud against the minority shareholders or where an act requires
the approval of a greater percentage of the Company's shareholders than actually
approved it. The winning party in such an action generally would be able to
recover a portion of attorneys fees or fees incurred in connection with such
action. Class actions and derivative actions generally are available to
stockholders under Delaware law for, among other things, breach of fiduciary
duty, corporate waste and actions not taken in accordance with applicable law.
In such actions, the court has discretion to permit the winning party to recover
attorney fees incurred in connection with such action.

Indemnification of Directors. The Company may indemnify its directors or
officers in their capacity as such in respect of any loss arising or liability
attaching to them by virtue of any rule of law in respect of any negligence,
default, breach of duty or breach of trust of which a director or officer may be
guilty in relation to the Company other than in respect of his own wilful
default, wilful neglect, fraud or dishonesty. Under Delaware law, a corporation
may adopt a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for breaches of the director's duty of
loyalty, for acts or omissions not in good faith or which involve intentional
misconduct or knowing violations of law, for improper payment of dividends or
for any transaction from which the director derived an improper personal
benefit. Delaware law has provisions and limitations similar to Bermuda
regarding indemnification by a corporation of its directors or officers, except
that under Delaware law the statutory rights to indemnification may not be as
limited.

Inspection of Corporate Records. Members of the general public have the
right to inspect the public documents of the Company available at the office of
the Registrar of Companies in Bermuda which will include the Memorandum
(including its objects and powers) and any alteration to the Memorandum and
documents relating to an increase or reduction of authorized capital. The
shareholders have the additional right to inspect the bye-laws, minutes of
general meetings and audited financial statements of the Company, which must be
presented to the annual general meeting of

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shareholders. The register of shareholders of the Company is also open to
inspection by shareholders without charge, and to members of the public for a
fee. The Company is required to maintain its share register in Bermuda but may
establish a branch register outside Bermuda. The Company is required to keep at

its registered office a register of its directors and officers which is open for
inspection by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies of
any other corporate records. Delaware law permits any shareholder to inspect or
obtain copies of a corporation's shareholder list and its other books and
records for any purpose reasonably related to such person's interest as a
shareholder.

CERTAIN PROVISIONS OF BERMUDA LAW

The Company has been designated as a non-resident under the Exchange
Control Act of 1972 (the 'Control Act') by the Bermuda Monetary Authority whose
permission for the issue of shares of Common Stock of the Company has been
obtained. This designation allows the Company to engage in transactions in
currencies other than the Bermuda dollar. Prior to the Offering, this Prospectus
will be filed with the Registrar of Companies in Bermuda in accordance with
Bermuda law.

In granting such permission and in accepting this Prospectus for filing,
neither the Bermuda Monetary Authority nor the Registrar of Companies in Bermuda
accepts any responsibility for the financial soundness of the Company or of the
correctness of any of the statements made or opinions expressed in this
Prospectus.

The transfer of shares between persons regarded as resident outside Bermuda
for exchange control purposes and the issue of shares after the completion of
the Offering to or by such persons may be effected without specific consent
under the Control Act and regulations thereunder. Issues and transfers of shares
involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Control Act.

Non-Bermuda owners of the Company's shares of Common Stock are not
restricted in the exercise of the rights to hold or vote their shares. Because
the Company has been designated as a non-resident for Bermuda exchange control
purposes there are no restrictions on its ability to transfer funds in and out
of Bermuda or to pay dividends to United States residents who are holders of the
Company's Common Stock, other than in respect of local Bermuda currency.

In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an applicant
acting in a special capacity (for example as a trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity the Company
is not bound to investigate or incur any responsibility in respect of the proper
administration of any such trust.

The Company will take no notice of any trust applicable to any of its
shares whether or not it had notice of such trust.

As an 'exempted company', the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company the Company may not participate in certain business
transactions including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for

terms of not more than 21 years); (2) the taking of mortgages on land in Bermuda
to secure an amount in excess of $50,000 without the consent of the Minister of
Finance of Bermuda; (3) the acquisition of securities created or issued by, or
any interest in, any local company or business, other than certain types of
Bermuda government securities of another 'exempted' company, partnership or
other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Minister of Finance of Bermuda.

<PAGE>
CERTAIN TAX CONSIDERATIONS

The following discussion is a summary of certain anticipated tax
consequences of the operations of the Company and of an investment in the Class
A Common Stock under United States federal income tax laws and Bermuda tax laws.
The discussion does not deal with all possible tax consequences relating to the
Company's operations or to an investment in the Class A Common Stock. In
particular, the discussion does not address the tax consequences under state,
local and other (e.g., non-United States federal, non-Bermuda) tax laws.
Accordingly, each prospective investor should consult his or her tax advisor
regarding the tax consequences of an investment in the Class A Common Stock. The
discussion is based upon laws and relevant interpretations thereof in effect as
of the date of this Prospectus, all of which are subject to change. In this
section of the Prospectus, the term the 'Company' includes only CME.

BERMUDA TAXATION

In the opinion of Conyers, Dill & Pearman, Bermuda counsel to the Company,
the following discussion correctly describes certain tax consequences to the
Company with respect to the Offering and with respect to ownership of shares of
Class A Common Stock under Bermuda law.

At the date hereof, there is no Bermuda income, corporation or profits tax,
withholding tax, capital gains tax, capital transfer tax, estate duty or
inheritance tax payable by the Company or holders of Class A Common Stock other
than such holders ordinarily resident in Bermuda. The Company is not subject to
stamp or other similar duty on the issue, transfer or redemption of its shares
of Class A Common Stock.

The Company has obtained an assurance from the Minister of Finance of
Bermuda under the Exempted Undertaking Tax Protection Act 1966 that, in the
event there is enacted in Bermuda any legislation imposing tax computed on
profits or income or computed on any capital assets, gain or appreciation or any
tax in the nature of estate duty or inheritance tax, such tax shall not be
applicable to the Company or to its operations, or to the shares, debentures or
other obligations of the Company until March 28, 2016 except insofar as such tax
applies to persons ordinarily resident in Bermuda and holding such shares,
debentures or other obligations of the Company or any real property or leasehold
interests in Bermuda owned by the Company. No reciprocal tax treaty affecting
the Company exists between Bermuda and the United States.

As an exempted company, the Company is liable to pay in Bermuda a
registration fee based upon its authorized share capital and the premium on its
issued shares at a rate not exceeding $25,000 per annum.

UNITED STATES FEDERAL INCOME TAXATION

In the opinion of Rosenman & Colin LLP, United States counsel to the
Company, the following correctly describes certain United States federal income
tax consequences to the Company and to a United States person (i.e., a United
States citizen or resident, a United States corporation, a United States
partnership, or an estate or trust subject to United States federal income tax
on all of its income regardless of source (a 'United States Investor')) making
an investment in the Class A Common Stock. The following discussion does not
generally address the tax consequences to a person who holds (or will hold),
directly or indirectly, shares in the Company giving the holder the right to
exercise 10% or more of the total voting power of the Company 's outstanding
stock (a '10% Shareholder') or to persons who are not United States Investors.
Non-United States Investors and 10% Shareholders are advised to consult their
own tax advisors regarding the tax considerations incident to an investment in
the Class A Common Stock. In addition, the summary does not address the United
States federal income tax treatment of certain types of United States Investors
(e.g., individual retirement and other tax-deferred accounts, life insurance
companies, tax-exempt organizations, dealers in securities or currencies, and
persons whose functional currency is not the United States dollar) who may be
subject to tax rules that differ significantly from those summarized below. The
discussion below as it relates to United States federal income tax consequences
is based upon the provisions of the Internal Revenue Code of 1986,

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as amended (the 'Code'), and regulations, rulings and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified so as to result in United States federal income tax consequences
different from those discussed below. Prospective investors are advised to
consult their own tax advisors with respect to their particular circumstances
and with respect to the effect of state, local or foreign tax laws to which they
may be subject.

Taxation of the Company and its Subsidiaries

In general, the Company and its foreign (non-United States) Subsidiaries
will be subject to United States federal income tax only to the extent they have
income which has its source in the United States or is effectively connected
with a United States trade or business. It is anticipated that the Company and
its foreign Subsidiaries will derive substantially all of their income from
foreign sources and that none of their income will be effectively connected with
a United States trade or business. In addition, it is anticipated that any
United States source income of the Company will be derived solely from
tax-exempt municipal securities the interest on which will be exempt from United
States federal income taxation. As a result, the Company and its foreign
Subsidiaries should not be subject to United States federal income taxation. On
the other hand, the domestic (United States) Subsidiaries of the Company will be
subject to United States federal income taxation on their worldwide income
(regardless of source), subject to reduction by allowable foreign tax credits,

and distributions by such United States Subsidiaries to the Company or its
foreign Subsidiaries generally will be subject to United States withholding
taxes.

Taxation of Shareholders

A United States Investor receiving a distribution on the Class A Common
Stock generally will be required to include such distribution in gross income as
a taxable dividend to the extent such distribution is paid from the current or
accumulated earnings and profits of the Company as determined under United
States federal income tax principles. Distributions in excess of the earnings
and profits of the Company generally will first be treated, for United States
federal income tax purposes, as a nontaxable return of capital to the extent of
the United States Investor's basis in the Class A Common Stock and then as gain
from the sale or exchange of a capital asset, provided that the Class A Common
Stock constitutes a capital asset in the hands of the United States Investor.
Dividends received on the Class A Common Stock by United States corporate
shareholders will not be eligible for the corporate dividends received
deduction.

A United States Investor will be entitled to claim a foreign tax credit
with respect to income received from the Company only for foreign taxes (such as
withholding taxes), if any, imposed on dividends paid to such United States
Investor and not for taxes, if any, imposed on the Company or on any entity in
which the Company has made an investment. (Special rules may apply, however, in
the case of a United States corporation that is a 10% Shareholder.) It is not
anticipated, however, under current Bermuda law that any such withholding taxes
would be imposed by Bermuda on distributions made by the Company to a United
States Investor. Distributions with respect to the Class A Common Stock that are
taxable as dividends generally will constitute income from sources without the
United States for purposes of determining the limitation on the allowable
foreign tax credits. The overall limitation on foreign taxes eligible for credit
is calculated separately with respect to specific classes of income. For this
purpose, dividends distributed by the Company to United States Investors
generally will constitute 'passive income' for purposes of applying the foreign
tax credit limitations.

With certain exceptions, gain or loss on the sale or exchange of the Class
A Common Stock will be treated as United States source gain or loss and will be
capital gain or loss if the Class A Common Stock is held as a capital asset.
Such capital gain or loss generally will be long-term capital gain or loss if
the United States Investor's holding period for the Class A Common Stock is more
than one year at the time of the sale or exchange.

Various Code provisions impose special taxes in certain circumstances on
United States or foreign corporations and their United States stockholders. The
following is a summary of certain provisions which could have an adverse impact
on the Company and the United States Investors.

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Personal Holding Companies

A corporation that is a personal holding company ('PHC') is subject to a

39.6% tax on its undistributed personal holding company income. In general, a
PHC is a corporation (i) more than 50% of the stock of which measured by value
is owned, directly or indirectly, by five or fewer individuals (without regard
to their citizenship or residence) and (ii) which receives 60% or more of gross
income, as specifically adjusted, from certain passive sources. For purposes of
this ownership test, pension plans and certain other tax-exempt organizations
are treated as 'individuals'. For purposes of this gross income test, income of
a foreign corporation means generally only taxable income derived from United
States sources or income that is effectively connected with a United States
trade or business.

After the Offering, it is not likely that more than 50% of the outstanding
shares of the Common Stock of the Company or of the shares of its corporate
Subsidiaries by value will be owned, directly or indirectly, by five or fewer
individuals. In any event, since it is anticipated that the Company and its
foreign corporate Subsidiaries will derive substantially all of their income
from foreign sources that will not be effectively connected with a United States
trade or business, and that any United States source income of the Company will
be derived solely from tax-exempt municipal securities, the interest on which
will be excluded from gross income for United States federal income tax
purposes, the Company believes that neither the Company nor any of such
Subsidiaries will satisfy the foregoing income test and therefore none of them
should be classified as a PHC. In addition, since it is anticipated that the
Company's United States Subsidiaries will derive most or all of their income
from non-passive sources, the Company further believes that such Subsidiaries
will not satisfy the foregoing income test and, thus, will not be classified as
PHCs. The Company intends to manage its affairs and the affairs of its
Subsidiaries so as to attempt to avoid or minimize the imposition of the
personal holding company tax, to the extent consistent with its other business
goals.

Foreign Personal Holding Companies

In general, if the Company or any of its foreign corporate Subsidiaries
were to be classified as a foreign personal holding company ('FPHC'), the
undistributed foreign personal holding company income (generally, the taxable
income, with certain adjustments) of the Company or such Subsidiary would be
imputed to all of the United States Investors who were deemed to hold the
Company's stock or the stock of such Subsidiary on the last day of its taxable
year. Such income would be taxable to such persons as a dividend, even if no
cash dividend were actually paid. United States Investors who dispose of their
Class A Common Stock prior to such date generally would not be subject to tax
under these rules. In certain circumstances, if the Company were to become an
FPHC, United States Investors who acquire Class A Common Stock from decedents
would be denied the step-up of the income tax basis for such Class A Common
Stock to fair market value at the date of death which would otherwise have been
available and instead would have a tax basis equal to the lower of the fair
market value or the decedent's basis.

A foreign corporation will be classified as an FPHC if (i) five or fewer
individuals, who are United States citizens or residents, directly or
indirectly, own more than 50% of the corporation's stock (measured by either
voting power or value, as opposed to only value, as in the case of the PHC
ownership test, described above) (the 'stockholder test') and (ii) the

corporation receives at least 60% of its gross income (regardless of source), as
specifically adjusted, from certain passive sources (the 'income test'). After a
corporation becomes an FPHC, the income test percentage for each subsequent
taxable year generally is reduced to 50%.

Immediately after the Offering, it is likely that five or fewer individuals
who are United States citizens or residents will, directly or indirectly, own a
beneficial interest of more than 50% of the voting power of the outstanding
Common Stock of the Company and of the shares of certain of its foreign
corporate Subsidiaries for purposes of the FPHC rules. Accordingly, the Company
believes that the stockholder test will likely be met immediately after the
Offering with respect to the Company and such Subsidiaries. The Company
believes, however, that none of its foreign corporate Subsidiaries (except
possibly for CME BV) should be classified as an FPHC because each of these
Subsidiaries should not

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satisfy the foregoing income test. The Company also believes that CME BV, an
indirect wholly-owned subsidiary of the Company organized to hold and operate
the Company's investments in its Central and Eastern European and German
broadcast operations, should not satisfy the income test and should not be an
FPHC because it will derive most of its gross income from its equity interest in
entities that the Company believes are treated as partnerships for United States
federal income tax purposes. In particular, while differing conclusions are
possible and, therefore, the conclusion is not free from doubt, the Company has
been advised by Rosenman & Colin LLP that Nova TV is likely to be treated as a
partnership and not an association taxable as a corporation for United States
federal income tax purposes. As a result, the income of such entity (as well as
other entities owned by CME BV that the Company believes are treated as
partnerships for United States federal income tax purposes) should 'flow
through' to CME BV, and the Company believes that substantially all of such
income will not be considered passive income for purposes of the FPHC rules. If,
on the other hand, these entities were considered to be corporations and not
partnerships for United States federal income tax purposes, then distributions,
if any, to CME BV from these entities out of their current or accumulated
earnings and profits would result in passive income to CME BV and may cause CME
BV to be treated as an FPHC.

In addition, it is anticipated that the Company would retain a portion of
the proceeds of the Offering and invest such proceeds solely in tax-exempt
municipal securities the interest income from which will be excluded from the
Company's gross income for United States federal income tax purposes or other
securities that would not generate passive income for purposes of the FPHC
rules. The Company expects to use such proceeds (as well as the income derived
therefrom) to pay its ongoing operating expenses. The anticipated tax-exempt
income from the investment of such proceeds should not constitute passive income
for purposes of the FPHC rules. As a result, the Company does not believe that
it will be an FPHC under these rules.

While the Company currently believes that neither it nor any of its foreign
corporate Subsidiaries would be classified as an FPHC, it is possible that the
Company or one or more of such Subsidiaries would meet the foregoing income test
in a given taxable year and would qualify as an FPHC for that year. In this

connection, proposed Treasury Regulations were recently issued that generally
permit a taxpayer to elect (subject to certain limitations) whether an entity is
treated as a partnership or a corporation for United States federal income tax
purposes. These proposed Treasury Regulations also provide that the claimed
classification of an entity in existence prior to the issuance of final
regulations would be respected (subject to certain limitations). If (as
expected) these proposed regulations are finalized without significant
modifications, the Company believes that the classification of any existing
entity that the Company has been treating as a partnership for United States
federal income tax purposes should be respected. As indicated above, if the
classification of any such entity owned by CME BV is so respected, then neither
CME BV nor any such entity should be treated as an FPHC under the foregoing
rules. Also, the Company intends, to the extent possible and to the extent
consistent with its other business goals, to elect partnership treatment for
entities formed after such final regulations are issued and/or otherwise attempt
to manage its affairs and the affairs of its Subsidiaries so as to attempt to
avoid or minimize having income that would be imputed to the United States
Investors under these rules.

Passive Foreign Investment Companies

If 75% or more of the gross income of the Company (taking into account,
under an income 'look-through' rule, the Company's pro rata share of the gross
income of any company of which the Company is considered to own 25% or more of
the stock by value) in a taxable year is passive income, or if at least 50% of
the average percentage of assets of the Company (generally determined based upon
the fair market value or, if the Company were a controlled foreign corporation
(see discussion below), based upon the adjusted tax bases of the Company's
assets, also taking into account, under an asset 'look-through' rule, the
Company's pro rata share of the assets of any company of which the Company is
considered to own 25% or more of the stock by value) in a taxable year produce
or are held for the production of passive income, the Company would be
classified as a 'passive foreign investment company' ('PFIC') for that taxable
year and generally for all subsequent taxable years. Passive income

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for purposes of the PFIC rules generally includes dividends, interest and other
types of investment income and generally would include amounts derived by reason
of the temporary investment of funds raised in the Offering. If the Company were
a PFIC, each shareholder who was a United States Investor (regardless of the
percentage of stock owned) would, upon certain distributions by the Company and
upon disposition of the Class A Common Stock at a gain, be liable to pay tax
plus an interest charge. The tax would be determined by allocating such
distribution or gain ratably to each day of the United States Investor's holding
period for the Class A Common Stock. The amount allocated to years prior to the
taxable year of the distribution or disposition would be taxed at the highest
marginal rates for ordinary income for such years (if the Company was a PFIC
during such years). The United States Investor would also be liable for interest
on the amount of such additional tax due with respect to such prior years in
which the Company was a PFIC. The amount allocated to the current taxable year
and any non-PFIC years would be taxed in the same manner as other ordinary
income earned in the current taxable year.

Under certain circumstances, if the Company were to become a PFIC,
distributions and dispositions in respect of shares in a direct or indirect
foreign corporate Subsidiary of the Company may be attributed in whole or in
part to a United States Investor, and such United States Investor may be taxed
under the PFIC rules with respect to such distributions or dispositions.

If the Company were to become a PFIC, United States Investors who acquire
Class A Common Stock from decedents could be denied the step-up of the income
tax basis for such Class A Common Stock to fair market value at the date of
death which would otherwise have been available and instead could have a tax
basis equal to the lower of the fair market value or the decedent's basis.

The above results can be eliminated if a United States Investor elects to
treat the Company as a 'qualified electing fund' ('QEF') for United States
federal income tax purposes. A stockholder of a QEF is required for each taxable
year to include in income a pro rata share of the ordinary income of the QEF as
ordinary income and a pro rata share of the net capital gain of the QEF as
long-term capital gain. If a United States Investor in a PFIC has made a QEF
election for all years that such United States Investor has held Class A Common
Stock, gain on the sale of such stock generally will be characterized as capital
gain and the denial of basis step-up at death and the interest charge (as well
as the other PFIC tax consequences) described above would not apply.

The Company believes that it is not now a PFIC and intends to manage its
business so as to attempt to avoid PFIC status in the future. The Company will
notify United States Investors in the event that it concludes that it will be
treated as a PFIC for any future taxable year to enable United States Investors
to consider whether to elect to treat the Company as a QEF for United States
federal income tax purposes. In addition, the Company will, at the request of a
United States Investor who elects to have the Company treated as a QEF, comply
with the applicable information reporting requirements.

Controlled Foreign Corporations

If 10% Shareholders, who are also United States persons, own, in the
aggregate, directly or indirectly, more than 50% (measured by voting power or
value) of the shares of a foreign corporation, that foreign corporation would be
a controlled foreign corporation ('CFC'). If a foreign corporation were
characterized as a CFC, then some portion of the undistributed income of the
foreign corporation may be imputed to such 10% Shareholders, and some portion of
the gains recognized by such 10% Shareholders on the disposition of their shares
in the foreign corporation (which would otherwise qualify for capital gains
treatment) may be converted into ordinary dividend income. After the Offering,
it is likely that 10% Shareholders who are also United States persons would be
deemed to own more than 50% of the voting power of the outstanding Common Stock
of the Company and, thus, that the Company would be characterized as a CFC. If
the Company were to be classified as a CFC, however, the CFC rules referred to
above would only apply with respect to such 10% Shareholders. In future years,
the Company would continue to be characterized as a CFC as long as 10%
Shareholders who were also United States persons were deemed to own more than
50% of the voting power or value of the Company's outstanding Common Stock. In
addition, as discussed above, if the Company were a

<PAGE>
CFC, the asset test to determine whether the Company would be a PFIC would be
made by comparing the relative adjusted tax bases of the Company's assets and
not the relative fair market values of such assets, making it more difficult for
the Company to manage its affairs so as to avoid PFIC status.

United States Backup Withholding and Information Reporting

The receipt of dividends on the Class A Common Stock by a holder of the
Class A Common Stock (i) made by mail or wire transfer to an address in the
United States, (ii) made by a paying agent, broker or other intermediary in the
United States or (iii) made by a United States broker or a 'United States-
related' broker to such holder outside the United States may be subject to
United States information reporting requirements. Holders of Class A Common
Stock who are not United States persons ('non-United States holders') generally
would be exempt from these reporting requirements, but may be required to comply
with certification and identification procedures in order to prove their
exemption. Treasury regulations currently in effect do not require backup
withholding with respect to dividends paid by a foreign corporation such as the
Company.

The payment of the proceeds of the disposition of Class A Common Stock by a
holder to or through the United States office of a broker generally will be
subject to information reporting and backup withholding at a rate of 31% unless
the holder either certifies its status as a non-United States holder under
penalties of perjury or otherwise establishes an exemption. The payment of the
proceeds of the disposition by a holder of Class A Common Stock to or through a
non-United States office of a broker will generally not be subject to backup
withholding and information reporting. Information reporting (but not backup
withholding) may apply, however, to such a holder who sells a beneficial
interest in Class A Common Stock through non-United States branch of a United
States broker, or through a non-United States office of a 'United
States-related' broker, in either case unless the holder establishes an
exemption or the broker has documentary evidence in its files of the holder's
status as a non-United States holder. For purposes of these rules, a 'United
States-related' broker is a broker or other intermediary that is a controlled
foreign corporation for United States federal income tax purposes or that is a
foreign person 50% or more of the gross income from all sources of which, over a
specified three-year period, is effectively connected with a United States trade
or business.

Any amounts withheld under the backup withholding rules from a payment to a
holder will be refunded (or credited against the holder's United States federal
income tax liability, if any) provided that the required information is
furnished to the United States Internal Revenue Service.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have a total of
23,122,301 shares of capital stock outstanding (23,842,301 shares if the
Underwriters' over-allotment option is exercised in full). Of the shares,
14,736,958 shares of Class A Common Stock (15,456,958 shares if the
Underwriters' over-allotment option is exercised in full) will be freely
tradeable without restriction or registration under the Securities Act. 9,700

shares of Class A Common Stock are subject to volume restrictions under the
Securities Act. All of the remaining 8,375,643 shares of capital stock are
'restricted' securities as that term is defined by Rule 144 as promulgated under
the Securities Act, of which 7,261,779 shares currently may be sold under Rule
144 volume restrictions. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated), including an affiliate, is
entitled to sell in 'broker's transactions' or to market makers, within any
three-month period, a number of shares that does not exceed the greater of (i)
1% of the then outstanding shares of Class A Common Stock or (ii) the average
weekly trading volume in the shares of Class A Common Stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such sale,
provided that at least two years have elapsed since such shares were acquired
from the Company and subject to certain other limitations and restrictions. A
person who is not deemed to have been an affiliate of the Company at any time
during the three months preceding a sale would be entitled to sell such shares
under Rule 144(k) without regard to the requirements described above, provided
that at least three years have elapsed since the

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shares were acquired from the Company. Sales of 'restricted securities' by
affiliates, even after a three-year holding period, are subject to the volume
limitations described above.

The Company and certain of the Company's officers, directors and
shareholders holding an aggregate of 347,046 shares of Class A Common Stock,
5,915,382 shares of Class B Common Stock and warrants to purchase up to 350,000
additional shares of Class A Common Stock have agreed that, for a period of 120
days after the date of this Prospectus, they will not, directly or indirectly,
offer, sell, offer to sell, contract to sell, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, grant of any option to purchase or other sale or disposition) of any
shares of Class A Common Stock or Class B Common Stock or any securities
convertible into, exchangeable or exercisable therefor, except shares purchased
in the public market and grants and exercises of options under the 1994 Stock
Option Plan and the 1995 Stock Option Plan, without the prior written consent of
the Representatives on behalf of the Underwriters. For a description of the
restriction on sales contained in the Underwriting Agreement relating to the
Offering, see 'Underwriting.'

Following the Offering, sales of substantial amounts of Class A Common
Stock (including shares of the Class A Common Stock issuable upon the conversion
of the Class B Common Stock or the exercise of options) in the public market
under Rule 144 or otherwise, or even the potential of such sales, could
adversely affect the prevailing market price of the Class A Common Stock and
impair the Company's ability to raise capital through the sale of equity
securities. See 'Risk Factors--Shares Eligible For Future Sale.'

<PAGE>
UNDERWRITING

The Underwriters named below have severally agreed, subject to certain

conditions, to purchase from the Company the aggregate number of shares of Class
A Common Stock set forth opposite their respective names:

NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------- ----------
Schroder Wertheim & Co. Incorporated......... 848,000
Prudential Securities Incorporated........... 848,000
Smith Barney Inc............................. 848,000
Bear, Stearns & Co. Inc...................... 96,000
Alex. Brown & Sons Incorporated.............. 96,000
CS First Boston Corporation.................. 96,000
Deutsche Morgan Grenfell Inc................. 96,000
Dillon, Read & Co. Inc....................... 96,000
Donaldson, Lufkin & Jenrette Securities
Corporation................................ 96,000
A.G. Edwards & Sons, Inc..................... 96,000
Goldman, Sachs & Co.......................... 96,000
Lazard Freres & Co. LLC...................... 96,000
Morgan Stanley & Co. Incorporated............ 96,000
Oppenheimer & Co., Inc....................... 96,000
PaineWebber Incorporated..................... 96,000
SBC Warburg Inc.............................. 96,000
ING Baring (U.S.) Securities, Inc............ 96,000
ABN Amro Securities (USA) Inc................ 56,000
Advest, Inc.................................. 56,000
Allen & Company Incorporated................. 56,000
Arnhold and S. Bleichroeder, Inc............. 56,000
Cowen & Company.............................. 56,000
EVEREN Securities, Inc....................... 56,000
Gabelli & Company, Inc....................... 56,000
Interstate/Johnson Lane Corporation.......... 56,000
Ladenburg, Thalmann & Co. Inc................ 56,000
McDonald & Company Securities, Inc........... 56,000
Morgan Keegan & Company, Inc................. 56,000
Neuberger & Berman........................... 56,000
The Robinson-Humphrey Company, Inc........... 56,000
Wheat First Butcher Singer................... 56,000
Brean Murray & Co., Inc...................... 32,000
Gerard Klauer Mattison & Co., LLC............ 32,000
Pennsylvania Merchant Group Ltd.............. 32,000
The Seidler Companies Incorporated........... 32,000
----------
Total................................... 4,800,000
==========

The Underwriting Agreement provides that the several Underwriters are
obligated to purchase all the 4,800,000 shares of Class A Common Stock offered
hereby (other than shares of Class A Common Stock that may be purchased under
the over-allotment option), if any are purchased. Schroder Wertheim & Co.
Incorporated, Prudential Securities Incorporated and Smith Barney Inc., as
representatives of the several Underwriters (the 'Representatives'), have
advised the Company that the Underwriters propose to offer the shares of Class A
Common Stock to the public initially at the public offering price set forth on

the cover page of this Prospectus; that the Underwriters propose initially to
allow a concession not in excess of $0.80 per share to certain dealers,
including the Underwriters; that the Underwriters and such dealers may initially
allow a discount of not in excess of

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$0.05 per share to other dealers; and that the public offering price and the
concession and discount to dealers may be changed by the Representatives after
the initial public offering.

The Company has granted to the Underwriters an option, expiring at the
close of business on the 30th day after the date of the Underwriting Agreement,
to purchase up to an additional 720,000 shares of Class A Common Stock at the
public offering price less underwriting discounts and commissions, all as set
forth on the cover page of this Prospectus. The Underwriters may exercise the
option only to cover over-allotments, if any, in the sale of shares of Class A
Common Stock in the Offering. To the extent that the Underwriters exercise this
option, each Underwriter will be committed, subject to certain conditions, to
purchase a number of additional shares of Class A Common Stock proportionate to
such Underwriter's initial commitment.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.

The Company and its directors, officers, certain 5% shareholders and
certain other shareholders have agreed not to sell or otherwise dispose of any
shares of Class A Common Stock or Class B Common Stock for a period of 120 days
after the date of this Prospectus without the prior written consent of the
Representatives.

In connection with the Offering, certain Underwriters and selling group
members who are qualifying registered market makers on the Nasdaq National
Market may engage in passive market making transactions in the Class A Common
Stock on the Nasdaq National Market in accordance with Rule 10b-6A under the
Securities Exchange Act, during the two business day period before commencement
of offers of sales of shares of the Class A Common Stock offered hereby. Passive
market making transactions must comply with certain volume and price limitations
and be identified as such. In general, a passive market maker may display its
bid at a price not in excess of the highest independent bid for the security,
and if all independent bids are lowered below the passive market maker's bid,
then such bid must be lowered when certain purchase limits are exceeded.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby will be
passed upon by Conyers, Dill & Pearman, counsel for the Company. Certain legal
matters will be passed upon for the Company by Rosenman & Colin LLP, United
States counsel for the Company, and Conyers, Dill & Pearman, Bermuda counsel for
the Company. Certain legal matters will be passed upon for the Underwriters by
Akin, Gump, Strauss, Hauer & Feld L.L.P.

EXPERTS

The Consolidated Financial Statements of the Company included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen & Co., independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.

AVAILABLE INFORMATION

The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the 'Commission'). Reports, proxy statements and other information
filed by the Company may be inspected at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Judiciary
Plaza, Washington, DC 20549 and at certain regional offices of the Commission
located at 7 World Trade Center, 13th Floor, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission, Washington, DC 20549 at prescribed rates.
The Class A Common Stock is listed on the Nasdaq National Market and reports and
other information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc. at 1735 K Street, NW, Washington, DC
20006. The

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Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission and the address of such site is (http://www.sec.gov).

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended, with respect to the shares of
Class A Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
shares of Class A Common Stock offered hereby, reference is hereby made to such
Registration Statement and to the exhibits and schedules thereto. The
Registration Statement can be inspected without charge at the principal office
of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the Commission's Regional offices at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of such material can be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.

Statements made in this Prospectus concerning the provisions of any
document or agreement are not necessarily complete, and in each instance
reference is made to the copy of the document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by this
reference.

The Company furnishes its shareholders with annual reports containing
financial statements audited by its independent public accountants and files
with the Securities and Exchange Commission quarterly reports containing

unaudited financial information for each of the first three quarters of each
fiscal year.

INFORMATION INCORPORATED BY REFERENCE

The following documents filed by the Company with the Commission (File No.
0-24796) pursuant to the Exchange Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K and amendment to the
Company's Annual Report on Form 10-K/A for the fiscal year ended December
31, 1995 filed pursuant to Section 13 of the Exchange Act.

2. The Company's Quarterly Reports on Form 10-Q for the quarter ended
March 31, 1996 and the quarter ended June 30, 1996, filed pursuant to
Section 13 of the Exchange Act.

3. The description of the Class A Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission on September
14, 1994.

4. All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of this Offering.

Any statement incorporated herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, in a supplement to this Prospectus or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as to modified or superseded,
to constitute a part of the Registration Statement or this Prospectus.

The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any and all of the documents which are
incorporated herein by reference (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference into such document).
Requests for such documents should be directed to the offices of the Company
located at 18 D'Arblay Street, London W1V 3FP England, telephone number
44-171-292-7900.

<PAGE>
INDEX TO FINANCIAL STATEMENTS

PAGE
----
ANNUAL FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS............................ F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1994 and 1995..... F-3
Consolidated Statements of Operations for the years ended
December 31, 1993, 1994 and 1995................................ F-4

Consolidated Statements of Shareholders' Equity (Deficit) for the
period from December 31, 1992 to December 31, 1995.............. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1994 and 1995................................ F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................... F-7

INTERIM FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheet as of June 30, 1996................... F-30
Consolidated Statements of Operations for the six months ended
June 30, 1995 and 1996.......................................... F-31
Consolidated Statement of Shareholders' Equity (Deficit) for the
six months ended June 30, 1996.................................. F-32
Consolidated Statements of Cash Flows for the six months ended
June 30, 1995 and 1996.......................................... F-33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.......................... F-34

F-1

<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of
Central European Media Enterprises Ltd.:

We have audited the accompanying consolidated balance sheets of Central European
Media Enterprises Ltd. as of December 31, 1994 and 1995, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. 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 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 provide a reasonable basis for our
opinion.

In our opinion, 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, 1994 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with United States generally accepted
accounting principles.

ARTHUR ANDERSEN & CO.

Hamilton, Bermuda
March 28, 1996

F-2

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
($000S)

<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents (Note 3).................................. $ 42,002 $ 53,210
Investments in marketable securities (Note 3)....................... 7,725 10,652
Restricted cash (Note 4)............................................ 1,600 4,216
Accounts receivable (net of allowances of $945, $1,105)............. 13,660 32,475
Program rights costs (Note 3)....................................... 4,970 9,219
Value-added tax recoverable......................................... 21 733
Amount due from unconsolidated affiliate (Note 12).................. 115 --
Advances to affiliates (Note 12).................................... 569 953
Prepaid expenses.................................................... 785 5,270
------------ ------------
Total current assets............................................ 71,447 116,728
INVESTMENT IN UNCONSOLIDATED AFFILIATES (Note 3)...................... 7,317 12,433
LOANS TO AFFILIATES (Note 12)......................................... -- 6,272
PROPERTY, PLANT & EQUIPMENT (net of depreciation of $3,477, $10,281)
(Note 5)............................................................ 31,219 51,699
PROGRAM RIGHTS COSTS (Note 3)......................................... 1,484 10,496
BROADCAST LICENSE COSTS AND OTHER INTANGIBLES (net of amortization of
$461, $1,007) (Note 3).............................................. 2,040 2,365
LICENSE ACQUISITION COSTS (net of amortization of $0, $54) (Note 3)... -- 4,723
GOODWILL (Note 3)..................................................... -- 1,510
ORGANIZATION COSTS (net of amortization of $281, $507) (Note 3)....... 503 1,337
DEVELOPMENT COSTS (net of allowance of $985, $4,373) (Note 3)......... 1,190 10,127
DEFERRED TAXES (Note 7)............................................... -- 559
OTHER ASSETS (Note 6)................................................. 132 3,778
------------ ------------
Total assets.................................................... $115,332 $222,027
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................... $ 5,819 $ 12,956
Accrued liabilities................................................. 3,420 9,804
Duties and other taxes payable...................................... 1,192 288
Income taxes payable................................................ 2,428 15,946
Current portion of obligations under capital lease (Note 11)........ 1,380 2,111
Current portion of credit facilities (Note 9)....................... 3,922 2,661

Advances from affiliates (Note 12).................................. -- 2,687
------------ ------------
Total current liabilities....................................... 18,161 46,453
DEFERRED INCOME TAXES (Note 7)........................................ 903 2,317
OBLIGATIONS UNDER CAPITAL LEASE (Note 11)............................. 9,948 8,747
LONG-TERM PORTION OF CREDIT FACILITIES (Note 9)....................... 10,842 6,766
SHAREHOLDER LOAN (Note 8)............................................. 6,500 --
OTHER LIABILITIES..................................................... -- 173
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES........................ 6,347 18,635
SHAREHOLDERS' EQUITY:
Preferred Stock, $0.01 par value: authorized: 5,000,000 shares;
issued and outstanding: none...................................... -- --
Class A Common Stock, $0.01 par value: authorized:
30,000,000 shares; issued and outstanding:
5,942,203 at December 31, 1994 and 10,294,549 shares at December
31, 1995....................................................... 59 103
Class B Common Stock, $0.01 par value: authorized:
15,000,000 shares; issued and outstanding:
8,078,297 shares................................................ 81 81
Additional paid-in capital.......................................... 94,956 187,997
176,872 Class A Treasury stock of $0.01 par value................... -- (2,476)
------------ ------------
94,956 185,521
Deferred stock compensation charge (Note 14)........................ (3,334) --
Accumulated deficit................................................. (29,265) (48,001)
Cumulative currency translation adjustment.......................... 134 1,232
------------ ------------
Total shareholders' equity...................................... 62,631 138,936
------------ ------------
Total liabilities and shareholders' equity...................... $115,332 $222,027
------------ ------------
------------ ------------
</TABLE>

F-3

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
($000S, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
GROSS REVENUES.............................................. $ -- $ 64,389 $121,113
Discounts and agency commissions............................ -- (10,823) (22,194)
-------- -------- --------
NET REVENUES................................................ -- 53,566 98,919

STATION EXPENSES:

Other operating costs and expenses........................ 1,658 21,907 29,881
Amortization of programming rights........................ 140 10,403 16,319
Depreciation of station fixed assets and other
intangibles............................................ 4 3,773 7,251
-------- -------- --------
Total station operating costs and expenses................ 1,802 36,083 53,451
Selling, general and administrative expenses.............. 811 6,009 6,816

CORPORATE EXPENSES:
Corporate operating costs and development expenses........ 2,708 4,684 14,111
Stock compensation charge (Note 14)....................... -- 5,833 858
Dutch capital registration tax (Note 7b).................. -- -- 1,375
-------- -------- --------
2,708 10,517 16,344

OPERATING INCOME (LOSS)..................................... (5,321) 957 22,308

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES (Notes 2
and 13)................................................... (3,671) (13,677) (14,816)
INTEREST AND OTHER INCOME................................... 64 179 1,238
INTEREST EXPENSE............................................ (140) (1,992) (4,959)
FOREIGN CURRENCY EXCHANGE GAIN (LOSS) (Note 3).............. (176) (245) 324
-------- -------- --------
Net income (loss) before provision for income taxes......... (9,244) (14,778) 4,095
Provision for income taxes (Note 7a)........................ -- (3,331) (16,340)
-------- -------- --------
Net loss before minority interest........................... (9,244) (18,109) (12,245)

MINORITY INTEREST IN INCOME (LOSS) OF CONSOLIDATED
SUBSIDIARIES (Note 3)..................................... 884 (2,396) (6,491)
-------- -------- --------

Net Loss.................................................... $ (8,360) $(20,505) $(18,736)
-------- -------- --------
-------- -------- --------

PER SHARE DATA (Note 3)
Net loss per share.......................................... $ (1.28)
--------
--------
Weighted average number of common shares outstanding
(000s).................................................... 14,678
--------
--------
</TABLE>

F-4

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM DECEMBER 31, 1992 TO DECEMBER 31, 1995
($000S)

<TABLE>
<CAPTION>
CLASS CLASS CUMULATIVE
A B ADDITIONAL CURRENCY
COMMON COMMON PAID-IN TREASURY DEFERRED ACCUMULATED TRANSLATION
STOCK STOCK CAPITAL STOCK COMPENSATION DEFICIT(1) ADJUSTMENT TOTAL
------ ------ ---------- -------- ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992.... $ -- $ -- $ 400 $ -- $ -- $ (400) $ -- $ --
Capital contributed by
Shareholders.............. -- -- 11,485 -- -- -- -- 11,485
Services contributed by
Shareholders.............. -- -- 615 -- -- -- -- 615
Foreign Currency Translation
Adjustment................ -- -- -- -- -- -- (276) (276)
Net loss.................... -- -- -- -- -- (8,360) -- (8,360)
------ ------ ---------- -------- ------------ ----------- ---------- --------

BALANCE, December 31, 1993.... -- -- 12,500 -- -- (8,760) (276) 3,464
Capital contributed by
Shareholders, net of
related costs of $7,681... 59 81 73,120 -- -- -- -- 73,260
Services contributed by
Shareholders.............. -- -- 169 -- -- -- -- 169
Stock compensation charge
(note 14)................. -- -- 9,167 -- (3,334) -- -- 5,833
Foreign Currency Translation
Adjustment................ -- -- -- -- -- -- 410 410
Net loss.................... -- -- -- -- -- (20,505) -- (20,505)
------ ------ ---------- -------- ------------ ----------- ---------- --------

BALANCE, December 31, 1994.... 59 81 94,956 -- (3,334) (29,265) 134 62,631
Capital contributed by
Shareholders including
$6,500 loan converted,
less related costs of
$5,426.................... 44 -- 93,041 -- -- -- -- 93,085
Stock compensation charge
Charge.................... -- -- -- -- 858 -- -- 858
Reduction in stock
compensation charge
(note 14)............... -- -- -- (2,476 ) 2,476 -- -- --
Foreign Currency Translation
Adjustment................ -- -- -- -- -- -- 1,098 1,098
Net loss.................... -- -- -- -- -- (18,736) -- (18,736)
------ ------ ---------- -------- ------------ ----------- ---------- --------
BALANCE, December 31, 1995.... $103 $ 81 $187,997 $(2,476 ) $ -- $ (48,001) $1,232 $138,936
------ ------ ---------- -------- ------------ ----------- ---------- --------
------ ------ ---------- -------- ------------ ----------- ---------- --------
</TABLE>

- ------------------
(1) Of the accumulated deficit of $48,001,000 at December 31, 1995, $32,381,000
represents loss in unconsolidated affiliates.

F-5

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000S)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.................................................... $ (8,360) $(20,505) $(18,736)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity in loss of unconsolidated affiliates............... 3,671 13,677 14,816
Depreciation & amortization............................... 144 14,176 23,705
Minority interest in income (loss) of consolidated
subsidiaries............................................ (884) 2,396 6,491
Services contributed by shareholders...................... 615 169 --
Valuation allowance for license development costs......... -- 985 3,388
Compensation charge....................................... -- 5,833 858
Changes in assets & liabilities
Accounts receivable....................................... (425) (12,950) (18,176)
Related party receivable.................................. -- 263 115
Program rights costs...................................... (1,008) (13,417) (24,040)
VAT recoverable........................................... (1,050) 1,121 (710)
Dividends paid to minority shareholders................... -- -- (612)
Advances to affiliates.................................... -- -- (337)
Production costs.......................................... (355) 355 --
Prepaid expenses.......................................... (44) (673) (1,780)
Other assets.............................................. (119) (5) (3,639)
Accounts payable.......................................... 2,840 646 1,180
Accrued liabilities....................................... 693 2,698 6,197
Income & other taxes payable.............................. 228 3,699 13,223
Other liabilities......................................... 228 -- --
-------- -------- --------
Net cash from (used in) operating activities............ (3,826) (1,532) 1,943
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated affiliates.................. (5,370) (19,268) (19,220)
Investments in marketable securities...................... -- (7,725) (2,927)
Restricted cash........................................... (501) (1,072) (2,616)
Acquisition of fixed assets............................... (8,207) (13,298) (23,196)
Purchase of business...................................... -- -- (1,510)
Payments for license acquisition costs.................... -- -- (4,777)
Payments for organization costs........................... (717) -- (1,032)
Payments for broadcast license costs and other
intangibles............................................. (1,610) (790) (760)
Development costs......................................... -- (2,175) (12,325)

-------- -------- --------
Net cash used in investing activities................... (16,405) (44,328) (68,363)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Current portion of credit facilities...................... -- 3,922 (1,474)
Long-term portion of credit facilities.................... -- 10,476 (4,666)
Payments under capital lease.............................. -- -- (1,570)
Advances to affiliates.................................... (815) (1,396) (6,272)
Advances received from affiliates......................... 1,036 7,457 2,687
Loans received from affiliates............................ 5,142 3,546 --
Repayments of loans from affiliates....................... -- (7,216) --
Repayment of advances by affiliates....................... -- (9,336) --
Shareholder loan.......................................... -- 6,500 --
Capital contributed by shareholders....................... 11,485 73,260 86,585
Long-term payables........................................ -- -- 173
Investments by minority shareholders in consolidated
subsidiaries............................................ 4,589 -- 2,000
-------- -------- --------
Net cash provided by financing activities............... 21,437 87,213 77,463
-------- -------- --------
IMPACT OF EXCHANGE RATE FLUCTUATIONS ON CASH................ (276) (281) 165
-------- -------- --------
Net increase in cash and cash equivalents............... 930 41,072 11,208
CASH AND CASH EQUIVALENTS, beginning of period.............. -- 930 42,002
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period.................... $ 930 $ 42,002 $ 53,210
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL INFORMATION
Cash paid for interest.................................... $ -- $ 1,891 $ 4,942
-------- -------- --------
-------- -------- --------
Income taxes.............................................. $ -- $ -- $ 2,922
-------- -------- --------
-------- -------- --------
</TABLE>

F-6

<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995

1. ORGANIZATION AND BUSINESS

Central European Media Enterprises Ltd., a Bermuda corporation ('CME'), was
formed in June 1994. Through its predecessors, CME has been in operation since
1991. CME, together with its subsidiaries (CME and its subsidiaries are
collectively referred to as the 'Company') develops, owns and operates private,
commercial television and radio stations in the newly emerging markets of
Central and Eastern Europe, and regional commercial television stations in
Germany. The Company makes investments through its wholly-owned subsidiary, CME
Media Enterprises B.V. ('CME BV').

In the Czech Republic, the Company owns a 66% interest in Ceska Nezavisla
Televizni Spolecnost s.r.o. ('Nova TV'), which broadcasts as the only private
national television station.

In Romania, the Company has a 77.5% equity interest in Media Pro
International (known as 'PRO TV'), a national television network. The Company's
partners hold options which, if exercised, would reduce the Company's interest
to not less than 66%. PRO TV was launched on December 1, 1995.

In Slovenia, the Company together with Boutique MMTV d.o.o. Ljubljana
('MMTV') and Tele 59 d.o.o. Maribor ('Tele 59'), (MMTV and Tele 59 are together
referred to as the 'Slovenian Broadcasters') created Produkcija Plus d.o.o.
('POP TV'). POP TV was launched on December 15, 1995 and provides programming to
the Slovenian Broadcasters and sells national advertising. POP TV is not a
broadcaster, but operates as a television network. The Company owns 58% of the
equity of POP TV, but has an effective economic interest of 72% as a result of
its 10% equity and 33% economic interest of MMTV and of Tele 59, each of which
have a 21% interest in POP TV.

In Germany, the Company owns a 48.48% interest, in PULS (formerly known as
1A Berlin), a regional television station based in Berlin based on its
commitments to fund capital calls; in April 1994, the Company obtained a 50%
non-controlling interest in Franken Funk & Fernsehen GmbH ('FFF'), which owns
74.8% of a regional television station in Nuremberg, Germany. The Company's
investments in both of these companies are accounted for under the equity
method.

In the Czech Republic, the Company entered into loan and consulting
agreements with Radio Nova Alfa ('Radio Alfa'), one of two Czech Republic
national radio broadcasters. Subject to the approval of the Czech Radio and
Television Council, the Company's loan and consulting agreements may be
converted into an equity interest in Radio Alfa of up to 46%. Radio Alfa was
relaunched under the name of Radio Nova Alfa in October 1995.

The Company continues to pursue and develop opportunities for television
and radio broadcasting throughout Central and Eastern Europe, and on a regional
basis in Germany.

The accompanying consolidated financial statements represent the financial
statements of the entities formed since 1991, presented as of December 31, 1995
and 1994, and for each of the three years in the period ended December 31, 1995.

2. FINANCING OF OPERATING AND CAPITAL NEEDS

In 1994, the Company raised cash contributions of $73,260,000 from
shareholders, primarily from its initial public offering, which raised
$76,475,000 from the issue of 5,462,500 shares of Class A Common Stock, less
underwriting costs and issue and other related expenses of approximately
$7,681,000.

In 1995, the Company raised cash contributions of $92,000,000 from
shareholders, less underwriting costs and issue and other related expenses of
approximately $5,426,000, from the issue of 4,000,000 shares of Class A Common

Stock.

F-7
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

2. FINANCING OF OPERATING AND CAPITAL NEEDS--(CONTINUED)
Proceeds from the above public offerings have been used to fund the
Company's activities and to repay certain loans and advances from affiliates.
The Company had cash of $42,002,000 and $53,210,000 and marketable securities of
$7,725,000 and $10,652,000 at December 31, 1994 and 1995, respectively, to
enable it to finance its future activities.

For the years ended December 31, 1994 and 1995, Nova TV generated profits
of $7,045,000 and $23,086,000, respectively, after interest and tax. On June 23,
1995, Nova TV declared a dividend of Kc 53,000,000 ($2,010,000). This amount
reflects the 1994 net income of Nova TV less 1993 losses and a 10% reserve from
the 1994 net income which, under Czech law, cannot be distributed to
shareholders. In accordance with Nova TV's shareholders' agreement, the Company
received Kc 37,000,000 ($1,398,000) of the distribution. In March 1996, Nova TV
declared a dividend of Kc 330,000,000 ($12,406,000) to be paid in equal
installments of Kc 165,000,000 ($6,203,000) in May and November of 1996 (refer
to Note 15).

Other entities included in the accompanying consolidated financial
statements incurred operating losses, and the Company expects them to continue
to incur operating losses in developing their operations.

Future capital commitments and operating requirements for Nova TV, PRO TV,
POP TV, PULS, FFF, Radio Alfa and the Company's corporate operations, as well as
management's plans with regard to meeting those commitments, are as follows:

Nova TV

At December 31, 1994, the Company had contributed Kc 264,000,000
($9,265,000) to Nova TV. No additional funding was provided to Nova TV during
1995. The entity is expected to be able to fund its future operations from cash
generated from operations and available borrowing facilities. Accordingly, the
Company does not presently anticipate that it will need to provide further
financing.

PRO TV

PRO TV generated a loss of $699,000 for the year ended December 31, 1995
after interest and tax and is expected to be able to fund its future operations
from a combination of cash generated from the business, additional funding from
the Company and debt financing. At December 31, 1995, the Company had
contributed $12,732,000 to PRO TV and is obliged to provide a further
$7,268,000. Additionally, the Company is committed to funding any outstanding
liabilities of an affiliated entity at December 31, 1996 in connection with the
reorganization of that entity, estimated not to be in excess of $2,400,000

(refer to 'Dividends from consolidated subsidiaries and unconsolidated
affiliates' below). The Company may make additional debt funding for the
operations of the business and capital needs, if necessary, which is expected to
be ultimately replaced by third party debt financing.

POP TV and the Slovenian Broadcasters

For the year ended December 31, 1995, POP TV generated a loss of $3,683,000
after interest and tax and is expected to be able to fund its future operations
from cash generated from the business and debt financing. At December 31, 1995,
the Company had contributed $18,275,000 to POP TV and the Slovenian
Broadcasters, consisting of $9,600,000 and $1,030,000 of equity, respectively,
and $7,645,000 as a loan from the Company. POP TV intends to obtain debt
financing which is to be used to repay the loan from the Company.

F-8
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

2. FINANCING OF OPERATING AND CAPITAL NEEDS--(CONTINUED)
PULS

At December 31, 1995, the Company had contributed $33,687,000 to PULS.
Management estimates that DM 12,000,000 ($8,392,000) in funding will be required
during 1996 of which DM 5,000,000 was funded in March 1996. The Company's
obligation to provide funding to PULS will be based on its decisions to
participate in future capital calls. Funding beyond the percentage of ownership
increases the Company's percentage of ownership and accordingly the Company's
share of profits or losses.

FFF

In April 1994, the Company agreed to purchase a 50% non-controlling
interest in FFF for DM 8,000,000 ($5,200,000). Additional funding of DM
2,000,000 ($1,300,000) and DM 7,000,000 ($4,895,000) was provided during 1994
and 1995, respectively. Management estimates that DM 3,000,000 ($2,100,000) in
funding will be required during 1996 of which DM 1,000,000 ($699,000) was funded
in March 1996. The Company's obligation to provide funding to FFF will be based
on its decisions to participate in future capital calls.

Radio Alfa

In February 1995, the Company entered into loan and consulting agreements
with Radio Alfa, one of two Czech Republic national radio broadcasters, which
may be converted into up to 46% of equity subject to the approval of the Czech
Radio and Television Council. As of December 31, 1995 the Company has advanced
Kc 79,000,000 ($2,970,000) in loans to Radio Alfa. Radio Alfa generated a loss
of Kc 69,275,000 ($2,607,000) for the year ended December 31, 1995 after
interest and tax. The company provided an additional $739,000 to Radio Alfa in
January 1996 as a loan.

Corporate Operations

The Company has reached agreements with regard to broadcast licenses in the
Slovak Republic, Budapest, Hungary, and Kiev, Ukraine and is seeking licenses in
other areas ( refer to Note 11). Funding of the operations currently under the
Company's control, together with funding which would be required if the Company
were successful in other areas of Europe, may require the Company to seek to
raise substantial capital beyond the amount which was raised by the Company's
public offerings, sources of which may include additional equity and debt
financing.

While losses from development activities are expected to continue in 1996,
management believes that the Company's liquidity and capital resources at
December 31, 1995, including the proceeds of the 1995 Stock Issue, potential
corporate debt facilities and the financial commitments of local majority and
minority shareholders or partners in its various operating entities, are
adequate to fund existing operations through 1996.

Dividends from consolidated subsidiaries and unconsolidated affiliates

The Company conducts all of its operations through subsidiaries.
Accordingly, the primary internal source of the Company's cash will ultimately
be dividends and other distributions from its subsidiaries. Each of these
subsidiaries was formed under the laws of, and has its operations in, a country
other than Bermuda, the jurisdiction of the Company. In addition, each of the
operating subsidiaries receives its revenues in the local currency of the
jurisdiction in which it is situated. As a consequence, the Company's ability to
obtain dividends or other distributions is subject to, among other things,
restrictions

F-9
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

2. FINANCING OF OPERATING AND CAPITAL NEEDS--(CONTINUED)
on dividends under applicable local laws and foreign currency exchange
regulations of the jurisdictions in which its subsidiaries operate.

Nova TV

On an ongoing basis, the Company is entitled to 66% of the total profits of
Nova TV, except that until the Company is repaid its capital contributions plus
a priority return at the rate of 6% per annum on such capital contributions, 50%
of the profits of Nova TV will be paid to the Company and Ceska Sporitelna in
proportion to their respective capital contributions (75% to the Company) and
the remaining profits will be shared in accordance with partners' equity
interests (66% to the Company). Nova TV is required by its Articles of
Association, at the time it becomes profitable, to create and contribute to a
reserve fund 10% of its net profit; however such contribution shall not exceed
5% of its registered capital. Thereafter, the reserve fund shall receive a
contribution of 5% of the net profit annually until such time as the reserve

fund reaches 10% of its registered capital. The reserve fund was fully funded up
to 10% of Nova TV's registered capital at December 31, 1995.

PRO TV

The Company is entitled to 77.5% of the total profits of PRO TV, although
the Company's partners hold options which, if exercised, would reduce the
Company's stake of PRO TV's profits to not less than 66%. In addition, the
Company is entitled to a one-time preferred dividend of approximately $468,000
from PRO TV related to certain reorganization costs of an affiliated entity.
Furthermore, PRO TV has committed to pay for any outstanding reorganization
costs of an affiliated entity at December 31, 1996 estimated not to exceed
$2,400,000. The Company would be entitled to receive a preferred dividend equal
to any additional future reorganizational costs paid for by the Company. PRO TV
is required to contribute 5% of net profits to a reserve fund until equal to at
least 20% of share capital.

POP TV and the Slovenian Broadcasters

Based on a direct equity interest of 58% in POP TV, the Company has the
right to 58% of POP TV's profits. The Company is indirectly entitled to an
additional 14% of POP TV's profits via its 33% economic interest in MMTV and
Tele 59, each of which own a 21% equity interest in POP TV, subject to the
results of operations of these entities including taxation.

FFF

A partner in FFF is entitled to a one-time preferred distribution of DM
1,900,000 ($1,300,000) out of cumulative profits of FFF when the company has
achieved net positive retained earnings.

General

The ability of the subsidiaries and the unconsolidated affiliates to pay
dividends or make other distributions to the Company is also subject to their
having sufficient funds from their operations legally available which are not
needed to fund their operations. In some cases it is subject to the approval of
the other partners, stockholders or creditors of these entities.

Other than the dividends of $1,398,000 from Nova TV in 1995, no other
dividends have been received in the period from inception through December 31,
1995.

F-10
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with the
accounting principles generally accepted in the United States. The significant

accounting policies are summarized as follows:

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company's wholly-owned subsidiaries, and the accounts of Nova TV, PRO TV and
POP TV as consolidated entities, and reflect the interests of the minority
owners of Nova TV, PRO TV and POP TV. The accounts of PULS and FFF, in which the
Company has minority ownership interests, are included in the accompanying
consolidated financial statements as investments in unconsolidated affiliates
under the equity method.

The Company was a development stage company until the fourth quarter of
1994 when the Company completed a successful initial public offering of its
Class A Common Stock and Nova TV produced significant operating revenues and
operating profits.

Cash and Cash Equivalents

Cash and cash equivalents includes unrestricted cash in banks and highly
liquid investments with maturities of less than three months when purchased.

Investments in Marketable Securities

Effective January 1, 1994 the Company adopted Statement of Financial
Accounting Standards No. 115 'Accounting for Certain Investments in Debt and
Equity Securities'. In connection with the adoption of this pronouncement, debt
and equity securities held by the Company that may be sold in response to
changes in interest rates, prepayments, and other factors have been classified
as available-for-sale. Such securities are reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a separate
component of shareholders' equity (on an after tax basis). Gains and losses on
the disposition of securities are recognized on the specific identification
method in the period in which they occur. There were no significant realized or
unrealized gains or losses as of December 31, 1995 and 1994.

Revenue Recognition

Revenues primarily result from the sale of advertising time and are
recognized in the period in which advertising is aired.

Barter Transactions

Revenue from barter transactions (television advertising time provided in
exchange for goods and services) is recognized as income when commercials are
broadcast, and programming, merchandise or services received are charged to
expense or capitalized as appropriate when received or used. Barter revenues of
$2,841,000 and $3,647,000 have been recognized for the years ended December 31,
1994 and 1995, respectively. The Company does not believe that the bartered
programming has significant value on second or subsequent showings on Czech
television as it has been its experience that first runs, on average, account
for a substantial majority of the program's potential revenue.

The Company records barter transactions at the estimated fair market value

of the production or services received. In cases where bartered programs can
only be obtained through a barter agreement the Company values the barter at the
value of the asset given up. In other cases where the Company

F-11
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
has elected to enter into barter agreements as an alternate method of payment,
strictly for economic reasons, the Company values the barter agreement at the
value of the asset received. If merchandise or services are received prior to
the broadcast of a commercial, a liability is recorded. Likewise, if a
commercial is broadcast first, a receivable is recorded. At December 31, 1995,
barter receivables were $587,000 and are included in the accompanying
consolidated balance sheet.

Property, Plant and Equipment

Property, plant and equipment is carried at cost, less accumulated
depreciation. Depreciation is computed using the straight-line and accelerated
methods over the estimated useful lives of the related assets (refer to Note 5).

Assets held under capital leases

Assets held under capital leases are accounted for in accordance with
Statement of Financial Accounting Standards No. 13, 'Accounting for Leases', and
recorded in Property, Plant and Equipment. The related liability is included in
obligations under capital lease.

Program Rights and Production Costs

Program rights acquired by the Company under license agreements and the
related obligations incurred are recorded as assets and liabilities when the
license period begins, and the assets are amortized to expense using
straight-line and accelerated methods based on the estimated period of usage,
ranging from one to five years. Amortization estimates for program rights are
reviewed periodically and adjusted prospectively. Program rights costs are shown
net of amortization of $10,328,000 and $25,181,000 at December 31, 1994 and
1995, respectively.

Payments made for program rights in which the license period has not begun
before year end are classified as prepaid expenses and are $153,000 and
$2,688,000 at December 31, 1994 and 1995, respectively.

Production costs for self-produced programs are capitalized, and expensed
when first broadcast except where the programming has potential to generate
future revenues. When this is the case, production costs are capitalized and
amortized on the same basis as programming obtained from third parties.

Goodwill

Goodwill represents the Company's excess cost over net assets acquired and
is being amortized on a straight-line basis over the estimated useful life of
the assets. Amounts recognized to date have been amortized over 4 years from the
original date of acquisition. It has been the Company's policy to evaluate and
recognize impairment if it is probable that the amounts are not recoverable from
future cash flows.

License Acquisition Costs

License acquisition costs represent the excess of the Company's investment
above the Company's share of net assets received from consolidated entities and
reflect the amounts paid to secure exclusive rights to the licenses. It is
amortized over the lives of the related licenses which range from 5 to 10 years.
License acquisition costs are reviewed for impairment whenever events or
circumstances provide evidence that suggests that the carrying amount of license
acquisition costs may not be

F-12
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
recoverable. At December 31, 1994 and 1995, $0 and $4,777,000, respectively, has
been capitalized, $0 and $54,000, respectively, has been amortized.

Broadcast License Costs and Other Intangibles

The costs of acquiring licenses to broadcast are capitalized and amortized
over the life of the related license. As of December 31, 1994 and 1995,
$1,711,000 and $1,804,000, respectively, has been capitalized in the
accompanying consolidated financial statements related to the Company's 12 year
broadcast license in the Czech Republic, and $219,000 and $392,000 has been
amortized through December 31, 1994 and 1995, respectively.

Other intangibles, which include the cost of acquiring software and other
intangible assets, are capitalized and amortized over their estimated useful
lives. At December 31, 1994 and 1995, and $790,000 and $1,568,000, respectively,
has been capitalized, and $242,000 and $614,000, respectively, has been
amortized.

Organization Costs

The Company has capitalized $784,000 and $1,844,000 in costs incurred in
connection with the organization and incorporation of consolidated subsidiaries
at December 31, 1994 and 1995, respectively, which will be amortized over four
years. Amortization of $281,000 and $507,000 has been provided through December
31, 1995 and 1994, respectively.

Development Costs

In the course of its activities the Company incurs costs in connection with
the development of new license opportunities for the Company. Costs incurred in
the period prior to the launch, or relaunch, of stations are classified as
development costs by the Company.

These costs are capitalized and shown as an asset on the balance sheet
where separately identifiable. It is the Company's policy to account for these
assets at the lower of cost or fair value. As part of an ongoing review of the
valuation of such assets, management assesses their carrying value. If this
review indicates that the assets will not be recoverable through potential
future operations, the carrying values of these assets are reduced to their
estimated recoverable value by the recording of an allowance. As of December 31,
1994 and 1995, the Company has incurred capitalizable costs of $2,175,000 and
$14,500,000, respectively, which have been reduced by an allowance of $985,000
and $4,373,000, respectively. As a result of its review, management has
determined that such assets are fairly stated at December 31, 1995 and 1994.

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, 'Accounting for Income Taxes.' This
statement requires a liability approach for measuring deferred taxes based on
temporary differences between the financial statement and income tax bases of
assets and liabilities existing at each balance sheet date using enacted rates
for the years in which the taxes are expected to be paid or recovered.

Deferred income taxes are provided on temporary differences between
financial statement and taxable income. The primary sources of these differences
are depreciation, amortization and capital lease payments.

F-13
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Foreign Currency Translation

The Company has applied the provisions of Statement of Financial Accounting
Standards No. 52 'Foreign Currency Translation' ('SFAS No. 52') in translating
the financial statements of its entities from German marks ('DM'), Czech korunas
('Kc'), Romanian lei ('ROL') and Slovenian tolars ('SIT') to U.S. dollars.
Transactions denominated in foreign currencies are recorded at the exchange rate
in effect at the date of the transaction.

The financial statements of Nova TV and POP TV, which operate in economies
that are considered non-highly inflationary, are measured using the local
currency as the functional currency. Income and expense items are translated at
average monthly rates of exchange. Gains and losses from currency translations
of these affiliates are included in net earnings. Assets and liabilities of
these affiliates are translated at the rates of exchange at the balance sheet
date. The resultant translation adjustments are included as cumulative currency

translation adjustment as a component of shareholders' equity.

PRO TV operates in an economy qualifying as highly inflationary.
Accordingly, non-monetary assets and liabilities are translated at historical
exchange rates and monetary assets and liabilities are translated at current
exchange rates. Translation adjustments are included in the determination of
income.

Current exchange rates and average exchange rates for the respective
periods are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 AVERAGE FOR 1994
-------------------- ----------------
<S> <C> <C>
Czech koruna equivalent of $1.00........ 28.05 28.45
Romanian lei equivalent of $1.00........ N.A. N.A.
Slovenian tolar equivalent of $1.00..... N.A. N.A.
German mark equivalent of $1.00......... 1.55 1.62

<CAPTION>
AT DECEMBER 31, 1995 AVERAGE FOR 1995
-------------------- ----------------
<S> <C> <C>
Czech koruna equivalent of $1.00........ 26.60 26.57
Romanian lei equivalent of $1.00........ 2,578 2,402*
Slovenian tolar equivalent of $1.00..... 126 126**
German mark equivalent of $1.00......... 1.43 1.44
- ------------------
*Period from December 1, 1995
**Period from December 15, 1995
</TABLE>

In the accompanying notes, except where referring to amounts presented in
income statements, $ equivalents of Kc, ROL, SIT and DM amounts have been
included in brackets at December 31, 1994 or 1995 or at their respective
historical rate, as applicable, for illustrative purposes only. Future amounts
are shown at December 31, 1995 exchange rates.

Fair Value of Financial Instruments

Effective December 31, 1995, the Company adopted Statement of Financial
Accounting Standard No. 107, 'Disclosures about Fair Value of Financial
Instruments' (SFAS No. 107). To meet the reporting requirements of SFAS No. 107,
the Company calculates the fair value of financial instruments and includes this
additional information in the notes to financial statements when the fair value
is different from book value of those financial instruments. When the fair value
is equal to the book value, no additional disclosure is made. The Company uses
quoted market prices whenever available to calculate these fair values. When
quoted market prices are not available, the Company uses standard pricing models
for various types of financial instruments which take into account the present
value of

F-14

<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
estimated future cash flows. At December 31, 1995, the carrying value of all
financial instruments approximated fair value.

Net Loss Per Share

Net loss per share was computed by dividing the Company's net loss by the
weighted average number of Common Shares (both Class A and Class B) and common
share equivalents outstanding during the year ended December 31, 1995. The
impact of outstanding options and warrants has not been included in the
computation of net loss per share, as the effect of their inclusion would be
anti-dilutive.

Recently Issued Accounting Standards

During March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of'.
This statement establishes financial accounting and reporting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used, and for long-lived assets and
certain identifiable intangibles to be disposed of. This statement is effective
for financial statements for fiscal years beginning after December 15, 1995,
although earlier application is encouraged.

During October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 123, 'Accounting for Stock
Based Compensation'. This statement establishes financial accounting and
reporting standards for stock-based employee compensation plans. SFAS No. 123
encourages entities to adopt a fair value based method of accounting for stock
compensation plans. However, SFAS No. 123 also permits the Company to continue
to measure compensation costs under pre-existing accounting pronouncements. If
the fair value based method of accounting is not adopted, SFAS No. 123 requires
pro forma disclosures of net income and earnings per share in the notes to
financial statements. The accounting requirements of SFAS No. 123 are effective
for transactions entered into in fiscal years that begin after December 15,
1995, though they may be adopted on issuance. The disclosure requirements of
SFAS No. 123 are effective for financial statements for fiscal years beginning
after December 15, 1995, or for an earlier fiscal year for which SFAS No. 123 is
initially adopted for recognizing compensation cost.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the

reporting period. Actual results could differ from those estimates.

Reclassifications

Certain reclassifications were made to prior period amounts to conform to
current period classifications.

F-15
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

4. RESTRICTED CASH

Restricted cash at December 31, 1994 and 1995 is $1,600,000 and $4,216,000,
respectively. Restricted cash at December 31, 1994 consists of cash restricted
in connection with a DM 2,000,000 letter of credit issued on behalf of an
unconsolidated affiliated entity in relation to leasing commitments in that
entity. Restricted cash at December 31, 1995, additionally includes $2,000,000
restricted in connection with an extended offer to purchase an entity in Hungary
(refer to Note 15) and $616,000 pledged on behalf of a loan obtained by an
affiliated entity in Romania.

5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
USEFUL DECEMBER 31,
LIVES ------------------
YEARS 1994 1995
------ ------- -------
<S> <C> <C> <C>
(000S) (000S)
Land and buildings held under capital leases.... 25 $12,812 $17,899
Leasehold improvements.......................... 4-15 2,933 3,873
Station machinery, fixtures and equipment....... 4-8 18,918 37,893
Other equipment................................. 4-8 33 --
Construction in progress........................ -- -- 2,315
------- -------
34,696 61,980
Less--Accumulated depreciation.................. (3,477) (10,281)
------- -------
$31,219 $51,699
------- -------
------- -------
</TABLE>

6. OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
<S> <C> <C>
(000S) (000S)
Advances for technical equipment.... $ -- $ 2,591
Satellite transponder............... -- 850
Other............................... 132 337
------- -------
$ 132 $ 3,778
------- -------
------- -------
</TABLE>

In June 1995 the Company, through its wholly-owned subsidiary CME
Programming Services Inc., obtained leasehold rights to a 33 Mhz transponder on
the Eutelsat HB3 Satellite which the Company anticipates will be launched in
January 1997. The Satellite Transponder, which has been leased through British
Telecommunications plc for a 12 year period, will give the Company's stations
the capability of distributing programs to their terrestrial television
transmitters as well as to cable television systems throughout the Central and
Eastern European region. The Company paid an $850,000 deposit toward future
transponder lease obligations. The annual charge for the lease is approximately
$4.4 million, beginning after the launch of the satellite. The obligations of
CME Programming Services Inc. under the transponder lease are guaranteed by CME.

F-16
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

7. INCOME AND CAPITAL TAXES PAYABLE

(a) Provision for income taxes relates primarily to the profits of Nova TV.

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
(000S) (000S) (000S)
Current income taxes..... $ -- $ 2,428 $15,473
Deferred income taxes.... -- 903 867
------- ------- -------
$ -- $ 3,331 $16,340
------- ------- -------

------- ------- -------
</TABLE>

Income taxes are provided on Nova TV profits, which cannot be offset
against losses incurred in PRO TV, POP TV, PULS and FFF or against corporate
costs incurred in other jurisdictions. The effective income tax rate in the
Czech Republic is 42% and 41% for the years ended December 31, 1994 and 1995,
respectively. Nova TV's net operating losses brought forward from 1993 were
fully utilized to offset profits in 1994. These factors represent the difference
between the Company's income tax charge and the federal rate of income tax
applied to the Company's loss before tax.

At the present time no income, profit, capital or capital gain taxes are
levied in Bermuda and, accordingly, no provision for such taxes has been
recorded by the Company. In the event that such taxes are levied, the Company
has received an undertaking from the Bermuda Government exempting it from all
such taxes until March 28, 2016.

Deferred income tax assets relate to the following timing differences:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
<S> <C> <C>
(000S) (000S)
Provisions against receivables...................... $ 382 $ 891
Accelerated amortization of programming licenses.... -- 529
Other............................................... -- 30
------- -------
382 1,450
Valuation allowance on deferred tax asset........... (382) (891)
------- -------
------- -------
$ -- $ 559
------- -------
------- -------
</TABLE>

A full valuation allowance has been provided for provisions against
receivables due to the delay in obtaining a tax deduction for such amounts in
the Czech Republic.

Deferred income tax liabilities relate to the following timing differences:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
------- -------
<S> <C> <C>

(000S) (000S)
Depreciation and amortization.... $ 62 $ 1,503
Lease payments................... 720 595
Other............................ 121 219
------- -------
$ 903 $ 2,317
------- -------
------- -------
</TABLE>

At December 31, 1995, the Company had no net operating loss carry-forward
in the Czech Republic as these had been fully utilised in 1994. Net operating
losses incurred in 1995 in Germany, Romania and Slovenia are available for
offset against taxable income in the future. Net operating losses

F-17
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

7. INCOME AND CAPITAL TAXES PAYABLE--(CONTINUED)
experienced in jurisdictions prior to 1995 may not be fully available for offset
against taxable income in the future.

(b) Dutch Capital Registration Tax

Dutch capital registration tax is payable on the contribution of capital to
Dutch resident Companies. It has been included within corporate expenses as it
is not dependent upon the level of income in the amount of $1,375,000.

8. SHAREHOLDER LOAN

On September 9, 1994, the Company borrowed $6,500,000 from Ronald S. Lauder
(the 'Principal Shareholder Loan'), who is also a director of the Company. The
Principal Shareholder Loan was evidenced by an unsecured Term Promissory Note
due September 30, 1996, bearing interest at a rate of 10% per annum. In
addition, Mr. Lauder received warrants to purchase 250,000 shares of Class A
Common Stock at an exercise price of $16.10 per share. These warrants are
exercisable for five years, commencing one year after their date of issue.

Concurrent to the equity offering of 4,000,000 shares of Class A Common
Stock on November 9, 1995 (the '1995 Offering'), Mr. Lauder purchased 297,346
shares of Class A Common Stock at the price to the public in the 1995 Offering,
less underwriting discounts and commissions, in exchange for the Principal
Shareholder Loan of $6,500,000.

9. LOAN OBLIGATIONS

Long-term debt consists of the following :

DECEMBER 31,
----------------------------
1994 1995
------------ ------------
<S> <C> <C>
($ MILLIONS) ($ MILLIONS)
Nova TV
Long-term investment loan, interest at 2.5% above Ceska
Sporitelna bank's prime rate (14.5% at December 31,
1995)(a).................................................. $ 10.6 $9.0
Revolving credit loan, interest at 1% above Ceska Sporitelna
bank's prime rate (13% at December 31, 1994)(b)........... 4.1 --
Line of credit loan, interest at 12%(c)..................... -- --
PRO TV
Operating bank loan, interest at 12% per annum(d)........... -- 0.2
Operating bank loan, interest at 12.1% per annum(d)......... -- 0.3
------------ -----
14.7 9.5
Less current maturities..................................... (3.9) (2.7)
------------ -----
$ 10.8 $6.8
------------ -----
------------ -----
</TABLE>

Nova TV

(a) The long-term investment loan was obtained from Ceska Sporitelna bank, an
investor in Nova TV, to be used for the purchase of equipment. The loan had
a maximum facility of Kc 300 million ($10.7 million) which was fully
utilized at December 31, 1994. Principal payments of Kc 60 million,

F-18
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

9. LOAN OBLIGATIONS--(CONTINUED)
($2.1 million) are due on this loan each year and paid accordingly in 1995.
The loan bears interest at 2.5% above the bank's prime rate (prime rate
currently 12%).

(b) Also obtained from Ceska Sporitelna bank, Nova TV had a revolving credit
facility for an amount of up to Kc 214 million ($7.6 million) which bore
interest at a rate 1% above the bank's prime rate. The revolving credit
facility was automatically renewable each year provided that Nova TV was in
compliance with its covenants, except that the availability under the
facility was reduced by Kc 25 million ($891,000) in April and October of
each year. Nova TV had used Kc 114 million ($4.1 million) of its available
credit at December 31, 1994 which was fully repaid in 1995.

maximum facility of Kc 250 million ($9 million) bearing interest of 12%.
This facility was unutilized at December 31, 1995.

The long-term investment loan (a) is secured by the Nova TV's equipment,
vehicles and 50% of its receivables and the line of credit loan (c) is secured
by the remaining 50% of receivables.

PRO TV

(d) In exchange for certain assets, PRO TV has assumed two loans from an
affiliated entity, payable to Tiriac Bank, which is partially owned by an
PRO TV investor. The principal portion of the first loan is $250,000,
denominated in USD, with interest of 12% per annum. The loan has variable
monthly payments with a final balloon payment of $165,000 due on September
1996. The second loan is for a principal amount of $300,000, denominated in
USD, with equal monthly payments of $37,500 through April 1996 and interest
of 12.1% per annum. Both loans are secured by certain of PRO TV's equipment.

At December 31, 1995, maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
TOTAL
------------
<S> <C>
($ MILLIONS)
1996.... $2.7
1997.... 2.3
1998.... 2.3
1999.... 2.2
-----
$9.5
-----
-----
</TABLE>

10. STOCK OPTION PLAN

The Company adopted the 1994 Stock Option Plan in 1994 and the 1995 Stock
Option Plan in August 1995. Under the 1994 Stock Option Plan, the Compensation
Committee is authorized to grant options for up to 900,000 shares of the
Company's Class A Common Stock. Under the 1995 Stock Option Plan, subject to
shareholder approval, the Company will be authorized to grant options for up to
1,200,000 shares of the Company's Class A Common Stock. The Stock Option Plans
allow grants to consultants and non-affiliated directors. The maximum term of
the options granted under the Stock Option Plans is ten years. Options granted
may be either incentive stock options under the Internal Revenue Code of 1986,
as amended (the 'Code'), or non-qualified stock options. Under the Stock Option
Plans, non-affiliated directors are automatically granted each year options to
purchase 10,000 shares of Class A Common Stock. The Compensation Committee has
granted substantially all options to purchase the 900,000 shares of Class A
Common Stock created by the 1994 Stock Option Plan and 223,600 shares of Class A
Common Stock under the 1995 Stock Option Plan. The 1995 Stock Option

F-19
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

10. STOCK OPTION PLAN--(CONTINUED)
Plan includes options to purchase 67,000 shares of Class A Common Stock granted
to the President and Chief Executive Officer of the Company and 23,800 shares of
Class A Common Stock granted to the Vice President-Finance and Chief Financial
Officer.

Transactions involving the Stock Option Plan are summarized as follows:

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
1993 1994 1995
------- ------- ---------
<S> <C> <C> <C>
Outstanding at beginning of year............. -- -- 354,500
Granted.................................... -- 354,500 756,600
Exercised.................................. -- -- (55,000)
Cancelled.................................. -- -- (6,500)
------- ------- ---------
Outstanding at end of year................... -- 354,500 1,049,600
------- ------- ---------
------- ------- ---------
Exercisable ($0.20-$14.00 (per share))..... -- -- 122,250
------- ------- ---------
------- ------- ---------
</TABLE>

One of the Company's directors was awarded 25,000 options on August 3, 1995
which were granted outside of both the 1994 Amended and Restated Option Plan and
the 1995 Stock Option Plan. Half of his shares vest 6 months after issue and the
remainder after one year.

11. COMMITMENTS AND CONTINGENCIES

Ownership and Financial Commitments--Existing Entities

The Company's ownership interests and financial commitments regarding
existing entities are as follows:

Nova TV

Current financing requirements are being met by cash generated from the
business. The Company does not presently anticipate that it will need to provide
further financing.

PRO TV

The Company is required to provide additional funding of the project in the
amount of $7,268,000 for total funding of $20,000,000. Additional funding may be
provided to PRO TV, on a temporary basis, until such time as local debt
financing can be obtained. Subsequent to December 31, 1995, the Company has
funded $4,271,000 to PRO TV.

POP TV and the Slovenian Broadcasters

The Company has funded approximately $18,275,000 to POP TV and the
Slovenian Broadcasters, which consists of $9,600,000 and $1,030,000 as equity,
respectively, and $7,645,000 as a loan to POP TV. Further funding of the
operations and capital needed for POP TV is expected to be obtained from local
debt financing, cash generated from the business and additional funding by the
Company. Additionally, local debt financing would be used to repay the loan from
the Company.

PULS

The Company had contributed DM 30,000,000 ($19,400,000) and DM 50,800,000
($33,687,000) to PULS at the end of December 31, 1994 and 1995, respectively.
Total funding for PULS for operating

F-20
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
and capital needs in 1996 is estimated to be DM 12,000,000 ($8,392,000). The
Company has resolved to fund these operations for at least the first 6 months of
1996 and estimates the cash requirements of PULS will be DM 8,570,000
($6,000,000) of which DM 5,000,000 ($3,500,000) has already been paid.

FFF

At December 31, 1994 and 1995, the Company had contributed DM 10,000,000
($6,500,000) and DM 17,000,000 ($11,900,000), respectively. Management estimates
additional funding for operating and capital needs in 1996 will be DM 3,000,000
($2,100,000). The Company has resolved to fund these operations for at least the
first 6 months of 1996 and estimates the cash requirements of FFF will be DM
1,692,000 ($1,183,000) of which DM 1,000,000 ($699,000) has already been funded.

Radio Alfa

At December 31, 1995, the Company has contributed Kc 79 million
($2,970,000) to Radio Alfa in the form of a loan, a portion of which may be
converted into a 46% equity interest in Radio Alfa subject to approval by the
Czech Radio and Television Council. The Company provided an additional $739,000
to Radio Alfa in January 1996 as a loan.

Licenses

The Company has no reason to believe that the licenses for stations will
not be renewed. However, no statutory or regulatory presumption exists for the
current license holder, and there can be no assurance that licenses will be
renewed upon expiration of their initial terms. The failure of any such licenses
to be renewed may adversely affect the results of the Company's operations.

In Romania, PRO TV does not have television broadcast licenses, but through
an exclusive operating agreement, has the use of television and radio broadcast
licenses of affiliated entities owned by other shareholders of PRO TV. License
periods are 7 and 5 years for television and radio, respectively, with a one
time unconditional renewal option. The Company has no reason to believe that
this exclusive operating agreement will be terminated by the local licensing
authorities; however such termination of PRO TV's use of the licenses would
adversely affect the results of the Company's operations. The risk of business
interruption from such termination of the exclusive operating agreement by local
licensing authorities is reduced because under the exclusive operating
agreement, all parties agree to renegotiate the agreement in good faith and
recast the agreement in terms that would likely cure the defects perceived by
the local licensing authorities and return a balance of benefits to all parties
comparable to the balance of benefits provided by related current agreements
between the parties and by the current terms of the exclusive operating
agreement.

In Slovenia, POP TV does not have a television broadcast license, but has
an agreement whereby affiliated entities obtain all programming exclusively
through POP TV. POP TV has the exclusive right to sell advertising in exchange
for programming. Licenses held by affiliates operating under these agreements
have license periods of up to 10 years which are extendable for one five year
period. The Company has no reason to believe that these agreements will be
terminated by the local licensing authorities; however, such termination of this
arrangement would adversely affect the results of the Company's operations.

F-21
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Ownership and Financial Commitments--Future Expansion

The Company's ownership interest and financial commitments regarding
entities to be considered for future expansion are as follows:

Slovak Republic

In the Slovak Republic, the Company has entered into an agreement with
Markiza to create STS, an independent commercial full service television station
in the Slovak Republic. The Company has a 49% equity interest and an 80%
economic interest in STS. Markiza was awarded a television broadcast license by
the Slovak Council for Television and Radio Broadcasting in July 1995 and the

Company expects to launch broadcast operations by the end of 1996. At December
31, 1995, the Company had contributed $3,714,000 in capital to STS, which is
included in development costs in the accompanying consolidated balance sheet as
the station is still under development.

Hungary

The Company owns 95.0% of the equity 2002 Kft., which has been awarded a
local microwave (MMDS) license with a broadcast reach of approximately 200,000
homes in Budapest. The Company's business plan contemplates commencing broadcast
operations in Hungary in 1997. The Company believes that because of the
significant capital required to develop broadcast operations in Hungary, 2002
Kft would only be economically viable if the Company could expect to reach a
significant portion of Hungary's population.

Poland

In Poland, the Company has entered into an alliance with the Polish media
group ITI, forming TVN Sp. z.o.o. ('TVN') which in May 1995 applied for
broadcast licenses in Poland. The application is currently pending due to the
recent local governmental elections. At December 31, 1995, the Company had
contributed $1.65 million to TVN, classified as development costs in the
accompanying consolidated balance sheets as the Company has not been granted a
license in Poland. The capital contributed, less expenses incurred in pursuing
the licenses, is refundable in the event TVN is not successful in obtaining
broadcast licenses in Poland. The total development costs for Poland at December
31, 1995 were $4,640,000.

Ukraine

Pursuant to a September 1995 agreement, the Company acquired a 30% equity
interest in a television broadcast venture based in Ukraine which is known as
'Gravis'. At December 31, 1995, the Company had contributed $470,000, classified
as development costs in the accompanying balance sheets, and has agreed to fund
Gravis's operating and capital requirements of up to $900,000 through the first
quarter of 1996. The Company has no commitments for funding over the $900,000
referred to above.

SFF

The Company entered into an agreement in September 1995 to purchase a 49%
equity interest in SFF for a price of approximately DM 2,850,000 ($1,980,000).
SFF owns 33% of a venture which has been awarded two regional television
broadcasting licenses in Leipzig and Dresden and which operates a regional
window in Chemnitz. The Company anticipates that the stations in Leipzig and
Dresden will

F-22
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
be launched within the next year and therefore amounts have been included in
development costs. The Company is currently developing a business plan for the
SFF operations and finalizing the costs of the launch.

Other potential commitments

The Company is pursuing additional broadcast development opportunities in
Central and Eastern Europe, Germany and other areas. In some of these countries
and regions, the Company has entered into preliminary understandings with local
strategic and financial partners to seek television broadcast licenses from the
local government authorities.

Currency exchange rate fluctuation

The Company generates most of its revenues in German marks ('DM'), Czech
korunas ('Kc'), Slovenian tolars ('SIT') and Romanian lei ('ROL') and incurs
expenses in those currencies, as well as in British pounds and U.S. dollars. In
addition, certain expenses, primarily for programming, are incurred in U.S.
dollars, and certain of the Company's capital and operating commitments are in
foreign currencies. Fluctuations in the value of foreign currencies may cause
U.S. dollar translated amounts to change in comparison with previous periods.
The Company has not hedged against fluctuations in foreign currency rates. Due
to the number of currencies involved, the constantly changing currency exposures
and the fact that all foreign currencies do not fluctuate in the same manner
against the U.S. dollar, the Company cannot anticipate the effect of exchange
rate fluctuations on its financial condition.

Employment and Consulting Agreements

The Company has employment and service agreements dated as of August 10,
1995, with the President of the Company and Chief Executive Officer of the
Company. Under the employment agreement, the President and Chief Executive
Officer is to receive an annual salary of $250,000 for the first year, $275,000
for the second year and $300,000 for the third year. The employment agreement
also contains a confidentiality covenant and a non-compete covenant which has a
term of two years after the termination of employment. Pursuant to a consulting
agreement with a wholly-owned subsidiary of the Company, a consulting company
owned by Mr. Fertig is paid $50,000 per year. He has also been granted options
to purchase 25,000 shares of Class A Common Stock under a previous agreement
with the Company and under his current agreement options to purchase 200,000
shares of Class A Common Stock, 66,667 shares becoming exercisable on the first
two anniversary dates of the agreements and 66,666 shares vesting on the third
anniversary date of the agreements, all pursuant to the Stock Option Plans. In
addition, if the Company meets or exceeds performance goals to be established by
agreement between the Compensation Committee and he, options to purchase an
additional 100,000 shares will be issued to him. In the event of a merger,
reorganization or consolidation in which the Company is not the surviving
corporation, all options which have been granted shall be immediately
exercisable in full.

The Company has a two year employment contract with its Vice
President--Finance and Chief Financial Officer dated August 14, 1995, which
provides for an annual aggregate salary of $175,000 in the first year, which

amount may be increased by the Board of Directors by an amount not less than the
U.S. Consumer Price Index in the second year. The employment agreement contains
a confidentiality covenant and a non-compete covenant which has a term of two
years after termination of his employment. He, who had previously been granted
options to purchase 60,000 shares of Class A Common Stock, has been granted
options under his current agreements to purchase an additional

F-23
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
25,000 shares of Class A Common Stock, 12,500 shares of which are exercisable on
each of the first two anniversary dates of the agreements, all pursuant to the
Company's Stock Option Plans. In the event of a merger, reorganization or
consolidation in which the Company is not the surviving corporation, then all
options which have been granted to him shall be immediately exercisable in full.

The Company has entered into employment agreements with entities owned by
its Vice Chairman of the Board of Directors and its Vice President, Secretary
and Director which provide for payment of $125,000 for the services of each of
these two individuals to companies owned by them, annually through October 1996.
Both agreements contain prohibitions on the disclosure of confidential
information and a non-compete convenant which has a term of two years after
their termination.

Pension and other post-retirement benefits

The Company has no obligation to provide pension and other post-retirement
benefits.

Station Programming Rights Agreements

The Company had programming rights commitments for $2,400,000 and
$13,179,000 in respect of future programming which includes contracts signed
with license periods starting after December 31, 1994 and 1995, respectively.

Nova TV has also entered into certain barter agreements continuing through
1996 and beyond, by which television advertising will be provided in exchange
for programming. As the value of this advertising time will only be established
at the time of broadcast, it is not possible to quantify the impact of these
agreements.

Lease Commitments

On November 30, 1994 the Board of Nova TV decided to purchase part of the
building it currently occupies and uses for its Prague television headquarters
through a capital lease transaction with a bargain purchase option with an
affiliated entity from which it had previously rented the property under the
terms of an operating lease. In accordance with the decision to purchase the
property, the Company will continue to make quarterly fixed and variable

payments until the loan obligation on the property has been repaid at which
point title of the property will be transferred to Nova TV. In accordance with
the lease agreement, Nova TV must pay certain taxes, expenses and other amounts.

During November and December 1995, POP TV entered into 10 capital leases on
vehicles for employees accounted for as capital leases.

Minimum future obligations under capital leases, including interest, are
expected to be as follows, though precise terms will be affected by future
negotiations:

<TABLE>
<CAPTION>
PAYMENTS DUE (000S)
- ---------------------------------------- -------
<S> <C>
1996.................................... $ 4,018
1997.................................... 4,018
1998.................................... 4,011
1999.................................... 3,928
-------
15,975
Less: Amounts representing interest..... (5,117)
-------
Total................................... $10,858
-------
-------
</TABLE>

F-24
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
An affiliated entity of Nova TV had a Kc 317,500,000 ($11,328,000) and Kc
258,000,000 ($9,700,000) outstanding on a loan at December 31, 1994 and 1995,
respectively. The loan is secured by the building discussed above and carries an
interest rate of 2.5% above prime (prime rate currently 12%). Principal payments
on the loan are Kc 66,000,000 ($2,500,000) per year, payable on a quarterly
basis.

For the fiscal years ended December 31, 1993, 1994 and 1995, the Company
paid aggregate rent on all facilities of $161,000, $2,430,000 and $340,000.

12. RELATED PARTY TRANSACTIONS

Contributed Services

Affiliates controlled by certain shareholders of the Company provide
various administrative services for the Company and its predecessors. Amounts
charged for the years ended December 31, 1993, 1994 and 1995, were $615,000,

$733,000 and $357,000, respectively, and are included in corporate operating
costs and expenses. The Company has recognized the contribution of these
services by the shareholders as additional paid-in capital in each of the
periods to December 31, 1993. In the year to December 31, 1994, $169,000 was
recognized as additional paid-in capital, while the remainder was settled in
cash. Management believe the amounts charged and contributed represent the fair
market value for such services.

Amount Due From Unconsolidated Affiliate

At December 31, 1994, the Company had paid $115,000 in expenses on behalf
of PULS, and this amount is reflected as a current asset in the accompanying
consolidated balance sheet. These amounts were recovered in 1995 in respect of
capital calls whereby the Company's interest in PULS was increased in exchange
for this receivable.

Advances to Affiliates and Related Parties

In 1994, the Company had advanced $1,846,000 to affiliates, to enable those
affiliates to bear costs on the Company's behalf. This amount, less advances
made to the Company by those affiliates of $1,277,000 (see 'Advances from
Affiliates' below) is reflected as a current asset in the accompanying
consolidated balance sheet at December 31, 1994. At December 31, 1995, the
balance relating to the above was $543,000, net.

PRO TV has receivables of $297,000 from several affiliated entities which
have been either repaid or worked off through services performed for PRO TV
subsequent to December 31, 1995. Amounts are included in advances to affiliates
in the accompanying consolidated balance sheet at December 31, 1995.

Currently the Company is negotiating an agreement to finance the principal
portion of a loan to Tele 59 from SKB banka d.d., totalling DM 1,496,000,
($1,046,000) in exchange for a promissory note to be given to the Company. Under
this financing arrangement, the Company would reimburse Tele 59 for payments
made on behalf of the Company. Such payments would be added to the principal
portion of the promissory note to the Company. At December 31, 1995, $47,000 is
accrued payable to POP TV for principal payments made by POP TV on behalf of the
Company.

Additionally, $66,000 has been advanced to Slovenian affiliates and is
included in advances to affiliates in the accompanying consolidated balance
sheet at December 31, 1995.

F-25
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

12. RELATED PARTY TRANSACTIONS--(CONTINUED)
Loans to Affiliates

The Company entered into a loan agreement with the General Manager and 15%

equity owner of PRO TV, whereby a total of $2,000,000 has been contributed to
PRO TV as share capital by the Company on his behalf. His related 10% equity
ownership in PRO TV is pledged under the terms and conditions of the loan.
Interest on the loan is currently under negotiation. As of December 31, 1995,
the Company had contributed $2,000,000 in share capital to PRO TV on his behalf
which is classified as loan to affiliates in the accompanying consolidated
balance sheet.

In connection with the PRO TV broadcast television station, the Company
made a $1,302,000 loan in December 1995 to InterMedia in order to finance
InterMedia's purchase of a majority shareholding in a construction company
owning the television broadcast station. The General Manager is the majority
shareholder in InterMedia. The loan bears interest of LIBOR plus 3% per annum
and is repayable at December 31, 1998. The loan is included in Loans to
Affiliates in the accompanying consolidated balance sheet at December 31, 1995.

The Company has a loan to Radio Alfa in the amount of Kc 79 million
($2,970,000) which is included in Loans to Affiliates in the accompanying
consolidated balance sheet at December 31, 1995 (refer to Note 2).

Advances from Affiliates

The Company borrowed funds from certain of its affiliates (collectively,
the 'Affiliate Loans') in connection with its development stage operations. In
November 1993, CEDC American Business Center GmbH & Co. KG loaned the Company DM
1,950,000 bearing interest at the Bundesbank discount rate plus 2% and due on
demand. The proceeds of the loan were used to finance capital expenditures of
the Company, primarily to fund construction of PULS's broadcasting facilities.
In addition, in April 1994, CEDC Grundbesitz Am Kollnischen Park GmbH & Co. KG
loaned the Company DM 5,925,000, and in July 1994 a further DM 75,000 bearing
interest at the Bundesbank discount rate plus 1% and due on demand which was
incurred primarily to repay a short-term credit facility which had been incurred
to make capital contributions to PULS and to fund development expenses. Messrs.
Lauder, Palmer and Gaspar, directors of the Company, are limited partners of
these affiliates and together have an aggregate equity interest in excess of 10%
in each of these affiliates.

The Company also borrowed $2,500,000 and $1,500,000 from R. S. Lauder,
Gaspar & Co., L.P. and RSL Investments Corporation, respectively, evidenced by
promissory notes, each bearing interest at 12.5% and due on November 15, 1994.
The proceeds of these loans were used to fund equity contributions to PULS and
Nova TV. Messrs. Lauder and Gaspar, directors of the Company, are indirect
majority partners of R.S. Lauder, Gaspar & Co., L.P., and Mr. Lauder is the sole
stockholder of RSL Investments Corporation.

All amounts outstanding under the Affiliate Loans, including interest
thereon, were repaid with a portion of the proceeds of the initial public
offering in 1994. The Company believes that all of these borrowings were
effected on terms at least as favorable to the Company as those which would have
been attained from unrelated third parties.

Interest of $757,000 and $565,000 was charged to income in 1994 and 1995,
respectively, in relation to these loans and the Principal Shareholder Loan
(refer to Note 8). At December 31, 1995, interest of $116,000 remained unpaid

and is included in Advances from Affiliates in the accompanying consolidated
balance sheet at December 31, 1995.

F-26
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

12. RELATED PARTY TRANSACTIONS--(CONTINUED)
CEDC and R.S. Lauder, Gaspar & Co., L.P. advanced an aggregate of
$1,277,000 to the Company in 1993 and 1994 to fund capital expenditures of PULS
and certain other costs (see 'Advances to Affiliates' above). These amounts are
non-interest bearing. Messrs. Lauder, Palmer and Gaspar, directors of the
Company are Chairman, President and Vice Chairman, respectively of CEDC and have
an aggregate equity interest in excess of 10% in CEDC. Mr. Palmer, a director of
the Company, is the Managing Director of CEDC Management Services GmbH.

$7,216,000 was advanced by R.S. Lauder, Gaspar & Co., L.P. to fund the
acquisition of the Nuremberg Station, certain development expenses of PULS and
corporate overhead. Messrs. Lauder and Gaspar, directors of the Company, are
indirect majority partners of R.S. Lauder, Gaspar & Co., L.P. The total amount
of this advance was repaid prior to December 31, 1995. These amounts were non
interest bearing.

Amounts outstanding at December 31, 1995 related to affiliates who provide
various administrative services for the Company (refer to 'Contributed Services'
above) were $271,000 and are included in Advances from Affiliates in the
accompanying consolidated balance sheet at December 31, 1995.

PRO TV purchased certain assets from an affiliated entity (seller) in
exchange for assuming certain liabilities of that entity, certain of which were
payable to a second affiliated entity which had funded the seller's purchase of
assets and operating costs. At December 31, 1995, $1,304,000 was payable to the
second affiliated entity and is included in Advances from Affiliates in the
accompanying consolidated balance sheet at December 31, 1995.

PRO TV has a payable of $446,000 to two affiliated entities for the
purchase of certain fixed assets and a payable of $16,000 to other related
entities, both of which are included in advances from affiliates in the
accompanying consolidated balance sheet at December 31, 1995.

Included in advances from affiliates at December 31, 1995 is $450,000
payable to MMTV in respect of the purchase of an equity interest in MMTV. This
amount was paid in March 1996.

Also included in advances from affiliates in the accompanying consolidated
balance sheet at December 31, 1995 is $84,000 owed to the Slovenian Broadcasters
resulting from an ongoing agreement that POP TV has with the Slovenian
Broadcasters to pay operating costs related to the broadcasting of POP TV's
programming.

13. SUMMARY FINANCIAL INFORMATION FOR PULS AND FFF

<TABLE>
<CAPTION>
AS OF
----------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995
------------------ ------------------
PULS FFF PULS FFF
------- ------- ------- -------
<S> <C> <C> <C> <C>
(000S) (000S) (000S) (000S)
Current assets.............. $ 5,027 $ 1,633 $ 6,938 $ 2,538
Non-current assets.......... 16,320 4,358 15,971 3,308
Current liabilities......... (5,764) (1,643) (5,678) (1,410)
Non-current liabilities..... (9,798) (1,680) (9,081) (9,526)
------- ------- ------- -------
------- ------- ------- -------
Net assets (deficiency)..... $ 5,785 $ 2,668 $ 8,150 $(5,090)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>

F-27
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

13. SUMMARY FINANCIAL INFORMATION FOR PULS AND FFF--(CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995
------------------ ------------------
PULS FFF PULS FFF
------- ------- ------- -------
(000S) (000S) (000S) (000S)
<S> <C> <C> <C> <C>
Net revenues................ $ 2,379 $ 3,529 $ 3,371 $ 4,410
Operating loss.............. (29,503) (4,836) (24,387) (5,058)
Net loss.................... (29,694) (4,917) (24,204) (6,027)
</TABLE>

The Company's share of the losses of PULS and FFF accounted for by the
equity method were $11,721,000 and $3,095,000, respectively, for the year ended
December 31, 1995.

Management has considered the amounts held in the consolidated balance
sheets for PULS and FFF and believe that the loans and equity contributions
made, net of losses recognized, have not suffered an impairment in value. The
Company believes that recent changes in management and new programming formats
combined with current decreases in station operating costs and increases in

revenues support the carrying values of PULS and FFF. Management will continue
to review the Company's German operations throughout 1996.

14. STOCK COMPENSATION CHARGE

Under the terms of the Company's contracts with its former President, the
Company issued 454,703 shares of Class A Common Stock to a trust nominated by
him. Ownership of 194,873 shares had vested by December 31, 1994. Upon the
former President's departure in August 1995, 194,872 shares remained unvested.
The Company and its former President agreed that 18,000 of these unvested shares
are eligible for vesting on December 31, 1996 and the remaining 176,872 shares
were forfeited by its former President. In the twelve months ended December 31,
1995, $858,000 was recognized as the current expense to account for the vesting
of 64,958 shares in 1995 under the original plan and for the recognition of the
18,000 unvested shares, which no longer required additional services in order to
vest. The deferred compensation charge related to the remaining unvested shares
of $2,476,000 was recognized as treasury stock.

In addition, the Company granted 203,000 options to officers and employees
with an exercise price below market price in the year ended December 31, 1994.

The above transactions have resulted in stock compensation charges of
$858,000 and $5,833,000 in the years ended December 31, 1995 and 1994,
respectively, and a deferred compensation charge of $0 and $3,334,000 at
December 31, 1995 and 1994, respectively.

15. SUBSEQUENT EVENTS

Nova TV

In March 1996, Nova TV declared a dividend of Kc 330,000,000 ($12,406,000)
to be paid in equal installments of Kc 165,000,000 ($6,203,000) in May and
November of 1996.

Videovox--Hungary

In March 1996, the Company intends to enter into a $5,000,000 loan
agreement with Magyarhang Kft. The loan will be used by Magyarhang Kft, to
acquire a 90% equity interest in Videovox, a broadcast production studio.
Subsequently, Magyarhang Kft. is to merge with 2002 Kft. resulting in the
Company having 95% equity and economic interest in the merged Company subject to
approval by local

F-28
<PAGE>
CENTRAL EUROPEAN MEDIA LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1994 AND 1995

15. SUBSEQUENT EVENTS--(CONTINUED)
authorities. If the Company and its partners are unable to effect a merger, the
loan would be converted into 95% equity ownership in Magyarhang Kft.

Ukraine

In March 1996, Gravis and another affiliated entity in the Ukraine, Nova
Mova, formed a company, Nova, which won broadcast licenses for 16 cities in the
Ukraine. The Company is in negotiation for a direct ownership interest in Nova.
Additionally, the Company has a 30% ownership in Gravis and currently a loan in
the amount of $150,000 to Nova Mova, which bears interest at 3% net of local
deductions. Currently the Company has no commitment to fund Nova, however, it
intends to sign an agreement in which it commits to initially fund Nova for
$500,000, representing the initial share capital to be used for equipment and
operation costs.

Slovenia

POP TV intends to enter into an agreement in March 1996 with another
license holder to further its signal distribution in Slovenia. In accordance
with the agreement, such license holder will become a part of the POP TV network
of affiliated stations.

Stock Options

During January 1996, 5,000 stock options for Class A Common Stock were
exercised at a price of $14.00.

F-29

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
($000S)

ASSETS
JUNE 30,
1996
--------
CURRENT ASSETS:
Cash and cash equivalents...................................... $ 25,348
Investments in marketable securities........................... 4,352
Restricted cash................................................ 1,600
Accounts receivable (net of allowance of $1,947)............... 35,581
Program rights costs........................................... 10,809
Value-added tax recoverable.................................... 180
Advances to affiliates......................................... 1,008
Prepaid expenses............................................... 5,696
--------
Total current assets......................................... 84,574
INVESTMENT IN UNCONSOLIDATED AFFILIATES.......................... 16,691
LOANS TO AFFILIATES.............................................. 7,003
PROPERTY, PLANT & EQUIPMENT (net of depreciation of $15,219)..... 56,345
PROGRAM RIGHTS COSTS............................................. 11,331
BROADCAST LICENSE COSTS AND OTHER INTANGIBLES (net of
amortization of $1,053)........................................ 2,319
LICENSE ACQUISITION COSTS (net of amortization of $454).......... 4,323

GOODWILL......................................................... 1,674
ORGANIZATION COSTS (net of amortization of $886)................. 963
DEVELOPMENT COSTS (net of allowance of $3,834)................... 23,034
DEFERRED TAXES................................................... 1,610
OTHER ASSETS..................................................... 3,578
--------
Total assets................................................. $213,445
========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................... $ 11,031
Accrued liabilities............................................ 13,968
Duties and other taxes payable................................. 616
Income taxes payable........................................... 23,971
Dividend payable............................................... 1,633
Current portion of obligations under capital lease............. 1,607
Current portion of credit facilities........................... 410
Advances from affiliates....................................... --
--------
Total current liabilities.................................... 53,236
DEFERRED INCOME TAXES............................................ 2,721
OBLIGATIONS UNDER CAPITAL LEASE.................................. 8,066
LONG-TERM PORTION OF CREDIT FACILITIES........................... 6,519
OTHER LIABILITIES................................................ 402
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES................... 16,750
SHAREHOLDERS' EQUITY:
Preferred Stock, $0.01 par value: authorized: 5,000,000 shares;
issued and outstanding: none................................. --
Class A Common Stock, $0.01 par value: authorized: 30,000,000
shares; issued and outstanding: 10,406,799 shares at June 30,
1996......................................................... 104
Class B Common Stock, $0.01 par value: authorized: 15,000,000
shares; issued and outstanding:
8,078,297 shares............................................. 81
Additional paid-in capital..................................... 188,785
176,872 Class A Treasury stock of $0.01 par value.............. (2,476)
--------
186,309
Accumulated deficit............................................ (60,381)
Cumulative currency translation adjustment..................... (362)
--------
Total shareholders' equity................................... 125,751
--------
Total liabilities and shareholders' equity................... $213,445
========

F-30

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
($000S, EXCEPT PER SHARE DATA)

<TABLE>

<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------
1995 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
GROSS REVENUES.............................................. $ 58,197 $ 76,935
Discounts and agency commissions............................ (10,959) (15,130)
----------- -----------
NET REVENUES................................................ 47,238 61,805

STATION EXPENSES:
Operating costs and expenses.............................. 13,204 24,423
Amortization of programming rights........................ 6,492 10,269
Depreciation of station fixed assets and other
intangibles............................................ 3,196 6,109
----------- -----------
Total station operating costs and expenses................ 22,892 40,801
Selling, general and administrative expenses.............. 2,939 8,735
----------- -----------

CORPORATE EXPENSES:
Corporate operating costs and development expenses........ 5,439 7,173
Stock compensation charge................................. 810 --
----------- -----------
6,249 7,173

OPERATING INCOME............................................ 15,158 5,096

EQUITY IN LOSS OF UNCONSOLIDATED AFFILIATES................. (6,766) (5,936)
INTEREST AND OTHER INCOME................................... 959 1,079
INTEREST EXPENSE............................................ (2,134) (1,532)
FOREIGN CURRENCY EXCHANGE (LOSS) GAIN....................... 115 (1,630)
----------- -----------
Net income (loss) before provision for income taxes......... 7,332 (2,923)
Provision for income taxes.................................. (8,178) (8,313)
----------- -----------
Net loss before minority interest........................... (846) (11,236)

MINORITY INTEREST IN INCOME OF CONSOLIDATED SUBSIDIARIES.... (3,923) (1,144)
----------- -----------

Net Loss.................................................... $ (4,769) $ (12,380)
=========== ===========
PER SHARE DATA
Net loss per share.......................................... $ (0.34) $ (0.67)
=========== ===========
Weighted average number of common shares outstanding
(000s).................................................... 14,021 18,447
=========== ===========
</TABLE>

F-31

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
($000S)

<TABLE>
<CAPTION>
CLASS CLASS CUMULATIVE
A B ADDITIONAL CURRENCY
COMMON COMMON PAID-IN TREASURY ACCUMULATED TRANSLATION
STOCK STOCK CAPITAL STOCK DEFICIT(1) ADJUSTMENT TOTAL
------ ------ ---------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995.............. $103 $ 81 $187,997 $(2,476 ) $ (48,001) $ 1,232 $ 138,936
Foreign Currency Translation
Adjustment.......................... -- -- -- -- -- (1,594) (1,594)
Capital contributed by Shareholders... 1 -- 788 -- -- -- 789
Net loss.............................. -- -- -- -- (12,380) -- (12,380)
------ ------ ---------- -------- ----------- ---------- ---------
BALANCE, June 30, 1996 (unaudited)...... $104 $ 81 $188,785 $(2,476 ) $ (60,381) $ (362) $ 125,751
====== ====== ========== ======== =========== ========== =========
</TABLE>
- ------------------
(1) Of the accumulated deficit of $60,381,000 at June 30, 1996, $38,317,000
represents loss in unconsolidated affiliates.

F-32

<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000S)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------
1995 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.................................................... $ (4,769) $(12,380)
Adjustments to reconcile net loss to net cash generated from
operating activities:
Equity in loss of unconsolidated affiliates............... 6,766 5,936
Depreciation & amortization............................... 9,688 16,862
Minority interest in income (loss) of consolidated
subsidiaries........................................... 3,923 1,144
Valuation allowance for development costs................. 900 413
Stock compensation charge................................. 810 --

Changes in assets & liabilities:
Accounts receivable....................................... (8,891) (3,675)
Related party receivable.................................. 235 --
Program rights costs...................................... (12,863) (13,787)
Value-added tax recoverable............................... (131) 458
Advances to affiliates.................................... -- (2,899)
Prepaid expenses.......................................... (2,308) (545)
Other assets.............................................. 99 (127)
Accounts payable.......................................... (386) 1,558
Accrued liabilities....................................... 2,501 4,159
Income & other taxes payable.............................. 7,064 8,347
Other liabilities......................................... 1,225 --
-------- --------
Net cash from operating activities..................... 3,863 5,464
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in unconsolidated affiliates.................. (16,543) (9,444)
Investments in marketable securities...................... -- 6,300
Restricted cash........................................... -- 2,524
Acquisition of fixed assets............................... (2,168) (10,670)
Purchase of subsidiary operation.......................... -- (2,962)
Dividends paid to minority shareholders................... (1,396)
Payments for broadcast license costs and other
intangibles............................................ (99) --
Development costs......................................... (3,256) (14,349)
-------- --------
Net cash used in investing activities.................. (22,066) (29,997)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Current portion of credit facilities...................... (2,297) (2,108)
Payments under capital lease.............................. (780) (776)
Advances to affiliates.................................... -- (731)
Repayment of loans of subsidiary operation................ -- --
Capital contributed by shareholders....................... -- 789
-------- --------
Net cash used in financing activities.................. (3,077) (2,826)
-------- --------
IMPACT OF EXCHANGE RATE FLUCTUATIONS ON CASH................ 219 (503)
-------- --------
Net decrease in cash and cash equivalents.............. (21,061) (27,862)
CASH AND CASH EQUIVALENTS, beginning of period.............. 42,002 53,210
-------- --------
CASH AND CASH EQUIVALENTS, end of period.................... $ 20,941 $ 25,348
======== ========
</TABLE>

F-33
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996

1. ORGANIZATION AND BUSINESS

Central European Media Enterprises Ltd., a Bermuda corporation ('CME'), was
formed in June 1994. Through its predecessor companies, CME has been in
operation since 1991. CME, together with its subsidiaries (CME and its
subsidiaries are collectively referred to as the 'Company'), develops, owns and
operates national and regional commercial television stations and networks in
the newly emerging markets of Central and Eastern Europe and regional commercial
television stations in Germany.

The Company owns a 66% interest in Ceska Nezavisla Televizni Spolecnost
s.r.o. ('Nova TV'), which broadcasts as the only private national television
station in the Czech Republic. On August 1, 1996, the Company entered into an
agreement with Ceska Sporitelna Bank ('CS') for the purchase of CS's entire 22%
economic interest and 20% of CS' voting rights for a purchase price of Kc 1
billion (approximately $36 million) (the 'CS Agreement'). The agreement and
subsequent registration of the Company's increased ownership in Nova TV are
subject to Czech laws (See Note 5 of Notes to Consolidated Financial
Statements).

In Slovenia, the Company launched 'POP TV' in December 1995 together with
MMTV1 d.o.o. Ljubljana ('MMTV') (formerly known as Boutique MMTV) and Tele 59
d.o.o. Maribor ('Tele 59'), (MMTV and Tele 59 are together referred to as the
'Slovenian Broadcasters') through the formation of the company Produkcija Plus
d.o.o. ('Pro Plus' or 'POP TV'). Pro Plus provides programming to the Slovenian
Broadcasters and other affiliated stations and sells national advertising in
conjunction with POP TV programming. The Company owns 58% of the equity of Pro
Plus, but has an effective economic interest of 72%, as a result of a 33%
economic interest in MMTV and a 33% economic interest in Tele 59, each of which
have a 21% interest in Pro Plus. The Slovenian Broadcasters and one other
affiliate began broadcasting 'POP TV' in December 1995.

In Romania, the Company and two local partners, Adrian Sarbu and Ion Tiriac
operate 'PRO TV' through the formation of Media Pro International S.A. ('Media
Pro International' or 'Pro TV'), a commercial television network. The Company
holds a 77.5% equity interest in Media Pro International, although the Company's
partners hold options valid through October 1997 which, if exercised, would
reduce the Company's interest to approximately 66%. Media Pro International
launched operations in December 1995.

In addition, in Hungary the Company holds a 95% ownership interest in 2002
Consulting and Servicing Limited Liability Company ('2002') which has a 97.4%
indirect beneficial ownership interest in Videovox Studio Limited Liability
Company ('Videovox'), a Hungarian dubbing and production company acquired by
2002 in May 1996 which, thus far, has generated only limited revenues and
expenses. Videovox's operating results for the period from 1 May 1996 through 30
June 1996 have been consolidated in the accompanying financial statements.

The Company owns a 52.6% non-controlling interest in PULS ('PULS', formerly
known as 1A Berlin), a regional television station based in Berlin, Germany, and
a 50% interest (non-voting profit participation) in Franken Funk & Fernsehen
GmbH ('FFF'), which owns 74.8% of a regional television station in Nuremberg,
Germany, NMF Neue Medien Franken GmbH and Co., K.G. ('NMF'). The Company's
interest in PULS increased to 52.6% as of June 30, 1996 from 48.48% at December
31, 1995 as a result of additional capital calls paid by the Company and not
satisfied by the other partners of PULS. The Company has a 49% non-controlling

interest, and a 50% economic interest in Sachsen Funk und Fernsehen GmbH,
Germany ('SFF') which owns 33.33% equity interest in Sachsen Fernsehen Betriebs
KG, a regional TV station in Leipzig and Dresden, Germany.

F-34
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996

1. ORGANIZATION AND BUSINESS--(CONTINUED)
The Company continues to pursue and develop opportunities for television
broadcasting throughout Central and Eastern Europe and on a regional basis in
Germany. The Company has formed Slovenska Televizna Spolocnost s.r.o. ('STS') in
Slovakia with Markiza--Slovakia s.r.o. which expects to launch Markiza TV during
the third quarter 1996. The Company has an effective 80% economic interest in
STS. In accordance with the Company's accounting policies, assets purchased and
funds used to support pre operating activities of Markiza TV are classified in
Development Costs in the accompanying consolidated financial statements in the
amount of approximately $17 million. The Company also has interests in companies
seeking licenses or seeking to expand upon regional licenses in Poland, Ukraine
and Hungary.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

These financial statements have been prepared in accordance with the
accounting principles generally accepted in the United States. In the opinion of
management, these consolidated financial statements include all adjustments
necessary to fairly state the Company's financial position and results of
operations. The results for the six months ended June 30, 1996 are not
necessarily indicative of the results expected for the year.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company's wholly-owned subsidiaries, Nova TV, PRO TV, POP TV, and Videovox
as consolidated entities and reflect the interests of the minority owners of
Nova TV, PRO TV, POP TV, and Videovox in the six months ended June 30, 1996 and
two months ended June 30, 1996, respectively. POP TV and PRO TV began operations
in December of 1995, Videovox was acquired on May 1, 1996 and thus Nova TV was
the only consolidated entity for the six months ended June 30, 1995. The results
of the operating stations, PULS, FFF, and SFF, in which the Company has minority
or non-controlling ownership interests, are included in the accompanying
consolidated financial statements as investments in unconsolidated affiliates
using the equity method. The Company's investments in broadcast operations under
development, which includes Markiza TV, and other broadcast development
opportunities are reflected in the balance sheet as development costs.

Net Loss Per Share

and 1996. The impact of outstanding options and warrants has not been included
in the computation of net loss per share, as the effect of their inclusion would
be anti-dilutive.

3. DIVIDENDS

In March 1996, Nova TV declared a total dividend of Kc 330,000,000
($12,066,000) to all shareholders of which Kc 116,325,000 ($4,153,000) was paid
to the Company in May 1996 with the remainder of Kc 116,325,000 ($4,213,000)
scheduled to be paid to the Company in November 1996. In connection with the CS
Agreement, the Company is entitled to receive CS's remaining 1995 dividend of
approximately Kc 38.8 million (approximately $1.4 million) scheduled to be paid
in November 1996.

F-35
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996

4. SUMMARY FINANCIAL INFORMATION FOR PULS AND FFF

JUNE 30, 1996
------------------
FFF
-------
PULS (000S)
-------
(000S)
Current assets.............. $ 4,899 $ 2,543
Non-current assets.......... 14,137 2,606
Current liabilities......... (5,212) (2,305)
Non-current liabilities..... (7,469) (9,458)
------- -------
Net assets.................. $ 6,355 $(6,614)
------- -------
------- -------

FOR THE SIX MONTHS ENDED
-----------------------------------------
JUNE 30, 1995 JUNE 30, 1996
------------------- ------------------
FFF PULS FFF
------- ------- -------
PULS (000S) (000S) (000S)
--------
(000S)
Net revenues........ $ 1,593 $ 1,980 $ 1,665 $ 2,375
Operating loss...... (11,520) (2,913) (9,561) (1,675)
Net loss............ (11,831) (3,346) (9,655) (1,771)

The Company's share of the losses of PULS, FFF and SFF accounted for by the
equity method for the six months ended June 30, 1995 and 1996 were $6,766,000

and $5,936,000, respectively.

As of June 30, 1996 FFF had DM 11 million ($7.3 million) in loans from the
Company. The loans bear an annual interest rate of 10.5%. The Company has agreed
to subordinate its claims under the loans to all other claims against FFF.

5. SUBSEQUENT EVENTS

Czech Republic

On August 1, 1996, the Company entered into an agreement (the 'CS
Agreement') with Ceska Sporitelna Bank ('CS') for the purchase of CS's 22%
economic and virtually all of CS's voting rights in Nova TV for a purchase price
of Kc 1 billion (approximately $36,000,000). In connection with the CS
Agreement, the Company is to receive CS's remaining 1995 dividend of Kc 38.8
million (approximately $1.4 million) scheduled to be paid in November 1996 as
well as 88% of all future dividends declared. If the increase in the Company's
economic ownership from 66% to 88% of Nova TV had been in effect for the whole
of 1996, then the Company's Attributable Broadcast Cash Flow for Nova TV would
have increased by $5.4 million for the six month period ended June 30, 1996.

In connection with the CS Agreement, the Company has entered into a loan
agreement with CS to finance 85% of the purchase price. The remainder of the
purchase price Kc 150 million ($5,500,000) will be paid by the Company on
November 15, 1996 out of its cash balances. The CS loan will be drawn in August
1996 and April 1997 in the amounts of Kc 450 million ($16,298,000) and Kc 400
million ($14,487,000), respectively to fund purchase price payments due at those
times, and bears annual interest at the rate of 12.9% p.a. The agreement and
subsequent registration of the Company's increased ownership are subject to
Czech laws.

F-36
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996

5. SUBSEQUENT EVENTS--(CONTINUED)
Romania

On July 12, 1996, the Company announced its intention to exercise its
option within the next few months to buy 49% of the shares of PRO TV, SRL, an
affiliate station of Media Pro International owned by the Company's partners
(Adrian Sarbu and Ion Tiriac) on terms that have yet to be finalized. This
option was granted to the Company through the terms of the partnership agreement
for Media Pro International.

Credit Agreement

The Company and certain of its subsidiaries (the 'CME Borrowers') have
executed a term sheet with ING Bank N.V. ('ING') pursuant to which ING and a
group of banks contemplate providing the CME borrowers with a $50 million
revolving credit facility (the 'Potential Revolving Loan Facility'). The

Potential Revolving Loan Facility is subject to satisfactory documentation and
final due diligence to be performed by the bank. In connection with these
negotiations, CME's subsidiary, CME Media Enterprises B.V. CME BV entered into a
bridge loan facility (the 'Bridge Loan'), on July 16, 1996, for $10,000,000 with
ING which matures on November 30, 1996 and bears annual interest at a rate of
1.6% per annum above LIBOR. This facility has since been increased to
approximately $25 million, with a maturity date of November 15, 1996. The shares
of CME BV have been pledged as security for this loan. Both CME and CME's
subsidiary Central European Media Enterprises N.V. have guaranteed repayment of
the facility.

Strategic Investor for PULS

The partners of PULS have retained a financial advisor to seek one or more
strategic partners for PULS. Such a strategic partner would be expected to
acquire a significant equity interest in PULS and assume responsibility for
PULS' operations. Such a strategic investment would be anticipated to
significantly dilute the Company's equity interest in PULS and to decrease the
Company's future funding obligations to PULS, and could result in a material
reduction of the carrying value of the Company's equity investment in PULS,
which was $8.9 million as of June 30, 1996, and a corresponding charge against
the Company's earnings in the period incurred. At the date of the filing of the
Company's Form 10-Q for the quarter ended June 30, 1996, the Company did not
consider the value of PULS TV to be impaired.

Acquisitions

The Company acquired a 50% economic interest in a group of companies (the
'Studio 1+1 Group') which has the right until July 2000 to broadcast programming
and sell advertising on one of Ukraine's public television stations for a
specified number of hours per week, including during prime time. This public
station reaches over 90% of Ukraine's population. In addition, the Company,
together with the Studio 1+1 Group, has plans to apply for licenses in Ukraine
to develop a new national television station. The Company's initial financial
commitment in Ukraine is anticipated to be up to $12,000,000.

The Company acquired a 95.0% equity interest in Unimedia, a recently formed
entity which has agreed to acquire a 10% equity interest in MobilRom, which has
applied for a GSM cellular telephone license in Romania. It is anticipated that
the Romanian Government will award two GSM cellular telephone licenses in late
October 1996. There are several other groups competing for these licenses. If a
license is awarded to MobilRom, the Company does not anticipate exercising any
managerial or operational control over MobilRom. It is anticipated that MobilRom
will not have active operations unless it is awarded such a license. If MobilRom
is awarded a telecommunications license in Romania, the Company will be
obligated to fund MobilRom in the amount of approximately $3.5 million within 15
days after such award and up to an additional $6.5 million during the next 12
months. The Company's aggregate funding commitment with respect to MobilRom is
up to $16 million.

F-37
<PAGE>
CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

JUNE 30, 1996

5. SUBSEQUENT EVENTS--(CONTINUED)
The Company does not believe that the pro forma impact of these
acquisitions would be material to its results of operations.

Shareholder Loan

F-38

<PAGE>

[PHOTOS PORTRAYING NEWS OPERATIONS, FEATURE FILMS, LOCAL PROGRAMMING, INCLUDING
VARIETY SHOWS BROADCAST BY THE COMPANY'S BROADCAST OPERATIONS.]

[PHOTO] [PHOTO] [PHOTO]
CME's news operations employ lively program formats and western style
production techniques.

[PHOTO]
Twentieth Century Fox's "My Cousin Vinny"

The Company operates the leading national television station in the Czech
Republic (Nova TV) and the Company's television operations in Romania (PRO TV)
and Slovenia (POP TV) command the leading audience share within their areas of
broadcast reach.

CME's broadcast operations have long-term programming contracts with major
studios, including Twentieth Century Fox, Sony Pictures, Warner Brothers,
Paramount, MCA, MGM, Canal + and Granada.

[PHOTO]
"Pop Kviz," a game show designed and produced by POP TV

[PHOTO]
Markiza TV broadcasts the locally produced sitcom "Silvanovci"

<PAGE>
================================================================================
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY
OTHER THAN THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATES AS OF WHICH INFORMATION IS FURNISHED OR THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

PAGE
-----
Prospectus Summary............................................. 3
Risk Factors................................................... 9
The Company.................................................... 16
Use of Proceeds................................................ 20
Price Range of Common Stock.................................... 20
Dividend Policy................................................ 20
Capitalization................................................. 21
Selected Consolidated Financial Data........................... 22
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................ 24
Business....................................................... 35
Management..................................................... 52
Description of Capital Stock................................... 54
Certain Tax Considerations..................................... 59
Shares Eligible for Future Sale................................ 64
Underwriting................................................... 66
Legal Matters.................................................. 67
Experts........................................................ 67
Available Information.......................................... 67
Information Incorporated by Reference.......................... 68
Index to Financial Statements.................................. F-1

4,800,000 SHARES

[LOGO]

CENTRAL EUROPEAN
MEDIA ENTERPRISES LTD.

CLASS A COMMON STOCK
($.01 PAR VALUE)

SCHRODER WERTHEIM & CO.
PRUDENTAL SECURTES INCORPORATED
SMITH BARNEY INC.

OCTOBER 30, 1996

================================================================================
================================================================================