MULTIMEDIA POLSKA GROUP

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3 INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 6-MONTH PERIOD ENDED 30 JUNE 2009 TOGETHER WITH INDEPENDENT AUDITORS REPORT

4 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT...2 INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME...3 INTERIM CONDENSED CONSOLIDATED BALANCE SHEET...4 INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT...5 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY...6 INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY...7 NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS General Information Composition of the Group Composition of the Management Board of the Parent Company Approval of Interim Condensed Consolidated Financial Statements Basis of Preparation of the Interim Condensed Consolidated Financial Statements Summary of Significant Accounting Policies Changes in Estimates Seasonality Segment Information Income Tax Dividends Paid and Declared Property, Plant and Equipment Acquisitions and Disposals Impairment Leases Prepayments and Deferred Costs Employee Benefits Cash and Cash Equivalents Share Capital, Reserve Capital and Other Reserves Share Capital Reserve Capital Undivided Financial Results and Restrictions on Dividend Payment Interest-Bearing Bank Loans and Borrowings Equity Securities Provisions Trade and Other Payables (Current) Contingent Liabilities Court Proceedings Tax Settlements Investment Liabilities Reasons for Differences Between Changes in Balance Sheet Statement and Cash Flow Statement Related Parties Entity with Significant Influence on the Group Transactions with Management and Supervisory Board Members Company Shares held by Members of the Management and Supervisory Board Transactions with Top Management under Share Option Plan Goals and Policies of Financial Risk Management Capital Management Events Subsequent to the Balance Sheet Date Financial Statements for Year 2008 Restated due to Separation of Relationships with Customers from Goodwill Consolidated Income Statement for the Year Consolidated Cash Flow for the Year

5 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT for the 6-month period ended 30 June 2009 Continued operations Note 3-months period ended 30 June 2009 unaudited 6-months period ended 30 June 2009 unaudited 3-months period ended 30 June 2008 Restated, unaudited 6-months period ended 30 June 2008 Restated, unaudited Subscriber-generated and interoperator revenues Other sales revenue Sales revenue Depreciation and amortisation Materials External services Taxes and charges Payroll Other employee benefits Other expenses Value of goods and materials sold Operating expenses Gross profit on sales Other operating revenue Other operating expenses Operating profit Finance revenue Finance costs Profit/(loss) before tax Income tax expense Net profit/(loss) Net profit/(loss) Attributable to: Equity holders of the parent Minority interest Earnings per share (in PLN): basic, for profit for the period attributable to ordinary equity holders of the parent basic, for profit for the period from continuing operations attributable to ordinary equity holders of the parent Notes included on pages 8 to 32 are an integral part of these interim condensed consolidated financial statements. This is a translation of interim condensed consolidated financial statements originally issued in Polish 2

6 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the 6-months period ended 30 June months period ended 30 June 2009 unaudited 6-months period ended 30 June 2009 unaudited 3-months period ended 30 June 2008 Restated, unaudited 6-months period ended 30 June 2008 Restated, unaudited Note Profit for the period Other comprehensive income Exchange differences on translation of foreign operations Available-for-sale financial assets Actuarial gains/(losses) on defined benefit pension plans Income tax relating to components of other comprehensive income Total net other comprehensive income TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Notes included on pages 8 to 32 are an integral part of these interim condensed consolidated financial statements. This is a translation of interim condensed consolidated financial statements originally issued in Polish 3

7 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) INTERIM CONDENSED CONSOLIDATED BALANCE SHEET as at 30 June 2009 Note 30 June December 2008 unaudited ASSETS Non-current assets Property, plant and equipment Goodwill Intangible assets Financial assets Non-current receivables Prepayments and deferred costs Deferred tax assets Currents assets Inventories Trade and other receivables Income tax receivables Prepayments and deferred costs Current investments, including SWAP contracts Cash and cash equivalents TOTAL ASSETS EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Share capital Share premium Treasury shares (4 447) (39 222) Other reserve capital Retained earnings Minority interest Total equity Non-current liabilities Interest-bearing loans and borrowings Deferred income Provisions Deferred income tax liabilities Current liabilities Interest-bearing loans and borrowings and other Trade and other payables Income tax liabilities Accruals Deferred income Provisions Total liabilities TOTAL EQUITY AND LIABILITIES Notes included on pages 8 to 32 are an integral part of these interim condensed consolidated financial statements. This is a translation of interim condensed consolidated financial statements originally issued in Polish 4

8 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT for the 6-month period ended 30 June 2009 Notes 6-months period ended 30 June 2009 unaudited 6-months period ended 30 June 2008 Restated, unaudited Cash flows from operating activities Profit/(loss) before tax Adjustments for: Participation in the profit (loss) of affiliated entities, valued using the equity method - - Depreciation and amortisation Interest and dividends, net Foreign exchange gains/(losses) Gain/(loss) from investing activities (158) Change in inventories 25 (208) Change in trade and other receivables Change in current payables except bank loans (2 271) Change in accruals and prepayments (6 693) (3 573) Change in provisions 96 (26) Income tax paid (6 679) (9 229) Other adjustments finance fees SWAP interest paid (1) (646) - provision for share options other (105) (277) Net cash flows from operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment and intangibles Purchase of property, plant and equipment and intangibles (97 816) ( ) Acquisition of an organized part of an enterprise - (4 636) Interest received SWAP contracts paid Repayment of loans granted - 1 Granting of loans (197) - Net cash flows from investing activities (96 230) ( ) Cash flows from financing activities Payment of finance lease liabilities (1 195) (1) Proceeds from loans/borrowings Repayment of loans and borrowings (40 498) (40 943) Share buy-back (6 341) (28 378) Interest and fees paid (9 884) (12 048) Other disposal of fixed assets for leasing other Net cash flows from financing activities (40 060) (81 370) Net change in cash and cash equivalents (16 652) (78 617) Net foreign exchange differences Cash and cash equivalents at the beginning of the period Profit/(loss) on valuation of cash in foreign currencies (1 915) - Cash and cash equivalents at the end of the period Notes included on pages 8 to 32 are an integral part of these interim condensed consolidated financial statements This is a translation of interim condensed consolidated financial statements originally issued in Polish 5

9 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the 6-month period ended 30 June 2009 (Unaudited) Share capital Share premium Treasury shares Other reserve capital Retained earnings Total Minority Interest Total equity At 1 January (39 222) Total comprehensive income for the period Issue of shares Transaction costs Share options Share options (Share Option Plan) (1 114) Share buy-back - - (6 328) (13) - (6 341) - (6 341) Share redemption (4 510) (34 790) Purchase of minority interest Distribution of prior years profit (66 672) Other additions/disposals At 30 June 2009 unaudited (4 447) Notes included on pages 8 to 32 are an integral part of these interim condensed consolidated financial statements This is a translation of interim condensed consolidated financial statements originally issued in Polish 6

10 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the 6-month period ended 30 June 2009 Restated (unaudited) Share capital Share premium Treasury shares Other reserve capital Retained earnings Total Minority Interest Total equity At 1 January (4 386) Total comprehensive income for the period Issue of shares Transaction costs Share options Share options (Share Option Plan) Share buy-back - - (28 378) (57) - (28 435) - (28 435) Share redemption Purchase of minority interest Distribution of prior years profit (35 202) (33 897) - (33 897) Other additions/disposals (189) (189) - (189) At 30 June 2008 unaudited (32 764) Notes included on pages 8 to 32 are an integral part of these interim condensed consolidated financial statements This is a translation of interim condensed consolidated financial statements originally issued in Polish 7

11 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. General Information Multimedia Polska Group (the Group ) is composed of Multimedia Polska Spółka Akcyjna (the Parent Company or the Company ) and its subsidiaries (see Note 2). The interim condensed consolidated financial statements of the Group have been drawn for the 6-month period ended 30 June 2009 and contain comparative data for the 6-month period ended 30 June 2008 and as at 31 December The income statement and respective notes cover also the 3-month period ended 30 June 2009 and contain comparative data for the 3-month period ended 30 June 2008 these data were not subject to review or audit by an independent auditor. In 2008, the Company seperated relations with customers from goodwill arising on the merger and the purchase of organized parts of enterprises. Comparative data in the income statement and the cash flow statement are presented as if the separation had taken place on the day of the change of control (Note 29). The Parent Company is registered with the National Court Register kept by the District Court, VIII Commercial Division of the National Court Register, under entry No The Parent Company has been assigned industry identification No. REGON The Company s registered office is located in Gdynia, at ul. Tadeusza Wendy 7/9. The duration of the Parent Company and its subsidiaries is unlimited. The Group s main activity is the provision of a wide range of telecommunications services, in particular radio, television, internet and telephony over cable television systems. 2. Composition of the Group The Group comprises Multimedia Polska S.A. and the following subsidiaries: Company Registered office Business profile % of share in capital held by Multimedia Polska S.A Tele Top Grupa Multimedia Polska Sp.z o.o. (TOP) 2 Multimedia Polska - Zachód Sp. z o.o. (TNZ) 3 Multimedia Polska - Południe S.A. (TNPD) Gdynia, ul.t.wendy 7/9 - film and video production 99.9% 99.9% 4 Telewizja Kablowa Brodnica Sp. z o.o. Gdynia, ul.t.wendy 7/9 Gdynia, ul.t.wendy 7/9 Gdynia, ul.t.wendy 7/9 - voice, data and other telecommunications services - voice, data and other telecommunications services - cable television, other building installation 100.0% 100.0% 100.0% 100.0% 94.1% 94.1% During the 6 months ended 30 June 2009 there were no changes in the composition of the Group. On 26 February 2009, the Management Board of Multimedia Polska S.A. announced its intention to merge Multimedia Polska S.A. (the Acquirer) and Multimedia Polska - Zachód Sp. z o.o. (the Acquiree). On 28 April 2009 the Company s Annual General Meeting adopted resolution no. 15 regarding the merger of those companies. On 17 July 2009, the District Court for Gdańsk- Północ of Gdańsk VIII Economic Division of the National Court Register registered the merger of Multimedia Polska S.A. with Multimedia Polska Zachód Sp. z o.o. In accordance with the plan of merger, the merger was effected in accordance with Art and Art of the Commercial Companies Code by transferring all assets of Multimedia Polska - Zachód Sp. z o.o. to Multimedia Polska S.A. 8

12 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) The merger of Multimedia Polska S.A. and Multimedia Polska - Zachód Sp. z o.o. is aimed at reducing operating expenses associated with the operation of subsidiaries and simplifying managing and reporting processes within Multimedia Polska Group. As at 30 June 2009 and 30 June 2008, the percentage of voting rights held by the Group in subsidiaries corresponded to the percentage held in the share capital of those entities. 3. Composition of the Management Board of the Parent Company As at 30 June 2009, the Management Board of the Parent Company consisted of: Andrzej Rogowski President of the Management Board The composition of the Management Board did not change during the reporting period nor during the period up to the date of authorisation of these interim condensed consolidated financial statements. 4. Approval of Interim Condensed Consolidated Financial Statements These interim condensed consolidated financial statements were approved for publication by the Management Board on 26 August Basis of Preparation of the Interim Condensed Consolidated Financial Statements These interim condensed consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ), in particular in accordance with IAS 34 and IFRSs endorsed by the European Union. At the date of authorisation of these condensed consolidated financial statements, in light of the current process of IFRS endorsement in the European Union and the nature of the Group s activities, there is no difference between the IFRSs applied by the Group and the IFRSs endorsed by the European Union. IFRSs comprise standards and interpretations accepted by the International Accounting Standards Board ( IASB ) and the International Financial Reporting Interpretations Committee ( IFRIC ). These interim condensed consolidated financial statements have been prepared on a historical cost basis, except for financial instruments, which have been measured at fair value. These interim condensed consolidated financial statements are presented in thousands of Polish zloty ( PLN ), except when otherwise indicated. These interim condensed consolidated financial statements of the Group have been prepared on the assumption that the Group companies will continue as going concerns. As at the date of approval of these consolidated financial statements, the Management Board is not aware of any facts or circumstances that would indicate a threat to the continued operation of the Group. As a result of the merger the activity of Multimedia Polska Zachód Sp. z o.o. will be continued by Multimedia Polska S.A. and therefore the Management Board decided to prepare these interim condensed consolidated financial statements on the assumption that the Group companies will continue as going concerns. As at 30 June 2009, current liabilities of the Group presented in the consolidated balance sheet were higher than current assets by PLN 150 million. It was generally caused by the following events: - in the first half of 2009, the Company entered into finance lease agreements, which increased current liabilities by PLN 6,188 thousand, - in the first half of 2009, the Company repaid an instalment totalling PLN 40 million. The facility will continue to be repaid in semi-annual instalments. The Group s current liabilities presented in the balance sheet as at 30 June 2009 in the amount of PLN 219 million include deferred income of PLN 16 million which will not be paid by the Group. Excluding the deferred income, current liabilities were higher than current assets by PLN 133 million. The Group generates PLN 20 million of net cash inflows from operating activities per month. Information presented above means 9

13 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) that in the period from July to December 2009, the Group is able to generate net cash inflows of PLN 120 million. In 2009, the Group generated sufficient cash flows to finance ongoing operations. Net cash receipts from operating activities of the Group amounted to PLN million. The Group also generated a satisfactory EBITDA of PLN million. The Group defines EBITDA as operating profit, adjusted for depreciation and other costs and revenues related to the value of fixed assets. One-off events are not taken into consideration in the calculation of this ratio. During the 6 months ended 30 June 2009 and in the 6-month period ended 30 June 2008, no one-off events occurred. In the comparable period as of 31 December 2008, the current liabilities of the Group were higher than current assets by PLN 125 million. Net cash inflows from operating activities of the Group for the 6-month period ended 30 June 2008 amounted to PLN million, in the same period EBITDA amounted to PLN 114 million. The Company is in the process of negotiating with the banks the possibility of refinancing the existing credit facility and taking out a new credit facility to finance new investments and potencial acquisitions. As a result of the new financing, working capital would amount to about PLN 342 million at the end of 2009 and the debt ratio would not exceed 2.5 during the whole financing period (unaudited data). The interim condensed consolidated financial statements do not include all the information and disclosures required in annual consolidated financial statements, and should be read in conjunction with the Group s annual consolidated financial statements as at 31 December Summary of Significant Accounting Policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group s annual consolidated financial statements for the year ended 31 December 2008, except for the amendments and adoption of new Standards and Interpretations applicable to annual reporting periods beginning on or after 1 January 2009 as noted below: IAS 1 Presentation of Financial Statements (revised in September 2007) the Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with non-owner changes in equity presented as a single line. In addition the Standard introduces the statement of comprehensive income: it presents all items of recognised income and expense, either in one single statement, or in two linked statements. The Group presents the statement of comprehensive income in two linked statements. IAS 23 Borrowing costs (revised in March 2007) the revised Standard requires capitalisation of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. The implementation of this amendment did not have an impact on the financial position or performance of the Group, as this policy has been applied by the Group regarding the costs of external funding. IFRS 2 Share-based payment: Vesting Conditions and Cancellations the amendment clarifies the definition of a vesting condition and prescribes the treatment for an award that is effectively cancelled. The implementation of this amendment did not have an impact on the financial position or performance of the Group, as no events occurred to which the amendments may relate to. Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements: Puttable Financial Instruments and Obligations Arising on Liquidation provide a limited scope exception for puttable instruments to be classified as equity if they fulfil a number of specified criteria. The implementation of these amendments did not have any impact on the financial position or performance of the Group, as the Group had not issued such instruments. Interpretation IFRIC 13 Loyalty Programmes- interpretation requires customer loyalty credits to be accounted for as a separate component of the sales transaction in which they are 10

14 Early adoption: Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) granted. The implementation of this Interpretation did not have impact on the financial position or performance of the Group, as the Group does not maintain a loyalty programme. Changes that result from Improvements to IFRS. The changes did not have an impact on the financial position or performance of the Group. Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements: Cost of an investment in a subsidiary, jointly-controlled entity or associate the amendments to IFRS 1 allow an entity to determine the cost of investment in subsidiaries, jointly-controlled entities or associates in its opening IFRS financial statements in accordance with IAS 27 or using the deemed cost. The amendments to IAS 27 require that all dividends from a subsidiary, jointlycontrolled entity or associate are recognised in the income statement in the separate financial statements of the parent company. The revision to IAS 27 is applied prospectively. The new requirements affect only the parent s separate financial statements and do not have impact on the consolidated financial statements. Amendments to IFRS 7 Financial Instruments: Disclosures the amended standard requires additional disclosures on re-measurement to fair value and on liquidity risk. The fair value measurements are to be disclosed by source of inputs using a three level hierarchy for each class of financial instrument. In addition, reconciliation between the opening and closing balances for Level 3 fair value measurements is now required, as well as disclosure for significant transfers between Level 1 and Level 2 fair value measurements. The amendments also clarify the requirements for liquidity risk disclosures. Amendments concerning liquidity risk disclosures do not have significant impact on the liquidity-related disclosures presented previously by the Group. Interpretation IFRIC 15 Agreement for the Construction of Real Estate the interpretation clarifies when and how revenue and related expenses from the sale of a real estate unit should be recognized if an agreement between a developer and a buyer is reached before the construction of real estate is completed. Furthermore, the interpretation provides guidance on how to determine whether an agreement is within the scope of IAS 11 or IAS 18. IFRIC 15 will not have an impact on the consolidated financial statements because the Group does not conduct such activity. Interpretation IFRIC 16 Hedges of a Net Investment in a Foreign Operation - the interpretation provides guidance on the accounting for a hedge of a net investment. As such it provides guidance on identifying the foreign currency risks that qualify for hedge accounting in the hedge of a net investment, where within the group the hedging instruments can be held in the hedge of a net investment and how an entity should determine the amount of foreign currency gain or loss, relating to both the net investment and the hedging instrument, to be recycled on disposal of the net investment. IFRIC 16 will not have impact on the consolidated financial statements because the Group does not hedge any net investment in a foreign operation. IFRS 8 Operating Segments replaces IAS 14 Segment Reporting. IFRS 8 introduces a management approach to identification and measurement of reporting segments results. The Group applied IFRS 8 recognizing market segments and presented data in the financial statements for The Management Board decided to implement IFRS 8 Operating Segments earlier than it was required. 7. Changes in Estimates In the consolidated financial statements for the year ended 31 December 2008, the Group recognised customer relations with indefinite useful lives in the amount of PLN 6.6 million. In January 2009, the Group changed the useful life estimate of this asset from indefinite to 10 years and began to amortise it. The Group revised and changed as from 1 January 2009 estimated useful lives of tangible assets. This change increased net profit by about PLN 519 thousand. In 2009, there were no other changes in estimates influencing the current period or future periods. 11

15 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) 8. Seasonality The Group s activities are not of seasonal nature. Therefore the results presented by the Group do not fluctuate significantly during the year. 9. Segment Information In accordance with the requirements of IFRS 8 Operating Segments, the Group divides its business activities into four separate segments television, internet, telephony and other services (lease of infrastructure). Financial decisions and allocation of resources are made based on internal financial reports presenting revenues and operating results divided into services representing the segments defined above. The basic measure of profit in the telecommunication industry is EBITDA. Analysis of EBITDA divided into segments is one of the tools in making business decisions by Management. No operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of business units separately for the purpose of making decisions about resource allocation and performance assessment. Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments. Segmentation is performed on the basis of individual accounting transactions. Most revenues and some variable cost items are allocated directly to specific segments. Other revenues and costs are allocated to a specific segment based on allocation keys such as the structure of RGUs (revenue generating units), structure of fixed assets, intangible assets, revenues from subscriber sales, wholesales, other services, or based on the structure of inventory. Revenues generated by the Group mainly come from individual customers. Revenues from business customers - other operators using the Group s network or services - represent not more than 7% of sales revenue. The television segment covers cable TV, digital TV and products such as Premium packages. The Internet segment is primarily based on providing HFC and DSL internet services. The telephony segment consists of fixed-line telephony services, interconnect services, indirect services and pay phones. All of the segments also include appropriately allocated revenue from other sales, such as sales of activation services, reactivation services and package migrations. Other services/leasing consist of revenues and costs of leasing telecommunication infrastructure, links, bandwidth, network and offices. Not allocated items include finance costs or revenues, income tax charges and the results of transactions which impact the value of fixed assets. Detailed information about business segments for 6 months ended 30 June 2009 (in PLN thousands, unaudited) are as follows: Television Internet Telephony Other services/ leasing Not allocated Total Sales revenue Other sales revenue Direct variable costs (33 670) (5 110) (9 657) - - (48 437) Operating costs (35 182) (22 297) (25 206) (420) - (83 105) Other operating revenues/costs 42 (1) (19) EBITDA Other revenue/costs (19 776) (19 776) Depreciation and amortisation (27 338) (22 759) (28 254) - - (78 351) Net profit (4 942) (19 776)

16 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) Other revenues/(costs) for the period of 6 months ended 30 June 2009 in the total amount of PLN (19,776) thousand comprise: - other operating revenue/costs related to the change in value of non-current assets PLN 328 thousand, - finance revenue and costs PLN (11,485) thousand, - current income tax PLN (8,619) thousand. Operating costs recognised in the income statement comprise: direct variable costs, operating costs and amortisation and depreciation. Detailed information about business segments for 3 months ended 30 June 2009 (in PLN thousands, unaudited) are as follows: Television Internet Telephony Other services/ leasing Not allocated Total Sales revenue Other sales revenue Direct variable costs (16 293) (2 604) (4 611) - - (23 508) Operating costs (18 061) (11 434) (13 400) (218) - (43 113) Other operating revenues/costs EBITDA Other revenue/costs (9 659) (9 659) Depreciation and amortisation (13 844) (11 438) (14 361) - - (39 643) Net profit (3 183) (9 659) Other revenues/(costs) for the period of 6 months ended 30 June 2009 in the total amount of PLN (9,659) thousand comprise: - other operating revenue/costs related to the change in value of non-current assets PLN 478 thousand, - finance revenue and costs PLN (4,264) thousand, - current income tax PLN (5,873) thousand. Operating costs recognised in the income statement comprise: direct variable costs, operating costs and amortisation and depreciation. 13

17 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) Comparable data for the period of 6 months ended 30 June 2008 (transformed) were as follows: Television Internet Telephony Other services/ leasing Not allocated Total Sales revenue Other sales revenue Direct variable costs Operating costs Other operating revenues/costs (23 428) (6 019) (12 054) - - (41 501) (35 070) (20 477) (18 719) (376) - (74 642) (476) (234) (174) - - (884) EBITDA (19 826) (19 826) Other revenue/costs Depreciation and (23 600) (21 135) (23 972) - - (68 707) amortisation Net profit (19 826) Other revenues/(costs) for the period of 6 months ended 30 June 2008 in the total amount of PLN (19,826) thousand comprise: - other operating revenue/costs related to the change in value of non-current assets PLN (1,546) thousand, - finance revenue and costs PLN (9,448) thousand, - current income tax PLN (8,832) thousand. Detailed information about business segments for 3 months ended 30 June 2008 (in PLN thousands, restated, unaudited) are as follows: Television Internet Telephony Other services/ leasing Not allocated Total Sales revenue Other sales revenue 186 (339) Direct variable costs (11 405) (2 731) (5 364) - - (19 500) Operating costs (18 256) (10 567) (9 374) (156) - (38 353) Other operating revenues/costs (430) (207) (154) - - (791) EBITDA Other revenue/costs (11 734) (11 734) Depreciation and amortisation (11 953) (10 904) (12 465) - - (35 322) Net profit (11 734) Other revenues/(costs) for the period of 6 months ended 30 June 2009 in the total amount of PLN (11,734) thousand comprise: - other operating revenue/costs related to the change in value of non-current assets PLN (1,012) thousand, 14

18 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) - finance revenue and costs PLN (4,327) thousand, - current income tax PLN (6,395) thousand. Operating costs recognised in the income statement comprise: direct variable costs, operating costs and amortisation and depreciation. Sales revenue comprises revenue from subscriber services and interoperator activities. Other sales revenue comprises revenue from the rental of telecommunications infrastructure, lines, bandwidth, networks and premises, as well as revenue from other sales - advertising, licences. Direct variable costs are the charges against the Group for programming charges, copyright, administrative fees, interconnect and bandwidth. Operating costs are the costs of materials and energy, rentals, external services and compensation, taxes, sales and marketing. Due to the nature of services and transactions performed by the Group, there are no sales/purchases or other transactions between the business segments. The Group defines EBITDA as operating profit adjusted for depreciation and amortisation and other costs and income resulting from a change in the value of non-current assets. In the calculation of EBITDA the Group disregards one-off events. EBITDA for the period of 6 months ended 30 June 2009 was stable at PLN 124,232 thousand. For the period of 6 months ended 30 June 2008 EBITDA of the Group was stable at PLN 113,957 thousand. Earnings per segment for 6 months of 2009 were as follows: TV earnings of PLN 60,236 thousand 48.5 %, Internet - earnings of PLN 36,371 thousand 29.2 %, Telephony - earnings of PLN 23,312 thousand 18.8 %, Earnings from other services (lease) amounted to PLN 4,313 thousand, accounting for 3.5 % of total EBITDA. In the same period of 2008 the earnings by segment were as follows: TV - earnings of PLN 54,618 thousand 47.9 %, Internet - earnings of PLN 28,597 thousand 25.1 %, Telephony - earnings of PLN 27,611 thousand 24.2 %, Earnings from other services (lease) amounted to PLN 3,131 thousand, accounting for 2.8 % of total EBITDA. EBITDA for the second quarter of 2009 was stable at PLN 62,954 thousand. In the same period of 2008 EBITDA of the Group was stable at PLN 57,323 thousand. Earnings per segment for Q2 of 2009 were as follows: TV earnings of PLN 31,415 thousand 49.9 %, Internet - earnings of PLN 18,217 thousand 28.9 %, Telephony - earnings of PLN 11,178 thousand 17.8 %, Earnings from other services (lease) amounted to PLN 2,144 thousand, accounting for 3.4 % of total EBITDA. In the same period of 2008 the earnings by segment were as follows: TV - earnings of PLN 27,255 thousand 47.6 %, Internet - earnings of PLN 14,519 thousand 25.3 %, Telephony - earnings of PLN 14,706 thousand 25.6 %, Earnings from other services (lease) amounted to PLN 843 thousand, accounting for 1.5 % of total EBITDA. The Group provides its services on the territory of the Republic of Poland, which constitutes a single consistent geographic area. Hence, the Group does not make any allocations to geographic segments. 15

19 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) 10. Income Tax Major components of income tax expense for the period of six months ended 30 June 2009 and 30 June 2008 were as follows: 3-months period ended 30 June 2009 unaudited 6-months period ended 30 June 2009 unaudited 3-months period ended 30 June 2008 Restated, unaudited 6-months period ended 30 June 2008 Restated, unaudited Current income tax Current income tax charge Deferred income tax Relating to origination and reversal of temporary differences (116) (465) Income tax expense reported in consolidated income statement Dividends Paid and Declared On 28 April 2009, the Annual General Shareholders Meeting of Multimedia Polska S.A adopted a resolution regarding the allocation of total net profit generated by the Company in 2008 amounting to PLN 66,152 thousand to reserve capital. On 22 June 2009, the Annual General Shareholders Meeting of Multimedia Polska- Południe S.A adopted a resolution regarding the allocation of 8% of net profit generated by the company in 2008 amounting to PLN 520 thousand to reserve capital. 12. Property, Plant and Equipment Acquisitions and Disposals During the 6-month period ended 30 June 2009, the Group acquired items of property, plant, equipment and intangible assets and incurred capital expenditure totalling PLN 85,372 thousand (during the 6-month period ended 30 June 2008: PLN 90,131 thousand) and acquired tangible fixed assets under finance lease agreements in the amount of PLN 10,620 thousand. Property, plant and equipment with a net book value of PLN 217 thousand were disposed of by the Group during the 6-month period ended 30 June 2009 (during the 6-month period ended 30 June 2008: PLN 242 thousand) thus realizing the net gain on disposal of PLN 181 thousand (2008: loss on disposal PLN 19 thousand) Impairment In the period ended 30 June 2009, the Group reduced impairment write-down of property, plant and equipment by the amount of PLN 860 thousand as a result of disposal and liquidation of tangible fixed assets (in the respective period of the prior year, the Group reduced impairment write-down of property, plant and equipment by the amount of PLN 10,932 thousand). 13. Leases Liabilities under Financial Leases Finance leases pertain to vehicles, an office building, electronic equipment of server rooms and head-ends and computer systems. Lease agreements are concluded for 2-10 years. In conformance with the lease agreements, there was a transfer of basically the entire risk and benefits arising in the connection with holding the assets. Lease is secured with blank promissory notes. 16

20 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) In the first half of 2009, the Company entered into the following finance lease agreements: On 16 March 2009, the Company entered into a transaction with ING Lease (Polska) Sp. z o.o., whereby it sold electronic equipment of server rooms and head-ends. The Company made sure it had continued access to that part of telecom infrastructure by signing a finance lease agreement with the buyer for 3 years. The aggregate value of the subject of the above transaction was PLN 2,791, This transaction enabled the Company to unfreeze previously invested funds and at the same time to continue unlimited use of these assets. The Company issued two blank promissory notes as collateral for the agreement. The Company settled the transaction as financing on the basis of an assessment of the economic content of each transaction and the terms and conditions of the respective agreements. On 8 April 2009, the Company entered into a transaction with ING Lease (Polska) Sp. z o.o. whereby it sold electronic equipment of server rooms and head-ends. The Company made sure it had continued access to that part of telecom infrastructure by signing a finance lease agreement with the buyer for 2 years. The aggregate value of the subject of the above transaction was PLN 4,296, The Company issued two blank promissory notes as collateral for the agreement. The Company settled the transaction as financing on the basis of an assessment of the economic content of each transaction and the terms and conditions of the respective agreements. On 11 May 2009, the Company signed a finance lease agreement with ING Lease (Polska) Sp. z o.o. The lease pertains to electronic equipment of server rooms and head-ends with a total value of PLN 7,965, The Company issued two blank promissory notes as collateral for the agreement. The Company classified the lease agreement as finance lease on the basis of an assessment of the economic content of each transaction and the extent to which the risks and benefits arising from the possession of the lease items are allocated to the lessor and the lessee. On 8 June 2009, the Company signed a finance lease agreement with ING Lease (Polska) Sp. z o.o. The lease pertains to computer equipment with a total value of PLN 2,653, The Company issued two blank promissory notes as collateral for the agreement. The Company classified the lease agreement as finance lease on the basis of an assessment of the economic content of each transaction and the extent to which the risks and benefits arising from the possession of the lease items are allocated to the lessor and the lessee. On 29 June 2009, the Company signed lease agreements with PSA Finance Polska Sp. z o.o. The lease pertains to vehicles with a total value of PLN 268,096.68, which were received to use in July The Company issued blank promissory notes as collateral for the agreement. The Company classified the lease agreement as finance lease on the basis of an assessment of the economic content of each transaction and the extent to which the risks and benefits arising from the possession of the lease items are allocated to the lessor and the lessee. As at 30 June 2009 and as at 31 December 2008, minimum future lease payments and the current value of minimum net leases were as follows: 30 June 2009 (unaudited) Minimum payments Current value of payments 31 December 2008 Minimum payments Current value of payments Within 1 year After one year but not more than five years Total minimum lease payments Less finance costs (1 456) (91) Current value of minimum lease payments

21 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) 14. Prepayments and Deferred Costs 30 June December 2008 (unaudited) Lease Car services Insurance Technical support Permissions Real estate tax Company Social Benefits Fund Acquisition costs Other prepayments and deferred costs Other Total current non-current The increase of prepayments and deferred costs related to real estate tax results from the nature and settlement cycle of this tax. 15. Employee Benefits Employee Share Option Plan On 11 February 2009, the Management Board of Multimedia Polska S.A. acting under the authorisation granted by the Extraordinary General Meeting in resolution no. 5 dated 19 January 2009 passed resolution no. 5/2009 setting forth the conditions of offering shares to Company employees (Share Option Plan). The goal of the Plan is to provide additional incentive for Key Employees by granting eligible ones a premium (henceforth the Option ). The Plan will be executed in 2009, and subsequently in On 30 January 2009, acting pursuant to Art of the commercial companies code and resolution No. 5 of the Extraordinary General Meeting of the Company dated 19 January 2009, Multimedia acquired 861 thousand treasury shares in a block transaction for a total consideration of PLN 6,328,350 during a trading session at the Warsaw Stock Exchange (Giełda Papierów Wartościowych S.A.). The price per share was PLN The Company acquired own shares in order to offer them for purchase by the Company employees in execution of the Company s share option plan. The allocation of shares to eligible employees in the first stage of the Plan was completed on 3 March In the first stage of the plan, a total of 256 thousand shares at PLN 3.00 each were allocated to 17 key employees. The shares were acquired in Warsaw, outside the regulated market. The cost of the share option plan, being the difference between the buy price paid by the Company for the shares and the sell price at which shares were sold to eligible employees, was PLN 1,113,600. In 2008 and 2007 the Company made a provision of PLN 1,143, for those costs under payroll. Nine of the employees who were granted shares used the option of taking out a loan from the Company to purchase the shares. The shares were acquired in Warsaw, outside the regulated market. The nine employees are persons having permanent access to inside information and at the same time authorised to make decisions regarding the prospects and development of the Company s business however not managing persons or members of the Company s supervisory bodies. Those persons acquired in aggregate 136,000 shares. The first stage of the Plan did not involve the Company s Management Board. Up to 30 June 2009, in the second stage of the plan, a total of 275 thousand share options at PLN 3.00 each were allocated to employees. 18

22 Interim condensed consolidated financial statements for the 6-month period ended 30 June 2009 (in PLN thousands) Up to 30 June 2009, the cost of the second stage of the share option plan was PLN 510, thousand. The options were valued with the Black-Scholes method, with the use of the following input data: Price on the option grant date PLN 7.35 Strike date 30 January 2010 Employee exit ratio 5% Annual risk-free rate 4.50%. The model assumes that no dividend will be paid during the Plan term. The options will vest on 31 December 2009, provided that a given Beneficiary continues to be employed at the Company on that date. The options granted to a given Beneficiary expire if their employment contract has been terminated or a penalty under the Company work rules has been imposed on the employee. The purchase of shares is to be settled by 30 January Cash and Cash Equivalents Cash at banks earns interest at floating rates applicable to overnight deposits. Short-term deposits are placed for periods of different lengths, from overnight up to one month depending on the Group s current cash requirements, and bear interest at rates fixed in advance for such deposits. As at 30 June 2009, the value of cash and cash equivalents amounted to PLN 6,295 thousand (PLN 24,862 thousand as at 31 December 2008). All risks related to the operations of the Company are described in Note 26. As at 30 June 2009, the Group had un-drown committed overdraft facilities amounting to PLN 4,590 thousand. As at 30 June 2009, the Group held the following short-time deposits: - PLN 13 thousand earning interest at 2.1% (opening date 5 July 2008) The balance of cash and cash equivalents disclosed in the consolidated cash flow statement consists of the following items: 30 June December 2008 (unaudited) Cash on hand and in the banks Short-term deposits Other cash Cash and cash equivalents Share Capital, Reserve Capital and Other Reserves Share Capital On 30 June 2009, the Company s share capital was PLN 153,189,683 and was divided into 153,189,683 ordinary bearer shares of a nominal value of PLN 1.00 each. The Company s share capital changed during the 6-month period ended 30 June On 19 January 2009, the Extraordinary General Meeting of Multimedia Polska S.A. passed a resolution concerning the reduction of the Company s share capital from PLN 157,700,000 to PLN 153,189,683 by PLN 4,510,317 by cancelling 4,510,317 bought-back shares. On 31 March 2009 the cancellation of treasury shares became effective, upon registration of the reduction of the share capital by the District Court for Gdańsk Północ of Gdańsk, VIII Economic Division of the National Court Register. In connection with the resolution referred to above, the Extraordinary General Meeting amended 6 of the Statutes of Multimedia Polska S.A. so as to read as follows: The Company s share capital shall amount to PLN 153,189,683 (one hundred fifty-three million, one hundred eighty-nine thousand, six hundred eighty-three zloty) and shall be divided into 153,189,683 (one hundred fiftythree million, one hundred eighty-nine thousand, six hundred eighty-three) ordinary bearer shares with the nominal value of PLN 1.00 (one) each. 19