CTC Media (CTCM) 10-Q 2014 Q1 Quarterly report

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TABLE OF CONTENTS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 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

Commission file number: 000-52003

CTC MEDIA, INC.
(Exact name of registrant as specified in its charter)

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)

        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):

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

        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 April 30, 2014, there were outstanding 155,762,166 shares of the registrant's common stock, $0.01 par value per share.

CTC MEDIA, INC.
INDEX

		Page
PART I.	FINANCIAL INFORMATION	4
Item 1.	Financial Statements	4
	Unaudited Condensed Consolidated Balance Sheets as of December 31, 2013 and March 31, 2014	4
	Unaudited Condensed Consolidated Statements of Income for the three months ended March 31, 2013 and 2014	5
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2013 and 2014	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2014	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
PART II.	OTHER INFORMATION	45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 6.	Exhibits	67
Signatures
Exhibit Index

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        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.

3

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements

CTC MEDIA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands of US dollars, except share and per share data)

	December 31, 2013			March 31, 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 4)	$	30,574		$	37,739
Short-term investments (Note 4)		180,337			160,663
Trade accounts receivable, net of allowance for doubtful accounts (December 31, 2013—$483; March 31, 2014—$643)		36,875			34,200
Taxes reclaimable		22,929			24,433
Prepayments		57,536			42,165
Programming rights, net (Note 5)		172,197			167,510
Deferred tax assets		30,400			28,277
Other current assets		4,373			4,693
TOTAL CURRENT ASSETS		535,221			499,680
PROPERTY AND EQUIPMENT, net		36,874			31,479
INTANGIBLE ASSETS, net:
Broadcasting licenses		59,676			51,293
Cable network connections		20,422			17,687
Trade names		5,332			4,892
Other intangible assets		4,876			4,274
Net intangible assets		90,306			78,146
GOODWILL		135,276			124,071
PROGRAMMING RIGHTS, net (Note 5)		121,802			114,486
INVESTMENTS IN AND ADVANCES TO INVESTEES		5,524			4,453
PREPAYMENTS		27,602			28,626
DEFERRED TAX ASSETS		18,371			16,593
OTHER NON-CURRENT ASSETS (Note 4)		—			6,916
TOTAL ASSETS	$	970,976		$	904,450
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable		105,849			103,848
Accrued liabilities		20,449			26,367
Taxes payable		33,630			19,155
Deferred revenue		10,223			10,683
Deferred tax liabilities		49,770			54,061
Other current liabilities		3,390			3,186
TOTAL CURRENT LIABILITIES		223,311			217,300
DEFERRED TAX LIABILITIES		13,549			12,727
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Common stock ($0.01 par value; shares authorized 175,772,173; shares issued and outstanding December 31, 2013 and March 31, 2014—158,210,719)		1,582			1,582
Additional paid-in capital		494,122			494,625
Retained earnings		386,575			390,542
Accumulated other comprehensive loss		(124,339	)		(189,053	)
Less: Common stock held in treasury, at cost (December 31, 2013 and March 31, 2014—2,500,000 shares)		(29,727	)		(29,727	)
Non-controlling interest		5,903			6,454
TOTAL STOCKHOLDERS' EQUITY		734,116			674,423
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	970,976		$	904,450

The accompanying notes are an integral part of these financial statements.

4

CTC MEDIA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands of US dollars, except share and per share data)

	Three months ended March 31,
	2013			2014
REVENUES:
Advertising	$	190,032		$	184,563
Sublicensing revenue and other revenues		5,255			1,684
Total operating revenues		195,287			186,247
EXPENSES:
Direct operating expenses (exclusive of programming expenses, shown below; exclusive of depreciation and amortization of $7,460 and $6,642 for the three months ended March 31, 2013 and 2014, respectively; and exclusive of stock-based compensation (expenses) benefit of $(682) and $1,149 for the three months ended March 31, 2013 and 2014, respectively)		(11,443	)		(11,653	)
Selling, general and administrative (exclusive of depreciation and amortization of $1,005 and $1,190 for the three months ended March 31, 2013 and 2014, respectively; and exclusive of stock-based compensation (expense) benefit of $(656) and $358 for the three months ended March 31, 2013 and 2014, respectively)		(40,765	)		(41,552	)
Stock-based compensation (expense)/benefit		(1,338	)		1,507
Programming expenses		(91,092	)		(78,578	)
Depreciation and amortization		(8,465	)		(7,832	)
Total operating expenses		(153,103	)		(138,108	)
OPERATING INCOME		42,184			48,139
FOREIGN CURRENCY GAINS (LOSSES)		546			(3,370	)
INTEREST INCOME		3,316			3,278
INTEREST EXPENSE		(207	)		(136	)
OTHER NON-OPERATING LOSS, net		(349	)		(1,058	)
EQUITY IN INCOME (LOSS) OF INVESTEE COMPANIES		203			(939	)
Income before income tax		45,693			45,914
INCOME TAX EXPENSE		(16,259	)		(14,179	)
CONSOLIDATED NET INCOME	$	29,434		$	31,735
LESS: INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST	$	(846	)	$	(519	)
NET INCOME ATTRIBUTABLE TO CTC MEDIA, INC. STOCKHOLDERS	$	28,588		$	31,216
Net income per share attributable to CTC Media, Inc. stockholders—basic	$	0.18		$	0.20
Net income per share attributable to CTC Media, Inc. stockholders—diluted	$	0.18		$	0.20
Weighted average common shares outstanding—basic		158,160,719			155,710,719
Weighted average common shares outstanding—diluted		158,170,789			155,803,931
Dividends declared per share	$	0.15		$	0.18

The accompanying notes are an integral part of these financial statements.

5

CTC MEDIA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)

(in thousands of US dollars, except share and per share data)

	Three months ended March 31,
	2013			2014
Net Income	$	29,434		$	31,735
Other Comprehensive loss:
Foreign Currency Translation Adjustment		(17,856	)		(65,478	)
Other Comprehensive Loss		(17,856	)		(65,478	)
Comprehensive Income (Loss)	$	11,578		$	(33,743	)
Less: Comprehensive (Income) Loss attributable to the non-controlling interest		(842	)		245
Comprehensive Income (Loss) attributable to CTC Media, Inc. stockholders	$	10,736		$	(33,498	)

The accompanying notes are an integral part of these financial statements.

6

CTC MEDIA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of US dollars)

	Three months ended March 31,
	2013			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	29,434		$	31,735
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax expense (benefit)		(2,290	)		3,279
Depreciation and amortization		8,465			7,832
Programming expenses		91,092			78,578
Stock-based compensation expense (benefit)		1,338			(1,507	)
Equity in (income) loss of unconsolidated investees		(203	)		939
Foreign currency (gains) losses		(546	)		3,370
Changes in operating assets and liabilities:
Trade accounts receivable		(14,453	)		11,175
Prepayments		(5,457	)		(1,173	)
Other assets		2,049			1,345
Accounts payable and accrued liabilities		370			(12,425	)
Deferred revenue		2,610			2,771
Other liabilities		(16,357	)		(8,860	)
Acquisition of programming and sublicensing rights		(108,955	)		(84,656	)
Net cash provided by/(used in) operating activities		(12,903	)		32,403
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment and intangible assets		(1,120	)		(974	)
Receipts from/(investments in) deposits, net		(306	)		4,522
Net cash provided by/(used in) investing activities		(1,426	)		3,548
CASH FLOWS FROM FINANCING ACTIVITIES:
Settlement of overdraft and loans, net		(6,955	)		(91	)
Increase in other non-current assets (Note 4)		—			(6,916	)
Dividends paid to stockholders		(17,786	)		(20,333	)
Dividends paid to noncontrolling interest		(127	)		(24	)
Net cash used in financing activities		(24,868	)		(27,364	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(584	)		(1,422	)
Net increase/(decrease) in cash and cash equivalents		(39,781	)		7,165
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		55,181			30,574
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	15,400		$	37,739

The accompanying notes are an integral part of these financial statements.

7

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands of US dollars, except share and per share data)

1. ORGANIZATION

        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 networks' 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.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        The accompanying unaudited condensed consolidated financial statements for the three months ended March 31, 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.

Basis of Presentation

        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 complete 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 months ended March 31, 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.

8

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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.

Principles of Consolidation

        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 March 31, 2014, the Channel 31 Group had assets (excluding intercompany assets) totaling $21,085 and liabilities (excluding intercompany liabilities) totaling $7,883. 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 during the ordinary course of business. Channel 31 Group's net loss attributable to CTC Media, Inc. stockholders excluding intercompany expenses totaled $585 for the three months ended March 31, 2014.

Seasonality

        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.

Use of Estimates

        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. Significant estimates in the financial statements include, among others, the estimate of fair

9

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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 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 Recognition

        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

10

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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 use, the arrangement fee is fixed or determinable, and collection of the arrangement fee is reasonably assured.

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

Programming rights

        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 Long-Lived Assets

        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.

        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 is amortizing the remaining balances of its broadcasting licenses on a straight-line

11

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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

basis over each broadcasting license's estimated remaining useful life, originally estimated in the range of 2.75 to 5.75 years, depending on the region. In April 2014, the Ministry of Communications and Mass Media announced that current timelines for switching off analog broadcasting will be extended to the end of 2018. As a result, the Company will change its estimate of the remaining economic lives of its analog broadcasting licenses in the second quarter of 2014. The Company estimates that the amortization charge for its broadcasting licenses will be approximately $7.1 million for the remainder of 2014 and $10.6 million annually from 2015 through 2018. 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.

Fair Value Measurements

        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:

        Level 1—Unadjusted quoted prices that are available in active markets for the identical assets or liabilities at the measurement date.

        Level 2—Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets in non-active markets; (3) inputs other than quoted prices that are observable for the asset or liability; and (4) inputs that are derived principally from or corroborated by other observable market data.

        Level 3—Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management's estimates of market participant assumptions.

        There were no transfers between categories during the periods presented.

12

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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

        The fair values of the Company's derivative assets of $2,476 and derivative liabilities of $2,755 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 March 31, 2014, respectively.

Goodwill Impairment Test

        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.

        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. In December 2012, the CTC and Domashny channels were selected in a public tender for inclusion in the second digital multiplex; Peretz channel was not selected. 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. Currently, the Company believes the most significant of these uncertainties relate to the Company's overall operating costs during (and following) the transition to digital broadcasting.

        In addition, uncertainty exists about Peretz's technical penetration and its impact on advertising revenues after the end of analog broadcasting. 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 after the end of analog broadcasting. 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

13

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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

Company may need to further revise its projected cash flows, which could adversely impact the fair value of its reporting units and related goodwill.

        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 goodwill. 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, additional impairments may be required in the foreseeable future.

        In addition, uncertainty remains concerning global economic stability in the medium-term. Any significant continuation or worsening of the current economic instability, including as a result of geopolitical developments or related economic sanctions, could result in decreases in the fair values of goodwill and require the Company to record additional impairment losses that could have a material adverse impact on its net income.

        As of March 31, 2014, currently available information regarding the TV advertising markets in which the Company operates and management's current assessment of factors that could impact the Company's future cash flows in connection with the anticipated digitalization indicated that no downward revisions to the Company's internal cash flow projections are required. There were no indicators of additional impairment for the Company's goodwill or long-lived assets, and the Company was not required to record any additional impairment charges.

        The Company considers all current information in determining the need for or calculating the amount of any impairment charges; however, future changes in events or circumstances could result in decreases in the fair values of its intangible assets and goodwill.

Stock-based compensation expense

        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

14

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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

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.

Tax provisions and valuation allowance for deferred tax assets

        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.

New and Recently Adopted Accounting Pronouncements

        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 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.

15

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

3. NET INCOME PER SHARE

        Basic net income per share for the three months ended March 31, 2013 and 2014 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 3,229,904 and 2,279,166 for the three months ended March 31, 2013 and 2014, respectively.

        The components of basic and diluted net income per share were as follows:

	Three months ended March 31,
	2013		2014
Net income attributable to CTC Media, Inc. stockholders	$	28,588	$	31,216
Weighted average common shares outstanding—basic
Common stock		158,160,719		155,710,719
Dilutive effect of:
Stock-based awards		10,070		93,212
Weighted average common shares outstanding—diluted		158,170,789		155,803,931
Net income per share attributable to CTC Media, Inc. stockholders:
Basic	$	0.18	$	0.20
Diluted	$	0.18	$	0.20

        The numerator used to calculate diluted net income per common share for the three months ended March 31, 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 in short-term investments. Below are breakdowns of cash and cash equivalents and short-term investments:

	December 31, 2013		March 31, 2014
Cash and cash equivalents:
Russian ruble bank accounts	$	16,616	$	21,363
US dollar bank accounts		12,754		12,916
Other		1,204		3,460
Total cash and cash equivalents	$	30,574	$	37,739

16

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

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

	December 31, 2013			March 31, 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%	$	130,663
US dollar-denominated deposits	0.27%	$	1,400	0.75 - 1.40%	$	30,000
Total Short-term investments		$	180,337		$	160,663

        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, the Company's Board declared a dividend to stockholders of record as of March 19, 2014. The Company paid the declared dividends on March 28, 2014, however, dividends of $6.9 million 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.

17

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

5. PROGRAMMING RIGHTS, NET

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

	December 31, 2013			March 31, 2014
Internally produced—TV broadcasting:
Released:
Historical cost	$	167,182		$	158,311
Accumulated amortization		(158,996	)		(150,379	)
Released, net book value		8,186			7,932
Completed and not released		7,318			4,051
Total		15,504			11,983
Acquired rights:
Historical cost		777,719			748,320
Accumulated amortization		(499,224	)		(478,307	)
Net book value		278,495			270,013
Total programming rights	$	293,999		$	281,996
Current portion	$	172,197		$	167,510
Non-current portion	$	121,802		$	114,486

        The Company expects to amortize approximately $5 million of internally produced TV programming for its completed and released programs and completed but not yet released programs during the twelve months ending March 31, 2015. In addition, the Company expects to amortize all of its unamortized internally produced programming rights within the three years following March 31, 2014.

6. STOCKHOLDERS' EQUITY

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

Type	December 31, 2013			March 31, 2014
Common stock issued		158,210,719			158,210,719
Less: Common stock held in treasury		(2,500,000	)		(2,500,000	)
Common stock outstanding		155,710,719			155,710,719

Stock repurchase program

        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

18

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

6. STOCKHOLDERS' EQUITY (Continued)

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.

        The Company's certificate of incorporation authorizes the Company to issue 175,772,173 shares of common stock and, 155,710,719 shares were outstanding as of December 31, 2013 and March 31, 2014. 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

        In 2014, the following dividends were declared and paid:

Declaration date	Per Share Dividend		Aggregate Dividend		Record Date	Payment Date
March 5, 2014	$	0.175	$	27,249	March 19, 2014	March 28, 2014

        As of March 20, 2014, dividends payable of $6,916 to Telcrest were blocked pursuant to the US sanctions imposed on Bank Rossyia described above in Note 4. As of March 31, 2014, dividends payable to Telcrest were recorded in accrued liabilities in the Company's condensed consolidated balance sheets.

        During the three months ended March 31, 2014, the Company declared and paid dividends to MTG of $10,494.

        The following table summarizes the changes in stockholders' equity during the three months ended March 31, 2013 and 2014:

	Total			CTC Media, Inc. stockholders			Noncontrolling interest
Stockholders' equity, December 31, 2012	$	762,926		$	758,323		$	4,603
Net Income		29,434			28,588			846
Other comprehensive loss		(17,856	)		(17,852	)		(4	)
Comprehensive income		11,578			10,736			842
Additional paid-in capital		649			649			—
Dividends declared		(25,024	)		(23,724	)		(1,300	)
Stockholders' equity, March 31, 2013	$	750,129		$	745,984		$	4,145

19

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

6. STOCKHOLDERS' EQUITY (Continued)

	Total			CTC Media, Inc. stockholders			Noncontrolling interest
Stockholders' equity, December 31, 2013	$	734,116		$	728,213		$	5,903
Net income		31,735			31,216			519
Other comprehensive loss		(65,478	)		(64,714	)		(764	)
Comprehensive loss		(33,743	)		(33,498	)		(245	)
Additional paid-in capital		503			503			—
Disposals of noncontrolling interests		820			—			820
Dividends declared		(27,273	)		(27,249	)		(24	)
Stockholders' equity, March 31, 2014	$	674,423		$	667,969		$	6,454

7. STOCK-BASED COMPENSATION

        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.

        The Company's Board of Directors approved performance criteria for the 2013 sub-tranche under the 2013 Equity Incentive Plan in respect of 637,800 RSUs with a weighted average per unit grant date fair value of $10.53. In the three months ended March 31, 2014, the Company recognized $0.5 million of expense attributable to these RSUs related to 2013 sub-tranche. The Company's Board of Directors has not yet determined performance criteria for the 2014 sub-tranche, but expects that such terms will be finalized by the end of the second quarter of 2014.

        The Company estimates that the total compensation expense related to awards approved under the 2013 Plan not yet recognized as of March 31, 2014 approximates $7.8 million, of which $7.3 million relates to RSUs for which performance criteria for 2014 and following years are not set, which is expected to be expensed over a weighted average period of 3.0 years. The Company expects to settle employee RSU exercises out of treasury stock. In March 2014, the Company's Board of Directors has agreed to grant additional equity awards of approximately 0.7 million shares of common stock in the form of RSU to its employees. The Compensation Committee of the Company's Board of Directors has not yet determined the vesting conditions of these awards, but expects that such terms will be finalized by the end of the second quarter of 2014. The grant date will be the date when the key terms of these awards are determined and agreed with employees.

8. INCOME TAX

        The Company is subject to US (domestic), 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

20

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

8. INCOME TAX (Continued)

companies holding less than 50% in a Russian distributing subsidiary for more than 365 days. The statutory income tax rate in Russia and Kazakhstan in 2013 and the three months ended March 31, 2014 was 20%.

        The Company's effective income tax rate was 36% and 31% for the three months ended March 31, 2013 and 2014, respectively. The decrease in effective tax rate when comparing the three-month periods ended March 31, 2013 and 2014 was primarily due to the recognition of foreign tax benefits that we determined were available for offset against US taxes based on a comprehensive examination of certain positions taken in the Company's 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".

        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, 2009 through 2013 remain subject to examination by the Kazakh tax authorities.

9. COMMITMENTS AND CONTINGENCIES

Operating environment

        Russia and Kazakhstan continue to implement economic reforms and to develop the legal, tax and regulatory frameworks to support a market economy. The future stability of the Russian and Kazakh economies is largely dependent upon these reforms and developments and the effectiveness of economic, financial and monetary measures undertaken by their governments.

        The Russian and Kazakh economies are vulnerable to market downturns and economic slowdowns elsewhere in the world. The recent economic downturn in both the European and global economies has resulted in reduced growth in the advertising market. A continuation of this economic downturn could adversely affect further economic growth, access to capital and cost of capital, which could negatively affect the Company's future financial position, results of operations and business prospects. In the three months ended March 31, 2014, the Russian and Kazakh governments continued to take measures to support their economies in order to overcome the consequences of the economic downturn. There continues to be uncertainty regarding further economic growth, access to capital and cost of capital, which could negatively affect the Company's future financial position, results of operations and business prospects.

        In addition, current instability in Ukraine, and related international economic sanctions, has the potential to negatively affect the Company's ability to sublicense certain programming in that country and may also have broader impacts on the macroeconomic environment of the region, which may adversely affect the Company's business.

        Although management believes it is taking appropriate measures to support the sustainability of the Company's business in the current circumstances, unexpected further deterioration in the areas described above could negatively affect the Company's results and financial position in a manner not currently determinable.

21

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

9. COMMITMENTS AND CONTINGENCIES (Continued)

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 goodwill. Also, uncertainty exists about Peretz's technical penetration and its impact on advertising revenues after the end of analog broadcasting. 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, additional impairments may be required in the foreseeable future.

        On an ongoing basis, the Company meets 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 current business and industry initiatives.

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. Additionally, given that substantially all of its revenues are generated in rubles, the Company faces exchange rate risk relating to payments that it must make in currencies other than the ruble. In the three months ended March 31, 2014, the Russian ruble depreciated against the US dollar by 8%, and was on average 13% lower than the average value of the Russian ruble compared to the US dollar during the three months ended March 31, 2013. If the exchange rate between the ruble and the US dollar were to depreciate further, the revenues and operating results of the Company, as reported in US dollars, would be adversely affected. Among other factors, the current situation in Ukraine, and related international economic sanctions, has the potential to further negatively impact the value of the Russian ruble.

Derivative Financial instruments

        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.

22

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

9. COMMITMENTS AND CONTINGENCIES (Continued)

        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 gains on the derivative instruments of $2.3 million, as well as offsetting foreign currency losses on the hedged item in its condensed consolidated statement of income for the three months ended March 31, 2014. In addition, during the three months ended March 31, 2014, the Company entered into short-term non-designated hedges with the notional amount of $103.4 million to mitigate its exposure related to US-dollar denominated payments and recognized foreign currency gains of $0.5 million on derivative instruments in its condensed consolidated statement of income for the three months ended March 31, 2014.

Purchase commitments

        The table below summarizes information with respect to the Company's commitments as of March 31, 2014:

	Total		Through 2014		2015		2016		2017		2018		2019
	(in thousands)
Acquisition of programming rights	$	234,877	$	182,693	$	43,078	$	9,106	$	—	$	—	$	—
Transmission and satellite fees		71,126		14,083		17,543		16,705		12,379		5,396		5,020
Leasehold obligations		40,825		5,205		7,267		7,503		7,783		6,403		6,664
Network affiliation agreements		8,835		2,244		2,851		1,913		1,687		140		—
Acquisition of format rights		320		320		—		—		—		—		—
Cable connections		1,979		1,565		414		—		—		—		—
Payments for intellectual rights		14,466		1,903		2,684		2,832		2,240		2,347		2,460
Other contractual obligations		21,304		3,292		4,561		4,475		4,141		4,276		559
Total	$	393,732	$	211,305	$	78,398	$	42,534	$	28,230	$	18,562	$	14,703

        In addition, in connection with the planned digitalization in Russia and Kazakhstan, the Company may 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 specific services, coverage and equipment to be provided by RTRS will be agreed by the parties on an annual basis pursuant to a rollout plan forming a part of the principal agreement between the parties. The agreements terminate on March 31, 2023. In 2013, the amount payable to RTRS by the CTC and Domashny channels combined was approximately $1.2 million. The Company estimates that fees payable to RTRS for 2014 will be approximately $25 million for its CTC and Domashny channels in aggregate. Governmental authorities have indicated that each channel participating in the second multiplex will be expected to pay up to $26 million annually in transmission fees after the rollout. 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 all of its channels in aggregate.

23

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

9. COMMITMENTS AND CONTINGENCIES

Compliance with Licenses terms

        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. In addition, the Company holds universal licenses, permitting each of its channels to broadcast through free-to-air, cable and satellite broadcasting, in either digital or analog format.

        A broadcaster must conform its programming to the programming concept outlined in the broadcasting license. In particular, the broadcaster is obliged to ensure the compliance of its programming with the declared genres of the channel and to sustain the volume-genre ratio of broadcasted materials prescribed in the license.

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

        The Company may not always be in full compliance with these requirements. Also, the Company's independent 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 a television station otherwise violates applicable Russian legislation or regulations, the license, after a warning notice from the regulator, may be suspended or terminated (which decision may be appealed in court). If an independent affiliate were to broadcast without all the necessary licenses, broadcasting may be terminated and fines could be imposed. Management believes that the probability of initiation of action against any material owned-and operated station or independent affiliate is remote.

Legal and Tax Proceedings

        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.

10. SEGMENT INFORMATION

        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.

24

CTC MEDIA, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands of US dollars, except share and per share data)

10. SEGMENT INFORMATION (Continued)

        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 March 31, 2013
	Operating revenue from external customers		Intersegment revenue			Operating income/ (loss)			Identifiable assets			Depreciation and amortization			Programming expenses
CTC Channel	$	138,832	$	412		$	41,950		$	601,510		$	(2,334	)	$	(64,162	)
Domashny Channel		29,479		101			4,105			115,981			(1,981	)		(14,960	)
Peretz Channel		20,551		—			1,069			156,667			(3,073	)		(8,978	)
Channel 31		4,154		—			(454	)		21,776			(737	)		(2,763	)
All Other		2,271		161			(4,486	)		105,197			(340	)		(229	)
Business segment results	$	195,287	$	674		$	42,184		$	1,001,131		$	(8,465	)	$	(91,092	)
Eliminations		—		(674	)		—			(53,656	)		—			—
Consolidated results	$	195,287		—		$	42,184		$	947,475		$	(8,465	)	$	(91,092	)

	Three months ended March 31, 2014
	Operating revenue from external customers		Intersegment revenue			Operating income/ (loss)			Identifiable assets			Depreciation and amortization			Programming expenses
CTC Channel	$	132,884	$	276		$	39,690		$	626,906		$	(2,309	)	$	(58,166	)
Domashny Channel		28,080		29			6,521			100,311			(1,823	)		(11,881	)
Peretz Channel		18,956		2			3,625			131,270			(2,676	)		(6,272	)
Channel 31		3,812		—			(28	)		21,170			(658	)		(2,141	)
All Other		2,515		23			(1,669	)		70,705			(366	)		(118	)
Business segment results	$	186,247	$	330		$	48,139		$	950,362		$	(7,832	)	$	(78,578	)
Eliminations		—		(330	)		—			(45,912	)		—			—
Consolidated results		186,247		—		$	48,139		$	904,450		$	(7,832	)	$	(78,578	)

11. SUBSEQUENT EVENTS

        On April 29, 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 June 30, 2014 to shareholders of record as of June 16, 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. The Company's Board currently intends to pay further dividends in each of the following quarters of 2014. Although it is the Board's current intention to declare and pay further dividends in the remaining quarters of 2014, there can be no assurance that such additional dividends will in fact be declared and paid. Any such declaration is at the discretion of the Board and will depend upon factors such as Company's earnings, financial position and cash requirements.

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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 months ended March 31, 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.

Executive Summary

	Three months ended March 31,						% of total operating revenues						Change period-to-period
	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	195,287		$	186,247			100	%		100	%		(5	)%		10	%
Including:
Advertising revenues		190,032			184,563			97	%		99	%		(3	)%		12	%
Total operating expenses	$	(153,103	)	$	(138,108	)		78	%		74	%		(10	)%		4	%
Including:
Direct operating expenses		(11,443	)		(11,653	)		6	%		6	%		2	%		17	%
Selling, general and administrative expenses		(40,765	)		(41,552	)		21	%		22	%		2	%		18	%
Programming expenses		(91,092	)		(78,578	)		47	%		42	%		(14	)%		(1	)%
Stock-based compensation (expense) benefit		(1,338	)		1,507			1	%		1	%		(213	)%		(228	)%
Depreciation and amortization		(8,465	)		(7,832	)		4	%		4	%		(7	)%		6	%
Operating income	$	42,184		$	48,139			22	%		26	%		14	%		33	%
Foreign currency gains (loss)		546			(3,370	)								(717	)%		(797	)%
Interest income, net		3,109			3,142									1	%		16	%
Other non-operating loss, net		(146	)		(1,997	)								nm			nm
Income before income tax	$	45,693		$	45,914			23	%		25	%		0	%		18	%
Income tax expense		(16,259	)		(14,179	)								(13	)%		4	%
Consolidated net income	$	29,434		$	31,735			15	%		17	%		8	%		26	%
Less: Income attributable to noncontrolling interest	$	(846	)	$	(519	)								(39	)%		(30	)%
Net income attributable to CTC Media, Inc. stockholders	$	28,588		$	31,216			15	%		17	%		9	%		27	%

*

"nm" indicates the value that is not meaningful

        The functional currency of our Russian-domiciled segments is the Russian ruble, and 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 months ended March 31, 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 first quarter of 2014, the Russian ruble depreciated against the US dollar by 8% and was on average 13% lower than the average value of the Russian ruble as compared to the first quarter of 2013. In addition, in February 2014, the National Bank of Kazakhstan devaluated Kazakh tenge by 19% against the US dollar and, as a result, Kazakh tenge depreciated by 16% during the first quarter

26

of 2014. 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—Declines in the value of the Russian ruble against the US dollar have in the past negatively affected our reported revenues and our operating results, both of which are reported in US dollars".

Revenues

        In the first quarter of 2014, our advertising revenue grew 12% in ruble terms year-on-year, significantly outpacing the estimated 7-8% growth of the Russian TV advertising market and as the result of higher advertiser demand for our channels' inventory during the 2014 Sochi Olympic Games, although CTC and Peretz audience shares decreased as all domestic channels that did not broadcast the Games were under pressure due to loss of viewers to Channel One Russia and VGTRK channels. In March 2014, we also felt the shift of viewers' focus to news broadcasts on the Ukraine crisis.

        The increase in the Russian television advertising market in the first quarter may not be indicative of the market growth that can be expected for 2014 as a whole. 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. 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:

Audience shares:

	Average target audience share				Average All 4+ audience share
	Three months ended March 31,
	2013		2014		2013		2014
CTC (Russia)		11.3		10.8		6.7		6.2
Domashny (Russia)		3.0		3.1		2.3		2.3
Peretz (Russia)		2.5		2.4		2.0		1.8
Channel 31 (Kazakhstan)		13.4		11.7		12.2		10.7

        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 local TV channels viewership in the "All 4+" category, which increased from 15.5% in 2012 to 17.2% in 2013 and 17.6% in the first quarter of 2014.

        CTC channel's average target audience share among 10 to 45 year-old viewers decreased year-on-year in the first quarter of 2014 from 11.3% to 10.8%, primarily reflecting the increased competition from the channels licensed to broadcast the 2014 Olympics Games in Sochi and the effect of audience fragmentation (discussed above), partially offset by the performance of the channel's high-rating content and new premiers.

        Domashny channel's target audience share among 25-59 year-old female viewers increased year-on-year in the first quarter of 2014 from 3.0% to 3.1%, reflecting the structural changes in the programming schedule and the success of the programming in weekend and daytime slots, partially

27

offset by the effect of audience fragmentation. Domashny channel is continuing to work to strengthen its demographic profile and to grow its core female audience segment.

        Peretz channel's target audience share among 25 to 49 year-old viewers decreased year-on-year in the first quarter of 2014 from 2.5% to 2.4%, reflecting increased competition from the channels that broadcast political news regarding the situation in Ukraine, as well as competition from the channels licensed to broadcast the 2014 Olympics Games in Sochi, partially offset by the strong performance of locally produced series. Peretz channel is continuing to refresh its positioning and programming grid to be a more cutting edge, dynamic and thrilling channel, with a focus on edgy action content.

        Channel 31's target audience share among 6 to 54 year-old viewers decreased year-on-year in the first quarter of 2014 from 13.4% to 11.7%, reflecting increased competition from Kazakh channels that broadcast mainly in the Kazakh language due to strengthening of the Kazakh law on local-language programming and increased audience fragmentation.

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

Expenses

        Our total operating expenses decreased by 10% year-on-year in US dollar terms and increased by 4% in ruble terms when comparing the periods under review, of which a 5 percentage point ("pp") related to increases in selling, general and administrative expenses (discussed below).

Direct operating expenses increased by 2% year-on-year in US dollar and 17% in ruble terms in the first quarter of 2014, largely as a result of a 6pp increase in salaries and benefits costs, reflecting annual raises and increased headcount, and an 8 pp increase in transmission costs, primarily reflecting annual raises.

        In connection with the planned digitalization in Russia, in March 2013, we entered into 10-year transmission agreements with RTRS, a transmission provider, for digital transmission for CTC and Domashny channels. We estimate that fees payable to RTRS for 2014 will be approximately $25 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 all of our channels in aggregate. See also "—Key Factors Affecting Our Results of Operations", 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".

Selling, general and administrative expenses increased by 2% year-on-year in US dollar terms and 18% in ruble terms in the first quarter of 2014, primarily due to a 7pp increase in advertising and promotion expenses, reflecting the timing effect of advertising campaigns at CTC channel and a 9pp increase in compensation payable to Video International that was in line with the revenue dynamics.

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 of the reporting date, as the result of our decreased share price in the first quarter of 2014.

        In March 2013, our Board of Directors agreed to grant equity awards to a number of our employees under a new 2013 Equity Incentive Plan (the "Plan") which was approved by our stockholders at the 2013 Annual Meeting. In addition, our Board approved an open market stock repurchase program, pursuant to which we repurchased 2.5 million shares of common stock in the market for use under our 2013 Equity Incentive Plan. See also "—2013 Equity Incentive Plan" below.

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We expect to recognize stock-based compensation expense related to our 2013 Equity Incentive Plan and other outstanding equity awards of approximately $2.1 million for the remainder of 2014, $4 million for 2015, $1.5 million for 2016 and $0.2 million for 2017.

Programming expenses decreased by 14% year-on-year in US dollar terms and 1% in ruble terms in the first quarter of 2014, reflecting the timing effect of the launch of the Peretz spring schedule in April 2014 and the timing of investing in the Domashny schedule which is planned for the second half of 2014, partially offset by a more expensive programming mix at CTC channel due to the airing of more expensive foreign content. We expect our programming expenses will increase in ruble terms for the full year.

        Due to the reasons discussed aboveour operating income increased by 14% in US dollar terms and 33% in ruble terms to $48.1 million in the first quarter of 2014 (Q1 2013: $42.2 million).

Foreign currency losses of $3.4 million, primarily represent the impact of ruble depreciation on our dollar-denominated liabilities, partially offset by gains from our foreign exchange forward contracts.

Net interest income of $3.1 million reflects the interest earned on our cash balances and short-term investments.

        Income tax expense.    The decrease in our effective income tax rate from 36% to 31% when comparing the periods under review reflects the change in our approach to the recognition of foreign 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 starting from the third quarter of 2013 and will apply it prospectively.

Key Factors Affecting Our Results of Operations

        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. Total television advertising spending in Russia and Kazakhstan has been adversely affected by recent economic instability. Considerable uncertainty remains concerning economic stability globally in the medium-term. Additionally, because Russia produces and exports large amounts of oil and gas, its economy is particularly vulnerable to fluctuations in the price of oil and gas in the world market. Decreases in international oil prices have adversely affected and may continue to adversely affect its economy. 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. Also, current instability in Ukraine, and potentially the related international economic sanctions, have the potential to negatively affect our ability to sublicense certain programming in that country and may also have broader impacts on the macroeconomic environment of the region, which may adversely affect our business.

        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.

        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.

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        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 Kazakh tenge. 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. In the three months ended March 31, 2014, the Russian ruble depreciated against the US dollar by 8%, and was on average 13% lower than the average value of the Russian ruble compared to the US dollar during the three months ended March 31, 2013. In addition, in February 2014, the National Bank of Kazakhstan devaluated Kazakh tenge by 19% against the US dollar. If the exchange rate between the ruble and the US dollar were to further depreciate, our revenues and operating results, as reported in US dollars, would be adversely affected. The current situation in Ukraine, and potentially the related international economic sanctions, have the potential to further negatively impact the value of the Russian ruble.

        While the ongoing development and expansion of our television channels represents the core of our strategy, we also seek opportunities to expand our business through select media acquisitions that complement our existing businesses, including opportunities in Russian-speaking markets where we can effectively and efficiently leverage our management and programming resources. These acquisitions or expansion plans, if completed, could subject us to a range of additional factors that could affect our subsequent results of operations.

        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.

        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 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

30

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, sellout rates may decrease, which in turn would negatively impact our revenues. 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. Governmental authorities initially indicated that the existing analog broadcasting system would be switched off in stages during the rollout period, and indicated regional deadlines ranging from 2014 to the end of 2017. In April, 2014, the Ministry of Communications and Mass Media extended the rollout period and switch off of analog broadcasting to 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 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 addition, uncertainty exists surrounding Peretz's technical penetration and its impact on advertising revenues once the analog broadcasting system has been switched off. Our development strategy covered the eventuality that not all of our channels would be included in the second multiplex. We have already developed and approved an alternative transmission plan, which envisages the use of cable and satellite networks, as well as the internet, to provide a substantial level of technical penetration for Peretz.

        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 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 performance-based vesting conditions over a period

31

of three years from grant, and will become 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 March 2014, our Board of Directors agreed to grant additional equity awards over approximately 0.7 million shares of common stock in the form of restricted share units to our employees. The Compensation Committee of our Board of Directors has not yet determined the vesting conditions of these awards, but expects that such terms will be finalized in the second quarter of 2014. The grant date will be the date when the key terms of these awards are determined and agreed. We expect that our estimated stock-based compensation expense will increase as a result of these awards.

        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 20% in 70 cities in Russia.

        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.

•

CTC channel.  CTC channel's principal target audience is 10-45 year-old viewers. CTC's technical penetration is 95.3% with its signal covering approximately 100 million people in Russia. CTC channel manages 60 owned-and-operated stations and repeater transmitters that provide 63.3% technical penetration (or 66.4% of the channel's total penetration of 95.3%) and has arrangements with independent affiliate stations that provide 32% technical penetration (or 33.6% of the channel's total penetration of 95.3%).

•

Domashny channel.  Domashny channel principally focuses on 25-59 year-old female viewers. Domashny's technical penetration is 90.1% with its signal covering approximately 63 million people in Russia. Domashny channel manages 51 owned-and-operated stations and repeater transmitters that provide 49.1% technical penetration for the Domashny channel (or 54.5% of its total penetration of 90.1%) and has arrangements with independent affiliate stations that provide 41% technical penetration (or 45.5% of its total penetration of 90.1%).

•

Peretz channel.  Peretz channel principally focuses on 25-49 year-old viewers. Peretz's technical penetration is 85.5% with its signal covering approximately 61 million people in Russia. Peretz channel manages 59 owned-and- operated stations and repeater transmitters that provide 54.1% technical penetration (or 63.3% of its total penetration of 85.5%) and has arrangements with independent affiliate stations that provide 31.4% technical penetration (or 36.7% of its total penetration of 85.5%).

•

Channel 31.  Channel 31 is a Kazakh television broadcaster targeted principally at 6-54 year-old viewers. Channel 31 broadcasts its signal by 11 repeater transmitters and has arrangements with 11 independent affiliates and 73 local cable operators.

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Comparison of Consolidated Results of Operations by segment for the three-month periods ending March 31, 2013 and 2014

        The following table presents our revenues and operating income for the three-month periods ending March 31, 2013 and 2014 by segments:

	Three months ended March 31,						Change period-to-period
	2013			2014			2014 to 2013
	(in thousands)						% USD			% RUR
Total operating revenues
CTC Channel	$	138,832		$	132,884			(4	)%		11	%
Domashny Channel		29,479			28,080			(5	)%		10	%
Peretz Channel		20,551			18,956			(8	)%		6	%
Channel 31		4,154			3,812			(8	)%		5	%*
All Other		2,271			2,515			11	%		27	%
Total	$	195,287		$	186,247			(5	)%		10	%
Operating income/(loss)
CTC Channel	$	41,950		$	39,690			(5	)%		10	%
Domashny Channel		4,105			6,521			59	%		85	%
Peretz Channel		1,069			3,625			239	%		290	%
Channel 31		(454	)		(28	)		(94	)%		(101	)%*
All Other		(4,486	)		(1,669	)		(63	)%		(56	)%
Total	$	42,184		$	48,139			14	%		33	%

*

for Channel 31 period-to-period changes are shown in Kazakh tenge terms, %

        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.

CTC Channel

	Three months ended March 31,						% of total operating revenues						Change period-to-period
	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	138,832		$	132,884			100	%		100	%		(4	)%		11	%
Including:
Advertising revenues		135,610			132,629			98	%		100	%		(2	)%		13	%
Total operating expenses	$	(96,882	)	$	(93,194	)		70	%		70	%		(4	)%		11	%
Including:
Direct operating expenses		(4,070	)		(4,790	)		3	%		4	%		18	%		35	%
Selling, general and administrative expenses		(26,316	)		(27,929	)		19	%		21	%		6	%		23	%
Programming expenses		(64,162	)		(58,166	)		46	%		44	%		(9	)%		4	%
Depreciation and amortization		(2,334	)		(2,309	)		2	%		2	%		(1	)%		13	%
Operating income	$	41,950		$	39,690			30	%		30	%		(5	)%		10	%

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Revenues

        Advertising revenues of CTC channel increased by 13% in ruble terms when comparing the three-month periods ended March 31, 2013 and 2014, largely reflecting the estimated increase in the overall Russian television advertising market of 7-8% in ruble terms, and higher advertiser demand as the result of the 2014 Sochi Olympic Games, partially offset by a 4% decrease in target audience share.

        The decrease in target audience share over the periods under review was primarily due to increased competition from the channels licensed to broadcast the 2014 Olympics Games in Sochi and the effect of audience fragmentation, partially offset by the performance of the channel's high-rating content and new premiers.

        All larger national free-to-air TV channels in Russia were negatively impacted by increased competition from smaller non-free-to-air and local TV channels viewership among 10 to 45 year-olds, which increased from 16.2% in 2012 to 18.6% in 2013 and 19.2% in the first quarter of 2014. See "Item 1A. Risk Factors—A reduction in our audience shares and ratings would likely result in a reduction in our advertising revenues".

Expenses

        Total operating expenses of CTC channel increased by 11% in ruble terms when comparing the periods under review, of which an increase of 6pp related to selling, general and administrative expenses and 3pp related to programming expense (discussed below).

Direct operating expenses of CTC channel as a percentage of this segment's total operating revenues remained approximately flat at 4% when comparing the periods under review. In ruble terms, direct operating expenses increased by 35%, of which an increase of 17pp related to salaries and benefit costs reflecting annual raises and increased headcount as the result of transfers of some employees from other segments to CTC channel and an increase of 10pp related to transmission and maintenance costs primarily reflecting annual raises.

Selling, general and administrative expenses of the CTC channel as a percentage of this segment's total operating revenues increased from 19% to 21% when comparing the periods under review. In ruble terms, selling, general and administrative expenses increased by 23%, of which an increase of 11pp related to compensation payable to Video International that was in line with the revenue dynamics and an increase of 10pp related to advertising and promotion expenses because of the timing of advertising campaigns to support new premiers at CTC channel in the first quarter of 2014.

Programming expenses of the CTC channel as a percentage of this segment's total operating revenues decreased from 46% to 44% when comparing the periods under review, primarily due to increased channel revenues. In ruble terms, programming expenses increased by 4%, primarily due to the airing of more expensive foreign content and high-rating premiers to support the channel's audience share.

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Domashny Channel

	Three months ended March 31,						% of total operating revenues						Change period-to-period
	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	29,479		$	28,080			100	%		100	%		(5	)%		10	%
Including:
Advertising revenues		28,734			27,839			97	%		99	%		(3	)%		12	%
Total operating expenses	$	(25,374	)	$	(21,559	)		86	%		77	%		(15	)%		(2	)%
Including:
Direct operating expenses		(2,794	)		(2,778	)		9	%		10	%		(1	)%		14	%
Selling, general and administrative expenses		(5,639	)		(5,077	)		19	%		18	%		(10	)%		4	%
Programming expenses		(14,960	)		(11,881	)		51	%		42	%		(21	)%		(9	)%
Depreciation and amortization		(1,981	)		(1,823	)		7	%		6	%		(8	)%		6	%
Operating income	$	4,105		$	6,521			14	%		23	%		59	%		85	%

Revenues

        Advertising revenues of the Domashny channel increased by 12% when comparing the periods under review, largely reflecting the estimated increase in the overall Russian television advertising market of 7-8% in ruble terms, and the higher advertiser demand as the result of the 2014 Sochi Olympic Games and an increase in target audience share of 3%. The increase in target audience share over the periods under review was primarily due to the structural changes in the programming schedule and the success of programming in weekend and daytime slots, partially offset by the effect of audience fragmentation. Domashny channel is continuing to work to strengthen its demographic profile and to grow its core female audience segment.

Expenses

        Total operating expenses of Domashny channel decreased by 2% in ruble terms when comparing the periods under review, reflecting a decrease of 5pp in programming expense, partially offset by an increase of 2pp in direct operating expenses (discussed below).

Direct operating expenses of Domashny channel as a percentage of this segment's total operating revenues remained approximately flat at 10% when comparing the periods under review. In ruble terms, direct operating expenses increased by 14%, of which an increase of 12pp related to transmission and maintenance costs mainly due to annual raises.

Selling, general and administrative expenses of Domashny channel as a percentage of this segment's total operating revenues remained approximately flat at 18% when comparing the periods under review, mainly due to increased channel revenues and decreased advertising and promotion expenses. In ruble terms, selling, general and administrative expenses increased by 4%, of which 9pp related to an increase in compensation payable to Video International that was in line with the revenue dynamics, partially offset by a 5pp decrease in advertising and promotion expenses because of the later timing of advertising campaigns in 2014 compared to 2013.

Programming expenses of the Domashny channel as a percentage of this segment's total operating revenues decreased from 51% to 42% when comparing the periods under review mainly due to a less expensive programming mix (discussed below) and increased channel revenues. When comparing the periods under review, programming expenses decreased by 9% in ruble terms primarily due to less

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expensive and decreased volume of Russian content, partially offset by more expensive foreign series due to the launch of Turkish premiers to support Domashny's audience share.

Peretz Channel

	Three months ended March 31,						% of total operating revenues						Change period-to-period
	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Total operating revenues	$	20,551		$	18,956			100	%		100	%		(8	)%		6	%
Including:
Advertising revenues		20,451			18,810			100	%		99	%		(8	)%		6	%
Total operating expenses	$	(19,482	)	$	(15,331	)		95	%		81	%		(21	)%		(9	)%
Including:
Direct operating expenses		(3,085	)		(2,517	)		15	%		13	%		(18	)%		(6	)%
Selling, general and administrative expenses		(4,346	)		(3,866	)		21	%		20	%		(11	)%		3	%
Programming expenses		(8,978	)		(6,272	)		44	%		33	%		(30	)%		(20	)%
Depreciation and amortization		(3,073	)		(2,676	)		15	%		14	%		(13	)%		0	%
Operating income	$	1,069		$	3,625			5	%		19	%		239	%		290	%

Revenues

        Advertising revenues of the Peretz channel increased by 6% in ruble terms when comparing the periods under review, largely reflecting the estimated increase in the overall Russian television advertising market of 7-8% in ruble terms, primarily as the result of higher advertiser demand due to the 2014 Sochi Olympics Games, partially offset by a 4% decrease in target audience share. The decrease in Peretz audience share in the periods under review was primarily due to increased competition from the channels that broadcast political news following the situation in Ukraine and audience fragmentation, partially offset by the strong performance of locally produced series. Peretz channel is continuing to refresh its positioning and programming grid to be a more cutting edge, dynamic and thrilling channel, with a focus on edgy action content.

Expenses

        Total operating expenses of Peretz channel decreased by 9% in ruble terms when comparing the periods under review, of which a decrease of 9pp related to programming expense (discussed below).

Direct operating expenses of Peretz channel as a percentage of this segment's total operating revenues decreased from 15% to 13% when comparing the periods under review, primarily due to decreased salaries and benefits costs. In ruble terms, direct operating expenses decreased by 6%, mainly due to decreased salaries due to transfers of some employees to CTC channel.

Selling, general and administrative expenses of Peretz channel as a percentage of this segment's total operating revenues remained approximately flat at 20% when comparing the periods under review. In ruble terms, selling, general and administrative expenses increased by 3%, reflecting the joint effect of an increase of 5pp in compensation payable to Video International as the result of increased channel revenues, and a decrease of 4pp in advertising and promotion expenses, due to the timing effect of advertising campaigns at Peretz channel.

Programming expenses of the Peretz channel as a percentage of this segment's total operating revenues decreased from 44% to 33% when comparing the periods under review. In ruble terms,

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programming expenses decreased by 20%, reflecting the timing effect of the launch of Peretz spring schedule in April 2014, partially offset by increased cost and volume of high ratings Russian series.

Channel 31

	Three months ended March 31,						% of total operating revenues						Change period-to-period
	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% KZT
Total operating revenues	$	4,154		$	3,812			100	%		100	%		(8	)%		5	%
Including:
Advertising revenues		4,140			3,673			100	%		96	%		(11	)%		2	%
Total operating expenses	$	(4,608	)	$	(3,840	)		111	%		101	%		(17	)%		(5	)%
Including:
Direct operating expenses		(269	)		(262	)		6	%		7	%		(3	)%		12	%
Selling, general and administrative expenses		(839	)		(779	)		20	%		20	%		(7	)%		5	%
Programming expenses		(2,763	)		(2,141	)		67	%		56	%		(23	)%		(11	)%
Depreciation and amortization		(737	)		(658	)		18	%		17	%		(11	)%		0	%
Operating loss	$	(454	)	$	(28	)		11	%		1	%		(94	)%		(101	)%

        The functional currency of Channel 31 is the Kazakh tenge, and 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 months ended March 31, 2014, Channel 31 results of operations were significantly impacted by the devaluation of Kazakh tenge by 19% against the US dollar that was implemented by National Bank of Kazakhstan in February 2014 and, as a result, the Kazakh tenge depreciated by approximately 16% in the first quarter of 2014.

Revenues

        Advertising revenues of Channel 31 increased by 2% in Kazakh tenge terms when comparing the three-month periods ended March 31, 2013 and 2014, principally due to increased sellout and sponsorship revenues, partially offset by a 13% decrease in target audience share, reflecting increased competition from other channels. The estimated overall television advertising market in Kazakhstan was approximately flat in Kazakh tenge, when comparing the periods under review.

Expenses

        Total operating expenses of Channel 31 decreased by 5% in Kazakh tenge terms when comparing the periods under review, mainly due to a 7pp decrease in programming expenses (discussed below).

Direct operating expenses of Channel 31 as a percentage of this segment's total operating revenues were approximately flat at 7% when comparing the periods under review. In Kazakh tenge terms, direct operating expenses increased by 12%, primarily due to increases in salaries and benefits costs due to hiring of several channel's top-management in the second half of 2013.

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Selling, general and administrative expenses of Channel 31, as a percentage of this segment's total operating revenues, remained flat at 20% when comparing the periods under review. In Kazakh tenge terms, selling, general and administrative expenses increased by 5%, of which an increase of 4pp related to other general and administrative expenses reflecting the annual mandatory membership fees to the Association of Businesses of Kazakhstan starting from 2014.

Programming expenses of Channel 31 as a percentage of this segment's total operating revenues decreased from 67% to 56% when comparing the periods under review. In Kazakh tenge terms, when comparing the periods under review, programming expenses decreased by 11%, primarily due to the timing effect of airing of the locally produced content and decreased volume of foreign movies.

All Other

	Three months ended March 31,						% of total operating revenues						Change period-to-period
	2013			2014			2013			2014			2014 to 2013
	(in thousands)						% USD			% USD			% USD			% RUR
Operating revenues	$	2,271		$	2,515			100	%		100	%		11	%		27	%
Operating expenses	$	(6,757	)	$	(4,184	)		298	%		166	%		(38	)%		(29	)%
Including:
Selling, general and administrative expenses		(3,933	)		(4,004	)		173	%		159	%		2	%		18	%
Stock based compensation expenses		(1,338	)		1,507			59	%		60	%		(213	)%		(228	)%
Other expenses		(1,486	)		(1,687	)		65	%		67	%		14	%		31	%
Operating loss	$	(4,486	)	$	(1,669	)		198	%		66	%		(63	)%		(56	)%

        Operating revenues in the All Other segment primarily represent revenues earned by our CTC-International and digital media businesses. In three-month periods ended March 31, 2013 and 2014, operating revenues from CTC-International amounted to $1.1 million and 0.9 million, respectively, and operating revenues from our digital media businesses amounted to $1.1 million and $1.4 million, respectively.

        Selling, general and administrative expenses consist principally of the general and administrative expenses of our corporate headquarters and digital media businesses. When comparing the periods under review, selling, general and administrative expenses increased by 18% in ruble terms, primarily due to increases in salaries and benefits costs in our digital media businesses, reflecting the annual raises and increased headcount, partially offset by decreases in salaries and benefits costs in our corporate headquarters, reflecting the departure of several top managers and transfer of some employees to CTC channel in the second half of 2013 and increased advertising and promotion expenses in our digital media businesses which were in line with segment revenue dynamics.

        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 of the reporting date, as the result of our decreased share price in the first quarter of 2014.

        Other expenses consist principally of direct operating, programming and depreciation and amortization expenses. Other expenses increased by 31% in ruble terms when comparing the periods under review, primarily due to increases in direct operating expenses, reflecting the reallocation of certain transmission costs to our digital media businesses from our channels in the first quarter of 2014.

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

Short-term and long-term prepayments

        Prepayments decreased from December 31, 2013 to March 31, 2014 by $14.3 million, primarily due to the effect of depreciation of the Russian ruble against the US dollar.

Short-term and long-term programming rights

        The decrease in programming rights from December 31, 2013 to March 31, 2014 of $12.0 million was primarily due to the effect of depreciation of the Russian ruble against the US dollar.

Intangible assets and Goodwill

        Intangible assets and Goodwill decreased from December 31, 2013 to March 31, 2014 by $12.2 million and $11.2 million, respectively, due to the effect of the depreciation of the Russian ruble against the US dollar.

Taxes payable

        Our taxes payable decreased by $14.5 million from December 31, 2013 to March 31, 2014, 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 first quarter of 2014 and, to a lesser extent, due to the effect of the depreciation of the Russian ruble against the US dollar.

Liquidity and Capital Resources

        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 March 31, 2014, we had $37.7 million in cash and cash equivalents, of which approximately 34% was held in US dollar-denominated accounts. In addition, as of March 31, 2014, we had $160.7 million in deposits with maturities ranging from one to twelve months, of which approximately 19% 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 $28 million (at closing exchange rate of RUR 35.69 to $1.00). As of December 31, 2013 and March 31, 2014, we didn't have outstanding overdrafts.

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Cash flows

        Below is a summary of our cash flows during the periods indicated:

	Three months ended March 31,
	2013			2014
	(in thousands)
Net cash provided by/(used in) operating activities:	$	(12,903	)	$	32,403
Net cash provided by/(used in) investing activities:		(1,426	)		3,548
Net cash used in financing activities:		(24,868	)		(27,364	)

        Cash flows from operating activities increased by $45.3 million, reflecting the joint effect of higher cash receipts from advertising sales and the lesser cash spending on the acquisition of programming and operating costs. Substantially all of our cash flows from operating activities are derived from advertising revenues. Our advertising revenues were $190.0 and $184.6 million for the three-month periods ended March 31, 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 $108.9 and $84.7 million for the three-month periods ended March 31, 2013 and 2014, respectively. The decrease in cash paid for programming rights in the first quarter of 2014 was primarily due to the timing effect of our investments in Russian and foreign content that will be used in 2014 and thereafter. Programming expenses amounted to $91.1 and $78.6 million for the three-month periods ended March 31, 2013 and 2014, respectively.

        Cash used in 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 three-month period ended March 31, 2014, our cash provided by investing activities primarily represented receipts from deposits of $4.5 million and cash paid for capital expenditures of $1.0 million, mainly on purchases of broadcasting equipment. In the three-month period ended March 31, 2013, our cash used in investing activities primarily represented cash paid for capital expenditures of $1.1 million, mainly on purchases of cable connections and broadcasting equipment.

        Cash used in financing activities includes net proceeds from or settlement of our overdraft and loan, and payments of dividends. In the three-month period ended March 31, 2014, our cash used in financing activities includes payment of dividends in the amount of $20.3 million to our stockholders, $0.02 million in dividends paid to minority shareholders of our subsidiaries and $6.9 million increase in other non-current assets which represents dividends to one of our stockholder that were blocked pursuant to US sanctions imposed on Bank Rossiya. In the three-month period ended March 31, 2013, our cash used in financing activities includes payment of dividends in the amount of $17.8 million to our stockholders, $0.1 million in dividends paid to minority shareholders of our subsidiaries and settlement of a $6.9 million bank overdraft.

        On April 29, 2014, our Board of Directors 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 June 30, 2014 to shareholders of record as of June 16, 2014; except that any dividend payable to Telcrest will be blocked pursuant to OFAC regulations related to U.S. sanctions described in Note 4, while either Bank Rossiya or LLC IC Abros remain an SDN.

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Contractual obligations

        The table below summarizes information with respect to our contractual obligations as of March 31, 2014:

	Total		Through 2014		2015		2016		2017		2018		2019
	(in thousands)
Acquisition of programming rights	$	234,877	$	182,693	$	43,078	$	9,106	$	—	$	—	$	—
Transmission and satellite fees		71,126		14,083		17,543		16,705		12,379		5,396		5,020
Leasehold obligations		40,825		5,205		7,267		7,503		7,783		6,403		6,664
Network affiliation agreements		8,835		2,244		2,851		1,913		1,687		140		—
Acquisition of format rights		320		320		—		—		—		—		—
Cable connections		1,979		1,565		414		—		—		—		—
Payments for intellectual rights		14,466		1,903		2,684		2,832		2,240		2,347		2,460
Other contractual obligations		21,304		3,292		4,561		4,475		4,141		4,276		559
Total	$	393,732	$	211,305	$	78,398	$	42,534	$	28,230	$	18,562	$	14,703

(1)

Accrued liabilities related to income taxes are excluded from this table because we cannot make a reasonably reliable estimate of the period of cash settlement with the taxing authorities.

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

        In March, 2013, CTC and Domashny entered into agreements on identical terms with the Russian Television and Radio Network, a transmission provider. We estimate that fees payable to RTRS for 2014 will be approximately $25 million for our CTC and Domashny channels in aggregate. Governmental authorities have indicated that each channel participating in the second multiplex will be expected to pay up to $26 million annually in digital transmission fees once the rollout is complete. 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 all of our channels in aggregate. In addition, in April 2014, governmental authorities have announced its plan to postpone the rollout period until the end of 2018.

        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 also "—Key Factors Affecting Our Results of Operations", and "Risk Factors—We may face additional expenditures in connection with the planned transition from analog to digital broadcasting in Russia and Kazakhstan, and may incur further impairment charges in connection with this transition".

Critical Accounting Policies, Estimates and Assumptions

        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

41

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.

        The planned transition to digital broadcasting could impact our assumptions used in economic models and our assessment of the fair value of our reporting units. In December 2012, CTC and Domashny channels were selected in a public tender for inclusion in the second digital multiplex; Peretz channel was not selected. 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. Currently, we believe the most significant of these uncertainties relate to our overall operating costs during (and following) the transition to digital broadcasting.

        In addition, uncertainty exists about Peretz's technical penetration and its impact on advertising revenues after the end of analog broadcasting. 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 after the end of analog broadcasting. 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. 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.

        For a discussion of the methodology and major assumptions regarding our impairment test refer to the Annual Report on Form 10-K filed with the SEC on March 6, 2014.

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 in the range of 2.75 to 5.75 years, depending on the region, which would be $12.5, $15.0, $11.7, $8.3 and $3.8 million annually from 2014 through 2018.

        In April 2014, the Ministry of Communications and Mass Media extended the current timelines for switching off analog broadcasting to the end of 2018. As the result, we changed our estimate of the remaining economic lives of our analog broadcasting licenses in the second quarter of 2014. We estimate that the amortization charge for our broadcasting licenses will be approximately $7.1million

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for the remaining of 2014 and $10.6 million annually from 2015 through 2018. The estimated useful lives of our broadcasting licenses is subject to availability of further information about 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.

Recently Issued Accounting Pronouncements

        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."

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Foreign currency exchange risk

        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. 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 ruble, primarily US dollar payments for non-Russian produced programming. For the three months ended March 31, 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 $16.5 million and $8.5 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. The current situation in Ukraine has the potential to further negatively impact the value of the Russian ruble.

        The prevailing exchange rate as of April 25, 2014 was RUR 35.68 to $1.00.

        From time to time we enter into foreign exchange hedging arrangements in relation to a portion of our payments denominated in US dollars. In the first quarter of 2014, we entered into foreign exchange forward contracts for approximately $109.4 million to reduce a portion of our foreign exchange risk related to US-dollar denominated payments.

Item 4.    Controls and Procedures

Evaluation of disclosure controls and procedures

        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 March 31, 2014. Management recognizes that any controls and procedures, no matter how well designed and operated,

43

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 March 31, 2014, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting

        During the three months ended March 31, 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.

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PART II. OTHER INFORMATION

Item 1.    Legal Proceedings

        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.

Item 1A.    Risk Factors

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.

Risks relating to our business and industry

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.

        Beginning in the second half of 2008, Russia, like many other countries, experienced economic instability, characterized by a steep decline in the value of shares traded on its stock exchanges, devaluation of its currency, capital flight and a decline in gross domestic product. Additionally, because Russia produces and exports large amounts of oil and gas, recent decreases in international oil prices have adversely affected and may continue to adversely affect the Russian economy. The current situation in Ukraine, including international economic sanctions, also has the potential to negatively affect our ability to sublicense certain programming in that country and may also have broader impacts on the macroeconomic environment of the region, which may adversely affect our business. Like Russia, Kazakhstan has also experienced economic instability.

        Although overall Russian television advertising spending increased in each of the past three years, if overall spending by advertisers in the Russian television advertising market falls substantially in future periods, our advertising revenues may be significantly reduced, materially adversely affecting our results of operations.

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

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material. 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 2017. 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. Governmental authorities have recently announced that analog broadcasting will not be switched off until the end of 2018. 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 be available to approximately 97.6% of the Russian population.

        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 in 2014. The terms for participation in the third digital multiplex have not been specified.

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        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:

•

The anticipated transition to digital broadcasting may affect the relative position of broadcasters within the television marketplace, which may negatively impact the audience shares of our channels.

•

Viewers may not acquire television-sets or converters that will allow them to receive the digital signal prior to the time analog broadcasting ends. Further, viewers may switch to cable television. In the absence of 'must-carry' obligations for cable operators, this could lead to a decline in the overall number of households viewing free-to-air television and, as a result, our viewer ratings.

•

Our Peretz channel may not be able to compete effectively if it is not included in the third multiplex, as its technical penetration could decrease when free-to-air analog broadcasting is terminated and could be limited, at a maximum, to the level of overall cable penetration. Currently, cable penetration in Russia among cities with more than 100,000 residents is approximately 60%, which is lower than Peretz channel's current overall technical penetration of 85.5%. With respect to the third multiplex, it is unclear what requirements the channels are supposed to meet in order to be included in that multiplex.

•

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. 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 our signal.

•

We expect to continue to incur analog transmission costs during the analog-to-digital transition period. In 2013, we incurred $24 million of such expenses for our Russian channels; we may also incur further costs, in addition to those we currently have, during the transition period and thereafter. Governmental authorities have also indicated that each channel participating in the second multiplex will be expected to pay up to $26 million annually in digital transmission fees once the second multiplex is fully introduced. In the transition period, these transmission fees are expected to be lower and are to be paid by way of stage payments as the rollout progresses. As a result, increased revenues from higher anticipated geographical penetration from digital broadcasting may not sufficiently compensate for increased costs associated with transmission and broadcast equipment upgrades.

•

There may be other unanticipated risks and expenses that we encounter during the transition and subsequently that could be material to our future financial position and results of operations.

        While our channels will continue to broadcast in the analog format under existing analog licenses until the transition to the digital format is completed, as discussed above, 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 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

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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 those assets, we may be required to record additional impairment losses that could materially adversely impact our net income."

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 ongoing resources toward compliance efforts.

        Significant uncertainty exists surrounding the current geopolitical situation in Ukraine. Both the United States and the European Union have imposed economic sanctions on certain Russian government officials, other individuals and, in the case of the United States, certain Russian companies. 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 U.S. or EU lists of sanctioned parties. Bank Rossiya and LLC IC Abros, which control 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 and LLC IC Abros's 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) otherwise evade the 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. 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 will be subject to OFAC blocking and reporting obligations.

        Telcrest's position as principal minority shareholder of ours and its right to designate three of the nine members of our Board of Directors present significant compliance challenges for us. We have recently introduced policies and procedures 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 newly formed 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, which must operate with additional formalities related to these sanctions, including the recusal of Telcrest designated directors from decisions or deliberations on all transactions by our Board.

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        We are committed to complying with all applicable U.S. and other laws, including the recent 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.

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

        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 new 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 the new 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 that these amendments will 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 no legal practice in implementing these amendments and there are no court interpretations of them.

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 CTC, Domashny or Peretz) and ratings (the percentage of the total population that is watching CTC, Domashny or Peretz 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.

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        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.

        The anticipated transition to digital broadcasting discussed above may also result in changes in the TNS measurement system, including a re-weighting of the panel cities, to reflect increased penetration of Russian channels after the rollout period. In response to the Russian digitalization program, TNS plans to change its measuring parameters to the "total urban population" by 2017. At the moment the key parameters of "total urban population" measurement have not been determined. The transition to the "total urban population" will likely affect all market participants. We cannot predict the impact of any such changes at this time.

        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 further decreases in our 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 additional 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.

        In addition, uncertainty remains concerning global economic stability in the medium-term. 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, including continued or expanded international economic sanctions, these companies 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. 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 after the end of analog broadcasting. 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 goodwill. As of March 31, 2014, the carrying values of goodwill related to CTC, Domashny and Peretz were $47.3 million, $23.9 million and $52.8 million, respectively. Any

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decrease in cash flow projections could adversely impact the fair value of our reporting units and related goodwill or intangible assets, and we would then record additional impairment charges.

        We consider all current information in respect of determining the need for, or calculating, any impairment loss; however, future changes in events or circumstances, such as a continuation or worsening of the current economic instability, continued or expanded economic sanctions, decreases in our audience shares or ratings, increased competition from cable providers or others, or changes in the audience measurement system, could result in decreases in the fair value of our long-lived assets and require us to record additional impairment losses that could have a material adverse impact on our net income.

Declines in the value of the Russian ruble against the US dollar have in the past negatively affected our reported revenues and our operating results, both of which are reported in US dollars.

        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. 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.

        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 period from December 31, 2013 to March 31, 2014, the Russian ruble further depreciated against the US dollar to RUR 35.69 to $1.00 as of March 31, 2014. If the exchange rate between the ruble and the US dollar were to further depreciate, our revenues and operating results, as reported in US dollars, would be adversely affected. The current situation in Ukraine, and related economic sanctions, has the potential to further negatively impact the value of the Russian ruble.

Restrictions on direct or indirect foreign ownership of Russian television companies could limit our ability to grow our business through acquisitions.

        In May 2008, the law "On foreign investments in economic entities that have strategic importance for defense and security of the state" (the "Strategic Enterprises Law") came into effect in Russia. The Strategic Enterprises Law imposes restrictions on direct or indirect non-Russian ownership in "strategically important" industries, including television broadcasters that broadcast to more than 50% of the population of a relevant constituent entity of the Russian Federation. Among other things, the Strategic Enterprises Law requires prior approval from the Commission for Control Over Foreign Investments, and potentially from the Federal Security Bureau, for the acquisition by a non-Russian entity of an interest above a certain ownership threshold in a company operating in a strategically significant sector. We, understand that such approval generally requires at least six months.

        The Strategic Enterprises Law contains a "grandfather" provision with respect to pre-existing holdings in affected companies that requires notification of such pre-existing holdings but does not have an approval requirement. We therefore believe that neither CTC Media's pre-existing ownership of its Russian operating subsidiaries, nor the pre-existing ownership of shares of CTC Media by non-Russian stockholders, violates the Strategic Enterprises Law or requires any approval. We do believe, however, that we will be required to obtain approval under the Strategic Enterprises Law for any acquisition of an affiliate television station that broadcasts to more than 50% of the population of a relevant constituent entity of the Russian Federation, or any acquisition of another Russian network. Such approval process is likely to be time-consuming and may, in any event, ultimately result in a rejection

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of a proposed transaction. As a result, we may lose out on acquisition opportunities to competitors, and our ability to grow our business through acquisitions in Russia may be limited. Even if the authorities approve such a transaction, they may do so subject to conditions regarding the operation of the company—including, for example, the composition of its management—that may limit our effective control and operational flexibility.

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

        In addition to the Strategic Enterprises Law discussed above, the law "On Mass Media" (the "Mass Media Law") also restricts direct (but not indirect) foreign involvement in Russian television businesses. Following adoption of these provisions in 2002, we implemented a restructuring plan pursuant to which we created a holding company structure and reduced CTC Media's direct ownership in the CTC Network and each of our owned-and-operated stations below 50%. CTC Media's direct ownership of Domashny and the Peretz Group, which were acquired subsequent to the adoption of these restrictions, is also below 50%. This restructuring was completed prior to the August 2002 deadline with respect to all entities in our group, other than our CTC-Moscow station; the restructuring of the ownership of that station was completed in December 2002. To date, no Russian governmental authorities have taken any action against our CTC-Moscow station for its failure to comply with the restrictions on foreign legal ownership by the deadline. Because CTC Media itself does not broadcast or distribute television programming in the Russian Federation, we believe that CTC Media itself does not fall under the definition of a "founder of a television or video program" for purposes of the Mass Media Law, and that CTC Media does not violate the foreign involvement restrictions of that law.

        The Mass Media Law could in the future be interpreted by Russian governmental authorities or a court to extend to, and to prohibit, indirect foreign ownership of or control over Russian broadcasters of television or video programs. In addition, the Strategic Enterprises Law described above could be implemented or interpreted to apply in some respects to foreign holdings existing at the time of adoption of the law. In either case, it is possible that Russian governmental authorities could suspend or revoke broadcasting licenses or permits held by our networks and our owned-and-operated stations, or fail to renew any such licenses. If any law were to be adopted or interpreted to restrict indirect foreign ownership and control of Russian television broadcasters, and did not contain a "grandfather" provision with respect to existing holdings, CTC Media could be obliged to restructure its group in order to comply with such requirements, including by divesting a controlling stake in our networks and our owned-and-operated stations. If we failed to comply in a timely manner, the authorities could suspend, revoke or fail to renew broadcasting licenses or permits held by our networks or our owned-and-operated stations, or could take other actions against us that could limit our ability to operate.

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

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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 March 31, 2014, was approximately $5.8 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:

•

additional and significant demands placed on our senior management, who are also responsible for managing our existing operations;

•

increased overall operating complexity of our business, requiring greater personnel and other resources;

•

difficulties of expanding beyond our core expertise;

•

significant initial cash expenditures to acquire and integrate new businesses;

•

contingent liabilities associated with acquired businesses; and

•

incurrence of debt to finance acquisitions and high debt service costs related thereto.

        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.

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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 had a standard term of ten years. We also hold a so-called "universal licenses", which permits 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

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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 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.

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We rely on third parties for the production of some 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. 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, the state-controlled energy company, 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 in 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. 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.

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        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.

        On June 1, 2011, Telcrest acquired 25.15% of our common stock from a former stockholder. We understand that the beneficial owners of 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 a 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 local 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. 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 March 31, 2014 we had contractual commitments for the acquisition of approximately $182.7 million in programming rights in 2014, $43.1 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. We would have only limited ability to reduce our costs in the short-run in response to such developments.

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.

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        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.

Loss of key personnel could affect our growth and future success.

        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

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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. Lorenzo Grabau, a member of the Board of MTG, is a Co-Chairman of our board of directors; Jørgen Madsen Lindemann, President and CEO 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 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. 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 ongoing resources toward compliance efforts."

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Risks relating to doing business and investing in Russia

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. 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, especially media companies, 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.

        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 ongoing resources toward 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:

•

inconsistencies between and among laws and governmental, ministerial and local regulations, orders, decisions, resolutions and other acts;

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substantial gaps in the regulatory structure resulting from the delay in adoption or absence of implementing regulations;

•

limited judicial and administrative guidance on interpreting Russian legislation;

•

the relative inexperience of judges and courts in interpreting relatively new commercial legislation;

•

a lack of judicial independence from political, social and commercial forces;

•

under-funding and under-staffing of the court system;

•

a high degree of discretion on the part of the judiciary and governmental authorities; and

•

poorly developed bankruptcy procedures that are subject to abuse.

        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 will not interpret this law or implement it 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.

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

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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. Under an earlier version of this law, the company's shareholders could also bring an action to force the 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

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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 formulistic 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.

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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.

Risks relating to doing business elsewhere in the CIS

We face similar risks in other countries of the CIS.

        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".

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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.

        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 ongoing resources toward compliance efforts."

Risks relating to our stock

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. 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:

•

fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

•

changes in estimates of our financial results or recommendations by securities analysts;

•

changes in market valuations of similar companies;

•

extraordinary expenses or charges in particular periods, including material impairment losses;

•

changes in economic, political and market conditions in Russia and globally;

•

changes in the audience shares of our networks;

•

changes in the structure of advertising sales in Russia;

•

public announcements by industry experts regarding trends in advertising spending in Russia and globally; and

•

announcements regarding our acquisition activities, if any.

        Moreover, only a relatively small number of shares of our common stock are currently actively traded in the public market. As of April 22, 2014, approximately 36% of our outstanding common stock

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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 April 22, 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.

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:

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Stockholders' meetings may only be called by one of the Co-Chairmen of our board of directors, our Chief Executive Officer or the majority of the board of directors.

•

Our stockholders may not take action by written consent.

•

We have a classified board of directors, which means that our directors serve for staggered three-year terms and currently no more than three of our nine directors are elected each year.

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.

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        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.

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.

Item 6.    Exhibits

        The Exhibit index is hereby incorporated herein by reference.

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SIGNATURES

        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.

CTC MEDIA, INC.
By:	/s/ NIKOLAY SURIKOV Nikolay Surikov Chief Financial Officer

Date: April 30, 2014

CTC MEDIA, INC.
By:	/s/ YULIA SHTYROVA Yulia Shtyrova Acting Chief Accounting Officer

Date: April 30, 2014

EXHIBIT INDEX

		Incorporated by Reference
Exhibit No.	Description	Form on which Originally Filed		Original Exhibit Number	Original Filing Date with SEC		SEC File Number
3.4	Restated Certificate of Incorporation of CTC Media		S-1	3.4		April 11, 2006		333-132228
3.7	Amended and Restated Bylaws of CTC Media		10-K	3.7		March 2, 2009		000-52003
4.1	Specimen Certificate evidencing shares of common stock		S-1	4.1		May 12, 2006		333-13228
10.1	Additional Agreement No.31 to the Contract No. KT-361-1110 as of November 11, 2010 between Closed Joint Stock Company EvereCT-C and Closed Joint Stock Company TSV Company dated as of March 21, 2014 (English translation)		Filed herewith
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)—14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15(d)—14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002		Filed herewith
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		Furnished 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.

*

Submitted electronically herewith. The XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.