Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No ý

As of October 29, 2014, there were outstanding 155,762,166 shares of the registrant's common stock, $0.01 par value per share.

This quarterly report contains forward-looking statements that involve substantial risks and uncertainties. In some cases you can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would," or similar words. You should read statements that contain these words carefully because they discuss future expectations, contain projections of future results of operations or of financial position or state other "forward- looking" information. The factors described in the "Risk Factors" section of this quarterly report on Form 10-Q, as well as any cautionary language elsewhere in this quarterly report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations described in these forward-looking statements. Other unknown or unpredictable factors could have material adverse effects on our future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed herein may not occur and actual performance and results may vary from those anticipated or otherwise suggested by such statements. You are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

	December 31, 2013			September 30, 2014

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 4)	$	30,574		$	29,837
Short-term investments (Note 4)		180,337			121,982
Trade accounts receivable, net of allowance for doubtful accounts (December 31, 2013—$483; September 30, 2014—$565)		36,875			29,934
Taxes reclaimable		22,929			23,816
Prepayments		57,536			64,398
Programming rights, net (Note 5)		172,197			154,758
Deferred tax assets		30,400			22,048
Other current assets		4,373			6,110


TOTAL CURRENT ASSETS		535,221			452,883


PROPERTY AND EQUIPMENT, net		36,874			26,671
INTANGIBLE ASSETS, net:
Broadcasting licenses		59,676			41,361
Cable network connections		20,422			17,160
Trade names		5,332			4,525
Other intangible assets		4,876			3,425


Net intangible assets		90,306			66,471
GOODWILL (Note 2)		135,276			112,427
PROGRAMMING RIGHTS, net (Note 5)		121,802			103,591
INVESTMENTS IN AND ADVANCES TO INVESTEES		5,524			3,873
PREPAYMENTS		27,602			24,365
DEFERRED TAX ASSETS		18,371			13,107
OTHER NON-CURRENT ASSETS (Note 4)		—			24,776


TOTAL ASSETS	$	970,976		$	828,164




LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		105,849			81,181
Accrued liabilities		20,449			43,151
Taxes payable		33,630			11,475
Deferred revenue		10,223			6,092
Deferred tax liabilities		49,770			58,663
Other current liabilities		3,390			2,780


TOTAL CURRENT LIABILITIES		223,311			203,342


DEFERRED TAX LIABILITIES		13,549			9,758
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY (Note 6):
Common stock ($0.01 par value; shares authorized 175,772,173; shares issued December 31, 2013 and September 30, 2014—158,210,719)		1,582			1,582
Additional paid-in capital		494,122			496,056
Retained earnings		386,575			394,281
Accumulated other comprehensive loss		(124,339	)		(252,172	)
Less: Common stock held in treasury, at cost (December 31, 2013—2,500,000; September 30, 2014—2,448,553 shares)		(29,727	)		(29,115	)
Non-controlling interest		5,903			4,432


TOTAL STOCKHOLDERS' EQUITY		734,116			615,064


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	970,976		$	828,164

	Three months ended September 30,						Nine months ended September 30,

	2013			2014			2013			2014
REVENUES:
Advertising	$	166,891		$	156,022		$	556,477		$	523,080
Sublicensing revenue and other revenues		4,193			2,545			15,909			6,046


Total operating revenues		171,084			158,567			572,386			529,126


EXPENSES:
Direct operating expenses (exclusive of programming expenses, shown below; exclusive of depreciation and amortization of $7,066 and $5,542 for the three months and $21,860 and $18,157 for the nine months ended September 30, 2013 and 2014, respectively; and exclusive of stock-based compensation expense (benefit) of $(26) and $(11) for the three months and $1,417 and $(787) for the nine months ended September 30, 2013 and 2014, respectively)		(10,682	)		(10,131	)		(33,582	)		(34,743	)
Selling, general and administrative (exclusive of depreciation and amortization of $1,084 and $827 for the three months and $3,113 and $2,864 for the nine months ended September 30, 2013 and 2014, respectively; and exclusive of stock-based compensation expense of $545 and $652 for the three months and $1,740 and $1,173 for the nine months ended September 30, 2013 and 2014, respectively)		(37,808	)		(33,816	)		(122,540	)		(114,376	)
Stock-based compensation expense		(519	)		(641	)		(3,157	)		(386	)
Programming expenses		(69,738	)		(63,350	)		(252,368	)		(227,581	)
Depreciation and amortization		(8,150	)		(6,369	)		(24,973	)		(21,021	)


Total operating expenses		(126,897	)		(114,307	)		(436,620	)		(398,107	)


OPERATING INCOME		44,187			44,260			135,766			131,019
FOREIGN CURRENCY (LOSS) GAIN		(49	)		1,159			1,187			(3,546	)
INTEREST INCOME		2,233			2,356			8,203			8,698
INTEREST EXPENSE		(178	)		(131	)		(577	)		(395	)
OTHER NON-OPERATING LOSS, net		(271	)		(179	)		(374	)		(771	)
EQUITY IN (LOSS) INCOME OF INVESTEE COMPANIES		385			244			840			(425	)


Income before income tax		46,307			47,709			145,045			134,580


INCOME TAX (EXPENSE)/ BENEFIT (Note 8)		1,785			(14,724	)		(33,696	)		(41,906	)


CONSOLIDATED NET INCOME	$	48,092		$	32,985		$	111,349		$	92,674




LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST	$	(1,437	)	$	(1,390	)	$	(4,513	)	$	(3,202	)


NET INCOME ATTRIBUTABLE TO CTC MEDIA, INC. STOCKHOLDERS	$	46,655		$	31,595		$	106,836		$	89,472




Net income per share attributable to CTC Media, Inc. stockholders—basic	$	0.30		$	0.20		$	0.68		$	0.57




Net income per share attributable to CTC Media, Inc. stockholders—diluted	$	0.30		$	0.20		$	0.68		$	0.57




Weighted average common shares outstanding—basic		155,986,822			155,762,166			157,286,789			155,742,190




Weighted average common shares outstanding—diluted		156,099,208			156,125,495			157,339,072			155,970,240




Dividends declared per share	$	0.16		$	0.18		$	0.47		$	0.53

	Three months ended September 30,						Nine months ended September 30,

	2013			2014			2013			2014
Net income	$	48,092		$	32,985		$	111,349		$	92,674
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment		8,563			(105,750	)		(47,922	)		(128,735	)


Other comprehensive income (loss)		8,563			(105,750	)		(47,922	)		(128,735	)


Comprehensive income (loss)	$	56,655		$	(72,765	)	$	63,427		$	(36,061	)




Less: Comprehensive income attributable to noncontrolling interest		(1,463	)		(1,172	)		(4,411	)		(2,300	)


Comprehensive income (loss) attributable to CTC Media, Inc. stockholders	$	55,192		$	(73,937	)	$	59,016		$	(38,361	)

	Nine months ended September 30,

	2013			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	111,349		$	92,674
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax expense		1,378			11,631
Depreciation and amortization		24,973			21,021
Programming expenses		252,368			227,581
Stock based compensation expense		3,157			386
Equity in loss (income) of unconsolidated investees		(840	)		425
Foreign currency losses (gains)		(1,187	)		3,546
Changes in operating assets and liabilities:
Trade accounts receivable		(7,903	)		12,982
Prepayments		957			(6,799	)
Other assets		(5,819	)		(8,779	)
Accounts payable and accrued liabilities		(4,513	)		(9,178	)
Deferred revenue		(914	)		(1,190	)
Other liabilities		(26,721	)		(16,913	)
Dividends received from equity investees		707			772
Acquisition of programming and sublicensing rights		(282,487	)		(273,182	)


Net cash provided by operating activities		64,505			54,977


CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment and intangible assets		(3,548	)		(3,793	)
Acquisitions of businesses, net of cash acquired		(461	)		—
Receipts from deposits		26,219			36,936


Net cash provided by investing activities		22,210			33,143


CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchases of common stock		(29,727	)		—
Proceeds from exercise of stock options		454			—
Settlements of overdraft and loans		(3,587	)		(628	)
Increase in other non-current assets (Note 4)		—			(20,763	)
Dividends paid to stockholders		(73,854	)		(61,003	)
Dividends paid to noncontrolling interest		(4,795	)		(4,591	)


Net cash used in financing activities		(111,509	)		(86,985	)


EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(2,613	)		(1,872	)
Net decrease in cash and cash equivalents		(27,407	)		(737	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		55,181			30,574


CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	27,774		$	29,837

The accompanying consolidated financial statements include the accounts of CTC Media, Inc. and all consolidated subsidiaries (the "Company"). CTC Media, Inc., a Delaware corporation, operates the CTC, Domashny and Peretz television channels in Russia and Channel 31 in Kazakhstan. Each channel includes operating results of its network, which is responsible for broadcasting operations, including sales of its network's advertising, licensing and commissioning of programming, producing its programming schedule, managing its relationships with its independent affiliates, and the respective stations that distribute the network's signal. For financial reporting purposes the Company's other less significant operating segments are included along with the Company's headquarters' operations in the "All Other" category.

The Company generates substantially all of its revenues from the sale of television advertising on both a national and regional basis. The Company also generates revenues from the sublicensing of programming rights.

The accompanying unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2014 should be read in conjunction with the consolidated financial statements contained in the Company's Annual Report on Form 10-K filed with the US Securities and Exchange Commission (the "SEC") on March 6, 2014. The Company's accounting policies are more fully described in the Annual Report. The preparation of the Company's unaudited condensed consolidated financial statements requires the Company to make judgments in selecting appropriate assumptions for calculating financial estimates, which inherently contain some degree of uncertainty. The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following discussion addresses the Company's most critical accounting policies, which require management's most difficult, subjective and complex judgments.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been recorded. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

The condensed consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for the complete financial statements.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K as of and for the year ended December 31, 2013.

Wholly owned subsidiaries and majority owned ventures where the Company has operating and financial control, as well as variable interest entities where the Company has been deemed the primary beneficiary with power and ability to control, are consolidated. Those ventures where the Company exercises significant influence, but does not exercise operating and financial control, are accounted for under the equity method. The Company uses the purchase method of accounting for all business combinations. Results of subsidiaries acquired and accounted for under the purchase method are included in operations from the date of acquisition. Noncontrolling interests represent a noncontrolling shareholder's proportionate share of the equity in certain of the Company's consolidated entities. Intercompany accounts and transactions are eliminated upon consolidation. Disposals are reflected at the time risks and rewards of ownership have been transferred.

The Company is the primary beneficiary of the Channel 31 Group, a variable interest entity consisting of a 20% participation interest in Teleradiokompaniya 31st Kanal LLP ("Channel 31"), and a 70% and 60% interest in Prim LLP and Advertising and Marketing LLP, respectively, which provide programming content and the advertising sales function to Channel 31 (together, the "Channel 31 Group"). These interests provide the Company with a right to 60% of the economic interest of the Channel 31 Group. The Company consolidates the Channel 31 Group. As of September 30, 2014, the Channel 31 Group had assets (excluding intercompany assets) totaling $19,784 and liabilities (excluding intercompany liabilities) totaling $5,191. These assets and liabilities primarily relate to broadcasting licenses, trade payables for programming rights, loans and related deferred tax assets and liabilities. The Company finances the Channel 31 Group's operations in the ordinary course of business. Channel 31 Group's net income attributable to CTC Media, Inc. stockholders excluding intercompany expenses totaled $519 and $129 for the three- and nine-months ended September 30, 2014, respectively.

The Company experiences seasonal fluctuations in overall television viewership and advertising revenues. Overall television viewership is lower during the summer months and highest in the first and fourth quarters. Seasonal fluctuations in consumer patterns also affect television advertising expenditures. In 2013, approximately 31% of the Company's total advertising revenues were generated in the fourth quarter.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

values in business combinations, estimates of the fair value of the Company's common stock in determining stock-based compensation, the amortization method and periods for programming rights, useful lives of tangible and intangible assets, impairment of goodwill, valuation of intangible assets and long-lived assets, estimates of contingencies, estimates of income taxes in relation to the Company's interpretation of current tax laws, in particular, in determination of foreign tax credits, determination of valuation allowances for deferred tax assets, and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. While the Company believes it has made, and continues to make, reasonable judgments in determining its tax filing positions in each jurisdiction in which it is subject to tax, views may differ as to the determination of its tax obligations. These judgments may ultimately be subjected to examination by the tax authorities and further revisions may be required in the Company's estimates. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making changes in estimates from time to time, and evaluates the estimates on an ongoing basis. Actual results may differ from those estimates under different assumptions or conditions.

Revenue is recognized when there is persuasive evidence of an arrangement, services have been rendered, the price is fixed or determinable and collectability is reasonably assured. An allowance for doubtful accounts is maintained for estimated losses resulting from the customers' inability to make payments. The Company recognizes advertising revenues at the moment when the advertising is broadcast and net of Value Added Taxes ("VAT").

The Company's own sales house serves as the exclusive advertising sales agent for substantially all advertising broadcast on all of its channels in Russia, and the advertising is placed with advertisers and their agencies under direct sales arrangements with them. The sales house is primarily responsible for all national and regional advertising sales, with the exception of advertising sales to local clients of a number of the Company's regional stations, which are made through Video International.

The Company's cooperation model with Video International also provides for the licensing of specialized advertising software by Video International to the Company's sales house, together with the provision by Video International of related software maintenance and analytical support and consulting services. Compensation expenses payable to Video International for the use of advertising software, related maintenance and analytical support and consulting services are included in selling, general and administrative expenses in the Company's consolidated statement of income.

The Company recognizes its Russian advertising revenues, excluding regional advertising revenues from local clients, based on the gross amounts billed to the advertisers and their agencies under direct sales arrangements. Advertising sales to local clients under the agency agreements with Video International continue to be recognized net of agency commissions.

Sublicensing revenues primarily represent revenues the Company earns from sublicensing its rights to programming and from licensing of internally-produced programming. Sublicensing revenue is recognized at such time as there is persuasive evidence that a sale or arrangement with a customer

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

exists, the underlying programming is complete and has been transferred to the customer, the licensing period has commenced and the customer can begin to use, the arrangement fee is fixed or determinable, and collection of the arrangement fee is reasonably assured. Given the recent uncertainties in Ukraine, in 2014 the Company commenced to use the instalment method for certain sublicensing arrangements.

Payments received in advance for advertising and other revenue are recorded as deferred revenue until earned.

Programming rights are stated at the lower of their unamortized cost or net realizable value. The Company reports an asset and liability for the rights acquired and obligations incurred at the commencement of the licensing period when the cost of the programming is known or reasonably determinable, the program material has been accepted and the programming is available for airing.

The Company's programming rights also include internally produced programming. The cost of such programming includes expenses related to the acquisition of format rights, direct costs associated with production and capitalized overhead. The Company capitalizes production costs, including costs of individuals or departments with exclusive or significant responsibility for the production of programming that can be allocated to such particular programming, as a component of programming costs. Internally-produced programming is reported at the lower of unamortized cost or fair value.

Purchased program rights are classified as current or non-current assets based on anticipated usage and the licensing period. Internally produced and purchased programming with unlimited rights are classified as non-current.

The Company amortizes programming based on expected revenue generation patterns, based on the proportion that current estimated revenues bear to the estimated remaining total lifetime revenues. If the initial airing of content allowed by a license is expected to provide more value than subsequent airings, the Company applies an accelerated method of amortization. These accelerated methods of amortization depend on the estimated number of runs the content is expected to receive, and are determined based on a study of historical results for similar programming. For content that is expected to be aired only once, the entire cost is recognized as an expense on the first run. To the extent that the revenues the Company expects to earn from broadcasting a program are lower than the book value, the program rights are written down to their net realizable value by way of recording an additional amortization charge. Such write-downs establish a new cost basis for programming rights.

Amortizable assets are stated at cost less accumulated amortization. Definite-lived intangible assets primarily represent broadcast licenses and cable network connections. Cable network connections are amortized on a straight-line basis over their estimated period of future economic benefit, approximately until 2018.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As a result of developments in the transition to digital broadcasting, the Company changed its estimate of the useful lives of its broadcasting licenses from indefinite to finite in the fourth quarter of 2012. The Company now amortizes the remaining balances of its broadcasting licenses on a straight-line basis over their remaining useful life, which is estimated until the end of 2018. The Company estimates that the amortization charge for its broadcasting licenses will be approximately $3.7 million for the remainder of 2014, $10.8 million for 2015, $9.7 million for 2016 and $8.6 million annually from 2017 through 2018 (at an exchange rate of RUR 39.39 to $1.00 as of September 30, 2014). The estimated useful lives of broadcasting licenses is subject to the availability of further information about the transition to digital broadcasting which could require the Company to revise amortization expense on a prospective basis. Amortizable assets, including property and equipment and finite-lived intangibles, are reviewed periodically to determine whether an event or change in circumstances indicates that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, the Company bases its evaluation on such impairment indicators as the nature of the assets, the future economic benefit of the assets and any historical or future profitability measurements, as well as other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of the asset may not be recoverable, the Company determines whether impairment has occurred through the use of an undiscounted cash flows analysis of assets at the lowest level for which identifiable cash flows exist. If the carrying value of the asset or group of assets exceeds the undiscounted cash flows, impairment is deemed to have occurred, and the Company recognizes an impairment loss for the difference between the carrying amount and the estimated fair value of the asset. The fair value of the asset is estimated using a discounted cash flow analysis or other valuation techniques. See also—"Goodwill and Long-Lived Intangible Assets Impairment Tests" below.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows:

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The fair values of the Company's derivative assets of $1,946 and derivative liabilities of $228 have been classified as Level 2. The fair value of the Company's foreign exchange forward contracts is determined based on the present value of future cash flows using market-based observable inputs such as forward rates, discounts rates and foreign currency exchange rates. Counterparty credit risk did not have a material impact on derivative fair value estimates. The Company's derivative instruments are short-term in nature, primarily one month to one year in duration.

The carrying amounts of the Company's financial instruments, which include cash and cash equivalents, short-term investments, accounts receivable and accounts payable approximate their fair value as of December 31, 2013 and September 30, 2014, respectively.

The Company assesses the carrying value of its goodwill on an annual basis, or more frequently if events or changes in circumstances indicate that such carrying value may not be recoverable. Other than its annual review, factors the Company considers important which could trigger an impairment review include under-performance of reporting units or changes in projected results, changes in the manner of utilization of the asset, a severe and sustained decline in the price of the Company's shares and negative market conditions or economic trends. For a discussion of methodology and major assumptions regarding the Company's impairment test refer to the Annual Report on Form 10-K filed with the SEC on March 6, 2014.

In the annual impairment review performed as of December 31, 2013, the Company concluded that the fair values of its reporting units significantly exceeded their carrying values, reflecting the improved macroeconomic conditions from the downturn in the economy that started in 2008.

During the nine months ended September 30, 2014, the current geopolitical situation in Ukraine created economic instability in Russia that has been characterized by a steep decline in the value of shares traded on Russia's stock exchanges, depreciation of the Russian ruble, and a forecasted decline in the growth of gross domestic product in 2014. Additionally, because Russia produces and exports large amounts of oil, its economy is particularly vulnerable to the price of oil on the world market. Recent decreases in international oil prices may continue to adversely affect its economy. Many of the largest advertisers in the Russian market, including many of the largest advertisers on CTC, Domashny and Peretz, are multinational companies that sell consumer products on a worldwide basis. If Russia experiences significant economic instability or uncertainty, these companies may choose to reduce their advertising spending in Russia. In addition, during the third quarter of 2014 and in October 2014, analysts downgraded their forecasts for growth in the TV advertising market in 2015 due to macroeconomic and political headwinds.

Fair values of the Company's reporting units are highly sensitive to changes in the television advertising market assumptions. As of September 30, 2014, the carrying values of goodwill related to CTC, Domashny and Peretz totaled $42.8 million, $21.6 million and $47.9 million, respectively. In

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

addition, as of September 30, 2014, the Company had significant balances of amortizable broadcasting licenses totaling $41.4 million, including CTC licenses—$6.7 million; Domashny licenses—$8.7 million, and Peretz licenses—$21.3 million. Due to the significance of the negative factors described above, the Company performed an interim analysis for impairment. Although there is considerable uncertainty regarding the ultimate outcome of the Ukrainian crisis and its impact on the Russian economy, and, in particular, concerning the Russian advertising market in 2015 and thereafter, the Company has determined that it is more likely than not that current economic conditions have impacted the fair value of its reporting units. As a result of the impairment review performed as of September 30, 2014, the Company concluded that fair values of the CTC, Domashny and Peretz reporting units exceeded their carrying values. However, due to the revision of assumptions in the TV advertising market for 2015 and in the medium-term, the excess of fair values over the carrying value of the Peretz reporting unit decreased from 48% to 7%, when compared with the fair values estimated during the annual 2013 impairment tests. The estimated fair values of the CTC and Domashny reporting units remained significantly in excess of their respective carrying amounts.

Other than with respect to the Peretz reporting unit, hypothetical 10% and 15% decreases in the fair value of each reporting unit would not have resulted in impairment.

In order to check the reasonableness of the fair values implied by cash flow estimates, the Company also calculates the value of its common stock implied by its cash flow forecasts and compares this to actual traded values. As of September 30, 2014, the Company's consolidated net book value (or shareholders' equity) amounted to $615,064. This compares to a market capitalization of the Company as of September 30, 2014 of approximately $1,035,818.

In order to evaluate the sensitivity of the fair value calculations in its impairment analysis, the Company applied hypothetical 5, 10 and 15 percentage point decreases to the 2015 television advertising market growth forecast:

Also, the fair value estimates are highly sensitive to the cost of capital used by the Company in the discounting of expected cash flows attributable to its reporting units. The potential negative trends in the macroeconomic environment could increase risk to investors investing in Russian markets, which could increase the cost of capital, which in turn will decrease the fair value of the respective assets or reporting units. Additionally, changes in the financial markets, such as an increase in interest rates or an increase in the expected required return on equity by market participants within the industry, could increase the discount rate, thus decreasing the fair value of assets. The cost of capital used by the Company in its analysis was 13.0% as of December 31, 2013 and 13.8% as of September 30, 2014. In order to evaluate the sensitivity of the fair value calculations in its impairment analysis, the Company applied a hypothetical 3 percentage points increase to the cost of capital used: if the cost of capital used by the Company were higher by 3 percentage points, the Company would have recognized

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

impairment charge in respect of the Peretz reporting unit's goodwill and broadcasting license, of approximately $16.0 million.

During 2014, the plans around TV broadcasting in Russia, in particular digital broadcasting, have continued to evolve. While the Company expects some of these developments to be beneficial to its businesses, other changes may increase the uncertainties and risks with respect to the business models the Company currently operates. As a result, the Company is required to consider a number of factors in determining the estimated fair values of its reporting units which could change rapidly or unpredictably. The planned transition to digital broadcasting could impact the Company's assumptions used in its economic models and its assessment of the fair value of its reporting units.

The Company cannot guarantee that its Peretz channel may be able to compete effectively if it is not included in the third multiplex. With respect to the third multiplex, it is unclear what requirements the channels will be required to meet in order to be included in that multiplex as the terms for participation in the third digital multiplex have not been specified. The fair value of the Peretz reporting unit is particularly sensitive to changes in revenues and costs that may result depending on its distribution model. Currently, the terms for participation in the third digital multiplex have not been specified. In addition, current Russian legislation does not provide 'must carry' obligations for cable and satellite operators, and accordingly the Company may be unable to secure or maintain carriage of its signal over cable in certain regions, or at transmission rates that are consistent with its historical experience. As a result, there can be no assurance that the Company will be able to negotiate mutually acceptable transmission agreements with cable providers in the future relating to the carriage of the Peretz signal. Depending on further information about the terms of the transition to digital broadcasting, terms of interaction with cable and satellite providers, and other future developments, the Company may need to further revise its projected cash flows, which could adversely impact the fair value of its reporting units and related assets.

Also, given the terms and fees associated with participation in the second multiplex, the Company expects to encounter certain risks and uncertainties in the execution of each of CTC and Domashny channels' business models. It is difficult to predict accurately how the digitalization of broadcasting may affect the market. While digital broadcasting would increase CTC's and Domashny's overall technical penetration, the necessary investments for digital migration may not be fully monetized.

There may be other risks and expenses that the Company encounters during and subsequent to the transition that the Company is unable to anticipate at this time that could be material to its future financial position and results of operations. While the models used in the Company's assessments of its reporting units in its impairment testing incorporate changes in assumptions of revenues and costs, as well as risks associated with those uncertainties, depending on further information about the terms of the transition to digital broadcasting, as well as other future developments, the Company may need to further revise its projected cash flows, which could adversely impact the fair value of its reporting units and related assets. Subject to the availability of further information from the government and market participants, and the Company's ability to make further assessments of the government's plans, impairments may be required in the foreseeable future.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company estimates the fair value of equity awards at the date of grant using the Black-Scholes option pricing model. The Black-Scholes pricing model was originally developed for use in estimating the fair value of traded options, which have different characteristics than the Company's employee equity awards. The model is also sensitive to changes in subjective assumptions, which can materially affect the fair value estimate. These subjective assumptions include expected volatility, the expected life of the awards, future employee turnover rates, and future employee award exercise behavior. The Company determines the fair value of its common stock by using closing prices as quoted on the NASDAQ Global Select Market. Performance-based nonvested share awards require management to make assumptions regarding the likelihood of achieving the set goals.

Once the Company has estimated the fair value of the equity instruments, it recognizes this estimated cost as stock-based compensation expense over the service period. Equity-based incentive awards that meet liability accounting criteria are remeasured at each reporting date at their fair value until settlement. The fair value of such unsettled equity-based incentive awards is recognized in liabilities.

Deferred income taxes result from temporary differences between the tax bases of assets and liabilities and the bases as reported in the consolidated financial statements, as well as the tax benefits of net operating loss carry forwards which are expected to be realized. The Company records valuation allowances related to the tax effects of deductible temporary differences and loss carry forwards when, in the opinion of management, it is more likely than not that the respective tax assets will not be realized. Changes in the Company's assessment of the probability of realization of deferred tax assets may affect the Company's effective income tax rate.

The Company records temporary differences related to investments in its Russian subsidiaries. These temporary differences consist primarily of undistributed earnings that the Company does not plan to permanently reinvest in operations outside the U.S.

The level of sophistication and expertise with respect to complex tax laws is continually evolving both on the part of tax professionals and the taxing authorities. The Company is a US legal entity with substantially all of its operations outside the US, primarily in Russia. As a result, the Company's tax filing positions in the US are substantially impacted by the Company's interpretation of tax law and how the Company applies it in determining US taxes payable and deferred tax liabilities. While the Company believes it has made, and continues to make, reasonable judgments in determining its tax filing positions in each jurisdiction in which the Company is subject to tax, views may differ as to the determination of its tax obligations. These judgments may ultimately be subjected to examination by the tax authorities and further revisions may be required in the Company's estimates.

Effective January 1, 2014, the Company adopted Accounting Standards Update 2013-05, Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity ("ASU 2013-05"), Accounting Standards Update 2013-07, Liquidation Basis of Accounting ("ASU 2013- 07") and Accounting Standards Update 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). The adoption of these amendments did not have a material impact on the Company's condensed consolidated balance sheet or results of operations.

In April 2014, the FASB issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity ("ASU 2014-08"). ASU 2014-08 changes the criteria for determining which disposals can be presented as discontinued operations and modified related disclosure requirements. Under the new guidance, a discontinued operation is defined as: (i) a disposal of a component or group of components that is disposed of or is classified as held for sale that represents a strategic shift that has or will have a major effect on an entity's operations and financial results or (ii) an acquired business or nonprofit activity that is classified as held for sale on the date of acquisition. The standard states that a strategic shift could include a disposal of (i) a major geographical area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity. The adoption of this guidance, which is effective prospectively for reporting periods beginning on or after December 15, 2014 and interim periods within that year, is not expected to have a material effect on the Company's condensed consolidated balance sheet or results of operations.

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new guidance (i) removes inconsistencies, and weaknesses in revenue requirements, (ii) provides a more robust framework for addressing revenue issues, (iii) improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, (iv) provides more useful information to users of financial statements through improved disclosure requirements, and (v) simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for annual reporting periods beginning after December 15, 2016 including interim periods within that reporting period. The Company plans to apply the new standard beginning January 1, 2017 either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of adopting this new accounting standard on its financial statements.

In June 2014, the FASB issued Accounting Standards Update 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period ("ASU 2014-12"). ASU 2014-12 applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. That is the case when an employee is eligible to retire or otherwise terminate employment before the end of the period in which a performance target could be achieved and still be eligible to vest in the award if and when the

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

performance target is achieved. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period to be treated as a performance condition. A reporting entity should apply existing guidance ASC 718 as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The adoption of this guidance, which is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, is not expected to have a material effect on the Company's condensed consolidated balance sheet or results of operations.

In August 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 requires management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term "substantial doubt", (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of the consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The adoption of this guidance, which is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter, is not expected to have a material effect on the Company's condensed consolidated balance sheet or results of operations.

Basic net income per share is computed on the basis of the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares are calculated using the "treasury stock" method and consist of shares underlying outstanding equity awards. The number of shares excluded from the diluted net income per common share computation because their effect was antidilutive was 2,544,140 and 2,096,112 for the three months ended September 30, 2013 and 2014, respectively, and 2,547,890 and 2,131,611 for the nine months ended September 30, 2013 and 2014, respectively.

	Three months ended September 30,				Nine months ended September 30,

	2013		2014		2013		2014
Net income attributable to CTC Media, Inc. stockholders	$	46,655	$	31,595	$	106,836	$	89,472


Weighted average common shares outstanding—basic
Common stock		155,986,822		155,762,166		157,286,789		155,742,190
Dilutive effect of:
Stock-based awards		112,386		363,329		52,283		228,050


Weighted average common shares outstanding—diluted		156,099,208		156,125,495		157,339,072		155,970,240
Net income per share attributable to CTC Media, Inc. stockholders:
Basic	$	0.30	$	0.20	$	0.68	$	0.57
Diluted	$	0.30	$	0.20	$	0.68	$	0.57

The numerator used to calculate diluted net income per common share for the three and nine months ended September 30, 2013 and 2014 was net income attributable to CTC Media, Inc. stockholders.

4. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS; OTHER NON-CURRENT ASSETS

The Company's cash and cash equivalents and short-term investments comprise bank accounts and term deposits. Deposits with an original maturity ranging from 91 to 365 days are classified as short-term investments. Below are breakdowns of cash and cash equivalents and short-term investments:

4. CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS; OTHER NON-CURRENT ASSETS (Continued)

Other non-current assets—On March 20, 2014, the United States imposed sanctions on Bank Rossiya, a Russian open joint stock company, and Bank Rossiya was placed on the Specially Designated Nationals ("SDN") and Blocked Persons List of the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC"). On April 28, 2014, LLC IC Abros, a holding company related to Bank Rossiya, was also designated an SDN. More than 50% of the voting capital of Telcrest Investments Limited ("Telcrest"), one of the Company's principal stockholders, is beneficially owned, directly or indirectly, by Bank Rossiya and LLC IC Abros, and therefore Telcrest is also considered to be a target of sanctions.

On March 5, 2014, April 29, 2014 and July 25, 2014, the Company's Board declared a dividend to stockholders. The Company paid the declared dividends on March 28, 2014, June 26, 2014 and September 25, 2014, however, dividends totaling $20,763 otherwise payable to Telcrest were blocked pursuant to the U.S. sanctions described above and paid into a separate interest-bearing bank account for the benefit of Telcrest, but to which Telcrest will not have access while either Bank Rossiya or LLC IC Abros remain an SDN.

Programming rights as of December 31, 2013 and September 30, 2014 comprise the following:

	December 31, 2013			September 30, 2014

Internally produced—TV broadcasting and theatrical:
Released:
Historical cost	$	167,182		$	143,712
Accumulated amortization		(158,996	)		(137,506	)


Released, net book value		8,186			6,206


Completed and not released		7,318			2,941


Total		15,504			9,147


Acquired rights:
Historical cost		777,719			710,153
Accumulated amortization		(499,224	)		(460,951	)


Net book value		278,495			249,202


Total programming rights	$	293,999		$	258,349




Current portion	$	172,197		$	154,758




Non-current portion	$	121,802		$	103,591

The Company expects to amortize approximately $2,384 of internally produced TV programming for its completed and released programs and completed but not yet released programs during the twelve months ending September 30, 2015. In addition, the Company expects to amortize all of its unamortized internally produced programming rights within the three years following September 30, 2014.

As of December 31, 2013 and September 30, 2014, the Company's issued and outstanding share capital was as follows:

On March 4, 2013, the Board of Directors approved an open market stock repurchase program, pursuant to which the Company was authorized to repurchase up to 2.5 million shares of common stock in the market for use under the Company's 2013 Equity Incentive Plan (the "Plan"). During the

period ended December 31, 2013, the Company repurchased 2,500,000 shares of its common stock at an average price of $11.89 per share for a total of $29,727. Treasury stock is accounted for under the cost method. In April 2014, the Company issued 51,447 treasury stocks upon RSUs exercise under the 2013 sub-tranche of the 2013 Equity Incentive Plan.

The Company's certificate of incorporation authorizes the Company to issue 175,772,173 shares of common stock. As of December 31, 2013 and September 30, 2014, 155,710,719 and 155,762,166 shares were outstanding, respectively. Each holder of common stock is entitled to one vote for each share of common stock held of record on all matters on which stockholders generally are entitled to vote.

Dividends payable to Telcrest of $20,763 for the nine months ended September 30, 2014 were blocked pursuant to the US sanctions imposed on Bank Rossyia and LLC IC Abros described above in Note 4. As of September 30, 2014, dividends payable to Telcrest were recorded in accrued liabilities in the Company's condensed consolidated balance sheets.

During the nine months ended September 30, 2014, the Company declared and paid dividends to MTG Russia AB of $31,505.

The following table summarizes the changes in stockholders' equity during the nine months ended September 30, 2013 and 2014:

	Total			CTC Media, Inc. stockholders			Noncontrolling interest

Stockholders' equity, December 31, 2012	$	762,926		$	758,323		$	4,603
Net Income		111,349			106,836			4,513
Other comprehensive loss		(47,922	)		(47,820	)		(102	)


Comprehensive income	$	63,427		$	59,016		$	4,411


Additional paid-in capital		3,326			3,326			—
Less: Common stock held in treasury		(29,727	)		(29,727	)		—
Dividends declared		(78,877	)		(73,854	)		(5,023	)


Stockholders' equity, September 30, 2013	$	721,075		$	717,084		$	3,991

	Total			CTC Media, Inc. stockholders			Noncontrolling interest

Stockholders' equity, December 31, 2013	$	734,116		$	728,213		$	5,903
Net income		92,674			89,472			3,202
Other comprehensive loss		(128,735	)		(127,833	)		(902	)


Comprehensive (loss) income		(36,061	)		(38,361	)		2,300


Additional paid-in capital		1,934			1,934			—
Treasury stock issued upon RSU exercise		612			612			—
Disposals of noncontrolling interests		820			—			820
Dividends declared		(86,357	)		(81,766	)		(4,591	)


Stockholders' equity, September 30, 2014	$	615,064		$	610,632		$	4,432

The Company has several stock-based compensation programs. See the Annual Report on Form 10-K filed with the SEC on March 6, 2014—"Item 8. Financial Statements and Supplementary Data—Note 15, Stock-based compensation" for a discussion of these programs.

In April 2014, the Company's Board of Directors approved performance criteria for the 2014 sub-tranche under the 2013 Equity Incentive Plan in respect of 742,100 RSUs with a weighted average per unit grant date fair value of $8.36.

In 2014, the Company's Board of Directors approved the grant of an additional 887,407 RSUs to the Company's employees, at no cost, upon the satisfaction of 2014, 2015 and 2016 performance-based vesting conditions, exercisable on a staggered basis over a period of four years from grant.

The Company recognized $1.1 million and $2.6 million of expense attributable to RSUs in the three and nine months ended September 30, 2014, respectively.

The Company estimates that the total compensation expense related to awards approved under the 2013 Plan not yet recognized as of September 30, 2014 approximates $11.9 million, of which $3.7 million relates to RSUs granted in 2013 and 2014 and $8.2 million relates to RSUs for which performance criteria for 2015 and following years have not been set, which is expected to be expensed over a weighted average period of 2.9 years. The Company expects to settle employee RSU exercises out of treasury stock.

The Company is subject to US, Russian and Kazakh income taxes, based on US legislation, Russian tax legislation, Kazakh legislation and the Double Tax Treaty of 1992 between the United States and Russia ("Treaty"). US taxable income or losses recorded are reported on CTC Media, Inc.'s US income tax return. CTC Media, Inc.'s taxable revenues consist predominantly of dividends paid by its owned-and-operated affiliate stations and networks and interest on deposits. Dividends distributed to CTC Media, Inc. are subject to a Russian withholding tax of 5% under the Treaty. Dividends distributed within Russia are subject to a withholding tax of 9% for Russian companies holding (1) less than 50% in a Russian distributing subsidiary or (2) more than 50% in a Russian distributing subsidiary

for less than 365 days. The statutory income tax rate in Russia and Kazakhstan in 2013 and for the nine months ended September 30, 2014 was 20%.

In the three- and nine-month periods ended September 30, 2013, the Company's effective tax rate was impacted by the recognition in the third quarter of 2013 of tax benefits that the Company determined were available for offset against US taxes based on a comprehensive examination of certain positions taken in its historical US income tax filings. See the Annual Report on Form 10-K filed with the SEC on March 6, 2014—"Item 8. Financial Statements and Supplementary Data—Note 13, Income taxes". Net of this effect, its effective tax rate for the three- and nine-month periods ended September 30, 2013 would have been 30% and 34%, respectively. In the three- and nine-month periods ended September 30, 2014, the Company's effective tax rate was approximately 31%.

The tax years ended December 31, 2011, 2012 and 2013 remain subject to examination by the Russian and US tax authorities. The tax years ended December 31, 2010 through 2013 remain subject to examination by the Kazakh tax authorities.

The Company's Board of Directors and shareholders may pursue a restructuring of the Company's group to comply with the restrictions on non-Russian ownership of mass media entities under the Russian law On Mass Media (see Note 9, Commitments and Contingencies—Amendment to Mass Media law), that may result in the group being required to pay significant US taxes.

Amendment to Mass Media law—In September 2014, the State Duma approved an amendment to the Russian law "On Mass Media", which will reduce the permitted level of foreign ownership in Russian mass media companies, including television broadcasters, from 50% direct ownership to 20% beneficial ownership, direct or indirect. On October 14, 2014, this amendment was signed by the Russian President. The law does not provide for "grandfathering" of existing foreign ownership interests. The law will come into force on January 1, 2016. In the event of non-compliance by the stated deadline, the Russian government would have the authority, among other things, to revoke the mass media registration and broadcasting licenses of the Company's business. If the Company is unable to take steps to restructure its operations in such a way that achieves compliance with this law while retaining its current ownership structure, the Company may be required to an effect a sale of 80 percent or more of its Russian businesses.

Economic environment—Significant uncertainty exists surrounding the current geopolitical situation in Ukraine. The United States, the European Union and other countries have imposed economic sanctions on certain Russian government officials, other individuals and certain Russian companies in connection with recent developments in Ukraine and Crimea. Neither the Company, nor any of its Russian subsidiaries or other operations or assets, are a target of current sanctions and the Company does not appear on the United States and European Union lists of sanctioned parties. However, there is significant uncertainty regarding the extent or timing of any potential further economic or trade sanctions, or the ultimate outcome of the Ukrainian crisis. The current situation in Ukraine has negatively affected the Company's sublicensing sales of certain programming in that country and has also had a broader impact on the macroeconomic environment of the region. These factors in conjunction with global macroeconomic weakness, may adversely affect the Company's business.

During the nine months ended September 30, 2014, Russia has experienced economic instability that has been characterized by a steep decline in the value of shares traded on its stock exchanges, depreciation of its currency and a forecasted decline in the growth of gross domestic product in 2014. Additionally, because Russia produces and exports large amounts of oil, its economy is particularly vulnerable to the price of oil on the world market and recent decreases in international oil prices may continue to adversely affect its economy. As a result of the current global economic instability and any further potential deterioration in the Russian economy, total television advertising spending in Russia may be adversely affected which, in turn, would materially adversely affect the Company's operating results.

Exchange Rate—Although the Company's reporting currency is the US dollar, it generates almost all of its revenues through the sale of advertising, which in Russia is sold primarily in rubles. The ruble is also the functional currency of the Company's principal operating subsidiaries. As a result, the Company's reported revenues and results of operations are impacted by fluctuations in the exchange rate between the US dollar and the Russian ruble. In the three months ended September 30, 2014, the Russian ruble depreciated against the US dollar by 15%, but was on average 9% lower than the average value of the Russian ruble compared to the US dollar during the three months ended September 30, 2013. In the nine months ended September 30, 2014, the Russian ruble depreciated against the US dollar by 17%, and was on average 11% lower than the average value of the Russian ruble compared to the US dollar during the nine months ended September 30, 2013. During the period from October 1, 2014 to October 27, 2014, the value of the Russian ruble depreciated further against the US dollar by approximately 6% to RUR 41.8 to $1.00.

Additionally, given that substantially all of the Company's revenues are generated in Russian rubles, the Company faces exchange rate risk relating to payments that the Company must make in currencies other than the Russian ruble. The Company generally pays for non-Russian produced programming in US dollars. As of September 30, 2014 the Company had US dollar denominated contractual commitments for the acquisition of approximately $25.0 million in programming rights in 2014, $45.7 million in 2015 and $9.1 million in 2016. In addition, on October 27, 2014, the Company's Board declared a dividend of $0.175 per outstanding share of common stock, or approximately $27.3 million in total. The record date is December 1, 2014 and the payment date is on or about December 26, 2014. As of September 30, 2014, US dollar-denominated cash and cash deposits comprised approximately $65 million; in addition, as of September 30, 2014, the Company had an outstanding foreign exchange forward contract to purchase approximately $25 million at an exchange rate of RUR 37.2 to $1 in December 2014, to reduce a portion of its foreign exchange risk related to US-dollar denominated payments. The Company has not entered into any arrangements to reduce the foreign exchange risk with respect to the remaining future US dollar denominated payments.

If the exchange rate between the Russian ruble and the US dollar remains at its current level or if the Russian ruble depreciates further, the Company's revenues and operating results for 2014, as reported in US dollars, will be materially adversely affected.

Transition to Digital Broadcasting—The Company believes that the introduction of digitalization will not adversely affect its ability to broadcast in the medium term, as its channels will continue to broadcast in the analog format under existing analog licenses until the transition to the digital format is

completed. However, there is currently great uncertainty regarding the effect of the implementation of digital broadcasting on the Company's business models, as it is difficult to predict accurately how the digitalization of broadcasting may affect the market. While digital broadcasting would increase CTC's and Domashny's overall technical penetration, the necessary investments for digital migration may not be fully monetized. In addition, under Roskomnadzor's terms of participation in the second multiplex, the Company expects to encounter certain risks and uncertainties in the execution of the CTC and Domashny business models, which could significantly impact the operations and fair value of its reporting units and related assets. Also, uncertainty exists about Peretz's technical penetration and its impact on advertising revenues. Subject to the availability of further information from the government and market participants, and the Company's ability to make further assessments of the government's plans, impairments may be required in the foreseeable future.

On an ongoing basis, the Company meets key participants of the media industry and governmental representatives for discussion and analysis of the transition to digital broadcasting, as well as the development of current business and industry initiatives.

The Company has assets recorded on its consolidated balance sheet, such as broadcasting licenses and goodwill, which represent a significant portion of the Company's total assets. If the Company determines that its estimate of the current value of a reporting unit is below the recorded value of that unit on its balance sheet, the Company may record an impairment loss for goodwill. As of September 30, 2014, the carrying values of goodwill related to CTC, Domashny and Peretz totaled $42.8 million, $21.6 million and $47.9 million, respectively. In addition, as of September 30, 2014, the Company had significant balances of amortizable broadcasting licenses totaling $41.4 million, including CTC licenses—$6.7 million; Domashny licenses—$8.7 million, and Peretz licenses—$21.3 million.

During the nine months ended September 30, 2014, the current geopolitical situation in Ukraine created economic instability in Russia. If Russia experiences significant economic instability or uncertainty, including continued or expanded international economic sanctions, advertisers may choose to reduce their advertising spending in Russia.

The fair value of the Peretz reporting unit is highly sensitive to changes in the television advertising market assumptions. As a result of the impairment review performed as of September 30, 2014, due to the revision of assumptions in the TV advertising market for 2015 and in the medium-term, the excess of fair values over the carrying value of Peretz reporting unit decreased from 48% to 7%, when compared with the fair values estimated during the annual 2013 impairment tests. Depending on further developments of the Ukrainian crisis and related geopolitical situation in the region and its impact on macroeconomic environment of Russia and, specifically, on the Russian TV advertising market in 2015 and medium term, the Company may need to further revise its projected cash flows, which could adversely impact the fair value of its reporting units and related assets, and it would then record impairment charges. See also "Note 2, Basis of Presentation and Summary of Significant Accounting Policies—Goodwill and Long-Lived Intangible Assets Impairment Tests" for sensitivity discussion analysis.

In addition, the Company's management also considers the developments in digital broadcasting and their potential impacts on revenues and costs. The fair value of the Peretz reporting unit is particularly sensitive to changes in revenues and costs that may result depending on its distribution model. Currently, the terms for participation in the third digital multiplex have not been specified. In addition, current Russian legislation does not provide 'must carry' obligations for cable and satellite operators, and accordingly the Company may be unable to secure or maintain carriage of its signal over cable in certain regions, or at transmission rates that are consistent with its historical experience. Depending on further information about the terms of the transition to digital broadcasting, terms of interaction with cable and satellite providers, as well as other future developments, the Company may need to further revise its projected cash flows, which could adversely impact the fair value of its reporting units and related assets, and the Company would then record impairment charges.

As part of its risk management strategy, the Company uses derivative financial instruments, primarily foreign exchange forward contracts, to mitigate its exposure to currency exchange risk related to US dollar denominated payments. The Company's objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. It is the Company's policy to enter into foreign currency derivative transactions only to the extent considered necessary to meet its objectives as stated above.

The Company entered into certain foreign exchange forward contracts designated as fair value hedges to protect the value of its existing foreign currency liabilities and firm commitments. For derivative instruments with the notional amount of $56.6 million that were designated and qualify as fair value hedges, the Company recognized foreign currency gains on the derivative instruments of $2.2 million, as well as offsetting foreign currency losses on the hedged item in its condensed consolidated statement of income for the nine months ended September 30, 2014. For derivative instruments with the notional amount of $192.1 million that were designated and qualify as non-designated hedges related to US dollar denominated payments the Company recognized foreign currency gains of $4.1 million on derivative instruments in its condensed consolidated statement of income for the nine months ended September 30, 2014.

The table below summarizes information with respect to the Company's commitments as of September 30, 2014:

	Total		Through 2014		2015		2016		2017		2018		2019

	(in thousands)
Acquisition of programming rights	$	179,555	$	82,879	$	84,077	$	12,599	$	—	$	—	$	—
Transmission and satellite fees		99,715		4,967		20,761		21,414		21,739		20,999		9,835
Leasehold obligations		34,670		1,626		6,773		6,965		7,225		5,908		6,173
Network affiliation agreements		14,066		678		2,868		3,025		3,183		3,344		968
Payments for intellectual rights		11,322		464		1,964		2,072		2,180		2,284		2,358
Other contractual obligations		22,582		1,113		4,279		4,311		4,093		4,291		4,495


Total	$	361,910	$	91,727	$	120,722	$	50,386	$	38,420	$	36,826	$	23,829

In addition, in connection with the planned digitalization in Russia and Kazakhstan, the Company will incur additional costs. In March 2013, the Company entered into 10-year transmission agreements with the Russian Television and Radio Network ("RTRS"). Under the terms of these agreements, RTRS will provide to CTC and Domashny all services required for the channels to broadcast their signals in digital format throughout Russia to approximately 141.6 million viewers. The agreements terminate on March 31, 2023. In July 2014, the Company amended the agreements to specify services fees for 2014 and cash payments for period from 2014 to 2018. The Company's digital transmission expense for 2014 related to broadcasting in the cities with populations more than 50,000 ("50+ coverage") will be approximately $5 million; the expense for 2015 and beyond will be calculated on an annual basis according to rates that RTRS will set by October 1st of the prior year. In addition, during the period 2015-2018, RTRS will construct the digital broadcasting infrastructure in smaller cities with populations less than 50,000 ("50- coverage"). It is expected that this infrastructure will be put into operation in 2019. According to the amended terms of agreements, in addition to the transmission services in the 50+ coverage cities described above, the Company expects to advance payments towards the construction of the digital infrastructure in the 50- coverage regions for CTC and Domashny channels. In aggregate we expect to advance approximately 390 million rubles in 2014, 644 million rubles in 2015, 271 million rubles in 2016, 68 million rubles in 2017 and 51 million rubles in 2018 resulting in total advances of approximately 1,424 million rubles or $36.2 million by the end of 2018 (at an exchange rate of RUR 39.4 to $1.00 as of September 30, 2014). Under the amended terms, these advances will be offset against service payments otherwise required for digital transmission services subsequent to 2018. In the nine months ended September 30, 2014, advance payments towards the construction of the digital infrastructure in the 50- coverage regions was approximately $3.3 million for CTC and Domashny channels in aggregate, which are presented as other non-current assets on the Company's balance sheets.

In addition, the Company expects to continue incurring analog transmission costs during the analog-to-digital transition period. In 2013, the Company incurred approximately $24 million of such expenses, excluding payments to RTRS for transmission of digital signal, for all of its channels in aggregate.

In the ordinary course of business, the Company may be party to various legal and tax proceedings, including tax audits, and subject to claims, certain of which relate to the developing markets and evolving fiscal and regulatory environments in which the Company operates. In the opinion of management, the Company's liability, if any, in all pending litigation, other legal proceedings or other matters, will not have a material effect upon the financial condition, results of operations or liquidity of the Company.

The Company's three Russia-based television channels (CTC, Domashny and Peretz) and Channel 31 in Kazakhstan represent the Company's reportable segments. Each channel includes operating results of its network, which is responsible for broadcasting operations, including sales of its network's advertising, licensing and commissioning of programming, producing its programming schedule and managing its relationships with its independent affiliates, and the respective owned-and-operated stations that distribute the network's signal.

The Company's other less significant operating segments are included along with headquarters' operations in the "All Other" category for financial reporting purposes. The Company evaluates performance based on the operating results of each segment, among other performance measures.

	Three months ended September 30, 2013

	Operating revenue from external customers		Intersegment revenue			Operating income/ (loss)			Identifiable assets			Depreciation and amortization			Programming expenses
CTC Channel	$	119,329	$	315		$	42,536		$	588,905		$	(2,211	)	$	(47,525	)
Domashny Channel		26,099		29			3,636			108,173			(1,956	)		(12,289	)
Peretz Channel		17,115		5			1,166			149,475			(2,863	)		(6,788	)
Channel 31		6,409		—			1,167			25,014			(721	)		(3,118	)
All Other		2,132		—			(4,318	)		96,921			(399	)		(18	)
Business segment results	$	171,084	$	349		$	44,187		$	968,488		$	(8,150	)	$	(69,738	)


Eliminations		—		(349	)		—			(43,425	)		—			—
Consolidated results	$	171,084	$	—		$	44,187		$	925,063		$	(8,150	)	$	(69,738	)

	Three months ended September 30, 2014

	Operating revenue from external customers		Intersegment revenue			Operating income/ (loss)			Identifiable assets			Depreciation and amortization			Programming expenses
CTC Channel	$	109,140	$	333		$	38,930		$	538,891		$	(1,648	)	$	(43,247	)
Domashny Channel		26,100		27			7,978			88,687			(1,269	)		(10,326	)
Peretz Channel		15,108		2			125			117,436			(2,108	)		(7,394	)
Channel 31		5,226		21			1,185			19,870			(620	)		(2,213	)
All Other		2,993		21			(3,958	)		93,181			(724	)		(170	)
Business segment results	$	158,567	$	404		$	44,260		$	858,065		$	(6,369	)	$	(63,350	)


Eliminations		—		(404	)		—			(29,901	)		—			—
Consolidated results	$	158,567	$	—		$	44,260		$	828,164		$	(6,369	)	$	(63,350	)

	Nine months ended September 30, 2013

	Operating revenue from external customers		Intersegment revenue			Operating income/ (loss)			Identifiable assets			Depreciation and amortization			Programming expenses
CTC Channel	$	403,794	$	883		$	130,486		$	588,905		$	(6,832	)	$	(178,906	)
Domashny Channel		85,559		161			13,373			108,173			(5,870	)		(40,436	)
Peretz Channel		59,018		9			2,856			149,475			(8,898	)		(23,981	)
Channel 31		17,355		—			2,762			25,014			(2,198	)		(8,543	)
All Other		6,660		161			(13,711	)		96,921			(1,175	)		(502	)
Business segment results	$	572,386	$	1,214		$	135,766		$	968,488		$	(24,973	)	$	(252,368	)


Eliminations		—		(1,214	)		—			(43,425	)		—			—
Consolidated results	$	572,386	$	—		$	135,766		$	925,063		$	(24,973	)	$	(252,368	)

	Nine months ended September 30, 2014

	Operating revenue from external customers		Intersegment revenue			Operating income/ (loss)			Identifiable assets			Depreciation and amortization			Programming expenses
CTC Channel	$	374,257	$	991		$	117,177		$	538,891		$	(5,730	)	$	(163,415	)
Domashny Channel		82,051		81			19,823			88,687			(4,569	)		(34,405	)
Peretz Channel		50,966		6			2,479			117,436			(7,120	)		(22,670	)
Channel 31		13,761		67			1,673			19,870			(1,898	)		(6,713	)
All Other		8,091		66			(10,133	)		93,181			(1,704	)		(378	)
Business segment results	$	529,126	$	1,211		$	131,019		$	858,065		$	(21,021	)	$	(227,581	)


Eliminations		—		(1,211	)		—			(29,901	)		—			—
Consolidated results	$	529,126	$	—		$	131,019		$	828,164		$	(21,021	)	$	(227,581	)

On October 27, 2014, the Company's Board declared a dividend of $0.175 per outstanding share of common stock, or approximately $27.3 million in total, which will be paid on or about December 26, 2014 to shareholders of record as of December 1, 2014; provided however, that any dividend payable to Telcrest will be blocked pursuant to OFAC regulations related to US sanctions described in Note 4, while either Bank Rossiya or LLC IC Abros remain an SDN.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis relates to our financial condition and results of operations for the three and nine months ended September 30, 2013 and 2014. This discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 6, 2014 (the "2013 Annual Report") and our Unaudited Condensed Consolidated Financial Statements and the notes thereto appearing elsewhere in this quarterly report.

	Three months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	171,084		$	158,567			*100*	%		*100*	%		(7	)%		3	%


Including:
Advertising revenues		166,891			156,022			98	%		98	%		(7	)%		4	%


Total operating expenses	$	(126,897	)	$	(114,307	)		74	%		72	%		*(10*	)%		0	%


Including:
Direct operating expenses		(10,682	)		(10,131	)		6	%		6	%		(5	)%		5	%
Selling, general and administrative expenses		(37,808	)		(33,816	)		22	%		21	%		(11	)%		(1	)%
Programming expenses		(69,738	)		(63,350	)		41	%		40	%		(9	)%		0	%
Stock based compensation expense		(519	)		(641	)		0	%		0	%		24	%		36	%
Depreciation and amortization		(8,150	)		(6,369	)		5	%		4	%		(22	)%		(14	)%


Operating income	$	44,187		$	44,260			26	%		28	%		0	%		13	%




Foreign currency gains (loss)		(49	)		1,159									nm			nm
Interest income, net		2,055			2,225									8	%		19	%
Other non-operating gains, net		114			65									(43	)%		(26	)%


Income before income tax	$	46,307		$	47,709			27	%		30	%		3	%		16	%


Income tax (expense) benefit		1,785			(14,724	)								nm			nm


Consolidated net income	$	48,092		$	32,985			28	%		21	%		*(31*	)%		*(22*	)%




Less: Income attributable to noncontrolling interest	$	(1,437	)	$	(1,390	)								(3	)%		14	%


Net income attributable to CTC Media, Inc. stockholders	$	46,655		$	31,595			27	%		20	%		*(32*	)%		*(24*	)%

	Nine months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	572,386		$	529,126			*100*	%		*100*	%		(8	)%		4	%


Including:
Advertising revenues		556,477			523,080			97	%		99	%		(6	)%		6	%


Total operating expenses	$	(436,620	)	$	(398,107	)		76	%		75	%		(9	)%		2	%


Including:
Direct operating expenses		(33,582	)		(34,743	)		6	%		7	%		3	%		16	%
Selling, general and administrative expenses		(122,540	)		(114,376	)		21	%		22	%		(7	)%		5	%
Programming expenses		(252,368	)		(227,581	)		44	%		43	%		(10	)%		1	%
Stock based compensation expense		(3,157	)		(386	)		1	%		0	%		(88	)%		(86	)%
Depreciation and amortization		(24,973	)		(21,021	)		4	%		4	%		(16	)%		(6	)%


Operating income	$	135,766		$	131,019			24	%		25	%		(3	)%		10	%




Foreign currency gains (loss)		1,187			(3,546	)								nm			nm
Interest income, net		7,626			8,303									9	%		22	%
Other non-operating gains (loss), net		466			(1,196	)								nm			nm


Income before income tax	$	145,045		$	134,580			25	%		25	%		(7	)%		6	%


Income tax expense		(33,696	)		(41,906	)								24	%		43	%


Consolidated net income	$	111,349		$	92,674			19	%		18	%		*(17*	)%		(5	)%




Less: Income attributable to noncontrolling interest	$	(4,513	)	$	(3,202	)								(29	)%		(20	)%


Net income attributable to CTC Media, Inc. stockholders	$	106,836		$	89,472			19	%		17	%		*(16*	)%		(5	)%

The functional currency of our Russian-domiciled segments is the Russian ruble, the functional currency of our Kazakhstan-domiciled segment is the Kazakh tenge, while our reporting currency is the US dollar. As a result, we translate our results of operations into US dollars using the current rate method. As such, assets and liabilities are translated at the rates of exchange prevailing at the balance sheet dates and revenue and expenses are translated at monthly average rates of exchange. In the three and nine months ended September 30, 2014, our results of operations were significantly impacted by the value of the Russian ruble and, to a lesser extent, the value of the Kazakh tenge, as compared to the US dollar. In the three months ended September 30, 2014, the Russian ruble depreciated against the US dollar by 15%, and was on average 9% lower than the average value of the Russian ruble compared to the US dollar during the three months ended September 30, 2013. In the nine months ended September 30, 2014, the Russian ruble depreciated against the US dollar by 17%, and was on average 11% lower than the average value of the Russian ruble compared to the US dollar during the nine months ended September 30, 2013. In addition, in February 2014, the National Bank of Kazakhstan devalued the Kazakh tenge by 19% against the US dollar. As a result, the Kazakh tenge depreciated by 16% in the nine months ended September 30, 2014 and was on average 15% lower than the average value of the Kazakh tenge compared to the US dollar during the nine months ended September 30, 2013. Should the Russian ruble and Kazakh tenge significantly depreciate against the US dollar in future periods, our revenues and operating results for future periods, as reported in US dollars, will be adversely affected. See "Item 1A. Risk Factors—Decreases in the value of the Russian

ruble as compared to the US dollar that have resulted from the current economic and political instability in Russia have negatively impacted our reported revenues and operating results. If the exchange rate between the ruble and the US dollar remains at its current level or if the ruble depreciates further, our revenues and our operating results, both as reported in US dollars, may continue to negatively affect our reported results of operations in the future" and "Item 3. Quantitative and Qualitative Disclosures about Market Risk—Foreign currency exchange risk".

Our total operating revenues decreased by 7% in US dollar terms and increased by 3% in ruble terms when comparing the three months ended September 30, 2013 and 2014 and decreased by 8% in US dollar terms and increased by 4% in ruble terms when comparing the nine months ended September 30, 2013 and 2014. Our advertising sales accounted for 98% and 99% of total operating revenues during the three- and nine-month periods under review, respectively.

Our advertising sales decreased by 7% in US dollar terms and increased by 4% in ruble terms when comparing the three-month periods under review and decreased by 6% in US dollar terms and increased by 6% in ruble terms when comparing the nine-month periods under review, due to estimated growth in the Russian television advertising market (which includes both national and regional markets) of 4% in ruble terms in the two periods under review, reflecting higher advertiser demand which was especially reflected in higher sales of our CTC and Domashny inventory and greater sponsorship revenues, partially offset by lower year-on-year audience share of CTC channel. The increase in the Russian television advertising market in the first nine months of 2014 may not be indicative of the market growth that can be expected for the full year 2014.

We are cautious about the potential negative impact that economic conditions, particularly the global economic slowdown, and, potentially, international economic sanctions, could have on television advertising spending in future periods. If overall spending by the largest multinational advertisers in the Russian television advertising market falls substantially, our advertising revenues may be significantly reduced, materially adversely affecting our results of operations. See "Item 1A. Risk Factors—We derive almost all of our revenues from the sale of advertising, which is sensitive to broader economic conditions. Our revenues may substantially decrease if the economic environment deteriorates in Russia or other CIS countries in which we operate."

The table below provides certain key statistics about the CTC, Domashny, Peretz and Channel 31 television channels:

Our Russian channels' target audience shares were affected by overall audience fragmentation and increased competition. All larger national free-to-air TV channels in Russia were negatively impacted by increased competition from smaller non-free-to-air and niche TV channel viewership in the "All 4+" category, which increased from 15.5% in 2012 to 17.2% in 2013 and 18.3% in the nine months ended September 30, 2014.

CTC channel's average target audience share among 10 to 45 year-old viewers decreased year-on-year in the third quarter of 2014 from 11.6% to 10.3% and from 11.4% to 10.4% when comparing the nine-month periods under review, primarily reflecting the increased competition from other channels, including channels that broadcast political news on the Ukraine crisis, the effect of audience fragmentation and the relative underperformance of certain programming in the third quarter of 2014. In addition, when comparing the nine-month periods under review, the decrease of CTC channel's average target audience share reflected the competition from the channels licensed to broadcast the 2014 Olympic Games in Sochi in the first quarter of 2014.

Domashny channel's target audience share among 25-59 year-old female viewers slightly decreased year-on-year in the third quarter of 2014 from 3.9% to 3.7% and from 3.5% to 3.4% when comparing the nine-month periods under review, reflecting the effect of audience fragmentation and increased competition from the channels that broadcast political news on the Ukraine crisis, partially offset by successful changes in the programming schedule in daytime and primetime slots. In October 2014, Domashny channel launched a restyle of its logo and updated its visual format with a new motto: "Forever for women". Domashny channel is continuing to share positive and bright emotions with its viewers and to grow its core female audience segment.

Peretz channel's target audience share among 25 to 49 year-old viewers, with its reality and action positioning and male skewed audience, decreased year-on-year in the third quarter of 2014 from 2.3% to 2.1% and from 2.4% to 2.1% when comparing the nine-month periods under review, reflecting increased competition from the channels that broadcast political news on the situation in Ukraine, as well as competition from the channels licensed to broadcast the 2014 Olympics Games in Sochi in the first quarter of 2014, audience fragmentation and the relative underperformance of certain programming. Peretz channel is continuing to refresh its positioning and programming grid to be a more cutting edge and dynamic channel, with a focus on edgy action content.

Channel 31's target audience share among 6 to 54 year-old viewers increased year-on-year in the third quarter of 2014 from 14.1% to 14.9% and from 13.3% to 13.4% when comparing the nine-month periods under review, reflecting successful changes in the programming schedule of certain local-language programming and better performance of certain locally-produced programming and foreign series.

See "Item 1A. Risk Factors—A reduction in our audience shares and ratings would likely result in a reduction in our advertising revenues".

Our total operating expenses decreased by 10% year-on-year in US dollar terms and remained approximately flat in ruble terms when comparing the three-month periods under review, and decreased by 9% year-on-year in US dollar terms and increased by 2% in ruble terms when comparing the nine-month periods under review.

Direct operating expenses decreased by 5% year-on-year in US dollar and increased by 5% in ruble terms when comparing the three-month periods under review, and increased by 3% in US dollar and 16% in ruble terms when comparing the nine-month periods under review, primarily reflecting increases of 3 and 5 percentage point ("pp"), respectively, in ruble terms in salaries and benefits costs as the result of annual salary raises and increased headcount for each period under review. In addition, when comparing the nine-month periods under review, an increase in direct operating costs of 9pp in ruble terms related to increased digital transmission costs for CTC and Domashny channels in connection with the rollout plan for the second multiplex which began in March 2013 and annual raises.

Agreement with RTRS—In July 2014, we amended our agreements with the Russian Television and Radio Network (RTRS) to specify digital broadcasting services fees for 2014 and cash payments for period from 2014 to 2018, for CTC and Domashny channels. Our digital transmission expense for 2014 related to broadcasting in cities with populations more than 50,000 ("50+ coverage") will be approximately $5 million; the expense for 2015 and beyond will be calculated on an annual basis according to rates that RTRS will set by October 1st of the prior year. In addition, we expect to make advance payments towards the construction of the digital infrastructure in smaller cities with populations less than 50,000 ("50- coverage"). In aggregate we expect to advance approximately 390 million rubles in 2014, 644 million rubles in 2015, 271 million rubles in 2016, 68 million rubles in 2017 and 51 million rubles in 2018 resulting in total advances of approximately 1,424 million rubles or $36.2 million by the end of 2018 (at an exchange rate of RUR 39.4 to $1.00 as of September 30, 2014). Under the amended terms, these advances will be offset against service payments otherwise required for digital transmission services subsequent to 2018. In addition, we expect to continue incurring analog transmission costs during the analog-to-digital transition period. In 2013, we incurred approximately $24 million of such expenses, excluding payments to RTRS for transmission of digital signal, for all of our channels in aggregate. See also "—Key Factors Affecting Our Results of Operations—Transition to digital broadcasting" and "Item 1A. Risk Factors—We may face additional expenditures in connection with the planned transition from analog to digital broadcasting in Russia and Kazakhstan, and the necessary investments for digital migration may not be fully monetized".

In the nine months ended September 30, 2014, digital transmission costs for CTC and Domashny channels pursuant to the rollout plan for the second multiplex amounted to $2.1 million. In addition, we made advance payments towards the construction of the digital infrastructure in the 50- coverage regions in the amount of approximately $3.3 million.

Selling, general and administrative expenses decreased by 11% year-on-year in US dollar terms and 1% in ruble terms when comparing the three-month periods under review, reflecting a joint effect of increased compensation to Video International due to increased revenues and a decrease in advertising and promotion expenses as the result of the timing of advertising campaigns. When comparing the nine-month periods under review, selling, general and administrative expenses decreased by 7% year-on-year in US dollar terms and increased by 5% in ruble terms, primarily due to a 5pp increase in ruble terms in compensation to Video International, reflecting increased revenues and the timing of certain services provided in the first half of 2014.

Stock-based compensation expenses were approximately flat at $0.5-0.6 million when comparing the three-month periods under review. When comparing the nine-month periods under review, stock-based compensation expenses decreased by $2.8 million, primarily as the result of remeasuring the equity-based cash incentive awards granted to employees under our 2009 Stock Incentive Plan at their fair value, as the result of our decreased share price in 2014.

We expect to recognize stock-based compensation expense related to our 2013 Equity Incentive Plan and other outstanding equity awards of approximately $1.1 million for the remainder of 2014, $6.1 million for 2015, $4.1 million for 2016 and $0.6 million for 2017.

Programming expenses decreased by 9% year-on-year in US dollar terms and remained flat in ruble terms when comparing the three-month periods under review, and decreased by 10% year-on-year in US dollar terms and increased by 1% in ruble terms when comparing the nine-month periods under review. These changes were due to the joint effect of CTC channel airing more expensive foreign content, partially offset by less expensive Russian content to support the channel's audience share, increases in the cost and volume of high-rating Russian series at Peretz channel in response to increased competition from other channels and the timing of investing in Domashny's schedule which is planned for the fourth quarter of 2014 following the launch of its restyling in October 2014. For the full year 2014, we expect our programming expenses will grow more slowly than our revenues.

Due to the reasons discussed above our operating income remained flat in US dollar terms and increased by 13% in ruble terms from $44.2 million to $44.3 million when comparing the three months ended September 30, 2013 and 2014, and decreased by 3% in US dollar terms and increased by 10% in ruble terms from $135.8 million to $131.0 million when comparing the nine months ended September 30, 2013 and 2014.

Foreign currency gains of $1.2 million for the three months ended September 30, 2014 primarily represent gains from our foreign exchange forward contracts, partially offset by the impact of ruble depreciation on our dollar-denominated liabilities. Foreign currency losses of $3.5 million for the nine months ended September 30, 2014 primarily represent the impact of ruble depreciation on our dollar-denominated liabilities and losses from our foreign exchange forward contracts in the second quarter of 2014, partially offset by gains from our foreign exchange forward contracts in the third quarter of 2014.

Net interest income increased by 8% year-on-year in US dollar terms and 19% in ruble terms for the three-month periods under review and increased by 9% year-on-year in US dollar terms and 22% in ruble terms for the nine-month periods under review, primarily reflecting the interest earned on our cash balances and short-term investments due to an increase in average deposit balances in the periods under review.

Income tax expense. In the three- and nine-month periods ended September 30, 2013, our effective tax rate was (4)% and 23%, respectively. These rates were impacted by the recognition in the third quarter of 2013 of tax benefits that we determined were available for offset against US taxes based on a comprehensive examination of certain positions taken in our historical US income tax filings. We applied this approach for the recognition of tax benefits beginning in the third quarter of 2013. See the Annual Report on Form 10-K filed with the SEC on March 6, 2014—"Item 8. Financial Statements and Supplementary Data—Note 13, Income taxes". Net of this effect, our effective tax rate for the three- and nine-month periods ended September 30, 2013 would have been 30% and 34%, respectively. In the three- and nine-month periods ended September 30, 2014, our effective tax rate was approximately 31%, reflecting the change in our approach to the recognition of foreign tax benefits.

Amendment to Mass Media law—On October 14, 2014, President Putin signed an amendment to the Russian law "On Mass Media", which will reduce the permitted level of foreign ownership in Russian mass media companies, including television broadcasters, from 50% direct ownership to 20% beneficial ownership, direct or indirect. The law does not provide for "grandfathering" of existing foreign ownership interests. The law will come into force on January 1, 2016, by which time each Russian mass media entity, including television broadcasters, must comply with the requirement that non-Russian entities and individuals in the aggregate beneficially own no greater than 20% of the relevant mass media entity. Russian entities and individuals that beneficially own interests in Russian mass media businesses greater than 20% through off-shore holding structures will have an additional year in which to restructure such foreign holding structures. In the event of non-compliance by the stated deadline, the Russian government would have the authority, among other things, to revoke the mass media registration and broadcasting licenses of our business.

CTC Media is a Delaware corporation that directly and indirectly owns 100% of the shares of a series of Russian legal entities that operate the CTC business in Russia. CTC Media's stockholders include MTG Russia AB, a Swedish company that is 100% indirectly owned by Modern Times Group MTG AB, a Swedish listed company, which holds approximately 39% of CTCM's common stock; Telcrest Investments Limited, a Cypriot limited company that we understand is indirectly beneficially owned by Russian entities and individuals, which holds approximately 25% of CTCM's common stock; and a number of public stockholders, which we understand include numerous US and European investors, which together holder the remaining approximately 36% of CTCM's common stock. If we are

unable to take steps to restructure our operations in such a way that achieves compliance with this law while retaining our current ownership structure, we may be required to an effect a sale of 80 or more of our Russian businesses. See also "Item 1A. Risk Factors—Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders".

Economic environment—Our results of operations are affected primarily by the overall demand for and consequent pricing of television advertising, the limited supply of television advertising time, our ability to deliver a large share of viewers with desirable demographics, and the availability and cost of quality programming. The global credit crisis and the related turmoil in the global financial system in 2008 had a material negative impact on the Russian economy, with total spending on television advertising in Russia declining significantly, falling by 18% in 2009 when comparing to 2008. Although in the past years the Russian economy demonstrated recovery and overall Russian television advertising spending was growing at a CAGR of 12% in the period from 2009 to 2013, during the nine months ended September 30, 2014, Russia has experienced economic instability that has been characterized by a steep decline in the value of shares traded on its stock exchanges, depreciation of its currency and a forecasted decline in the growth of gross domestic product in 2014. Additionally, because Russia produces and exports large amounts of oil, its economy is particularly vulnerable to the price of oil on the world market and recent decreases in international oil prices may continue to adversely affect its economy. As a result of the current global economic instability and any further potential deterioration in the Russian economy, total television advertising spending in Russia may be adversely affected which, in turn, would materially adversely affect our operating results. See also "Item 1A. Risk Factors—Geopolitical and macroeconomic events have adversely affected and created uncertainty and instability in the Russian economy" and "—We derive almost all of our revenues from the sale of advertising, which is sensitive to broader economic conditions. Our revenues may substantially decrease if the economic environment deteriorates in Russia or other CIS countries in which we operate".

Also, significant uncertainty exists surrounding the current geopolitical situation in Ukraine. Both the United States and the European Union, as well as other countries, have imposed economic sanctions on certain Russian government officials, other individuals and certain Russian companies in connection with recent developments in Ukraine and Crimea. Neither we, nor any of our Russian subsidiaries or other operations or assets, are a target of current sanctions and we do not appear on the United States and European Union lists of sanctioned parties. However, there is significant uncertainty regarding the extent or timing of any potential further economic or trade sanctions, or the ultimate outcome of the Ukrainian crisis. The current situation in Ukraine has negatively affected our sublicensing sales of certain programming in that country and has also had a broader impact on the macroeconomic environment of the region. These factors in conjunction with global macroeconomic weakness, may adversely affect our business. See "Item 1A. Risk Factors—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and will require us to employ significant time and resources to ongoing compliance efforts".

The supply of television advertising time is limited by Russian legislation (as discussed below). As a result of this limited supply of advertising time, we are only able to increase our revenues by delivering larger audience shares and by increasing the price of advertising. Current Russian law limits the amount of time that a broadcaster may devote to advertising to no more than 15% of any broadcasting hour. In Kazakhstan, the maximum airtime available for advertising is limited to no more than 20% of total broadcasting time each day. The continued success of our advertising sales depends largely on our ability to attract a large share of the key target audiences, especially during primetime. Our ability to attract our key target audiences in turn depends in large part on our ability to broadcast quality programming. We face strong competition from other television broadcasters for programming

content, and we must continue to strive to air programming that addresses evolving audience tastes and trends in television broadcasting.

Exchange Rate—In addition to the factors discussed above affecting our ability to generate advertising revenues, our reported results of operations are also materially impacted by currency fluctuations. Our reporting currency is the US dollar. Substantially all of our revenues, however, are generated in rubles. Through our Channel 31 operations, we also generate revenues in the Kazakh tenge. In the first nine months of 2014, the Russian ruble depreciated against the US dollar by 17%, and was on average 11% lower than the average value of the Russian ruble compared to the US dollar during the nine months ended September 30, 2013. In addition, in February 2014, the National Bank of Kazakhstan devalued the Kazakh tenge by 19% against the US dollar and, as a result, the Kazakh tenge depreciated by 16% during the nine months ended September 30, 2014. During the period from October 1, 2014 to October 27, 2014, the value of the Russian ruble depreciated further against the US dollar by approximately 6% to RUR 41.8 to $1.00. Additionally, we face exchange rate risk relating to payments that we must make in currencies other than the ruble. We generally pay for non-Russian produced programming in US dollars. As of September 30, 2014 we had US dollar denominated contractual commitments for the acquisition of approximately $25.0 million in programming rights in 2014, $45.7 million in 2015 and $9.1 million in 2016. In addition, on October 27, 2014, our Board declared a dividend of $0.175 per outstanding share of common stock, or approximately $27.3 million in total. The record date is December 1, 2014 and the payment date is on or about December 26, 2014. As of September 30, 2014, our US dollar-denominated cash and cash deposits comprised approximately $65 million; in addition, as of September 30, 2014, we have an outstanding foreign exchange forward contract to purchase approximately $25 million at an exchange rate of RUR 37.2 to $1 in December 2014, to reduce a portion of our foreign exchange risk related to US-dollar denominated payments. We have not entered into any arrangements to reduce the foreign exchange risk with respect to the remaining future US dollar denominated payments. If the exchange rate between the ruble and the US dollar were to further depreciate, our revenues and operating results for 2014, and perhaps future periods, as reported in US dollars, will be materially adversely affected. The current situation in Ukraine, and potentially the related international economic sanctions, has the potential to further negatively impact the value of the Russian ruble.

Television Advertising Sales—We generate substantially all of our revenues from the sale of television advertising on both a national and regional basis. Our own advertising sales house, EvereST-S, serves as the exclusive advertising sales agent for substantially all advertising broadcast on all of our channels in Russia, and the advertising is placed with advertisers and their agencies under direct sales arrangements with them. The sales house is primarily responsible for all national and regional advertising sales, with the exception of advertising sales to local clients of a number of our owned- and-operated regional stations, which are made through Video International, an external sales house. Our cooperation model with Video International also provides for the licensing of specialized advertising software by Video International to our internal sales house, as well as the provision by Video International of related software maintenance, analytical support and consulting services.

In July 2014, the Russian parliament adopted an amendment to the advertising law that came into force on July 22, 2014. This amendment eliminated the prior restriction that prohibited an advertising sales house having a greater than 35% share of the TV advertising market. In 2011, when this restriction came into force, we formed our own sales house, EvereST-S, and terminated our sales agency agreement with Video International, which had historically served as our sales house and which then had a share of the Russian TV advertising market greater than 35%. On October 3, 2014, the four largest television groups in Russia, Gazprom Media, VGTRK, Channel One and National Media Group, together with the management of Video International, announced the formation of a new advertising sales house to operate under the Vi brand. We are unable to predict how the combination of the major sales houses will affect the broader advertising market in Russia or impact our ability to

obtain necessary support for our internal sales house. See also "Item 1A. Risk Factors—The pending combination of the major advertising sales houses in Russia may adversely affect our competitive position and our results of operations".

The level of advertising revenues that we receive is directly tied to our audience shares and ratings. Audience share represents the audience attracted by a channel as a proportion of the total audience watching television. Ratings represent the number of people watching a channel (expressed as a proportion of the total population measured). Because advertisers often seek to reach particular demographic groups, including particular ages and genders, they will often base their advertising placement decisions on ratings among such groups, rather than among the overall population. We place CTC's advertising on the basis of our ratings in CTC's target audience, the 10-45 year-old demographic; Domashny's advertising on the basis of our ratings in Domashny's target audience, 25-59 year-old female viewers; and Peretz's advertising on the basis of our ratings in Peretz's target audience, 25-49 year-old viewers. While we undertake all necessary steps to maximize the audience numbers and desirable demographics that we deliver to advertisers, there is currently strong competition among the Russian channels for audience and ratings. See "Item 1A. Risk Factors—A reduction in our audience shares and ratings would likely result in a reduction in our advertising revenues".

Generally, our ability to grow our revenues depends primarily on increases in the price of our advertising, demand for advertising and our ability to increase our advertising inventory by increasing our audience shares, as well as overall television viewership. Due to the current economic instability, and potentially international economic sanctions, we believe that increases, if any, in the price of our advertising in the near term will be moderate. In addition, because of the current economic instability and international economic sanctions, sellout rates may decrease, which in turn would negatively impact our revenues. See "—Economic environment" above. Our ability to increase our advertising inventory at the national level depends upon our success in increasing our audience share, which in turn increases the number of gross ratings points (GRPs) we have available to sell. See also "Item 1A. Risk Factors—A reduction in our audience shares and ratings would likely result in a reduction in our advertising revenues".

Television advertising sales vary over the course of the year. Overall television viewership is lower during the summer months and highest in the first and fourth quarters. Seasonal fluctuations in consumer patterns also affect television advertising expenditures. In 2013, approximately 31% of our total advertising revenues were generated in the fourth quarter.

Transition to digital broadcasting—The Russian government has launched a federal program to introduce digital broadcasting throughout Russia. The government's plan called for digital broadcasting to be introduced in stages, with several packages of digital signals, or "multiplexes", to be launched over time. The government then determined channels (principally state-controlled channels) that would be included in the first digital multiplex. In December 2012, an additional 10 channels, including our CTC and Domashny channels, were selected for inclusion in the second digital multiplex. Given the terms and fees associated with participation in the second multiplex, we expect to encounter certain risks and uncertainties in the execution of CTC and Domashny channels' business models. Also, current legislation does not provide 'must carry' obligations for cable operators, and accordingly we may be unable to secure or maintain carriage of our channels' signals over cable in certain regions, or at transmission rates that are consistent with our historical experience. As a result, there can be no assurance that we will be able to negotiate mutually acceptable transmission agreements in the future relating to the carriage of our signals with cable providers. On an ongoing basis, we meet with key participants of the media industry and governmental representatives for discussion and analysis of the transition to digital broadcasting, as well as the development of business and industry initiatives.

In March 2013, we entered into 10-year transmission agreements with the Russian Television and Radio Network ("RTRS"). Under the terms of these agreements, RTRS will ultimately provide to CTC and Domashny, as well as other broadcasters in the second multiplex, all services required for the channels to broadcast their signals in digital format throughout Russia to more than approximately 140 million viewers, once the rollout of digital broadcasting is complete throughout the territory of the Russian Federation. In July 2014, we amended these agreements with RTRS to better reflect the planned rollout schedule and to amend the financial terms of participation in the second multiplex in light of RTRS's current implementation timeframes, the funds needed to provide services in regions as they become operational, and the financial support required for the build-out of the infrastructure for a comprehensive digital platform throughout the Russian Federation by 2019. RTRS is initially launching digital broadcast services in the second multiplex in cities with populations of more than 50,000 people ("50+ coverage") with approximately 90% of 50+ coverage operational by the end of 2014. Our digital transmission expense for 2014 related to broadcasting in the 50+ coverage cities will be approximately $5 million; the expense for 2015 and beyond will be calculated on an annual basis according to rates that RTRS will set by October 1st of the prior year.

In addition, during the period 2015-2018, RTRS will construct the digital broadcasting infrastructure in smaller cities with populations less than 50,000 ("50- coverage"). It is expected that this infrastructure will be put into operation in 2019. According to the amended terms of our agreements, in addition to the transmission services in the 50+ coverage cities described above, we expect to advance payments towards the construction of the digital infrastructure in the 50- coverage regions for CTC and Domashny channels. In aggregate we expect to advance approximately 390 million rubles in 2014, 644 million rubles in 2015, 271 million rubles in 2016, 68 million rubles in 2017 and 51 million rubles in 2018 resulting in total advances of approximately 1,424 million rubles or $36.2 million by the end of 2018 (at an exchange rate of RUR 39.4 to $1.00 as of September 30, 2014), which we will amortize over the implementation period. Under the amended terms, these advances will be offset against service payments otherwise required for digital transmission services subsequent to 2018. In the nine months ended September 30, 2014, we made advance payments towards the construction of the digital infrastructure in the 50- coverage regions of approximately $3.3 million for CTC and Domashny channels in aggregate.

In addition, we expect to continue incurring analog transmission costs during the analog-to-digital transition period. In 2013, we incurred approximately $24 million of such expenses, excluding payments to RTRS for transmission of digital signal, for all of our channels in aggregate. Increased revenues from higher anticipated geographical penetration from digital broadcasting may not sufficiently compensate for the increased costs associated with transmission and broadcast equipment upgrades.

It is difficult to predict accurately how the digitalization of broadcasting may affect the market. While digital broadcasting would increase our overall technical penetration, the necessary investments for digital migration may not be fully monetized. See also "Item 1A. Risk Factors—We may face additional expenditures in connection with the planned transition from analog to digital broadcasting in Russia and Kazakhstan, and the necessary investments for digital migration may not be fully monetized".

The 2013 Equity Incentive Plan—In March 2013, our Board of Directors adopted our 2013 Equity Incentive Plan, which was approved by the stockholders on April 30, 2013, at the 2013 Annual Meeting. The Board approved an initial round of awards to employees of approximately 2.0 million shares of common stock in the form of restricted share units that will entitle the grantees to receive shares of common stock, at no cost, upon the satisfaction of 2013, 2014 and 2015 performance-based vesting

conditions, exercisable on a staggered basis over a period of four years from grant. In addition, our Board approved an open market stock repurchase program, pursuant to which we repurchased 2.5 million shares of our common stock in the market for use under our 2013 Equity Incentive Plan. In 2014, our Board of Directors approved the grant of additional equity awards over approximately 0.9 million shares of common stock in the form of restricted share units to our employees, at no cost, upon the satisfaction of 2014, 2015 and 2016 performance-based vesting conditions, exercisable on a staggered basis over a period of four years from grant.

New businesses—In April 2014, we launched our fourth Russian television channel CTC Love, targeting the 11-34 year-old audience, through cable and satellite with penetration of approximately 39% in 141 cities in Russia. In September 2014, TNS Russia started measuring the audience of CTC Love, and its target audience share reached 0.8% in the first month.

Segment overview—Our management and Board of Directors evaluate and manage the performance of the Group and make operational decisions based primarily on our three Russia-based television channels (CTC, Domashny and Peretz) and Channel 31 in Kazakhstan. Each channel's performance takes into account the operating results of its network, which is responsible for broadcasting operations, including sales of the network's advertising, licensing and commissioning of programming, production of its programming schedule, management of its relationships with its independent affiliates, and management of the respective stations that distribute the network's signal. Our other less significant operating segments are included along with headquarters' operations in the "All Other" category for financial reporting purposes.

Comparison of Consolidated Results of Operations for the three- and nine-month periods ending September 30, 2013 and 2014 by Segments

The following table presents our revenues and operating income for three- and nine-month periods ending September 30, 2013 and 2014 by segments:

All Other. All other revenues primarily represent revenues from the CTC-International and digital media businesses; all other operating loss primarily represents expenses of our corporate headquarters, operating results of CTC-International, digital media businesses and CTC Love.

	Three months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	119,329		$	109,140			*100*	%		*100*	%		(9	)%		2	%


Including:
Advertising revenues		116,247			107,946			97	%		99	%		(7	)%		3	%


Total operating expenses	$	(76,793	)	$	(70,210	)		64	%		64	%		(9	)%		1	%


Including:
Direct operating expenses		(4,097	)		(3,970	)		3	%		4	%		(3	)%		8	%
Selling, general and administrative expenses		(22,960	)		(21,345	)		19	%		20	%		(7	)%		3	%
Programming expenses		(47,525	)		(43,247	)		40	%		40	%		(9	)%		1	%
Depreciation and amortization		(2,211	)		(1,648	)		2	%		2	%		(25	)%		(19	)%


Operating income	$	42,536		$	38,930			36	%		36	%		(8	)%		3	%

	Nine months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	403,794		$	374,257			*100*	%		*100*	%		(7	)%		4	%


Including:
Advertising revenues		392,899			372,451			97	%		100	%		(5	)%		7	%


Total operating expenses	$	(273,308	)	$	(257,080	)		68	%		69	%		(6	)%		6	%


Including:
Direct operating expenses		(12,455	)		(14,082	)		3	%		4	%		13	%		26	%
Selling, general and administrative expenses		(75,115	)		(73,853	)		19	%		20	%		(2	)%		11	%
Programming expenses		(178,906	)		(163,415	)		44	%		44	%		(9	)%		2	%
Depreciation and amortization		(6,832	)		(5,730	)		2	%		2	%		(16	)%		(7	)%


Operating income	$	130,486		$	117,177			32	%		31	%		*(10*	)%		2	%

Advertising revenues of CTC channel increased by 3% and 7% in ruble terms, when comparing the three- and nine-month periods under review, respectively, principally due to increased sales of the channel's inventory on a federal level and increased sponsorship revenues, reflecting our ability to command higher advertising prices for our target audience, partially offset by 11% and 9% decreases in the audience share, respectively, reflecting the increased competition from other channels, including channels that broadcast political news on the Ukraine crisis, the effect of audience fragmentation and the relative underperformance of certain programming in the third quarter of 2014. In addition, when comparing the nine-month periods under review, the decrease of CTC channel's average target audience share reflected the competition from the channels licensed to broadcast the 2014 Olympic Games in Sochi in the first quarter of 2014.

The increase in the Russian television advertising market in the first nine months of 2014 may not be indicative of the market growth that can be expected for the full year 2014.

All larger national free-to-air TV channels in Russia were negatively impacted by increased competition from smaller non-free-to-air and niche TV channels viewership among 10 to 45 year-olds, which increased from 16.2% in 2012 to 18.6% in 2013 and to 20.0% in the nine months ended September 30, 2014. See "Item 1A. Risk Factors—A reduction in our audience shares and ratings would likely result in a reduction in our advertising revenues".

Total operating expenses of CTC channel increased by 1% and 6% in ruble terms when comparing the three- and nine-month periods under review, respectively, primarily due to increases of 1pp and 3pp, respectively, in selling, general and administrative expenses (discussed below).

Direct operating expenses of CTC channel as a percentage of this segment's total operating revenues remained approximately flat at 4% in the three- and nine-month periods under review. In ruble terms, direct operating expenses increased by 8% and 26% in the three- and nine-month periods under review, respectively, of which increases of 9pp and 6pp, respectively, related to other direct expenses due to an increased amount of integrated sponsorship and royalty costs. In addition, when comparing the nine-month periods under review, direct operating expenses increased due to a 12pp increase in salaries and benefits costs, reflecting increased headcount and annual salary raises, and a 10pp increase in transmission expenses, reflecting increased digital transmission costs for CTC channel in connection

with the roll-out plan of the second multiplex which began in March 2013 (see "—Transition to Digital Broadcasting" above) and annual raises.

Selling, general and administrative expenses of the CTC channel as a percentage of this segment's total operating revenues remained approximately flat at 20% when comparing the three- and nine-month periods under review. In ruble terms, selling, general and administrative expenses increased by 3% and 11% in the three- and nine-month periods under review, respectively, of which increases of 2pp and 7pp, respectively, related to compensation to Video International, reflecting an increase in the channel's revenue dynamic and the timing of certain services provided in the first half of 2014.

Programming expenses of the CTC channel as a percentage of this segment's total operating revenues remained approximately flat at 40% and 44% in the three- and nine-month periods under review, respectively, and increased in ruble terms by 1% and 2%, respectively, primarily due to the airing of more expensive foreign movies, partially offset by less expensive Russian content to support the channel's audience share.

	Three months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	26,099		$	26,100			*100*	%		*100*	%		0	%		11	%


Including:
Advertising revenues		25,976			25,992			100	%		100	%		0	%		11	%


Total operating expenses	$	(22,463	)	$	(18,122	)		86	%		69	%		*(19*	)%		*(11*	)%


Including:
Direct operating expenses		(2,738	)		(2,156	)		10	%		8	%		(21	)%		(12	)%
Selling, general and administrative expenses		(5,480	)		(4,371	)		21	%		17	%		(20	)%		(12	)%
Programming expenses		(12,289	)		(10,326	)		47	%		40	%		(16	)%		(7	)%
Depreciation and amortization		(1,956	)		(1,269	)		7	%		5	%		(35	)%		(28	)%


Operating income	$	3,636		$	7,978			14	%		31	%		*119*	%		*146*	%

	Nine months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	85,559		$	82,051			*100*	%		*100*	%		(4	)%		8	%


Including:
Advertising revenues		84,547			81,641			99	%		100	%		(3	)%		9	%


Total operating expenses	$	(72,186	)	$	(62,228	)		84	%		76	%		*(14*	)%		(3	)%


Including:
Direct operating expenses		(8,324	)		(8,462	)		10	%		10	%		2	%		13	%
Selling, general and administrative expenses		(17,556	)		(14,792	)		21	%		18	%		(16	)%		(6	)%
Programming expenses		(40,436	)		(34,405	)		47	%		42	%		(15	)%		(4	)%
Depreciation and amortization		(5,870	)		(4,569	)		7	%		6	%		(22	)%		(13	)%


Operating income	$	13,373		$	19,823			16	%		24	%		48	%		69	%

Advertising revenues of the Domashny channel increased by 11% and 9% in ruble terms when comparing the three- and nine-month periods under review, respectively, principally due to increased sales of the channel's inventory on a federal level and increased sponsorship revenues, reflecting our ability to command higher advertising prices for our target audience, partially offset by 5% and 3% decreases in the audience share, respectively. The decrease in Domashny's audience share in the three- and nine-month periods under review was primarily due to the effect of audience fragmentation and increased competition from the channels that broadcast political news on the Ukraine crisis, partially offset by successful changes in the programming schedule in daytime and primetime slots. In October 2014, Domashny channel launched a restyle of its logo and updated its visual format with a new motto: "Forever for women". Domashny channel is continuing to share positive and bright emotions with its viewers and to grow its core female audience segment.

The increase in the Russian television advertising market in the first nine months of 2014 may not be indicative of the market growth that can be expected for the full year 2014.

Total operating expenses of Domashny channel decreased by 11% and 3% in ruble terms when comparing the three- and nine-month periods under review, respectively, reflecting decreases of 4pp and 3pp, respectively, in programming expenses (discussed below) and decreases of 3pp and 1pp, respectively, in selling, general and administrative expenses, primarily due to advertising and promotion expenses (discussed below).

Direct operating expenses of Domashny channel as a percentage of this segment's total operating revenues decreased from 10% to 8% when comparing the three-month periods under review and remained approximately flat at 10% when comparing the nine-month periods under review. In ruble terms, direct operating expenses decreased by 12% in the three-month periods under review of which a 17pp related to the timing decrease in the third quarter of 2014 in digital transmission costs for Domashny channel in connection with the roll-out plan of the second multiplex which began in March 2013 (see "—Transition to digital broadcasting" above) and increased by 13% in the nine-month periods under review, of which an 11pp increase related to digital transmission costs for Domashny channel (discussed above).

Selling, general and administrative expenses of Domashny channel as a percentage of this segment's total operating revenues decreased from 21% to 17% when comparing the three-month periods under review and decreased by 12% in ruble terms, of which 13pp related to advertising and promotion expenses, reflecting the timing of advertising campaigns which are planned for the fourth quarter of 2014 following the launch of the channel's restyling in October 2014. When comparing the nine-month periods under review, selling, general and administrative expenses decreased as a percentage of this segment's total operating revenues from 21% to 18% and decreased in ruble terms by 6%, reflecting the joint effect of a decrease of 11pp in advertising and promotion expenses (discussed above) and increase of 6pp in compensation to Video International due to the timing of certain services provided in the first half of 2014. For the full year 2014, we expect that advertising and promotion expenses at Domashny channel will be at the same level as in 2013.

Programming expenses of the Domashny channel as a percentage of this segment's total operating revenues decreased from 47% to 40% when comparing the three-month periods under review and decreased from 47% to 42% when comparing the nine-month periods under review. In ruble terms, programming expenses decreased by 7% and 4% when comparing the three- and nine-month periods under review, respectively, primarily due to timing decreases in the volume and cost of Russian content, partially offset by spending on more foreign content in the two periods under review. For the full year 2014, we expect that programming expenses at Domashny channel will be higher than in 2013 following the launch of the channel's restyling in October 2014.

	Three months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	17,115		$	15,108			*100*	%		*100*	%		*(12*	)%		(2	)%
Including:
Advertising revenues		17,091			15,107			100	%		100	%		(12	)%		(2	)%


Total operating expenses	$	(15,949	)	$	(14,983	)		93	%		99	%		(6	)%		4	%


Including:
Direct operating expenses		(2,359	)		(2,452	)		14	%		16	%		4	%		15	%
Selling, general and administrative expenses		(3,939	)		(3,029	)		23	%		20	%		(23	)%		(15	)%
Programming expenses		(6,788	)		(7,394	)		40	%		49	%		9	%		21	%
Depreciation and amortization		(2,863	)		(2,108	)		17	%		14	%		(26	)%		(19	)%


Operating income	$	1,166		$	125			7	%		1	%		*(89*	)%		*(82*	)%

	Nine months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	59,018		$	50,966			*100*	%		*100*	%		*(14*	)%		(3	)%
Including:
Advertising revenues		58,323			50,778			99	%		100	%		(13	)%		(2	)%


Total operating expenses	$	(56,162	)	$	(48,487	)		95	%		95	%		*(14*	)%		(3	)%


Including:
Direct operating expenses		(8,311	)		(7,462	)		14	%		15	%		(10	)%		1	%
Selling, general and administrative expenses		(14,972	)		(11,235	)		25	%		22	%		(25	)%		(16	)%
Programming expenses		(23,981	)		(22,670	)		41	%		44	%		(5	)%		6	%
Depreciation and amortization		(8,898	)		(7,120	)		15	%		14	%		(20	)%		(10	)%


Operating income	$	2,856		$	2,479			5	%		5	%		*(13*	)%		(1	)%

Advertising revenues of the Peretz channel decreased by 2% in ruble terms when comparing the three- and nine-month periods under review, principally due to 9% and 13% decreases in audience share, respectively, partially offset by estimated growth in the Russian television advertising market of 4% in ruble terms in the two periods under review and increased sponsorship revenues, reflecting our ability to command higher advertising prices for our target audience. The decrease in Peretz audience share in the three- and nine-month periods under review was primarily due to increased competition from the channels that broadcast political news on the situation in Ukraine, as well as competition from the channels licensed to broadcast the 2014 Olympics Games in Sochi in the first quarter of 2014, audience fragmentation and relative underperformance of certain programming. Peretz channel is continuing to refresh its positioning and programming grid to be a more cutting edge and dynamic channel, with a focus on edgy action content.

The increase in the Russian television advertising market in the first nine months of 2014 may not be indicative of the market growth that can be expected for the full year 2014.

Total operating expenses of the Peretz channel increased by 4% in ruble terms when comparing the three-month periods under review, reflecting a joint effect of a 9pp increase in programming expenses (discussed below) and a 4pp decrease in selling, general and administrative expenses, primarily due to advertising and promotion expenses (discussed below). When comparing the nine-month periods under review, total operating expenses of the Peretz channel decreased by 3%, of which 4pp related to selling, general and administrative expenses, primarily due to decrease in advertising and promotion expenses (discussed below).

Direct operating expenses of Peretz channel as a percentage of this segment's total operating revenues increased from 14% to 16% when comparing the three-month periods under review, and increased from 14% to 15% when comparing the nine-month periods under review. In ruble terms, direct operating expenses increased by 15% and 1% in the three- and nine-month periods under review, respectively, of which increases of 14pp and 3pp, respectively, related to transmission and maintenance expenses due to annual raises and increased technical penetration, partially offset by decreases in cable connections in the first half of 2014.

Selling, general and administrative expenses of Peretz channel as a percentage of this segment's total operating revenues decreased from 23% to 20% when comparing the three-month periods under review and from 25% to 22% when comparing the nine-month periods under review, primarily due to decreased advertising and promotion expenses in the periods under review. In ruble terms, selling, general and administrative expenses decreased by 15% and 16% in the three- and nine-month periods under review, of which decreases of 12pp and 16pp, respectively, related to advertising and promotion expenses, reflecting savings in advertising campaigns as the result of relative underperformance of channel's premiers in the first half of 2014.

Programming expenses of the Peretz channel as a percentage of this segment's total operating revenues increased from 40% to 49% when comparing the three-month periods under review and increased from 41% to 44% when comparing the nine-month periods under review. In ruble terms, programming expenses increased by 21% and 6% when comparing the three- and nine-month periods under review, respectively, primarily due to increases in the cost and volume of high-rating Russian series in response to increased competition from other channels in the two periods under review.

	Three months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% KZT
Total operating revenues	$	6,409		$	5,226			*100*	%		*100*	%		*(18*	)%		(3	)%
Including:
Advertising revenues		6,249			4,970			98	%		95	%		(20	)%		(5	)%


Total operating expenses	$	(5,242	)	$	(4,041	)		82	%		77	%		*(23*	)%		(8	)%


Including:
Direct operating expenses		(388	)		(367	)		6	%		7	%		(5	)%		13	%
Selling, general and administrative expenses		(1,015	)		(841	)		16	%		16	%		(17	)%		(1	)%
Programming expenses		(3,118	)		(2,213	)		49	%		42	%		(29	)%		(15	)%
Depreciation and amortization		(721	)		(620	)		11	%		12	%		(14	)%		3	%


Operating income	$	1,167		$	1,185			18	%		23	%		2	%		21	%

	Nine months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% KZT
Total operating revenues	$	17,355		$	13,761			*100*	%		*100*	%		*(21*	)%		(6	)%
Including:
Advertising revenues		17,132			13,092			99	%		95	%		(24	)%		(9	)%


Total operating expenses	$	(14,593	)	$	(12,088	)		84	%		88	%		*(17*	)%		(2	)%


Including:
Direct operating expenses		(979	)		(1,006	)		6	%		7	%		3	%		22	%
Selling, general and administrative expenses		(2,873	)		(2,471	)		17	%		18	%		(14	)%		1	%
Programming expenses		(8,543	)		(6,713	)		49	%		49	%		(21	)%		(7	)%
Depreciation and amortization		(2,198	)		(1,898	)		13	%		14	%		(14	)%		1	%


Operating income	$	2,762		$	1,673			16	%		12	%		*(39*	)%		*(26*	)%

In the nine months of 2014, Channel 31's results of operations were significantly impacted by the devaluation of the Kazakh tenge by 19% against the US dollar that was implemented by National Bank of Kazakhstan in February 2014. In the three months ended September 30, 2014, the Kazakh tenge appreciated against the US dollar by 1% and was on average 16% lower than the average value of the Kazakh tenge compared to the US dollar during the three months ended September 30, 2013. In the nine months ended September 30, 2014, the Kazakh tenge depreciated against the US dollar by 16% and was on average 15% lower than the average value of the Kazakh tenge compared to the US dollar during the nine months ended September 30, 2013.

Advertising revenues of Channel 31 decreased by 5% and 9% in Kazakh tenge terms when comparing the three- and nine-month periods under review, principally due to decreases in the estimated overall television advertising market in Kazakhstan of 5% and 7%, respectively, in Kazakh tenge terms. When comparing the three-month periods under review, target audience share increased by 6%, reflecting successful changes in the programming schedule of local-language programming and better performance of certain locally-produced programming and foreign series, but was fully offset by a decrease in Kazakh overall free-to-air television viewership due to increased audience fragmentation. When comparing the nine-month periods under review, the target audience share remained approximately flat.

Total operating expenses of Channel 31 decreased by 8% and 2% in Kazakh tenge terms in the three- and nine-month periods under review, respectively, of which decreases of 9pp and 4pp, respectively, related to programming expenses (discussed below).

Direct operating expenses of Channel 31 as a percentage of this segment's total operating revenues remained approximately flat at 7% when comparing the three- and nine-month periods under review and increased by 13% and 22%, respectively, in Kazakh tenge terms mainly due to increases in salaries and benefits costs due to the hiring of several of the channel's top-management at the end of 2013.

Selling, general and administrative expenses of Channel 31, as a percentage of this segment's total operating revenues and in Kazakh tenge terms remained approximately flat when comparing the three-and nine-month periods under review.

Programming expenses of Channel 31 as a percentage of this segment's total operating revenues decreased from 49% to 42% when comparing the three-month periods under review, and remained approximately flat at 49% when comparing the nine-month periods under review. In Kazakh tenge terms, programming expenses decreased by 15% and 7% when comparing the three- and nine-month periods under review, respectively, primarily reflecting decreased volume of locally produced programming and foreign content, partially offset by increased cost of high-rating Russian series to support Channel 31's audience share.

	Three months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Operating revenues	$	2,132		$	2,993			*100*	%		*100*	%		40	%		57	%


Operating expenses	$	(6,450	)	$	(6,951	)		*303*	%		*232*	%		8	%		16	%


Including:
Selling, general and administrative expenses		(4,584	)		(4,335	)		215	%		145	%		(5	)%		5	%
Stock based compensation expenses		(519	)		(641	)		24	%		21	%		24	%		36	%
Other expenses		(1,347	)		(1,975	)		63	%		66	%		47	%		44	%


Operating loss	$	(4,318	)	$	(3,958	)		*203*	%		*132*	%		(8	)%		(3	)%

	Nine months ended September 30,						% of total operating revenues						Change period-to-period

	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Operating revenues	$	6,660		$	8,091			*100*	%		*100*	%		21	%		37	%


Operating expenses	$	(20,371	)	$	(18,224	)		*306*	%		*225*	%		*(11*	)%		(1	)%


Including:
Selling, general and administrative expenses		(12,648	)		(12,317	)		190	%		152	%		(3	)%		9	%
Stock based compensation expenses		(3,157	)		(386	)		47	%		5	%		(88	)%		(86	)%
Other expenses		(4,566	)		(5,521	)		69	%		68	%		21	%		29	%


Operating loss	$	(13,711	)	$	(10,133	)		*206*	%		*125*	%		*(26*	)%		*(18*	)%

Operating revenues in the All Other segment primarily represent revenues earned by our CTC-International and digital media businesses. When comparing the three-month periods ended September 30, 2013 and 2014, operating revenues from our digital media business amounted to $1.1 and $1.6 million, respectively and operating revenues from CTC-International amounted to $0.8 and $1.0 million, respectively. When comparing the nine-month periods ended September 30, 2013 and 2014, operating revenues from our digital media business amounted to $3.1 and $4.3 million, respectively and operating revenues from CTC-International amounted to $2.9 and $3.0 million, respectively.

Selling, general and administrative expenses consist principally of the general and administrative expenses of our corporate headquarters, CTC-International, digital media business and new channel CTC Love (see "—New businesses" above). In ruble terms, selling, general and administrative expenses increased by 5% in the three-month periods under review, of which a 13pp increase related to CTC Love channel, which was launched in April 2014, primarily reflecting increased advertising and promotion expenses, partially offset by a 9pp decrease in selling, general and administrative expenses of

our corporate headquarters, reflecting decreases in salaries and benefits costs due to the departure of several top managers and the transfer of some employees to CTC channel at the end of 2013. When comparing the nine-month periods under review, selling, general and administrative expenses increased by 9% in ruble terms, of which a 7pp increase related to CTC Love due to increased advertising and promotion campaigns, a 7pp increase related to our digital media business due to increased salaries and benefits costs, reflecting increased headcount and annual salary raises and a 3pp decrease related to our corporate headquarters, reflecting decrease in salaries and benefits costs (discussed above).

Stock-based compensation expenses were approximately flat at $0.5-0.6 million when comparing the three-month periods under review. When comparing the nine-month periods under review, stock-based compensation expenses decreased by $2.8 million, primarily as the result of remeasuring the equity-based cash incentive awards granted to employees under our 2009 Stock Incentive Plan at their fair value, as the result of our decreased share price in 2014.

Other expenses consist principally of direct operating, programming and depreciation and amortization expenses. Other expenses increased by 44% and 29% in ruble terms in the three- and nine-month periods under review, respectively, primarily due to the launch of new channel CTC Love, reflecting increased transmission and programming expenses.

Consolidated Financial Position—Significant Changes in our Consolidated Balance Sheets as of September 30, 2014 Compared to December 31, 2013

Prepayments increased from December 31, 2013 to September 30, 2014 by $3.6 million, primarily due to increases in advances made for Russian content that will be used during the remainder of 2014 and thereafter, partially offset by the effect of depreciation of the Russian ruble against the US dollar.

The decrease in programming rights from December 31, 2013 to September 30, 2014 of $35.7 million was primarily due to the effect of depreciation of the Russian ruble against the US dollar. In ruble terms, programming rights increased by 6%, primarily due to an increase in Russian content, partially offset by decreased foreign content which was used at CTC and Domashny channels to support audience shares.

Intangible assets and Goodwill decreased from December 31, 2013 to September 30, 2014 by $23.8 million and $22.8 million, respectively, primarily due to amortization of our broadcasting licenses and cable connections and the effect of the depreciation of the Russian ruble against the US dollar.

As of September 30, 2014, other non-current assets and accrued liabilities primarily reflect dividends of $20.8 million otherwise payable to one of our principal stockholders, Telcrest, that were blocked pursuant to the U.S. sanctions and paid into a separate interest-bearing bank account for the benefit of Telcrest, but to which Telcrest will not have access while either Bank Rossiya or LLC IC Abros remain an SDN. See also "Item 1A. Risk Factors—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and may require us to employ significant time and resources to ongoing compliance efforts."

Accounts payable decreased from December 31, 2013 to September 30, 2014 by $24.7 million, primarily due to the effect of depreciation of the Russian ruble against the US dollar. In ruble terms, accounts payable decreased by 7%, primarily due to decreased payables for foreign content.

Our taxes payable decreased from December 31, 2013 to September 30, 2014 by $22.2 million, primarily due to a decrease in income tax payable as the result of seasonally higher revenues in the fourth quarter of 2013 compared with the third quarter of 2014.

Our sources of capital consist primarily of cash flows from operations. We believe that our operating cash flow, cash on hand, and available short-term and long-term capital resources are sufficient to fund our working capital requirements, capital expenditures and programming commitments, income tax obligations, and anticipated dividends to our shareholders. We cannot assure you, however, that the assumed levels of revenues and expenses underlying this projection will prove to be accurate. We continually assess the counterparties and instruments we use to hold our cash and cash equivalents, with a focus on preservation of capital and liquidity. Based on information currently available, we do not believe that we are at risk of default by our counterparties.

As of September 30, 2014, we had $29.8 million in cash and cash equivalents, of which approximately 53% was held in US dollar-denominated accounts. In addition, as of September 30, 2014, we had $122.0 million in deposits with maturities ranging from one to twelve months, of which approximately 40% was held in US dollar-denominated accounts. In April 2014, we renewed a Ruble-denominated overdraft agreement with Alfa Bank bearing annual interest at the variable Mosprime Overnight rate +2.21% with a credit limit of approximately RUR 1 billion or $25 million (at an exchange rate of RUR 39.4 to $1.00). As of December 31, 2013 and September 30, 2014, we did not have outstanding overdrafts.

Cash flows from operating activities decreased by $9.5 million, when comparing the nine-month periods ended September 30, 2013 and 2014, primarily due to the depreciation of the Russian ruble against the US dollar. In ruble terms, net cash provided by operating activities remained approximately flat, reflecting the joint effect of higher cash receipts from advertising sales and higher spending on the acquisition of programming. In addition, since July 2014, we paid advances towards the construction of the digital infrastructure in the 50- coverage regions of approximately $3.3 million for CTC and Domashny channels in aggregate. See "—Transition to digital broadcasting". Substantially all of our cash flows from operating activities are derived from advertising revenues. Our advertising revenues were $556.5 and $523.1 million for the nine-month periods ended September 30, 2013 and 2014, respectively. Our most significant use of cash in relation to operating activities throughout the periods

under review was primarily attributable to the acquisition of programming and sublicensing rights. Our cash expenditures for the acquisition of programming and sublicensing rights were $282.5 million and $273.2 million for the nine-month periods ended September 30, 2013 and 2014, respectively. The decrease in cash paid for programming rights was primarily due to the depreciation of the Russian ruble against the US dollar. In ruble terms, cash paid for programming rights increased by 9%, primarily due to investments in Russian-produced and foreign content that will be used in 2014 and thereafter. Programming expenses amounted to $252.4 million and $227.6 million for the nine-month periods ended September 30, 2013 and 2014, respectively.

Cash provided by investing activities includes cash used for the acquisition of property, equipment and intangible assets, purchases of new broadcasting stations, and investments in or receipts from cash deposits. In the nine-month period ended September 30, 2014, our cash provided by investing activities primarily represented net receipts from cash deposits of $36.9 million and cash paid for capital expenditures of $3.8 million. In the nine-month period ended September 30, 2013, our cash provided by investing activities primarily represented net receipts from cash deposits of $26.2 million. In addition, we spent $3.5 million for capital expenditures and $0.5 million for acquisitions of new broadcasting stations.

Cash used in financing activities includes net proceeds from or settlement of overdrafts and loans, repurchases of our common stock and payments of dividends. In the nine-month period ended September 30, 2014, our cash used in financing activities includes payment of dividends in the amount of $61.0 million to our stockholders, $4.6 million in dividends paid to minority shareholders of our subsidiaries and $20.8 million increase in other non-current assets which represents dividends to one of our stockholders that were blocked pursuant to US sanctions imposed on Bank Rossiya and LLC IC Abros. In the nine-month period ended September 30, 2013, our cash used in financing activities includes payments of dividends in the amount of $73.9 million to our stockholders, $4.8 million in dividends paid to minority shareholders of our subsidiaries, repurchases of our common stock of $29.7 million and net settlement of $3.6 million bank overdraft and loans.

On October 27, 2014, our Board declared a dividend of $0.175 per outstanding share of common stock, or approximately $27.3 million in total. The record date is December 1, 2014 and the payment date is on or about December 26, 2014; except that any dividend payable to Telcrest will be blocked pursuant to OFAC regulations related to U.S. sanctions described in "Item 1. Financial Statements—Note 4, Cash and cash equivalents and short-term investments; other non-current assets", while either Bank Rossiya or LLC IC Abros remain an SDN.

The table below summarizes information with respect to our contractual obligations as of September 30, 2014:

	Total		Through 2014		2015		2016		2017		2018		2019

	(in thousands)
Acquisition of programming rights	$	179,555	$	82,879	$	84,077	$	12,599	$	—	$	—	$	—
Transmission and satellite fees		99,715		4,967		20,761		21,414		21,739		20,999		9,835
Leasehold obligations		34,670		1,626		6,773		6,965		7,225		5,908		6,173
Network affiliation agreements		14,066		678		2,868		3,025		3,183		3,344		968
Payments for intellectual rights		11,322		464		1,964		2,072		2,180		2,284		2,358
Other contractual obligations		22,582		1,113		4,279		4,311		4,093		4,291		4,495


Total(1)	$	361,910	$	91,727	$	120,722	$	50,386	$	38,420	$	36,826	$	23,829

See also "Item 1A. Risk Factors—Decreases in the value of the Russian ruble as compared to the US dollar that have resulted from the current economic and political instability in Russia have negatively impacted our reported revenues and operating results. If the exchange rate between the ruble and the US dollar remains at its current level or if the ruble depreciates further, our revenues and our operating results, both as reported in US dollars, may continue to negatively affect our reported results of operations in the future".

In addition, in connection with the planned digitalization in Russia and Kazakhstan, we may incur additional costs.

Agreement with RTRS—In July 2014, we amended our agreements with RTRS to specify digital broadcasting services fees for 2014 and cash payments for period from 2014 to 2018, for CTC and Domashny channels.

Also, current legislation does not provide 'must carry' obligations for cable operators, and accordingly we may be unable to secure or maintain carriage of our channels' signals over cable in certain regions, or at transmission rates that are consistent with our historical experience. As a result, there can be no assurance that we will be able to negotiate mutually acceptable transmission agreements in the future relating to the carriage of our signals with cable providers.

See "—Key Factors Affecting Our Results of Operations—Transition to digital broadcasting" above and "Item 1A. Risk Factors—We may face additional expenditures in connection with the planned transition from analog to digital broadcasting in Russia and Kazakhstan, and the necessary investments for digital migration may not be fully monetized".

The preparation of financial statements in conformity with the accounting principles generally accepted in the United States 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. Critical accounting estimates include, among others, the estimate of fair values in business combinations, estimates of the fair value of the company's common stock in determining stock- based compensation, the amortization method and periods for programming rights and sublicensing rights, useful lives of tangible and intangible assets, impairment of goodwill, valuation of intangible assets and long-lived assets, fair value of derivative instruments, estimates of contingencies, and the determination of valuation allowances for deferred tax assets. We have discussed the estimates that we believe are critical and require the use of complex judgment in our 2013 Annual Report on Form 10-K. Since that date, there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them.

Goodwill and Intangible assets—We assess the carrying value of goodwill on an annual basis, or more frequently if events or changes in circumstances indicate that such carrying value may not be recoverable. Other than our annual review, factors we consider important which could trigger an impairment review include under-performance of reporting units or changes in projected results, changes in the manner of utilization of the asset, a severe and sustained decline in the price of our shares and negative market conditions or economic trends.

In the annual impairment review performed as of December 31, 2013, we concluded that the fair values of our reporting units significantly exceeded their carrying values, reflecting the improved macroeconomic conditions from the downturn in the economy that started in 2008. For a discussion of the methodology and major assumptions regarding our annual impairment test refer to the Annual Report on Form 10-K filed with the SEC on March 6, 2014.

Fair values of our reporting units are highly sensitive to changes in the television advertising market assumptions. As of September 30, 2014, the carrying values of goodwill related to CTC, Domashny and Peretz totaled $42.8 million, $21.6 million and $47.9 million, respectively. In addition, as of September 30, 2014, we had significant balances of amortizable broadcasting licenses totaling $41.4 million, including CTC licenses—$6.7 million; Domashny licenses—$8.7 million, and Peretz licenses—$21.3 million. Due to the significance of the negative factors described above, we performed an interim analysis for impairment. Although there is considerable uncertainty regarding the ultimate outcome of the Ukrainian crisis and its impact on the Russian economy, and, in particular, concerning the Russian advertising market in 2015 and thereafter, we determined that it is more likely than not that current economic conditions have impacted the fair value of our reporting units. As a result of the impairment review performed as of September 30, 2014, we concluded that fair values of the CTC, Domashny and Peretz reporting units exceeded their carrying values. However, due to the revision of assumptions in the TV advertising market for 2015 and in the medium-term, the excess of fair values over the carrying value of the Peretz reporting unit decreased from 48% to 7%, when compared with the fair values estimated during the annual 2013 impairment tests. The estimated fair values of the CTC and Domashny reporting units remained significantly in excess of their respective carrying amounts.

Other than with respect to the Peretz reporting unit, hypothetical 10% and 15% decreases in the fair value of each reporting unit would not have resulted in impairment.

In order to check the reasonableness of the fair values implied by cash flow estimates, we also calculated the value of our common stock implied by our cash flow forecasts and compares this to actual traded values. As of September 30, 2014, our consolidated net book value (or shareholders' equity) amounted to $615,064. This compares to our market capitalization of approximately $1,035,818 as of September 30, 2014.

In order to evaluate the sensitivity of the fair value calculations in our impairment analysis, we applied hypothetical 5, 10 and 15 percentage points' decreases to the 2015 television advertising market growth forecast:

Also, the fair value estimates are highly sensitive to the cost of capital used in the discounting of expected cash flows attributable to our reporting units. The potential negative trends in the macroeconomic environment could increase risk to investors investing in Russian markets, which could increase the cost of capital, which in turn will decrease the fair value of the respective assets or

reporting units. Additionally, changes in the financial markets, such as an increase in interest rates or an increase in the expected required return on equity by market participants within the industry, could increase the discount rate, thus decreasing the fair value of assets. The cost of capital used in our analysis was 13.0% as of December 31, 2013 and 13.8% as of September 30, 2014. In order to evaluate the sensitivity of the fair value calculations in our impairment analysis, we applied a hypothetical 3 percentage points increase to the cost of capital used: if the cost of capital were higher by 3 percentage points, we would have recognized impairment charge in respect of the Peretz reporting unit's goodwill and broadcasting license of approximately $16,048.

See also Item 1A Risk factors—"—We derive almost all of our revenues from the sale of advertising, which is sensitive to broader economic conditions. Our revenues may substantially decrease if the economic environment deteriorates in Russia or other CIS countries in which we operate".

During 2014, the plans around TV broadcasting in Russia, in particular digital broadcasting, have continued to evolve. While we expect some of these developments to be beneficial to our businesses, other changes may increase the uncertainties and risks with respect to the business models we currently operate. As a result, we are required to consider a number of factors in determining the estimated fair values of our reporting units which could change rapidly or unpredictably. The planned transition to digital broadcasting could impact our assumptions used in our economic models and our assessment of the fair value of our reporting units.

We cannot guarantee that our Peretz channel will be able to compete effectively if it is not included in the third multiplex. With respect to the third multiplex, it is unclear what requirements the channels will be required to meet in order to be included in that multiplex as the terms for participation in the third digital multiplex have not been specified. The fair value of the Peretz reporting unit is particularly sensitive to changes in revenues and costs that may result depending on its distribution model. Currently, the terms for participation in the third digital multiplex have not been specified. In addition, current Russian legislation does not provide 'must carry' obligations for cable and satellite operators, and we may be unable to secure or maintain carriage of our signal over cable in certain regions, or at transmission rates that are consistent with our historical experience. As a result, there can be no assurance that we will be able to negotiate mutually acceptable transmission agreements with cable providers in the future relating to the carriage of the Peretz signal. Depending on further information about the terms of the transition to digital broadcasting, terms of interaction with cable and satellite providers, and other future developments, we may need to further revise our projected cash flows, which could adversely impact the fair value of our reporting units and related goodwill.

Also, given the terms and fees associated with participation in the second multiplex, we expect to encounter certain risks and uncertainties in the execution of each of CTC and Domashny channels' business models. It is difficult to predict accurately how the digitalization of broadcasting may affect the market. While digital broadcasting would increase CTC's and Domashny's overall technical penetration, the necessary investments for digital migration may not be fully monetized.

There may be other risks and expenses that we encounter during and subsequent to the transition that we are unable to anticipate at this time that could be material to our future financial position and results of operations. While the models used in our assessments of our reporting units in our impairment testing incorporate changes in assumptions of revenues and costs, as well as risks associated with those uncertainties, depending on further information about the terms of the transition to digital broadcasting, as well as other future developments, we may need to further revise our projected cash flows, which could adversely impact the fair value of our reporting units and related goodwill. Subject to the availability of further information from the government and market participants, and our ability to make further assessments of the government's plans, impairments may be required in the foreseeable future.

Intangible assets primarily represent our broadcasting licenses and cable network connections. Cable network connections are amortized on a straight-line basis over their estimated period of future economic benefit until approximately 2018. As a result of developments in the transition to digital broadcasting, we changed our estimate of the useful lives of our broadcasting licenses from indefinite to finite in the fourth quarter of 2012. We amortized the remaining balances of our broadcasting licenses on a straight-line basis over each broadcasting license's estimated remaining useful life, which is estimated until the end of 2018. We estimate that the amortization charge for our broadcasting licenses will be approximately $3.7 million for the remainder of 2014, $10.8 million for 2015, $9.7 million for 2016 and $8.6 million annually from 2017 through 2018 (at an exchange rate of RUR 39.39 to $1.00). The estimated useful lives of our broadcasting licenses is subject to availability of further information about the transition to digital broadcasting, which could require us to revise amortization expense on a prospective basis.

Tax provisions—We record temporary differences related to investments in our Russian subsidiaries. These temporary differences consist primarily of undistributed earnings that we do not plan to permanently reinvest in operations outside the U.S. The level of sophistication and expertise with respect to complex tax laws is continually evolving both on the part of tax professionals and the taxing authorities. We are a US legal entity with substantially all of our operations outside the US, primarily in Russia. As a result, our tax filing positions in the US are substantially impacted by our interpretation of tax law and how we apply it in determining US taxes payable and deferred tax liabilities. While we believe we have, and continue, to make reasonable judgments in determining our tax filing positions in each jurisdiction in which we are subject to tax, views may differ as to the determination of our tax obligations. These judgments may ultimately be subjected to examination by the tax authorities and further revisions may be required in our estimates.

Our Board of Directors and shareholders may pursue a restructuring of our group to comply with the restrictions on non-Russian ownership of mass media entities under the Russian law On Mass Media that may result in the group being required to pay significant US taxes. See also "Item 1A. Risk Factors—Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders".

We have considered all recently issued accounting pronouncements and disclosed the ones that could be material to our financial statements in the notes to our consolidated financial statements. See "Item 1. Financial Statements—Note 2, Basis of Presentation and Summary of Significant Accounting Policies."

Because our reporting currency is the US dollar and the functional currency of our principal operating subsidiaries is the Russian ruble, our reported results of operations are impacted by fluctuations in the exchange rate between the US dollar and the Russian ruble. During the nine months ended September 30, 2014, the value of the Russian ruble depreciated against the US dollar by approximately 17% to RUR 39.4 to $1.00 as of September 30, 2014. This exchange rate was on average 11% lower than the average value of the Russian ruble compared to the US dollar during the nine months ended September 30, 2013. This depreciation had a material negative impact on our reported results of operations for the nine months ended September 30, 2014.

Additionally, given that substantially all of our revenues are generated in rubles, we face exchange rate risk relating to operating expenses that we incur in currencies other than the Russian ruble, primarily US dollar payments for non-Russian produced programming. As of September 30, 2014 we had US dollar denominated contractual commitments for the acquisition of approximately $25.0 million in programming rights in 2014, $45.7 million in 2015 and $9.1 million in 2016. In addition, on October 27, 2014, our Board declared a dividend of $0.175 per outstanding share of common stock, or approximately $27.3 million in total. The record date is December 1, 2014 and the payment date is on or about December 26, 2014. As of September 30, 2014, our US dollar-denominated cash and cash equivalents comprised approximately $65 million; in addition, as of September 30, 2014, we have an outstanding foreign exchange forward contract to purchase approximately $25 million at an exchange rate of RUR 37.2 to $1 in December 2014, to reduce a portion of our foreign exchange risk related to US-dollar denominated payments. In the nine months of 2014, we entered into foreign exchange forward contracts for approximately $173.1 million to reduce a portion of our foreign exchange risk related to US-dollar denominated payments. We have not entered into any arrangements to reduce the foreign exchange risk with respect to the remaining future US dollar denominated payments.

During the period from October 1, 2014 to October 27, 2014, the value of the Russian ruble depreciated further against the US dollar by approximately 6% to RUR 41.8 to $1.00.

For the nine months ended September 30, 2014, if the value of the ruble compared to the US dollar had been, on average, 10% lower than it actually was, we would have reported decreases in total operating revenues and total operating expenses of approximately $46.5 million and $25.9 million, respectively. The total operating expenses we reported would have decreased in this hypothetical scenario because most of our operating expenses are ruble-denominated even though our reporting currency is the US dollar.

Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e) or 15d-15(e)) as of September 30, 2014. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management

necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2014, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

During the three months ended September 30, 2014, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are not currently party to any legal proceedings, the outcome of which would reasonably be expected to have a material adverse effect on our financial results or operations.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors and all other information contained in this Quarterly Report on Form 10-Q before purchasing our common stock. The risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties of which we are unaware, or that we currently deem immaterial, may also become important factors that affect us. There may be risks that a particular investor views differently from us, and our analysis of the risks we face might be wrong. If any of the risks that we face actually occur, our business, financial condition and operating results could be materially adversely affected and could differ materially from any possible results suggested by any forward-looking statements that we have made or might make. In such case, the trading price of our common stock could decline, and you could lose some or all of your investment. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders.

On October 14, 2014, President Putin signed into law an amendment to the Russian law "On Mass Media", which will reduce the permitted level of foreign ownership in Russian mass media companies, including television broadcasters, from 50% direct ownership to 20% beneficial ownership, direct or indirect. The law does not provide for "grandfathering" of existing foreign ownership interests. The law will come into force on January 1, 2016, by which time each Russian mass media entity, including television broadcasters, must comply with the requirement that non-Russian entities and individuals in the aggregate beneficially own no greater than 20% of the relevant mass media entity. Russian entities and individuals that beneficially own interests in Russian mass media businesses greater than 20% through off-shore holding structures will have an additional year in which to restructure such foreign holding structures. In the event of non-compliance by the stated deadline, the Russian government would have the authority, among other things, to revoke the mass media registration and broadcasting licenses of our business.

The enactment of this law creates uncertainty regarding our corporate structure, ownership and operations after this law comes into force. Our Board of Directors has formed an Advisory Committee to review all potential responses to the enactment of this law, which may include corporate restructuring, franchising and licensing structures, capital reorganization or divestments. Any actions in

response to this amendment are likely to require significant Board and management time and attention, which will distract from the normal operations of our business. Any such actions may also result in significant changes to our corporate structure. If we are unable to take steps to restructure our operations in such a way that permits us to achieve compliance with this law while retaining our current ownership structure, we may be required to effect a sale of 80 percent or more of our Russian businesses. Any such sale may not result in proceeds at a level that reflects the underlying value of our business, particularly as the pool of potential purchasers would be limited to Russian persons that are not subject to applicable international sanctions. As a result, the value of the common stock of our company could further decline, and you may lose all or a significant portion of your investment.

In addition, our Board of Directors may pursue options to restructure our group to comply with the restrictions of this law that may result in the group being required to pay significant taxes, in particular in connection with complex corporate transactions in which the application of tax laws may be unclear.

The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and will require us to employ significant time and resources to ongoing compliance efforts.

Significant uncertainty exists surrounding the current geopolitical situation in Ukraine. Both the United States and the European Union, as well as other countries, have imposed economic sanctions on certain Russian government officials, other individuals and certain Russian companies in connection with recent developments in Ukraine and Crimea. There is significant uncertainty regarding the extent or timing of any potential further economic or trade sanctions, or the ultimate outcome of the Ukrainian crisis.

Neither we, nor any of our Russian subsidiaries or other operations or assets, are a target of current sanctions and we do not appear on the United States, European Union or other lists of sanctioned parties. Bank Rossiya and LLC IC Abros, which beneficially own a majority of one of our principal minority shareholders, Telcrest Investments Limited, and Yuri Kovalchuk, who has a significant interest in Bank Rossiya, have been named as parties on the Specially Designated Nationals ("SDN") and Blocked Persons List, published by the U.S. Department of the Treasury, Office of Foreign Assets Control ("OFAC"). Details can be found at http://www.treasury.gov/ofac/downloads/t11sdn.pdf. Due to Bank Rossiya's and LLC IC Abros's majority ownership interest in Telcrest, Telcrest is also deemed to be a SDN. Under the applicable sanctions, we (1) may not engage in any financial or commercial transaction with an SDN; (2) must block any "property interest" of an SDN over which we have possession or control; (3) may not facilitate or approve the action of any other party that would violate the sanctions; or (4) may not otherwise evade the sanctions. The European Union and many other countries have imposed similar sanctions.

As a result of the sanctions programs, we must engage in additional due diligence of prospective customers, suppliers or other third parties, which may delay or prohibit us from entering into agreements with these third parties. Any negative perception by our international customers or suppliers of our direct and indirect relationship to sanctioned parties, or regarding the overall geopolitical situation, may make it more difficult to do business with these customers or suppliers and may negatively impact our revenue and profitability. In particular, there have been press reports speculating that Video International, the advertising sales house on which we rely for the software used by our internal sales house and for material consulting services and analysis of the advertising market, may be controlled by parties subject to sanctions. According to our due diligence in respect of Video International, the Compliance Committee of our Board has concluded there the evidence does not suggest that Video International is majority owned or otherwise controlled by sanctioned parties. Nevertheless, negative perceptions resulting from our relationship with Video International may result in harm to our reputation or to our relationships with other counterparties. In addition, although we

have taken all reasonable efforts to confirm that Video International and our other counterparties are not majority owned or controlled by sanctioned parties, there remains the possibility that we could be found not to be in compliance with applicable legal requirements in respect of sanctions, which could materially adversely harm our business.

Sanctions could also impede our ability to effectively manage our legal entities and operations globally. We are a Delaware corporation, while our wholly-owned primary operating subsidiaries are organized under the laws of the Russian Federation. We may also be required to seek guidance or licenses from OFAC regarding compliance or in order to proceed to do certain business, and we are subject to OFAC blocking and reporting obligations.

Telcrest's position as principal minority shareholder of our company and its right to designate three of the nine members of our Board of Directors present significant compliance challenges for us. We have in place policies and procedures designed to ensure compliance with the applicable requirements. Such compliance efforts may take substantial time and attention of our management and Board of Directors, including our Compliance Committee, which would otherwise have been focused on other aspects of our business. We may also experience delays in business and corporate governance processes as a result of the requirements of these policies, including the recusal of Telcrest designated directors from decisions or deliberations on all transactions by our Board.

Applicable sanctions may also adversely affect our relationships with international banks, advisors and commercial counterparties. We have to date encountered several international banks that have declined to transact business with us, including processing routine payments from us to third parties, as a result of internal compliance policies that are significantly more restrictive than what is required by applicable law. Although these actions have not to date materially adversely affected our operations, if international banks or other Western counterparties decline to do business with us because of real or perceived compliance concerns, this could have a material adverse effect on our operations, results of operations and financial position.

We are committed to complying with all applicable laws, including Ukraine-related sanctions. However, if we fail to comply with sanctions requirements, our company and/or our directors and senior management could face administrative, civil and criminal penalties.

The pending combination of the major advertising sales houses in Russia may adversely affect our competitive position and our results of operations

On October 3, 2014, the four largest television groups in Russia, Gazprom Media, All-Russia State Television and Radio Broadcasting Company (VGTRK), Channel One and National Media Group, together with management of Video International, announced the formation of a new advertising sales house to operate under the Vi brand.

Historically, Video International operated as our exclusive sales house, placing substantially all of our national and a significant portion of our regional advertising. Following the introduction of a law in 2011 limiting the market share of advertising sales houses, we changed the model of our cooperation with Video International, pursuant to which it now provides software and consulting support to our internal sales house. Nevertheless, we remain substantially dependent on our relationship with Video International for our advertising sales. We are unable to predict how the combination of the major sales houses will affect the broader advertising market in Russia or impact our ability to obtain necessary support for our internal sales house. These developments may adversely affect our ability to negotiate favorable terms with Vi when our current agreements expire at the end of 2015 or may otherwise adversely affect our position in the broader advertising market. If we are unable to continue to obtain the support we need for our internal sales house and to compete effectively in the advertising market, our business and results of operations may be materially adversely affected.

We derive almost all of our revenues from the sale of advertising, which is sensitive to broader economic conditions. Our revenues may substantially decrease if the economic environment deteriorates in Russia or other CIS countries in which we operate.

We generate substantially all of our revenues from advertising. In general, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and buying patterns. Since the introduction of commercial television advertising in Russia following the fall of the Soviet Union, advertising spending has fluctuated substantially, generally increasing during periods of economic growth and decreasing during downturns. The global credit crisis and the related turmoil in the global financial system in 2008 had a material negative impact on the Russian economy, with total spending on television advertising in Russia declining significantly, falling by 18% in 2009 when comparing to 2008. Although in the past years the Russian economy demonstrated recovery and overall Russian television advertising spending grew at a compound annual growth rate of 12% in the period from 2009 to 2013, during the nine months ended September 30, 2014, Russia has experienced economic instability, characterized by a steep decline in the value of shares traded on its stock exchanges, depreciation of its currency and a forecasted decline in the growth of gross domestic product in 2014. Additionally, because Russia produces and exports large amounts of oil, its economy is particularly vulnerable to the price of oil on the world market and recent decreases in international oil prices may continue to adversely affect its economy. As a result of the current global economic instability and any further potential deterioration in the Russian economy, total television advertising spending in Russia may be adversely affected which, in turn, would materially adversely affect our operating results.

As discussed above, significant uncertainty exists surrounding the current geopolitical situation in Ukraine. Both the United States and the European Union, as well as other countries, have imposed economic sanctions on certain Russian government officials, other individuals and certain Russian companies in connection with recent developments in Ukraine and Crimea. There is significant uncertainty regarding the extent or timing of any potential further economic or trade sanctions, or the ultimate outcome of the Ukrainian crisis. The current situation in Ukraine has negatively affected our sublicensing sales of certain programming in that country and has also had a broader impact on the macroeconomic environment of the region. These factors, in conjunction with global macroeconomic weakness, may adversely affect our business. See also "—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and will require us to employ significant time and resources to ongoing compliance efforts".

Decreases in the value of the Russian ruble as compared to the US dollar that have resulted from the current economic and political instability in Russia have negatively impacted our reported revenues and operating results. If the exchange rate between the ruble and the US dollar remains at its current level or if the ruble depreciates further, our revenues and our operating results, both as reported in US dollars, may continue to negatively affect our reported results of operations in the future.

Although our reporting currency is the US dollar, we generate almost all of our revenues through the sale of advertising, which in Russia is sold primarily in rubles. The ruble is also the functional currency of our principal operating subsidiaries. As a result, our reported revenues and results of operations are impacted by fluctuations in the exchange rate between the US dollar and the Russian ruble.

In 2013, the Russian ruble depreciated against the US dollar by 7%, and was on average 2% lower than the average value of the Russian ruble compared to the US dollar during 2012. In 2013, the average exchange rate was RUR 31.85 to $1.00. The prevailing exchange rate as of December 31, 2013 was RUR 32.73 to $1.00. During the nine months ended September 30, 2014, the value of the Russian ruble depreciated against the US dollar by approximately 17% to RUR 39.4 to $1.00 as of September 30, 2014. This exchange rate was on average 11% lower than the average value of the

Russian ruble compared to the US dollar during the nine months ended September 30, 2013. This depreciation had a material negative impact on our reported results of operations for the nine months ended September 30, 2014. During the period from October 1, 2014 to October 27, 2014, the value of the Russian ruble depreciated further against the US dollar by approximately 6% to RUR 41.8 to $1.00.

See also "Item 3. Quantitative and Qualitative Disclosures about Market Risk—Foreign currency exchange risk".

Additionally, given that substantially all of our revenues are generated in Russian rubles, we face exchange rate risk relating to payments that we must make in currencies other than the Russian ruble. We generally pay for non-Russian produced programming in US dollars. As of September 30, 2014 we had US dollar denominated contractual commitments for the acquisition of approximately $24.5 million in programming rights in 2014, $46.2 million in 2015 and $9.1 million in 2016. In addition, on October 27, 2014, our Board declared a dividend of $0.175 per outstanding share of common stock, or approximately $27.3 million in total. The record date is December 1, 2014 and the payment date is on or about December 26, 2014. At September 30, 2014, our US dollar-denominated cash and cash equivalents comprised approximately $65 million; in addition, as at September 30, 2014, we have an outstanding foreign exchange forward contract to purchase approximately $25 million at an exchange rate of RUR 37.2 to $1 in December 2014, to reduce a portion of our foreign exchange risk related to US-dollar denominated payments. We have not entered into any arrangements to reduce the foreign exchange risk with respect to the remaining future US dollar denominated payments.

If the exchange rate between the Russian ruble and the US dollar remains at its current level or if the Russian ruble depreciates further, our revenues and operating results for 2014, and perhaps future periods, as reported in US dollars, will be materially adversely affected.

A reduction in our audience shares and ratings would likely result in a reduction in our advertising revenues.

The level of advertising revenues that we receive is directly tied to our audience shares and ratings. If our audience shares or ratings were to fall as a result, for example, of competitive pressures, underperformance of key programs, failure to renew licenses, or a change in the method of measuring television audiences, this would likely result in a decrease in our advertising revenues, which could be material. In the nine months ended September 30, 2014, the target audience share of CTC channel was below the audience share for the same period of 2013, mainly due to increased competition and the effect of audience fragmentation. In addition, in the nine months ended September 30, 2014, the target audience share of Peretz channel was below the audience share for the respective preceding periods, due to increased competition from channels broadcasting political news on the situation in Ukraine, relative underperformance of content and audience fragmentation.

Our ability to attract and retain viewers depends primarily on our success in offering programming that appeals to our target audiences. Russian viewer preferences have been changing in recent years, with increasing demand for programming produced in Russia. There is currently a relatively limited supply of Russian-produced programming and strong competition among Russian networks and channels for such programming and Russian production talent, as well as for popular foreign programming.

From time to time we air one or two series during primetime that contribute disproportionately to our overall audience share, resulting in an overall audience share that we may not be able to sustain once that series is discontinued or loses popularity. Moreover, because we continue to rely on third-party production companies for a large portion of our programming and our programming library is not as extensive as those of some of our competitors, we may be unable to quickly substitute new programming for underperforming programming. If we are unable to produce or secure a steady supply of high-quality programming, particularly in the key timeslots, or if we fail to anticipate, identify or

react appropriately to changes in Russian viewer tastes or legislation, or to increased competition, by providing appropriate programming, our overall audience shares could be negatively affected, which would adversely affect our advertising revenues. Moreover, if any of the programming we produce, commission or license does not achieve the audience share levels we anticipate, we may be required to write-off all or a portion of the carrying cost of such programming, and we could be forced to broadcast more expensive programming to maintain audience share, either of which could have a material adverse impact on our results of operations.

We may face additional expenditures in connection with the planned transition from analog to digital broadcasting in Russia and Kazakhstan, and the necessary investments for digital migration may not be fully monetized.

The Russian government has announced a federal program to introduce digital broadcasting throughout Russia by the end of 2018. The government's plan called for digital broadcasting to be introduced in stages, with several packages of digital signals, or "multiplexes", to be launched over time. The government initially announced the channels that would be included in the first multiplex (Channel One, Rossiya 1, Rossiya 2, Rossiya 24, Rossiya K, Channel 5, NTV, Karousel, TVC and Public TV of Russia (OTR)), determined milestones for the transition to this multiplex, and indicated that the infrastructure for this first multiplex will be funded by the government.

In October 2012, the Russian Federal Service for Supervision in the Sphere of Telecommunications, Information Technologies and Mass Communications (Roskomnadzor) announced the terms of a tender for a second multiplex, the results of which were announced on December 14, 2012. In total, 10 channels, including our CTC and Domashny channels, were selected for inclusion in the second multiplex. It is expected that the second multiplex will ultimately be available to approximately 97.6% of the Russian population.

In March 2013, we entered into 10-year transmission agreements with the RTRS. Under the terms of these agreements, RTRS will ultimately provide to CTC and Domashny, as well as other broadcasters in the second multiplex, all services required for the channels to broadcast their signals in digital format throughout Russia to more than approximately 140 million viewers, once the rollout of digital broadcasting is complete throughout the territory of the Russian Federation. In July 2014, we amended these agreements with RTRS to better reflect the currently planned rollout schedule and to amend the financial terms of participation in the second multiplex in light of RTRS's current implementation timeframes, the funds needed to provide services in regions as they become operational, and the financial support required for the build-out of the infrastructure for a comprehensive digital platform throughout the Russian Federation by 2019. RTRS is initially launching digital broadcast services in the second multiplex in cities with populations of more than 50,000 people ("50+ coverage") with approximately 90% of 50+ coverage operational by the end of 2014. In addition, during the period 2015-2018, RTRS will construct the digital broadcasting infrastructure in smaller cities with populations less than 50,000 ("50- coverage"). It is expected that this infrastructure will be put into operation in 2019. See also "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Factors Affecting Our Results of Operations—Transition to digital broadcasting".

In addition, governmental authorities announced plans to introduce a third multiplex which is supposed to cover only cities with populations of more than 50,000 people and is expected to be available to approximately 64% of the Russian population, and indicated that the structure of the third multiplex and terms of participation in it, as well as terms of the tender for the third multiplex, will be determined by a governmental commission by December 2014. The terms for participation in the third digital multiplex have not been specified. Following the introduction of digital broadcasting, we expect

to encounter certain risks and uncertainties in the execution of each of our channels' business models. Currently, we believe the most significant of these are the following:

While our channels will continue to broadcast in the analog format under existing analog licenses, there is currently uncertainty regarding the effect of the implementation of digital broadcasting on our business models, and the digitalization of broadcasting may adversely affect our market position and financial condition.

In February 2014, a governmental committee suggested that all channels included in the first and second digital multiplex reconfigure their broadcasting signal into high definition (HD) format. This suggestion is not obligatory, but in case this suggestion is upheld by the Russian government we may be obliged to reconfigure the broadcasting signal of our CTC and Domashny channels into HD format. If

such decision is implemented in the future, we will be required to reconsider our operational models and business plans in order to reflect such changes. While we do not believe such changes would impact us in the near term, we are unable to predict how such changes, if any, may affect our business, financial condition and results of operations in future periods.

See also "—A significant portion of our total assets relates to goodwill. We have been required to record significant impairment charges for goodwill in the past, and if events or changes in circumstances further reduce the fair value of our reporting units, we may be required to record impairment losses that could materially adversely impact our net income."

Several recently adopted Russian laws regarding advertising and programming content may impact the programming and advertisements we are permitted to broadcast, which could result in a reduction in our audience share and advertising revenues.

On July 4, 2014, the Russian Parliament adopted three laws amending the Advertising Law. One of the amendments eliminates the existing restriction that prohibits an advertising sales house having a greater than 35% share of the TV advertising market. The amendment came into force on July 22, 2014. In 2011, when this restriction came into force, we formed our own sales house—EvereST-S—and terminated our sales agency agreement with Video International, which had historically served as our sales house and which then had a share of the Russian TV advertising market greater than 35%. We continue to rely on Video International for material software and consulting services. On October 3, 2014, the four largest television groups in Russia, Gazprom Media, VGTRK, Channel One and National Media Group, together with the management of Video International, announced the formation of a new advertising sales house to operate under the Vi brand. We are unable to predict how the combination of the major sales houses will affect the broader advertising market in Russia or impact our ability to obtain necessary support for our internal sales house. These developments may adversely affect our ability to negotiate favorable terms with Vi when our current agreements expire at the end of 2015 or may otherwise adversely affect our position in the broader advertising market. See also "—The pending combination of the major advertising sales houses in Russia may adversely affect our competitive position and our results of operations".

A second amendment removes the prohibition on advertising by beer producers and their brands during the broadcasting of sporting events. The amendment came into force on July 22, 2014. Currently, our channels do not broadcast sporting events and we therefore do not expect that this amendment will affect our operations.

The last amendment prohibits advertising on pay-TV channels and will come into force on January 1, 2015. We are not able to predict how this amendment will affect the pay-TV market.

The law "On protection of children from harmful information", which came into effect in September 2012, prohibits the distribution of any information that may be harmful to children, such as scenes of violence, abusive language, pornography and scenes encouraging children to consume alcohol, drugs and tobacco. All information must be labeled into five categories: (1) information appropriate for children under 6 years, (2) information appropriate for children 6 years and older, (3) information appropriate for children 12 years and older, (4) information appropriate for children 16 years and older, and (5) information prohibited for children. In order to comply with this new law, we have established an editorial control department responsible for labeling our programs in accordance with these five categories. Since September 2012 all our programs have been labeled in accordance with this new law. Implementation of this law has not adversely affected our channels to date, but we can provide no assurance that governmental authorities will not in the future interpret the law in such a way that will require us to revise our programming, which could adversely impact the audience share of our channels.

In April 2013, a new law came into force amending the federal law "Improving Regulation of Mass Media, Television and Radio Broadcasting" as well as the Administrative Code, prohibiting the use of abusive language in mass media. We believe that these amendments will not affect our channels as long as we constantly monitor our content, but since the term "abusive language" is not defined and is subject to interpretation, we cannot guarantee that we will not be faced with claims that we have violated this law or that we will be able to defend these claims successfully.

In October 2013, a new law came into force amending the law on advertising as well as the Administrative Code regulating the advertising of biologically active additives (BAA) and imposing penalties for inappropriate advertising thereof. According to this law, advertisements must include a disclaimer that BAAs are not a medicine. Advertisers as well as television channels broadcasting such BAA advertisements will be liable if such a disclaimer is not included or does not satisfy these new requirements. We do not expect this law to affect our business significantly, since we have editorial control over commercials we broadcast, but we cannot be sure that we will not receive any claims in the future, since there is limited legal practice in implementing these amendments and there are no court interpretations of them.

In addition, recently adopted laws in Kazakhstan may affect our Kazakh operations. One new law generally prohibits advertising of medicines, ways of medical treatment and diagnosis. This law will come into force in November 2014. A second law prohibits advertising umbrella brands of alcohol producers. This law came into force on July 13, 2014. We are unable to predict the impact of these new laws on our Kazakh operations.

Changes in the method of measuring television audiences and ratings have at times in the past resulted, and may again in the future result, in decreases in our audience share and ratings.

Our advertising revenues are largely driven by our audience share (the percentage of all people watching television at a given time who are watching our channels) and ratings (the percentage of the total population that is watching our channels at a given time). The system of audience measurement in Russia, currently run by TNS Russia, has evolved as the advertising market has matured and in response to changing Russian demographics.

TNS Russia currently weights the panel of measured cities based on broadcasters' technical penetration in a group of 165 cities (the so-called "establishment survey"). The panel cities are chosen from among those Russian cities with more than 100,000 residents, which together account for approximately 50% of the total population of Russia. Our audience share could be negatively affected if we were to lose an affiliate in one of the cities in that group, or if our technical penetration in that group of cities were to be lower than our average technical penetration.

At the end of 2012, the government published the results of the Russian population census taken at the end of 2010. These results led to changes to the relative weighting of the cities in the panel, the size of which increased to 77 cities starting January 1, 2013. Furthermore, in 2013 TNS expanded the "establishment survey" from 121 cities to all cities with more than 100,000 residents (165 cities in total). According to preliminary estimates such change did not lead to any significant changes in the weighting system or have any impact on our estimated ratings.

In addition, on June 30, 2014, the Industry Committee on TV Audience Measurement in Russia announced a tender for the right to provide the industry-standard measurement of TV audiences in Russia for the period from 2017 through 2026. We understand that in October 2014, four companies, including TNS, submitted applications in response to this tender, and that the Committee will select a winner during the fourth quarter of 2014. This tender may result in a change in the provider of audience measurement services in Russia, or may in any event result in changes in the audience measurement system. We are unable to predict at this time the impact of any such changes on our audience share or ratings, but any such changes may adversely affect our audience shares.

When changes to the system of audience measurement occur, we attempt to take steps when possible in respect of our programming, distribution and sales to counteract the effects of such changes. We cannot assure you that these steps will be adequate or effective, or that any further changes in the measurement system will not result in decreases in our estimated audience shares and, as a result, a material decrease in our advertising revenues.

A significant portion of our total assets relates to goodwill. We have been required to record significant impairment charges for goodwill in the past, and if events or changes in circumstances further reduce the fair value of our reporting units, we may be required to record impairment losses that could materially adversely impact our net income.

We have a significant amount of goodwill recorded on our consolidated balance sheet. If we determine that our estimate of the current value of a reporting unit is below the recorded value of that unit on our balance sheet, we may record an impairment loss for goodwill. As of September 30, 2014, the carrying values of goodwill related to CTC, Domashny and Peretz totaled $42.8 million, $21.6 million and $47.9 million, respectively. In addition, as of September 30, 2014, we have significant balances of amortizable broadcasting licenses totaling $41.4 million, including CTC licenses—$6.7 million; Domashny licenses—$8.7 million, and Peretz licenses—$21.3 million.

In the annual impairment review performed at December 31, 2013, we concluded that the fair values of our reporting units significantly exceeded their carrying values, reflecting the improved macroeconomic conditions from the downturn in the economy that started in 2008.

During the nine months ended September 30, 2014, the geopolitical situation in Ukraine created economic instability in Russia, See also "—We derive almost all of our revenues from the sale of advertising, which is sensitive to broader economic conditions. Our revenues may substantially decrease if the economic environment deteriorates in Russia or other CIS countries in which we operate." If Russia experiences significant economic instability or uncertainty, including continued or expanded international economic sanctions, international advertisers may choose to reduce their advertising spending in Russia. Our management, in consultation with the Board of Directors, continuously assesses market conditions and may revise its estimates for the Russian television advertising market growth in the medium term to reflect potential negative trends in the macroeconomic environment.

The fair value of the Peretz reporting unit is highly sensitive to changes in our assumptions regarding the television advertising market. Although there is considerable uncertainty regarding the ultimate outcome of the Ukrainian crisis and its impact on the Russian economy, and, in particular, concerning the Russian advertising market in 2015 and thereafter, we have determined that it is more likely than not that current economic conditions have impacted the fair value of our reporting units. As a result of the impairment review performed as of September 30, 2014, due to the revision of assumptions in the TV advertising market for 2015 and in the medium-term, the excess of fair values over carrying value of the Peretz reporting unit decreased from 48% to 7%, when compared with the fair values estimated during the annual 2013 impairment tests. Depending on further developments of the Ukrainian crisis and related geopolitical situation in the region and its impact on macroeconomic environment of Russia and, specifically, on the Russian TV advertising market in 2015 and the medium term, we may need to further revise our projected cash flows, which could adversely impact the fair value of our reporting units and related assets, and we would then record impairment charges.

See also "Financial Statements and Supplementary Data—Note 2, Basis of Presentation and summary of significant accounting policies—Goodwill and Long-Lived Intangible Assets Impairment Tests" for a discussion of our sensitivity analysis.

Our management also considers the developments in digital broadcasting and their potential impacts on revenues and costs (see also "—We may face additional expenditures in connection with the planned transition from analog to digital broadcasting in Russia and Kazakhstan, and the necessary

investments for digital migration may not be fully monetized"). The fair value of the Peretz reporting unit is particularly sensitive to changes in revenues and costs that may result depending on its distribution model. Currently, the terms for participation in the third digital multiplex have not been specified. In addition, current Russian legislation does not provide 'must carry' obligations for cable and satellite operators, and accordingly we may be unable to secure or maintain carriage of our signal over cable in certain regions, or at transmission rates that are consistent with our historical experience. Depending on further information about the terms of the transition to digital broadcasting, terms of interaction with cable and satellite providers, as well as other future developments, we may need to further revise our projected cash flows, which could adversely impact the fair value of our reporting units and related assets, and we would then record impairment charges.

Restrictions on foreign involvement in the television business in Kazakhstan could be amended or interpreted in such a way as to result in our loss of necessary licenses or to require us to divest control of our Kazakh operating subsidiaries.

The Mass Media Law in Kazakhstan restricts direct and indirect foreign ownership of any Kazakh television broadcaster to no more than 20%. In 2008, we acquired a 20% interest in the Kazakh television broadcast company Channel 31, and established two subsidiaries that provide the programming content and advertising sales functions to Channel 31 on an exclusive basis (together, the "Channel 31 Group"). Together, these interests provide us with a 60% economic interest in the Channel 31 Group as a whole. If the existing 20% limit were to be interpreted to restrict effective or economic control, rather than just direct ownership, or if the law were to be changed or interpreted to impose further restrictions or limitations on foreign ownership of Kazakh television broadcasters, we could be obliged to restructure this group in order to comply with such requirements or could be required to divest all or a portion of our interest in the Channel 31 Group. If we fail to comply in a timely manner, the authorities could suspend or revoke Channel 31's broadcasting licenses or could take other actions that could limit our ability to operate the Channel 31 Group. The book value of Channel 31's broadcasting license as of September 30, 2014, was approximately $4.7 million.

We may encounter difficulties integrating acquired businesses, and if we fail to identify additional suitable targets our growth may be impeded.

As part of our growth strategy, we intend to continue to evaluate potential acquisitions that we believe are commercially attractive. While acquisitions represent an important component of our growth strategy, the integration of new businesses poses significant risks to our existing operations, including:

Additionally, the integration of new businesses may be difficult for a variety of reasons, including differing cultures or management styles, legal restrictions in the target's jurisdiction, poor target records or internal controls and an inability to establish control over cash flows. Furthermore, even if we are

successful in integrating new businesses, expected synergies and cost savings may not materialize, resulting in lower than expected profit margins.

As a US public company, we are subject to securities laws and regulations requiring that we file with the SEC audited historical financial statements for businesses we acquire that exceed certain materiality thresholds. Given the financial reporting practices in Russia and other CIS countries, such financial statements are often not readily available or are not capable of being audited to the standards required by US securities regulations. As a result, we may be prevented from pursuing acquisition opportunities that our competitors and other financial and strategic investors are able to pursue.

A change in Russian law further limiting the amount of advertising time permitted on television could materially adversely affect our results of operations.

Current Russian law limits the amount of time that a broadcaster may devote to advertising to no more than 15% of any broadcasting hour. From time to time, there are discussions in the Russian government regarding imposing additional restrictions on television advertising, such as limiting the types of products that may be advertised, limiting product placements in programming, limiting the number of advertising breaks allowed in certain programs or requiring channels to devote more broadcast time to public service announcements. If legislation were introduced to further limit our ability to broadcast paid advertising or product placements, we cannot guarantee that increases in advertising prices, if any, or any other steps we would be able to take to mitigate the impact of such further limitation would be sufficient to compensate for the loss of advertising time.

If free-to-air television does not continue to constitute a significant advertising forum in Russia, our revenues could be materially reduced.

We generate substantially all our revenues from the sale of television advertising in Russia, which constituted approximately half of all advertising expenditures in Russia in 2013, having increased from 25% in 1999. In the broader advertising market, television competes with various other advertising media, such as print, radio, internet and outdoor advertising. In addition, the television broadcasting industry is affected by rapid innovations in technology. The implementation of new technologies and the introduction of broadcasting distribution systems other than free-to-air broadcasting, such as direct-to-home cable and satellite distribution systems, the internet, video-on-demand, user-generated content sites and the availability of television programming on portable digital devices, are changing consumer behavior by increasing the number of entertainment choices available to the audience. While television continues to constitute the single largest component of all advertising spending in Russia, there can be no assurance that television will maintain its current position among advertising media. Increases in competition arising from the development of new forms of advertising media could have an adverse effect on our ability to maintain and develop our advertising revenues and, as a result, on our results of operations.

The loss of licenses, or the failure to comply with the terms of licenses, could have an adverse effect on our business.

All broadcast television stations in Russia are required to have broadcasting and other operating licenses. Only a limited number of such licenses are available in each locality. These licenses currently have a standard term of ten years. We also hold so-called "universal licenses", which permit a channel to broadcast through free-to-air, cable and satellite broadcasting, in either digital or analog format across the whole territory of Russia. However, we anticipate that analog licenses will be relevant until the full transition to digital broadcasting is complete.

In addition, Russian law could be interpreted as requiring cable television operators to have broadcast and other operating licenses for each of the channels or networks they transmit on their

cable systems. Most of the independent cable television operators that currently carry our networks do not possess such licenses. The issuance of a license, as well as the terms and conditions of any license, are often subject to the exercise of broad discretion by governmental authorities.

A broadcaster must conform its programming to the programming concept outlined in the broadcasting license. In particular, the broadcaster is obliged to ensure compliance of its programming with the declared genres of the channel and to maintain a required balance in the volume-genre ratio of broadcasted materials, both of which are prescribed in the license. Until recently, the broadcasting licenses of our affiliate stations also contained various restrictions, including requirements with respect to the minimum amount of locally produced programming that must be broadcast.

The broadcasting license of Channel 31 in Kazakhstan also contains various restrictions and obligations. Kazakh law currently requires that broadcasters air at least 50% of their programming in the Kazakh language during every six-hour slot.

We may not always be in full compliance with license requirements. Also, our affiliates have not always been in full compliance with all the requirements of their licenses or obtained all the licenses necessary for broadcasting. If the terms of a license are not complied with, or if we violate applicable legislation or regulations, the license may be suspended or terminated (which decision may be appealed in court). If an affiliate were to broadcast without all the necessary licenses, broadcasting may be terminated and fines could be imposed.

The loss of an existing broadcasting license, or the failure to obtain a broadcasting license in a new market, particularly in a significant market, could reduce or limit the coverage of our networks and result in a loss of audience share and a fall in ratings, which could materially adversely affect our advertising revenues and business.

The failure of our independent affiliates to comply with requirements in our network agreements that they broadcast our advertising creates the potential for complaints from our advertising clients.

We seek to enter into formal agreements with our independent affiliate stations governing various aspects of the broadcast of our network programming. These agreements generally require our affiliates to air most of our programming, including advertising during federal advertising slots. The majority of our independent affiliate stations have their own broadcasting licenses which entitle them to form their own broadcasting grid structured in accordance with their licenses as well as our network agreements.

Although we have introduced procedures to monitor the broadcasting of our network programming in cities that have not been included in TNS Russia Panel, we cannot ensure that our affiliates are always consistent in their compliance with the federal advertising provisions of our agreements. If an independent affiliate breaches its obligations under our network agreement, we may face complaints from our advertising clients.

The loss of independent affiliates could result in a loss of audience share.

We seek to enter into formal agreements with our independent affiliate stations that govern various aspects of the broadcast of our network programming. These agreements generally provide each party with the right to terminate the agreement on 60 or 90 days' notice without penalty. If an independent affiliate in a larger market, particularly in a city where audiences are measured and in which we do not own and operate a station, were to terminate its agreement with us, sell itself to a competing network or lose the ability to broadcast our signal, it could result in a decrease in our audience share.

We rely on third parties to provide us with re-transmission capabilities in certain locations, and our business would be adversely affected if such parties terminated or adversely changed the terms of those relationships.

In certain locations, we depend on cable operators or other third parties to carry our signal. In Moscow, for example, television signals are transmitted from a central tower to roof antennas located on buildings throughout the city, and are then amplified for retransmission within the buildings. Mostelecom is the major local provider of cable transmission in Moscow. We have contracts with Mostelecom to secure the rights of our CTC, Domashny and Peretz Moscow stations to be connected by cable to households in Moscow. These contracts do not, however, grant us the right to be connected to all households in Moscow for all of our networks. From time to time we evaluate, from a cost benefit analysis, whether to connect by cable to additional households. A second cable operator carries our networks' signals to approximately 15% of the Moscow households covered by our networks' signals. We pay this cable operator an annual fee for transmission to these households. A cable system similar to that provided by Mostelecom is in place in St. Petersburg and is operated by the local provider; we pay this cable operator an annual fee for transmission.

If we were to be denied continued access to the cable systems that carry our networks' signals in Moscow or St. Petersburg, our technical penetration would be materially adversely affected which would, in turn, have a material adverse effect on our audience shares. Depending on the exact terms of the transition to digital broadcasting, our dependence on cable operators may increase. Current Russian legislation does not provide 'must carry' obligations for cable operators, and accordingly we may be unable to secure or maintain carriage of our channels' signals over cable in certain regions, or at transmission rates that are consistent with our historical experience. As a result, there can be no assurance that we will be able to negotiate mutually acceptable transmission agreements in the future relating to the carriage of our signals with cable providers.

We rely on third parties for the production of a significant portion of our original Russian programming, and our business could be adversely affected if we are unable to continue such relationships on acceptable terms.

We rely on third-party production houses to produce a significant portion of our original programs. If we are unable to continue our close working relationships with the production houses we use or to develop new relationships, our ability to air premium new Russian content may be impeded, which would likely result in a loss of audience share and therefore a reduction in our share of the television advertising market.

We may not be able to compete successfully against other free-to- air channels and networks that may have broader coverage, greater name recognition, larger market share, wider programming content or access to more funding than we do, or with niche channels or non-free-to-air channels offering competitive programming formats.

The Russian television broadcasting business is highly competitive. Approximately 20 free-to air television channels account for approximately 98% of the television advertising market. The market also includes multiple non-free-to-air television channels. The free-to-air channels include five larger national channels, namely Channel One, Rossiya 1, NTV, TNT and CTC, and a number of smaller niche channels, including Domashny and Peretz. Our networks compete for audience share with other national television networks and channels and with local stations, as well as with niche broadcasters. We compete on the basis of both the actual and anticipated size of our audiences for specific time slots, as well as the demographic characteristics of our viewers.

On a national level, CTC competes directly with other larger broadcast networks and channels, including Channel One, as well as with the smaller networks, TNT and NTV. Domashny competes for advertising revenues primarily with Rossiya 1 and TVC, and Peretz competes primarily with NTV and REN-TV, although they both also compete with the larger broadcast networks and channels for viewers

within their target demographic groups. On a local level, our owned-and- operated stations compete with other stations for local advertising.

Channel One and Rossiya 1 were established as state television channels during the Soviet period and they remain under Russian state control. As a result, we understand that these channels receive state benefits not generally available to private companies, including free signal transmission (in the case of Channel One), direct state budget subsidies (in the case of Rossiya 1) and preferences in licensing. The provision of benefits and preferences to state controlled entities may impede our ability, as a private media company, to effectively operate and compete in the broadcasting market given the trend towards market consolidation by state controlled entities. For example, Gazprom, the state-controlled energy company, expanded its Russian media empire further in November 2013 by the acquisition of Profmedia which operates TV and radio stations as well as other media assets.

Moreover, nearly every viewing household in Russia can receive the broadcast signals of Channel One and Rossiya 1, while only a more limited viewing audience can currently receive our network signals. The much broader coverage and name recognition of Channel One and Rossiya 1, coupled with programming geared toward a broader demographic group, help them to attract large audience shares. NTV, which is indirectly controlled by the state through Gazprom, also has a broader coverage than our networks, and we believe also benefits from free signal transmission. In 2013, Channel One had an average audience share among 10-45 year-old viewers of 11.6%, while Rossiya 1's was 8.6% and NTV's was 9.0%. CTC's average target audience share in 2013 was 11.3%. We believe that the strong audience shares of Channel One, Rossiya 1 and NTV may give these broadcasters added leverage in negotiations with advertisers, advertising agencies and sales houses. See also "—The pending combination of the major advertising sales houses in Russia may adversely affect our competitive position and our results of operations." Moreover, as we focus on entertainment programming, we are unable to compete with other broadcasters for audiences for news and sporting programs, some of which have among the highest audience shares and ratings in their time slots. In addition, Channel One, Rossiya 1 and NTV enjoy certain preferences that commercial channels do not. For example, they are included in the list of free-access federal channels that benefit from a must-carry option throughout Russia, as opposed to commercial channels including ours, which have to pay for transmission services.

Disney Channel launched free-to-air broadcasting in Russia in December 2011. The Disney channel focuses on family entertainment by combining Disney programming with original Russian TV shows. CTC channel competes with Disney Channel for younger audiences.

We understand that the beneficial owners of one of our principal minority stockholders, Telcrest, including Bank Rossiya (which is not affiliated with Rossiya television channel), have investments in Russian media businesses, including through ownership interests in Channel One, REN-TV and Channel 5. Telcrest and Bank Rossiya may have interests different from, or in addition to, the interests of other stockholders of CTC Media. See also "—Our principal stockholders may have interests that are different from, or in addition to, the interests of other stockholders of CTC Media."

Non-free-to-air channels typically provide services to subscribers for a regular subscription fee, and typically do not generate a significant portion of their revenues from advertising. As a percentage of the overall television market, the non-free-to-air market in Russia is currently smaller than in the United States and Western European countries. Audience share for these channels, however, is increasing. In other countries, such as the United States, growth in non-free-to-air television services has often resulted in fragmentation of the market and a corresponding decrease in the audience share of large national networks and channels. All larger national free-to-air TV channels in Russia have in recent periods been negatively impacted by increased competition from smaller non-free-to-air and niche TV channel viewership in the "All 4+" category, which increased from 12.6% in 2010 to 14.5% in 2011, 15.5% in 2012 and 17.2% in 2013 and 18.3% in the nine months ended September 30, 2014. If niche and non-free-to-air channels continue to grow their customer base in Russia, our audience shares

and ratings, especially the audience share of CTC channel, could be negatively affected, which would adversely affect our advertising revenues. See also "—If free-to-air television does not continue to constitute a significant advertising forum in Russia, our revenues could be materially reduced".

Also, the introduction of digital broadcasting may affect competition within the television marketplace, which may negatively impact the audience shares of our channels. See also "—We may face additional expenditures in connection with the planned transition from analog to digital broadcasting in Russia and Kazakhstan and the necessary investments for digital migration may not be fully monetized".

We have substantial future programming commitments that we may not be able to vary in response to a decline in advertising revenues, and as a result could experience material reductions in operating margins.

Programming represents our most significant expense, and at any given time we generally have substantial fixed commitments for the succeeding two to three years. For example, as of September 30, 2014 we had contractual commitments for the acquisition of approximately $82.9 million in programming rights in 2014, $84.1 million in 2015 and $12.6 million in 2016, including US dollar denominated commitments of approximately $25.0 million in 2014, $45.7 million in 2015 and $9.1 million in 2016.

Given the size of these commitments, at any time a reduction in our advertising revenues could adversely affect our operating margins and results of operations. See also—"Decreases in the value of the Russian ruble as compared to the US dollar that have resulted from the current economic and political instability in Russia have negatively impacted our reported revenues and operating results. If the exchange rate between the ruble and the US dollar remains at its current level or if the ruble depreciates further, our revenues and our operating results, both as reported in US dollars, may continue to negatively affect our reported results of operations in the future".

Our relationships with the co-owners of our television stations may limit our ability to implement our business plans and strategy.

More than half of our owned-and-operated stations are 100% owned by CTC Media. Other shareholders own between less than 1% and 50% of each of the remaining owned-and-operated stations. In some cases, we depend to a significant extent on our local partners for their familiarity with the local business environment and public authorities. Moreover, we may in the future similarly rely on joint-owners as we acquire additional stations. Any significant disruption in our relationship with these parties could make it more difficult for us to operate these stations.

Russian law and some of the agreements governing these stations grant protective rights to our co-owners that enable them to block certain significant corporate actions. Under Russian company law, significant corporate decisions, such as declaring and paying dividends and entering into substantial transactions, require the consent of the holders of two-thirds or three-quarters of the voting interests of the company, depending on the subject matter and the legal structure of the company. In addition, unanimous shareholder approval is required in limited instances, which could further affect our control over certain actions. For example, approval of a joint stock company's initial charter and reorganization of a joint stock company into a non-commercial partnership require 100% approval of shareholders. In the case of a limited liability company, increases in charter capital, amendments to a limited liability company's charter, and liquidation, among other actions, require 100% approval of the holders of participation interests.

As a result, we are often required to obtain the consent of our co-owners when making significant corporate decisions. Although we are not aware of any specific transaction in which we failed to obtain the requisite approval of the co-owners of our stations, due to the formalistic nature of Russian law and the large number of corporate actions that are taken annually by our co-owned stations, we believe

it is likely that, from time to time, not all necessary minority shareholder consents have been obtained. As a result, we cannot guarantee that co-owners of our stations will not bring claims against us for failure to obtain these necessary consents, which, if successful, could result in the transaction in question being voided. Moreover, even if not technically required by law or contract, we generally prefer to obtain the consent and support of our co-owners before undertaking significant corporate actions. If this consent cannot be obtained, we may decide to forego a transaction that is commercially favorable to us in an effort to preserve goodwill with our co-owners.

We believe that our growth and our future success will depend in large part upon our ability to attract and retain highly skilled senior management, production talent, finance and legal personnel. We believe that certain competitors continue to aggressively court some of our personnel. The competition is intense in Russia for qualified personnel who are familiar with the Russian television industry and/or who are knowledgeable about US accounting and legal practices. We cannot assure you that we will be able to retain qualified personnel, or hire appropriate replacements on reasonable terms or at all.

A broadcasting systems failure could prevent us from transmitting our network signal and lead to a loss of viewers, damage to our reputation and a reduction in our advertising revenues.

Our networks' signals originate in Moscow and are uplinked to multiple separate satellite systems that transmit our signals to our affiliate stations and unmanned repeater transmitters. From time to time we experience insignificant signal failures. Although we are able to backup our signal, prolonged or repeated disruptions in our signals could lead to a loss of viewers, damage to our reputation and a reduction in our advertising revenues. We do not carry business interruption insurance to protect us in the event of a catastrophe or termination of our ability to transmit our signals, even though such an event could have a significant negative impact on our business.

We do not carry all of the insurance coverage customary in many countries for a business of our size and nature, and as a result could experience substantial loss or disruption.

The insurance industry is less developed in Russia than in other developed countries, and many forms of insurance protection common in other countries are not yet available in Russia on comparable terms. Although we have insurance covering risks of loss of satellite signal and satellite capacity, at present, we have no coverage for business interruption or loss of key management personnel. We do not maintain separate funds or otherwise set aside reserves for these types of losses. Any such loss may cause substantial disruption and may have a material adverse effect on our business, results of operations and financial condition.

We may from time to time be involved in lawsuits and investigations that could entail significant costs and, if determined against us, could require us to pay substantial damages, fines and/or penalties.

In the normal course of our business we are involved in various legal proceedings. These lawsuits and other proceedings include commercial disputes, claims regarding intellectual property, tax disputes and labor disputes. Litigation can be expensive, lengthy and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. If a lawsuit is decided in a way that is unfavorable to us, this could have a material adverse effect on our business, reputation, operating results, or financial condition.

As a publicly listed company, we may be exposed to lawsuits in which plaintiffs allege that CTC Media or our directors or officers failed to comply with applicable securities laws, stock market regulations or other laws, regulations or requirements. Whether or not there is merit to such claims, the time and costs incurred in defending our company and its directors or officers, and any potential

settlement or compensation we might be obligated to pay the plaintiffs, could have a significant impact on our reported results, as well as our reputation.

Our principal stockholders may have interests that are different from, or in addition to, the interests of other stockholders of CTC Media.

Each of our two largest stockholders, which together hold approximately 64% of our common stock, is involved in the television business in Russia.

MTG Russia AB, an affiliate of the publicly listed Modern Times Group MTG AB ("MTG"), holds a 50% interest in Raduga Holdings. Raduga is the sole owner of LCC DalGeoCom, which operates Raduga TV, a nationwide Russian digital satellite pay-TV platform. Jørgen Madsen Lindemann, a member of the Board of MTG, is a Co-Chairman of our board of directors; Mathias Hermansson, CFO of MTG, and Irina Gofman, Chief Executive Officer of MTG Russia AB, are members of our board of directors. Although we do not currently operate in the pay-TV market, and do not currently compete with or have any commercial relationship with Raduga TV, MTG may have interests that are different from or in addition to interests of other stockholders of CTC Media, including as a result of its interest in another Russian television business.

We understand that the beneficial owners of our second largest shareholder Telcrest, including Bank Rossiya, have investments in Russian media businesses, including through indirect minority equity interests in Channel One, REN-TV and TRK 5 (Channel 5). We understand that Bank Rossiya also has indirect significant minority interests in Video International, with which we have software license and service agreements in respect of advertising sales.

Pursuant to a stockholders agreement, Telcrest has designated three of our directors, none of whom we understand is currently primarily engaged in the operations of Channel One, REN-TV, TRK 5 or Video International. We compete with broadcasters in which the beneficial owners of Telcrest have equity and financial interests, and we believe the services of Video International are important to our operations. Although we are not aware of any conflicts of interest with Telcrest in this regard, Telcrest and its beneficial owners may have interests that are different from or in addition to interests of other stockholders of CTC Media. As a result of the recent amendments to the Mass Media Law and a proposed restructuring of the Video International business may also cause Telcrest to have interests different from those of our other stockholders.

See also: "—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and may require us to employ significant time and resources to ongoing compliance efforts." and "—Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in our the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders." and "—Several recently adopted Russian laws regarding advertising and programming content may impact the programming and advertisements we are permitted to broadcast, which could result in a reduction in our audience share and advertising revenues."

Geopolitical and macroeconomic events have adversely affected and created uncertainty and instability in the Russian economy.

vulnerable to the price of oil on the world market and recent decreases in international oil prices may continue to adversely affect its economy. As a result of the current global economic instability and any further potential deterioration in the Russian economy, total television advertising spending in Russia may be adversely affected which, in turn, would materially adversely affect our operating results.

The Russian banking system remains underdeveloped, and another banking crisis could place severe liquidity constraints on our business.

Russia's banking and other financial systems are less developed and regulated than those of many other developed countries, and Russian legislation relating to banks and bank accounts is subject to varying interpretations and inconsistent application. Many Russian banks do not meet international banking standards, and the transparency of the Russian banking sector still lags far behind internationally accepted norms. Furthermore, Russian bank deposits made by corporate entities generally are not insured.

The disruption in the world credit markets in 2008 and 2009 also negatively impacted the banking sector in Russia. Moreover, the sector specific sanctions on certain Russian banks recently introduced by United States and European Union have negatively affected the Russian banking system. There are currently a limited number of creditworthy Russian banks, most of which are located in Moscow and the largest of which are state-owned. We generally hold a large majority of our cash balance in Russian banks, including the Russian subsidiaries of foreign banks. Of that balance, a significant portion is held in ruble-denominated accounts. There are few, if any, safe ruble-denominated instruments in which we may invest our excess ruble cash. A banking crisis or the bankruptcy or insolvency of the banks from which we receive or with which we hold our funds could result in the loss of our deposits or affect our ability to complete banking transactions in Russia, which could have a material adverse effect on our business, financial conditions and results of operations.

Businesses in Russia can be subject to politically motivated actions, which could materially adversely affect our operations.

The Russian government has taken various actions in past years against business people and companies operating in Russia that have been perceived as having been politically motivated, including actions for technical violations of law or violations of laws that have been applied retroactively, including violations of tax laws. These actions have on occasion resulted in significant fluctuations in the market prices of the securities of businesses operating in Russia, a weakening of investor confidence in Russia and doubts about the progress of market and political reforms in Russia. For example, the Russian state has recently brought legal proceedings against AFK Sistema concerning the acquisition of its controlling stake in OAO Bashneft during 2005 to 2009. The state is seeking the return of Sistema's interest in the regional oil producer on the grounds that it was privatized without state consent and has placed its founder and majority shareholder under house arrest. The risk of similar claims, which may be perceived as being politically motivated, against Russian companies and/or companies operating in the Russian market has created uncertainty and instability which may inhibit our ability to operate and exert downward pressure on our stock price.

Media businesses can be particularly vulnerable to politically motivated actions. We believe that our focus on entertainment, and the fact that we broadcast entertainment and celebrity news, but do not offer "hard" news, commentary or analysis on our national networks, could lessen the risk of provoking politically motivated actions. However, we do not restrict the ability of our independent affiliates to broadcast local news in local broadcasting windows, and some of our independent affiliates, as well as one of our owned-and-operated CTC stations, broadcast local political news, generally with the approval of our local partners and the local authorities. Any politically motivated action against us, our networks, our independent affiliates, or any of our principal stockholders, including the beneficial owners of MTG or Telcrest, could materially adversely affect our operations. See also: "—The current

geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and may require us to employ significant time and resources to ongoing compliance efforts."

The Russian legal system can create an uncertain environment for investment and business activity, which could have a material adverse effect on our business and the value of our common stock.

The legal framework to support a market economy remains new and in flux in Russia and, as a result, the Russian legal system can be characterized by:

As is true of civil law systems, judicial precedents generally have no binding effect on subsequent decisions. Not all Russian legislation and court decisions are readily available to the public or organized in a manner that facilitates understanding. The Russian judicial system can be slow, and enforcement of court orders can in practice be very difficult. All of these factors make judicial decisions in Russia difficult to predict and effective redress uncertain. Additionally, court claims and governmental prosecutions are sometimes used in furtherance of political aims.

In February 2014, a new law came into force amending the Russian Constitution and merging the Higher Arbitration court with the Higher Court, creating a new Higher Court. As of the date of this Quarterly Report, the new Higher Court is in the process of being established. We cannot predict the effect of this merger on judicial practice and the Russian judicial system.

The untested nature of much of recent Russian legislation and the rapid evolution of the Russian legal system in ways that may not always coincide with market developments may result in ambiguities, inconsistencies and anomalies in the Russian legal system.

For example, the new law "On protection of children from harmful information" does not contain any detailed regulation as to how this law will be implemented. Although we believe that we are in compliance with this law, there is very limited practice of implementation of this law in Russia, which may lead to a high degree of discretion of governmental authorities in its implementation, as well as abuse of this law. We cannot guarantee that authorities willnot interpret or implement this law in a way that may adversely affect us.

In April 2013, a new law came into force amending the federal law "Improving Regulation of Mass Media, Television and Radio Broadcasting" as well as the Administrative Code, prohibiting the use of abusive language in mass media as well as increasing the penalties for doing so. We believe that these amendments will not affect our channels as long as we constantly monitor our content, but since the term "abusive language" is not defined and is subject to interpretation, we cannot guarantee that we

will not be faced with claims that we have violated this new law or that we will be able to defend these claims successfully.

Such uncertainties in the Russian legal system could affect our ability to enforce our rights under our licenses and under our contracts, or to defend ourselves against claims by others, including government authorities. Furthermore, we cannot assure you that regulators, judicial authorities or third parties will not challenge our compliance with applicable laws, decrees and regulations. See also "—Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders." and "—Several recently adopted Russian laws regarding advertising and programming content may impact the programming and advertisements we are permitted to broadcast, which could result in a reduction in our audience share and advertising revenues."

Selective or arbitrary government action may have an adverse effect on our business and the value of our common stock.

Government authorities have a high degree of discretion in Russia and have at times exercised their discretion selectively or arbitrarily, without hearing or prior notice, and sometimes in a manner that is influenced by political or commercial considerations. The government also has the power, in certain circumstances, to interfere with the performance of, nullify or terminate contracts. Selective or arbitrary actions have included withdrawal of licenses, sudden and unexpected tax audits, criminal prosecutions and civil actions. Federal and local government entities have also used common defects in documentation as pretexts for court claims and other demands to invalidate and/or to void transactions, apparently for political purposes. We cannot assure you that regulators, judicial authorities or third parties will not challenge our compliance (including that of our subsidiaries) with applicable laws, decrees and regulations in Russia. Selective or arbitrary government action could have a material adverse effect on our business and on the value of our common stock.

If the Russian Federal Anti-monopoly Service were to conclude that we acquired or created a new company in contravention of anti-monopoly legislation, it could impose fines or administrative penalties and could require the divestiture of such company or other assets.

Our business has grown in part through the acquisition and establishment of companies, many of which transactions required the prior approval of, or subsequent notification to, the Russian Federal Anti-monopoly Service or its predecessor agencies (the "FAS"). The relevant legislation restricts the acquisition or establishment of companies by groups of companies or individuals acting in concert without the required approval or notification. This legislation is vague in parts and subject to varying interpretations. If the FAS were to conclude that an acquisition or establishment of a new company had been effected in contravention of applicable legislation and competition has been reduced as a result, it could impose administrative penalties and require the divestiture of such company or other assets, adversely affecting our business strategy and our results of operations.

If one of our principal subsidiaries is forced into liquidation due to negative net assets, our results of operations could suffer.

If at the end of any fiscal year a Russian company's net assets as determined in accordance with Russian accounting regulations are below the minimum amount of charter capital required by Russian law, the company is required to convene a shareholders meeting to adopt a decision to liquidate. If it fails to do so within a "reasonable period," the company's creditors may request early termination or acceleration of the company's obligations to them, as well as damages, and governmental authorities may seek to cause the involuntary liquidation of the company. It is unclear under Russian law whether a historical violation of this requirement may be retroactively cured, even if a company later comes into

compliance with the requirement. On occasion, Russian courts have ordered the involuntary liquidation of a company for having negative net assets even if the company has continued to fulfill its obligations and had net assets in excess of the minimum amount at the time of liquidation.

Certain of our regional subsidiaries have had, and continue to have, negative equity as reported in their respective Russian statutory financial statements. None of these companies has applied for voluntary liquidation. We are currently taking steps to remedy the negative net asset value of these subsidiaries, but we have not included it as a contingency in our financial statements because we believe that, so long as these subsidiaries continue to fulfill their obligations, the risk of their forced liquidation is remote.

There has been no judicial or other official interpretation of what constitutes a "reasonable period" within which a company must act to liquidate. If any of our subsidiaries were to be liquidated involuntarily, we would be forced to reorganize the operations we currently conduct through that subsidiary. The liquidation of any of our owned-and-operated station subsidiaries would result in the termination of their existing broadcast and other licenses, and we cannot assure you that we would be able to secure new licenses needed for these stations to continue to operate. Accordingly, any liquidation could have a material adverse effect on our business.

Russian law requires the approval of certain transactions by the minority shareholders of our subsidiaries, including several of our owned-and-operated television stations, and failure to receive this approval could adversely affect our business and results of operations.

We own less than 100% of many of our owned-and-operated stations. Under Russian law, certain transactions defined as "interested party transactions" require approval by disinterested members of the board of directors or disinterested shareholders of the companies involved. Our owned-and-operated stations that have other shareholders engage in numerous transactions with us that require interested party transaction approvals in accordance with Russian law. Due to the formalistic nature of much of Russian law, these transactions have not always been properly approved, and therefore may be contested by minority shareholders. In the event that these other shareholders were successfully to contest past interested party transactions, or prevent the approval of such transactions in the future, our flexibility in operating these television stations could be limited and our results of operations could be adversely affected.

Certain transactions between members of our consolidated corporate group may constitute interested party transactions under Russian law even when the companies involved are wholly owned by us. Although we generally endeavor to obtain all corporate approvals required under Russian law to consummate these transactions, we have not always applied special approval procedures in connection with our consummation of transactions with or between our subsidiaries. In the event that a claim is filed in relation to certain transactions with or between our subsidiaries, such transactions are found to have been interested party transactions, and we are found to have failed to obtain the appropriate approvals, such transactions may be declared invalid. The unwinding of any transactions concluded with or between our subsidiaries may have a negative impact on our business and results of operations.

Shareholder liability under Russian legislation could cause us to become liable for the obligations of our subsidiaries.

The Russian Civil Code, the Law on Joint Stock Companies and the Law on Limited Liability Companies generally provide that shareholders in a Russian joint stock company or limited liability company are not liable for the obligations of the company and bear only the risk of loss of their investment. This may not be the case, however, when one person (an "effective parent") is capable of determining decisions made by another (an "effective subsidiary"). The effective parent bears joint and

several responsibilities for transactions concluded by the effective subsidiary in carrying out these decisions in certain circumstances.

In addition, a parent is secondarily liable for an effective subsidiary's debts if an effective subsidiary becomes insolvent or bankrupt as a result of the action or inaction of the parent. This is the case no matter how the parent's capability to determine decisions of the effective subsidiary arises. For example, this liability could arise through ownership of voting securities or by contract. In these instances, other shareholders of the effective subsidiary may claim compensation for the effective subsidiary's losses from the parent that caused the effective subsidiary to act or fail to act, knowing that such action or inaction would result in losses. Accordingly, in CTC Media's position as a parent, it could be liable in some cases for the debts of its effective subsidiaries. Although the total indebtedness of CTC Media's effective subsidiaries is currently immaterial, it is possible that CTC Media could face material liability in this regard in the future, which could materially adversely affect our business and our results of operations.

Changes in the Russian tax system or arbitrary or unforeseen application of existing rules could materially adversely affect our financial condition.

Our tax burden may become greater than the estimated amount that we have expensed to date and paid or accrued on our balance sheets. Russian tax authorities have often been arbitrary and aggressive in their interpretation of tax laws and their many ambiguities, as well as in their enforcement and collection activities. Many companies are often forced to negotiate their tax bills with tax inspectors who may demand higher taxes than applicable law appears to provide. Any additional tax liability, as well as any unforeseen changes in Russian tax laws, could have a material adverse effect on our future results of operations or cash flows in a particular period. We have at times accrued substantial amounts for contingent tax liabilities, a substantial portion of which accruals we have reversed as contingencies have been resolved favorably or changes in circumstances have occurred. The amounts currently accrued for tax contingencies may not be sufficient to meet any liability we may ultimately face. From time to time, we also identify tax contingencies for which we have not provided an accrual. Such unaccrued tax contingencies could materialize and require us to pay additional amounts of tax.

Under Russian accounting and tax principles, financial statements of our Russian companies are not consolidated for tax purposes. As a result, each Russian-registered entity in our group pays its own Russian taxes and we cannot offset the profits or losses in any single entity against the profits and losses of any other entity. Consequently, our overall effective tax rate may increase as we expand our operations, unless we are able to maintain an effective corporate structure that minimizes the effect of these Russian accounting and tax norms.

The Russian tax system imposes additional burdens and costs on our operations in Russia, and complicates our tax planning and related business decisions. The uncertainty involved potentially exposes us to significant fines, penalties and enforcement measures despite our best efforts at compliance, which could result in a greater than expected tax burden on our subsidiaries. These factors raise the risk of a sudden imposition of arbitrary or onerous taxes on our operations in Russia. This could adversely affect our business and the value of our common stock.

Any US or other foreign judgments that may be obtained against us may be difficult to enforce against us in Russia.

Although CTC Media is a Delaware corporation, subject to suit in US federal and other courts, most of our assets are located in Russia, and all of our directors and their assets are located outside the United States. Although arbitration awards are generally enforceable in Russia, judgments obtained in the United States or in other foreign courts, including those with respect to US federal securities law claims, may not be enforceable in Russia. There is no mutual recognition treaty between the United

States and the Russian Federation, and no Russian federal law provides for the recognition and enforcement of foreign court judgments. Therefore, it may be difficult to enforce any US or other foreign court judgment obtained against our company, any of our operating subsidiaries or any of our directors in Russia.

In addition to Russia, we currently have operations in other countries in the CIS, including Kazakhstan and Moldova. We may acquire additional operations in other countries of the CIS. In many respects, the risks inherent in transacting business in these countries are similar to those in Russia, especially those risks set out above in "—Risks relating to doing business and investing in Russia".

Emerging markets such as Russia and other CIS countries are subject to greater risks than more developed markets, including legal, economic and political risks.

Investors in emerging markets such as Russia and other CIS countries should be aware that these markets are subject to greater risk than more developed markets, including in some cases legal, economic and political risks. Investors should also note that emerging economies, such as the economies of Russia and Kazakhstan, are subject to rapid change and that the information set out herein may become outdated relatively quickly. Furthermore, in doing business in various countries of the CIS, we face risks similar to (and sometimes greater than) those that we face in Russia. For example, the current circumstances involving Ukraine, including international economic sanctions, may have deleterious macroeconomic and other effects on the regions in which we operate, including, among other things, increased volatility in foreign currency values and a weaker overall business environment. Moreover the recently adopted amendment to the Russian law On Mass Media restricts foreign investments over 20% in Russian mass media and broadcasting companies that may negatively affect our company and the price of its shares.

Accordingly, investors should exercise care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved and investors are urged to consult with their own legal and financial advisors before making an investment in our shares. See also: "—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and may require us to employ significant time and resources to ongoing compliance efforts." and "—Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders".

The price of our common stock has experienced significant volatility in the past and may be volatile in the future.

Our stock price has experienced significant volatility in the past and is likely to be volatile in the future. The stock market in general and, in particular, the market in emerging markets, like Russia, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. This volatility has been more pronounced due to the turmoil in world financial markets, and most recently due to the current situation in Ukraine, including international economic sanctions. The macroeconomic environment in Russia has also resulted in a widespread deterioration in the price of Russian-exchange listed stocks and the stock of companies which predominantly operate in

Russia and the CIS that are traded on other exchanges. Furthermore, the recently adopted amendment to the Russian law "On Mass Media", which restricts foreign ownership of mass media and broadcasting entities, has also had a significant negative impact on our company's stock price, which has fallen by approximately 50% since the amendment to the law was announced. See also "—Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders". These factors create a high level of uncertainty regarding the stock price which the company can achieve in the near and long-term future.

As a result of this volatility, investors may not be able to sell their shares of our common stock at or above the price at which they purchase it. The market price for our common stock may be influenced by many factors, including:

Moreover, only a relatively small number of shares of our common stock are currently actively traded in the public market. As of Octobet 27, 2014, approximately 36% of our outstanding common stock was held by parties other than our directors, executive officers and principal stockholders and their respective affiliates. The limited liquidity of our common stock may have a material adverse effect on the price of our common stock.

In the past, following periods of volatility in the market price of a company's securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our profitability and reputation.

If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.

The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our stock could decline if one or more equity research analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

Insiders have substantial control over us and could delay or prevent a change in corporate control.

As of October 27, 2014, our directors, executive officers and our two principal stockholders, and their respective affiliates, beneficially owned, in the aggregate, approximately 64% of our outstanding common stock. As a result, these stockholders, if acting together, may have the ability to determine the outcome of matters submitted to our stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these persons, acting together, may have the ability to control the management and affairs of our company. In particular, our two principal stockholders have entered into a voting arrangement that determines the composition of our board of directors. See also "—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and will require us to employ significant time and resources to ongoing compliance efforts."

Anti-takeover provisions in our charter documents and under Delaware law could prevent or delay change-of-control transactions.

Anti-takeover provisions of Delaware law and our charter documents may make a change in control of our company more difficult. For example:

This structure may make it more difficult for an acquirer to take control of our company, which may make our company a less desirable acquisition target.

Delaware law also prohibits a corporation from engaging in a business combination with any holder of 15% or more of its capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction or approves the transaction pursuant to which the holder became a 15% holder. Our board of directors may use this provision to prevent changes in our management. Our board of directors approved the transaction pursuant to which Telcrest became a holder of more than 15% of our capital stock, and accordingly this prohibition would not apply in the case of a business combination transaction with Telcrest.

Under applicable Delaware law, our board of directors may adopt additional anti-takeover measures in the future.

In addition, we are party to a stockholders' agreement with our two largest stockholders, MTG and Telcrest, pursuant to which each of these stockholders has agreed, with limited exceptions, not to acquire additional shares of our capital stock to the extent that such acquisition would cause its beneficial ownership to exceed 50% of the voting power of our outstanding shares without making a tender offer for all of our outstanding shares in compliance with the tender offer rules under the Securities Exchange Act of 1934, unless it reaches this ownership level through the exercise of rights of first offer set forth in the stockholders' agreement. See also "—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and will require us to employ significant time and resources to ongoing compliance efforts."

If there are substantial sales of our common stock in the market by our existing stockholders, our stock price could decline.

If our existing stockholders sell a large number of shares of our common stock or the public market perceives that existing stockholders might sell shares of common stock, the market price of our common stock could decline significantly. The holders of approximately 64% of our common stock have the right under specified circumstances to require us to register their shares for resale to the public or participate in a registration of shares by us. See also "—The current geopolitical situation in Ukraine and related international economic sanctions may adversely affect our business, financial conditions and results of operations, and will require us to employ significant time and resources to ongoing compliance efforts."

The introduction of restrictions on the foreign ownership of Russian mass media and broadcasting entities pursuant to the Russian law On Mass Media has significantly increased the risk of substantial sales in our stock by investors who may want to reduce risk exposure in relation to any further decrease in the value of our stock . See also "—Recently adopted amendments to the Russian law "On Mass Media" will further limit foreign ownership of Russian television broadcasters, which is likely to require a significant change in the ownership structure of our business, and may materially adversely affect our operations and/or our stockholders".

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Exhibit No.		Description	Form on which Originally Filed

31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)	Filed herewith
31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)	Filed herewith
32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
101.INS	*	XBRL Instance Document.
101.SCH	*	XBRL Taxonomy Extension Schema Document.
101.CAL	*	XBRL Taxonomy Calculation Linkbase Document.
101.LAB	*	XBRL Taxonomy Label Linkbase Document.
101.PRE	*	XBRL Taxonomy Presentation Linkbase Document.
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document.


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2014
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Delaware (State or other jurisdiction of incorporation or organization)		58-1869211 (I.R.S. Employer Identification No.)
31A Leningradsky Prospekt 125284 Moscow, Russia +7-495-785-6333 (Address Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
2711 Centerville Road, Suite 400 Wilmington, DE 19808 302-636-5400 (Name, Address Including Zip Code and Telephone Number, Including Area Code, of Agent for Service)


Large accelerated filer o		Accelerated filer ý		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o



PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements	2
	Unaudited Condensed Consolidated Balance Sheets as of December 31, 2013 and September 30, 2014	2
	Unaudited Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2013 and 2014	3
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2014	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2014	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	57
PART II.	OTHER INFORMATION	59
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 6.	Exhibits	86
Signatures
Exhibit Index

	Hypothetical Impairment charge that could be recorded if 2015 advertising market growth forecast is lower by:

	5 pp			10 pp			15 pp
Peretz goodwill and broadcasting licenses	$	(15,572	)	$	(38,843	)	$	(62,113	)

	December 31, 2013		September 30, 2014

Cash and cash equivalents:
Russian ruble bank accounts	$	16,616	$	11,779
US dollar bank accounts		12,754		15,718
Other		1,204		2,340


Total cash and cash equivalents	$	30,574	$	29,837

	December 31, 2013			September 30, 2014

	Annual interest rate	Amount		Annual interest rate	Amount
Short-term investments:
Ruble-denominated deposits	6.3 - 9.0%	$	178,937	7.0 - 9.0%	$	72,982
US dollar-denominated deposits	0.27%	$	1,400	0.74 - 2.57%	$	49,000


Total short-term investments		$	180,337		$	121,982

Type

Common stock issued	158,210,719		158,210,719
Less: Common stock held in treasury	(2,500,000	)	(2,448,553	)


Common stock outstanding	155,710,719		155,762,166

Declaration date	Per Share Dividend		Aggregate Dividend		Record Date	Payment Date

March 5, 2014	$	0.175	$	27,249	March 19, 2014	March 28, 2014
April 29, 2014	$	0.175	$	27,258	June 16, 2014	June 26, 2014
July 25, 2014	$	0.175	$	27,259	September 5, 2014	September 25, 2014

	Average target audience share				Average All 4+ audience share				Average target audience share				Average All 4+ audience share

	Three months ended September 30,								Nine months ended September 30,
	2013		2014		2013		2014		2013		2014		2013		2014
CTC (Russia)		11.6		10.3		7.0		6.0		11.4		10.4		6.9		6.0
Domashny (Russia)		3.9		3.7		2.7		2.6		3.5		3.4		2.5		2.4
Peretz (Russia)		2.3		2.1		1.9		1.6		2.4		2.1		1.9		1.7
Channel 31 (Kazakhstan)		14.1		14.9		13.0		13.4		13.3		13.4		12.3		12.2


		CTC MEDIA, INC.
		By:		/s/ NIKOLAY SURIKOV
		Nikolay Surikov Chief Financial Officer Date: October 29, 2014
		CTC MEDIA, INC.
		By:		/s/ YULIA SHTYROVA
		Yulia Shtyrova Acting Chief Accounting Officer Date: October 29, 2014